Superior Oil Corp. v. Wilson
| Decision Date | 09 April 1940 |
| Docket Number | 28736. |
| Citation | 103 P.2d 535,187 Okla. 447,1940 OK 196 |
| Parties | SUPERIOR OIL CORPORATION v. WILSON et al. |
| Court | Oklahoma Supreme Court |
Rehearing Denied June 18, 1940.
Syllabus by the Court.
In an action of purely equitable cognizance this court on appeal will weigh the evidence, and, if the judgment is against the clear weight of the evidence, will reverse the judgment rendered, and cause to be entered a proper judgment.
Appeal from District Court, Seminole County; Tal Crawford, Judge.
Action by Freelin Pruitt against the Superior Oil Corporation to impress a trust, to terminate a trust, and for an accounting in and to a one-sixth interest in a certain tract of land. The plaintiff died, and the action was revived by Mattie Wilson, executrix of the last will and testament and of the estate of Freelin Pruitt, deceased. C. W. Sandlin intervened in the action, asserting that he had acquired an interest therein by virtue of a contract between himself and Mattie Wilson, individually. From an adverse judgment, the defendant appeals.
Judgment reversed, and cause remanded, with directions to render judgment for defendant.
Busby Harrell & Trice, of Ada, Gibson & Holleman, of Tulsa, and R J. Roberts, of Wewoka, for plaintiff in error.
Blakeney Wallace & Blakeney, Beets, Zeeman & Beets, and Tom Huser, all of Oklahoma City, C. T. Huddleston, of Ada, and Banks, O'Brien & McVey, of Independence, Kan., for defendants in error.
This is an appeal from the District Court of Seminole County, Oklahoma, involving a suit to impress a trust, to terminate trust, and for an accounting, in and to a 1/6th interest in a certain tract of land in Seminole County, Oklahoma.
This action was originally filed by Freelin Pruitt on December 26, 1933, against the Superior Oil Corporation. He died on May 19, 1934, and the action was revived by Mattie Wilson, executrix of the estate of Freelin Pruitt, deceased, on January 14, 1936. September 21, 1937, C. W. Sandlin intervened, asserting that he had acquired an interest therein by virtue of a contract between himself and Mattie Wilson, individually.
Essential facts are that Freelin Pruitt, a minor, who attained majority December 25, 1931, owned an undivided 1/6th interest in a tract of land. During his minority an oil and gas lease on his interest in said land was sold through probate court to one Norvell and came by assignment to be owned by A. E. Graham, C. E. Gragg, and Gordon Dovell, hereinafter called "assignees." By the terms of the lease the "assignees" were to prospect and develop the land for oil and gas and have for themselves 7/8ths of the production and pay to the minor 1/8th of the production. The "assignees" by a bargain with the Superior Oil Corporation assigned to Superior a certain interest or portion of the lease in consideration of the agreement of Superior to drill and develop the premises.
As agreed, Superior did drill and develop the premises and produced oil therefrom. Up to this point the rights of the parties to the oil production, so far as disclosed by the records, were as follows: The minor was entitled to 1/8th royalty by the terms of the original lease; the "assignees" were entitled to the portion of the 7/8ths working interest which they had reserved by their bargain with and assignment to Superior; and Superior was entitled to the portion of the 7/8ths working interest assigned to them by "assignees" and for which Superior had agreed to and did develop the premises.
But the minor had sued the "assignee" and recovered from them the portion of the 7/8ths working interest they had attempted to reserve for themselves. This recovery was had by the minor on the theory that by reason of the method employed in obtaining the original lease to Norvell, which was fully known in detail by the "assignees;" that the said "assignees" held the lease in trust for the minor. See Gragg v. Pruitt, 179 Okl. 369, 65 P.2d 994. Thus by that litigation the record rights of the "assignees" came to be recognized as rights belonging to the minor who thereby owned his own original 1/8th royalty interest, together with the reserved portion of the 7/8ths working interest which did not pass by assignment from the "assignees" to Superior.
