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DABNEY v. EDWARDS.*
On January 25, 1929, Edward C. Doak was a licensed real estate salesman acting under Walter E. Dabney, the respondent, a licensed real estate broker. On that date he was authorized orally by appellant to sell for appellant certain oil leases, all of which were for a term of years, and two of which provided, in addition to the term specified, that the leases were to continue “so long thereafter as gas or oil or either of said substances is produced therefrom in quantities sufficient to pay to pump, or otherwise to secure and save * * *.” The sale of the leases was consummated, appellant contending in the court below that Doak had agreed to accept 2 1/212 per cent. commission, which was paid. Doak testified and the court found upon sufficient evidence that the agreement called for a commission of 5 per cent., one-half of which was to be paid as installments were paid on the purchase price of the leases, and the other one-half on the happening of a contingency which did occur prior to the bringing of the lawsuit. Respondent admitted the receipt of one-half of the commission, and proved that the contingency upon which the payment of the other one-half depended had occurred, and demanded payment of the additional 2 1/212 per cent. for which he obtained the judgment, from which this appeal is taken. There is also an appeal from an order denying motion for new trial.
Appellant's primary contention is that the agreement to employ respondent was of the kind required to be in writing, and that, since it was oral, respondent cannot recover. The question presented, therefore, is whether an agreement employing and authorizing a real estate broker to sell an oil lease is within the statute of frauds; or more specifically, does such an agreement contemplate the purchase or sale of “real estate” as the term is used in subdivision 5, § 1624, of the Civil Code?
Real estate at common law and in its generally accepted meaning is synonymous with real property. Estates for years at common law were classified as chattels real and regarded as personal property. Except in those cases where our courts have construed some particular statute, which by its own terms so defined real estate as to include an estate for years, a claim to an estate in or a right to possession of real property, the common law definition has been definitely maintained and indorsed by the courts of this state. 10 Cal. Jur. 601; Jeffers v. Easton, Eldridge & Co., 113 Cal. 345, 45 P. 680; German-American Savings Bank v. Gollmer, 155 Cal. 683, 686, 687, 102 P. 932, 24 L. R. A. (N. S.) 1066; County of Ventura v. Barry, 207 Cal. 189, 277 P. 333; Summerville v. Stockton Milling Co., 142 Cal. 529, 76 P. 243; Potts Drug Co. v. Benedict, 156 Cal. 322, 104 P. 432, 25 L. R. A. (N. S.) 609; Barr Lumber Co. v. Perkins, 214 Cal. 531, 6 P.(2d) 948.
A perusal of the foregoing cases discloses the persistence with which our courts have maintained that “the common law upon the subject has not been changed by our statutes. * * * [And that] there is a marked difference between things real, and an interest or estate in things real.” Jeffers v. Easton, Eldridge & Co., supra, 113 Cal. 345, at page 353, 45 P. 680, 681. This position is further demonstrated by a comparison of the cases of Pike v. Psihogios, 68 Cal. App. 145, 228 P. 722, 723, and Nittler v. Continental Casualty Co., 94 Cal. App. 498, 271 P. 555, 558, 272 P. 309. In both cases hearings were denied by the Supreme Court. Both cases involved the construction of section 2 of “An act to define real estate brokers and salesmen * * *” approved May 17, 1919 (see Deering's Gen. Laws, 1931 Ed., Act 112). In the Pike Case the court said: “It will be observed that section 2 of said act, in its enumeration of the acts which only a duly licensed real estate broker may perform, does not specify either the sale of personal property, or the sale of a lease to real property. It was therefore not necessary for Katugios to obtain a license under said section 2 to perform the services rendered by him to the plaintiff, and which form the basis of this counterclaim.” In 1925, section 2 of the act in question was amended. Stats. 1925, p. 600. Thereafter the court in the Nittler Case ruled exactly opposite to the rule in the Pike Case, the court saying: “As a result of the Pike decision, the Legislature, at its next session amended this section of the act so as to expressly include within the definition of a real estate broker one who negotiated for or sold or exchanged a lease in real property.”
