Tenneco Oil Co. v. Humble Oil & Refining Co.

• Decision Date: 07 January 1969
• Docket Number: No. 41772,41772
• Citation: 449 P.2d 264
• Parties: TENNECO OIL COMPANY, a Corporation, Plaintiff in Error, v. HUMBLE OIL & REFINING COMPANY, a Corporation, Defendant in Error.
• Court: Oklahoma Supreme Court

Page 264

449 P.2d 264

TENNECO OIL COMPANY, a Corporation, Plaintiff in Error, v. HUMBLE OIL & REFINING COMPANY, a Corporation, Defendant in Error.

No. 41772.

Supreme Court of Oklahoma.

Jan. 7, 1969.

Syllabus by the Court

1. One who purchases land with knowledge of such facts as would put a prudent man upon inquiry, which, if prosecuted with ordinary diligence, would lead to actual notice of rights claimed adversely to his vendor, is guilty of bad faith if he neglects to make such inquiry, and is chargeable with the 'actual notice' he would have received.

2. In a case of equitable cognizance, this court will examine the whole record and weigh the evidence and affirm the judgment of the trial court unless clearly against the weight of the evidence or contrary to law or established principles of equity.

Appeal from District Court, Dewey County; F. B. H. Spellman, Trial Judge.

Action to quiet title under an oil and gas lease against holder of a subsequent oil and gas lease from same lessor covering same interest in the oil, gas and other minerals in and under the same tract of land. Judgment for plaintiff. After overruling of its motion for a new trial, defendant appeals. Judgment affirmed.

Baker H. Melone, of Miller, Melone, Wilson, Adams & Spencer, Oklahoma City, for plaintiff in error.

Albert C. McClain, Richard W. Fowler, Oklahoma City, for defendant in error; Fowler, Rucks, Baker, Jopling, Gramlich & Mee, Oklahoma City, Sparks, Boatman & Rizley, Woodward, of counsel.

LAVENDER, Justice.

This appeal involves the following question: Where actual notice of the prior existence of an oil and gas lease is imparted to one seeking to also obtain such a lease does the latter exercise 'reasonable diligence' in inquiring as to the continued effectiveness of such lease where he limits his inquiry to questioning the intended lessor as to any outstanding leases? The trial court in effect answered such question in the negative. Under the circumstances herein we agree.

This action was commenced in the court below by the Humble Oil and Refining Company, as plaintiff, against Tenneco Oil Company, defendant. The parties will be referred to by name or as they appeared in the trial court. The plaintiff alleged that it was the present owner of all of the rights of the original lessee in one certain oil and gas lease covering an undivided three-sixteenths interest in the oil, gas and other minerals in and under the Southeast Quarter of Section 32, Township 16 North, Range 15 West, Dewey County, Oklahoma. Plaintiff's lease was executed September 30, 1959, but was not filed of record until January 16, 1964. On January 5, 1960, an assignment of that lease was filed for record and the original lease was described by reference to its parties and date.

On July 13, 1962, the lease which plaintiff sought to cancel in this action was executed and delivered to defendant. It was executed by the same lessor as was plaintiff's lease and of course, covered the identical property and interest. According to the evidence defendant was aware of the recorded assignment of plaintiff's oil and gas lease at the time it paid the consideration for its lease.

The parties stipulated that both leases were supported by consideration and all payments called for in both instruments had been made. They further agreed that at all pertinent times involved here the parties to the assignment, filed January 5, 1960, both maintained offices in Oklahoma City and were listed in the telephone and city directories of that city. The assignor of the assignment was the original lessee of plaintiff's lease and the assignee was plaintiff's immediate predecessor in title.

According to the evidence defendant's agent, although informed of the existence of the assignment of an oil and gas lease on record, limited his 'inquiry' to telephoning the president of his proposed lessor and inquiring if there was any outstanding lease on the subject property. The lessor-corporation president informed defendant's employee that to the best of his knowledge there were no other leases on the property and for defendant to go ahead and mail the proposed lease for signature--that he would check in the meantime and if there was any outstanding lease defendant's lease would be returned unsigned and the draft attached to it would not be endorsed. Defendant's agent followed these directions and the draft was thereafter said and the defendant's oil and gas lease executed by lessor and delivered to the defendant.

Title 25 O.S.1961, § 13 is particularly appropriate, it provides:

'Every person who has actual notice of circumstances sufficient to put a prudent man upon inquiry as to a particular fact, and who omits to make such inquiry with reasonable diligence, is deemed to have constructive notice of the fact itself.'

In the early case of Cooper v. Flesner et al. (1909), 24 Okl. 47, 103 P. 1016, 23 L.R.A.,N.S., 1180, this court treated the notice now provided for in the above statute as being implied actual notice, and in its syllabus to that case restated the rule of the statute, as applied to land transactions, in the following language:

'One who purchases land with knowledge of such facts as would put a prudent man upon inquiry, which, if prosecuted with ordinary diligence, would lead to actual notice of rights claimed adversely to his vendor, is guilty of bad faith if he neglects to make such inquiry, and is chargeable with the 'actual notice' he would have received.'

The rule is stated in the same way in Herbert v. Wagg et al. (...