Miles v. Ashby

• Decision Date: 19 October 1943
• Citation: 174 S.W.2d 753,295 Ky. 500
• Parties: MILES et al. v. ASHBY.
• Court: Kentucky Court of Appeals

174 S.W.2d 753

295 Ky. 500

MILES et al. v. ASHBY.

Court of Appeals of Kentucky

October 19, 1943

Appeal from Circuit Court, Ohio County; Clarence Bartlett, Judge.

Action by A. T. Miles and another against F. M. Ashby seeking a cancellation of a deed. Judgment of dismissal, and plaintiffs appeal.

Affirmed.

Claude E. Smith of Owensboro, for appellants.

Morton Holbrook and E. B. Anderson, both of Owensboro, for appellee.

REES Justice.

On July 14, 1936, A. T. Miles and S.D. Miles, owners of a 177-acre farm in Ohio county, executed and delivered to F. M. Ashby a deed conveying to him a one-half interest in the oil and gas underlying their land. On December 31, 1940, they brought this action against Ashby seeking a cancellation of the deed. As grounds for cancellation they alleged lack of consideration, mistake on part of plaintiffs in executing it and fraud, misrepresentation and duress practiced on the plaintiffs by the defendant in its obtention. After the issues were completed a large amount of proof was taken, and a judgment was rendered dismissing the petition as amended.

The pertinent facts are these: Appellants executed an oil and gas lease on their farm to the Kentucky Natural Gas Corporation on July 27, 1934. The lease provided that the lessee should commence a well on the land within one year or the lease should terminate as to both parties unless the lessee on or before that date should pay or tender the lessors or to the lessors' credit in the Fordsville Bank at Fordsville Kentucky, which should continue as the depository regardless of the change in the ownership of the land, the sum of $1 per acre per year, payable semi-annually, which should operate as a rental and cover the privilege of deferring the commencement of a well. The lease contained this provision "Should the first well drilled on above described land be a dry hole, then 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 the lessee on or before the expiration of said twelve months shall resume the payment of rentals in the same amount and in the same manner as hereinafter provided." It then provided that upon the resumption of payment of rentals the lease should continue in force just as though there had been no interruption in the rental payments.

The Kentucky Natural Gas Corporation drilled a dry hole on the land in December, 1934. On May 22, 1936, appellants executed to appellee, F. M. Ashby, an oil and gas lease on the 177-acre farm and in June, 1936, he moved a drilling rig on the land. On July 11, 1936, a commercially producing oil well was completed. A day or two later he received a letter from a firm of attorneys representing the Kentucky Natural Gas Corporation notifying him that their client had an oil and gas lease on the land superior to the lease executed to him by the appellants on May 22, 1936. Appellee, accompanied by his attorney, went to Hartford, the county seat of Ohio county, and examined the lease of June 27, 1934, to the Kentucky Natural Gas Corporation, which was recorded in the clerk's office. He then went to Fordsville and found that the Kentucky Natural Gas Corporation had deposited $88.50 in the Bank of Fordsville on June 16, 1936, to the credit of appellants for six months' rental under its lease. He informed appellants at once of the results of his investigation, and advised them that they were liable to him on the warranty contained in their lease. After some discussion they agreed to convey him one-half of the oil and gas underlying the land in settlement of any claim he might have against them on account of the breach of warranty. On July 14, 1936, they did execute to him a deed for one-half of the oil and gas under their farm, and it is this deed they now seek to have canceled. Soon after this transaction the Kentucky Natural Gas Corporation moved drilling rigs on the land and began drilling. When this suit was instituted on December 31, 1940, seventeen producing wells had been completed and $8,776.56 in royalties had been paid, of which appellee had received one-half, or $4,388.28. When appellants executed and delivered to appellee the mineral deed conveying to him one-half of the royalty interest in the oil on their 177-acre farm, appellants were conducting a restaurant on the corner of Main and Triplett streets in Owensboro, Kentucky, in a building owned by a brother of appellee. It appears that appellee furnished the capital, appellants managed the business, and the profits were divided one-half to appellee and one-half to appellants. This arrangement continued until...