Arnett v. Stephens

• Decision Date: 12 June 1923
• Parties: ARNETT ET AL. v. STEPHENS ET AL.
• Court: Kentucky Court of Appeals

251 S.W. 947

199 Ky. 730

ARNETT ET AL. v. STEPHENS ET AL.

Court of Appeals of Kentucky.

June 12, 1923

Appeal from Circuit Court, Magoffin County.

Action by J. H. Arnett and others against E. L. Stephens and others to quiet title to an oil and gas lease. Judgment for defendants, and plaintiffs appeal. Reversed.

Dysard & Adamson and J. B. Adamson, all of Ashland, for appellants.

E. W Pendleton, of Prestonsburg, for appellees.

SETTLE J.

On July 12, 1916, J. W. Lemaster and wife executed and delivered to A. H. Adams, for a valuable consideration, an oil and gas lease on a tract of land in Magoffin county supposed to contain 200 acres. The property is described as follows:

"Situated in State Road district, Magoffin county, Kentucky, on the waters of State Road fork of Licking river, and bounded as follows: On the north by the lands of Abel Caudill; on the east by the lands of Warrick Bailey; on the south by the lands of P. E. Caudill; on the west by the lands of Abel Caudill, containing 200 acres, more or less."

By its terms this lease was to run for ten years, provided certain rentals were paid quarterly in advance. This lease was assigned by A. H. Adams to N. P. Howard, by the following writing:

"Know all men by these presents that I, A. H. Adams, for and in consideration of $1 and other good and valuable considerations, the receipt of which is hereby acknowledged, have this 14th day of March, 1918, transferred, conveyed, and sold unto N. P. Howard all my right, title, and interest in the foregoing lease."

This assignment was subscribed by A. H. Adams, acknowledged by him before a notary public and afterwards duly recorded. On June 16, 1919, N. P. Howard assigned the same lease to V. M. Higgins for the recited consideration of $1, and this transfer, in so far as pertinent, reads: "Do hereby sell, convey, and transfer all my right, title, and interest in a certain oil and gas lease," etc., and it is signed by Howard and acknowledged before a notary public. On the 19th day of June, 1919, Higgins assigned the said lease to Samuel J. Patrick for the recited consideration of $1, using these words: "Do hereby sell, convey, and transfer all my right, title, and interest in and to a certain oil and gas lease," etc.

On July 19, 1919, Lemasters and wife, who owned the land, executed and delivered to H. B. Adams a lease on a small tract of land supposed to contain 20 acres as recited in the lease, but which in fact contains only 5 or 6 acres, describing the lease by metes and bounds. This last boundary lies within the boundary described in the lease which Lemaster and wife made to A. H. Adams in 1916, if the original lease is read as construed by Patrick, but is not so included if the construction of Adams' is correct. This oil territory having proven valuable, the holders of the two lease contracts are litigating their rights in this action, which was brought by the holders of the junior lease against the holders of the senior lease, praying to be adjudged the owners of the small lease, with all the rights and privileges granted by virtue of their contract, and that their title be quieted, and they pray for all general and proper relief. The defendants E. L. Stephens, Samuel J. Patrick, A. B. Patrick, and the Model Oil Company, the first three being directors of the latter, filed a general demurrer to the petition and without waiving it filed an answer and counterclaim setting forth the granting of the lease by Lemaster in 1916, and the various assignments made thereof as above set out, and further pleaded that after the granting of the lease by Lemaster in 1916, and after the lease had been assigned several times, Lemaster and wife executed an oil and gas lease on the small portion of the land theretofore leased by Lemaster and wife to A. H. Adams in 1916, and further pleaded that the small lease was wholly embraced within the original lease; that the original lease was placed on record long before the execution of the junior lease, and that appellants well knew of its existence long before they acquired any interest in the junior lease. After averring that the holders of the junior lease were about to and would enter upon the property in controversy and begin to drill oil wells unless enjoined by the court, the answer of defendants prayed to be adjudged the owners of the entire lease as described in the original contract and for an injunction against the holders of the junior lease to prevent them from entering upon or drilling said lease. The cause being submitted, the trial court dismissed the plaintiffs' petition and entered judgment declaring the original lease made by Lemaster to A. H. Adams, in 1916, valid and covering all of the property of Lemaster including the lands embraced in the junior lease. From this judgment the holders of the junior lease appeal.

