Shinn v. Buxton

154 F.2d 629, 1946 U.S. App. LEXIS 3257

• Court: Court of Appeals for the Tenth Circuit
• Decided: March 25, 1946
• Docket: 3228
• Status: Published

Opinions

MURRAH, Circuit Judge.

This appeal involves the construction and legal effect of two mineral deeds, by the terms of the first of which the appellants, Rector T. Shinn and Lottie Pearl Shinn, granted and conveyed unto John Wilver “an undivided one, one hundred-twenty-eighth (1/128) interest in and to all of the oil, gas, and other minerals” that might be produced from 159 acres of described land located in Oklahoma County, Oklahoma, for a period of twenty years. The deed recited that the conveyance was subject to the terms of an oil and gas lease to record owners, “but covers and includes the 1/16 of the full 1/8 of all of the oil royalty * * * paid under the terms of said lease.” This deed was dated August 1, 1928, and was filed of record on the following October 3rd. By the terms of the second mineral deed dated March 7, 1929, Wilver conveyed the foregoing interest to Grant Buxton, whose administratrix is appellee here. The form, language and interest conveyed in both deeds are identical, so that Buxton acquired the same estate which Shinn had previously conveyed to Wilver.

It is the contention of the appellee, as framed by the pleadings in the trial court, that these deeds are ambiguous by their terms as a result of the mutual mistake of the parties, since they do not conform to or convey the interest intended to be conveyed under the terms of an antecedent written contract, in compliance of which the deed from Shinn to Wilver was executed. It is said that it was the mutual intention of the parties as expressed in the written agreement, that Shinn should convey, and Buxton should acquire, a nonparticipating l/16th of the oil and gas under the described land for a period of 20 years from August 1, 1928, -so that in the event of production by lessee, Buxton would receive every 128th barrel of oil produced under the lease. Buxton prayed that the mineral deeds be reformed accordingly.

The appellants deny the alleged ambiguity, or that the deeds fail to conform to the intentions of the parties. They assert that the deeds were intended to and did convey unto Wilver and to Buxton a 1/16th of the l/8th, or l/128th of the royalty interest reserved by the landowner from the existing oil and gas lease. Thus in the event of production under a 7/8ths oil and gas lease, the owner of the interest conveyed would be entitled to every 1024th barrel of oil produced from the premises. It is said that the mineral deed from Shinn to Wilver was executed August 1, 1928, and was accepted by him in full compliance with the antecedent contract between Buxton and Shinn, and since Buxton, with knowledge of the contents of the deed, never asserted any ambiguity or mutual mistake until this suit was filed, he is now barred and precluded from claiming any interest other than the l/128th of the mineral interest as described in the deed.

The trial court sustained the contentions ■of the appellee Buxton, specifically finding that it was the mutual intention of the parties, as evidenced by their agreement, that Shinn should convey, and Buxton should acquire, a l/16th non-participating interest in all of the oil and gas and other minerals for a term of 20 years from August 1, 1928 “in such manner that in the ■event of production of oil or gas by a lessee, the said Grant M. Buxton would receive l/16th of the full %th oil royalty, and gas rental or royalty due and to be paid by the lessee, thereby entitling the said ■Grant M. Buxton to receive one barrel of oil out of each 128 barrels of oil produced by the lessee from the lands therein described.” The court held that the mineral deeds were ambiguous in that they did not express the true intention of the parties as embodied in the antecedent contract, and they were reformed accordingly.

The material facts are not in dispute. Prior to the execution of the agreement and deeds in question, and on or about March 23, 1928, Buxton, as the owner of the land in question, granted John Wilver “an undivided one-sixteenth interest in and to all of the oil, gas and other minerals * * * that may be produced” from the lands. The conveyance recited that it was subject to the terms of an oil and gas lease “but covers and includes l/16th of all the oil royalty * * *, he [Wilver] owning one-sixteenth of all oil, gas and other minerals under said lands, together with one-sixteenth interest in all future events * * * for a term of 20 years from date hereof, and as long thereafter as oil and gas or either of them is produced.” This conveyance, was filed of record on March 24, 1928. Contemporaneously with the execution and delivery of this conveyance, Wilver granted to Buxton the identical interest in identical terms, but this conveyance was not filed of record at that time. Subsequently, Shinn negotiated with Buxton for the purchase of the land in question, but when Shinn learned of the outstanding royalty interest held by Wilver, negotiations were broken off until Buxton indicated that he would secure the royalty conveyance from Wilver, thus giving Shinn title to the land free of the royalty incumbrance.