While the exact question presented here has never been decided in this state with reference to oil leases, it has been squarely decided with reference to ordinary leases. Guy v. Brennen, 60 Cal. App. 452, 213 P. 265. The legal doctrine announced by Guy v. Brennen, supra, is that the words “real estate” as used in subdivision 5, § 1624, Civil Code (subdivision 6 at the time of that case), mean real property and not personal property and the corollary which follows, to wit: That a contract of employment made with a real estate broker “to sell a lease for years” is not within the statute of frauds and need not be in writing. This doctrine is apparently followed with approval in Layne v. Malmgren, 99 Cal. App. 742, 279 P. 670; County of Ventura v. Barry, 207 Cal. 189, 277 P. 333; Spalding v. Bennett, 93 Cal. App. 577, 269 P. 948; Lind v. Huene, 205 Cal. 569, 271 P. 1087; Edgecomb v. Callahan, 132 Cal. App. 248, 22 P.(2d) 521. Other authorities are to the same effect: 17 Cal. Law Review 187; Nelson Law of Real Estate Brokerage, page 25; Myers v. Arthur, 135 Wash. 583, 238 P. 899; Lowenmeyer v. National Lumber Co., 71 Ind. App. 458, 125 N. E. 67; Barr v. Campbell Mill Co., 154 Wash. 83, 280 P. 929, 284 P. 1119.
Appellant vigorously assails this doctrine, contending that there is a substantial distinction between an oil lease and an ordinary lease (Graciosa Oil Co. v. County of Santa Barbara, 155 Cal. 140, 99 P. 483, 486, 20 L. R. A. (N. S.) 211); and that Guy v. Brennen, supra, has in effect been overruled in the case of Wilson v. Earp, 91 Cal. App. 538, 261 P. 112.
In the Graciosa Case the court says, 155 Cal. 140, at pages 144, 145, 99 P. 483, 486, 20 L. R. A. (N. S.) 211, speaking with reference to the difference between an oil lease and an ordinary lease: “There are material differences between such estates for years and the right and privilege to bore for and extract oil held by the plaintiff under its oil lease. * * * The plaintiff, it is true, does not own an absolute present title to the oil strata in place. Such an absolute estate in an underlying stratum may be created and the estate of the owner of the overlying land and of the owner of the subterranean stratum will be as distinct and separate as is the ownership of respective owners of two adjoining tracts of land. * * * The right vested in plaintiff is an estate for years, so far as necessary for the purpose of taking oil therefrom, and it carries with it the right to extract the oil and remove it from the premises. This right constitutes, for the term prescribed, a servitude on the land and a chattel real at common law. Civ. Code, § 801, subd. 5; section 802, subd. 6; Harvey C. & C. Co. v. Dillon, 59 W. Va. 605, 53 S. E. 928-937 [6 L. R. A. (N. S.) 628], and cases there cited; Thornton on Oil Leases, § 51. * * * The right of the lessee under this contract is more than that of the ordinary lessee. It is of a different character and for a different purpose. He has no right at all to the usufruct of the soil. His right extends to the extraction of a certain part of the substance of the land itself, to its permanent separation and removal and its conversion to his own use. The whole object of the contract is to effect, if not technically a sale and conveyance of a substantial and specific part of the land, at least a disposition and transfer thereof to another.”
In the Graciosa Case, as is suggested by the foregoing excerpt, the court was considering whether an oil lease could be assessed and taxed severally and separately from the real estate, the court holding that it could be so separately taxed, saying, 155 Cal. 140, at page 145, 99 P. 483, 486, 20 L. R. A. (N. S.) 211: “It can be easily seen that the reasons for the rule applicable to ordinary leases for the use only that the entire estate should be assessed to the lessor are entirely lacking here, and that it would be a more just and reasonable adjustment of the burden of taxation of such oil leases to assess each party separately with the value of his right or estate in the land. There is no statute forbidding it. On the contrary, we think the statute at least permits it, if it does not require it.”
In the Graciosa Case, the court nowhere says that such a lease is real property, but on the contrary says: “This right constitutes, for the term prescribed, a servitude on the land and a chattel real at common law.” (Italics ours.)
