Kelley v. Russell

This is an appeal from a judgment for the plaintiffs in an action for specific performance.

The respondent Lillian Kelley was formerly the owner in

In 1923, the respondent Kelley also conveyed about 200 acres of adjoining land to the appellant Russell and one Babbitt and took back a lease thereon, the terms of which were practically identical with the terms of the lease above described, and this lease and option was also to expire on July 30, 1939. The appellant Russell acquired title to and became the owner of both of the tracts above mentioned, subject to these leases, and about the same time he purchased other land in the vicinity, acquiring in all about 9,000 acres. He was in the cattle business and purchased the land for grazing purposes.

The respondent Chanslor-Canfield Midway Oil Company acquired by assignment from Miss Kelley her interest in a

In May, 1939, and prior to the expiration of the leases and options, the respondent's Kelley and Chanslor-Canfield Midway Oil Company attempted to exercise their options to purchase six forty-acre tracts according to the legal subdivision thereof, being the tracts on which oil had been developed with certain forty-acre tracts adjacent thereto. At their request, an abstract company wrote to the appellant Russell advising him that these parties were exercising their optional rights and that the agreed purchase price would be paid to him upon his advising them that he would execute the necessary deeds. Russell replied to the effect that he had had no dealing with the abstract company and that he had thus far received nothing from the real parties in interest indicating their desires or intentions.

On June 20, 1939, respondents Kelley and Chanslor-Canfield Midway Oil Company wrote to Russell notifying him that they had elected to and did thereby exercise the options to purchase these six described forty-acre tracts, as provided for in the leases and by virtue of the discovery of oil in paying quantities upon certain described forty-acre tracts, and also informing him that they had been advised by the defendant Pacific Indemnity Company that it was entitled to receive the money to be paid for the land, and that they had deposited the purchase price of the land, amounting to $5,213.80, with the Bakersfield Abstract Company to be paid to the party entitled thereto and offering to pay this amount to Russell or to the Pacific Indemnity Company, as might be directed by them, upon the conveyance of the fee title. With this letter were sent forms of conveyances, with the request that these be executed and returned to the abstract company with instructions regarding the delivery of the same and the payment of the purchase price therefor. A copy of this letter was sent to the Pacific Indemnity Company. It is admitted that Russell had previously assigned his interest in these leases to the Pacific Indemnity Company for security purposes.

On June 28, 1939, Russell was again advised by an attorney for the respondents that the money for the purchase of these lands was in the hands of the Bakersfield Abstract Company but no offer to convey or expression of willingness to convey the property in question or any part thereof or upon any terms whatever were communicated to the respondents by the appellant. Being unable to get such a conveyance the respondents filed this action on July 26, 1939, and before the leases and options had expired. The complaint alleged, among other things, that written notice of a desire to exercise these options had been given on June 20, 1939, with a request for a conveyance of that part of the property; that the defendants had failed and refused to convey said lands or any part thereof, although no objection had been made to the manner of the exercise of the option or to the mode or amount

During the trial the respondents offered to accept deeds to the property in question, excepting therefrom any ten-acre parcels upon which there had been wells, springs or other sources of water supply, provided these were so chosen as not to include any property upon which there was a producing oil well, and it is conceded that a similar offer was made by the respondents before the action was filed. The court found in all respects in favor of the respondents and entered the judgment from which this appeal was taken. In this connection it may be observed that while the court found that there was a water well upon the property in question at the time the leases were executed and that this water well was later abandoned, the judgment gave the appellant a license and easement to use any water on the premises at the time of the trial instead of excepting any ten-acre parcel from the conveyances ordered to be made to the respondents. This portion of the judgment was based, in part, upon findings to the effect that the appellant had refused, and still refuses, to pick out a ten-acre parcel upon which there was or had been a water supply without including therein any property upon which there was a producing oil well. It should be further observed that in his answer and ever since, the appellant claims that five ten-acre tracts along the southern boundary of the property here in question are excepted under the terms of these options because they had water wells or other sources of water supply located thereon at the time the leases were executed. It so happens that nine of the sixteen oil wells are located on these five ten-acre tracts.