Accordingly on June 20, 1928, the parties entered into an agreement which, after providing for the terms of the sale, recited that the land was subject to an oil and gas lease of record and the royalty interest held by Wilver. It was agreed that the outstanding royalty interest held by Wilver would be reconveyed to Buxton, and that Shinn would thereafter, as the owner of the land, convey to Wilver “a royalty interest for 20 years of one sixteenth (1/16) of the full one eighth (1/8) royalty, being a one-one hundred and twenty-eighth (1/128) interest in and to all of the oil or gas produced from the above described land.” To comply with the contract, Buxton filed of record the previously executed royalty conveyance from Wilver, and it is agreed that the mineral deed from Shinn to Wilver dated August 1, 1928, was executed and delivered to Wilver in compliance with the antecedent agreement. Buxton’s interest in the land is derived from the mineral deed executed by Wilver to him on March 7, 1929. As we have seen, these two mineral deeds from Shinn to Wilver and Wilver to Buxton, conveying, identical estates in identical language, are the subject of our controversy. Buxton, as the owner of such mineral interest, joined in the execution of the oil and gas lease presently of record, and is therefore entitled to participate in any bonuses or delayed rentals provided therein. See Carroll v. Bowen, 180 Okl. 215, 68 P.2d 773; Sykes v. Austin, 182 Okl. 299, 77 P.2d 719.

Appellee recognized, as did the trial court, that upon their face, the mineral deeds in question granted and conveyed a l/16th of the l/8th, or l/128th of the royalty interest, thereby giving the grantees under the deeds every 1024th barrel of oil produced under a 7/8ths lease. It is only when we resort to the antecedent agreement that any ambiguity is imputed to the mineral deeds. The term royalty or royalty interest, as used in oil ^nd gas parlance to define a mineral interest in land, has a well known and commonly accepted meaning. It means a share (usually l/8th) in the oil and gas reserved to the landowner from an oil and gas lease, which when produced is delivered to the purchaser free of cost to the landowner. See Burns v. Bastien, 174 Okl. 40, 50 P.2d 377; Carroll v. Bowen, 180 Okl. 215, 68 P.2d 773; Meyers v. Central Nat. Bank, 183 Okl. 231, 80 P.2d 584; Sykes v. Austin, 182 Okl. 299, 77 P.2d 719; McCullough v. Almach, 188 Okl. 434, 110 P.2d 295; Anderson v. Commissioner, 310 U.S. 404, 60 S.Ct. 952, 84 L.Ed. 1277; Vol. 37 Words and Phrases, Perm. Ed., p. 811.

Furthermore, the phrase ‘‘l/16th of the full l/8th of all the oil royalty,” or words of similar import, is well known to the oil and gas vernacular. In Manley v. Boling, 186 Okl. 59, 96 P.2d 30, 31, the fee owner of certain land conveyed to Manley “the undivided l/16th of all the oil and gas or other minerals under the aforesaid lands.” Thereafter Manley and tlie then owner of the land joined in a 7/8ths oil and gas lease covering the land. When oil was produced under the lease, a controversy arose concerning the extent of Manley’s interest, he contending that an “undivided l/16th of all the oil and gas” entitled him to one-half of the l/8th royalty. The Oklahoma court held that “if a party purchased l/16th of the minerals, and joined with the owners of the remaining 15/16ths in a lease reserving a l/8th royalty, his share in such royalty would be l/16th of such l/8th, in the absence of any agreement to share in different proportions.” “And,” said the court, “the result would be the same if at the date of the purchase of the mineral interest the land were subject to an oil and gas lease.” .

