Joseph M. GERHARD, Plaintiff and Appellant, v. Mary STEPHENS et al., Defendants and Respondents.
KENNEDY-WEBER OIL COMPANY, Inc., a corporation, Plaintiff and Appellant, Joseph M. Gerhard, Defendant, Respondent and Appellant, v. Mary STEPHENS et al., Defendants and Respondents.
Ira S. SOLOMON, Administrator with the Will Annexed of the Estate of Daisy Liederman, deceased, and Josephine C. Dannebaum, Plaintiffs and Appellants, v. Mary STEPHENS et al., Defendants and Respondents.
Herbert METTLER, Executor of the Estate of Charles H.W. Brandt, Deceased, Plaintiff and Appellant, v. Mary STEPHENS et al., Defendants and Respondents.
Appeals from judgments in favor of defendants in four quiet title actions consolidated for trial. Identical findings of fact, conclusions of law and judgments were entered in each action.1
1. Were the interests claimed by plaintiffs in section 31 abandoned?
2. Did defendants gain title by adverse possession?
3. Effect of action 1870.
4. Effect of actions 5362 and 5591.
5. Is action 6021 a “Class Action”?
6. Laches, statutes of limitation and estoppel.
7. Alleged bad faith of Shell Oil Company.
8. The mortgages.
History of the Title of the Mineral Estate Underlying Section 31
Plaintiffs claim to own certain fractional undivided mineral interests in section 31, township 16 south, range 11 east, Mount Diablo base and meridian in San Benito County as successors to certain stockholders of The Ashurst Oil and Land and Development Company (Ashurst) and the California Oil Products Company (COP). Defendants (other than Joseph Gerhard) claim title as successors in interest of Antonio Frusetta (Frusetta) and Warren Cornwell (Cornwell) and through adverse possession and certain decrees and judgments hereinafter discussed.
The history commences with the ownership of the entire Syncline Ranch by Robert, Mark and Mary Ashurst. On November 22, 1905 they conveyed it to L.J. Abrams (Abrams) and C.H.W. Brandt (Brandt). These two men with Charles M. Weber II (Weber) formed the two corporations above mentioned. Abrams and Brandt conveyed the mineral estate under one portion of section 31 to Ashurst and the balance of the mineral estate under that section to COP. Ashurst drilled three unproductive wells on section 31 and then did no more drilling. COP did no drilling.
On November 30, 1912 COP and on February 27, 1915 Ashurst forfeited their charters for nonpayment of taxes. Thereby the stockholders of the respective companies succeeded to the legal title of their corporations in the corporate property. (See Capuccio v. Caire (1922) 189 Cal. 514, 518, 209 P. 367.) The court found that by these forfeitures the respective stockholders became the owners of undivided fractional shares in the mineral estates underlying section 31 in proportion to the shares of stock which they owned. Abrams and Brandt as a partnership, and Abrams and Brandt individually were stockholders in the corporations. Thus, when the charters were forfeited the situation of Abrams and Brandt was as follows: As a partnership they owned the surface estate of Syncline Ranch and a fractional interest in the mineral estate, and as individuals they owned separate fractional interests in the mineral estate.
In 1917 Brandt brought a quiet title action in San Benito County (No. 1870) in which the judgment quieted the title of Abrams and Brandt as a partnership in the surface rights of the Syncline Ranch and in the fractional interests in the mineral estate to which the partnership had succeeded as stockholders, and decreed the fractional interests of Abrams and Brandt individually in the corporate property to which they had succeeded respectively as stockholders by the corporate forfeitures. It then stated that subject to the trusteeship for liquidation of the directors-trustees of the corporations and the lien of certain mortgages the named shareholders became on the dates of dissolution the “coowners” of the indicated fractional shares of the corporations' titles to the real property. Plaintiffs are successors in interest of some of the stockholders found to be such in that action.
On August 8, 1919 Brandt filed an action (No. 13948) in San Joaquin County for a partnership accounting. It was there determined that the partnership interest in section 31 and the other lands of the Syncline Ranch including an undivided 114,811/366,201 3/434ths of the property granted to Ashurst and an undivided 199,500/503,000ths of the property granted to COP be sold. The court included in its decree a copy of the “Decree of Foreclosure of Mortgage” in Hollister Savings Bk. v. Brandt, Abrams, Weber, Helen M. Kennedy and certain named others in which latter decree the court foreclosed the mortgage given by Abrams and Brandt to the Hollister Bank prior to the conveyances to Ashurst and COP, and order the whole of the Syncline Ranch sold to pay the amounts found due under the mortgage. In the foreclosure action the court found that the interests of Weber, Helen M. Kennedy and the other defendants therein were subordinate to the lien of the mortgage. The decree in action 13948 then stated that Brandt paid the bank the amounts due on the mortgage, and an assignment of the note, mortgage and judgment was made to J.H. Mettler “merely a name for Brandt, whose son-in-law he was and is.” The commissioner in action 13948 sold and conveyed the partnership interest in the ranch, the mineral rights, and the purchase mortgage and debt, to Brandt's nephew, Gerald C. Halsey. Halsey then, in 1924, conveyed to Frusetta and Cornwell, the “whole” of section 31 and also the Abrams and Brandt partnership interest in Ashurst and COP, subject to the 1910 deeds to Ashurst and COP. From the purchase price of the Halsey deed the purchase money mortgage held by Brandt was paid off.
On November 5, 1938 a decree of distribution in the Frusetta Estate distributed a one-half interest in section 31 to George Frusetta and Frank E. Frusetta. No mention was made of the mineral interests as such. On June 14, 1947, a decree of distribution in the Cornwell Estate distributed to his heirs, defendants Mary Stephens, Maida DiFiore, Katheryn O'Donnell and Jessie Lee Irvine, the other undivided one-half interest in section 31. The grant was limited to a life estate only, with remainder over to their surviving issue. The mineral interests as such were not described in the decree of distribution.
At the time of the sale in action 13948 Frusetta was a lessee of the Syncline Ranch. Then and at all times thereafter the predecessors of defendants occupied the ranch as a cattle ranch. Certain oil and gas leases were entered into. These will be hereinafter discussed. No wells were sunk until 1956. In July of that year the Shell Oil Company struck oil on the Ashurst portion and in March 1957 on the COP portion. The discovery of oil caused Gerhard to investigate titles. He and one Fyfe then contacted such heirs of the original stockholders as they could find and either obtained assignments of their rights from them or joined them as plaintiffs in these actions.
Plaintiffs concede that the surface estate and 114,811/366,201 3/434ths interests in the mineral rights originally owned by Ashurst and the 199,500/503,000ths interest in the mineral rights originally owned by COP (all of which interests were originally owned by the Abrams and Brandt partnership), which are not involved in this litigation, belong as follows: Frank and George Frusetta, an undivided one-half interest; Maida DiFiore, Katheryn O'Donnell, Mary Stephens and Jessie Lee Irvine, an undivided one-eighth life estate each in the other one-half and the remainder in that one-half, upon their respective deaths, in their respective child or children, the unknown remainderman defendants.2 ,3
The Court's Findings
The court found in pertinent part: That section 31 is a part of the Syncline Ranch in San Benito County, consisting of approximately 4,600 acres; that when Robert, Mary and Mark Ashurst conveyed the ranch to Brandt and Abrams, the purchase price was $27,500 of which $10,000 was paid in cash and the balance of $17,500 was secured by a purchase money mortgage; that on March 24, 1910, Abrams and Brandt conveyed to Ashurst “All petroleum, coal oil, naptha, asphalt, maltha, brea, bitumen, natural gas and other kindred substances and deposits and rocks, gravels or other formations containing or yielding any of said substances in, upon or “under” lot No. 8 and the west one-half of the southeast one-quarter of section 31, township 16 south, range 11 east, Mount Diablo Base and Meridian, “together with the full, free and perpetual right and privilege to enter in and upon said parcel of land”; and that on October 28, 1910, Abrams and Brandt conveyed to COP the same type of mineral interests as described in the conveyance to Ashurst “under all of Section Thirty-one * * * save and except Lot Eight and the West half of the South East quarter of said section Thirty-one.”
The court further found that the deeds from Brandt and Abrams to Ashurst and COP, respectively, in addition to conveying the oil and gas rights as above set forth, granted the full, free and perpetual right of ingress to or egress from and rights of way upon and over said lands adjoining, belonging to, or under the control of the grantors, also rights of way for telegraph and telephone lines and for roads, pipelines, rights of location for tunnels, mines, shafts, wells, derricks, houses, workshops, pumping stations, buildings, and the right to any water then flowing or that might thereafter flow on said lands; that Ashurst forfeited its charter on February 27, 1915 for failure to pay $85 in California franchise taxes; that it then had outstanding 366,201 3/434ths shares of stock of which 144,920 5/959ths shares were held by persons through whom plaintiffs in action 6019 (appeal 22281) 4 claim; 33,527 shares were held by persons through whom plaintiffs in said action 6021 (appeal 22282) 5 claim; 17,879 shares were held by persons through whom plaintiffs in action 6022 (appeal 22283) 6 claim; and 28,150 shares were held by persons through whom plaintiffs in action 6094 (appeal 22284) 7 claim; that COP “forfeited its charter on November 30, 1912, for failure to pay $110 in California franchise taxes; COP then had outstanding 503,000 shares of stock of which 264,400 shares were held by persons through whom plaintiffs in action No. 6021 claim,” (the original Weber stock ownership); and that proof as to the amount of Ashurst and COP stock outstanding at the time of forfeiture and as to the identity of then then stockholders is provided in action 1870 filed by Brandt in 1917.8 “Since, however, Brandt, the plaintiff in that action, was also a trustee of Ashurst and COP and since the decree in that action, dated November 26, 1923, does not purport to speak of ownerships as of that date, the decree is not res judicata as of the date it bears.” Further findings appear hereinafter.
As conclusions of law the court concluded that all defendants, other than Gerhard as defendant in action 6021, are entitled to judgment quieting their titles to section 31 including the oil, gas and mineral rights therein, and that plaintiffs and Gerhard as defendant in the named action are not entitled to an accounting and have no right, title or interest in “the oil, gas hydrocarbons, and other minerals produced from said Section 31”; that action 6021 should be dismissed with prejudice as to defendants denominated “a number of other persons” as it is not an appropriate class action. The court further found, answering certain contentions of plaintiffs, that actions 5362 and 5591 insofar as they purported to eliminate any interests of plaintiffs in section 31 were not in violation of the Fourteenth Amendment to the Constitution of the United States or article I, section 13 of the California Constitution. Judgment was entered accordingly.9
The court found that Helen Weber Kennedy (Helen) individually and as guardian of her brother, Charles M. Weber III (Charles) a minor (then 20 years of age), and Charles after becoming of age, abandoned the stock in COP and Ashurst which they received from the Weber Estate, and also abandoned any interest in the mineral rights of section 31 which they might have inherited from the Weber Estate. The court found that none of the other plaintiffs nor their predecessors in interest abandoned any stock to which they were entitled but did abandon any interest in the mineral rights to which they may have succeeded. The trial court held that all plaintiffs claiming through original corporate stockholders made out a prima facie title to the fractional interests in the corporate properties to which their predecessors succeeded upon the charter forfeitures and that their predecessors in interest became cotenants of predecessors of the Frusetta–Cornwell–Irvine defendants on the dates of charter forfeitures. However, the trial court held that plaintiffs and their predecessors in interest lost their title by abandonment and by the adverse possession of defendants.
The findings that Charles and Helen abandoned the stock distributed to them in Weber's estate is based partially on the order and decree finally closing his estate on March 23, 1914 and partially upon their acts in failing to indicate thereafter any interest in the stock or the mineral rights until the discovery of oil on the property by Shell. The order and decree referred to recited: “That the following personal property belonging to said estate and inventoried and appraised therein as of no value, and the same being of no value, as this Court is advised, and reported for distribution and distributed by the terms of said Order and Decree of Distribution and consisting of shares of Capital Stock in certain Corporations, has been tendered and offered for delivery and distribution to said distributees [Helen and Charles III] but the receipt and acceptance of the same have been refused by the distributees on account of said Stocks being worthless and of no value, to wit: * * * 33,357 shares of the capital stock of the Ashurst Oil Land and Development Company, * * *264,400 shares of the capital stock of the California Oil and Products Company, * * * ” (Emphasis added.)
