Moffit v. Sederlund

• Decision Date: 11 December 1985
• Docket Number: Docket No. 75879
• Citation: 145 Mich.App. 1,378 N.W.2d 491
• Parties: , Blue Sky L. Rep. P 72,341 F. Russell MOFFIT, Trustee of the Brookfield Royalty Pool, Plaintiff-Counterdefendant-Appellee, v. Roger SEDERLUND and Darlene Sederlund, Defendants-Counterplaintiffs-Third Party Plaintiffs-Appellants, v. F. Russell MOFFIT, individually, Brookfield Royalty Pool, C.B. Acker, D.J. Acker, and Amoco Production Company, jointly and severally, Third Party Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 491

378 N.W.2d 491

145 Mich.App. 1, Blue Sky L. Rep. P 72,341

F. Russell MOFFIT, Trustee of the Brookfield Royalty Pool, Plaintiff-Counterdefendant-Appellee, v. Roger SEDERLUND and Darlene Sederlund, Defendants-Counterplaintiffs-Third Party Plaintiffs-Appellants, v. F. Russell MOFFIT, individually, Brookfield Royalty Pool,

C.B. Acker, D.J. Acker, and Amoco Production

Company, jointly and severally, Third

Party Defendants-Appellees.

Docket No. 75879.

Court of Appeals of Michigan.

Submitted Oct. 3, 1984.

Decided Aug. 19, 1985.

Release for Publication Dec. 11, 1985.

Fortino, Plaxton & Moskal by John J. Moskal, Alma, for plaintiff-counterdefendant-appellee.

William E. Tapovatz, Richland, for defendants-counterplaintiffs-third party plaintiffs-appellants.

Before CYNAR, P.J., and KELLY and EVANS ^*, JJ.

EVANS, Judge.

In this action, plaintiff, trustee of the Brookfield Royalty Pool, sought to obtain an order compelling defendants to pay him half of all royalties they received as the result of oil production on certain property, in accordance with the terms of a royalty pooling deed executed by defendants on April 27, 1971. By a counterclaim and a third-party complaint, defendants sought to have the royalty pooling deed rescinded and to obtain other relief. After a nonjury trial, the trial court found for plaintiff, and an order was entered granting the relief plaintiff requested on the condition that plaintiff produce within 90 days of the entry of judgment opinions and certificates of a title examiner showing that, as of May 15, 1971, the royalty pool had good and merchantable title pursuant to royalty pooling deeds to not less than 1,000 mineral acres in Brookfield Township and certain sections of Eaton Township in Eaton County. Defendants appeal as of right.

I

Defendants argue that the trial court erred by declining to grant their motion to dismiss plaintiff's complaint at the close of plaintiff's proofs. Defendants point to the following provision of the royalty pooling deed:

"Unless royalty pooling agreements similar to this agreement have been executed and delivered to the Trustee on or before the 15 of May 1971 covering a total of not less than 1,000 acres, within the limits of the lands described in Schedule 'A', the Grantors shall be entitled to the return of this pooling agreement unless the date last above set forth shall have been extended in writing signed by Grantors hereto."

Defendants argue that this provision of the deed required acquisition by the trustee of "good and merchantable" title to the amount of property specified in the provision and that plaintiff failed to show in his case in chief that the deeds that he obtained amounted to "good and merchantable" title. Resolution of this motion to dismiss was controlled by GCR 1963, 504.2, and the trial court's determination not to grant defendant's motion will not be overturned on appeal unless clearly erroneous. See, for example, Warren v. June's Mobile Home Village & Sales, Inc., 66 Mich.App. 386, 389, 239 N.W.2d 380 (1976).

As the previously-quoted provision of the deed shows, the deed contains no express requirement of "good and merchantable" title. Moreover, after a pretrial conference, a pretrial summary was entered and served on the parties' attorneys pursuant to GCR 1963, 301.3. That subrule provided in part:

"The judge shall prepare, file, and cause to be served upon the attorneys of record, at least 10 days in advance of trial, a summary of the results of the pretrial conference specifically covering each of the items herein stated. The summary of results controls the subsequent course of the action unless modified at or before trial to prevent manifest injustice."

The pretrial summary stated the issues to be litigated at trial; none related to the sufficiency of the trustee's title. Defendants made no attempt to have the pretrial summary modified, and first raised this issue in their motion to dismiss. When plaintiff's attorney expressed surprise, the trial court did not hold that defendants had waived this issue, as GCR 1963, 301.3 authorized him to hold, but instead established a mechanism for plaintiff to show "good and merchantable" title in post-judgment proceedings. On this record, we cannot say that the trial court's resolution of defendants' motion to dismiss was clearly erroneous or presents manifest injustice.

