Walter v. Sohio Petroleum Co.

• Decision Date: 17 January 1949
• Docket Number: No. 30708.,30708.
• Citation: 83 N.E.2d 346,402 Ill. 33
• Parties: WALTER et al. v. SOHIO PETROLEUM CO. et al.
• Court: Illinois Supreme Court

402 Ill. 33

83 N.E.2d 346

WALTER et al.

v.SOHIO PETROLEUM CO. et al.

No. 30708.

Supreme Court of Illinois.

Nov. 18, 1948.

Rehearing Denied Jan. 17, 1949.

Appeal from Circuit Court, Franklin County; Caswell J. Crebs, judge.

Suit for accounting of oil received from a certain oil lease by Blanche Walter and another against Sohio Petroleum Company, Clyde E. Frazier, and others. Clyde E. Frazier filed a counterclaim. From the decree, Clyde E. Frazier appeals.

Affirmed.

Wham & Wham, of Centralia, for appellant.

Hart & Hart and Layman & Johnson, all of Benton, Donovan D. McCarty, of Olney, Don Tuner, of St. Louis, Mo., and McAfee, Grossman, Hanning, Newcomer & Hazlett, of Cleveland, Ohio, for appellees.

GUNN, Justice.

Blanche Walter and Vivian Bllack, hereafter referred to as Walter and Blalack, filed suit in the circuit court of Franklin County against Sohio Petroleum Company for an accounting of oil received from a certain oil lease operated by plaintiffs and Clyde F. Frazier, and against the latter, who is asserting certain adverse rights in the leases which plaintiffs and Frazier were operating jointly. The prayer of the complaint against Frazier was that the certain claims against plaintiffs' interests in the oil leasehold be decreed unfounded. Frazier filed a counterclaim alleging in substance that by reason of the failure of title of the original lessors of Walter and Blalack, under the terms of the lease he acquired a claim against them for a greater share than he was receiving from the oil company, and prayed a determination of his rights. Before the case came to issue all of the parties directly or indirectly interested in the production of the oil from the particular lease were made parties, and a decree was entered in the case confirming the claims of Walter and Blalack, fixing the relative proportions of oil coming to each, and determining the issue against the counterclaimant Frazier. The issue involved is the claim to a fractional part of an oil-and-gas lease in land, and therefore involves a freehold, thereby authorizing a direct appeal to this court. Greer v. Carter Oil Co., 373 Ill. 168, 25 N.E.2d 805.

A resume of the facts preceding the contracts or leases involved is necessary to understand the controversy between the parties. Prior to July 12, 1905, James A. Batts owned the southwest quarter of the northeast quarter of section 35, township 6, range 2 east of the third P.M., in Franklin County, Illinois. On that date he sold ‘all the coal and other minerals underlying’ said land to Walter W. Williams, as trustee, who subsequently, on January 4, 1918, conveyed the ‘coal and other minerals' to Chicago, Wilmington & Franklin Coal Company, hereafter referred to as the C., W. & F. Coal Co. In course of time the surface ownership came into one Edward Rice, while the ‘coal and other minerals' stood in the name of the C., W. & F. Coal Co., but whether such terms conveyed the oil and gas was not a settled matter at the time of the dispute involved herein, and the Batts heirs still claimed the oil if not transferred by the deed of the C., W. & F. Coal Co.

In 1940 oil was discovered in paying quantities in the neighborhood of the lands involved. March 25, 1941, the C., W. & F. Coal Co. executed an oil-and-gas lease on said land to E. S. Adkins, which was assigned to Walter and Blalack August 15, 1941. This lease was made upon the assumption that the coal company owned the oil and gas by virtue of a deed years before from Batts. April 1, 1941, the Batts heirs, the original grantor being dead, executed an oil-and-gas lease to Lincoln Coleman covering the same land, which lease was assigned to Walter and Blalack April 21, 1941. There was a minor Batts heir, whose interest was authorized to be leased by the county court. Each of these leases carried an overriding royalty, viz., in addition to the lessors one-eighth royalty interest an additional fractional charge was placed against the remaining 7/8 of the oil produced by the working interest, viz., the share coming to Walter and Blalack. Thus the lease from the C., W. & F. Coal Co. carried an override of 1/8 to Adkins, and that of the Batts heirs an override of 1/16 of the 7/8 working interest.

Following the discovery of oil and gas in the locality there was litigation upon the moot question as to who owned the oil and gas under other lands in which the C., W. & F. Coal Co. owned the ‘coal and other minerals.’ Pending the final determination of this question by the court, the C., W. & F. Coal Co., owner of mineral deeds to many tracts of land containing the same provision, adopted a policy towards the surface owners and others interested, who were in a position to dispute the effect of the words ‘coal and other minerals,’ whereby the royalty interest obtained from oil and gas on such leases was equally divided between the coal company and the parties who would have been the owners of the oil and gas if the ‘coal and other minerals' clause should not be held to convey oil and gas. The original lessee of the Batts heirs, viz., Lincoln Coleman, and his assignees Walter and Blalack, and the appellant Frazier, knew of this general policy upon the part of the C., W. & F. Coal Co.