By this action the ward, Freelin Pruitt, after reaching majority, seeks to recover from Superior the remaining interest in the lease, being the portion of the 7/8ths working interest assigned to Superior by the "assignees," and received by Superior on its agreement to drill and develop the premises. Or to state it more exactly, plaintiff by this action seeks to recover from Superior a portion of the total value of oil produced, equal to the portion of the working interest conveyed to Superior by "assignees" as to plaintiff's interest in the land.
We should here note that legal title to the leasehold interest fully passed to the original lessee, Norvell, and by assignment to the "assignees." It has never been adjudged otherwise, nor contended otherwise, either by the plaintiff in the former litigation, or by the plaintiff, Freelin Pruitt, in this action or by the successor plaintiff herein or by the intervenor. It would follow that legal title passed to Superior to that portion or interest assigned by "assignees." It was determined in the prior litigation that while "assignees" held title to their retained interest in the lease, they held it in trust for the benefit of the minor.
By the terms of the lease "assignees" were obliged to prospect and develop the premises for oil. The fact that they held in trust for the benefit of the minor did not lessen their duty to drill and develop. That fact, if affecting their duty to develop at all, might be said to have increased it. Whatever they held in trust for this minor, they should have diligently held. Holding a leasehold privilege and right to drill for and produce oil, in trust for the ultimate benefit of the minor, they should diligently drill, or prudently obtain the drilling and development. See Gragg v. Pruitt, supra; In re Bowman's Estate, 332 Pa. 197, 2 A.2d 725; Lancaster Bank v. Marshel, 130 Neb. 141, 264 N.W. 470; Crane v. Owens, 180 Okl. 452, 69 P.2d 654; Graham v. Dunlap, 179 Okl. 295, 65 P.2d 538.
If "assignees" had themselves drilled the wells to production and consequent great profit, and had accounted to the minor for the production, either voluntarily or after suit, it seems reasonable to say that they would have been entitled to deduct the cost of production. If they had prudently paid someone else in cash to drill, they would have been entitled to deduct such cash expenditure, or to have the lessor reimburse them out of the production. If they, holding the lease in trust for the minor's benefit, had prudently contracted to obtain the drilling and to pay therefor out of the oil produced, or by and with a reasonable amount or per centum of the oil produced, such a contract should be regarded as properly in the discharge of their duties as holders in trust, in view of the circumstances of this particular trust. Then it would seem to follow that when they procured the drilling and development by conveying to Superior an interest in the lease, that such interest would fully pass to Superior, if the agreement was a prudent one, and the interest conveyed to Superior was a reasonable and proper consideration for the drilling and development of the premises.
In Restatement of the Law of Trusts, Sec. 283, this rule is stated: "If the trustee transfers trust property to a third person or creates a legal or equitable interest in the subject-matter of the trust in third person, and the trustee in making the transfer or in creating the interest does not commit a breach of trust, the third person holds the interest so transferred or created free of the trust, and is under no liability to the beneficiary."
And in the same authority, Sec. 296, there is this statement: "If the trustee transfers trust property in breach of trust to a transferee for value, the transferee takes free of the trust although he had notice of the existence of the trust, unless he has notice that the trustee is committing a breach of trust in making the transfer."
In this case the oil production was quite substantial, and resulted in large benefits to the minor, as the owners of the 1/8th royalty, and the adjudged owner of the substantial portion of the 7/8ths working interest reserved by the "assignees" when they dealt with Superior. Those benefits were fully enjoyed by the minor until his majority, and two years and one day thereafter before filing this suit, and we assume that since this suit was filed, such benefit has been enjoyed by the plaintiff Pruitt and his successors in interest. No such benefits could have resulted but for the drilling and developing of the lands for oil. They all in fact followed and resulted from the drilling and development obtained by the bargain between "assignees" and Superior.
When one is beneficial owner of property or rights, held in trust for his benefit by another, and the trustee makes a prudent bargain, resulting in great benefit to the owner who receives and fully enjoys the fruits of the bargain, equity will not be exercised to return also the consideration paid out in the bargain. It is not contended that the contract made by "assignees" with Superior was in any sense unreasonable, or that the assignment made to Superior was in any sense excessive when made.
In fact the conduct here goes far towards showing complete ratification. The benefits of these transactions were accepted, in large sums, by the minor and his guardian, and by the ward after obtaining majority, and by the successor plainti...
To continue reading
Request your trial