Defendants attack the sufficiency of plaintiff's post-judgment showing of "good and merchantable" title. We decline to address this issue, because defendants failed to raise it in the trial court at a time when the trial court had jurisdiction to resolve it. After defendants filed a claim of appeal, jurisdiction over this case vested in this Court pursuant to GCR 1963, 802.1. The trial court had no jurisdiction to conduct proceedings in the case. People v. George, 399 Mich. 638, 250 N.W.2d 491 (1977). Defendants only raised this issue in the trial court when the case was on remand to the trial court for the limited purpose of determining whether execution of the judgment should be stayed. The trial court properly declined to address the issue at that time, on the ground that the issue was outside of the scope of the jurisdiction conferred by the order remanding the case. Under these circumstances, we have nothing relating to this issue to review.

II

Findings of fact by a trial judge sitting without jury cannot be set aside on appeal unless clearly erroneous. See MCR 2.613(C) (formerly GCR 1963, 517.1). Defendants ask us to set aside the trial judge's finding that their execution of the royalty pooling deed was not induced by fraud. In Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813 (1976), the Court, quoting Candler v. Heigho, 208 Mich. 115, 121, 175 N.W. 141 (1919), explained:

"The general rule is that to constitute actionable fraud it must appear: (1) That defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury. Each of these facts must be proved with a reasonable degree of certainty, and all of them must be found to exist; the absence of any one of them is fatal to a recovery."

Generally, a failure to read a written contract document does not require rescission of the contract unless other facts indicate fraud, artifice, or deception. See, for example, Vandendries v. General Motors Corp., 130 Mich.App. 195, 200, 343 N.W.2d 4 (1983). Failure to read a contract document provides a ground for rescission only where the failure was not induced by carelessness alone, but instead was induced by some stratagem, trick, or artifice by the parties seeking to enforce the contract. Otto Baedeker & Associates, Inc. v. Hamtramck State Bank, 257 Mich. 435, 441, 241 N.W. 249 (1932). Here, defendants rely on alleged statements by a promoter of the pool, C.B. Acker, to show fraud. Some of these alleged statements are inconsistent with the language of the royalty pooling deed. A clause of the deed states that it expresses the entire agreement between the parties and that no person has any authority to make written or oral modifications or representations concerning the subject matter of the deed. Defendant Roger Sederlund admitted that he executed the deed without reading it completely. Defendants assert fraud, but do not assert that any fraud induced them to execute the deed without reading it completely.

Defendants claim that C.B. Acker falsely told them that there was a good prospect that oil would be discovered in their area of their township. Any such statement by Acker was, however, demonstrably true, since oil was in fact subsequently discovered on defendant's property.

Defendants also claim that C.B. Acker told them that they would benefit from participating in the pool. Defendants claim that they have not benefited because oil was discovered on their land but not on land of other participants in the pool. However, the testimony of defendant Roger Sederlund at trial showed that defendant understood from Acker's statements that participation in the pool would mainly be beneficial if oil was discovered on the land of other participants rather than on defendants' land. The royalty pool was a device to spread among participants the benefits of any discovery of oil or gas and the risk that no oil or gas would be discovered. Its nature was amply disclosed by the deed. Nothing revealed by the testimony could reasonably be construed as a warranty by Acker that oil would be discovered on the land of other participants and not on defendants' land. No false representation by Acker or reliance by defendants is apparent in connection with this allegation.

Defendants also claim that C.B. Acker falsely told them that they were conveying only 1/16 of their minerals by the royalty pooling deed. Under the terms of the deed, defendants technically transferred an undivided 1/2 interest in any oil and gas produced from their land, but they retained the exclusive right to lease their land for oil and gas purposes. Defendants agreed not to execute an oil or gas mining lease for the land without reserving at least 1/8 of the production as royalty. Because the pool would be entitled to only 1/2 the production reserved as royalty, any statement by Acker that defendants were transferring 1/16 of their oil and gas to the pool was not false.

Defendants also claim that C.B. Acker falsely told them that participation in the pool would be limited only to their immediate neighbors. The testimony of defendant Roger Sederlund shows, however, that Acker correctly told defendants that certain neighbors were participating in the pool, but made no representation that participation was...