Opinion
2-20-1958
Merril J. BROWN, Orpha L. Brown, and Walter E. Roth, Plaintiffs and Appellants, v. TERRA BELLA IRRIGATION DISTRICT, a body corporate and politic, Defendant and Respondent. * Civ. 5627.
Mack, Bianco, King & Eyherabide, Bakersfield, for appellants. Maddox, Abercrombie, Kloster & Jacobus, Visalia, for respondent.
Merril J. BROWN, Orpha L. Brown, and Walter E. Roth, Plaintiffs and Appellants,
v.
TERRA BELLA IRRIGATION DISTRICT, a body corporate and politic, Defendant and Respondent. *
Mack, Bianco, King & Eyherabide, Bakersfield, for appellants.
Maddox, Abercrombie, Kloster & Jacobus, Visalia, for respondent.
BARNARD, Presiding Justice.
The plaintiffs appeal from an adverse judgment in an action for declaratory relief and to quiet their title to certain oil, gas and mineral rights. The defendant filed a cross-complaint seeking to quiet its title to the land involved as against any right, title or interest claimed by the plaintiffs. The matter was submitted to the court on an agreed statement of facts, and this appeal is submitted on an agreed statement.
On December 16, 1925, Edward F. Halbert and the defendant irrigation district entered into a contract by which Halbert agreed to sell to the defendant about 240 acres of land for $25,000, payable in certain yearly instalments. The agreement provided that the seller 'expressly reserves from this agreement for the period herein specified, and from the said real property all oil and gas and all minerals in or underlying the said real property', together with the right in himself and his assigns to drill for and produce oil, gas and minerals on and under said land, and to remove the same and to maintain and operate all necessary facilities for that purpose; that 'said reservations aforesaid as to oil, gas and minerals shall continue for the period of Twenty-five years from the date of this agreement, and as long thereafter as oil or gas shall be produced from said real property in paying quantities'; and that any oil operations of the seller should be carried on so as to interfere as little as reasonably possible with the buyer's water operations.
The agreement further provided that upon full payment of said purchase price the seller would convey to the buyer all of said real property free and clear of all liens, claims and encumbrances 'reserving however from said conveyance all oil, gas and minerals in said real property together with the right to develop and remove the same as aforesaid', and furnish a certificate of title; and that a deed should immediately be executed by the seller and placed in escrow with the First National Bank at Porterville, with instructions to deliver it to the buyer upon its full performance of the terms of the contract. This contract was recorded on January 14, 1926.
A deed to the defendant was also executed by Halbert and placed in escrow on December 16, 1925. Payment in full having been made the deed was handed to a title company on January 12, 1932, and was recorded on January 16, 1932. This deed, after the clause granting all of the described property to the defendant district, contained a reservation of the oil, gas and minerals in the language used in the contract, as above quoted and described, except that it was there stated that this reservation should continue for 25 years from the date of the actual delivery of the deed to the irrigation district and as long thereafter as oil, gas or minerals shall be produced in paying quantities. Thereafter, the deed contains this provision 'Subject to the reservations and conditions aforesaid, the party of the first part hereby grants, bargains, sells and conveys all of said real property aforesaid, to the party of the second part, together with the tenements, hereditaments, and appurtenances thereunto belonging or appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof.'
In addition to the above facts it was stipulated at the trial that this deed was signed and acknowledged by Halbert on December 16, 1925 and placed in escrow as provided in the agreement; that the deed was delivered to the Tulare County Abstract Company on January 12, 1932, with instructions to record it when a policy of title insurance could be issued; that at no time subsequent to December 16, 1925, was this deed ever delivered to Halbert or his assigns or to these plaintiffs; that no oil, gas or minerals have ever been produced upon this property; and that on October 25, 1955, Edward F. Halbert executed and delivered to these plaintiffs a quitclaim deed. This quitclaim deed describes the property quitclaimed as all the oil or gas 'in and under, or that may be produced from' the real property here involved; and further provides that it is made subject to all of the terms, covenants and conditions of the deed from Halbert to the defendant district which was recorded on January 16, 1932. The court found in accordance with the stipulated facts and, as conclusions of law, found that the plaintiffs have no right, title or interest in and to said oil, gas or minerals; that the defendant is the owner and entitled to the possession of all of said real property; and that the defendant is entitled to a judgment quieting its title as against the plaintiffs. A judgment to that effect was entered.
The appellants contend that this reservation of the oil, gas and minerals under this land created a future contingent interest which was to vest at a time beyond lives in being and 21 years, and was thus void under the rule against perpetuities. It is argued that the 25-year period provided for presented the possibility of suspending the vesting of the title to the oil interest for a period beyond lives in being and 21 years, with a further suspension if oil was still being produced; that since this provision in the contract and deed was void, title to the oil interest did not pass to the grantee but remained in the grantor; that the court erred in entering a judgment that the respondent was the owner of such oil, gas and minerals; and that the case of Victory Oil Co. v. Hancock Oil Co., 125 Cal.App.2d 222, 270 P.2d 604, 606 is conclusive of the issues involved in this case. The respondent contends that the rule against perpetuities is not applicable here; that the rule should not be so extended as to cover a commercial transaction of this nature, particularly as affecting an interest owned by a public corporation; that the reasons for the rule are not properly applicable to this situation and no authorities can be found holding the rule to be applicable to a future interest transferred to the government or a public subdivision thereof; that its interest in the subsurface rights is not subject to the rule against perpetuities because that interest is coupled with and merges into a fee title which is exempt from the rule; that even if it received no vested interest in the subsurface rights through the effect of the void and ineffective reservation provision in the deed, that interest remained in or reverted to the grantor and he effectively conveyed that interest to the grantee district, by his deed, leaving nothing which he could thereafter convey to the appellants by a subsequent quitclaim deed; and that the appellants took their quitclaim deed with full knowledge of the rights of the district as revealed by its recorded deed.