It must be apparent, therefore, that even though our courts have recognized that there are substantial differences between an oil lease and an ordinary lease, that such recognition has not, by any decisions of the courts of this state, made an oil lease real property in the generic common-law sense of that phrase. Illinois has announced a contrary doctrine (Bruner v. Hicks, 230 Ill. 536, 82 N. E. 888, 120 Am. St. Rep. 332), but our courts have held uniformly and unequivocally that the interest created by an oil and gas lease is a term for years, and as such it is personalty. Chandler v. Hart, 161 Cal. 405, 119 P. 516, Ann. Cas. 1913B, 1094; Barr Lumber Co. v. Perkins, 214 Cal. 531, 6 P.(2d) 948; Moore v. Heron, 108 Cal. App. 705, 292 P. 136.
Appellant criticizes the soundness of the rule announced by Guy v. Brennen, supra, because the court in its opinion in that case failed to take into consideration, or at least in its opinion failed to refer to subdivision 3, § 658, or subdivision 5, § 801, Civil Code, adding further that section 773 of the Civil Code suggests a general distinction between “chattel” and a “chattel real.”
No specific mention is made in the Brennen Case of these sections, but in Jeffers v. Easton, Eldridge & Co., 113 Cal. 345, 45 P. 680, 681, the court makes clear that by section 765 of the Civil Code, California follows the common-law distinction between freehold estates and estates for years, and says: “The same distinction is to be found in section 14, and in sections 657-663 of the same Code.” And further, that the right of taking minerals mentioned in section 801, subd. 5, Civil Code, is not an incorporeal hereditament which constitutes the subject of the oil lease, but is an easement attached to other land as an easement appurtenant thereto. In other words, section 801 has to do with easements over a servient tenement appurtenant to a dominant tenement. There is no such question in this case.
The fact that section 773 of the Civil Code provides that “an estate for life may be created in a term of years” can have no significance, for the reason as stated in the Jeffers Case, 113 Cal. 345, pages 352, 353, 45 P. 680, “A term for years is only personal property,–a chattel real. ‘An estate for life, even if it be per autre vie, is a freehold; but an estate for a thousand years is only a chattel, and reckoned part of the personal estate.’ 2 Bl. Comm., p. 143. See, also, pages 385-387. ‘All leases for years are held by law to be of less value, perhaps it would be more proper to say of less dignity, than estates for life; estates for life being freeholds, and for years but chattels, and regarded as part of the personal estate, and cast upon the executor.’ * * * The common law upon the subject has not been changed by our statutes. The provision of section 1113 of the Civil Code that only certain enumerated covenants shall be implied in transfers of property is expressly limited to a conveyance by which ‘an estate of inheritance or fee simple is to be passed’; and by section 765 the common-law distinction between freehold estates and estates for years is followed, and it is declared that ‘estates for years are chattels real.’ The same distinction is to be found in section 14, and in sections 657-663 of the same Code. There is a marked difference between things real, and an interest or estate in things real. ‘The nature of the thing itself, therefore, does not determine the character of any particular estate that may exist in it, whether personal or real, but the extent and duration of the estate.’ 2 Cooley Bl., p. 15, note 1.” In short, at common law an estate for life, even though imposed upon an estate for years, was regarded as a freehold and as real property. But an estate for years, even for “a thousand years is only a chattel, and reckoned part of the personal estate” (Jeffers v. Easton, Eldridge & Co., supra), and this common-law distinction has been maintained in this state.
The case of Wilson v. Earp, supra, in so far as it differs with the principles herein announced, cannot be followed.
Appellant urges further that at the time the oral contract in question was made, he did not know that Doak, the salesman, was working for respondent Dabney. At the time of the trial, counsel for the parties stipulated: “Mr. Doak in January, 1929, was a licensed real estate salesman under Walter Dabney, the plaintiff, who was a duly licensed broker under the Real Estate Act of that time.” The foregoing stipulation amply supports the finding of the court that Doak was in fact the agent of respondent Dabney.
Appellant further urges that, since he did not know that Dabney was the principal of Doak, Dabney should not be permitted to recover the commission involved as an undisclosed principal. The right of an undisclosed principal to recover, however, is too well established to be open to question. Satisfaction Title, etc., Co. v. York, 54 Colo. 566, 131 P. 444.
The judgment is affirmed; the appeal from the order denying motion for new trial is dismissed.
ROTH, Justice pro tem.
We concur: CONREY, P. J.; YORK, J.
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Docket No: Civ. 8866.
Decided: April 03, 1935
Court: District Court of Appeal, Second District, Division 1, California.
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