On September 3, 1912 Weber, the father of Charles and Helen, died. Immediately the title to his corporate stock passed to Charles and Helen, his sole heirs, subject only to administration. “The estate vests in the her eo instanti upon the death of the ancestor; and no act of his is required to perfect title. The estate is cast on the heir by operation of law without regard to his wishes or election. No assent or acceptance is necessary. He cannot, by any act, cause the estate to remain in the ancestor, for the latter is incapable of holding it after his death. He cannot, by any renunciation or disclaimer, prevent the passage of title to himself. Nor can he, by a renunciation or disclaimer, transfer the estate to any other person * * *. He can only make a transfer by some instrument adapted to the transfer of the property.” (Estate of Meyer (1951) 107 Cal.App.2d 799, 810, 238 P.2d 597, fn. omitted; Brenham v. Story (1870) 39 Cal. 179, 188; Smith v. Olmstead (1891) 88 Cal. 582, 586, 26 P. 521, 12 L.R.A. 46; Estate of Packer (1899) 125 Cal. 396, 398, 58 P. 59; Estate of Wellings (1925) 197 Cal. 189, 194, 240 P. 21; Estate of Berk (1961) 196 Cal.App.2d 278, 282, 16 Cal.Rptr. 492.) Their interests were personal property. On November 30, 1912 COP forfeited its charter. Thereupon the property of that corporation became the property of the stockholders. (Rossi v. Caire (1916) 174 Cal. 74, 81, 161 P.1161; Rossi v. Caire (1921) 186 Cal. 544, 550, 199 P. 1042; Capuccio v. Caire, supra, 189 Cal. 514, 524, 209 P. 367; 19 Am.Jur.2d, Corporations, § 1660, p. 1008; 19 C.J.S. Corporations § 1730, pp. 1488–1489; 16A Fletcher, Cyclopedia Corporations, § 8130, pp. 290–291). As that property was mineral interests (real property), the interests of the stockholders became real property interests.
The decree of distribution in Weber's estate was entered March 23, 1914. It distributed Weber's stock in both COP and Ashurst to his children. At that time, as Ashurst had not yet forfeited its charter, the Weber interests in Ashurst were merely stock of the corporation. Thus we have the situation that at that time Charles' and Helen's interest in the COP property was real property and their interest in Ashurst personal property. Then in 1915 Ashurst forfeited its charter and Helen's and Charles' interest in its property became real property, if they still maintained their interests in that property. But in 1914 the order and decree in the Weber estate declared that they had abandoned their stock in the two corporations. Personal property can be abandoned by refusal to accept it or its indicia of ownership, but once an interest in real property vests, as will hereafter be shown, it may not be abandoned except by a written instrument. Thus, we would have a rather interesting question as to the effect of the determination in the order and decree in the Weber estate that charles and Helen had abandoned their interests in the properties of the two corporations, were it not for the judgment in action 1870 entered November 26, 1923, which determined, in effect, that they still had their interests in the corporate properties and exactly what those interests were.
Defendants contend that that judgment merely determined ownerships as of the date of the corporate forfeitures and did not determine ownerships as of the date of the judgment. An examination of the four corners of the judgment demonstrates that this contention is erroneous. In paragraph 2 the judgment decree that on February 27, 1915, the date of the forfeiture of its charter by Ashurst, the defendants in that case as stockholders in Ashurst became “co-owners” of the “indicated fractional shares of its said title to its said real property,” subject to the trusteeship for liquidation of its named directors as trustees, and that Weber, the father of Charles and Helen, owned a 20,064/366,201 3/434ths interest, and C.M. Weber, as trustee, owned a 500/366,201 3/434ths interest in the Ashurts property. The judgment also decreed that on November 30, 1912, the date of the forfeiture of its charter by COP, the defendants in that case as stockholders became “co-owners” of the indicated “fractional shares of its said title to its said real property,” subject to the trusteeship of its named directors for liquidation, and that Charles and Helen owned a 264,400/503,000 interest in the COP property.
The action was one to quiet title. The judgment goes on to quite the plaintiff Brandt's individual title to certain real property, including certain fractional interests in the properties of the two corporations, and the partnership's title to certain real and personal property including the Snycline Ranch. The judgment then provides: “That none of the defendants has any interest in or title to the said property herein described, and affected by this action, except as herein specified; and that each of them be and is hereby enjoined from asserting any other interest or any other title than that herein specified.” Thus, it is clear that, in effect, the court as of he date of the judgment was quieting the title of the various defendants to the fractional interests in the corporate properties which “became” their interests on the forfeiture dates, and enjoining them from asserting any other interests.
As the predecessors of all defendants and indeed of all plaintiffs in the instant action were parties to action 1870 this judgment is binding on them, and the determination of the fractional interests in the corporations as of the date of the judgment is res judicata, and no actions of Charles and Helen, nor any court determination, prior to that time can overcome the effect of the judgment in action 1870.10
The real question on the issue of abandonment by the Webers and all of the plaintiffs and their predecessors is whether real property interests may be abandoned by negative action rather than by affirmative action.
The trial court found that all plaintiffs and their predecessors abandoned their interests in the corporate properties. For this finding the court relied on their failure to include these interests in the estates of predecessors who died; to set foot on the property; to inquire concerning it; to drill for oil; to assert claims to the proceeds of the oil leases; to have their interests separately assessed for San Benito County tax purposes; and other inaction, which if real property can be abandoned by inaction and complete disregard for the property for over 40 years would clearly amount to abandonment.
The rule is settled that a fee simple title to real property cannot be divested by abandonment. (Ferris v. Coover (1858) 10 Cal. 589, 631; Davenport v. Turpin (1872) 43 Cal. 597, 602, overruled on other grounds in Burns v. Hiatt (1906) 149 Cal. 617, 625–626, 87 P. 196; Northern Assurance Co. of London v. Stout (1911) 16 Cal.App. 548, 557, 117 P. 617; Kern County Land Co. v. Nighbert (1925) 75 Cal.App. 103, 106, 241 P. 915; Romero v. Brewer (1943) 58 Cal.App.2d 759, 763, 137 P.2d 872; Carden v. Carden (1959) 167 Cal.App.2d 202, 209, 334 P.2d 87; Hunter v. Schultz (1966) 240 A.C.A. 23, 27, 49 Cal.Rptr. 315; 1 Cal.Jur.2d, Abandonment, § 9, p. 12; 1 Am.Jur.2d, § 13, p. 14; 1 C.J.S. Abandonment § 5, pp. 13–14; 4 Tiffany, Real Property (3rd ed.), p. 28.) The parties concede, as indeed they must, that the conveyances herein constituted a severance of the mineral estate from the surface rights and created fee simple mineral estates in the corporation.11 As the trial judge stated in his memorandum opinion, the conveyances “created an estate in real property, a profit a prendre, capable of enduring into perpetuity.” 12 Thus, as to the “fee simple” aspect of this rule, there s no dispute.
Defendants, however, as they successfully did in the court below, attempt to bring the instant cases outside the operation of this rule by arguing that in “California an oil and gas interest, whether limited or unlimited in duration, is [merely] the right to enter upon property, [and] drill for and take oil and gas, a profit a prendre, an incorporeal hereditament.” From this point of departure defendants proceed to their next premise that “all incorporeal hereditaments regardless of duration can be abandoned.” Thus is constructed what plaintiffs aptly title defendants' “house of cards.”
It is settled that the estate or interest which is created in oil rights by a landowner's conveyance of the exclusive right to drill for and produce oil is a profit a prendre, an interest in real property in the nature of an incorporeal hereditament. (Callahan v. Martin (1935) 3 Cal.2d 110, 122, 43 P.2d 788, 101 A.L.R. 871; Dabney–Johnston Oil Corp. v. Walden (1935) 4 Cal.2d 637, 649, 52 P.2d 237; 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, 820, 129 P.2d 383; Caffroy v. Fremlin (1961) 198 Cal.App.2d 176, 182, 17 Cal.Rptr. 668; 1A Summers Oil and Gas, § 136, p. 296; see Adsit, Oil Estate, 9 So.Cal.L.Rev. 299–314.) However, when the profit a prendre is unlimited in duration it is a freehold estate, an estate in fee and real property—and not subject to abandonment.
The leading case of Dabney–Johnston Oil Corp. v. Walden, supra, 4 Cal.2d 637, 52 P.2d 237, after setting out the settled rules on profits a prendre, has this to say: “The profit à prendre, whether it is unlimited as to duration or limited to a term of years, is an estate in real property. If it is for a term of years, it is a chattel real, which is nevertheless an estate in real property, although not real property, or real estate. Callahan v. Martin, supra, [3 Cal.2d 110] 43 P.(2) 788, 793. Where it is unlimited in duration, it is a freehold interest, an estate in fee, and real property or real estate.” (Emphasis added.) (P. 649 of 4 Cal.2d, P. 243 of 52 P.2d.) (In accord: Callahan v. Martin, supra, 3 Cal.2d 110, 120, 43 P.2d 788; Schiffman v. Richfield Oil Co. (1937) 8 Cal.2d 211, 223–224, 64 P.2d 1081; Carlson v. Lindauer (1953) 119 Cal.App.2d 292, 302, 259 P.2d 925; Wall v. Shell Oil Co. (1962) 209 Cal.App.2d 504, 510–511, 25 Cal.Rptr. 908; see In re Barlow v. Security T. & S. Bank (1925) 197 Cal. 263, 267, 240 P. 19.) Thus, the second aspect of the rule above set out is met and it appears that an exclusive right to oil and gas, if unlimited in duration, is a fee simple title in real property and thus not abandonable.
Nevada Irr. Dist. v. Keystone Copper Corp. (1964) 224 Cal.App.2d 523, 36 Cal.Rptr. 775 was a case involving quartz gold and silver mining rights. In that case the defendant's “title was in fee simple to the subsurface estate.” (P. 525, 36 Cal.Rptr. p. 777.) In discussing the interests involved, the court noted “that the interests in land we consider are not a single fee simple title, with a portion carved therefrom as a lesser estate (e.g., an easement) from a greater. We have instead a whole cut into two parts with equal status. The owner of real property may divide his lands horizontally as well as vertically, and when the conveys the subsurface mineral deposits separately from the surface rights, or reserves them from a conveyance of such surface rights, he creates two separate fee simple estates in the land, each of which has the same status and rank.” (Emphasis added.) (Pp. 526–527, 36 Cal.Rptr. p. 778.) Even though the Nevada Irr. case involved quartz gold and silver—minerals able to be owned in place—its designation of the subsurface estate as a “fee simple * * * [of] the same status and rank” is equally applicable to the subsurface estate in fugacious oil and gas. In any event, the oil and gas with which we are concerned is a “mineral” and thus within the rule.
In 10A Thompson on Real Property, section 5320, page 701, in the course of a general discussion of the types of ownership in oil rights, there appears the following apposite language: “As before noted in some jurisdictions, the courts have held to the view that these minerals in place are not capable of distinct ownership, and that a conveyance of them is not a grant of the minerals themselves in the ground, but to such part thereof as the grantee may find. But in other states an interest in oil rights which are estates in realty can be granted apart from a grant of the surface title, notwithstanding the rejection of oil and gas in place doctrine. The courts holding to this theory have held that a freehold interest will pass if the grant is of unlimited duration, or if the right to go upon the land and occupy it for the purpose of prospecting is capable of having unlimited duration.” (Emphasis added.) A pertinent footnote thereto cites Dabney–Johnston Oil Corp. v. Walden, supra, 4 Cal.2d 637, 52 P.2d 237. Thus is again recognized a distinction when the profit is for an unlimited duration, a distinction alluding to the equality and dignity of rank that Dabney–Johnston impliedly, and Nevada Irr. expressly, called for.
Apropos defendants' fallacious second premise (i.e., that all incorporated hereditaments regardless of duration can be abandoned) and deemed conclusive on this issue, we turn to an authority upon which defendants rely: Williams and Meyers, Oil and Gas Law. These authors note that one of the consequences of the corporeal-incorporated classification is that the latter can be abandoned: “In states which classify a mineral or leasehold interest as incorporeal in character, it has been held that such interest may be extinguished by abandonment.” (1 Williams & Meyers, Oil and Gas Law, § 210.1, p. 101.) But that is not the complete quotation. A pertinent footnote, after citing some cases from other jurisdictions where abandonment has been applied, continues on to say: “There are, of course, many cases in which the courts have held that a particular interest has not been extinguished by abandonment even though such interest is classified as incorporeal and there has been long continued non-user. Some such cases may be explained on the theory that the non-user alone was insufficient evidence of intent to abandon the interest; some appear to indicate that a severed mineral interest (as opposed to the estate of an oil and gas lessee) is not subject to loss by abandonment even though such interest is incorporeal in character.” (Emphasis added.) (P. 101, fn. 4.) As defendants here concede, the interest conveyed to COP and Ashurst was indeed a severed mineral interest for an unlimited duration, not the estate of an oil and gas lessee. As such, it is a freehold estate, an estate in fee and real property.
