Court Opinion

ID: 9582436
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:26:46.294898+00
Date Added: 2024-06-11T13:37:47.476474
License: Public Domain

SCHAUER, J., Dissenting.
In December, 1935, the then owners of the involved land executed and delivered to defendant an instrument entitled “Grant Deed,” in which it is declared that such owners ‘1 do hereby grant to [defendant] . . . Eight and one-third per cent (8%%) of all oil, gas and other hydrocarbon substances, and minerals, in, under/or which may be hereafter produced and saved from” such land. In August, 1936, the land was conveyed to plaintiffs, with the express exception of the percentage interest in the oil, gas and other minerals which had theretofore been transferred to defendant. By reason of the earlier conveyance and the express *238exception it is obvious that plaintiffs never acquired more than 91% per cent of the oil and mineral rights. In February, 1945, plaintiffs, as lessors, entered into an oil lease covering the property. The lease provides for a % (16%%) landowner’s royalty payable to plaintiffs and expressly requires of plaintiffs that (Par. 10-a) “in no event shall Lessee be required to pay greater rents or royalties than provided in this lease and Lessor [plaintiffs] further agrees that Lessor will fully satisfy and discharge any and all of the obligations and requirements under that certain Deed [to defendant, of its percentage interest in the oil, gas and other minerals] . . . insofar as the above described land and the production therefrom is concerned.” Defendant did not sign the lease as a lessor and is not named as such. Its character or relationship, as being distinct from that of cotenant lessor, is indicated by the provision above quoted and by the fact that under date of March 1, 1945, it executed a writing attached to the lease which reads: “The within Oil and Gas Lease is hereby ratified, approved and confirmed.” Obviously, the defendant, by the terms of the lease, by the substance of its endorsement thereon, and by the language of the original conveyance to it, is not a mere cotenant lessor. It is the owner of what heretofore in California has been termed a royalty interest—of 8% per cent of “all” oil and gas which may be “produced and saved” from the land. The lessee has “produced and saved” oil and gas from the demised premises and the sole question is: Is defendant entitled to 8% per cent of all the “produced and saved” oil and gas or only to 8% per cent of that share of the oil and gas (%) which plaintiffs as lessors reserved in their lease agreement with the producers?
The trial court accepted the language of the conveyance to defendant and adjudged that the defendant owns 8% per cent of all “oil, gas and other hydrocarbon substances and minerals in, under and/or which have heretofore or may hereafter be produced and saved” from the land; that defendant is entitled to receive that percentage of the total production; and that plaintiffs “shall account to and pay over to the defendant . . . the proceeds from the sale of 8%% of 100% of” the total production. Plaintiffs urge, however, and the majority now hold, that defendant is entitled not to 8% per cent of all the oil and gas “produced and saved” from the premises, but only to 8% per cent of one-sixth of the oil and gas so produced and saved. This startling result is accomplished by holding that the conveyance to defendant did not *239give it a royalty interest in the oil but that it is a tenant in common of land or mineral rights in fee with plaintiffs and is entitled merely to a share of their lessors’ royalty.
In support of the majority position it is argued that the language of the conveyance to defendant creates a fee interest in minerals, rather than a royalty interest; that, therefore, under the holdings of certain cases from other states, construing various contracts and conveyances, defendant should be held entitled to no more than 8% per cent of the plaintiffs’ Ye lease royalty; and, further, that as a cotenant holder of a “fee interest” in the oil and gas rights to the land, as well as by reason of defendant’s ratification of the lease, defendant should pay its “proportion of drilling and operation expenses” (see Dabney-Johnston Oil Corp. v. Walden (1935), 4 Cal.2d 637, 657 [52 P.2d 237]) and should share in royalties under the lease on the property in the same proportion that its “fee interest bears to the total fee interest.” I am satisfied that upon the law as heretofore established in California such position is untenable. This court has definitely rejected the theory that the transfer of fractional oil rights in land constitutes a transfer of a fee interest in the oil, and has held that in this state the transferee of such rights receives a royalty interest ; i. e., an interest in real property in the nature of an incorporeal hereditament, which he holds as a eotenant with the other owners of oil rights in the same land. (See Callahan v. Martin (1935), 3 Cal.2d 110, 125, 126 [43 P.2d 788, 101 A.L.R. 871]; Dabney-Johnston Oil Corp. v. Walden (1935), supra, 4 Cal.2d 637, 649, 650, 654; Schiffman v. Richfield Oil Co. (1937), 8 Cal.2d 211, 223-224 [64 P.2d 1081]; La Laguna Ranch Co. v. Dodge (1941), 18 Cal.2d 132, 135 [114 P.2d 351, 135 A.L.R. 546]; Tanner v. Title Ins. & Trust Co. (1942), 20 Cal.2d 814, 819-820 [129 P.2d 383]; Tanner v. Olds (1946), 29 Cal.2d 110, 116 [173 P.2d 6,167 A.L.R. 1219].)
