Gerhard v. Stephens, KENNEDY-WEBER

CourtUnited States State Supreme Court (California)
Citation68 Cal.2d 864,442 P.2d 692,69 Cal.Rptr. 612
Decision Date09 July 1968
Docket NumberKENNEDY-WEBER,S.F. 21805,S.F. 21808
Parties, 442 P.2d 692 Joseph M. GERHARD, Plaintiff and Appellant, v. Mary STEPHENS et al., Defendants and Respondents.OIL COMPANY, Inc., et al., Plaintiffs and Appellants, v. May STEPHENS et al., Defendants and Respondents; Joseph M. Gerhard, Defendant and Appellant. Ira S. SOLOMON, as Administrator, etc., et al., Plaintiffs and Appellants, v. Mary STEPHENS et al., Defendants and Respondents. Herbert METTLER, as Executor, etc., et al., Plaintiffs and Appellants, v. Mary STEPHENS et al., Defendants and Respondents. to

David B. Fyfe, San Rafael, Sullivan, Roche, Johnson & Farraher, Vincent J. Mullins, and Daniel H. Dibert, San Francisco, for plaintiffs and appellants and for defendant and appellant.

Philip T. Boyle, Bruce A. Richardson, Wyckoff, Parker, Boyle & Pope, Watson

ville, C. Ray Robinson, Merced, Duane W. Dresser, San Francisco, J. T. Harrington, Salinas, Arthur R. Albrecht, San Francisco, J. Carter Perkins, Washington, D.C., Michael Klynn, McCutchen, Doyle, Brown, Trautman & Enersen, Richard J. Archer, Robert D. Raven, William R. Berkman, Morrison, Foerster, Holloway, Clinton & Clark, San Francisco, and Stefan A. Riesenfeld, Berkeley, for defendants and respondents.

Edward D. Landels and Landels, Ripley, Gregory & Diamond, San Francisco, amicicuriae on behalf of defendants and respondents.

TOBRINER, Justice.

Plaintiffs brought these four actions to quiet title to undivided mineral interests underlying section 31, township 16 south, range 11 east, Mt. Diablo base and meridian, in San Benito County (section 31). They claimed these interests as successors of stockholders in two now defunct corporations, Ashurst Oil, Land and Development Company (Ashurst) and California Oil Products Company (COP), which obtained specified mineral rights in section 31 in 1910.

Joseph Gerhard (Gerhard), plaintiff in S.F. 21805, Ira Solomon and others (Solomon), plaintiffs in S.F. 21807, and Herbert Mettler and others (Mettler), plaintiffs in S.F. 21808, claim interests in the mineral rights formerly held by Ashurst. 1 The Kennedy-Weber Oil Company and others (Weber), plaintiffs in S.F. 21806, claim interests in the mineral rights formerly held by both Ashurst and COP. 2

Defendants 3 raised a number of defenses essentially based on their long occupation of the surface of section 31 and the failure of plaintiffs and their predecessors to assert these rights for 47 years until the time that defendants struck oil. The trial court entered judgment for defendants in each action, and plaintiffs appeal. We shall summarize the relevant facts and set forth additional matters as necessary in the body of the opinion.

In 1905 the Ashurst family conveyed the Syncline Ranch, which includes section 31, to Abrams and Brandt, who executed a purchase money mortgage for $17,500, which was assigned to the Hollister Savings Bank (Hollister Bank mortgage). Abrams and Brandt had organized two corporations, Ashurst and COP. To Ashurst they conveyed an estate in certain minerals underlying a portion of section 31, and to COP they conveyed a similar mineral estate underlying the remainder of section 31. 4 COP executed a mortgage for $21,610.82 to Abrams and Brandt as part of the purchase price (COP Mortgage).

Ashurst drilled three dry wells on the property; COP did no drilling. COP in 1912 and Ashurst in 1915 forfeited their corporate charters for nonpayment of taxes; the stockholders succeeded to the title of the corporate property.

In 1917 Brandt brought an action to quiet title to the Syncline Ranch. (Action 1870; San Benito County.) The court in 1923 quieted the title of Abrams and Brandt as a partnership in the surface estate in section 31 and in the portion of the mineral estate represented by the partnership's stock holdings. The court also found that Abrams and Brandt, as individual stockholders, obtained title to fractional interests in the mineral estate at the time the corporations forfeited their charters. It decreed all the stockholders, in proportion to their holdings, were 'co-owners' of the mineral estate subject to a trusteeship of the directors for liquidation and, in the case of the COP stockholders subject to the lien of the COP mortgage held by the partnership of Abrams and Brandt. The court ordered the trustees to sell the corporate properties and pay the proceeds into court for the benefit of shareholders and creditors, but it does not appear that this order was ever carried out.

