Taylor v. Brindley

• Decision Date: 01 December 1947
• Docket Number: No. 3459.,3459.
• Citation: 164 F.2d 235
• Parties: TAYLOR v. BRINDLEY.
• Court: U.S. Court of Appeals — Tenth Circuit

164 F.2d 235 (1947)

TAYLOR v. BRINDLEY.

No. 3459.

Circuit Court of Appeals, Tenth Circuit.

July 28, 1947.

As Modified on Denial of Rehearing December 1, 1947.

COPYRIGHT MATERIAL OMITTED

Earl Pruet, of Oklahoma City, Okl., for appellant.

John W. Swinford, of Oklahoma City, Okl. (Troy Shelton, of Oklahoma City, Okl., on the brief), for appellee.

Before PHILLIPS, HUXMAN, and MURRAH, Circuit Judges.

MURRAH, Circuit Judge.

The appellant, H. H. Taylor, sued the appellee, Ethel M. Brindley, to quiet the title to an oil and gas lease covering fifteen acres of royalty under described land in Oklahoma County. The issues before the trial court, as shaped by the pleadings, stipulations and pre-trial conference, were (1) whether a mineral deed executed by Brindley to one Stinchcomb, when construed together with a contemporaneous contract, authorized him to execute the oil and gas lease in question without the consent of Brindley; and (2) if not, did the appellee subsequently ratify the lease; or (3) is she estopped to deny its validity.

Construing the deed and contract together, the trial court held that they did not authorize the execution of the oil and gas lease without the consent of appellee, and that she neither ratified the same nor was estopped to deny its validity. The same questions are presented on appeal.

In support of its judgment, the trial court found that Stinchcomb was desirous of purchasing a mineral interest in land belonging to one Shellenbarger, but was unable to do so because of personal differences between them. Brindley and Stinchcomb entered into an arrangement, as on other occasions, whereby Stinchcomb would furnish the money, and appellee would buy the interest and convey it to Stinchcomb to secure his purchase money. Upon the sale of the interest, the parties would share equally in the profits after the purchase money and necessary expenses had been repaid. Pursuant to this arrangement, appellee purchased thirty-five acres of royalty under the land from Shellenbarger for $2625 furnished by Stinchcomb, and on the next day, May 1, 1930, conveyed the same by mineral deed to Stinchcomb. The deed in conventional form recited that it was subject to an oil and gas lease and in the event of its termination, all future rentals for oil and gas should be owned by the grantee. On the following day, in order to record their oral arrangement, the parties entered into a written contract, reciting that Stinchcomb had paid the purchase price for the mineral interest involved in the sum of $2,625 and in consideration thereof and mutual promises and agreements, Brindley had transferred, assigned and delivered to Stinchcomb a deed to the interest, subject to the following conditions: "It is understood and agreed that the party of the first part Stinchcomb is to hold the title by virtue of said deed last above described, and in the event of the sale of the said royalty or any part thereof, the profits of sale price are to be divided equally among the parties in the following proportions, * * * It is further understood and agreed that no sale of said interest above described, shall be compulsory on the other party or binding, unless a minimum price of $150.00 per acre is secured, and in the event said minimum price of $150.00 per acre is secured, then the act of each of both parties shall be binding on each of the parties in effecting the sale of said interest. * * * or in the event that no sale is consummated, the parties hereto shall share and share alike in the royalties, rentals, bonuses, or any other proceeds that may accrue hereunder and in direct proportions and on the same terms and conditions as above set forth. * * *"

Stinchcomb subsequently sold three acres of the royalty for $150 per acre; Brindley did not join in the conveyance, but was notified of the sale and given credit on the purchase price. Thereafter and on October 7, 1943, Stinchcomb executed the oil and gas lease in question to Chudacoff and Smith for $12.50 per acre. On April 26, 1944, Chudacoff and Smith assigned the lease to appellant, Taylor, and the same was filed of record on July 26, 1944. Brindley did not learn of the lease or its assignment until May, 1944, when the Magnolia Petroleum Company advised her of it during negotiations for a lease. Immediately upon learning of the outstanding lease, Brindley notified all interested parties that Stinchcomb had no authority to execute a lease covering her interest in the minerals. These conditions eventuated this lawsuit.

