Shell Petroleum Corporation v. Corn

• Decision Date: 04 January 1932
• Docket Number: No. 479.,479.
• Parties: SHELL PETROLEUM CORPORATION v. CORN et al.
• Court: U.S. Court of Appeals — Tenth Circuit

54 F.2d 766 (1932)

SHELL PETROLEUM CORPORATION v. CORN et al.^*

No. 479.

Circuit Court of Appeals, Tenth Circuit.

January 4, 1932.

W. K. Koerner, of St. Louis, Mo. (Thompson, Mitchell, Thompson & Young, of St. Louis, Mo., on the brief), for appellant.

A. M. Ebright of Wichita, Kan. (Ebright, Burch & Patterson, of Wichita, Kan., on the brief), for appellees.

Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.

McDERMOTT, Circuit Judge.

On the first appeal of this case (C. C. A.) 28 F.(2d) 168 it was held that the plaintiff's bill stated a cause of action, and that the lease of the plaintiff (appellant here) covered the minerals under the right of way of the Midland Valley railroad. When the case came back to the trial court, the defendants answered that the lease was ambiguous, and therefore open to construction; and, if not, that by mutual mistake it failed to express the actual agreement of the parties. The trial court referred the issues so joined to W. F. Lilleston, Esq., as Special Master. Mr. Lilleston heard the evidence and filed a report and a helpful memorandum opinion. Exceptions were seasonably taken thereto by the plaintiff; the trial court, after argument, denied the exceptions, confirmed the report of the Master, made findings of its own, and entered a decree reforming the lease in question as prayed, and dismissing plaintiff's bill. This is an appeal from that decree.

There is little room for dispute as to the facts. J. M. Buffington, for a great many years, owned a tract of land near Oxford, Kansas, containing 36.2 acres. In 1911 he conveyed, by general warranty deed, a strip containing 2.7 acres to the Midland Valley Railroad Company. This left him 33.5 acres. In 1923 he negotiated with Fred Barnes for an oil and gas lease on this 33.5 acres, and an agreement was reached by which Barnes would take a lease, with the usual royalty reserved to Buffington, and pay him a bonus on an acreage basis. This was done, and Barnes paid him a bonus on 33.5 acres only. Barnes and Buffington both testified that their agreement covered only the 33.5 acres; Buffington told Barnes he had theretofore conveyed the 2.7 acres, and he did not want the lease to cover that acreage. Buffington's deed to the railroad contained a warranty of title; the lease contained a warranty of title; Buffington was 80 years old, and he insisted that the 2.7 acres should not be included in the lease; Buffington testified by deposition as follows: "Yes, sir, I will tell you how it happened. I didn't consider that I had any right to that. I had already deeded it to them. I thought at that time it was theirs, and that ended it. I didn't want to get in any tangle, and I didn't have no right to that, because I had already deeded it."

Barnes agreed that the lease should cover only the mineral rights under the 33.5 acres, and should not cover the mineral rights under 2.7 acres. Barnes drew the lease and intended and believed that the words he used expressed the agreement actually made. His description included these words: "Except that part of Out Lot 9 West Division heretofore deeded to Wichita & Midland Valley Railroad Co. for right of way, * * * and containing 33.5 acres, more or less."