Indicative of the incorporeal interest that is nevertheless nonabandonable is the case of Jilek v. Chicago, Wilmington & Franklin Coal. Co. (1943) 382 Ill. 241, 47 N.E.2d 96, 102, 146 A.L.R. 871 where the following appears: “It is finally contended that the rights of the appellees were lost by * * * abandonment. As pointed out above, there was a complete severance of the mineral estate from the surface estate, and in such event the law is well settled there can be no adverse possession of the mineral estate by the owner of the surface estate, * * * Nor does nonuser or abandonment of the mineral interest terminate the estate.” (Emphasis added.) It should be noted that Jilek is an Illinois case, with the same ownership theory as in California. Just as in Jilek, in the case at bar there was a complete severance of the mineral estate; just as Jilek, he case at bar is an oil case. (To the same effect see Gray–Mellon Oil Co. v. Fairchild (1927) 219 Ky. 143, 292 S.W. 743, 746; and see 1A Summers Oil and Gas, § 139, p. 320 where it is said that “Where a separate estate or interest in oil and gas has been effectually crated by grant or exception, it is held by the courts in states, except Louisiana, that such estate or interest is not subject to termination by nonuser or abandonment * * * ”)
The fact that some states consider incorporeal interests not subject to abandonment is again recognized by 1 Williams & Meyers, op. cit., section 210.2, at page 105. Cases like Romero v. Brewer, supra, 58 Cal.App.2d 759, 137 P.2d 872, dealing with oil leases for terms of years where there was not complete severance of the mineral rights, and holding that such leases may be abandoned, are not in point.
As we have shown, the conveyances from Abrams and Brandt to Ashurst and COP, respectively, constituted a severance of the mineral estate from the surface rights. The estate in the mineral rights became a fee simple estate. A fee simple estate may not be abandoned by inaction, and there being no evidence in these cases of any affirmative acts of abandonment, the findings that plaintiffs and their predecessors had abandoned their interests in the mineral estates are erroneous.
2. Adverse Possession:
In action 1870 the court found that the predecessors of plaintiffs who were stockholders in COP at the time of charter forfeiture and the predecessors of plaintiffs who were stockholders in Ashurst at the time of charter forfeiture became cotenants of the predecessors of defendants in the mineral rights originally owned by the particular corporation. The court in the cases at bench found likewise and that, so far as the mineral rights are concerned, both plaintiffs and defendants claim through common ancestors, namely Ashurst and COP.
The court also found that defendants and their predecessors have been in possession of the Syncline Ranch including section 31 for more than 20 years prior to the commencement of this action, paying taxes (although no mineral rights were separately assessed); they have fenced the entire ranch; improved the ranch property; conducted cattle operations over the entire ranch and excluded all trespassers; for more than five years they “have exercised dominion over Section 31 oil rights, including the right to enter the property to explore for and to produce oil and gas, by fencing the property and excluding all trespassers, by negotiating oil and gas leases” (enumerating the Carroll lease of 1938, Hess lease of 1950, and the Shell leases of 1951 and 1952); the leases were executed without consulting plaintiffs or accounting them for rentals or other moneys received under the leases; the plaintiffs executed deeds of trust and decrees of distribution covering the entire fee, “which acts have continued over a long period of years, constitute conduct so openly and notoriously adverse to plaintiffs' predecessors as to constitute presumptive notice to them and to effect an ouster”; defendants claims have been open, notorious and adverse and their title has matured by adverse possession.
Plaintiffs urge that possession or drilling for minerals is essential to start the statute running while defendants claim that interference with the right to drill alone will suffice. Plaintiffs cite numerous cases which require, after severance, drilling or mining to start the statute running but defendants attempt to distinguish most of them on the ground that they represent the rule in states adopting the ownership in place theory or deal with solid minerals.
However, three nonownership states, Oklahoma, Illinois and Kentucky require drilling operations to effect an adverse possession after severance of the mineral estate. Thus in Deruy v. Noah (1947) 199 Okl. 230, 185 P.2d 189, 191, the court quoted from Claybrooke v. Barnes (1929) 180 Ark. 678, 22 S.W.2d 390, 670 A.L.R. 1436: “ ‘Where ownership of the surface and of the mineral rights has been severed, the only way the Statute of Limitations can be asserted against the owner of the mineral rights or estate is for the owner of the surface estate or some other person to take actual possession of the minerals by opening and operating mines for the statutory period.’ ” The facts in Deruy show that the minerals there involved were oil and gas: “Deruy made no allegation or claim that he had at any time made any attempt to explore for oil, gas, or other minerals, or that he had done anything whatever toward taking or even authorizing the taking of minerals from the land.” (P. 191 of 185 P.2d.)
The rule in Deruy has been consistently followed in Oklahoma regarding adverse possession of oil and gas interests: “The defendants' mineral rights had been severed from the title to the surface and possession of the surface by its owner is not adverse to owner of the minerals. It was not alleged or claimed by plaintiffs that they had taken actual possession of the minerals by drilling wells or opening mines for the statutory period.” (Noble v. Kahn (1952) 206 Ikl. 13, 240 P.2d 757, 759, 35 A.L.R.2d 119.)
“[T]he rule is well established that limitations do not run in favor of the owner of the surface rights against the owner of an interest in the minerals where there was no production, * * * and in the absence of any hostile claim or act by the owner of the surface.” (May v. Archer (Okl.1956) 302 P.2d 768, 770, citing Deruy v. Noah.) (See Strickland v. Reeburgh (Okl.1961) 362 P.2d 1110, 114; and Walker v. Hoffman (Okl.1965) 405 P.2d 57, 61.)
Douglass v. Mounce (Okl.1956) 303 P.2d 430, 433, is closely in point to the facts at bench because here, unlike the foregoing cases that merely involved the surface owner against the mineral owner, the contest was between a fractional mineral owner and the surface owner who also had a fractional mineral interest: “The possession of the surface thereafter [after severance] is not adverse to this separate mineral estate even when the surface owner also owns a portion of the minerals. (Emphasis added.) [Citing Deruy v. Noah and Noble v. Kahn, supra.] It follows, a priority, that after a severance there must be an actual possession of the several minerals in order to acquire a title to them by adverse possession. This has been the conclusion of almost all jurisdictions including Oklahoma. 35 A.L.R.2d 124, Sec. 21.”
Kentucky, another nonownership state, requires a working of the mines to begin the required period. Thus in Curtis–Jordan Oil & Gas Co. v. Mullins (1937) 269 Ky. 514, 106 S.W.2d 979, 981–982, the court applied the rule to oil and gas although it couched its discussion in terms of mining: “The owner of the surface may acquire title by adverse possession of minerals separated from the surface, but to do so he must not only open and work the mine, but actual possession and work must be uninterrupted, continuous, open, and notorious for the statutory period.” It is interesting to note that the court's description of the evidence is similar to the facts in our our case: “There is likewise no showing that the owners of the surface ever attempted to explore for or remove any gas, oil, or minerals or that any notice was ever given to the [owners of the minerals] or those claiming under it that the owners of the surface were making any claim to the oil, gas, or mineral rights. The evidence merely shows continuity of title to the surface and the failure of the [mineral owners] to develop and remove the minerals.” (106 S.W.2d at 981.) The evidence was held insufficient.
In Deiderich v. Ware (Ky.1956) 288 S.W.2d 643, 645–646, the court restated the rule in the context of an oil and gas case: “After such severance, title to the minerals cannot be gained through adverse possession without a penetration of the mineral estate. * * * The required factors to establish adverse possession of minerals are identical with those required for adverse possession of land. In other words, there must be exclusive * * * actual, peaceable, open and notorious, continuous and hostile possession of the minerals under a claim of right for the statutory period.” (P. 646.)
The rule in Illinois is indicated by this language in Uphoff v. Trustees of Tufts College (1932) 351 Ill. 146, 184 N.E. 213, 216, 93 A.L.R. 1224, where rights to coal were involved: “Where there has been a severance of title between the surface and the underground minerals, mere occasional acts of mining by the owner of the surface do not constitute adverse possession of the minerals remaining in the ground.”
Later, that rule was applied to oil and gas interest: “[P]ossession of the surface, unaccompanied by acts of dominion over the minerals, does not constitute adverse possession, but that, at the least, solid minerals must actually be removed from the ground or oil and gas actually produced in order to have adverse possession thereof.” (Pickens v. Adams (1955) 7 Ill.2d 283, 131 N.E.2d 38, 43, 56 A.L.R.2d 605, approved in Hunsley v. Valter (1958) 12 Ill.d 608, 147 N.E.2d 356, 360.)
Although our citations have been purposely limited to states having rules similar to California's relating to the ownership of oil and gas interests, research has disclosed that there is no case that discusses the rule advocated by defendants. The text writers deduce from the theories concerning ownership that obstruction of the right to drill will start the statute running, and for support they point to each other, or the language in Barker v. Campbell–Ratcliff Land Co. (1917) 64 Okl. 249, 167 P. 468, L.R.A. 1918A 487, which states: “there must appear to have been some denial of his right, or some assertion of a claim inconsistent with his right, * * * ” (See 2 American Law of Property, § 10.7, p. 523, fn. 16.) Whatever Barker means is clearly not the law of any jurisdiction because, as pointed out above, Oklahoma subsequent to Barker has uniformly followed the rule requiring actual drilling for oil. In any event to no case has been researched or cited by the parties in which there was obstruction of the mineral owner's attempt to drill followed by acquiescence by the mineral owner. Facts have not arisen where application of defendants' rule would apply even if it were adopted. The latest and apparently largest work on oil and gas points out the theoretical possibility that oil and gas rights in the nature of a profit a prendre may be lost by interference with access because profits are subject to loss by prescription (1 Williams & Meyers, op. cit., § 224.4, p. 360; for the same analysis see Mills & Willingham, Law of Oil and Gas (1926) § 19, p. 29); but another work points out the realities of the oil and gas industry and states that this situation is highly improbable: “From the practical standpoint, however, if the mineral owner has decided to enter to remove oil and gas and the surface possessor denies him such right, it is not likely that litigation on the matter will be delayed for the statutory period * * *.” (1 Kuntz, Law of Oil & Gas, § 10.4, p. 219.)
Kuntz discusses the distinction between ownership in place and nonownership states and points out that the distinction has not created a different rule for adverse possession. Although, as shown, the rule in other nonownership states requires that to constitute adverse possession against the owner of severed mineral rights the owner of the surface rights must actually remove oil or gas in order to notify such mineral rights owner that an ouster is taking place, it may very well be that in California there can be ouster by acts less than drilling for oil. However, applying the ordinary rules of adverse possession as regards cotenants there must be some act or acts which would clearly indicate to the mineral rights cotenant that the surface owner is claiming an adverse interest in those rights. It is not enough that the surface owner perform acts on the surface which he is entitled to perform because of his surface ownership. In the cases at bench, the acts of defendants were only such acts as the surface owners had the right to perform because of that ownership and the ownership of certain undivided interests in the mineral estate. Operating a cattle ranch and giving instructions to employees to keep trespassers off the ranch gave no indication of an open, hostile claim to the mineral estate.
Defendants contend that the leases which they made prior to five years before the filing of these actions constituted notice to plaintiffs of such a hostile claim. There were the following oil leases made by defendants: in 1938 to Carroll; 1950 to Hess; several in 1951 and 1952 to Shell. The record does not disclose the rental or consideration paid by the lessees for these leases. Whatever they were defendants did account for them to plaintiffs. Had plaintiffs known of these leases the failure of defendants to account to plaintiffs for a share of the moneys received might have started the period of adverse possession running.13 However, there is no evidence that plaintiffs knew of the leases. There was no indication on the ground that defendants were dealing adversely with the mineral rights until 1956 on the Ashurst land and 1957 on the Cop land when oil wells were drilled. The suits were commenced in 1957.
