Weiner v. Wilshire Oil Co. of Tex.
| Decision Date | 07 March 1964 |
| Docket Number | No. 43344,43344 |
| Citation | 389 P.2d 803,192 Kan. 490 |
| Parties | Carl WEINER and Howard Bowker, Administrator of the Estate of John G. Kienzle, Deceased, Appellees, v. WILSHIRE OIL COMPANY OF TEXAS, a Corporation, Appellant. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. In a declaratory judgment action brought to construe a written contract for the sale of oil and gas leases, an overriding royalty interest was reserved to the sellers with a specific provision reading: 'This overriding royalty interest shall continue so long as Dougherty operates the properties herunder.' Another provision of the contract recited that the provisions of the contract were binding upon the assigns of the respective parties. Upon application of familiar rules of construction on appeal it is held: The contract is not ambiguous, and with respect to the overriding royalty interest of the sellers the contract is construed to bind the assigns of Dougherty.
2. Prior to a resort to extrinsic evidence, a written instrument is to be interpreted from its four corners. That is to say, all the language used anywhere in the instrument should be taken into consideration and construed in harmony with other portions of the instrument. Ambiguity does not appear until the application of pertinent rules of interpretation to the face of the instrument leaves it genuinely uncertain which one of two or more meanings is the proper meaning.
3. In placing a construction on a written instrument, reasonable rather than unreasonable interpretations are favored by the law. Results which vitiate the purpose or reduce the terms of the contract to an absurdity should be avoided. The meaning of a contract should always be ascertained by a consideration of all the pertinent provisions and never be determined by critical analysis of a single or isolated provision.
K. W. Pringle, Jr., Wichita, argued the cause, and L. H. Cable, Chanute, George B. Collins, Oliver H. Hughes, Robert Martin, William F. Schell, Laverne Morin, Robert M. Collins and William L. Oliver, Wichita, and Thomas M. Burns, of Denver, Colo., were with him on the brief for appellant.
Joe F. Balch, Chanute, argued the cause, and Robert L. Briley, Chanute, was with him on the brief for appellees.
This is an action for a declaratory judgment to construe the terms of a written contract for the sale of several oil and gas leases. The defendant has duly perfected an appeal from a judgment decreeing that the plaintiffs are the owners of a 1/7th of 7/8ths overriding royalty interest in the oil and gas leases and ordering the defendant to account to the plaintiffs therefor.
The question is whether the plaintiffs' overriding royalty interest reserved in the contract of sale continued during the entire life of the leases or whether such interest terminated when H. K. Dougherty, the original assignee, ceased operating these particular oil and gas leases.
The facts pertinent to the issue in this case are not in dispute. They have been established either by stipulation or admission of the parties.
On January 26, 1939, the plaintiffs, Weiner and Kienzle, were the owners of a 7/8ths working interest in five oil and gas leases located in Neosho County, Kansas. On that date they entered into a written contract with H. K. Dougherty granting him the option for ninety days to purchase said leases and appurtenant equipment, and the right to investigate the property and to drill test wells. The contract further fixed the purchase price and method of payment in the event the option was exercised.
The principal issue in this case involves the construction of the last sentence in paragraph 3(c) of the written contract. This paragraph, in its entirety, provides as follows:
(Emphasis added.)
The written contract further provides that Dougherty, in the event of his intention to abandon any of the leases after two years because of nonprofitable operation, shall give notice of such intention to Weiner and Kienzle, who shall have the preferential right of repurchase.
The last paragraph of the written contract provides:
On April 20, 1939, a modification of the written contract was entered into between the parties, in which the method of payment, but not the amount, was changed, and in which paragraph 3(b) was deleted from the contract. Neither modification is material to this controversy.
On April 24, 1939, and within the ninety-day option period, Dougherty exercised the option.
At all times from and after January 26, 1939, Weiner and Kienzle were apprised by Dougherty that he (Dougherty) was acting as the agent for Hugh Grant, Bradford, Pennsylvania, doing business under the name and style of Kirby Oil Company, and that Dougherty was not performing solely for himself or for an undisclosed principal.
On June 15, 1939, Weiner and Kienzle, pursuant to the terms of the contract, assigned said leases to Dougherty, in the form of an assignment attached to the contract, in which Weiner and Kienzle reserved the following interest:
'* * * save and except that the undersigned hereby reserve and except to themselves, their heirs and assigns, an undivided one-seventh (1/7) of the oil and gas produced, saved and sold from the 7/8ths working interest of the leases hereby assigned, free and clear of all cost and expense, save taxes, all subject to the terms and conditions of the agreement dated January __, 1939, between the parties hereto concerning the aforesaid leases.'
On June 16, 1939, effective June 17, 1939, Weiner, Kienzle and Dougherty executed and delivered to the oil purchaser their transfer orders setting over to Dougherty the proceeds from the oil produced and sold under 6/7ths of the 7/8ths working interest.
On July 8, 1939, Dougherty assigned said leases to the Kirby Oil Company. The assignment contained the following special provisions:
'But subject to the reservation and exception of an undivided 1/7 of the oil and gas produced, saved and sold from the 7/8 working interest of the aforesaid leases, free and clear of all cost and expense save taxes, reserved by Carl Weiner and John G. Kienzle in the Assignment of the aforesaid oil and gas leases by them to H. K. Dougherty dated June 15, 1939, recorded in Book 24 M, page 448, reference to which is hereby made for the terms thereof; and also subject to the terms and conditions of the Contract dated January 26, 1936, between Carl Weiner and John G. Kienzle as first parties and H. K. Dougherty as second party as modified by supplemental contract dated April 20, 1939, between the same parties concerning the aforesaid leases; and also subject to the mortgage dated June 15, 1939, from H. K. Dougherty as mortgagor to Carl Weiner and John G. Kienzle as mortgagees covering the above described property and given to secure the sum of $22,500.00.
'That for the same consideration, and as a part hereof, the Assignor, H. K. Dougherty, hereby assigns to Kirby Oil Company the said Contract of January 26, 1939, and the said Supplemental Contract of April 20, 1939, and all rights thereunder, between Carl Weiner and John G. Kienzle and H. K. Dougherty with respect to the aforesaid leases; and the Assignee, Kirby Oil Company, hereby assumes all of the obligations thereof, and agrees to perform the same according to the terms and conditions and the tenor thereof; and the Kirby Oil Company assumes the payment of said mortgage for $22,500.00 and the indebtedness secured thereby; and the Kirby Oil Company shall save the assignor free and harmless of any and all loss or liability that may arise under, out of, or in connection with said contract as modified and said mortgage.'
This assignment was duly recorded on July 17, 1939.
On July 11, 1939, effective July 1, 1939, Dougherty and Kirby Oil Company executed and delivered to the oil purchaser their transfer orders setting over to Kirby Oil Company the proceeds from the oil produced and sold under 6/7 of the 7/8 working interest.
On July 1, 1944, Kirby Oil Company assigned said leases to Grant & Mohan Oil Company, which assignment contained the exact special provisions above quoted. This assignment was duly recorded on September 21, 1944.
In June and August, 1944, effective July 1, 1944, Kirby Oil Company and Grant & Mohan Oil Company executed and delivered to the oil purchaser their transfer orders setting over to Grant & Mohan Oil Company the proceeds from the oil produced and sold under 6/7ths of the 7/8ths working interest.
On January 15, 1945, Grant & Mohan Oil Company assigned said leases to Frank Young. The assignment contained the following special provisions:
'* * * But subject to the reservation and exception of an undivided 1/7 of the oil and gas produced, saved and sold from the 7/8...
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