Valentine Oil Co. v. Powers

• Decision Date: 05 June 1953
• Docket Number: No. 33259,33259
• Parties: VALENTINE OIL CO. et al. v. POWERS et al.
• Court: Nebraska Supreme Court

Page 150

59 N.W.2d 150

157 Neb. 71

VALENTINE OIL CO. et al. v. POWERS et al.

No. 33259.

Supreme Court of Nebraska.

June 5, 1953.

Syllabus by the Court.

1. An order or decree sustaining a demurrer will be affirmed if any one ground of demurrer is well taken, even though the ground on which the ruling is based is not well taken or the order or decree sustaining the demurrer is general and does not indicate the ground on which it is based.

2. A general demurrer admits all allegations of fact in the pleading to which it is addressed, which are issuable, relevant, material, and well pleaded; but does not admit the pleader's conclusions of law or fact.

3. In passing on a demurrer to a petition, the court will consider an exhibit attached thereto and made a part thereof, if the allegations stated therein either aid the petition in stating a cause of action or charge facts going to avoid liability on the part of the defendant.

4. The grantor or obligor of an instrument held as an escrow is entitled to its return when the grantee or obligee fails to perform the conditions of the escrow contract, or the contingency specified has not occurred.

5. Upon performance of the condition the grantee or obligee is entitled to delivery, which will be enforced by a decree of court. But a breach of the escrow agreement by the grantee may preclude him from bringing an action to enforce the terms of the agreement; thus where the grantee is in default, he cannot enforce a delivery of the instrument to him by the depositary.

6. In the law governing performance of escrow agreements, there is no doctrine of substantial compliance, and full performance only can discharge a condition precedent to valid delivery by the escrow holder. The question involved is one of performance of the escrow agreement, not of the ability of the parties to perform it, since such ability, without full performance, cannot amount to compliance.

7. The conditions on which instruments are deposited as escrows are ordinarily to be performed by the grantee or obligee, and performance by a person other than the one specified in the escrow contract is insufficient to entitle such other person to delivery of the instrument; but the necessity of action by a specified party may be obviated by his transfer of interest to another, or satisfied by the act of the depositor.

8. The grantor or depositor loses control over an instrument placed in escrow, although he retains legal title and its concomitants until performance of the conditions; but, where the escrow is abandoned, it becomes ineffectual for any purpose.

9. Where time is of the essence of an escrow agreement, the depositary has no authority to allow one of the parties to perform the conditions after the expiration of such time.

10. The obligations between the assignor and assignee of an oil and gas lease are what the contract of assignment makes them in the light of the provisions of the lease assigned.

11. The term 'special limitation' denotes that part of the language of a conveyance which causes the created interest automatically to expire upon the occurrence of a stated event, and thus provides for a terminability in addition to that normally characteristic of such interest.

12. An oil and gas lease, providing that, unless a well is commenced by a certain time, or unless the lessee timely pays a stated rental to renew the lease, it shall terminate, confers an optional right upon the lessee and should be strictly construed in favor of the lessor and against the lessee.

13. Such a delay rental clause is a special limitation, time is of the essence of the contract, and failure of the lessee or his assigns to tender or pay rentals within the specified time automatically terminates the lease without any affirmative action by the lessor, or any one else, for that purpose.

14. Based on the general equitable doctrine that equity will not render a decree which it is impractical to carry out, and because equity will not do a vain thing, a decree for specific performance of a contract will not be granted if it would be, or could be made, nugatory and useless, or if it would be ineffectual or not beneficial to plaintiff.

Eugene D. O'Sullivan, Eugene D. O'Sullivan, Jr., Omaha, A. Marvin Lungren, Denver, Colo., for appellants.

Edwin D. Crites, Chadron, for appellees.

Heard before SIMMONS, C. J., and CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE, and BOSLAUGH, JJ.

CHAPPELL, Justice.

The Valentine Oil Company, a corporation, and C. M. Valentine as alleged trustee therefor, brought this action as plaintiffs, seeking specific performance of an oil and gas lease escrow agreement, together with equitable relief and damages.

