Magnolia Petroleum Co. v. Ouart

• Decision Date: 08 April 1947
• Docket Number: 32002.
• Citation: 192 P.2d 698,200 Okla. 258,1947 OK 117
• Parties: MAGNOLIA PETROLEUM CO. v. OUART et al.
• Court: Oklahoma Supreme Court

192 P.2d 698

200 Okla. 258, 1947 OK 117

MAGNOLIA PETROLEUM CO. v. OUART et al.

No. 32002.

Supreme Court of Oklahoma

April 8, 1947

Rehearing Denied Dec. 16, 1947.

Second Petition for Rehearing Denied April 27, 1948.

Appeal from District Court, Pottawatomie County; Clyde G. Pitman Judge.

Action by C.J. Ouart against the Magnolia Petroleum Company, a corporation, for cancellation of mineral lease and for recovery of damages for drainage, and action by the Magnolia Petroleum Company, a corporation, against C.J. Ouart, Leila Ouart, and Eva F. Hunter in the nature of a stakeholder's suit, praying determination of the claims of the parties in royalty payments. After hearing all the evidence, the court consolidated the two cases. From a judgment in the action by the Magnolia Petroleum Company, a corporation, it appeals. George K. Hunter, husband of Eva F. Hunter, deceased, files a motion to dismiss the appeal as to the deceased.

Motion to dismiss appeal granted as to Eva F. Hunter, and judgment affirmed as to C. Jano Leila Ouart.

ARNOLD J., dissenting on rehearing.

Syllabus by the Court

1. A party is estopped to maintain inconsistent positions based upon opposite and irreconcilable claims of right, not only in the same action, but also in separate actions involving the same parties and questions.

2. Where it is made to appear that one of defendants in error departed this life after appeal was perfected, and that more than one year has elapsed since the date of death without the action having revived, the appeal will be dismissed as to the deceased party.

Walace Hawkins, of Dallas, Tex., W. R. Wallace, of Oklahoma City and I. C. Saunders, of Shawnee, for plaintiff in error.

Crump & Carver, of Wewoka, and Foy Edwards, of Shawnee, for defendants in error, C.J. Ouart and Leila Ouart.

Reily, Reily & Spurr, of Shawnee, for defendant in error, George K. Hunter.

BAYLESS Justice.

The Magnolia Petroleum Company has appealed from a judgment decreeing C.J. Ouart and Leila Ouart a 7/48ths interest and Eva F. Hunter a 5/95ths interest in the 1/8 royalty in the lease in controversy and a money judgment for their pro rata part of the royalty funds impounded by Magnolia at the date of trial. The interests of other persons were determined by the judgment, but we are concerned only with the controversy between Magnolia and the parties named above.

This controversy involves the interpretation of an oil and gas lease, Producer's Form 88, executed by the Ouarts in 1938, The lease described an entire 40-acre tract of land, although the Ouarts only owned an undivided interest in the west half of this tract, which fact was known to Magnolia. Magnolia took five separate leases covering all or part of the land involved at various times during the year 1937 and the first half of 1938. Three of these leases, including the Ouarts' lease, described the entire 40-acre tract. One of the leases described 'all interest in entire forty acres', and the remaining lease covered a part of the west half of the 40-acre tract. Three of these leases, including the Ouarts' lease, were to 'remain in force for a term expiring April 23, 1942, and as long thereafter as oil or gas or either of them is produced from said land by lessee.' The leases provided for a delay rental of $1 per acre. The last delay rental in the sum of $5.84 was paid to the Ouarts in April, 1941. The receipt on the bottom of the rental check provided: 'In full payment of: Rental for twelve months, payable 9 day of May, 1941 on forty acres covered by oil and gas lease recorded in * * *.'

