American Guar. Co. v. Sunset Realty & Planting Co.

• Decision Date: 06 November 1944
• Docket Number: 37350,37351.
• Citation: 23 So.2d 409,208 La. 772
• Court: Louisiana Supreme Court
• Parties: AMERICAN GUARANTY CO. v. SUNSET REALTY & PLANTING CO., Inc., et al.

23 So.2d 409

208 La. 772

AMERICAN GUARANTY CO. v. SUNSET REALTY & PLANTING CO., Inc., et al.

No. 37350, 37351.

Supreme Court of Louisiana

November 6, 1944

On Rehearing May 2, 1945.

Second Rehearing Denied June 29, 1945. [Copyrighted Material Omitted]

Appeal from Twenty-Fourth Judicial District Court Parish of St. Charles; L. Robert Rivarde, Judge.

Ellis Barranger & Suthon, of New Orleans, Frank B. Ellis, of Baton Rouge, Frank H. Langridge, of Gretna, and Charles D. Lancaster, of New Orleans, for plaintiff-appellant.

Milling, Godchaux, Saal & Milling, Chas. H. Blish, Roberts C. Milling, and M. Truman Woodward, Jr., all of New Orleans, Herold, Cousin & Herold and Sumter P. Cousin, all of Shreveport, and Dufour, St. Paul & Levy, John St. Paul, Jr., and Montgomery, Montgomery & Fenner, all of New Orleans, for defendant-appellee.

PONDER Justice.

The plaintiff, the American Guaranty Company, brought two suits to set aside two quitclaim deeds on the grounds that they had been obtained through fraud. The two suits were consolidated in the lower court for trial, and separate judgments were rendered by the trial judge, rejecting the plaintiff's demands. The plaintiff has appealed. The cases were consolidated for hearing on the appeal with the understanding that separate judgments would be rendered.

The two consolidated suits involved herein bear Nos. 37,350 and 37,351 of the docket of this Court, and we shall hereafter refer to these suits as Suit No. 37,350 and Suit No. 37,351 for brevity.

Suit No. 37,350 was brought against C. B. Small, Sunset Realty & Planting Company, Inc., the Texas Company and Hibernia Bank & Trust Company, in Liquidation, to set aside a quitclaim deed executed on November 15, 1939, by the plaintiff in favor of C. B. Small, covering Lot 53 and Lots 104 to 119, inclusive, of Sub-District No. 1 of the Sunset Drainage District in St. Charles Parish. The consideration recited in the quitclaim deed was $5,000 cash and $47,000 to be paid the plaintiff out of one-forty-eighth of the first oil, gas or other production from the property.

Suit No. 37,351 was brought against the same defendants and others, who had acquired rights from these defendants, to set aside a quitclaim deed executed on November 15, 1939, by the plaintiff in favor of C. B. Small, covering Lots 34 to 52, inclusive, and Lots 530 to 533, inclusive, in the Sunset Drainage District No. 1. This deed contains a general or omnibus clause whereby the plaintiff released and quitclaimed all of its rights, title and claims to all the property acquired by the plaintiff from C. J. Sorrells in a certain deed of August 8, 1921. The consideration recited in this quitclaim deed was $2,000 cash and the payment of a royalty to the plaintiff equal to one-two-hundredths (1/200ths) of the whole of the oil, gas or other minerals produced from Lots 34 to 52, inclusive, and Lots 530 to 533, inclusive. For the sake of brevity and certainty, we shall hereafter refer to the general or omnibus clause contained in this quitclaim deed as the omnibus clause.

The plaintiff contends that C. B. Small, acting for himself and the other defendants, fraudulently obtained the quitclaim deeds by misrepresentation and suppression of the true facts in that:

1. Defendant C. B. Small advised plaintiff that the well known as LL&E#1 in the Paradis area was a gas well producing some condensate or distillate, when in truth and in fact said well was an oil well, and represented further that the properties covered by the quitclaim deed were capable of producing only gas when defendants knew said properties were bound to produce great quantities of oil.

2. Defendant C. B. Small represented to plaintiff that Sunset Realty & Planting Company, Inc., had a good and paramount title to the property described above, whereas in truth and in fact said Sunset Realty & Planting Company, Inc., had no title whatever to part of said property and a doubtful claim on the remainder.

3. On the day following the execution of the quitclaim deeds, the defendant C. B. Small substituted a redrafted copy in place of one of the original quitclaim deeds, wherein the omnibus clause was surreptitiously inserted without the knowledge of the plaintiff.