Defendants Joseph V. Webster, the depositary, and Edwin D. Crites, who was a lessor and allegedly acted as agent for all lessors in executing the escrow agreement, together with other lessors named as defendants in plaintiffs' amended and supplemental petition, demurred thereto, specially upon the ground among others that there was a defect of parties defendant, and generally upon the ground that plaintiffs' petition did not state facts sufficient to constitute a cause of action. The trial court sustained the demurrer 'generally' and, upon failure of plaintiffs to plead further, dismissed the action at plaintiffs' costs. Thereafter plaintiffs appealed, assigning that the court erred in sustaining the demurrer and dismissing the action. We conclude that the assignment has no merit.

In that connection, the rule is that: 'An order or decree sustaining a demurrer will be affirmed if any one ground of demurrer is well taken, even though the ground on which the ruling is based is not well taken or the order or decree sustaining the demurrer is general and does not indicate the ground on which it is based.' 5 C.J.S., Appeal and Error, § 1464, p. 80. In the light of such rule, we conclude that the mere fact that the trial court sustained the demurrer 'generally' could not make it only a general demurrer, or require reversal of the judgment.

At the outset, it should be noted that two of the lessors and the wives of two of them who joined as lessors were not named as parties defendant. On the other hand, the lessee of all the leases, Roy R. Powers, and his agent, A. A. Kennedy, were named as defendants, each of whom, as alleged in plaintiffs' petition, was 'a citizen and resident of Casper, Natrona County, Wyoming' who had been 'advised in writing of the commencement and pendency of this case.' As a matter of course, such notice was not service of process, and their special appearance was sustained. In that connection, it is argued that upon plaintiffs' theory of recovery such persons were all indispensable parties within the purview of Local Union v. Western Public Service Co., 140 Neb. 186, 299 N.W. 531, and our supplemental opinion, Cunningham v. Brewer, 144 Neb. 218, 16 N.W.2d 533. Be that as it may, we dispose of the case upon the merits as upon general demurrer, rather than upon such ground.

We have examined plaintiffs' petition, keeping in mind the rule that: 'A general demurrer admits all allegations of fact in the pleading to which it is addressed, which are issuable, relevant, material, and well pleaded; but does not admit the pleader's conclusions of law or fact.' In re Estate of Halstead, 154 Neb. 31, 46 N.W.2d 779, 780.

It is also the rule that: 'In passing on a demurrer to a petition, the court will consider an exhibit attached thereto and made a part thereof, if the allegations stated therein either aid the petition in stating a cause of action or charge facts going to avoid liability on the part of the defendant.' Carson v. City of Hastings, 81 Neb. 681, 116 N.W. 673.

The petition is voluminous and can only be summarized. After identifying the parties and describing their respective capacities or positions in the litigation, plaintiffs alleged that on or about April 8, 1947, C. M. Valentine, acting as trustee for Valentine Oil Company, entered into a written contract with Roy R. Powers who was then engaged in the purchase of oil and gas leases and drilling operations in connection therewith. A copy of such agreement, marked exhibit A, was attached to and made a part of the petition. Therein, C. M. Valentine and Roy R. Powers agreed to start a leasing program within 10 days, time being of the essence. Valentine agreed to provide the necessary geological data in his possession, and Powers agreed to procure leases in certain Sheridan and Dawes County townships. Such leases were to be taken in the name of one or the other of the parties, and subsequently divided and assigned equally between them upon a designated formula, giving due consideration to the geological value of each. It was also agreed that simultaneously with conclusion of such leasing program, a mutually agreeable drilling contract for a test well would be entered into between Powers and Valentine Oil Company, of which C. M. Valentine was president. In that connection, plaintiffs alleged as a conclusion that all conditions precedent in such agreement were performed by them. It will be noted, however, that none of its terms make any mention of an escrow agreement. Concededly, however, all leases here involved were made with Powers as lessee and he as such subsequently executed a written escrow agreement with Edwin D. Crites, who in so doing allegedly acted as agent for lessors.

Such escrow agreement was executed on April 28, 1947. A copy thereof, marked exhibit B1, was attached to and made a part of plaintiffs' petition. Its provisions appointed Joseph V. Webster as escrow officer and agreed that certain attached oil and gas leases should be deposited with him to be held in escrow and disposed of by him on the following terms and conditions: 'If the said Powers, or his assigns, shall install a competent rotary drilling rig at a location as hereinafter provided, shall set his surfact (surface) casing, and shall...