Gypsy Oil Co. v. Schonwald

• Decision Date: 16 December 1924
• Docket Number: Case Number: 14474
• Parties: GYPSY OIL CO. v. SCHONWALD et al.
• Court: Oklahoma Supreme Court

1924 OK 1133

231 P. 864

107 Okla. 253

GYPSY OIL CO. v. SCHONWALD et al.

Case Number: 14474

Supreme Court of Oklahoma

Decided: December 16, 1924

Syllabus

¶0 1. Vendor and Purchaser--Fraud or Mistake in Contract--Nonassignability of Rights to Subsequent Purchasers.

Fraud or mutual mistake pleaded as a ground for rescission or reformation of an instrument affecting real property is personal to the grantor or maker of the instrument. It does not render the instrument void, but voidable. It is not capable of being assigned or transferred so that a subsequent purchaser charged with knowledge of such instrument can to his own advantage avail himself thereof for the purpose of securing an interest by reason of his subsequent conveyance which he would not have, but for the modification or change of the first instrument which he seeks to have made.

2. Receivers--Right to Appointment.

In determining whether or not a receiver should be appointed to take charge of property or any part thereof involved in litigation, the court not only has the right, but should consider the petition filed by the plaintiff, to determine whether or not the same pleads a cause of action in favor of the plaintiff seeking to have the receiver appointed, and this is in furtherance of a determination as to whether or not there exists a probability that the relief sought may ultimately be obtained by a judgment based on the petition in the action. If the petition fails to state a cause of action for relief against a party, a receiver should not be appointed so as to in any wise affect the party to the action against whom the petition fails to plead a right to relief.

3. Same--Oil and Gas -- Leases--Rights of Parties.

In the instant case, C. executed an oil and gas mining lease to G. In addition to the ordinary provisions, this clause was inserted: "If the leased premises are hereafter owned in severalty or in separate tracts, the premises, nevertheless, shall be developed and operated as an entirety, and royalties shall be paid to each separate owner in the proportion that the acreage owned by him bears to the entire leased acreage, and the lessee shall not be bound by any change in the ownership of the leased acreage, unless and until notified thereof in writing, and when such change is affected by will, deed, or other written instrument, said notice shall be accompanied by such instrument, or a duly authenticated copy thereof. This stipulation, and all other stipulations, covenants, conditions, agreements and terms of this instrument shall extend to, and be binding upon the heirs, executors, successors, assigns, and the legal representatives of the parties hereto." The lease covered 160 acres owned by C. in one tract. Subsequent thereto, C. sold and conveyed a fractional interest in the oil and gas on the west half of said tract to S. Held, that the conveyance made to S. was subject to the terms and provisions of said clause in said lease. Held, further, that said clause is not unreasonable, is not without consideration, and that the owner of the fee had a right to burden his premises with such a covenant or agreement; and that the same is not violative of public policy. Held, further, that the lessee in said lease has the right to operate the premises and pay out the royalty in accordance with said clause, without interference by the subsequent purchaser, and that the petition failed to set forth facts which show such probability of recovery by the plaintiffs as to warrant the appointment of a receiver.

James B. Diggs, William C. Liedtke, and Redmond S. Cole, for plaintiff in error.

Bellatti & Brown, Dale & Bierer, Sam K. Sullivan, and R. J. Shive, for defendants in error. Harry O. Glasser, amicus curiae.

BRANSON, J.

¶1 At all times herein mentioned, Dillard H. Clark was the owner in fee of lots 3 and 4 and the south half of the northwest quarter (referred to herein as the N.W. 1/4) of section 2, township 24 north, range 1 west, Noble county, Okla. He and wife, Ella, executed an oil and gas mining lease to W. E. Templeman, on October 25, 1916, for a term of years, and as long thereafter as oil and gas was produced. It was, in turn, assigned by the said lessee to the plaintiff in error, Gypsy Oil Company, a corporation. August 15, 1921, in lieu of the said lease, Dillard H. Clark executed to the plaintiff in error an oil and gas lease on the same land. The provisions in said lease questioned herein are, first, the royalty clause. It is as follows:

