Russell v. Shell Petroleum Corporation, 792.

• Decision Date: 22 August 1933
• Docket Number: No. 792.,792.
• Parties: RUSSELL et al. v. SHELL PETROLEUM CORPORATION.
• Court: U.S. Court of Appeals — Tenth Circuit

66 F.2d 864 (1933)

RUSSELL et al. v. SHELL PETROLEUM CORPORATION.

No. 792.

Circuit Court of Appeals, Tenth Circuit.

July 31, 1933.

Rehearing Denied August 22, 1933.

A. M. Cowan and Mark H. Adams, both of Wichita, Kan. (W. E. Holmes and Howard L. Baker, both of Wichita, Kan., on the brief), for appellants.

John M. Holmes, of St. Louis, Mo. (Thompson, Mitchell, Thompson & Young, of St. Louis, Mo., on the brief), for appellee.

Before LEWIS and PHILLIPS, Circuit Judges, and POLLOCK, District Judge.

PHILLIPS, Circuit Judge.

This is an appeal from a decree reforming an oil and gas lease.

The material facts are these. Prior to 1910 Benjamin H. Russell and Nathan W. Russell jointly owned the Northeast Quarter of Sec. 23, Twp. 19 South, Range 2 West, McPherson County, Kansas, subject to easements for two railroad rights of way. These rights of way covered the south 10 acres of the quarter section. In 1910 the Russells partitioned the 150 acres lying north of the rights of way. Benjamin received the north 70 acres of the south half and the south five acres of the north half of the quarter section. Nathan received the north 75 acres of the north half of the quarter section. The 10 acres burdened with the rights of way easements continued in their joint ownership. The ownership, after the partition, more graphically appears from the plat set out in note 1.¹

The description in the partition deed from Nathan to Benjamin reads as follows:

"All of our undivided interest and title in and to the following described land towit: Commencing at the fence of the Chicago, Rock Island Railway Company on the North line of said Right of Way, thence North Seventy-five rods (75) thence West to the line fence One Hundred and Sixty rods or more, thence South to the fence of the Chicago Rock Island Railway Company on its North line of the right of way Seventy-five rods, (75), then due east 160 rods or more to the place of beginning; the same to contain Seventy-five acres, more or less, and being the South one-half of the Northeast Quarter of Section Twenty-three (23) in Township Nineteen (19) South of Range Two (2) West 6th P. M. lying North of the Chicago Rock Island Railroad right of way."

The error in the italicized portion of the description resulted in a misconception by the Roxana Corporation as to the ownership of such quarter section.

In February, 1926, the Roxana Corporation, now the Shell Petroleum Corporation, was acquiring a block of oil and gas leases in the vicinity of the Russell land. Kirkbride, its leaseman, understood that Benjamin owned the south half and Nathan the north half of the quarter section. He acquired for the Roxana Corporation an oil and gas lease from Nathan covering the north half. The description in this lease included the south 5 acres of the north half owned by Benjamin. Thereafter Kirkbride, believing that he had acquired from Nathan a lease of the north half, negotiated with Benjamin for a lease on the south half, and pursuant thereto Benjamin and Emma L. Russell, his wife, executed a written lease on the south half to the Roxana Corporation, dated February 4, 1926, for a term of five years. Benjamin received therefor, in addition to the other consideration, a bonus of $80.

Kirkbride testified in part as follows:

"We then went to the home of Benjamin H. Russell, and told him we were taking a block for Roxana and had leased his brother's piece and wanted to lease his and were paying $1.00 an acre bonus and $1.00 a year rental for a five year commercial lease, which he said was satisfactory. He accepted the proposition. The lease was written and executed, and check for $80.00 delivered. * * * I wrote out the lease there. I told him I wanted to lease the South Half of the Northeast Quarter, and that is what was leased."

The oral negotiations were with respect to the south half, and the land was so described in the lease. As far as Kirkbride was concerned, the lease contract evidenced exactly what he intended. With respect to Benjamin and Emma, it may not have evidenced what they intended. The evidence in that respect is conflicting. They made an affidavit that both in the original lease and in the renewal lease, hereinafter referred to, they intended to lease all the land they owned in the quarter section.

