Hivick v. Urschel

• Decision Date: 29 January 1935
• Docket Number: 24501.
• Citation: 40 P.2d 1077,171 Okla. 17,1935 OK 71
• Parties: HIVICK v. URSCHEL et al. [a1]
• Court: Oklahoma Supreme Court

40 P.2d 1077

171 Okla. 17, 1935 OK 71

HIVICK v. URSCHEL et al. ^[a1]

No. 24501.

Supreme Court of Oklahoma

January 29, 1935

Syllabus by the Court.

1. Where a contract is executed which provides for the transfer of a number of oil and gas leases and the major portion of the consideration for such transfer is to be paid the assignor in oil produced from lands covered by said leases, a fiduciary relationship is created between such parties for the purpose of attaining the ultimate objects of the contract.

2. Where a contract for assignment of a number of oil and gas leases provides that before the assignee may relinquish any of said leases he must give the assignor 30 days' notice of his intention to do so, and upon request reassign such leases to the assignor, and the contract further provides that the major portion of the consideration is to be paid in oil to be produced from said leases, and approximately 60 days prior to the expiration of a certain lease the assignee executes and files a release of said lease and does not give the notice of his intention to do so to the assignor as provided in the contract, and, after the expiration of said lease, the assignee takes a new lease to himself and thereafter explores and finds valuable production on said lands, held that the interest of the assignee in the new lease is impressed with a constructive trust in favor of assignor to the extent that it is necessary to pay the amount of the consideration for the original transfer which was to be paid in oil produced.

3. It is contrary to the principles of equity to allow a trustee to profit by a breach of his trust at the expense of his cestui que trust.

Appeal from District Court, Oklahoma County; Lucius Babcock, Judge.

Action by L. C. Hivick against C. F. Urschel and others, as executors and administrators of the estate of Thomas B Slick, deceased. Judgment for defendants, and plaintiff appeals.

Judgment reversed and cause remanded with directions.

John Barry, Nowlin, Conner & Conner, Claude Nowlin, M. M. Thomas J. R. Spielman, and R. P. Hill, Jr., all of Oklahoma City for plaintiff in error.

Stokes Jarman & Brown, George W. Grant, R. J. Price, and J. B. Dudley, all of Oklahoma City, for defendants in error.

OSBORN Vice Chief Justice.

This action was filed in the district court of Oklahoma county by L. C. Hivick, hereinafter referred to as plaintiff, against C. F. Urschel, Arthur Seeligson, and Berenice Slick, as executors and trustees of the estate of Thomas B. Slick, deceased, hereinafter referred to as defendants, wherein plaintiff seeks to recover on a claim against the estate of T. B. Slick, deceased, in the sum of $44,800 arising through the alleged breach of a contract between plaintiff and the deceased. The cause was tried to the court and a judgment rendered for defendants, from which plaintiff appeals.

The pertinent provisions of the contract are as follows:

"This agreement made and entered into on this the 10th day of April, A. D. 1924, by and between L. C. Hivick of Oklahoma City, Oklahoma, and hereinafter designated Party of the First Part, and T. B. Slick of Clarion, Pennsylvania, and hereinafter designated as Party of the Second Part; Witnesseth, whereas, Party of the First Part is the owner of oil and gas mining leases covering the following described property, to-wit (description of various leases, including the lease involved herein), which oil and gas lease he is desirous of selling to party of the second part; and,

Whereas, party of the second part is willing to purchase said oil and gas mining leases upon the terms and conditions hereinafter set out.

Now, therefore, for and in consideration of the sum of Forty Nine Thousand Eight Hundred ($49,800.00) Dollars to be paid as hereinafter provided, party of the first part hereby grants, bargains, sells and assigns to Party of the Second part, oil and gas mining leases which he owns and which cover the above described property, said assignments to be made as of the 11th day of February, 1924, as to the commercial leases, and of even date as to the departmental leases, and agrees to furnish abstracts showing good and merchantable title in and to said oil and gas commercial leases and Certificate that the Departmental leases are in good standing.

1. Party of the Second Part agrees to pay to Party of the First Part the sum of Five Thousand ($5000.00) Dollars in cash upon the execution of this agreement, and the balance of Forty-four Thousand, Eight Hundred ($44,800.00) Dollars in oil, as hereinafter provided.