"To pay the lessor as royalty one-eighth part of all the oil saved from that produced, such part to be run to the lessor's credit in the pipe line, which lessee may connect with the well; or at lessee's option to pay to lessor one-eighth part of the market value of such oil sold at the time of its production in the field where produced, and in this last event, settlement shall be made by the lessee by the 15th day of each month, for the royalties for the preceding month" --and, second, a provision, to wit:

"If the leased premises are hereafter owned in severalty or in separate tracts, the premises, nevertheless, shall be developed and operated as an entirety, and royalties shall be paid to each separate owner in the proportion that the acreage owned by him bears to the entire leased acreage, and the lessee shall not be bound by any change in the ownership of the leased acreage, unless and until notified thereof in writing, and when such change is affected by will, deed, or other written instrument, said notice shall be accompanied by such instrument, or a duly authenticated copy thereof. This stipulation, and all other stipulations, covenants, conditions, agreements and terms of this instrument shall extend to, and be binding upon the heirs, executors, successors, assigns, and the legal representatives of the parties hereto."

¶2 On the 23rd day of June, 1922, said Dillard H. Clark executed a so-called "mineral deed" to one of the plaintiffs, Dave Schonwald, which "mineral deed" purported to convey to the grantee a one-fourth interest in the grantor's right to oil and gas and other minerals, in and under a certain portion of said land, to wit, lot 4, and the southwest quarter of the northwest quarter of section 2, township 24 north, range 1 west, or the west half of the 160-acre tract, which "mineral deed," after the granting clause, recited the following:

"Said land being now under an oil and gas lease, executed in favor of the Gypsy Oil Co. It is understood and agreed that this sale is made subject to the terms of said lease, but covers and includes one-fourth of all the oil royalty and gas rental or royalty due and to be paid under the terms of said lease."

¶3 The other defendants in error herein derive their interests, whatever they may be. through said mineral deed to Dave Schonwald, and their interests are contingent upon his. Under this lease, the defendant, the Gypsy Oil Company, developed said 160-acre tract, and found large deposits of oil an the leased premises. For a long time prior to the institution of this suit, and at the time of its institution, the lessee was producing large quantities of oil and gas from the land covered by the lease. In accord with the terms and provisions of the lease, the lessee was paying out the royalty. The wells drilled on the above described west half of said northwest quarter were much more productive of oil than the wells drilled upon the east half, and it is to be noted that the west half was the land incorporated by description in the mineral deed. This fact was no doubt the moving cause of this lawsuit, and it ranges around the above-quoted provisions of the lease, and the above-quoted provisions of the "mineral deed." Plaintiffs plead fraud and mistake in a too voluminous manner to undertake even to quote the substance in this opinion, but the gist of which is set out in the following paragraphs from plaintiffs' petition:

"And the said Dillard H. Clark did not know and was not advised at the time of the execution of said lease, Exhibit 'B,' that said recited and quoted paragraph was in said lease, or that said lease, Exhibit 'B,' was in form and terms different from said former lease. Exhibit 'A,' excepting gas royalties only, or that any of his rights which he had retained to himself in and to the one-eighth royalty in the oil to be obtained or produced from said tract of land was in any wise impaired, and did not know and was not advised that any clause was being placed in said lease which might be so construed as to deprive him of his free and full vested right to alienate and transfer the same. And the said Dillard H. Clark was, therefore, overreached, deceived, and imposed upon in the placing of said clause referred to in said renewal lease, and the said Dillard H. Clark did not know until a long time thereafter that said clause was in said lease, and would not have executed the same had he known that said clause was in said lease, and would not have executed said lease if he had known that there was any clause therein which might be so construed as to in any way infringe upon, impair, or interfere with the full right which he possessed, and which plaintiffs allege he thereafter possessed, to transfer his right in and to the one-eighth royalty in the oil and gas which he reserved to himself under the terms of said lease on said land.

"And by reason of which imposition and fraud upon said Dillard H. Clark, the plaintiffs allege that said clause in said lease is wholly without consideration, nugatory, and void, and that the defendant Dillard H. Clark, at all times under said lease, Exhibit 'B,' same being a renewal and extension of said lease Exhibit 'A' possessed and retained unto himself the full right, power, and authority to transfer in severalty and in respect to separate tracts said one-eighth royalty interest in and to the oil and gas to be produced by the defendant Gypsy Oil Company, under the terms of said lease, Exhibit 'B,' from the above

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