Kugel v. Young

• Decision Date: 28 November 1955
• Docket Number: No. 17517,17517
• Citation: 132 Colo. 529,291 P.2d 695
• Parties: Paul KUGEL, Frank Hartman, Robert E. Hogsett, Gretta C. Hogsett and John C. Stroh, Plaintiffs in Error, v. Frank W. YOUNG, Bankers' Life and Casualty Company, a corporation, Natural Gas Producers, Inc., a Colorado corporation, R. F. Spear, Col-Tex Oil, Inc., a corporation, and All Unknown Persons Who Claim Any Interest In the Subject Matter of This Action, Defendants in Error.
• Court: Colorado Supreme Court

Page 695

291 P.2d 695

132 Colo. 529

Paul KUGEL, Frank Hartman, Robert E. Hogsett, Gretta C Hogsett and John C. Stroh, Plaintiffs in Error, v.Frank W. YOUNG, Bankers' Life and Casualty Company, a corporation, Natural Gas Producers, Inc., a Colorado corporation, R. F. Spear, Col-Tex Oil, Inc., a corporation and All Unknown Persons Who Claim Any Interest In the Subject Matter of This Action, Defendants in Error.

No. 17517.

Supreme Court of Colorado, En Banc.

Nov. 28, 1955.

Rehearing Denied Jan. 16, 1956.

Gorsuch, Kirgis, Campbell, Walker & Grover, William C. McGehee, Denver, E. Ord Wells, Fort Morgan, for plaintiffs in error.

Akolt, Campbell, Turnquist & Shepherd, Denver, John E. Bell, Brush, for defendant in error, R. F. Spear.

Before ALTER, C. J., and MOORE, HOLLAND, CLARK, LINDSLEY, BRADFIELD and KNAUSS, JJ.

CLARK, Justice.

Action was commenced by plaintiffs in error to remove cloud from and quiet title to certain lands situate in the counties of Adams and Washington and, specifically, to have decreed the cancellation of an oil and gas lease in so far as the same had been assigned to and was then held by defendants in error.The plaintiffs Hogsett were and are the owners of the record title to said lands while plaintiffs Kugel, Hartman and Stroh acquired interests therein through purchase contracts and other agreements with the Hogsetts.

In the fall of 1950 the Hogsetts, Kugel and Hartman executed an oil and gas lease, covering a total of 3,400 acres of land, to one Chase, said lease bearing date of September 27, 1950.Under the 'partial assignment' clause contained in the lease Chase assigned portions thereof to various individuals.That with which we are here concerned was assigned to one Orrin Tucker who, in turn, on August 18, 1952, assigned the same to defendant Young by two separate documents, one describing the lands located in Adams County and the other the lands in Washington County; that in certain of said lands plaintiffs did not own the entire mineral right so that Young by his assignments, while covering 2,480 gross acres in Adams County, acquired actually 2,160 net mineral acres in said county, and 200 net mineral acres in Washington County out of a gross of 240 acres of land, thus bringing his total actual mineral acres acquired under said assignments to 2,360.This is the land involved in this litigation.

Usual complications incident to the problem are made more confusing by the findings, conclusions and judgment of the trial court, which at the very outset fell into error in its determination of the primary question involved.Being in error in determination of the primary issue, it necessarily follows that the findings and conclusions of the trial court are rendered erroneous with respect to many secondary issues.Briefly, the trial court found that the lease involved was not an 'unless' lease; that the plaintiffs by acceptance of the rental payment made September 26, 1952, although short in amount by the sum of $160, had waived the right to forfeiture of the lease and were estopped to deny the rights of the lessee thereunder, and that all equities in the case favored the defendants.Judgment was entered in favor of defendants on all issues.While we disagree with the findings and conclusions of the trial court, its judgment must be affirmed (except as to one tract of 160 acres) for the reason that where the result is correct even though the reason be wrong we must affirm.

Plaintiffs set up in their summary of argument as grounds for reversal of the judgment of the trial court, the following:

A.That the lease terminated on September 27, 1952, as to all land involved therein because:

(1) Being an unless lease it automatically terminated when the proper amount of money was not paid as rendered;

(2) That it is an unless lease;

(3) That no well was commenced in the year preceding September 27, 1952;

(4) That there was no proper tender of delay rental on or before said date;

(5) That where one person is the assignee of separate portions of the lease his responsibility for rental payments is not separate with respect to each tract;

B.There is no proper ground for revival of the lease by equitable intervention because:

(1) The mistake made by defendants does not constitute an equitable mistake;

(2) The conduct of plaintiffs was not improper.