2. Party of the Second Part further agrees to commence a well on one of the leases in Osage County, to be selected by him assigned to Party of the Second Part by this agreement, within sixty (60) days from the date of the approval of assignments, covering the leases in Osage County, by the Secretary of the Interior and exercise due diligence in drilling said well to a completion and should oil be found in paying quantities, Party of the First Part is to receive one-half (1/2) of said oil until Forty Four Thousand Eight Hundred ($44,800.00) Dollars payment, which he is to receive in oil, is fully paid; should the well be a dry hole, Party of the Second Part is to pay the rentals and protect the leases as he shall think advisable. Should Party of the First Part fail to receive the sum of Forty Four Thousand, Eight Hundred ($44,800.00) from the first well drilled, then he is to receive one half (1/2) of the oil or gas from any well drilled on any of the above described leases by Party of the Second Part until he receives said sum.

3. It is further agreed and understood by and between the parties hereto, that Party of the Second Part shall assume, from the date of this agreement, the payment of the rentals due to be paid under the terms of the several leases assigned to him pursuant to this agreement; provided, that party of the second part may, at any time he sees fit, release any lease so assigned to him under this agreement, and cease paying rentals thereon, but before releasing same, he shall give to party of the First Part, thirty, (30) days notice in writing of his intention to relinquish said lease, and Party of the First Part may within the thirty (30) days after receipt of said notice, request that said lease be reassigned to him, and upon the receipt of such request, Party of the Second Part will reassign same to Party of the First Part."

The lease involved in this action was on the west half of the southeast quarter of section 12, township 8 north, range 5 east, covering 80 acres. The land belonged to a three-quarter blood Seminole Indian named Nellie. The lease is referred to as the Nellie lease. Plaintiff had secured a lease on the land on July 29, 1916, for a period of ten years.

Under the terms of the above contract, plaintiff was paid $5,000 in cash and the well was drilled on one of the leases in Osage county but no oil was produced therefrom. On April 29, 1926, T. B. Slick executed a release of the above lease which was recorded in Seminole county May 4, 1926, and filed with Indian Agency at Muskogee on June 3, 1926. Following is a regulation of the Interior Department applicable to the facts involved herein:

"Where there is an existing oil and gas lease covering restricted Indian land, no new oil and gas lease will be given favorable consideration unless executed and filed after the expiration of the former lease. In case of cancellation of the former lease for violation of its terms or on application of the lessee, a new lease to receive favorable consideration must be executed and filed after such cancellation is entered of record on the docket in the office of the Superintendent for the Five Civilized Tribes: Provided, that where application for cancellation of an existing lease is completed and filed by the lessee in the office of the Superintendent within the period of ninety days immediately preceding the expiration date thereof, such application will be held in the office of the Superintendent without action, and no new oil and gas lease will be given favorable consideration unless executed and filed after the expiration of the lease term."

Since the release was not filed by Slick within ninety days prior to the expiration of the lease, it was held in the Muskogee office without action and the lease expired by its own terms on July 29, 1926. On July 30, 1926, a new lease was executed to T. B. Slick from the Indian Nellie, which was subsequently approved by the Department of the Interior, and, under this lease, the property was developed.

On March 3, 1929, drilling was commenced on the property, and about that time Slick sold a one-half interest in the lease to the Prairie Oil & Gas Company and it took over the drilling operations. The first production was had in May, 1929.

T. B. Slick died on August 15, 1930. On March 31, 1931, plaintiff filed a claim against the estate. On April 4, 1931, the claim was rejected. On June 29, 1931, this action was filed.

It is noted that under the terms of the above contract Slick was required to give to plaintiff thirty days' notice of his intention to cancel or release any of the leases involved in said contract. It is agreed that no such notice was given to plaintiff. In this connection the trial court found that the release filed by Slick was not effective, since it was not filed more than ninety days prior to the expiration of the lease and the lease expired by its own terms.

Considerable evidence was introduced relating to plaintiff's financial ability to drill a well on this property if he had been notified according to the terms of the contract of the intention of Slick to file the release, but the trial court found plaintiff was financially able at that time...