In 1919 Brandt brought an action (action 13948; San Joaquin County) for a partnership accounting. The court ordered the partnership interest in the Syncline Ranch to be sold; this included the surface estate in section 31, an undivided 114,811/366,201 3/4 interest in the Ashurst mineral rights, an undivided 199,500/503,000 interest in the COP mineral rights and the COP mortgage. The court included in the decree a copy of a mortgage foreclosure decree in which the Hollister Bank mortgage had been foreclosed and a sale ordered of the Syncline Ranch to pay off the mortgage. The decree in action 13948 proceeded to state that Brandt had paid the Hollister Bank mortgage and, through his son-in-law Mettler, taken an assignment of the mortgage. The court in action 13948 appointed a commissioner, who sold the partnership interest in the Syncline Ranch to Halsey, Brandt's nephew.

In 1924, shortly after the commissioner's sale, Halsey conveyed to Antonio Frusetta, who had previously been a lessee of the Syncline Rranch, and Warren Cornwell 5 (1) the 'whole' of section 31, 'subject to' the deeds to Ashurst and COP, (2) the Abrams and Brandt partnership interest in the property conveyed to Ashurst and COP, and (3) the COP mortgage. It was from the proceeds of this transaction that the Hollister Bank mortgage held by Brandt had been discharged. Frusetta and Cornwell, who, prior to 1924, had leased the Syncline Ranch and used it for a cattle ranch, continued to use it for that purpose.

Henry Carroll in 1938 obtained a lease covering oil, gas, and other hydrocarbons from the Frusetta-Cornwell defendants but did not undertake any drilling. In 1951 Tillman Hess obtained another lease from these defendants; he drilled a dry hole on the Syncline Ranch; the drilling, however, by inadvertance, did not take place in section 31. Defendant Shell Oil Company obtained the Hess lease and other leases from the Frusetta-Cornwell defendants in 1951 and 1952.

The Frusetta-Cornwell defendants, in 1952, brought an action (action 5362) against 'all persons unknown' to quiet title to 'all of Section 31.' None of the plaintiffs or their predecessors were named or served with process. Following publication of summons, the court in 1953 quieted title in the Frusetta-Cornwell heirs to 'all of Section 31.' In 1954 some of Cornwell's heirs brought an action (action 5591) to quiet title to an undivided one-half interest in section 31 against certain named heirs of Cornwell and 'all persons unknown.' As in action 5362, none of plaintiffs or their predecessors were named or served with process. The court quieted title to an undivided interest in section 31 subject to the Shell lease.

In 1956 Shell began drilling operations and struck oil on section 31. Plaintiff Gerhard, who had no connection with any of the transactions outlined above, read of the discovery and began investigating the title to section 31. Learning of the interests transferred to COP and Ashurst he approached the successors of the stockholders, obtained some of the claims, and instituted legal action. Other heirs of the stockholders brought separate actions. The trial court entered judgment in favor of defendants.

The trial court found that (1) plaintiffs had abandoned their interest in the oil and gas and other fugacious minerals underlying section 31; (2) defendants had acquired title to all the mineral interests by adverse possession; (3) plaintiffs' claims were barred by laches; (4) plaintiffs' claims were barred by the decrees in actions 5362 and 5591. Plaintiffs challenge these findings and additionally claim that (5) they were deprived of their right to cross-examine George Frusetta, the son of Antonio Frusetta. (6) The Weber plaintiffs claim that the trial court erred in disallowing a class action. Defendants claim that the trial court's judgment must be sustained in any event (7) as to all plaintiffs because they had lost their right to redeem under the Hollister Bank mortgage, and, (8), as to plaintiff Gerhard, because he acquired his claims through the unlawful practice of law and through violations of the California Corporate Securities Act.

We summarize our holding as follows: (1) Substantial evidence sustains the trial court's finding that the predecessors of the Weber plaintiffs abandoned their interests in the minerals underlying section 31. As to the remaining plaintiffs, however, we find no such substantial evidence. (2) Defendants did not acquire title to the mineral interests by adverse possession. (3) Plaintiffs are not guilty of laches in asserting their claims. (4) The decrees in actions 5362 and 5591 do not bar plaintiffs' claims. (5) Plaintiffs were not deprived of their right to cross-examination. (6) The trial court could properly rule that the Weber plaintiffs could not bring a class action. (7) The Hollister Bank mortgage does not cover plaintiffs' interests in the minerals. (8) Defendants may not be heard to assert that plaintiff Gerhard illegally acquired his claims. Accordingly, we reverse the judgments in S.F. 21805, 21807, and 21808, and the judgment in S.F. 21806 as to Joseph M. Gerhard. We affirm the judgment in S.F. 21806 as to all parties other than Gerhard.

1. Abandonment
A. Plaintiffs' interests are subject to abandonment.

The trial court found that 'the interests...

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