Superior Oil Company v. Vanderhoof

• Decision Date: 17 March 1969
• Docket Number: Civ. No. 724.
• Citation: 297 F. Supp. 1086
• Court: U.S. District Court — District of Montana
• Parties: The SUPERIOR OIL COMPANY, a corporation, Plaintiff, v. Edward VANDERHOOF, a single man, Orval Vanderhoof, a single man, Richland County, Montana, a quasi municipal corporation, Tribal Drilling Company, a partnership, Bright & Schiff, a partnership, J. C. Cottingham and Mrs. J. C. Cottingham, husband and wife, et al., Defendants.

297 F. Supp. 1086

The SUPERIOR OIL COMPANY, a corporation, Plaintiff, v. Edward VANDERHOOF, a single man, Orval Vanderhoof, a single man, Richland County, Montana, a quasi municipal corporation, Tribal Drilling Company, a partnership, Bright & Schiff, a partnership, J. C. Cottingham and Mrs. J. C. Cottingham, husband and wife, et al., Defendants.

Civ. No. 724.

United States District Court D. Montana, Billings Division.

March 17, 1969.

Habedank, Cumming & Best, Sidney, Mont., for Edward Vanderhoof and Orval Vanderhoof.

Kurth, Conner, Jones & Davidson, Billings, Mont., for Bright & Schiff and Tribal Drilling Co.

ORDER AND OPINION

JAMESON, District Judge.

Plaintiff, lessee in an oil and gas lease, instituted this action pursuant to the Federal Interpleader Act.¹ The defendants have or claim landowners' royalty interests in the oil and gas produced from the land under lease. Plaintiff's motion for interpleader was granted in an order entered October 11, 1968.² Thereafter the defendant Bright & Schiff moved for summary judgment against the defendants Edward and Orval Vanderhoof. This motion was denied by order and opinion filed November 20, 1968.³

The Vanderhoofs are record owners of 1040 acres of land in Richland County, Montana. 280 acres were obtained by conveyance from defendant Richland County in 1940 and 1943, the county reserving a six and one-fourth per cent royalty interest. By two deeds dated December 17, 1953, the Vanderhoofs conveyed to defendants J. C. Cottingham and Mrs. J. C. Cottingham a one per cent royalty interest in the 280 acres.

The 1040 acres were leased to I. H. Cunningham under an oil and gas lease dated April 20, 1962. This lease was assigned to plaintiff on May 22, 1962. It provides for the payment of a one-eighth or 12½ per cent royalty of all oil and gas produced from the 1040 acres and contains an "entireties clause" providing that the property may be developed as one lease and royalties paid to separate owners in the proportion that the acreage owned by each separate owner bears to the entire lease acreage.

By warranty mineral deed dated September 13, 1965, the defendants Edward V. Vanderhoof and Orval Vanderhoof conveyed to Rex H. Baker

By deeds dated October 4, 1965, Baker conveyed an undivided 328.5915 mineral acres to the defendant Tribal Drilling Company and an undivided 191.4085 mineral acres to the defendant Bright and Schiff.

The present controversy involves the respective rights of the defendants Vanderhoof and the defendants Bright and Schiff and Tribal Drilling by reason of the prior reservation by Richland County in the 280 acre tract and the conveyance of the one per cent royalty interest to Cottinghams.

The issues between these defendants were tried before the court without a jury on January 20, 1969. Both sides have filed post trial briefs. Two questions are presented: (1) whether the mineral deed was ambiguous, permitting parol evidence to explain the intent of the parties, and if so, whether the parties intended the grant of a one-half interest of whatever Vanderhoofs owned or a grant of 520 mineral acres; and (2) if not, whether Vanderhoofs may recover on their cross-claim for fraud and mutual mistake.

With respect to the first question, both parties have relied upon the general rule set forth in 1 Williams and Meyers, Oil and Gas Law, Section 320.2:

"The conflict between a grant of a fractional interest and the grant of mineral acres, in the same deed, may be disposed of in three ways:

"1. The court could declare the deed ambiguous and admit parol evidence. This solution has much to recommend it. There is certainly ambiguity and there is likely to be persuasive parol evidence available, since the deed indicates a bargain (and probably a price) based on mineral acres.

"2. The court could hold the instrument unambiguous and give precedence to the call for a certain number of mineral acres. Assuming the wisdom of excluding parol evidence for lack of ambiguity, we would urge this construction, for it appears more likely that the parties bargained in terms of mineral acres than in terms of fractional interests. The clause calling for mineral acres reflects, we think, a high degree of probability that the purchase price was paid on an undivided acreage basis.

"3. The court could hold the instrument unambiguous and give precedence to the call for a fractional interest. This is the least desirable course, in our view, for the reasons set forth in paragraphs 1 and 2 above."

