Court Opinion

ID: 7917135
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:12:27.094126+00
Date Added: 2024-06-11T16:32:52.227718
License: Public Domain

Arn, J.
(dissenting): I am unable to concur in all the conclusions reached by the court. This case, involving substantially the same issues and the identical written instruments, was decided by this court (163 Kan. 540) in an opinion dated August 12, 1947. There it was held the demurrer to the first amended petition should have been sustained. We are here concerned with the second amended petition which adds a new paragraph.
When this court passed upon the sufficiency of the first amended petition, in the former well-considered opinion with which the full court was in accord as to the result there reached, the same two written instruments, Exhibits A and B, were examined. These exhibits (Exhibit B is almost identical with Exhibit A) and others are recited in full as an appendix to the former opinion, pages 554-565. It was then held among other things that Exhibits A and B did not clearly state the rights and liabilities of the parties and were so ambiguous that the minds of the parties never met; that they did not imply trust powers in the grantee; that the provisions of paragraphs one and two of the exhibits were for the benefit of the grantee and did not constitute a consideration to the grantor; and that the instruments construed as the court was asked to construe them were so decidedly advantageous to the grantee, so un*211reasonable and unfair, that a court of equity could not enforce them. The new paragraph added to the second amended petition since Exhibits A and B were last considered by this court has not changed the instruments themselves, nor does it alter their legal interpretation. Consequently, this second amended petition attempts to relitigate matters which were fully decided by this court in the previous opinion referred to above. The theory upon which plaintiffs predicate their second amended petition must be the same as that of the former petition, else there is a fatal departure.
Exhibits A and B are upon their face unreasonable and unfair and demand of the landowner an unconscionable bargain for which the consideration was grossly inadequate. These instruments purport to give the grantee a twenty-year mineral lease without any delay rental in lieu of drilling, with a specific covenant that no development will ever be required of the grantee, and takes from the landowner twenty-five percent of the landowner’s customary one-eighth royalty — and with a further provision that all of the landowner’s one-eighth may be sold or conveyed at any price to any third person by the grantee without the landowner’s further consent. Also, by these instruments, the landowner grants an easement over his land for purposes of exploration, drilling, oil and gas development, storage of both oil and salt water, construction of ponds, pits, pipe lines, telephones and power lines, derricks and rigging, and indeed any other construction incidental to oil and gas development. All of these, together with the reference of such instruments regarding the formation of an acreage pool, are considerations moving to and in favor of the grantee. The nominal consideration received by the grantor is grossly inadequate. Such an instrument would create a situation by which those who are skilled in the technical operations of drilling, of dealing in royalties and mineral conveyances, and in explorations for oil and gas, may finesse a trusting landowner out of all his minerals, leaving to him only his surface rights — and with those rights subject to the easements for all purposes incidental to oil and gas development. In this respect it is contrary to public policy.
Plaintiffs rely, as they did when this case was here before, upon Moos v. Landowners Oil Ass’n, 136 Kan. 424, 15 P. 2d 1073. That case was different from the instant case. There the instrument before the court was decidedly more favorable to the farmer who merely conveyed one-half of his royalty to the Landowners Oil As*212sociation after he had already leased his land for a valuable consideration. A great part of that opinion considered the question of whether the instrument was a speculative security. Furthermore, the instrument involved in the Moos case was reasonably definite and from it the rights and liabilities of the parties could be fairly well ascertained. The Moos case is certainly not authority for approving a petition which is based upon such instruments as those 'here involved, and which instruments create a jumble of confusion, uncertainty and ambiguity as to the rights and liabilities of the parties, and which are designed to prey upon the farmers and landowners of this state. In Ward v. Home Royalty Ass’n, 142 Kan. 546, 50 P. 2d 992, reference was made to-the Moos case as follows:
“In the Moos case the association was a corporation with an apparently sound capital structure. Some of the results of operation were frankly disclosed, and the court declined to assume fraud would be practiced. The court did not foresee the extent to which such schemes would be promoted in Kansas, and did not take into account the practical helplessness of a Kansas farmer if compelled to resort to litigation to correct abuses in corporate or trust management." (p. 549.) (Emphasis supplied.)
Incidentally, the above reference to the Ward case, and a distinction between the Moos case and the instant case, were made in the former opinion (163 Kan. 540, 551-553) in which all the members of this court concurred.
The Moos case is clearly distinguishable from the case at bar, but I can frankly state that should it not be so, the Moos case should be overruled.
It cannot be said here that this case must be affirmed in order to protect “innocent purchasers for value.” The petition before us alleges that Central Royalty Company paid the trustee for Pool I, $250 for its rights acquired under Exhibit A; that Sinclair Prairie Oil Company paid Central Royalty Company $900 for assignment of the same rights as to Exhibit A only. Incidentally Exhibit A expired by its terms on April 24,1948. No rights were acquired under Exhibit B by Central Royalty. The only right Sinclair Prairie acquired under Exhibit B were by Exhibit F dated February 16, 1942, for a consideration of one dollar. It should be noted that Sinclair was to acquire these rights under Exhibit F “without the intervention and free from all claims of Lessor, Lessee, such pool members and/or such Trustees.” Sinclair must have anticipated claims by such persons. Exhibit B is the only instrument in existence under which Sinclair Prairie could claim any right — and the consideration *213paid therefor was one dollar. Sinclair Prairie Oil Company was charged with knowledge of all the terms, conditions and infirmities apparent on the face of these recorded instruments — and was not an innocent purchaser for any substantial value.
I have touched upon the fact that Exhibits A and B are so ambiguous and uncertain that there could have been no meeting of the minds of the parties. Pages could be added to this already too lengthy dissenting opinion in making references to such ambiguities. This, too, is a matter considered by this court and discussed in the former opinion (163 Kan. 540, 549-550) which had the concurrence of a unanimous court. The second amended petition now before us contains no allegation which tends to clarify the rights and liabilities of the parties under these' Exhibits A and B. Neither is there any allegation which alters the interpretation previously placed upon these instruments by the unanimous decision of this court. There is no reason for a different decision in this case now than was previously rendered. In all fairness, equity, justice and logic, the case should be reversed with directions to sustain defendant’s demurrer to plaintiff’s second amended petition.
Hakvby, C. J., and Smith, J., concur in the foregoing dissent.