Plaintiffs concede that if the parties to a conveyance “intended the conveyance to be of a royalty interest, it is generally held that the grantee takes what may be termed a non-expense bearing interest, or a net interest in the royalty reserved in any lease on the land.” As pointed out in the Dabney-Johnston case, at page 653, the “language of a grant is to be construed most strongly against the grantor” (see, also, Civ. Code, § 1069; Beam v. Duggan (1933), 132 Cal.App. 546, 550 [23 P.2d 58]) and (p. 657), “where cotenancy interests have been sold with the understanding and agreement that *240they shall not be subject to such charge [for a proportion of drilling and operation expense], but that other units shall bear the full expense of production . . . such agreement of the parties, express or necessarily implied [is controlling].” Here the grant to defendant unequivocally specifies that defendant is to receive 8% per cent of “all oil, gas . . . which may be hereafter produced and saved from” the land involved, and no mention or provision is made of a requirement that defendant pay, or be charged with, a share of the cost of production, or any other debit against his interest, under a lease for oil development which might subsequently be executed by the grantor or his successors in title. It would seem that, as commented by the court in Barnard v. Jamison (1947), 78 Cal.App.2d 136, 141 [177 P.2d 341], “the words of conveyance . . . could not be plainer.”
Moreover, it does not appear that by “ratifying, approving and confirming” the lease, defendant agreed to be charged with any part of the lessee’s share in the production. By paragraph 10-a of the lease, quoted in material part herein-above, plaintiffs expressly agreed to fully satisfy and discharge the obligation to pay over to defendant the latter’s royalty share in the oil and gas produced. Consequently, it seems only reasonable to conclude that, as impliedly found by the trial court, defendant’s ratification of the lease constituted no more than a consent that the lessee named therein should proceed with oil development upon the condition, explicitly set forth in the lease, that defendant’s rights be fully satisfied and discharged. Defendant’s royalty interest comes not from the lease but was created and is measured by the original landowner’s conveyance.
Plaintiffs rely upon cases from other states1 in which it was held that the landowner’s royalty to be paid under an oil and gas lease should be divided between cotenants in proportion to their interests in the land or the minerals. However, those eases differ from ours in language of the conveyances involved, in circumstances under which the leases were made, and in the accepted legal theories of oil and gas rights which were applied, and consequently they are of doubtful assistance here.
Plaintiffs argue that judgment on the pleadings was im*241proper because “the complaint for declaratory relief in this instance clearly stated a cause of action” (see Seeger v. Odell (1941), 18 Cal.2d 409, 412 [115 P.2d 977, 136 A.L.R. 1291]; Rannard v. Lockheed Aircraft Corp. (1945), 26 Cal.2d 149, 151 [157 P.2d 1]; Columbia Pictures Corp. v. De Toth (1945), 26 Cal.2d 753, 760 [161 P.2d 217,162 A.L.R. 747]), and plaintiffs “have not had an opportunity to prove the allegations in their complaint. They should not be denied their day in court unless the deed to Mountain View Dairies, Inc. so clearly constitutes an assignment of landowner’s royalty that no other construction upon such deed is possible.” It is to be noted, however, that the deed to defendant, as well as the oil lease here involved, were relied on by both parties and were pleaded in full by defendant in its cross-complaint. In their opening brief plaintiffs assert that “The primary question for determination ... is whether, under the pleadings, the deed and the lease here involved, Mountain View Dairies, Inc., is entitled to 8%% or 50% of the landowner’s royalty . . .” In their notice of motion for judgment on the pleadings plaintiffs solemnly declare that “Said motion will be made as to said cross-complaint upon the ground that no material issue of fact is presented by the cross-complaint and answer thereto but on the contrary that the only issue presented is one at law, to-wit, the legal interpretations of the” deed and the lease. (Italics added.) The declaratory judgment sought by each of the parties hereto involved the interpretation of the same instruments upon the same pleadings, and was rendered by the court. Under such circumstances plaintiffs are not entitled, when the judgment went against them, to now assert that interpretation of either the deed or the lease presents a question of fact, rather than of law, and that the judgment should not have been rendered on the pleadings alone.
For the reasons above stated, I would affirm the judgment appealed from.
Carter, J., concurred.

See Manley v. Boling (1939), 186 Okla. 59 [96 P.2d 30, 31-32]; Swearingen v. Oldham (1945), 195 Okla. 532 [159 P.2d 247, 250]; Murphy v. Dilworth (1941), 137 Tex. 32 [151 S.W.2d 1004, 1006]; Richardson v. Hart (1945), 143 Tex. 392 [185 S.W.2d 563, 564-565]; Shinn v. Buxton (1946, 10 C.C.A.), 154 F.2d 629, 632-633.