Standard Oil Co. v. Webb

88 So. 808, 149 La. 245, 1921 La. LEXIS 1411

• Court: Supreme Court of Louisiana
• Decided: May 2, 1921
• Docket: No. 22687
• Status: Published

Opinions

Statement of the Case.

MONROE, C. J.

This case is before the court on appeal, by defendant, from a judgment condemning him to pay plaintiff $2,700 with interest and costs.

The facts disclosed by the record are as follows:

On February 24, 1909, Albert Leonard, by one contract, and the Huron Land Company and Clarence Ellerbie, by another contract, in the one instance, for $680 cash and further considerations, and in the other, for $1,306.80 cash and further considerations, granted, bargained, sold, and conveyed to the Busch-Everett Company all of the oil and gas, in and under certain tracts of land in Caddo parish aggregating over 7,000 acres, together with rights of ingress and egress, upon'and from the land, all subject to and upon other terms and conditions usual in such contracts, including the condition that the grant should be forfeited unless the grantee should drill a well for gas or oil within a year; provided that it might prevent such forfeiture, and keep the contract alive, during five additional years, by making quarterly payments, in the one ease, of $170, and, in the other, of $326.-50. It was agreed that, in the event of the discovery of oil or gas, the grantor should receive one-eighth of the oil saved on the premises, and a certain amount for each gas well and free use of gas for certain purposes if both oil and gas should be discovered, saved, and used, etc.

“This grant” (the contract reads) “is not intended as a mere franchise, but it is intended as a conveyance of the property above described, for the purposes herein mentioned, and it is so understood by both parties to the agreement.”

The grantee, having drilled no well within the year, availed itself of the right agreed on, to extend the term of the contract by making the quarterly payments, as therein provided, which it' continued to make up to, and inclusive of, thé quarter beginning on May 24 (or 25th) 1913, or a total of say, $1,-985, after which they were discontinued by reason of the fact that Leonard (who appears-to have succeeded to the rights of his' co-grantor) refused to receive them, on the ground that the conditions of the contracts were potestative and neither party was-bound by them; and thereupon, on August 26 and 29, respectively, the grantors instituted suits in the district court to have the nullity, thus alleged, decreed. In the meantime, on December 9, 1912, while the quarterly payments were being received, without objection, Leonard sold the land here in controversy — which was included in the contract with the Busch-Everett-Company — to the defendant herein, by an act in which the-recited consideration is $29,400, of which $5,000 is said to have been paid in cash and the balance by notes, secured by mortgage, and in which, also, not only was the mortgage certificate waived, but, also the production of the tax receipts in default whereof' notaries are prohibited from executing such instruments.”