It was, and is, the contention of appellant that the mineral deed, being absolute and unconditional in form, certainly authorized the granting of an oil and gas lease without the consent of the appellee as grantor; that since the contemporaneous contract did not expressly prohibit, but clearly contemplated a leasing in the event of no sale, the conclusion is inevitable that the deed and contract, when construed as one instrument, contemplated and authorized Stinchcomb to execute the oil and gas lease in question. He says the conduct of the parties is confirmatory of this construction, and points to the execution by Stinchcomb of the mineral deed to the three acres of royalty for $150 per acre; the change of the depository agreement without objections; the writing of a letter by appellee to Stinchcomb in May 1945 which stated, "We executed a lease," all as convincing evidence of their mutual understanding with respect to Stinchcomb's power to execute a lease. Appellant also invokes the pre-trial conference agreement in which appellee conceded that the only limitation upon Stinchcomb's power to lease was a minimum sale price of $150 per acre.

These facts, say the appellant, bring the case within the doctrine of Pauly v. Pauly, Okl.Sup., 176 P.2d 491, in which one brother executed a quitclaim deed to the other of his interest in jointly owned property. Contemporaneously with the execution of the deed, the grantee, joined by his wife, executed a memorandum on the bottom of the deed in which it was recited that in the event of oil production on the land, the grantees "agree to remit annually one-third of royalty payments received to Frank R. Pauly, or his heirs." The Oklahoma Court held that the deed and contract, when construed as one instrument, while not a conveyance or reservation of a mineral interest, or an agreement to convey at some future date, did give the grantor a right analogous, or in many respects similar, to an oil payment in the nature of a covenant running with the land. Further defining the right, the court held that the grantor was not entitled to any share of the bonus money received by the grantees from leases, or to participate in the making of oil and gas leases, or to share in the rentals, his interest entitling him only to a share in the actual production.

By analogy, the appellant reasons that the contract and agreement in our case, when construed as one instrument, gave the appellee a right to one-half of the profits derived from the sale of the mineral interest, or "the royalties, rentals, bonuses, or any other proceeds that may accrue," but did not grant him an interest in the minerals conveyed in the deed. It is said that in any event, the restriction in the contract upon the sale or leasing is in the nature of a covenant running with the land, and not a conditional limitation upon the power to convey; that the only duty imposed upon Stinchcomb is to account for the rents and profits from the sale or leasing of the mineral interest, and the only remedy for the breach of this duty is specific performance or for damages. In that connection, our attention is called to a cause of action asserted by the appellee in a cross complaint to a suit by Stinchcomb upon promissory notes filed in the District Court of Oklahoma County in 1935. The asserted cause of action was to recover damages from Stinchcomb in the amount of $1155 by reason of his failure to consummate a sale of the mineral interest involved pursuant to an offer she is alleged to have received for $150.00 per acre. It is suggested that Brindley, having chosen to bring an action in damages against Stinchcomb for his alleged breach of the contract, she made an election of inconsistent remedies, and is now precluded from insisting upon a performance of the contract as she now construes it.

The appellee would have us treat the deed and contract as creating the relationship of tenants in common, and if not tenants in common, then trustee and beneficiary. It is said that the question for decision is not whether the contract expressly limited Stinchcomb's authority to lease appellee's interest, but whether the appellee expressly delegated such authority to her cotenant in the contract; that in the absence of express authority, Stinchcomb had no right to execute the lease as a matter of law.

It is important to consider what legal relationship between the parties was created by the controlling instruments in order to determine what legal and enforceable rights the law has given the parties occupying that particular relationship. It has been well said that "the question of what relationship is created by a given agreement between parties after the scope of the agreement has been determined, is one of law." Smith v. Cantner, 186 Okl. 348, 97 P.2d 896, 898.

The trial court held the deed a conveyance for the purpose of holding the mineral interest as security for the purchase price; that the subsequently recorded contract determined the powers of the holder of the legal title to sell or lease such property; that the contract specifically authorized either party to sell and convey the mineral interest, or any part thereof, for a minimum of $150.00 per acre; and in the event of no sale, the contract contemplated a leasing of the interest. But, the court was of the opinion that the contract being silent in respect to the authority of either to execute a lease, Stinchcomb was unauthorized...