Before examining the legal effect of the leases certain general premises in the law of adverse possession should be set forth: “There are no equities in favor of a party seeking by adverse holding to acquire the property of another. [Citation.] Indeed, the very purpose of all organized of government is to protect one in the enjoyment of his property, rather than by some sort of artifice to deprive him thereof.” (Myran v. Smith 91931) 117 Cal.App. 355, 360, 4 P.2d 219, 221.) “Before title may be acquired by adverse possession as between cotenants, the occupying tenant must bring home or impart notice to the tenant out of possession, by acts of ownership of the most open, notorious and unequivocal character, that he intends to oust the latter of his interest in the common property. [Citations.] Such evidence must be stronger than which would be required to establish a title by adverse possession in a stranger.” (Emphasis added.) (Wilkerson v. Thomas (1953) 121 Cal.App.2d 479, 488, 263 P.2d 678, 683, quoted in Weller v. Chavarria (1965) 233 Cal.App.2d 234, 243, 43 Cal.Rptr. 364, and Hunter v. Schultz, supra, 240 A.C.A. 23, 27, 49 Cal.Rptr. 315.)
The general rule on leases executed by cotenants is that “The possessor's act in purportedly leasing out the use and possession of the entire premises is not in itself an ouster or disseisin of his cotenants nor is it sufficient to establish an adverse possession against them.” (82 A.L.R.2d 5, 82.) “The mere execution, delivery, or recording of oil and gas leases or mineral deeds will not constitute adverse possession.” (1 Williams & Meyers, op. cit., § 224.4, p. 353.) “The delivery of an oil and gas lease * * * by the surface owner does not constitute disseisin of the mineral owner so as to establish possession of the minerals.” (1 Kuntz, op. cit., § 10.4, p. 221.) “Where title to the surface of land has been severed from the title to the underlying mineral estate, it has been held or recognized that the execution or recording of deeds or leases does not give title to the minerals by adverse possession.” (35 A.L.R.2d 124, 178.)
Thus, in Viersen v. Boettcher (Okl.1963) 387 P.2d 133, 138, the court outlined and applied the above rule: “The plaintiffs, in an effort to show a claim of adverse possession of the severed mineral interest, offered in evidence copies of oil and gas leases covering the premises * * * as well as the testimony of agricultural or farm tenants who testified that they had been in possession of the property during substantial periods of time under leases from the fee owners. The execution and recording of oil and gas leases by a mineral co-tenant, standing alone, will not support a claim of adverse possession to severed mineral [sic] which are owned by and in the constructive possession of another.” Further cases supporting the general rule are: Francis v. Francis (1941) 288 Ky. 685, 157 S.W.2d 289; Hale v. Horn (1936) 265 Ky. 560, 97 S.W.2d 402; Smith v. Graf (1935) 259 Ky. 456, 82 S.w.2d 461; Piney Oil & Gas Co. v. Scott (1934) 258 Ky. 51, 79 S.W.2d 394; Lyles v. Dodge (Civ.App.Tex.1921) 228 S.W.2 316.
The mere recording of a deed is not sufficient, in California, to give notice to a cotenant of adverse possession. (West v. Evans (1946) 29 Cal.2d 414, 418–419.)
As artfully stated in Piney Oil & Gas Co. v. Scott, supra: “[A]dverse possession means adverse occupation and user, which must be wrought on the property in question. It cannot be wrought in the office of the county clerk no matter how many deeds or leases the would-be disseisor may record there.” (79 S.W.2d at 401.)
“Color of title is that which gives the semblance or appearance of title, but is not title in fact—that which, on its face, professes to pass title, but fails to do so because of a want of title in the person from whom it comes or the employment of an ineffective means of conveyance. It is title in appearance only.” (3 Am.Jr.2d § 105, p. 188.)
“It is obvious, therefore, that a proper description of the premises in the instrument relied upon as color of title is of vital importance * * *. If no lands are described, nothing can pass * * *. A deed, which is color of title is such only for the land designated and described therein. No one can claim color of title by deed beyond what his deed purports to convey; a deed cannot serve as color of title to land not included in the description. A deed which describes part of a tract does not constitute color of title to the part of the tract not described so as to establish constructive adverse possession to the whole from the possession of part.” (3 Am.Jr.2d § 108, pp. 192–193.)
These extensive excerpts describing one of the essentials of color of title are a necessary introduction to the primary problem regarding adverse possession of the minerals in section 31. Defendants contend that the following various instruments purporting to convey the whole feel provide them with massive color of title: (1) the Cornwell estate decree of distribution, (2) the decree in Frusetta's estate, (3) the decree quieting defendants' title against Carroll in 1940, and (4) the decree of foreclosure under the Hollister Savings Bank mortgage. In all of these instruments the description was “section 31” or “all of section 31.” In none of them was the mineral estate separately described. It seems clear that if the oil and gas rights are described in any of those deeds, color of title is afforded defendants. “Generally, speaking, any instrument, however, defective or imperfect, and no matter from what cause invalid, purporting to convey the land, and showing the extent of the tenant's claim, may be color of title, * * * ” (71 A.L.R.2d 404, 407.)
At this point the significance of color of title should be examined. Witkin states that “Color of title is received in evidence for the purpose of showing that the title is adverse and it therefor dispenses with other proof of hostile or adverse claim.” (2 Witkin, Summary of Cal.Law, § 18, p. 875.) However, California Jurisprudence Second states: “The presence or absence of color of title merely affects the extent of the possession.” (2 Cal.Jur.2d, § 75, p. 580.)
“The instrument relied on for color of title simply measures and fixes the extent of the wrongful possession, * * * The instrument must, however, purport to transfer title; and to do this the property must be described with such definiteness that it can be identified.” (2 Cal.Jur.2d § 77, p. 582.)
“The effect of the statute [Code Civ.Proc., § 322] is not to make the instrument evidence of adverse possession, but to extend the claimant's possession of any portion of the land included in the instrument to the whole of that land.” (Emphasis added.) (2 Cal.Jur.2d, § 80, p. 584.)
“While color of title draws the constructive possession of the whole premises to the actual possession of a part only, and is evidence of the nature of the entry and of the extent and boundaries of the possession claimed, it is not of itself evidence of adverse possession, and it does not necessarily follow that adverse possession can be proved by less evidence when the entry is under color of title than when it is not. The existence of color of title does not dispense with the necessity for acts of adverse possession.” (Emphasis added.) (3 Am.Jur.2d, § 106, p. 190.) Or as stated in Piney Oil & Gas Co. v. Scott, supra, 79 S.W.2d 394, 400: “A would-be disseisor who enters under a bare color of title is no better off than one who enters without color and marks off a distinct line around what he intends to occupy. Each, if he acquires any rights, must do so because of his occupation, claim, and use of the premises for the statutory period.”
Illinois, like California, has adopted the nonownership theory (1 Williams & Meyers, op. cit., § 203, p. 32) and therefore it is instructive to note the Illinois rule regarding color of title to severed mineral rights. “Where such severance has occurred the possession of the surface does not carry with it the possession of the minerals under the surface. Separate estates are created by a severance, which are held by separate and distinct titles, and each estate is incapable of possession by the mere occupancy of the other; and this is so even if the instrument constituting color of title purports to convey the whole property.” (Uphoff v. Trustees of Tufts College, supra, 184 N.E. 213, 216. Rights to coal deposits were here at issue.)
This rule was followed in Jilek v. Chicago, Wilmington & Franklin Coal Co., supra, 47 N.E.2d 96, a case involving oil and gas rights. Later, this rule was again emphasized in Pickens v. Adams, supra, 131 N.E.2d 38, 43, also involving oil and gas: “[T]here can be no adverse possession of the mineral estate by the owner of the surface estate, even though the latter holds an instrument which purports to constitute color of title to the whole estate in the land. * * * [P]ossession of the surface does not carry possession of the minerals and that nonuser or abandonment of the mineral interest does not operate to terminate that estate. * * * [P]ossession of the surface does not carry possession of the minerals and that nonuser or abandonment of the mineral interest does not operate to terminate that estate. * * * [P]ossession of the surface, unaccompanied by any acts of dominion over the minerals, does not constitute adverse possession * * *.” (Emphasis added.)
Kentucky (listed by Williams & Meyers, op. cit., § 203, p. 33 as a nonownership state) apparently has adopted he same rule. In Piney Oil & Gas Co. v. Scott, supra, the Kentucky Court of Appeals stated that an adverse possessor on the surface with color of title to the surface has constructive possession to his boundaries, but “[W]hen he gets below the surface and attempts to take possession of minerals, he can have no immediately potential use or occupation of the whole of the minerals * * * ; therefore he can have no possession of the unmined portion.” (79 S.W.2d at 400.) It should be noted that the action in Piney Oil & Gas was instigated to quiet title to “the minerals, oils, gases, and certain rights of way,” but that the remarks of the court were made in reference to coal deposits. Piney Oil therefore stands for the proposition that after severance a deed to all the property cannot give constructive possession to the whole of the minerals. (Diederich v. Ware, supra, 288 S.W.2d 643, 647 so interprets it.)
Ohio is another state that follows the nonpossessory theory regarding oil and gas rights, and it too follows the general rule. Gill v. Fletcher (1906) 74 Ohio St. 295, 78 N.E. 433 involved a dispute over the grantor's reservation of a one-half interest in plaster deposits. The parties were cotenants of the minerals and one cotenant had rights to the surface. Because the adverse possessor was a cotenant, the court stated that “unique” notice had to be given. “Actual possession of the surface and constructive possession of the mineral under color of deeds will not be sufficient.” 78 N.E. at p. 436.) The adverse possessor's deeds did not show any right to the minerals. ‘As to the severed mining estate, a distinct title must be asserted and established.” (78 N.E. at p. 436.)
Sanford v. Alabama Power Co. (1951) 256 Ala. 280, 54 So.2d 562 presented the unusual situation where the adverse possessor had a deed to the minerals, however it was held that mining on one part does not give constructive possession to all the minerals. Pincy Oil was cited as support for the holding. Alabama appears to follow the nonownership theory regarding oil.
Vance v. Guy (1943) 223 N.C. 409, 27 S.E.2d 117, stands for a different rule. There the deed described the surface in lines and boundaries, and the adverse possessor mined in a small area of the tract. It was stated that despite prior severance of the minerals, the deed gave “colorable title to the entire interest and estate in the land,” and that mining operations gave constructive possession of all the minerals.
Diederich v. Ware, supra, 288 S.W.2d 643 appears to state that a surface warranty deed may give constructive possession to oil and gas pools after their severance from the surface if the mineral estate is worked. The court reviewed Pincy Oil, Alabama Power Co., and Vance v. Guy, and concluded that because the 1859 mineral deed was uncertain, and the long chain of title to the surface contained no reference to the minerals, the adverse possessor was working the deposits under color of title. However, the holding is either dictum or an alternative ground of decision because the court had previously held that pumping oil under a claim of right alone with sufficient because the adverse possessor exercised dominion over all the oil reservoir. All the forces in the pool combined to force the oil from the wells.
The only California case closely in point is Foss v. Central Pac. R.R. Co. (1935) 9 Cal.App.2d 117, 49 P.2d 292. There the contest was between a hopeful adverse possessor who owned both the surface rights and a portion of the mineral rights and his cotenant of the mineral rights. Thus, the parties'interests were aligned exactly as in the case at bench. The minerals apparently were solid, not oil or gas. There it was held that occupation of the surface under color of title provided by the deed in question was not an ouster, and that no act on the surface was adverse to the owner of the minerals below.14
No matter what rule on color of title is adopted, it is clear that before such rule can work in favor of the disseisor, he must occupy a portion of the estate, i.e., commence to work the minerals. This follows from the general rule that after severance occupation of the surface is not occupation of the minerals. In the case at bench, Carroll never produced any oil and it is unclear what his activities amounted to. Hess mistakenly drilled on the wrong tract, not section 31, and Shell did not bring in oil until 1956. (It is unclear from the record when Shell's exploration began.)
