Court Opinion

ID: 9637227
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:00:47.742905+00
Date Added: 2024-06-11T18:04:56.439352
License: Public Domain

HUXMAN, Circuit Judge
(dissenting).
I think the judgment of the trial court is right and should stand. In substance, this was an action to reform a deed to make it conform to the intentions of the parties as expressed in their written contract. It is not a question of interpreting the provisions of the deed from Shinn to Wilver. The question is, did Shinn convey to Wilver what he had agreed to convey? To get the correct picture, we must go back to the beginning. At the time Shinn undertook to purchase this land, Wilver was the owner of a perpetual mineral interest in the land. There is no ambiguity nor disagreement as to what the extent of this interest was. The deed under which Wilver held this interest conveyed to him in the granting clause an undivided l/16th interest in and to all the oil, gas and other minerals under the premises. There was 'a lease on the premises at the time he received his interest from Buxton, so the deed also provided that it was intended that he should receive his proportionate share of any production thereunder, in the following language: “Said land being now under and oil and gas lease executed in favor of Record Holders, it is understood and agreed that this sale is made subject to the terms of said lease, but covers and includes l/16th of all the oil royalty, and gas rental or royalty due and to be paid under the terms of said lease." Had production resulted from drilling operations under this lease, Wilver would have received one barrel out of each 128 produced. There is no ambiguity or uncertainty about this.
Now, let us see what happens: Apparently Shinn objected to the purchase of this land with an outstanding perpetual royalty, because in the written contract between himself and Buxton, the owner of the land, it was agreed that this outstanding perpetual oil interest, which was described as a royalty, should be reconveyed to Buxton; that Buxton should then convey the land to Shinn, free from any such royalty interest, and that Shinn then would reconvey to Wilver “a Royalty interest for 20 years of One Sixteenth 1/16 of the full one eight (%) royalty being a one-one hundred and twenty eight (1/128) interest in and to all of the oil or gas produced from the above described land.”
*635There can be no question as to what this language means or what the parties understood thereby. Had Shinn taken this contract to an attorney skilled in oil law, and asked him to prepare a deed conveying that which he had agreed to convey, there could be no question of what would have been put into the granting clause. We must remember that at the time of this contract the land was subject to a lease reserving a l/8th royalty. The only way you could give the grantee in a deed “a one-sixteenth (1/16) of the full one eighth {%) royalty being a one-one hundred and twenty-ejght (1/128) interest in and to all of the oil or gas produced from the above described land,” would be to grant and convey an undivided 1 /16th of all the oil and gas under the premises. This would then give a corresponding l/16th of the full l/8th royalty. This would give the grantee a 1/128Ü1 interest in the full production. Was this what Wilver was to receive from Shinn? There can be no doubt of it. Shinn spelled out Wilver’s interest clearly and unmistakenly in his contract when he himself interpreted what Wilver was to have as “being a one-one hundred and twenty eight (1/128) interest in and to all of the oil or gas produced from the above described land.”
There is no ambiguity in the contract. Standing alone, there can be no question as to what Wilver would get. If it was understood that Wilver was to have an undivided l/128th interest in the oil or gas under the premises and a corresponding interest in the l/8th royalty reserved under the existing lease, the reasonable< and obvious provision in the deed when referring to the existing lease would have been to provide that the conveyance covers and includes a corresponding l/128th interest in the royalty reserved under the lease, and if the royalty interest was to be defined, to provide that it included a l/128th of the full l/8th royalty. Why drag in the fraction l/16th if the parties did not understand that Wilver had a l/16th of the royalty interest? If that was not the understanding, it had no logical place in the deed. It would have been just as logical, and the result would have been the same, to have said that the deed intended to include a 1/2 of the 1/2 of the l/4tli of the l/8th of all of the full royalty; or any other combination of fractions which would have spelled out the same interest. It is of significance to me that the contract agrees to convey a l/16th “of the full %th royalty.” The fraction “%th” merely defines the quantum of the royalty interest under the lease. The effect of the contract would have been the same if it had merely said that Shinn agreed to convey a l/16th of the full royalty. No doubt when the scrivener prepared the deed he had this language in mind, but inadvertently injected the phrase “of all of the” after the phrase “includes the l/16th of the full %th.” If this phrase is eliminated, then the deed would read as follows: “includes the 1/16th of the full l/8th royalty.” That would then be in full conformity with the contract.
The word “royalty” is sometimes defined as being an interest in production under a lease, and at other times it is employed to denote an interest in the oil under the premises. It is quite evident that Shinn and Buxton used the term in their contract, when referring to Wilver’s outstanding interest, as meaning his interest in the oil under the premises, because his interest under his deed was an interest in the oil and gas under the premises, and the contract speaks of his interest as a royalty interest, and provides that he shall deed it back and Shinn then agrees that he will reconvey a l/16th of the full royalty.
