GAVINA ET AL v. SMITH

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District Court of Appeal, Fourth District, California.

GAVINA ET AL. v. SMITH.

Civ. 3139.

Decided: May 18, 1944

Hanna & Morton, of Los Angeles, Borton, Petrini, Conron & Borton, of Bakers–field, and J. G. Crichton, of Fresno, for appellant. Sidney J. W. Sharp and M. Wingrove, both of Hanford, for respondents.

This is an action brought under the usual simple form of pleading, to quiet title to 2309.50 acres of land in Kings and Tulare counties. Defendant answered, admitted plaintiffs' ownership of title and possession of the land described. It failed to set forth the nature of defendant's claimed right in or title to the land. A second amended answer was filed, by leave of court, by which defendant admitted plaintiffs' ownership but alleged defendant had an interest therein by reason of an option agreement to lease for oil and gas. (A copy of the written agreement was attached to the answer and made a part of it.) A general and special demurrer to the second amended answer was interposed. The trial court sustained them without leave to amend. Judgment for plaintiffs followed. Defendant appealed. The “Agreement to Lease for Oil and Gas” is dated March 18, 1942, and, so far as material here, reads in part: “For * * * ($100.00) * * * the * * * owner * * * does hereby grant to * * * Smith * * * (‘Optionee’), * * * option of leasing” the described land. “The lease to be executed shall be made upon the following terms and conditions”: (1) According to form attached; (2) rental to be paid to owner as follows: $1 per acre for one year payable in advance; (3) royalty to be 1/8; (4) all monies payable to lessor to be deposited to lessor's account in a certain named bank; (5) if optionee elects to exercise option he shall pay or tender to lessor money necessary to complete cash payment of advance rental, or he may deposit it in escrow with instructions to pay it to lessor upon receipt of executed oil and gas lease to optionee; (6) if option is exercised plaintiffs agree to execute and deliver to optionee a completed oil and gas lease “on the form attached”; (7) the option may be assigned and shall continue to March 25, 1942. It then provides that “this option cannot be recorded” and that the lease is only assignable to one of the major oil companies.

This option agreement was signed only by John F. N. Gavina and A. F. Silveira, and not by optionee Lon V. Smith. The blank form of lease attached to the agreement contains the usual provisions in reference to oil and gas leases and a provision that the lessee shall, in good faith, conduct drilling operations thereon as provided in the lease. It then recites:

“* * * in consideration of One Dollar * * * lessor * * * does * * * lease to lessee * * * for a period of _ years * * * _ acres * * *.” “Lessee will pay to Lessor on account of rent or royalty the equal of 1/8 part of the value of all oil sold or removed * * *.” “Lessee may at any time and from time to time quitclaim all or any portion of said lands and at such time all obligations and rights of lessee as to said surrendered lands shall cease and determine, * * *.” “A quitclaim deed shall be effective when mailed or delivered to the lessor or when filed for record by either party.” “* * * The lessee shall have no right to assign this lease, either in whole or in part, without the written consent of lessor first had and obtained, except to a responsible oil operator. It is hereby agreed that in the event this lease shall be assigned as a whole or as to part or parts of the above described lands, the herein lessee shall thereupon be released from all further obligations under this lease as to the lands assigned and the obligations of the several parties owning the lessee's interests under this lease shall be several and any default or forfeiture by one party holding any of the * * * lessee's rights under this lease shall in no way operate to defeat or affect this lease * * *.” (Italics ours.)

It is well–settled law in this state that a contract which cannot be specifically enforced is not a defense in an action to quiet title. Sheehan v. Vedder, 108 Cal.App. 419, 292 P. 175. In order to enable the courts to specifically enforce a contract the remedy must be mutual to both its parties. Pimentel v. Hall–Baker Co., 32 Cal.App.2d 697, 90 P.2d 588. George v. Weston, 26 Cal.App.2d 256, 79 P.2d 110, is factually similar to the instant case except it was an action whereby the plaintiff sought to obtain specific performance of an agreement to lease for oil and gas. The agreement was unilateral, signed only by the landowner. The only material difference between the instant case and that case, in addition to the difference in type of action under which the optionee sought to establish his alleged rights, is that in the cited case the proposed form of lease was not attached to or made a part of the option agreement but was merely referred to therein by number. The court there pointed out that the proposed form of lease contained the usual provision giving the lessee the right to surrender or quitclaim the lease at any time either in its entirety or as to part of the acreage covered thereby. It was there held that the proposed lease was lacking in mutuality.

In Dabney v. Key, 57 Cal.App. 762, 207 P. 921, following the authority of Sturgis v. Galindo, 59 Cal. 28, 43 Am.Rep. 239, and followed by Sheehan v. Vedder, supra, it was held that a contract to make a lease of land for the purpose of developing oil wells thereon is not specifically enforceable when the proposed lease reserves to the lessees the right to surrender it at such time as the lessees see fit but purports to bind the lessors for a term of years.

In Sheehan v. Vedder, supra [108 Cal.App. 419, 292 P. 176], the oil drilling contract contained a clause to the effect that “The party of the second part at any time before or after the discovery of oil on said premises may quitclaim said property or any part thereof to the parties of the first part, their successors or assigns, and thereupon all rights and obligations of the parties hereto, one to the other, shall * * * cease and determine as to the premises quitclaimed.” This court, relying on Sturgis v. Galindo, supra, and Dabney v. Key, supra, held that the lessee's right to abandon robbed the contract of mutuality and made it impossible to require its specific performance, and that under those circumstances it afforded no defense to an action to quiet title brought by the lessors. A somewhat similar situation was considered and a like view taken of the matter by this court in Moore v. Heron, 108 Cal.App. 705, 710, 292 P. 136.

It is the claim of appellant's counsel that so far as the destruction of mutuality by a right reserved to the lessee to surrender the lease is concerned, the cases last mentioned are contrary to the holding in Callahan v. Martin, 3 Cal.2d 110, 43 P.2d 788, 101 A.L.R. 871, and they rely mainly upon the holding of that case in which it was held that an oil and gas lease creates an interest or estate in real property. Callahan v. Martin, supra, has no application to the case at bar because in that case the owner of the land involved had executed an oil and gas lease thereon and there is no analogy between a lease that is perfectly valid in itself but subject to conditions subsequent that may at some future time bring it to an end and an instrument that so far lacks mutuality that it can be terminated at any time by the lessee under it. In other words, in Callahan v. Martin, supra, the lease involved had already been fully executed, but George v. Weston, supra, involved merely an agreement to execute a lease, no lease having been executed. The courts of this state have consistently followed and applied the rule of law adopted in George v. Weston, supra, in cases where the lease had not been fully executed and completed and there was only an agreement to execute a lease. There is nothing inconsistent between the two lines of cases, the distinction being whether the contract is executed or executory. Comparing the facts pleaded in the instant case with the facts stated in the cases above cited by respondent, we are unable to observe any distinction. We therefore must hold that the oil drilling contract or agreement to lease for oil and gas is and was executory in character and furnished no defense to an action to quiet title. Therefore the judgment of the lower court cannot be disturbed.

Judgment affirmed.

GRIFFIN, Justice.

BARNARD, P. J., and MARKS, J., concur.