G. F. Gratton testified that he had a conversation with Benjamin and Emma in August, 1931, in which both stated they intended to lease all of their land.

Emma testified, with reference to the Kirkbride negotiations, as follows:

"When Mr. Kirkbride came in 1926, he said he wanted to lease the south eighty. I could not say for sure but I guess he said he wanted to lease my husband's land in that section. * * * He asked for the south eighty, and I supposed he put that description in the lease. When he first talked about the south eighty, I had in mind the land we owned in the quarter section. Except when we want to be technical, we generally refer to our land as the south 80. After he left I found out that the lease didn't describe the land we actually owned."

Benjamin testified:

"He (Kirkbride) said: `Your land is the south half of that quarter.' I told him my land was not a full eighty, and he said we do not pay any attention to railroads, make no exceptions; said he wanted to lease the South Half of the Northeast Quarter. Accordingly the lease was executed. There was nothing said about the five acres I owned in the North Half of the Northeast Quarter. * * * We were not trying to slip anything over on the Shell's representative, but were just withholding the five acres. Didn't say anything about it. We told them the eighty was a short eighty, and they said they made no exceptions to the railroad. We did not tell them about the five acre strip. It was their own fault if they didn't know about it. I thought Shell had slipped up on that five acres; that they had missed it. I didn't intend to enlighten them, but it seems like they were enlightened about it some other way. We thought we were getting payment for five acres more than we were entitled to. * * * At the time Shell wanted to make their lease, they told me that they had leased my brother's land and wanted to lease my half of the quarter section. I told them mine was a short half, and they said they didn't except the right of way, that they took that. I explained nothing in regard to the five acres. I was paid $10.00 an acre, amounting to $800.00, for the renewal lease and $1.00 an acre for the original lease. As a matter of fact, I only owned about seventy-five acres, and didn't tell them anything about the five acres."

In 1930, Welsh, superintendent of the Shell Corporation at Wichita, offered Benjamin a $10 per acre bonus for a renewal lease. Oglesby, a leaseman under Welsh, continued the negotiations with the intention of procuring leases on the entire quarter section, still believing that Nathan owned the north half and Benjamin the south half thereof. An agreement was reached and renewal leases were executed, dated April 1, 1930, carrying the same descriptions as the original leases, and running for the term of two years from February 4, 1931, and as long thereafter as oil or gas should be produced from the land. Benjamin and Emma received a bonus of $800 for their renewal lease. The decree reformed such lease to include the 5 acres owned by Benjamin in the north half.

On the issue of reformation the court found that it was the intention of Benjamin and Emma, and the Roxana Corporation, in the transaction of February 4, 1926, to lease all of Benjamin's land, but through mutual mistake of fact the lease, as drawn and executed, covered only his land in the south half. The court further found a like intention and mutual mistake with respect to the lease of April 1, 1930, to the Shell Corporation. The evidence, in our opinion, fails to support these findings. Kirkbride believed, when he entered into negotiations with Benjamin, that Benjamin owned the south half. He had already acquired a lease purporting to cover the north half. His negotiations with Benjamin related particularly to the south half. Kirkbride, Benjamin, and Emma testified that Kirkbride stated definitely that he wanted to lease the south half. Hence the written lease evidenced the identical land specifically designated in the preliminary oral agreement. Kirkbride undoubtedly wanted to lease all the land owned by Benjamin in the quarter section, but he erroneously believed that Benjamin owned land only in the south half. Due to this misconception, he contracted with Benjamin in respect of the south half only, both in his oral negotiations and in the written contract. In other words, a mistake as to facts extrinsic to the oral negotiations and the contract led Kirkbride to make a contract which he would not have entered into had he understood the true facts, but the contract as written was exactly as he intended it to be; it expressed the very terms he intended.

Where an agreement has been made or a transaction entered into or determined upon as intended by the parties, but either through the mutual mistake of the parties, or through a mistake of one accompanied by a fraudulent knowledge and procurement of the other, the written instrument fails to express the real agreement or transaction, equity may grant reformation. Columbian Nat. Life I. Co. v. Black (C. C. A. 10) 35...