Dilworth v. Fortier

• Court: Oklahoma Supreme Court
• Writing for the Court: BLACKBIRD; DAVISON; JACKSON
• Citation: Dilworth v. Fortier, 354 P.2d 1091 (Okla. 1960)
• Decision Date: 12 January 1960
• Docket Number: No. 37965,37965
• Parties: Charles B. DILWORTH et al., Plaintiffs in Error, v. Leo R. FORTIER et al., Defendants in Error.

Page 1091

354 P.2d 1091

1960 OK 5

Charles B. DILWORTH et al., Plaintiffs in Error, v. Leo R. FORTIER et al., Defendants in Error.

No. 37965.

Supreme Court of Oklahoma.

Jan. 12, 1960.

Rehearing Denied March 22, 1960.

Application for Leave to File Second Petition for Rehearing

Denied Sept. 13, 1960.

Syllabus by the Court

1. When the ownership of an oil and gas mining, or mineral, estate and other interests in the production of such minerals, under a lease on a tract of land, has been severed from ownership of the surface and the rest of the whole estate in said tract, and becomes severed for tax purposes by production of said minerals under said lease, and such production continues and is continually subject to Oklahoma's Gross Production Tax for each year, for which there was assessed against said tract, ad valorem taxes that became delinquent, and for which the tract was sold at tax sales and resale; where, some years after the resale, production under said lease ceased and the lease was abandoned and released, the above-described severed interests in the oil and gas did not accrue to the tax resale purchaser, since said interests and mineral estate, being subject to the gross production tax in lieu of ad valorem taxes, were not affected by the ad valorem tax liens, sales, and resale deed. And, the fact that said lease's only production upon which the gross production tax was paid, was gas, or oil, does not change this result.

2. In the situation described above, the right to lease being pre-empted and being withheld from the tax sales and resale as a part of the mineral estate, no such right ever vested (after expiration of the lease) in the resale purchaser, but reverted to those who owned the leased land when it was sold for the delinquent ad valorem taxes, despite the wording of the royalty reservation involved.

Appeal from the District Court of Kay County; C. L. Armstrong, Judge.

Action by those claiming certain mineral estates, and nonparticipating oil and gas payment interests under a quarter section of land, to quiet their title against other parties deraigning their claims of title to said tract from its purchaser at a tax resale. After judgment determining the rights, title and interests of the various parties, both the plaintiffs, and some of the defendants, appeal. Affirmed in part: reversed in part, and remanded.

Janicke & Herlocker, Winfield, Kan., Rodgers & Gurley, and James E. Burger, Blackwell, Lowell Doggett, Ponca City, Neal A. Sullivan, Newkirk, for plaintiffs in error.

I. D. Ross, and David Ross, of Ross & Ross, Newkirk, for defendants in error, Earl Trenary, Floyd Trenary, Margalee Hartman Gogos, Minnie Myra Woodruff, and Charles L. Hartman.

Robinson, Shipp, Robertson & Barnes, by T. Murray Robinson, Oklahoma City, and Jochems, Sargent & Blaes, by Robert G. Braden, Wichita, Kan., for defendants in error, National Cooperative Refinery Ass'n, Fortier and Wright, John Roy Evans, W. R. Yeager and M. P. Yeager.

BLACKBIRD, Justice.

This appeal concerns a quiet title action involving a quarter section of land originally described as the Northeast Quarter of Section 5, Township 27 North, Range 1 West, in Kay County, Oklahoma.

One Charles E. Dilworth homesteaded this tract (usually referred to herein merely by the abbreviation 'NE') and thereafter, on September 15, 1913, he and his wife executed and delivered to Hercules Oil and Gas Company an oil and gas lease covering it, for a period of twenty (20) years 'and so much longer as oil or gas is found thereon in paying quantities.' The lease (which together with its leasehold will hereinafter usually be referred to merely as the 'Hercules Lease') reserved to said lessors one-eighth of the oil produced and saved from the leased premises, and provided, among other things, that if 'gas only' was found 'in quantities large enough to transport * * *', then lessee would deposit to lessor's credit, for the produce of each well so transported, $100 each year after the completion of each such well. The deposit so provided will hereinafter be referred to as 'the gas payment.'

After an assignee of the above described lease, called Jones & Buell Company, had become its owner, the Dilworths, by instrument dated October 7, 1915, conveyed to one D. S. Rose, subject to said lease, an undivided one-half interest 'in and to all the oil and gas and the oil and gas rights in or under * * *' the West Half of the leased tract. This conveyance specifically contemplated the grantee, Rose, receiving one-half of the royalties to be paid under the existing lease, and that he and the Dilworths would be equal tenants in common in the mineral rights, after said Hercules Lease had expired or 'become void.' Such an interest will hereinafter be referred to as a 'mineral interest'; and it, or so much of it as has survived the hereinafter described tax sale proceedings, if any, is now held by parties we will refer to herein as Wolfe, Mullendore et al.