August 8, 1941, Walter and Blalack entered into a contract with Frazier, agreeing to give him an assignment of an undivided 1/2 interest in a 7/8 oil-and-gas lease on said land, subject to the overriding royalty interest equal to 1/16 of 7/8 of all oil and gas produced payable to Lincoln Coleman. In the meantime Walter and Blalack were negotiating with the C., W. & F. Coal Co. and Adkins to acquire from them an assignment of the Adkins lease of the same property, and, August 15, 1941, they acquired from E. S. Adkins an assignment of the lease made to him by coal company, subject to an overriding royalty of 1/8 to Adkins, and an agreement by the C., W. & F. Coal Co. to reduce their royalty from 1/6 to 1/12 of the 7/8, so at the time of the assignment of the 1/2 interest sold Frazier the entire title to the oil and gas rights of both the Batts heirs and of the coal company was vested in Walter and Blalack, subject to royalties and overriding royalties.

September 8, 1941, Walter and Blalack and their husbands delivered to Frazier an assignment of an interest in the oil-and-gas lease, first describing the undivided 1/2 of 7/8 interest in the lease made from the Batts heirs and from Lincoln Coleman, with this proviso: ‘Subject, However to a proportionate burden of an overriding royalty interest of one sixteenth (1/16) of seven-eighths (7/8) of all the oil found, produced and saved from said premises.’ And, also, Walter and Blalack in the same transaction assigned to Clyde F. Frazier the undivided 1/2 of 7/8 of the lease made from C., W. & F. Coal Co. to Adkins, also ‘subject, However, to a proportionate burden of an overriding royalty interest of one-eighth (1/8) of all the oil, gas and casinghead gas produced and saved from said premises,’ reserved in favor of E. S. Adkins, and subject, also, to a ‘Proportionate burden of a certain overriding royalty interest equal to one-twelfth (1/12) part of all oil, gas and casinghead gas' payable to the C., W. & F. Coal Co.

Walter and Blalack and Frazier operated the oil-and-gas wells upon the said premises for over two years, sold their oil to the Sohio Petroleum Co., and made division orders in accordance with said contracts and assignments. In the meantime the litigation concerning the meaning of ‘coal and other minerals' was pursuing its way through the courts, and in 1943, in the cases of Jilek v. Chicago, Wilmington & Franklin Coal Co., 382 Ill. 241, 47 N.E.2d 96, 146 A.L.R. 871, and Shell Oil Co. v. Moore, 382 Ill. 556, 48 N.E.2d 400, it was definitely held that the words ‘coal and other minerals' included all oil and gas, and consequently the effect of these decisions would have rendered the Batts heirs' lease void for want of title, as well as the interest of their assigns, except for the fact of the contract with the C., W. & F. Coal Co., by which they obtained an interest in 1/2 of the oil and gas on the premises.

It was after the decisions of the Supreme Court in the cases mentioned that Frazier became of the opinion that he was entitled to the share of the Batts heirs, which had otherwise failed, and that the contract he had entered into with Walter and Blalack so provided, and if its effect was not to give him a full undivided 1/2 interest in the lease it should be reformed so as to give it to him. In other words, he now contends that the Batts heirs' title having failed, that Walter and Blalack conveyed to him a 1/2 of the 8/8 of the lease, viz., the lessors' 1/8 plus 1/2 of their share in the 7/8 working interest; and that likewise Lincoln Coleman's override of 1/16 was invalid and could not be collected. This is the substance of the lawsuit, and many ingenious arguments are presented to sustain the claim of Frazier to the interest of the Batts heirs which had failed.

The defendants suggest different defenses in each of the briefs for the different parties: There is (1) the Sohio Petroleum Company, which purchased the oil from the leasehold under division orders, and under which they paid Frazier the share claimed by him; (2) Walter and Blalack, against whom Frazier is making this additional claim because of their assignment of the interest made by them to him; and (3) the Batts heirs, whom Frazier claims have no interest whatever in the oil-and-gas property. These defenses are different, and, as stated, are covered by separate briefs.

It the main the defense of the Sohio Petroleum Company is that Frazier is estopped to now claim any greater interest than he has claimed for two years preceding the decision of this court in the Jilek and other cases, and from accepting payment upon that basis. The defense of Walter and Blalack is that they conveyed by their assignment to Frazier a certain interest in the oil and gas, and...