Brown v. Copp

• Court: California Court of Appeals
• Writing for the Court: VALLEE; SHINN, P. J., and WOOD
• Citation: Brown v. Copp, 105 Cal.App.2d 1, 232 P.2d 868 (Cal. App. 1951)
• Decision Date: 21 June 1951
• Parties: BROWN et al. v. COPP et al. Civ. 18055.

Page 868

232 P.2d 868

105 Cal.App.2d 1

BROWN et al. v. COPP et al.

Civ. 18055.

District Court of Appeal, Second District, Division 3, California.

June 21, 1951.

Rex B. Goodcell, Gilbert E. Harris and Lawrence L. Otis, all of Los Angeles, for appellants.

Andrew J. Copp, Jr., H. Dexter McKay, Los Angeles, for respondents.

VALLEE, Justice.

Appeal by plaintiffs from a judgment for defendants Bancroft and Copp in an action for a declaration of plaintiffs' rights in landowner's royalties under a community oil and gas lease. Plaintiffs, as owners of the fee by virtue of a trustee's deed, claim the entire landowner's royalty interest. Defendants claim to be the owners of 20% of the royalty interests.

September 2, 1936, one Moody executed a community oil and gas lease embracing several parcels of realty which he owned. The lease was for 18 months and 'so long as oil or gas or other hydrocarbon substances are produced therefrom in paying quantities.' Oil has been and is produced in commercially paying quantities. Moody's royalty interest was 61.714% of the whole. The lease was recorded August 12, 1937.

December 13, 1938, Moody and wife executed a deed of trust of the realty to secure the payment of a note for $11,400 in favor of Salvation Army. In the note (set out in the deed of trust), Moody agreed to pay the $11,400 'in accordance with the terms and provisions of a certain contract dated December 13, 1938 by and between said Salvation Army and Gene S. Moody and others, which contract is hereby referred to and by this reference made a part of this note * * *. The payment of said indebtedness is to be made at the time and in the manner and from the sources set out and referred to in the agreement above described.' The deed of trust was recorded December 15, 1938.

The contract of December 13, 1938, stated that 'The fund or source referred to in said non-negotiable note is 80% of the 61.714% landowner royalty interest belonging to Gene S. Moody in that certain Community Oil and Gas Lease dated September 2, 1936, made and entered into by and between Gene S. Moody, herein, and others as Lessors * * * which Lease has been assigned to the Superior Oil Company, a corporation, all as more particularly set forth in that certain assignment of royalties dated December 13, 1938, wherein Gene S. Moody is named as assignor and the Salvation Army as assignee. It is mutually agreed that the remaining 20% of such royalties shall continue to be paid to G. A. Smith, also known as Gene S. Moody, or his heirs, executors, administrators or assigns.' The contract was not recorded.

December 13, 1938, Moody assigned to Salvation Army 80% of 61.714% of the landowner's royalty interest in the lease of September 2, 1936. This assignment was recorded December 16, 1938.

December 13, 1938, Moody assigned to Herbert Freston and J. R. Files 20% of 61.714% of the landowner's royalty interest in the lease of September 2, 1936. This assignment was recorded December 20, 1938.

The instruments dated December 13, 1938, were executed concurrently and as a part of one transaction.

May 10, 1941, Moody authorized Herbert Freston and J. R. Files to transfer to Laura Bancroft the 20%. The instrument recited that the assignment to Freston and Files was 'as security for the payment of attorney's fees.' This instrument was not recorded.

October 20, 1941, Herbert Freston and J. R. Files executed a quitclaim deed to defendant Bancroft in which they quitclaimed to her 'all of their right, title, interest, and estate in and to 20% of 61.714% landowner's royalty interest' previously assigned to them. This quitclaim deed was not recorded.

March 21, 1942, Herbert Freston and J. R. Files executed a 'release' which recited the assignment by Moody to them of 20% of 61.714% of the landowner's royalty interest in the lease; that 'while said assignment appears to be absolute in form, it was in fact accepted by the undersigned only as security for an obligation and was only a mortgage'; that the obligation had been fully satisfied; and declared that they 'hereby release that certain mortgage, designated assignment, dated December 13, 1938.' This release was not recorded.

March 20, 1942, defendant Bancroft assigned to defendant Copp 5% of 61.714% of the landowner's royalty interest in the lease of September 2, 1936. This assignment was recorded March 20, 1942.

January 16, 1947, Salvation Army assigned to plaintiffs the beneficial interest in the deed of trust of December 13, 1938. This assignment was recorded February 19, 1947.

January 16, 1947, Salvation Army assigned to plaintiffs 'all right, title and interest under that certain Assignment of Landowners Royalty dated December 13, 1938, executed by Gene S. Moody, Assignor, to Salvation Army.' This assignment was recorded February 19, 1947.