In the meantime, also (that is to say, on August 27, 1913), the Busch-Everett Company had transferred the contracts in question, with others," to the Passadena Petroleum Company, by which they are said to have been subsequently transferred to the Producer’s Oil Company. Thereafter, on March 13, 1915, while the suits so instituted by the grantors of the Busch-Everett Company were-pending in the district court, the defendant entered into a contract with plaintiff with respect to the property here in question (being what is called an oil and mineral lease, in about same form as that between, his author in title and the Busch-Everett Company) for the consideration of $1,800, paid in cash, and the other considerations-usual in such cases, and with a similar condition in regard to the rights of the grantee to prevent forfeiture by making quarterly payments, and lie received two such payments, of $450 each, making' the total received by him the $2,700 for the reimbursement of which this suit is brought. Defendant was aware at that time of the existing lease to the Busch-Everett Company, which was recorded in the proper office; and of the pending litigation concerning it; but he did not impart that information to plaintiff, and plaintiff did not obtain it until afterwards; the explanation of its ignorance of those matters being found in the testimony of the late Judge J. C. Pugh, who, having been the only person, save the defendant, who was familiar with the circumstances leading to that contract, withdrew from the ease, as plaintiff’s counsel, and gave his testimony, to the following effect; He met defendant on March 13, 1915, and leárned from him that he was trying to lease his property but had been unable to do so. He informed him that plaintiff had some leases in that neighborhood and that he believed plaintiff could handle it, and he took defendant to plaintiff’s office, in Shreveport, and introduced him to Mr. Baird, “the lease man,” whom he told that defendant had land to lease (for oil and gas purposes), at $3 an acre. Baird agreed to take the lease at that price, and asked witness whether he was going to examine the title, to which witness replied that he had known Mr. Webb for many years, and that “{hey” (meaning the plaintiff company) “could rely on anything that he said.” Baird then asked defendant if there was anything against the property, and he replied, substantially, that “Mr. Leonard had a mortgage,” and witness then stated that the mortgage could Be arranged, either by Mr. Leonard subordinating, or signing an agreement not to foreclose, it within a specified time;, and that such an arrangement was made (Mr. Leonard’s written agreement not to foreclose within three years being in evidence); and that, the contract was thereupon entered into. Witness further testifies that Mr. Clark, plaintiff’s general manager, was not consulted, and that he afterwards told witness' that he had received information to the effect that the property leased was embraced within what was known as the “Busch-Everett lease,” and suggested that witness inquire into it; and that witness learned, upon inquiring from the title man of the Producers’ Oil Company, that the description in its lease was vague and that he had ordered an abstract of the title and would later, advise witness whether it covered the property leased by defendant to plaintiff; that considerable delay ensued, and that, finally, witness undertook an independent investigation, but that, a year having elapsed, plaintiff began making the quarterly payments required to prevent forfeiture; that the abstract company reported to plaintiff on September 4, 1916 (the report being in evidence and showing that defendant’s lease to plaintiff included the land which had been leased to the Busch-Everett Company); that witness advised that it would be necessary to drill a well on the property,' but that plaintiff was notified by the Producers’ Oil Company that it -wouict hold plaintiff liable in damages if such drilling were prosecuted; and that witness was satisfied, from personal examination, that the land covered by plaintiff’s lease from defendants was included in the Busch-Everett lease.

That, in the meantime, the suits brought by Leonard and Ellerbie were pending in the Supreme Court on rehearing (should be an application for rehearing); there having been judgments for defendant in the trial courts Which had been affirmed, by the Supreme Court (and, it may be added, the rehearing was refused by this court on October 6, 1916); that being the situation, witness suggested to Mr. Webb that if he would agree to return the money, in the event of the denial of the rehearing, plaintiff would continue to make the quarterly payments, leaving the question of the return of the money previously paid to be determined in a friendly suit, .to-which suggestion Webb replied that he would consult Mr. Leonard, and that, a few days later, witness received a letter, signed by Webb but in the handwriting of Leonard, in which Webb denied that he was under obligation to return any money received by him. Witness further testifies that, in a number of interviews that he had with him, Webb asserted that there was no lease on the property in question and that he had a letter from Leonard to that effect; and that he (witness) was satisfied that Webb was acting in good faith, and did not really know, when he made the lease to plaintiff, that the property was under lease to the Busch-Everctt people.

Defendant testifies that Leonard and Ellerbie informed him that the term of the Busch-Everett lease had expired and that the land was free to be leased by him. His cross-examination runs, in part, as follows:

“Did you tell them (Standard Oil people, when negotiating the lease) that Mr. Leonard had a mortgage on the property? A. They put me off that evening — to examine records. They said they would examine the records. Q. Did you tell them that Mr. Leonard had a mortgage on the property. A. I could not say that I did or did not, at that time; if they had asked me the direct question, I would have told them, Yes. * '* * Q. Lou did not know anything about the suit on this particular piece of land? (Objection. Overruled.) A. Yes, I heard there was a suit filed, but Mr. Leonard informed me that it was over with and the land was now free to be leased. He being a lawyer, I thought it right. * * * Q. You did not state to the Standard, at. that time — you did not mention anything about the suit? A. No, sir; I thought they all knew it. The oil companies have maps, and all those maps show the Sand Beach Plantation, and where the Busch-Everett lease was. Oth.er companies were leasing land this same way: Other people leased some of this land,’the same way.”

Opinion.

It- will. be seen from the foregoing statement that the six-year terms of the Busch-Everett leases which were to have been secured to the lessee (during five of the years) by the quarterly payments would, ordinarily, and in the event of failure to discover oil or gas have expired on, say, February 24 (or 25), 1915, but that the lessors, in August, 1913, interrupted the payments by refusing to receive them and by suing to have the leases decreed null for potestative conditions and want of mutuality; and that the litigation so inaugurated remained pending until October, 1916, when this court refused to grant a rehearing, thereby making final the judgments handed down in June, whereby plaintiffs’ demands were rejected and their suits dismissed, with a reservation of their right to require the sinking of wells on the leased premises, as stipulated in the contract, within a reasonable time.