In August, 1941, Magnolia drilled a producing oil well in the southeast 10 acres of the 40-acre tract. Shortly thereafter they drilled a well in the northeast quarter of the 40-acre tract which was not a commercial producer. Magnolia accepted division orders signed only by those owning royalty in the southeast 10 acres and we assume it paid the 1/8th royalty to such owners for a period of time at least, until payment was suspended, although there is no proof of such payment in the record. On July 8, 1942, C.J. Ouart filed an action in the district court of Pottawatomie County, No. 19062, against Magnolia alleging the execution of the lease covering the described 40-acre tract, the interest owned by him in the west 20 acres of the tract, that there had been no development on the west 20 since the execution of the lease, that Magnolia had obtained a large producing well in the southeast 10 acres, and that same had drained oil from under his property. He asked to have the lease cancelled and to recover damages for drainage. Magnolia's answer admitted the execution of the lease and plaintiff's ownership in the west 20 acres; but alleged it had kept plaintiff's lease in full force and effect by making developments thereon, pleading in detail the drilling of the two wells mentioned above, denying the allegation of drainage and that it would be prudent and profitable 'to further drill any other oil or gas well on any portion of said premises at this time, or was so at any time prior thereto; * * * that by reason of the facts * * * stated it has fulfilled all its duties toward plaintiff under the terms of said contract, which is still in full force and effect.' Ouart's reply was in the nature of a general denial of all affirmative allegations contained in Magnolia's answer.

At the commencement of the trial Ouart's attorney stated to the court that he adopted Magnolia's theory that the lease covered the entire 40-acre tract. He orally amended his petition and prayer to show that he was entitled to a portion of the royalty from production from the southeast 10 acres. The following discussion then took place:

'The court: Do you have any stipulation now to make as to what ownership of land the plaintiff has in that forty?

'Mr. Crump: We haven't stipulated, and they are estopped from showing it, because under their answer they state the lease covers the whole of said forty acres. I will read the answer. If that is not true, they are out on a limb and they are now estopped. They say the lease covers the entire forty, and we adopt their theory.'

Magnolia did not at that time or any subsequent time offer to surrender or terminate Ouart's lease, but has steadfastly maintained that the lease covering the entire 40-acre tract remained in full force and effect by reason of development and production in the southeast 10 acres. On March 29, 1943 the court rendered judgment in favor of Ouart, decreeing him to be the owner of an undivided 7/48ths interest in the oil, gas, and mineral rights under said lease, and decreeing a money judgment for production prior to the date of trial. A motion for new trial was filed but not acted upon. A few weeks later Magnolia filed a separate action, cause No. 19337, in the nature of a stakeholder's suit, alleging the aforesaid production, that payment of the royalty had been suspended because of conflicting claims, and praying the court to determine who should be legally entitled to share in the royalty payments. The answer of the Ouarts alleged they were entitled to 1/8th royalty as provided in the various leases in the proportion that their individual ownership bore to the entire 40 acres covered by the leases. They pleaded the judgment in cause No. 19062 rendered March 29, 1943, and prayed that their interests be determined in accordance with said judgment. Magnolia's reply denied that Ouarts were entitled to receive any royalty since production was not had from their land, stating that the contemporaneous leases, including the Ouarts' lease, were not communitization or unitization leases but were separate, individual leases of individual owners of portions of the 40-acre tract; that both parties had so construed the contract; and that the Ouarts, by their acquiescence with full knowledge of the facts as to production and distribution, were now estopped from claiming any interests in the royalty.

The Ouarts' lease contained the following provisions:

'To deliver to the credit of the lessor, free of cost in the pipe line to which he may connect his wells, the equal 1/8 part of all oil produced and saved from the leased promises.

'* * *

'If said lessor owns a less interest in the above described land than the entire and undivided fee simple estate therein, then the royalties and rentals herein provided for shall be paid the said lessor only in the proportion which lessor's interest bears to the whole and undivided fee'.

The parties stipulated as to most of the facts involved. The following is quoted from the stipulation:

'It is further stipulated and agreed that the Magnolia Petroleum Company paid the rental on said oil and gas lease on or before the 9th day of May, 1939, 1940, and 1941, in the amount of $5.84 per annum, a photostatic copy of said Magnolia Company vouchers showing payment of said rentals being attached hereto marked 'Exhibit E-1' and made a part hereof.'

After hearing all the evidence the court, on its own motion, consolidated the two cases. It then rendered judgment, which for practical purposes was the same as the judgment rendered in cause No. 19062, and Magnolia has appealed from the latter judgment.

Magnolia urges that the Ouarts' lease cannot be construed to be a communitized or unitized lease and that Ouarts are not entitled to proceeds from the production from land which they do not own or in which they have no interest. The Ouarts contend that it should be so construed. It is not necessary to pass upon this question other than to hold that the Ouarts' lease, considering all of the facts and circumstances involved, was ambiguous and therefore subject to construction by the court. We hold that if the Ouarts' lease is kept in force and...