Vanderhoofs argue that the deed in question is ambiguous, that the first alternative should be followed, and that the parties intended a grant of one-half of whatever interest Vanderhoofs owned. Bright and Schiff and Tribal Drilling argue that there is no ambiguity, that the second alternative should be followed, and that in any event, the parties intended a grant of 520 mineral acres.

No case has been cited which is precisely in point. Two cases cited in the 1968 supplement to Williams and Meyers, however, lend support to the contention of Bright and Schiff and Tribal Drilling that the conveyance calls for 520 mineral acres. In El Paso Natural Gas Company v. Kelly, 10 Cir. 1962, 308 F.2d 820, 823, in holding the number of mineral acres controlling, the court said in part:

"* * * The plaintiffs' mineral acres must be related to the total mineral acres, and they are not changed by variations in Hudson's total mineral acres. One of the reasons for describing an interest in terms of mineral acres is to protect the grantee against the possibility that the grantor's interest may be smaller than was contemplated at the time of conveyance. 1 Kuntz, Law of Oil and Gas § 16.3, at 381 (1962); 1 Williams and Meyers, Oil and Gas Law § 320.2, at 665 (1959). We agree that Hudson only owned one-half, or 3150, of the 6300 mineral acres, but this fact does not serve to reduce the plaintiffs' 660 mineral acres. Its only effect is to increase the plaintiffs' percentage of Hudson's interest."

In Wade v. Roberts, Okl.1959, 346 P.2d 727, 729, the court construed a deed granting 32 acres and containing the reservation of "an undivided 5/32 interest amounting to an undivided five (5) acre interest" in the mineral rights. By reason of the accretion of land, 5/32 of the tract amounted to 7.385 instead of five acres. In holding that the deed was not ambiguous and that the reservation was limited to five acres, the court said in part:

"* * * The term `amounting to' as used herein means `to rise or reach to, by an accumulation of particular sums or quantities; to come to in the aggregate or whole.' It is apparent, not only from the above expression but the whole contract or deed, that at that time it was the purpose and intent to limit the amount reserved to an undivided five-acre interest in the minerals of the lands conveyed." (346 P.2d 729).

Most of the cases cited in Williams and Meyers involve deeds with provisions that would clearly conflict if the acreage differed from that supposed, i. e., where the grantor in fact owned more or less acres than the acreage specified in the grant (or reservation). Here there is no question regarding the amount of surface acreage owned by the grantors. The ambiguity, if any exists, arises by reason of the fact that the grantors did not own all of the minerals in 280 of the 1040 acres. Nor, by reason of the conveyance of the one per cent interest to Cottinghams, did they own a full one-half interest.

This is not a case where the grantors conveyed an undivided one-half interest in "their" or "our" interest in the minerals in the 1040 acres of land, "consisting of (or amounting to) 520 mineral acres". Under that language it could properly be contended that there is a conflict between the grant of the fractional interest and the grant of the mineral acres, in the event the grantor owned more or less than one-half of the minerals in all or a part of the land. Here, however, the grantors conveyed one-half of the minerals in the 1040 acres and the deed expressly recites that, "It is the intention of the grantors to convey 520.00 mineral acres".

It should be noted also that at the time the deed in question was executed, the Vanderhoofs owned a one-sixth mineral interest in another 280 acre tract recently acquired. They executed a deed to Baker in the same form conveying "an undivided One-Twelfth (1/12th) interest in and to all of the oil, gas and other minerals in and under and that may be produced from the following described lands" (here follows a description of the 280 acres). Following the description of the land these words are typed in: "It is the intention of the grantors to convey 23.34 mineral acres".⁴ There is no dispute over what passed by this deed.

There is no ambiguity between the clause conveying one-half of the minerals in 1040 acres and the conveyance of 520 mineral acres, and the express provision that a grant of 520 mineral acres was intended would seem to resolve this issue in favor of Bright and Schiff and Tribal Drilling. In other words, this is not so much a conflict between a provision for the conveyance of a fractional interest and a provision for a specified number of mineral acres as it is a failure of title with respect to a one per cent royalty interest in 280 acres. In the absence of the conveyance to Cottinghams, I think it would be clear from the face of the mineral deed that a conveyance of 520 mineral acres was intended regardless of the reservations by Richland County.

In the event an ambiguity could be found by reason of this failure of title, the same evidence must be considered in resolving the question of the intent of the parties and Vanderhoofs' cross-claim alleging fraud and mutual mistake. At the trial all parties to the mineral deed and others who were present during the negotiations and signing of the deed on September 13, 1965, testified, including John Miller, a lease broker who acted as agent for Baker. The testimony may be...