Francis v. Superior Oil Co., 1748.
| Decision Date | 20 March 1939 |
| Docket Number | No. 1748.,1748. |
| Citation | 102 F.2d 732 |
| Parties | FRANCIS et al. v. SUPERIOR OIL CO. |
| Court | U.S. Court of Appeals — Tenth Circuit |
J. B. Dudley and T. Murray Robinson, both of Oklahoma City, Okl. (Luther Bohanon, Lynn Adams, and John H. Halley, all of Oklahoma City, Okl., on the brief), for appellants.
Streeter B. Flynn, of Oklahoma City, Okl. (Robert M. Rainey and Rainey, Flynn, Green & Anderson, all of Oklahoma City, Okl., on the brief), for appellee.
Before PHILLIPS, BRATTON, and WILLIAMS, Circuit Judges.
This is an action instituted by J. L. Francis, Lottie J. Francis, his wife, and Laird Oil Corporation against Superior Oil Company and Ernest J. Lippert to quiet title to a tract of land located in the city of Oklahoma City. The facts are not in dispute. Francis and wife owned the land, and they executed an oil and gas lease to Harry J. Brown, agent for Superior Oil Company, on May 25, 1932, for a consideration of $500 in cash and specified royalty interests. The instrument was recorded on June 4th, and later assigned to Superior Oil Company. It was provided in paragraph 3 of the lease that, except as provided in paragraph 11, it should remain in force for a term of five years from the date on which the lessee could legally and peaceably enter upon and drill the premises, and so long thereafter as oil, gas, casinghead gas, or casinghead gasoline should be produced, and that if operations for the drilling of a well should not be commenced within one year from the date on which the lessee could legally and peaceably enter upon and drill the premises the lease should terminate as to both parties unless the lessee should pay or tender annually a rental of $1 per acre; and it was provided in paragraph 11 that, notwithstanding anything to the contrary, if the lessee should commence drilling operations at any time while the lease was in force, it should remain in force and its terms should continue as long as such operations were prosecuted, and if production should result then as long as it should continue. Francis and wife executed an oil and gas lease to Laird Oil Corporation on March 21, 1936, covering the same land; and at the same time and as a part of the same transaction, the parties entered into a contract in writing but it is unnecessary to detail its provisions. At the time such lease and such contract were entered into, Laird Oil Corporation had both actual and constructive notice of the earlier lease to Superior Oil Company.
At all times prior to March 24, 1936, the drilling of a well for oil and gas on the premises covered by the leases was prohibited by ordinance or ordinances of the city; but on that date an election was held at which it was voted to include an area which embraced these premises within a zone in which development for oil and gas was permitted. On the following morning, Superior Oil Company placed an employee on the premises; he began to clear the land; and a tool house was placed upon it during the afternoon. This suit was filed between 12 and 1 o'clock that day; and on April 3d, plaintiffs commenced the construction of a fence around the property. Trouble ensued, and the employee of Superior Oil Company was arrested and confined in jail. Except for the time that employee was in jail, employees of Superior Oil Company were on the premises continuously from March 25th to the signing of the contract on April 13th, hereinafter referred to. On March 26th, Laird Oil Corporation made application to the Building Superintendent of the city for a permit to drill a well on the premises; and on March 30th, Superior Oil Company made like application. Both applications were denied and appeals were taken to the Board of Adjustment. On April 13th, the two companies entered into a development contract in which it was provided that they should endeavor to obtain a permit issued to them jointly; that in the event such permit was issued, Superior Oil Company should drill a well; that the oil should be run to some major pipe line company and the proceeds, less the cost of drilling and operation, should be held to await the final determination of the conflicting claims of the two companies under their respective leases; and that the contract should not be construed as a compromise or settlement of the controversy or as a waiver of any rights had or claimed by either party. The permit was issued; the well was drilled; oil was produced; and a fund in excess of the cost of drilling and operation accumulated.
While the suit was pending, Francis conveyed to his wife all of his right, title, and interest in the property, and later died. The suit was dismissed as to Francis and Lippert. The Superior Oil Company succeeded through merger and consolidation proceedings to the rights of Superior Oil Company in the lease, and was substituted as defendant. The court sustained the lease and quieted the title under it. Lottie J. Francis and Laird Oil Corporation appealed.
The two contentions urged for reversal of the decree are (1) that the lease to Superior Oil Company is void because of the uncertainty of its terms, and (2) that it violates the rule against perpetuities and the statutes prohibiting restraints on alienation of property. The asserted invalidity arises from the provision that the lease should remain in force for a term of five years from the date on which the lessee could legally and peaceably enter upon and drill the premises and so long thereafter as any one or more of the enumerated minerals should be produced. The contentions are so related that they may be considered together.
Section 32 of Article 2 of the Constitution of Oklahoma, Okl.St.Ann., provides that perpetuities and monopolies are contrary to the genius of free government and shall not be allowed. Section 11756, Oklahoma Statutes 1931, 60 Okl.St.Ann. § 31, provides that, except as provided in section 11759, 60 Okl.St.Ann. § 34, the absolute power of alienation cannot be suspended by any limitation or condition for a longer period than during the continuance of the lives of persons in being at the creation of the limitation or condition; section 11758, 60 Okl.St.Ann. § 33, provides that the suspension of all power to alienate the subject of the trust, other than power to exchange it for other property to be held upon the same trust, or to sell it and reinvest the proceeds to be held under the same trust, is a suspension of the power of alienation within the meaning of section 11756; section 11759 provides that a contingent remainder in fee may be created on a prior remainder in fee, to take effect...
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