The defendants take the position that the well was in fact a gas well producing some condensate and distillate, and that at the time the representations were made, the defendants nor anyone else knew that the area covered by the quitclaim deed would produce oil in paying quantities. The defendants admit that Small represented to the plaintiff that the Sunset Realty & Planting Company, Inc., had a paramount title to some of the properties described in the quitclaim deeds and assert that the representation is true. The defendants also admit that Small requested the officials of the plaintiff company to sign another quitclaim deed on November 16, 1939, similar in verbiage and import to the quitclaim deed of November 15, 1939, in order to correct the spelling of Small's name and change the attestation of the secretary of the company, but assert that in all other respects the instrument was neither changed nor altered.

On October 6, 1938, the Sunset Realty & Planting Company, Inc., hereinafter referred to as Sunset, granted to the Texas Company a mineral lease on a large tract of land which it owned in St. Charles Parish. A part of this leased property is involved in these suits. At the time the mineral lease was granted, the Texas Company held mineral leases on adjoining lands, particularly those of the Louisiana Land & Exploration Company, lying across the Southern Pacific Railway right-of-way from the Sunset acreage. The Texas Company began drilling operations in November, 1938, on the lands of the Louisiana Land & Exploration Company near the Southern Pacific right-of-way and some eight hundred feet from the Sunset property. The well was completed in the month of June, 1939, as a gas distillate well or, in other words, as a well producing gas and distillate. This well will hereinafter be referred to as LL&E#1.

Prior to the completion of this well, C. B. Small contacted the officers of Sunset, who were also the officials of the State Banking Department engaged in liquidating the Hibernia Bank & Trust Company, which owned an interest in Sunset as well as a large mortgage indebtedness against it, with the view of purchasing royalty interests. In examining Sunset's title to the property, Small's attorney discovered in the records of St. Charles Parish a deed dated August 8, 1921, whereby C. J. Sorrells had conveyed the lands to the American Guaranty Company. The attorney informed Small that this deed had the effect of casting a cloud upon Sunset's title to these lands. Small purchased the royalty interest from Sunset with the understanding that a slander of title suit would be brought against the plaintiff company, the American Guaranty Company, for the purpose of removing the cloud. Pursuant to this agreement or understanding, deeds were executed by Sunset conveying the royalty interest to Small and placed in escrow pending the determination of the slander of title suit. Sunset brought the suit against the plaintiff in conformity with the agreement. While this suit was pending, Small endeavored to locate the plaintiff company. On being informed that the plaintiff was a Delaware corporation, Small found, after investigation, that the company had been inactive for approximately sixteen years, and its last known president was Mr. C. I. Link of Denver, Colorado. He also found that the plaintiff was in arrears in the payment of its franchise tax, and it would be necessary to have the company reinstated before it would have any authority to act. He immediately contacted Mr. C. I. Link with the view of acquiring a quitclaim deed from the plaintiff on lots 53 and 104 to 119, inclusive. After negotiations with Link, an agreement was entered into whereby Small was to pay all the expenses for having the plaintiff corporation reinstated with the understanding that the plaintiff for a recited consideration would execute a quitclaim deed to Small covering these lots. The negotiations between Link and Small continued for some three months and finally terminated in the execution of the two quitclaim deeds involved in these suits.

While the negotiations were in progress and prior to the execution of the quitclaim deeds, the Texas Company began drilling operations of another well on the lands of the Louisiana Land and Exploration Company, more than one and one-fourth miles from the Sunset acreage. In the latter part of October, 1939, the well was cored and showed an oil sand. The well was brought in as a producing oil well on November 26, 1939, after the execution of the quitclaim deeds.

A short time after the execution of the quitclaim deeds, Tom L. Sessions and other parties contacted the plaintiff with the view of setting aside the quitclaim deeds and acquiring a mineral lease and royalty interests. The plaintiff and these parties entered into an agreement whereby Link was paid $10,000; a mineral lease was executed to Sessions; and certain mineral rights were transferred. In this agreement, Sessions was to pay the expenses of all litigation necessary to cancel the quitclaim deeds, and the attorneys selected by him were to receive certain interests in the property and the royalties for their services. It is specifically provided in the agreement and the other instruments executed in furtherance thereof that the plaintiff does not warrant the title to the land.

Thereafter, these suits were brought. At the time these suits were filed, the property had become a part of a proven oil field.

The plaintiff contends that it was misled in executing the quitclaim deeds by...