In Dunlap v. Jackson, 92 Okl. 246, 219 P. 314, the Oklahoma Supreme Court held that a deed which reserved 3/4ths of the royalty of the oil and gas reserved 3/4ths of the interest in the oil and gas under the premises, and entitled the holder thereof to 3/4ths of the royalty under a lease. In Burns v. Bastien, 174 Okl. 40, 50 P.2d 377, the deed conveyed an undivided 1/4-th interest in the royalties of oil and gas in place. The Oklahoma Supreme Court held that this conveyed to the grantee an undivided l/4th of the oil and gas under the land. It follows that when Shinn agreed to convey to Wilver a l/16th royalty interest, whether under an existing lease or even if there had been no lease, he agreed to convey a l/16th interest in and to the oil and gas under the premises. Only by so doing could he convey a l/16th of the royalty under a lease.
This dissent is bottomed on the premise that there is no ambiguity in the contract between Shinn and Buxton, and that it is perfectly clear what Shinn agreed to convey. The next question, then, is, did he do it? According to the decision of the *636majority, he did not, because instead of getting l/128th of the production as provided for in the contract, Wilver or his successor in interest gets only a l/1024th of such production.
The only reason Shinn is not compelled to convey what he agreed to convey is that it is presumed that the parties changed the contract by a new agreement under which it was agreed that Shinn was to convey to Wilver a l/128th of the full l/8th royalty instead of the l/16th of the full l/8th royalty he agreed to convey in the contract. The only evidence of such a new contract is the recital in the deed. It is argued that under the generally accepted rule that a contract becomes merged in a deed and that the deed evidences the intent of the parties, we look to the deed alone to ascertain “the ultimate intention of the parties.” There is no fault to be found with the general rule. My objection is to the way the rule is applied to the facts in this case. The presumption of merger of the contract in the deed does not apply when there is, as here, an issue of mistake in the execution of the deed.
The issue of mutual mistake is in this case. It follows that the contract is not merged in the deed and we seek to ascertain the intent from all the evidence in the case. We examine the contract, the deed, and all other relevant facts and circumstances surrounding the transaction.
When the appellees alleged the existence of a mutual mistake in the execution of the deed, theirs was the burden to establish the existence of such a mistake by clear and convincing evidence. To discharge • this burden, they introduced the contract. It constitutes evidence in the first instance of the strongest character. Its terms are crystal clear. It is such conclusive evidence as to the intent of the parties at the time of its execution that neither party can vary or contradict its provisions by parol testimony in the absence of a claim of fraud or mutual mistake in its execution, and none such is made here. When the contract is taken, together with the interest Wilver' had in these minerals prior to Shinn’s negotiations for the purchase of this land, it is reasonable to conclude that Shinn’s objection was to the perpetual outstanding mineral interest, and that he agreed to reconvey and intended to reconvey a like interest for a twenty-year period.
Shinn introduced no evidence to show a contrary understanding. For some reason he did not take the stand, but submitted his testimony in the form of a stipulation in which he purports to say that he intended to convey a l/1024th interest in the production instead of what he agreed to convey in his contract. Aside from the question whether this statement offends against the Oklahoma statute against testifying to transactions with deceased persons, it was incompetent and should not have been received, because it is in direct conflict with his written agreement, and he will not be permitted to vary that by oral statements.
The only other thing Shinn then has to rely on is the deed with its conflicting, or, to say the least, its unnecessarily irrelevant provisions in translating the mineral interest in the granting clause in terms of royalty interest under the existing lease. As pointed out, under the issue of mutual mistake the contract is not merged in the deed. The trial court was compelled to, as it no doubt did, consider the contract, the deed with its confusing and unexplainable provisions, Wilver’s interest prior to the negotiations for the sale, the conduct of the parties in negotiating the sale, as evidenced by the contract, in determining whether a mutual mistake was made in the execution of the deed. As already pointed out, if the parties by the execution of the deed intended to convey a l/128th interest in the minerals and a corresponding interest under the existing lease, why did they not say that they also intended to convey a l/128th interest of the royalty under the lease? Why did they reach into the stratosphere and bring forth the fraction “l/16th”? Under appellants’ contention, it had no more place in the deed than l/4th or l/20th or any other fraction. They could have used it only because they had it in mind as a part of the transaction and as a part of the interest which Wilver was to get.
It is my conclusion that all of the evidence and circumstances before the court was sufficient to sustain its judgment reforming the deed, and that the judgment should be affirmed.