Default was made under the terms of the deed of trust, a trustee's sale was had, and the property sold to plaintiffs. October 28, 1947, the trustee issued its deed by which it granted and conveyed the realty to plaintiffs. This deed was recorded October 29, 1947.

Each conveyance to which we have referred was made for a valuable consideration.

On direct examination plaintiff Leonard H. Brown testified that prior to the time he purchased the beneficial interest in the deed of trust of December 13, 1938, he had no knowledge of any transfers of royalty interests other than to Salvation Army and other than as disclosed by the official records of the county of Los Angeles. On cross-examination he testified as follows: I read the deed of trust before I purchased it from Salvation Army. I noted the reference in the deed of trust to another contract according to which payments were to be made for the satisfaction of the obligation of the deed of trust and note. I noticed that it referred to a contract dated December 13, 1938. I looked that up, '[a]fter I got the assignment The Salvation Army told me that was the assignment of the landowner's royalty to them.' I noticed that the document itself stated it was 80% of 61.714% of the landowner's royalty. I did not make any inquiry at tht time as to who were the owners of the other 20%. To the best of my knowledge, I first ascertained who held the other 20% after I foreclosed the property. I bought without investigation in that respect. After I purchased the property at the trustee's sale, I made a demand upon the bank to pay the 20%, and the bank told me who had been receiving the 20%.

The court found, concluded, and adjudged that plaintiffs are the owners of 80% of 61.714% of the landowner's royalty interest; that they have no right, title, or interest in the 20%; and that the respondents are the owners thereof. Plaintiffs appeal.

Plaintiffs claim that the finding that they have no right, title, or interest in the 20% is not supported by the evidence. They argue that the trustee's deed of October 28, 1947, conveyed to them 61.714% of the landowner's royalty interest in the lease. We do not agree.

The oil lease was executed by Moody on September 2, 1936. Having leased the realty for oil and gas purposes he was then vested with three distinct and separate interests--1) the fee simple title to the surface estate, 2) the reserved royalty interest, and 3) the possibility of a reverter of the minerals. 8 Cal.Jur. 10-Yr. Supp. 732, § 122, and cases there cited. Each of these interests is an interest in real property, alienable, and may be conveyed separately and independently of the others. La Laguna Ranch Co. v. Dodge, 18 Cal.2d 132, 135, 114 P.2d 351, 135 A.L.R. 546; Standard Oil Co. v. John P. Mills Organization, 3 Cal.2d 128, 132, 43 P.2d 797. As the lease was a community lease, Moody, and each of the other landowners, conveyed to his colessors a percentage interest in all oil produced on his land by the lessee during the life of the lease, which is an estate in real property. This estate does not follow the conveyance of the lessor's land but can only be conveyed by a specific conveyance of that interest. Tanner v. Title Ins. & Trust Co., 20 Cal.2d 814, 820, 129 P.2d 383; Friedrich v. Roland, 95 Cal.App.2d 543, 549, § 213 P.2d 423.

A deed granting a general estate in land conveys all oil rights in the land to the grantee as an incident to the conveyance, except as such rights have previously been assigned by instruments of which such grantee had actual or constructive notice, or are reserved by the deed. Callahan v. Martin, 3 Cal.2d 110, 113, 114, 43 P.2d 788, 101 A.L.R. 871; Standard Oil Co. v. John P. Mills Organization, 3 Cal.2d 128, 132, 43 P.2d 797. Generally, a valid deed of trust vests the whole estate in the trustee, subject to the execution of the trust. Civ.Code, § 863. However, every estate not embraced in an express trust, and not otherwise disposed of, is left in the author of the trust or his successors. Civ.Code, § 866. A trustee's deed conveys the absolute legal title to the purchaser, as against all claims subordinate to the deed of trust, but subject to all prior rights, interests, and titles. Streiff v. Darlington, 9 Cal.2d 42, 45, 68 P.2d 728. A trustee's deed does not carry to the grantee any better right or title than the trustors had when they executed the deed of trust. Roberts v. Colyear, 179 Cal. 669, 672, 180 P. 937.

The record of an instrument is constructive notice of its contents to subsequent purchasers. Civ.Code, § 1213. The rule contemplates only conveyances by one having the record title to the property conveyed. Dobbins v. Economic Gas Co., 182 Cal. 616, 620, 189 P. 1073. Recordation of an assignment of an interest in the minerals 'imparts constructive notice to a subsequent grantee of the fee in the general estate.' Callahan v. Martin, 3 Cal.2d 110, 113, 43 P.2d 788, 790, 101 A.L.R. 871. Whenever a party has information or knowledge of extraneous facts which of themselves do not amount to or tend to show actual notice but which are sufficient to put a reasonably prudent man upon inquiry...