Defendant’s position is that his rights are to be determined as of the date of his acquisition of the property, considered with reference to the incumbrances with which it was burdened, at that time, to wit, December 9, 1915; that under the Busch-Everett leases, which then incumbered it, that company was entitled to hold the property, for oil and gas operations, at most, for six years from the date of its leases, or, say, until February 24 (or 25), 1915, after which it was- competent for him as owner of the land and minerals to disregard these leases, as though they had never been recorded; and that from December 9, 1912, it was incompetent for Leonard, his vendor, by any act of his, whether for or against the Busch-Everett Company, to increase the burden imposed by its leases, upon that date.

[2] The weakness of the position thus stated lies in the omission of certain elements needed for its foundation. It is beyond dispute that, by a contract, executed and recorded nearly four years prior to defendant’s acquisition" of the property in question, Leonard had granted, "sold and conveyed all the oil and gas therein and thereunder to the Busch-Everett Company, and had received part of the price in cash and part in quarterly installments from the date of the contract, and had continued to receive them after the purported sale of the same property .to defendant (which is remarkable, considering that he had made the sale to defendant). So far, therefore, as those minerals were concerned (and we are here concerned with nothing else), he had nothing to sell to defendant, save an interest, contingent upon the failure of the parties to the earlier contract to comply with their respective obligations, and the contract spoke from the record to that effect. So that, when defendant says that Leonard could not, after his (defendant’s) acquisition of the property, prejudice his rights by bringing suit to annul the contract with the Busch-Everett - Company, he uses a sword which cuts both ways, since the argument also means that, after the Busch-Everett Company had acquired the rights conferred on it, by its prior contract, Leonard had no power to prejudice these rights by selling them to defendant. The most that he could do was to sell the land subject to the incumbrances, such as they were, with which it was then burdened; and the land, with its then incumbrances, was all that defendant acquired, or could acquire. If, for instance, upon the last day of the six years during which the Busch-Everett Company had the recorded right to explore for oil and gas, these minerals had been discovered in such quantities that they could be profitably produced for a century, the discoverer, or its assigns, would have been entitled to produce them for a century.

[1, 3] Having conveyed the minerals in question, with the right of ingress and egress upon and from the land, to the Busch-Everett Company, Leonard had 'no standing to interfere with his grantee in the enjoyment of the rights so conveyed, unless for some default on its part or illegality in the contract. He made that experiment, ■ -but it failed; and, as his contract was recorded, his successor in title is in-no better-position; since he, as well as Leonard, is a? much bound by one of the stipulations of .the recorded contract as by another. The law requiring rights asserted against immovable property to be made of record, in order, that, they may affect third persons, contains no-specification of the language in which such record shall be framed; and the notice' so-required, for the benefit of third persons, is sufficient if such persons are thereby reasonably informed of the nature and substance, or the amount in money, of the right. If, then, in this instance, the Busch-Everett contract sufficiently informed defendant that, in the event of the discovery, during its term, and by that -company or its assigns, of oil and gas, the right of the discoverer to operate under the contract for an indefinite period would be secured; equally did that contract sufficiently inform him that the Busch-Everett Company and’ its assigns were entitled to ingress and egress to and from the property for all the purposes of the contract, and for the term, and extended term, as therein provided, without hindrance or interruption from the grantor; and hence, as Leonard, if before the court, could not be heard to assert that the interruption, caused by his act, should be included in the term'of the contract, as time to be charged to his grantee, neither can the defendant, claiming under him, and informed, in the manner required by law, of his obligation in the premises,- be so heard.

It may be here remarked that, so far. as we can see, the suits to annul the lease-of the land here in question could have inured to the benefit of no one else but the defendant, since, according to the record, he had bought ■the land outright and his title purports to include all that is above or below the surface and leaves no interest whatever in his vendor. It could not, however, include the recorded rights already vested in a third person, which he assumed to sell to the plaintiff herein, and for which he received payments ; and, as plaintiff took nothing by those payments, the money so paid should be reimbursed by defendant, as herein prayed.

The judgment appealed from, which was in favor of plaintiff, is therefore affirmed.