C.A number of findings of the trial court are not supported by the evidence; and

D.The trial court erred in not adjudicating the right of defendantNatural Gas Producers, Inc.

Because of the apparent complications involved we shall forego our usual practice of discussing each point separately, but shall cover all thereof, together with defendants' counter-contentions, in a general analysis of all issues as we see them.

Other than defendant Spear, who claims to be the owner of an overriding royalty and whose interest would be affected to the extent that any part or portion of the lands claimed by Young and his associates be held to be without the terms of said lease, defendants named in the trial court who are not associated with Young, are not parties to this writ of error.

With respect to all essential matters the facts are quite generally agreed to by stipulation appearing in the record.It is agreed that a well was drilled on said premises in 1951 and completed as a 'dry hole.'It is further agreed that Young procured his assignment from Tucker under date of August 18, 1952, and that he caused to be remitted to the First National Bank at Fort Morgan, the depository bank named in the lease, by Western Union money order message on September 26, 1952, the sum of $2,000 as rental for lands in Adams County and $200 for the lands in Washington County.Facts relating to errors in said telegram as to land descriptions, as well as other pertinent issues, will be inserted as we proceed.

In the record before us the primary issue as we view it, is whether the lease involved is of the 'unless' type.We answer the question in the affirmative.There is no doubt and, in fact it is conceded, that the basic form of the lease, being a Producer's 88, well known in the industry, is a typical unless lease.It contains the usual provisions that:

'If no well be commenced on said land on or before the 27 day of September, 1951, this lease shall terminate as to both parties, unless the lessee on or before that date shall pay or tender to the lessor, * * * the sum of three thousand four hundred dollars, which shall operate as a rental and cover the privilege of deferring the commencement of a well for Twelve months from said date. * * *

'Should the first well drilled on the above described land be a dry hole, then and in that event, if a second well is not commenced on said land within twelve months from the expiration of the last rental period which rental has been paid, this lease shall terminate as to both parties, unless * * *.' further rental be paid.

A duplicate original of this lease, without any attached rider, was placed of public record in both counties in February of 1951.It is the record title upon which the assignments of Chase to Tucker, Tucker to Young, and subsequent assignment by Young, were based.A photostatic copy thereof appears as EntryNo. 11 in abstract of title No. A-8469, prepared by The Adams County Abstract Company as plaintiffs' Exhibit C, to which reference is made in the stipulation of facts between the parties, and by which it is therein agreed that 'said photostatic copy of said lease at said entry in the abstract is a true and exact copy of the oil and gas lease entered into by the parties. * * *.'It is the only document of which the assignees of Chase and Tucker had any knowledge during any of the times hereinabove referred to, and is the instrument pursuant to which defendant Young was bound to pay delay rental, under his assignment, by September 27, 1952, in the protection of his interest.During the course of the hearings before the trial court and as they were nearing an end, there was produced by plaintiffs their duplicate original of said lease to which was appended a rider which for some reason or other had either been removed from the duplicate original of said lease which was recorded or had become detached therefrom prior to its recordation.Here we digress a moment to say that insinuations in the argument, and in the findings of the trial court, indicating that the plaintiffs deliberately detached said rider before the recordation of the lease are without justification, because plaintiffs' duplicate of said lease was not recorded and the duplicate original that was recorded shows on the back thereof that it was to be returned after recordation to Sunny Valley Oil Company, % D. C. Jacobsen, Room 272, Shirley Savoy, Denver.

The rider attached to the deplicate original of said lease produced by plaintiffs, inter alia, provides that:

'The consideration for the signing of this lease is the drilling of a well 5500 feet or to the Dakota Sand or to production of oil or gas in commercial quantities if found at a lessor [lesser] depth.Said well to be drilled within the boundaries of * * *.Drilling operations to begin within 120 days of the signing of this lease by the lessors.In the event that said drilling operations are not commenced within 120 days of the signing of this lease by the lessors, then and in such event such lease shall be null and void and of no further force and effect.'

The defendants who had up to the point of presentation of plaintiffs' duplicate original of said lease been defending the case on the assumption that the lease was typically an unless lease, immediately changed their position, insisting that the rider converted the lease from an 'unless' type to the 'or' type, and that it was either a 'drill or pay' or 'drill or forfeit' lease, without specifying which.

While we have some doubt, in view of the fact that the lease was recorded by the lessee, and since defendants...