Further, the cases indicate that the possession (here, the working of the minerals) must be continuous, color of tile or not. In McCoy v. Lowrie (1953) 42 Wash.2d 24, 253 P.2d 415 at pag 417 the court stated, “The evidence shows that, beginning in 1948 [the disseisors] did certain development work on the land here in question and on land in close proximity thereto that might well be sufficient to evidence the beginning of an adverse possession by the McCoys so far as the mineral rights are concerned; but is is unnecessary to decide that point, since that activity has not continued for a sufficient period to enable the McCoys to claim any title to the mineral rights based on adverse possession.” Vance v. Guy, supra, 27 S.E.2d 117, 120 states that the working of the minerals must be continuous. “[T]here must be exclusive, actual, peaceable, open and notorious, continuous and hostile possession of the minerals under a claim of right for the statutory period.” (Emphasis added.) (Diederich v. Ware, supra, 288 S.W.2d at 646.)
As the title to the minerals is a separate estate in land (even though a profit a prendre, and the minerals themselves not subject to ownership) no adverse possession can arise until here is some interference with an aspect of the mineral estate. In an ownership in place state (as well as a nonownership state), it would appear that mere refusal to permit entry could start the statute. By the same token, even in a nonownership state, actual production by a surface owner who does not deny admittance to the mineral owner should start the statute. In any event, color of title is not important until there is some act that is equivalent of “possession” of the mineral. If the mineral estate is not worked or entrance not refused after request to enter, the situation is analogous to the disseisor holding color of title to the surface of adjoining property that he never enters.
The Illinois cases hold that since a severance of the minerals has taken place, possession of the surface alone is not actual possession of any minerals, and therefore no constructive possession of all or part of the minerals can take place under color of title.
The Foss case which states the California rule regarding solid minerals points out that there was no act that was adverse to the minerals' owners. This may be another way of stating that there was no possession of the minerals.
Foss was not followed below because the trial judge accepted the argument that that Foss reasoning was inconsistent with the profit a prendre nature of oil ownership in California. The argument was apparently advanced below that the Third District (which decided Foss) was not familiar with Callahan v. Martin, supra, 3 Cal.2d 110, 121–122, 43 P.2d 788, which was decided five months previously. Defendants feel that Foss is particularly inconsistent with certain language in Dabney–Johnston Oil Corp. v. Walden, supra, 4 Cal.2d 637, 649, 52 P.2d 237, 243, “Oil actually brought to the surface to which the grantee's right attaches may be not only the oil and gas in place beneath the surface of the assignor's land at the time of the assignment * * *. The right when granted is a profit a prendre, a right to remove a part of the substance of the land.” (Emphasis added.)
It must be remembered that defendants and their predecessors in interest were at all times cotenants of the mineral interests with plaintiffs and their cotenants and that the ordinary rules of cotenancy apply.
Weller v. Chavarria, supra, 233 Cal.App.2d 234, 242–243, 43 Cal.Rptr. 364, 370, states: “It is settled law that the exclusive occupancy of jointly owned premises by a cotenant is deemed permissive and does not become adverse until the tenant out of possession has had either actual or constructive notice that the possession of the cotenant is hostile to him. * * * In short, one tenant in common cannot by mere exclusive possession acquire the title of his cotenant.” (See Wilkerson v. Thomas, supra, 121 Cal.App.2d 479, 487, 488, 263 P.2d 678.)
“[T]he recordation of a deed purporting to convey the entire property in land to a tenant in possession is not, as a matter of law and independent of any other fact, notice to his cotenant of the adverse character of the grantee's possession.” (West v. Evans, supra, 29 Cal.2d 414, 418, 175 P.2d 219, 221; Wilkerson v. Thomas, supra, 121 Cal.App.2d at pp. 488–489, 263 P.2d 678.) “The law does not fasten upon a cotenant out of possession the burden of surveillance of public records to insure that his cotenant is not acquiring adverse rights.” (Wilkerson v. Thomas, supra, p. 489, 263 P.2d p. 684.)
In Currier v. Howes (1894) 103 Cal. 431, 437, 37 P.2d 521, 523, the court stated that where an ‘'easement is acquired by deed, no length of time of mere nonuser will operate to impair or defeat the right.” Necessarily, the same must be true of severed mineral rights acquired by deed.
The practical objection to accepting defendants' theoretical position (that possession of the surface in a nonownership state is the same as possession of the minerals in an “in place” state) is the limited notice that such possession gives to the mineral cotenant that the surface possessor's presence is adverse. In the light of the constantly repeated general principle that notice must be brought home to the cotenant (the older cases speak in terms of ouster) defendants' argument must be rejected. (Dimmick v. Dimmick (1962) 58 Cal.2d 417, 422, 24 Cal.Rptr. 856, 374 P.2d 824; West v. Evans, supra, 29 Cal.2d 414, 418, 175 P.2d 219; Johns v. Scobie 91939) 12 Cal.2d 618, 623–624, 86 P.2d 820, 121 A.L.R. 1404; Packard v. Johnson (1881) 57 Cal. 180, 183; Acquirre v. Alexander (1881) 58 Cal. 21, 28–29; Miller v. Myers (1873) 46 Cal. 535, 539; Weller v. Chavarria, supra, 233 Cal.App.2d 234, 242–243, 43 Cal.Rptr. 364 (see cases collected); Andreotti v. Andreotti (1964) 224 Cal.App.2d 533, 541, 36 CAl.Rptr. 709.)
In view of the holdings in Nevada Irr. Dist. v. Keystone Copper Corp., supra, 224 Cal.App.2d 523, 526–527, 36 Cal.Rptr. 775, and other cases, that severed mineral rights constitute a fee simple estate in the land, separate from and of equal status with the surface estate, and that a deed of the land not describing the severed mineral estate does not carry title to the latter; in Johnson v. Buck (1935) 7 Cal.App.2d 197, 202, 46 P.2d 771, 773, that “a deed is color of title only as to the land actually described by it”; and in Kile v. Tubbs (1863) 23 Cal. 431, 437, that possession is held to be coextensive only with the possessor's deed, we are constrained to hold that the instruments upon which defendants rely for “color of title” and which did not describe the mineral estate did not constitute “color of title” for adverse possession in the cases at bench. (See People v. Ocean Shore Railroad (1948) 32 Cal.2d 406, 417, 196 P.2d 570, 6 A.L.R.2d 1179.)
Having concluded that defendants did not have “color of title,” we question whether defendants proved the other kind of adverse possession which, according to Kimball v. Lohmas (1866) 31 Cal. 154, 159, arises “where the possession is taken by bow and spear without color of title, but with the intent to claim the fee exclusive of any other right and to hold it against all comers, * * * ” It is not clear from the record whether the type of adverse possession intended to be found by the court was the “color of title” variety or that of the “bow and spear.” Either type requires acts of possession of the mineral rights for at least five years prior to the filing of the actions. Whether we assume that the descriptions of “Section 31” or “all of Section 31” in the instruments which defendants claim gave them color of title did give color of title, or whether we consider the bow and spear type of possession, defendants' claims of adverse possession fail because there were not acts of possession of the mineral rights for the requisite period.
The finding that for more than five years defendants and their predecessors experienced dominion over section 31 oil rights is based solely upon the following activities of defendants and their predecessors: fencing the property; excluding all trespassers; negotiating oil and gas leases; leasing the property for oil development to Carroll in 1938, to Hess in 1950, to Shell in1951 and 1952 and not accounting to plaintiffs for the proceeds of the leases; and executing deeds of trust and decrees of distribution covering the entire fees (in none of these, however, were the mineral estates referred to). As hereinbefore pointed out, these activities—even in the aggregate—are not sufficient to constitute an open and notorious adverse claim to the mineral estates.
3. Effect of Action 1870:
As hereinbefore stated, in 1917 Brandt filed an action to quiet title to the Syncline Ranch including the oil rights. The plaintiffs were Brandt, as an individual, as trustee for the stockholders of COP and Ashurst, for Abrams and Brandt, for Pacific Gateway Development Company, for Vallecitos Land and Mercantile Company and as a partner in Abrams and Brandt. The defendants were Abrams and Brandt, a partnership, Abrams, the trustees of COP and Ashurst, George Frusetta, Helen Kennedy, Charles M. Weber, and all the other stockholders who held interests in various designated corporations (including COP and Ashurst) naming them, and all persons.
The judgment dated November 26, 1923 determined who the stockholders of COP and Ashurst were in the respective corporations on the forfeiture dates and the fractional shares of the title of the corporations owned by each stockholder. The court found that on the dates of forfeiture the Abrams and Brandt partnership was the owner of 114,811/366,201 3/434ths of the Ashurst real property and 199,500/503,000ths of COP real property; that Brandt as an individual was the owner of 28,150/366,201 3/434ths of Ashurst; that Abrams as an individual was the owner of 34,508/366,201 3/434ths of Ashurst; that Weber was the owner of 20,064/366,201 3/434ths of Ashurst; that Weber as trustee was the owner of 5,000/366,201 3/434ths of Ashurst; that Abrams and Brandt partnership was the owner of 199,500/503,000ths of COP; that C.M. Weber and Helen Weber Kennedy were the owners of 264,400/503,000ths of COP.
The judgment decreed that other stockholders on those dates became coowners of the indicated fractional shares of the respective corporation's title to the real property of such corporations subject, however, to the trusteeship for liquidation of the directors of the respective corporations.
The judgment ordered the trustees for the stockholders and creditors of Ashurst and COP to “proceed as a unit to sell and convey” the real property and any and all other property of Ashurst and COP and “report such sales to this Court and pay into this Court the proceeds (if any) * * * for the protection and benefit of its stockholders and creditors * * *.”
Plaintiffs contend that the court 15 found that because of this order of sale the interests of the various stockholders in the respective corporations became instanter and ipso facto transformed by equitable conversion from interests in real property to personal property choses in action to share in the proceeds, if any, of the sale of the corporate properties after paying costs of sale and outstanding obligations.
Defendants and the court rely for this alleged equitable conversion on Lynch v. Cunningham (1933) 131 Cal.App. 164, 21 P.2d 154 and Ephraim v. Metropolitan Trust Co. (1946) 28 Cal.2d 824, 172 P.2d 501. However, these two cases do not support he contention. In Lynch, the widow and children of the deceased to whom his entire estate, consisting of real property, was distributed, conveyed the real property to trustees, in trust to manage and receive the rents and income therefrom with power to sell the whole or any portion thereof, and to pay the net income from the trust estate to the beneficiaries and on the expiration of the trust period to transfer the trust property to the beneficiaries. Judgment was obtained by a creditor against one of the beneficiaries and execution was levied against her interest in the trust by levy upon the trustees under the procedure provided for levy upon personal property. An execution sale was then had of her interest in the property. She became bankrupt and her trustee in bankruptcy brought action against the purchaser at execution sale contending inter alia that her interest in the trust property was real property and not personal property and hence the execution sale was void, neither the levy nor the sale having been conducted as the statutes required concerning real property. The court held that as under the trust, the beneficiary was to receive at the end of the trust period a fractional interest in the real property which constituted the corpus of the trust, the beneficiary had an equitable interest in the real property which is regarded as real property, and then stated “The same result may be obtained by applying the equitable doctrine of conversion. 6 Cal.Jur., p. 528, § 3. Where real property is conveyed to a trustee with directions to sell in any event, it will be treated inequity as personal property. But, where the property in kid is, or may be, conveyed to the beneficiary, no such equitable conversion results.” (P. 173 of 131 Cal.App., p. 157 of 21 P.2d.) Thus, Lynch holds, in effect, that when a trust is created in real property and the res is to be conveyed to the beneficiaries at the end of the trust period, the beneficiaries' interests in the trust property is real estate even though the trustees to whom the legal title is conveyed have the power of sale. In our case, upon the charter forfeitures the stockholders received real property interests in the mineral rights belonging to the corporations, even though those interests were subject to the right of the directors as a trustees to sell the corporate property if necessary to pay the debts of the corporations.
In Ephraim, one Henry and wife, to secure an indebtedness owing by them to the trust company, executed to it a deed intended to serve as a mortgage. Later, the trust company and the Henrys executed a declaration of trust reciting that the trust company held title to the real property described in the deed as security for the payment of certain sums. The trust company, as trustee, was empowered to hold in trust, to subdivide, to convey and improve the real property and to apply the proceeds from the sale of the lots to designated purposes. At the end of 20 years the trustee was to convey to the Henrys any portion of the property which had not been sold. There was a provision in the trust declaration which completely distinguishes that case from the instant one. It provided that the interests of the beneficiaries and of their successors was personal property and that none of them had any right, title or interest in the real property.