In Swearingen v. Oldham, 195 Okl. 532, 159 P.2d 247, 250, the grantors reserved “an undivided l/16th of the oil, gas and other minerals under the land conveyed,” but gave unto the grantees the right to lease the land for any purpose, and to collect and retain all rentals and bonuses. Thereafter the grantees executed an oil and gas lease on the land, reserving l/8th of all the oil and gas, subject to the grantor’s l/16th interest. It was contended that the reservation of “l/16th of all the oil and gas” was a net royalty interest which was not diminished by the execution of the oil and gas lease. The Oklahoma court, relying upon the Manley case, held that the meaning of the language employed was free from ambiguity, and that the grantors as the owners of “an undivided l/16th interest of the oil, and gas and other minerals under the land” were “entitled to l/16thof the l/8th royalty,” or l/128th of the royalty interest.

The same or similar phraseology has. been construed by other courts in recent cases. In Richardson v. Hart, 143 Tex. 392, 185 S.W.2d 563, the mineral deed granted “an undivided l/16th of l/8th interest in and to all of the oil and gas and .other minerals” which might be produced! from described lands.- As in our case, the deed further recited that the land was. subject to an oil and gas lease, and it was. understood and agreed that the conveyance was made subject to the terms of that, lease, “but covered and included l/16th of the l/8th of all oil royalty and gas rentals-due and to be paid under the terms of the: said lease * * * it being understood, that he [grantee] owned a l/16th of l/8th of all the oil and gas and other minerals; under the said lands.” As in our case, the-grantee claimed that he was entitled to a. l/128th part of all the oil and gas produced from the lease. He sought reformation of the deed, alleging that the phrase-“l/16th of l/8th of all the royalty” was-ambiguous as a result of mutual mistake.. As in our case, the trial court sustained the-grantee’s contentions and reformed the instrument accordingly. The Civil Court: of Appeals of Texas affirmed, 183 S.W.2d . The Supreme Court of that State however reversed, stating “the judgment of the trial court fails to subject the interest decreed to Hart to the terms of the existing lease and thereby limit the royalty interest in the oil produced to a 1/128Ü1 of the l/8th royalty paid under the lease * * * or l/1024th of all the oil or other minerals produced under the lease.” The Court was of the opinion that the phrase “l/16th of l/8th of all of the oil royalty” could reasonably have but one meaning, and that is 1/128Ü1 of all the royalty paid under the lease.

In the later case of Watkins v. Slaughter, Tex.Sup, 189 S.W.2d 699, the grantor in a deed reserved a l/16th interest in all oil, gas and other minerals produced therefrom. The deed specifically provided that the grantor should not receive any part of the money rental paid on any future lease, but should receive the royalty reserved only from the actual production of oil and gas or other minerals from the land. The grantee executed the usual 7/8ths oil and gas lease, and the controversy arose whether the reservation of a l/16th interest in all of the oil and gas entitled the grantor to 1 /16th of the gross minerals produced, or l/16th of the l/8th royalty. The trial court held that the grantor was entitled to a “non-participating perpetual royalty interest equivalent to 1/16Ü1 of the gross minerals” produced from the land. The Civil Court of Appeals of Texas affirmed, and the Supreme Court, after first reversing, also affirmed. The court was of the opinion that since, according to the precise terms of the conveyance, the owners of the “l/16th interest” was to be paid only from production, and was not to receive any part of the lease bonus or rentals, the parties manifestly intended that the 1 /16th interest should not be affected by the subsequent execution of an oil and gas lease. But the court was careful to point out that had the granting clause used the words “l/16th royalty interest” instead of “l/16th interest,” the grantor’s interest would have been l/16th of the usual l/8th royalty. The distinction between “l/16th interest in all the oil and gas” that may be produced from land, and “l/16lh of the l/8th royalty interest,” as pointed out in the Watkins case, is exemplified in the still later case of Newman v. Kerlyn Oil Co, Tex.Civ.App, 189 S.W.2d 701. See also O’Fiel v. Brooks, Tex.Civ.App, 98 S.W.2d 266; State Nat. Bank of Corpus Christi v. Morgan, 135 Tex. 509, 143 S.W.2d 757.