The following Spring, or in April, 1916, a well was drilled on the leased quarter section that produced 10 barrels of oil per day. Later the same year, the Dilworths executed and delivered to one J. A. Frates a warranty deed, dated October 30, 1916, describing the entire quarter section (without mention of their previous deed to Rose) and reserving to themselves, for a period not to exceed 99 years, a one-hundred-dollar gas payment in words identical with those of the above described Hercules Lease, and also the same kind of one-eighth oil royalty prescribed in said lease. In said deed, it was also stated, in substance, that it was 'the intention' to reserve to the Dilworths, their heirs and assigns, not only the specified 'royalties' under the existing lease, but 'under any subsequent oil and gas lease that may be made by any owner of such land, and and this reservation is to be construed as and deemed a covenant running with the land.' (Emphasis ours.) The interest, thus described, will hereinafter be referred to as a 'non-participating oil payment' to distinguish it from a 'mineral interest', whose owner retains the exclusive right to lease it. (In connection with our use of the terms: 'non-participating' and 'working interest', notice the discussion in Colonial Royalties Co. v. Keener, Okl., 266 P.2d 467, 472.)

On November 11, 1916, Frates and his wife executed and delivered to Dilworth Townsite Company a warranty deed purporting to convey to said company, as 'party of the second part' (without mention of Dilworth's above described deed to Rose) the entire Northeast Quarter of Section 5. This deed also contained, however, a reservation of one-eighth oil royalty, and provision for a one-hundred-dollar per year gas payment, substantially in the same words that had been employed in the deed the Dilworths had previously executed and delivered to Mr. Frates, as aforesaid.

After completion of drilling in the well heretofore mentioned, other wells producing gas were drilled on the NE under various assignments of the original Hercules Lease; and it is established that their production, and the payment of gross production taxes on same, commenced at least as early as the year 1918, and continued until September, 1951. Nevertheless, after 60 acres of said quarter section had, in 1917, been selected as a site for the Town of Dilworth, and platted into town lots by Dilworth Townsite Company, ad valorem taxes were assessed against them for the year 1917, and subsequent years.

In February, 1918, an assignee called Bermont Oil Company, which was then the owner of the Hercules Lease, assigned it to Empire Gas and Fuel Company, excepting from said assignment that portion of the NE 'platted and known as the Town of Dilworth * * *'. Thereafter, in 1928, by mesne assignments of the same lease, Cities Service Oil Company became the owner of the 7/8ths working interest in the oil rights, and Cities Service Gas Company became the owners of the 7/8ths working interest in the gas rights under said lease.

Thereafter, most of the tracts, and/or lots, comprising the NE were sold for delinquent ad valorem taxes assessed for years during which some (if not all) of the aforementioned wells on said quarter section were producing. After said taxes became delinquent and the tracts were purportedly sold therefor, one C. L. Hartman acquired a resale tax deed to them in 1945.

In 1948, Hartman conveyed his entire interest in NE, including a 15-acre strip extending along the southern edge of the Dilworth Townsite, to Minnie Myra Woodruff and Margalee Hartman Gogos. Following the cessation of production under the Hercules Lease, in 1951, Cities Service Oil Company and Cities Service Gas Company executed on and before September 3, 1952, and thereafter filed of record, a release of said lease. Later, during the same month, Minnie Myra Woodruff and Margalee Hartman Gogos conveyed their interests to Earl H. and Floyd Trenary, said grantors reserving to themselves an undivided one-half interest in the oil and gas rights in and under the property so conveyed.

In October, 1954, the Trenarys and their wives and Minnie Myra Woodruff and Margalee Hartman Gogos, hereafter sometimes referred to merely as 'Woodruff and Gogos', executed and delivered to one W. R. Yeager an oil and gas lease purporting to cover the NE. It was provided in said lease that even if the lessors owned a lesser interest, than the entire fee simple estate, they should not receive less than one-eighth of the oil and gas produced and saved from the leased premises, and gas and casinghead gas used off said premises. This new lease (together with its leasehold) entered into since cessation of production under, and abandonment of, the Hercules Lease, will hereinafter be referred to as the 'Yeager Lease.'

By assignment, the 7/8ths working interest in this Yeager Lease, subject to a 1/16th overriding royalty in Southwestern Finance Company and Yeager, was acquired in equal parts, of an...