The plaintiff acquired the lease by assignment from Barnes about three weeks after it was executed. Plaintiff in its reply admits that "one C. B. Schoenfelt, on plaintiff's behalf purchased the assignment," etc. Barnes told Schoenfelt that the lease did not cover the right of way. Schoenfelt testifies: "Before he put his signature to the assignment he told me the right of way wasn't included in the lease and therefore it wasn't included in the assignment. I conveyed that information to my superior, Mr. Piggott. He held the office of Superintendent of the Land Department." This undisputed evidence makes it entirely clear that the plaintiff did not believe it was acquiring the mineral rights under the 2.7 acres when it took the assignment. Needless corroboration is, however, found in the fact that in 1924 the plaintiff in writing agreed to pay the Midland Valley Railroad Company 1½ per cent. royalty if the Midland would not permit any one else to drill on its right of way; and in 1927 entered into another contract with the Midland in which it is recited that the plaintiff owns oil and gas leases "adjoining" the right of way. If the plaintiff believed it had acquired the mineral rights under the right of way, it certainly would not have agreed to pay a substantial royalty to prevent their unlawful appropriation by another. In 1927 Buffington executed an oil and gas lease to Corn for the 2.7 acres intended to be excepted from the 1923 lease. The plaintiff now claims that the 2.7 acres passed under the 1923 lease to Barnes — that the lease covered 36.2 acres and not 33.5 acres, as recited therein — and seeks to quiet its title thereto as against Corn and those claiming under him.

The master and the trial court found upon ample and undisputed testimony, that by a mutual mistake the parties to the 1923 lease did not reduce their actual agreement to writing; and that the plaintiff, when it acquired the lease, knew that the original parties intended that only the 33.5 acres should be covered thereby. We are asked to overturn these findings because of certain answers made by Mr. Buffington in the course of a very artful cross-examination. Counsel for the plaintiff led the old gentleman — 86 years old and in a hospital — to say that he had conveyed the 2.7 acres; that having conveyed it, he didn't own it; that he didn't want to lease what he didn't own; that he wanted to convey what he did own; and then the question and answer relied on:

"You wanted to convey all that part of outlot 9 you actually owned, or thought you owned? A. Yes, that is the way I figured it. Eight acres is what we call it."

It is never satisfactory to determine property rights by an isolated answer of a witness, particularly under the circumstances of this examination. It is better to look to all the answers of all the witnesses. Taking the record as a whole, we are entirely satisfied that the actual facts are as found by the master and trial court, and as herein recited. A very strong bit of evidence as to the actual agreement is that the lease itself uses language which, to all but trained lawyers who have examined certain particular decisions, means that the right of way is excepted from the mineral grant, and only 33.5 acres is conveyed. That is what it says; that is what it would mean to a layman.

The plaintiff argues that since Mr. Buffington could not go upon the right of way to drill for the minerals in the 2.7 acres, there was no sound reason why he should have excepted them from the 1923 lease. That is beside the point; Buffington owned the mineral rights under 36.2 acres in 1923; he had a right to sell all, or part, or none, without giving or having any reason therefor. The point is, what did he sell to Barnes? He sold 33.5 acres; his reason, or lack of reason, for not selling more is unimportant. Nor is the argument sound as far as it has bearing on whether he did make the agreement that both parties thereto testify he did make. In the first place, in 1923 no one knew whether or not he could go on the right of way to drill; that question was not settled until July 30, 1928, when the opinion came down in Midland Valley R. Co. v. Sutter (C. C. A. 8) 28 F.(2d) 163. Prior to that time his right "was at least doubtful," as it was "difficult to wholly reconcile the Kansas decisions on this question," to use the language of the Court of Appeals. But even if the old gentleman could have accurately forecast the decisions of the courts that came down years later, he would have known that the railroad did not own the minerals in the 2.7 acres, and that it could not have drilled on its own right of way without his consent; and he may have believed the railroad company would pay him more for a lease than he was getting from Barnes. However, no reason could be better than the one he testified to: He had made one warranty as to this 2.7 acre tract; he did not want to make another; he did not "want to get in any tangle" — to have his declining years harried by lawsuits. If he was willing to forego the bonus on this 2.7 acres to avoid a "tangle," it was his business; the fact is, he did forego it, and did not intend to convey it.

The words used by the parties in undertaking to except the 2.7 acres did not accomplish the purpose. Following a long line of applicable decisions which are based on principles of public policy, it has been conclusively determined that the words used in the 1923 lease conveyed the mineral rights under the 2.7-acre tract. Roxana Pet. Corp. v. Corn (C. C. A. 8) 28 F.(2d) 168, and cases there cited; Roxana...