In the case at bench, the interests of the stockholders in the mineral rights of the corporations became interests in real property on the forfeiture of the charters. In the very judgment which ordered the sales by the directors as trustees it was determined that on the forfeiture dates the stockholders became coowners of the indicated fractional shares of the corporate real property subject to the trusteeships for liquidation, and, in the case of COP, to the lien of the mortgage of October 28, 1910 16 to Abrams and Brandt.
As that judgment has become final, we start with the fact that when the order of sale was made the interests of the stockholders were real property. Defendants have cited no case holding that where real property interests have vested a mere order of sale not carried out causes an equitable conversion of the real property interests into personal property interests. In determining the effect of the order of sale in this connection the rules of equitable conversion must be considered. As we said in Vigli v. Davis (1947) 79 Cal.App.2d 237, 255, 179 P.2d 586, 597, quoting from State v. O'Connell (1922) 121 Wash. 542, 209 P. 865, 868 “equitable conversion ‘is a fiction which will be enforced only when necessary to accomplish manifest justice,” and, quoting from In re Estate of Walkerly (1895) 108 Cal. 627, 652, 41 P. 772, 777, “ ‘The rule of equitable conversion merely amounts to this: That where there is a mandate to sell at a future time, equity, upon the principle of regarding that done which ought to be done, will for certain purposes, and in aid of justice, consider the conversion as effect at the time when the sale ought to take place, whether the land be then really sold or not.’ ” (P. 255 of 79 Cal.App.2d,, p. 597 of 179 P.2d; emphasis added.) As the court said in In re Lowe's Estate (1927) 291 Pa. 22, 139 A. 582, 583, “ ‘The law does not favor conversions * * *.’ ”
In In re Estate of Walkerly, supra, 108 Cal. 627, 41 P. 772, dealing with a testamentary trust, the court, after stating the rule of equitable conversion quoted above, said: “But whenever the direction is for a future sale, up to the time fixed the land is governed by the law of real estate.” (P. 652, 41 P. p. 777.)
Equitable conversion “is applied only for the purpose of doing equity between the parties.” (30 C.J.S. Equity § 106, p. 1075.) “[I]t can only be invoked against a party who has failed or refused to perform a duty imposed on him.” (P. 1076.) “The maxim operates in favor of such persons only as have a right to demand performance, * * * ” (P. 1076.)
From the foregoing rules applicable to the doctrine of equitable conversion it is clearly apparent that in our case the doctrine could not apply until there was actually a sale. The mere making of the order could not and did not deprive the stockholders of their real property interests.
4. Effect of Actions 5362 and 5591:
The court found that the claims which plaintiffs assert in the instant action are barred by the decrees in San Benito County actions 5362 and 5591, which decrees were found to have quieted title in defendants to the subject property.
Action 5362 was brought in 1952 by George Frusetta and the Cornwell life tenants (predecessors of defendants herein) to quiet title against “All Persons Unknown.” The complaint alleged that the plaintiffs therein, by virtue of adverse possession, were the owners of various parcels of realty, including “Lots 1, 2, 3, 4, 5, 6, 7 and 8, and the East half, being all of said Section 31”; that the defendants therein claimed an interest in this property adverse to the plaintiffs; and that such claim on the part of the defendants was without right and void. Accordingly, the plaintiffs prayed that title to the described property be quieted in them as against those defendants. An order for publication of summons was made based upon the affidavit of the plaintiffs' attorney that the names and residences of the defendants therein were unknown to the plaintiffs. Accordingly the summons was duly published and, the defendants failing to appear or answer, a default judgment was entered in favor of the plaintiffs, quieting their title to the property.
Action 5991 was brought by certain defendants herein 1954. It named as the defendants various known and unknown remaindermen of the Cornwell estate (none of whom are predecessors of plaintiffs herein), and, in addition, all other persons unknown. The plaintiffs sought to quiet title to various parcels of real property, including an undivided one-half interest in “Lots 1, 2, 3, 4, 5, 6, 7 and 8, and the East half of Section 31.” In addition, the plaintiffs prayed that the court, pursuant to Code of Civil Procedure section 373.5, appoint a guardian to represent the unknown remaindermen of the Cornwell estate and that this guardian be directed on behalf of these persons to execute the Shell lease. Summons was subsequently served in that action against the unknown defendants by publication pursuant to order of the trial court. A default judgment was entered as to those persons sued as “Unknown Persons,” adjudging that title to the subject property be quieted in favor of the plaintiffs, subject to the Shell lease, and that the claim of the defendants sued as persons unknown was without right.
In neither of these judgments were the mineral interests in section 31 described as such. This raises the question as to whether the judgments quieting title to “all of Section 31” quieted title to the segregated mineral interests. Plaintiffs, of course, could not be bound by these judgments if it appears on the faces of the judgments that their mineral interests were not included in them.
As we have hereinbefore shown, when the mineral rights are served from the surface rights in real property the mineral rights become a separate fee simple estate in the land having equal status and rank with the surface estate. (Nevada Irr. Dist. v. Keystone Copper Corp., supra, 224 Cal.App.2d 523, 526–527, 36 Cal.Rptr. 775; In re Barlow v. Security T. & S. Bank, supra, 197 Cal. 263, 267, 240 P. 19; Graciosa Oil Co. v. Santa Barbara (1909) 155 Cal. 140, 144, 99 P. 483, 20 L.R.A.,N.S., 211.)
Where title to the surface of land has been severed from the title to the underlying mineral estate, a deed of the land without mentioning the mineral estate does not give title to the minerals. “[W]here the subsurface title has been previously severed, a conveyance according to the surface description which makes no mention of the subsurface estate passes only the title to the surface. The mineral rights are not affected. This is the rule at least where private grantors and grantees are concerned. (3 American Law of Mining, sec. 15.13, pp. 143, 144.)” (Nevada Irr. Dist. v. Keystone Copper Corp., supra, 224 Cal.App.2d at p. 527, 36 Cal.Rptr. at p. 779, see Foss v. Central Pac, RR Co., supra, 9 Cal.Ap.2d 117, 120, 49 P.2d 292.) “After the owner of the separate mineral estate records his title, he ‘is not affected by the state of the title to, or the possession of, the surface.’ [Citation.] ‘Each estate may be occupied, conveyed, incumbered, sold by the sheriff, or allotted in partition, without any effect upon the other.’ ” (Ohio Oil Co. v. Wyoming Agency (1947) 63 Wyo. 187, 179 P.2d 773, 778.) The Ohio Oil case holds that where the mineral estate is owned separately from the surface estate and the land is assessed in the name of the owner of the surface, a valid tax sale will not carry the mineral estate. (In Bilby v. Wire (N.D.1956) 77 N.W.2d 882, 887, the court said: “We, therefore, hold that where the county takes tax title, after severance, by which the property is described by its government description, without mentioning the mineral interests separately from the surface, the county acquires tax title to the surface only.” Bodcaw Lumber co. v. Goode (1923) 160 Ark. 48, 254 S.W.2 345, 29 A.L.R. 578, held that where title to the surface a subsequent deed by the surface owner not describing the mineral estate does not carry title to the latter estate. (See 35 A.L.R.2d 178, § 25.)
If title to the separate mineral interests does not pass by a conveyance of the land by the owner of the surface rights it equally follows that a complaint to quiet title which does not describe the separate mineral estate gives no jurisdiction to a court to grant a judgment which will deprive the owner of the mineral estate of his interest.
As the descriptions in the complaints, processes and judgments in the two actions did not describe the mineral interests, thus not affecting the mineral interests claimed by plaintiffs, the issues in those actions were not identical with those in the case at bench and hence the judgments could not be and were not res judicata of the instant actions.
“In order that a judgment in one action may constitute an estoppel against the parties thereto in a subsequent action, it must be made to appear, either upon the face of the record or by extrinsic evidence, that the identical questions involved in the issues to be tried were determined in the former action.” (Beronio v. Ventura County Lumber Co. (1900) 129 Cal. 232, 236, 61 P. 958, 959.)
Plaintiffs argue further in attacking the judgments under the principles set forth in Stevens v. Kelley (1943) 57 Cal.App.2d 318, 134 P.2d 56, and Manuel v. Kiser (1949) 94 Cal.App.2d 540, 210 P.2d 918, that the judgments cannot be res judicata here for the failure of the plaintiffs in the two actions in question to include as named defendants therein either plaintiffs or their predecessors.
In view of our determination that because those actions did not describe the mineral interests they are not binding here, it is unnecessary to determine the question as to whether in an action to quiet title under section 749 of the Code of civil Procedure claimants' whose title appears of record more than 20 years prior to the bringing of the action must be named therein. Moreover, such a question is moot in the instant actions for the reason that none of plaintiffs herein nor their predecessors at any time claimed title to the property which was being quieted in those actions.
5. Class Action:
In action 6021 plaintiffs in the second cause of action of the amended complaint sought to bring a class action on behalf of all persons claiming an interest in the oil produced from section 31. The members of the class, their claims or the facts upon which they were based were not alleged. The complaint referred to the approximately 140 persons identified in action 1870 as stockholders of Ashurst and COP at the time of charter forfeiture. Plaintiffs do not claim to be successors in interest of these particular stockholders. Apparently, alleged successors of 20 of these were present as members of this class at the opening of the trial. However, they declined to intervene in the action. Defendants' motion to dismiss this cause of action was granted. The court found that “Action No. 6021 is not a proper case for a class action. Each claim of each purported class member presents individual and important problems. Each claimant must trace his title from a date on or before 1912 in the case of COP and 1915 in the case of Ashurst until 1957 a period of 42–45 years. Problems incident to abandonment, divorce, bankruptcy, succession, laches, estoppel, and the effect of several intermediate quiet title suits and foreclosures would affect each claimant's title individually and with divers results. The members of the purported class interested in prosecuting their claims are not so numerous as to require a class action as opposed to intervention. A large number of said persons had actual knowledge of the pendency of this litigation prior to the trial but none took any steps to intervene individually or as members of the class until the first day of trial by which time discovery herein had been closed by order of the court.”
Plaintiffs contend that the fact that the four instant cases were consolidated for trial and were decided without separate findings and separate judgments proves that this is a proper case for a class suit. This conclusion does not necessarily follow. Actually the claims of the successors of the original stockholders are individual claims requiring, among the other matters set forth in the above findings of the court, individual deraignments of title. As the court stated, in effect, the proper procedure for those claiming title would have been to intervene in this action.
Section 382 of the Code of Civil Procedure provides that when a question “is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the Court, one or more may sue or defend for the benefit of all.” While some of the questions of law involved in this case might be common to all successors of the stockholders, all questions of fact would not be common, particularly the deraignment of title. Nor, as the court found, were the parties so numerous that they could not have been brought before the court; nor would it have been impracticable to do so. If plaintiffs had prevailed and the class cause of action remained, the judgment could not have been one in favor of the unnamed plaintiffs as a class but would have had to be one specifying the particular aliquot share of each person in the mineral rights which such person was able to establish. The court did not err in granting the motion to dismiss the alleged class cause of action.
6. Laches, Statutes of Limitation and Estoppel:
The court found that the claims of plaintiffs to the mineral estates were barred by laches, certain statutes of limitation and estoppel.
Its findings on laches were based on the facts that because of the lapse of time since plaintiff's predecessors acquired their claims, many important documents had been lost or destroyed, many important witnesses had died and the memories of other such witnesses had failed; the Ashurst and COP books and records had been lost; the Brandt records had been destroyed; no files once belonging to five named former stockholders and “others” had been found; eleven former stockholders and “others” had died. Because of these facts, said the court, “complete presentation of the facts to the Court has been rendered impossible.” The court also found that the value of section 31 greatly increased by reason of the discovery of oil on the property, which increase in value resulted from the efforts of defendants and the expenditures by Shell of substantial amounts of money in exploring and developing the property, and that plaintiffs did nothing to contribute to this increase in value and made no claim until after Shell discovered oil on the property. It will be noted that even if the documents had not been lost and the witnesses and persons referred to had not died, there is nothing in the record to show that any facts could thereby be produced to show any acts by defendants or their predecessors which would indicate open and notorious claims by them to the mineral estates. As we have shown, the owner of segregated oil and gas estates is not required to come forth and affirmatively claim his interest until some acts of his cotenants occur which indicates that the cotenants are denying his cotenant's rights. (See Wareham v. Randolph 91960) 184 Cal.App.2d 218, 227, 7 Cal.Rptr. 483; and Secret Valley Land Co. v. Perry (1921) 187 Cal. 420, 426, 202 P. 449.)