However, the Kentucky court in Lively v. Federal Land Bank of Louisville, 296 Ky. 133, 176 S.W.2d 264, 266, could perceive no demonstrable difference between the phrase “l/16th of the oil and gas rights” and “l/16th royalty interest,” when used to define the mineral estate reserved by a vendor of land. In that case, a contract for the purchase of land provided that the grantor should retain a “l/16th of the oil and gas rights for 33 years” from the date of the sale, while the deed of conveyance executed in compliance with the contract, recited that the grantee “retains a l/16th royalty interest in all of the oil and gas” produced from the land for a period of 33 years. The Kentucky court treated the phrases synonymously, holding that “l/16th royalty interest means 1/2 of the royalty” and not 1 /16th of an undivided 1/8th, or 1/128th interest in the royalty. Although not relied upon or cited by the appellee, if this case supports the contentions of appellee, we regard it as in direct conflict with the reasoning of the Oklahoma court in both Manley v. Boling, supra, and Swearingen v. Oldham, supra, as well as the Texas cases, supra.

Under the articles of agreement between Shinn and Buxton, which the appellee contends control the intentions of the parties, Shinn acquired the land in question, subject to an oil and gas lease of record. Thus he became seized only with the usual l/8th royalty interest, and he accordingly agreed to convey Wilver “a royalty interest for 20 years of l/16th of the full l/8th royalty.” The parties further defined the interest as “being a l/128th interest in and to all of the oil and gas produced” from the land. If there is any ambiguity or obscurity in the words used to express the intention of the parties, it is found in the manifest inconsistency which arises when we attempt to reconcile “a l/16th of the l/8th royalty” as being a l/128th interest in and to all of the oil and gas produced from the land, which was at that time encumbered by a recorded 7/8ths oil and gas lease. But the contract was purely executory. It purported to convey nothing as evidenced by the subsequent execution of the mineral deed from Shinn to Wilver in admitted compliance with the contract. When the parties came to fulfill their agreement, they used words which left no doubt of their intention. Shinn granted “an undivided l/128th interest in and to all of the oil and gas” and other minerals that might be produced from the land for a period of 20 years, subject to an oil and gas lease, and to make plain the. interest thus conveyed included “the 1/16-th of the full l/8th of all the oil royalty” paid under the terms of the lease. Thus, the contract was merged in the mineral deed from Shinn to Wilver, and it was undoubtedly examined and accepted by Buxton as in full compliance with the agreement. It is a generally accepted rule that where, as' here, a deed is delivered and accepted in full compliance of a contract to convey, the contract becomes merged in the deed, and is presumed to evidence the ultimate intention of the parties. In the absence of fraud or mistake clearly and manifestly shown, the deed controls the rights of the parties, although the terms thereof may be at variance with the antecedent contract. Douglas v. Douglas, 176 Okl. 378, 56 P.2d 362; Fuqua v. Trego, 47 N.M. 34, 133 P.2d 344; Montclair Trust Co. v. Russell, 135 N.J.Eq. 570, 39 A.2d 641; Thompson v. Reising, 114 Ind.App. 456, 51 N.E.2d 488; Pybus v. Grasso, 317 Mass. 716, 59 N.E.2d 289; Bogert v. Citizens First Nat. Bank & Trust Co., 131 N.J.L. 218, 35 A.2d 706.

To justify the reformation of the deeds made in compliance with the antecedent contract, it must be convincingly clear that they do not conform to the mutual intentions of the parties as expressed in the agreement. Whittaker v. White, 169 Okl. 336, 37 P.2d 247; Ohio Casualty Ins. Co. v. Callaway, 10 Cir., 134 F.2d 788; Setterstrom v. Phelan, 182 Okl. 453, 78 P.2d 415. Here there is absolutely no proof that the deed does not evidence the mutual intention of the parties, except the possible ambiguity appearing in'the contract which, as we have seen, became merged in the deed. This we deem wholly insufficient to justify the reformation of an otherwise unambiguous instrument. To us it is unambiguously plain that by the terms of the agreement and mineral deed, when considered together, Shinn intended to and did convey to Wilver a l/128th part of the mineral estate which he owned in the land at the time the deeds were executed.

This conclusion is dispositive of all issues raised, and the judgment is reversed and remanded with directions to proceed accordingly.