It is the contention of appellants in their pleading and by Lemaster in his intervening petition, that the small boundary of land embraced in the junior lease was by mutual mistake of the landowner and the grantee in the original lease included within the boundary leased by the original writing; that it should not have been so included because the landowner and the lessee agreed upon a boundary excluding this part now covered by the junior lease. The evidence upon this point shows that Lemaster, an unlettered man, when approached for a lease upon his land by A. H. Adams, proposed to lease him a certain part of his lands embraced in a deed to him by Rachel Gullitt and heirs, but specifically reserved another tract which had been conveyed to him by Abel Caudill, and this last tract is the one upon which the junior lease was granted. Both Lemaster, the grantor, and Adams, the grantee, say that it was distinctly understood between them that the lease was to cover only the Gullitt tract and was not to cover the Abel Caudill tract. This is also proved by other witnesses. Appellants, therefore, contend that as appellees were not innocent purchasers, for reasons hereinafter set out, appellants were entitled to a reformation of the lease so as to make that instrument correctly express the terms of the contract. We have in many instances reformed written instruments like the one under consideration, which through mutual mistake of the contracting parties failed to express the terms of the contract actually entered into. Neale v. Wright, 130 Ky. 146, 112 S.W. 1115; Hill v. Pettit, 66 S.W. 190, 23 Ky. Law Rep. 2001; Harvey Sanders v. Daniel Wilson, 6 Ky. Op. 572; Mattingly v. Speaks, 4 Bush, 316.

In answer to appellants' contention that there was a mutual mistake between the original lessors and his grantee, Adams, the appellees now say the lease was transferred to them, and they took and received it, paying a valuable consideration therefor, without knowledge of information of any defect or insufficiency therein, and as innocent purchasers are entitled to protection. In avoidance of this appellants say that the transfer or assignment of the lease from A. H. Adams to Howard and from Howard to V. M. Higgins and from B. M. Higgins to Sam J. Patrick and from Sam J. Patrick to the Model Oil Company, a corporation, were mere quitclaims, or transfer of such rights, title and interest as belonged to the assignors at the time of the making of the several assignments and no more, and did not afford protection to appellees as bona fide purchasers as is usually the case when real property is conveyed by deed clear on its face; and in making this contention they rely upon the broad view taken in a great number of cases, where such assignments or quitclaim deeds have passed between the parties, holding that only the title or interest of the grantor at the time the deed is made is purported to be conveyed, and that one claiming under such a deed or assignment cannot claim protection as a bona fide purchaser, or any greater interest than his grantor then in fact had, and therefore takes subject to outstanding equities and prior unrecorded deeds. See 27 R.C.L. 733; 39 Cyc. 1693, 1694; Garrett v. Christopher, 74 Tex. 453, 12 S.W. 67, 15 Am.St.Rep. 850; 12 Am.St.Rep. 237; 18 C.J. 314, 315; 19 Ann.Cas. 320, notes; 29 R.C.L. 2.

The assignment transferring the leasehold from Adams to Howard and thence through mesne assignments to the corporation was no more than a quitclaim if it amounted to even that much. The assignee of the lease received just such rights as the assignor had and no more. Thornton on Oil and Gas, p. 352. These writings purported to invest the assignee with only such right, title, and interest as the assignor had at the time of the making of the assignment, and if he had no title or his title was defective and was subject to outstanding equities, the assignee was in no better position to defend than was his assignor. This is the rule established and faithfully adhered to by courts of last resort in a majority of the states, as well as in the U.S. Supreme Court and other federal courts. If then, appellees, by reason of taking an assignment of the right, title, and interest which A. H Adams, the original grantee in the lease, had in the leasehold, and if, as contended by appellees, the described boundary through mutual mistake of the parties to the original lease, included more land than was intended and more than it was agreed said lease should cover, then the appellee corporation is in no better position to defend than was A. H. Adams, the original grantee who admits that through mutual mistake the said lease contract did describe and include more land than was intended to be leased. The evidence on this point is quite strong. An assignor of a lease, unless by special covenant, is not a warrantor of title, and the assignee does not occupy the position of a bona fide...