The case of Victory Oil Co. v. Hancock Oil Co. involved somewhat different facts and is not controlling here. That case involved the continuing validity of a lease under which oil had been produced for many years and royalties had been paid to and accepted by the parties on both sides of the controversy. There, the grantor had deeded a parcel of land to the grantee 'excepting therefrom and reserving to the grantors' the oil interest in question. Among other things, the trial court had found that the conveyance was intended to be an exception rather than a reservation, and the main question decided seems to have been whether oil was still being produced from the land, within the meaning of the deed, since the only well which was still producing was bottomed outside of the leasehold.
It is well settled that title to such oil rights may be separated from title to the surface of the land and thus become a separate estate in real property which is recognized in our law. Such a separate estate had not been created prior to the sale of this land to the defendant and such an estate exists, if at all, only by virtue of the reservation clause here in question. Assuming, under the statements appearing in the Victory Oil Co. case, that the reservation clause here in question was void because it violated the rule against perpetuities it does not necessarily follow that the trial court erred in decreeing that this defendant is now the owner of such prospective oil rights as may exist. As pointed out in 15 Cal.Jur.2d Sec. 182 et seq. under Deeds, a grantor by a reservation in a deed takes back a right which would otherwise pass under the grant, such as an easement or a profit a prendre, whereas by an exception the grantor retains title to a part of the property described as granted as though that part were not included in the deed at all. It is also well settled that the intention of the parties at the time is the controlling factor, that such intention is to be determined from the entire instrument rather than from the questioned clause alone, and that the entire circumstances should be considered including the reasonableness of holding that an exception was intended.
The reservation in the deed here in question, being an integral part of the provision for future vesting, was void as to both grantor and grantee and neither acquired any additional rights under that provision. The real question here is whether this void provision constituted a reservation or an exception, with the resulting effect recognized by our law. In other words, whether this separate estate in the oil rights was totally excluded from the operation of the deed or not. This was a question of fact for the trial court, and its implied finding to the effect that this was not an exception is supported by the undisputed facts. An intention to totally exclude this estate in real property from the effect and operation of the deed does not clearly appear. While the fact that no words indicating a total exception were here used is not in itself controlling this is significant with respect to the intention of the parties. Where a grantor reserves the oil rights for all time, without any other words of limitation, an intention to except such oil rights from the conveyance would naturally appear. Instead of using such language the grantor here merely attempted to reserve in himself a limited right with respect to that estate in real property, and the attempted reservation was not only temporary and indefinite but it was also void. It appears from the language used in the reservation clause itself that the intention was that if the oil rights were not used by the grantor within a certain time they were to go to the grantee, and that even if oil was produced for a time and production then ceased the remaining oil rights were to go to the grantee. While this attempt to delay the vesting of the title of this particular estate was void, it discloses that the parties did not intend to exclude this estate entirely from the deed and the conveyance of this property. It cannot be said, as a matter of law, that these oil rights were entirely excluded from the conveyance of this land, and the implied finding to the contrary is sufficiently sustained by the evidence. Under these circumstances no separate estate with respect to these oil rights was created by the void reservation clause and retained by the grantor.
The intention of the parties is to be determined from the instrument as a whole and not alone from the language used in the questioned clause, and the other language of the deed here gives strong support to the court's conclusion and judgment. In this deed the grantor first states that he does thereby 'grant, bargain and sell' to the grantee and its successors and assigns forever, all of this real property as particularly described. Thereafter, the deed contains the reservation clause above quoted. Finally, the deed states that 'subject to the reservations and conditions aforesaid' the grantor grants, bargains and conveys all of said real property to the grantee, together with the tenements, hereditaments and appurtenances appertaining thereto and the reversion and reversions, remainder and remainders, rents, issues and profits thereof. The deed thereby conveys to the grantee a full title to the real property and all estates therein subject only to the reservations, which were void and ineffective for any purpose. Whether the invalidity of the reservation clause resulted in a reversion to the grantor or merely left a remainder in him, he conveyed whatever title he had. The grantor thus conveyed his entire interest in the land subject only to an attempted reservation for a limited time, which was void. The valid portion of the deed very specifically included and conveyed full title to the land and to every estate therein. Even if this void reservation had been valid and effective the deed would still have conveyed some interest in the oil rights, subject only to a temporary and limited reservation in the grantor. Even in that event, the grantor would not have been entitled to use or to transfer an unlimited right to attempt to discover oil at any time he might desire to do so in future years. The language of the deed, as well as the language of the reservation clauses, supports the conclusion reached by the trial court.
Not only should this be held to be the legal effect of the conveyance here made but all of the equities of the situation are in favor of such a result. Assuming that the reservation clauses in the contract and deed were void, it seems clear that the parties did not intend to exclude from the effect and operation of the deed the entire oil rights, as a separate estate, carrying with it the right to drill for and remove oil from the land at any time in the future. No oil was produced for more than 25 years from the date of the deed as agreed upon, and had not been produced for more than 30 years at the time of the trial. The original grantor did not comply with his agreement whereby the deed was to provide for a reservation period of 25 years from the date of the deed, but instead provided for a period of 25 years from the final delivery of the deed. The grantor, and his assigns, should not be entitled to take advantage of his wrong. The plaintiff's claim to have thereafter acquired a continuing and unlimited right to drill for oil on this land at any time in the future, irrespective of any resulting interference with the respondent's use of the property for the purpose for which it was acquired, rather clearly appears to be contrary to the intention of the parties at the time the original contract and deed were executed.
The judgment is affirmed.
GRIFFIN and MUSSELL, JJ., concur. --------------- * Opinion vacated 330 P.2d 775.