“Laches is an unreasonable delay in asserting a right which causes such prejudice to an adverse party as renders the granting of relief inequitable [citation]. In determining whether a delay has been unreasonable, the circumstances in each case must be taken into consideration, [citation]. Many factors may be involved, amongst which is the plaintiffs' knowledge of the defendants' wrongful acts [citations].” (Butler v. Holman (1956) 146 Cal.App.2d 22, 28, 303 P.2d 573, 577.) In that case in upholding a finding of no laches, the court said “There is no evidence that the plaintiffs knew that the defendants were operating a mine located in Section 34, until after the survey” (p. 28, 303 P.2d p. 577) just as in our cases there is no evidence that defendants were claiming interests adversely to plaintiffs until the discovery of oil. Butler further states: “Unless the party asserting the defense of laches has been injured by the delay complained of no prejudice has occurred.” (P. 29, 303 P.2d p. 577, citing Alexander v. State Capital Co. (1937) 9 Cal.2d 304, 313, 70 P.2d 619.)
No prejudice to defendants in the instant cases resulted from plaintiffs' failure to assert their rights until the discovery of oil. The delay in doing so did not prevent defendants from negotiating leases, nor did the loss of records or loss of memories prevent defendants from proving any and all acts which they contend showed adverse possession.
In Corcoran v. City of Los Angeles (1955) 136 Cal.App.2d 839, 844, 289 P.2d 556, 559, the court stated: “In Victor Oil Co. v. Drum, 184 Cal. 226, 193 P. 243, the court observed that ‘mere delay in bringing an action for a time less than the period of limitation does not amounting to laches,’ adding that ‘there must be also present the element that the delay has been to the prejudice of the opposite party.’ ” (Quoting from Hayman v. City of Los Angeles (1936) 17 Cal.App.2d 674, 680, 62 P.2d 1047, the court said: “ ‘It is not the lapse of time so much as it is the consequences of the delay which goes to make up the defense of laches.’ ”
In its memorandum decision the trial court relied upon Converse v. Joslin (1959) 176 Cal.App.2d 638, 645, 1 Cal.Rptr. 777, and Twin–Lick Oil Co. v. Marbury (1875) 91 U.S. 587, 592, 23 L.Ed. 328. Converse was an action to establish a trust in which judgments of dismissal were entered after demurrers were sustained without leave to amend. The reviewing court stated that the amended complaint showed “an unexcused delay of about 15 years from the wrong complained of until the action was commenced, during which period the mouths of those that could tell of the understanding reached, the reasons for action taken, the explanation for inaction, became permanently closed. This amounted to laches appearing from the pleading itself.” (P. 645 of 176 Cal.App.2d, p. 781 of 1 Cal.Rptr.; emphasis added.) Obviously in the instant cases there was no delay after discovery of the wrong complained of. The basis for the court's ruling in Converse shows its inapplicability to our cases, such basis being the following quotation from Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 736, 146 P.2d 673, 151 A.L.R. 1062: “ ‘Where for example, an action is commenced many years after its accrual, the death of witnesses or destruction of evidence, presumed as well as actual may prejudice the defendant and justify denial of relief because of staleness of the claim.’ ” (P. 645, 146 P.2d p. 682)
Twin–Lick dealt with a situation concerning an alleged agreement which the court held that if made, was an option which the plaintiff had failed to accept within a reasonable time during which time the defendant had spent considerable money in connection with the property the subject of the agreement, the delay thereby prejudicing the defendant. Neither Converse nor Twin–Lick is applicable here.
The court found that in actions 6021, 6022 and 6094, plaintiffs' claims are barred by the provisions of sections 318, 319, 321 and 336 of the Code of Civil Procedure and in action 6019 plaintiffs' claims are barred by the provisions of sections 318 and 321 of the Code of Civil Procedure.
As hereinbefore shown no cause of action of plaintiffs as against defendants arose until defendants acted in a manner showing that they were not recognizing plaintiffs' interests in the mineral estates. This occurred not more than a year prior to the filing of these actions. “Civil actions, without exception, can only be commenced within the periods prescribed in this title, after the cause of action shall have accrued, * * * ” (Emphasis added.) (Code Civ.Proc., § 312.)
“The statute of limitation does not begin to run until the cause of action accrues (Code Civ.Proc., § 312), that is to say, when suit may be brought upon it.” (Caffroy v. Fremlin, supra, 198 Cal.App.2d 176, 184, 17 Cal.Rptr. 668, 673.) “Discovery of oil may be regarded as the event upon which enjoyment and exploitation of vested interests in the oil rights are to commence.” (Caffroy v. Fremlin, supra, p. 182, 17 Cal.Rptr. p. 672.) The trial court found that the execution of a deed of trust by defendants' predecessors to French–American Corp. in 1928 covering the entire fee to section 31 gave plaintiffs a cause of action starting the statute of limitation running. This, however, did not have that effect because, first, the mineral estate was not described in the deed of trust and, secondly, because as hereinbefore shown the mere recording of a deed by one holding no record title is not notice of a claim by the latter against the record holder's title nor does it start the period of adverse possession running.
None of the statute of limitation barred the actions at bench.
The findings make the bald statement that “Plaintiffs are estopped from presenting their claims.” No reasons for the finding of estoppel are given. In its memorandum decision the trial court sated: “The defense of estoppel fails because the parties had equal knowledge of the record title, nothing was done to mislead, and nothing of a willful or culpable nature was performed by plaintiffs or their predecessors. (Biddle Boggs vs. Merced Mining Co., 14 Cal. 279; Eltinge vs. Santos, 171 Cal. 278 [152 P. 915].)” This statement, although not a part of the findings is, however, a true statement of the record and under the cases cited in the court's memorandum clearly proves that estoppel cannot apply here.
As said in Glowner v. De Alvarez (1909) 10 Cal.App. 194, 196, 101 P. 432, 433. “There are no equities in favor of a party seeking by adverse holding to acquire the property of another, * * * There is no principle of law which would estop plaintiff from saving his title by preventing the last act being done by the party seeking to acquire it, any more than there is to estop him at any other stage during the process of an attempt to acquire his title.”
“The law in California is very strict in applying the doctrine of estoppel to defeat title to real property, and in applying that doctrine to defeat the title to real property it is necessary for the innocent party to show culpability, consisting of actual fraudulent intent or culpable negligence amounting to constructive fraud.” (Alpha Stores, Ltd. v. Croft (1943) 60 Cal.App.2d 349, 352, 140 P.2d 688, 690.) The evidence in the instant cases fails completely to support any theory rendering applicable the doctrine of estoppel with respect to the mineral interests involved therein.
7. Shell Oil Company.17
The court found that “plaintiffs have not proved that Shell Oil Company acted in bad faith in negotiating its oil and gas leases on the Syncline Ranch and in producing oil from section 31. Plaintiffs concede that Shell's lessors own the surface of Section 31 and at least part of the oil produced from the property. Shell was not a trespasser in entering upon Section 31 and producing oil and gas. Shell relied on information furnished by a title company that its leases were valid. The validity of the Shell leasehold interest was insured by the title company, decrees had been entered in Actions Nos. 5362 and 5591 quieting title to the ranch in Shell's lessors, and the court in Action No. 5591 had directed a guardian acting on behalf of contingent remaindermen to execute the Shell lease. Prior to the commencement of the present controversy, there had been no dealings, representation or communications between Shell and any of the plaintiffs, and plaintiffs had not relied on any act of, or communication from Shell.” 18
Subsequent to the conveyance to Frusetta and Cornwell of the Syncline Ranch and the interests in the mineral rights in section 31 which the Grandt and Abrams partnership had because of their stock ownership, Frusetta and Cornwell leased the property for oil development as hereinbefore set forth to Henry R. Carroll, to Tillman B. Hess and to Shell.
In their complaint plaintiffs did not allege that any of these leases were obtained through bad faith of he lessees. In Shell's answer to the complaint it alleged that it obtained its leases in good faith and without any knowledge of the claims of any of the plaintiffs. During the course of the trial Shell made a motion in actions 6021, 6022 and 6094, for judgment under Code of Civil Procedure section 63.18, or, in the alternative, for an order declaring that plaintiffs had failed to produce sufficient evidence of fraud or bad faith to require refutation by Shell. The court did not grant judgment but did grant the order, and also, as stated above, the court found that plaintiffs had not proved bad faith on the part of Shell. Plaintiffs contend that the burden was on Shell to prove good faith rather than on plaintiffs to prove Shell's bad faith.
Assuming that the burden was on Shell to prove its good faith and that the court erred in granting the order declaring that plaintiffs had failed to produce sufficient evidence of bad faith to require refutation by Shell, such error was without prejudice to plaintiffs for the reason that, as stated by plaintiffs in their opening brief “[plaintiffs] herein proceeded to present to the court all of the evidence which it had acquired during the discovery proceedings relating to the manner in which the Shell Oil Company had acquired the executory interest and right to drill on Section 31.”
The evidence adduced justified the affirmative findings of the court that Shell was not a trespasser in entering upon section 31 and producing oil and gas; that it relied on information furnished by a title company that Shell's leases were valid; that decrees quieting title had been entered in actions 5362 and 5591, hereinafter discussed, quieting title in certain of the lessors; that the court in the latter action had directed a guardian of the contingent remaindermen to execute the Shell leases; and that Shell had made no representations to plaintiffs nor had plaintiffs been misled by any act or communication of Shell.
The fact that Shell through its employee Booth knew of the judgment in action 1870 and that Shell financed quiet title actions 5362 and 5691 did not constitute Shell's obtaining leases from Fresetta and Cornwell in fraud or bad faith. Frusetta and Cornwell had record title to the surface and to certain fractional mineral rights and so far as the rest of the mineral rights were concerned there was apparently no one claiming them. Shell was not a trespasser.
“The question whether or not the cross-defendants acted without fraud and in good faith was one of fact to be determined by the court from the evidence.” (Daly v. Smith (1963) 220 Cal.App.2d 592, 599, 33 Cal.Rptr. 920). No contention is made that the Shell leases are not fair nor that the one-eighth royalty therein provided is not a normal and reasonable royalty.
The Shell leases are valid leases of the fractional mineral rights owned by defendants, and are binding as between Shell and defendants. As pointed out in Dabney–Johnston Oil Corp. v. Walden, supra, 4 Cal.2d 637, 655–657, 52 P.2d 237, 246 the general rule prevailing in this country and the one followed in that case (as well as in the later case of Little v. Mountain View Dairies (1950) 35 Cal.2d 232, 217 P.2d 416), is “to the effect that a tenant in common has the right to go upon the lands and produce oil, provided he does not exclude other cotenants, but must account to cotenants for their respective percentages. A tenancy in common is characterized by a single unity, that of possession, or of the right to possession. In view of the fact that no enjoyment can be had of an estate in oil rights except through removal of the oil and other substances, it is held that it is not waste for a cotenant to go upon the land and produce oil. This rule has been announced in this state as to minerals which are nonfugacious in McCord v. Oakland Q.M. Co., 64 Cal. 134, 27 P. 863, 19 Am.Rep. 86. It is there said, 64 Cal. 134, at page 142; 27 P. 863, 865, 49 Am.Rep. 686: ‘The taking of ore from he mine is rather the use than the destruction of the estate, within the meaning of the general rule. The results of the tenant's labor and capital are in the nature of proceeds or profits, the partial exhaustion being but the incidental consequence of the use.’ This principle, applicable to minerals in general, is of special importance in regard to fugacious substances, which may be lost entirely through drilling operations on other lands if the owners do not diligently seek to reduce them to possession. A single cotenant should not be in a position to prevent beneficial utilization of the mineral estate by the other cotenants. * * * As to the ordinary tenancy in common in surface rights, it is the rule that where one of several cotenants has been in sole possession of the land and has produced crops thereon, he is entitled to retain the products of his labor, but where he receives rents from third persons for the use of the land, he must account to his cotenants for their share. [Citations.] The rule permitting nonproducing cotenants to share in oil produced by a single cotenant is justified by the difference in a cotenancy in mineral rights and such a tenancy in the surface estate. This rule has become well established, as indicated in the annotations to which we have referred. The propriety of the principle was recognized by this court in the early case of McCord v. Oakland Q.M. Co., supra, where the court said, 64 Cal. 134 at page 148, 27 P. 863, 868, 49 Am.Rep. 686: ‘But it may be conceded, for the purposes of this decision, that the relation of the tenants in common, under the circumstances disclosed, is sui generis, and their rights peculiar; that while the extraction of ore from the mine by one tenant, who does not exclude his co-tenants, is not waste, and the neglect of the latter to enter should be held an assent on their part to the exclusive occupation by the former; yet, because of the effect of the exclusive working by one may be to exhaust the mineral, and the uncertainty of the prospective value of the property may render it impossible to make a just partition of it, a court of equity should order an accounting; holding that, while it must have been contemplated by the parties that the tenant in occupation should not be held for waste, nor prohibited from proceeding with his work by the co-tenants who do not seek to enter, yet it must also have been contemplated that the tenant in occupation should not appropriate to himself the entire profits.’ ” 19
The relationship of plaintiffs to Shell is as set forth in Little v. Mountain View Dairies, supra, 35 Cal.2d 232, 235, 217 P.2d 416, 418, quoting from Davis v. Atlantic Oil Producing Co., (5 Cir., 1936) 87 F.2d 75, 77: “ ‘If a lease be executed by a cotenant, the nonconsenting cotenants may recognize the lease and receive their fractional interest in the royalty, or they may reject the lease, and receive their fractional part of the oil produced, less their proportionate part of the cost of discovery and production.’ ”
As said in Davis (the case approved in Little), the above-mentioned rule arises “because a cotenant has the right to occupy the whole joint property, and because oil is a fugitive substance which must be promptly captured to avoid loss by drainage through adjoining property, a cotenant may himself, or by lease to another, utilize oil discovered upon land, without the consent or concurrence of other cotenants.” 20 (P. 77 of 87 F.2d.)
On remand, plaintiffs must be given the option mentioned in the hereinabove quotation from Little and the court will then proceed accordingly.
8. The Mortgages:
Defendants contend that any interests of plaintiffs in the mineral estates are subject to the two mortgages hereinbefore mentioned. The first is the mortgage for $21,610.82 executed to Abrams and Brandt by COP as a part of the purchase price of its mineral interests. In action 13948 the court found that Abrams had permitted this mortgage to outlaw, although in the interlocutory judgment in said action the court ordered all the property of the Abrams and Brandt partnership to be sold. The commissioner sold and transferred said outlawed note and mortgage to Halsey who, in turn, transferred them to Frusetta and Cornwell. Defendants placed reliance on their being successors to Frusetta and Cornwell, who they claimed were “mortgagees in possession.” However, the trial court in the instant actions found that Frusetta and Cornwell were not such and that any interests of plaintiffs herein in the COP mineral interests “would necessarily be conditioned upon payment of this obligation.”
This statement by the court is based upon the well-settled rule that in an action to quiet title in California the mortgagor must pay the debt secured through it is barred by the statute of limitations. (Burns v. Hiatt, supra, 149 Cal. 617, 621, 87 P. 196.) However, as appears in Faxon v. All Persons (1913) 166 Cal. 707, 137 P. 919, L.R.A.1916B, this rule does not apply where the interests of the mortgagor are acquired by another after the debt and the lien of the mortgage have outlawed. It applies only to a mortgagor in possession at the time the statute of limitations ran against the debt. As said in Faxon concerning the claim of entry by a successor to the mortgagee whose right accrued after the mortgage had outlawed, “it appears clear to us that no such claim can properly be made upon an entry based upon proceedings for the enforcement of the lien instituted after the lien has been extinguished. The lien, together with all its incidents and appurtenances, being absolutely at an end, can no longer serve as a sufficient basis for the institution of any proceeding looking to its enforcement, or for the conclusion that one entering under any such proceeding entered ‘under color of the mortgage’ within the meaning of those words as used in Burns v. Hiatt, supra, [149 Cal. 617, 87 P. 196] * * * ” (Emphasis added; 166 Cal. at pp. 719–720, 137 P. at p. 924.) “It is however claimed that, even if defendant is not a mortgagee in possession, nevertheless, under the rule we have referred to, plaintiff should not have been allowed to obtain a judgment quieting title against the mortgage, so long as the debt to secure the payment of which it was given remains unpaid.” (Faxon v. All Persons, supra, p. 720, 137 P. p. 924) As to this contention, the court, after referring to the rule above-mentioned concerning payment of the outlawed debt, stated: “The respondent contends, and we think rightly, that the rule in question should not be extended to a case in which a liability to pay the debt does not, in morals and equity, rest upon the plaintiff or his property. Where the plaintiff is himself the debtor, the applicability of the rule is apparent. No different situation is presented where the plaintiff has bought the land before the right to foreclose the mortgage has become barred. In such case he acquired the property subject to a valid existing lien, which was, presumably, taken into account in fixing the purchase price. Such property, when he acquired it, was bound by the debt, and it would be as inequitable to relieve him of the burden without payment as it would be to thus free the original debtor. In the present case, however, the plaintiff acquired the land by purchase for a consideration after the lapse of the time within which an action to foreclose the mortgage could have been brought—after, indeed, it had been decided in this court that there was no right of foreclosure. The plaintiff was not personally liable for the debt, and was under no moral obligation to discharge it. When she bought the land, the records showed that the lien of the mortgage had become extinguished. Civ.Code, § 2911. It is difficult to see, therefore, how the land itself, so bought, was bound, legally or equitably, by the debt. There seems to be no good reason for refusing to quiet the title of an owner in the situation of the plaintiff here. To apply the rule contended for by appellant to such a case would be equivalent to holding that the owner of the property could never have his title quieted against an unpaid mortgage not satisfied of record, however long the lapse of time since the maturity of the debt, and however numerous the transfers since the expiration of the right to foreclose. To so hold would result in perpetuating clouds upon titles, where no substantial equity demands that the merchantability of real property be thus hampered.” (P. 721, 137 P. p. 925.)
Although the circumstances concerning the Hollister Bank mortgage are different than those involving the COP mortgage the legal result is the same. In purchasing the Syncline Ranch from the Ashurss in 1905, Abrams and Brandt executed to them a note in the sum of $17,500 secured by a deed of trust on the ranch. In 1906 these were renewed by a new note and deed of trust. On November 18, 1908 a reconveyance of the later deed of trust was recorded and on the same date Abrams and Brandt executed a deed of trust to Hollister Savings Bank as trustee for Mary Ashurst to secure their note for $17,500. In 1910 Abrams and Brandt conveyed the mineral interests to Ashurst. On January 6, 1911 the 1908 deed of trust was satisfied of record. The same day Abrams and Brandt mortgaged their interest in section 31 to the Hollister Bank. This mortgage, of course, did not cover the mineral interests which then belonged to Ashurst. It covered only the surface rights. Thereafter, the mortgage was foreclosed, although the property was not sold at foreclosure sale. The trial court found that from the proceeds of the sale of the Abrams and Brandt property to Halsey came the moneys to pay off this mortgage and that “the rights of the bank under the mortgage and the decree of foreclosure would pass to Frusetta and Cornwell to the extent necessary for their protection. Since, however, the title to the fractional interests in the oil rights in Section 31 purchased by Frusetta and Cornwell was clear of any claims of plaintiffs' predecessors, no interest in the mortgage or decree of foreclosure passed to Frusetta and Cornwell.” In view of this finding and of the fact that the mortgage in question did not cover the mineral interests of plaintiffs' predecessors, defendants can claim no rights therefrom. It is difficult to understand the theory upon which defendants claim that plaintiffs' interests in the mineral rights are subject to the lien of this mortgage inasmuch as it did not even purport to cover those interests.
In view of our decision, it becomes unnecessary to discuss other contentions made upon these appeals.
The trial court found and decreed the fractional interests of defendants in the mineral estates (except as to the interests of the remaindermen which it properly held cannot be determined until the termination of certain life estates). These fractions are based upon the determination that the collective interests of defendants amounted to the entire mineral estates. As we have shown, this determination is erroneous because of the interests of plaintiffs in those estates. The fractional interests therein of defendants will have to be redetermined and those of plaintiffs determined.21
The judgments are reversed and the cause remanded to the trial court to determine the exact fractional interests in the mineral estates of plaintiffs and defendants, and the situation with reference to the Shell leases.
1. Plaintiff Joseph Gerhard in addition to being a plaintiff in appeal 22281 was a defendant in appeal 22282 and appealed as such and the designation “plaintiffs” hereinafter includes him both as such plaintiff and defendant.
2. No issue was raised in these cases concerning the ownership of the above-mentioned interests.
3. Jessie Lee Irvine died October 25, 1960 and her life estate then terminated, the remainderman interests in her one-eighth of the property vested in the remaindermen defendants Lauralie Irvine, Jessie J. Irvine, Warren Irvine and Susan Irvine Bengard.
4. These plaintiffs claim through the original stock ownership of certain stockholders.
5. These plaintiffs claim through the original stock ownership of Weber.
6. These plaintiffs claim through the original stock ownership of Samuel S. Cohn.
7. These plaintiffs claim through the original stock ownership of Brandt individually.
8. Action 1870 is also hereinafter discussed.
9. Both the findings and the judgment provide that title is subject to the Shell Oil Company, Tillman B. Hess and Shell Canadian Exploration Company leases hereinafter mentioned.
10. There is a serious question whether the court in the Weber Estate, after decreeing distribution of the estate's corporate stock, had jurisdiction to find an abandonment of it by the distributees, or whether the distributees were bound by such determination. However, because of the later judgment in action 1870 we do not deem it necessary to determine that question.
11. It is clear that an owner of the fee title to the land may sever all or part of the estate in the oil and gas from the estate in the surface (Standard Oil Co. of California v. John P. Mills Organization (1935) 3 Cal.2d 128, 132, 43 P.2d 797( and further that “An estate in fee simple may be had either in corporeal or incorporeal hereditaments, and that it may also be had in minerals below the surface separate and apart from the surface right.” (19 Am.Jr., Estates, § 14, p. 473.)
12. Also, on the motion for new trial the following colloquy occurred: “Mr. Fyfe [attorney for appellant Gerhard]: In other words, Your Honor construed the deed, the conveyance from Abrams and Brandt, to Ashurst Oil, Land & Development Company as being a severance of the mineral estate in Section 31 as [sic] so far as the property described in that deed was concerned and that it constituted and created a fee simple mineral estate. The Court: “Correct.”
13. See Unger v. Mooney (1883) 63 Cal. 586, where it was held that sole occupancy for a great length of time, combined with the occupant's exclusive appropriation of all the rents without interference from the other cotenants or a demand by them for an accounting, put the cotenants on notice that the possession was adverse to them. However, in that case, different from the situation in our case, the tenant out of possession lived in the neighborhood and knew that the premises were being actively leased by the possessor. Moreover, there as no severance of surface and subsurface estates.
14. In Foss, the court assumed, without any discussion of the subject, that the decree of distribution which distributed the land in question, without any mention of the mineral rights, gave the distributes “color of title” to the mineral rights.
15. The court found that there were no debts of the corporation other than the COP purchase money mortgage to Abrams and Brandt which it found to be outlawed.
16. The judgment in action 13948 stated that the statute of limitations had run against the mortgage so that it was “outlawed.”
17. This subject is raised only in actions 6021, 6022 and 6094.
18. Shell's activities were conducted in good faith, without any fraud on plaintiffs and in the ordinary course of business.
19. It appears that plaintiffs in action 6019 (appeal 22281) are not attacking the Shell leases.
20. “[A] part owner who has not joined in a lease may not have the lease annulled merely because his interest was not excepted from the lease, and is entitled only to recognition of his interest.” (80 C.J.S. Tenancy in Common § 113, p. 521: see also 20 Am.Jur.2d, § 100, pp. 200–201.)
21. Defendants contend that there is a conflict in the claims of plaintiffs in action 6022 (appeal 22283) with those of plaintiffs in action 6021 (appeal 22282) in that certain interests in the first mentioned action are based upon shares of corporate stock issued to Samuel S. Cohn which it is claimed were sold be Weber, the predecessor in interest of plaintiffs in action 6021. This matter as well as the fractional interests of all plaintiffs will have to be determined by the trial court.
BRAY, Justice.* FN* Retired Presiding Justice of the District Court of Appeal of the State of California, First Appellate District, Division One, sitting pro tempore under assignment by the Chairman of the Judicial Council.
SULLIVAN, P.J., and MOLINARI, J., concur.