While the leases themselves indicate rather clearly an intention to give the lessees all of the oil and mineral rights and to preserve the water rights for the use of the lessor, the appellant now appears to be interested only in obtaining the oil rights. His two main contentions are that he is entitled, in selecting the land that is to be excepted from any conveyance under the terms of the lease, to take any square ten-acre parcel which constitutes one-fourth of a legal subdivision

It is first contended that the options were not properly exercised for the reasons that only one notice of election to exercise the options was served although there were two leases and options; that Miss Kelley had assigned a portion of her option rights to other parties who did not join in the notice of election; that the notice of election, as given, covered certain forty-acre tracts but did not exclude the five ten-acre parcels which the appellant claims he was not bound to convey and therefore was not in accordance with the terms of the options; that the deeds which the respondents sent with the notice of election did not contain certain reservations provided for in the leases and options; and that no sufficient tender was made.

It may be first observed that with the exception of the point that the notice of the exercise of these options applies to more land than the lessees were entitled to purchase since it did not exclude any ten-acre parcel on which there had been a water supply, the objections to the exercise of the option now raised were all waived by the appellant since they were, not included in such objections as were raised in replying to the notices first given by the abstract company and later given by the respondents on June 20, 1939. While there were two leases and options the interested parties were the same and no reason appears why the two parties entitled to exercise the options could not join in one notice. The appellant was in no way prejudiced and no reason appears why he could not have complied insofar as he was bound, without affecting his right to claim an exception as to a part of the property. The mere fact that the two optionees joined in one notice is immaterial. There was good reason for the respondents to attempt to complete the transfer through an escrow with an abstract company since the Pacific Indemnity Company was claiming the money which was to be paid to the appellant. Several of the objections to the form of the offer and to the tender are eliminated by the fact that the appellant did not recognize the escrow with the abstract company and a new notice of election was directly given by the respondents. The fact that the deeds which accompanied the original notice were deficient in form is

Appellant’s next point is that these option contracts cannot be specifically enforced because they were uncertain and lacked mutuality. This is based on one of the findings of the court to the effect that there is no ten-acre parcel containing a water well, spring or other water supply which is defined or can be identified by the terms of the leases, and that the appellant has failed and refused properly to designate or specify any such ten-acre parcel which he claims the right to except from the conveyance. From this it is argued that the option provisions are so uncertain that they cannot be specifically enforced. Any uncertainty which exists arises neither from the terms of the options nor from the court’s finding but from the refusal of the appellant to designate any such parcels upon which a water supply existed without including land upon which the oil wells were located. The mere fact that the appellant had the right under the options to claim and exclude from the forty-acre tracts, which the respondents were obliged to offer to purchase, any ten-acre parcels upon which a water supply had existed at the time in question, does not make these option contracts so uncertain as to be unenforceable. (Lange v. Waters, 156 Cal. 142 [ 103 Pac. 889 , 19 Ann. Cas. 1207] ; Stamm v. Colvin, 94 Cal. App. 180 [ 270 Pac. 744 ] ; Janssen v. Davis, 219 Cal. 783 [ 29 Pac. (2d) 196 ].) If the appellant desired to exercise the right given him to exclude any ten-acre tracts from the conveyances he was required to make, this exclusion depended upon facts which were readily determinable and the entire matter was one which was well within the powers of a court of equity. (Relovich v. Stuart, 211 Cal. 422 [ 295 Pac. 819 ] ; Fleishman v. Woods, 135 Cal. 256 [ 67 Pac. 276 ].)

The appellant has contended at the trial and here that the options were not properly exercised since the notice of election demanded the conveyance of more land than that to which the respondents were entitled and in this connection has contended that five square ten-acre tracts along the southern boundary of the property here in question were parcels each of which had upon it a well, spring or other water supply at the time the leases were executed. Our attention is called to no evidence whatever of any such water supply on either the westernmost or easternmost of these ten-acre parcels. It is contended, however, that Poso Creek, at the time the leases were executed, flowed over the south half of the middle one of these ten-acre parcels and in entering and leaving that parcel also flowed over the corner of the two adjoining ten-acre parcels. The court found, however, that while Poso Creek now flows in this manner over a portion of these three ten-acre parcels, that it did not so flow at the time these leases were executed. There is evidence that the course or channel of this creek has moved north through the years, caused by the washing down of rocks and debris from the surrounding hills by heavy storms, thus blocking the old channel and causing the waters of the creek to pass more to the north. "While there is some conflict in the evidence, there is evidence justifying the inference that this creek did not flow over any of the lands here in question at the time these leases were executed; that the creek was then a considerable distance south of the southerly boundary of these lands; and that the waters of the creek did not flow over any of this land prior to about 1931. The evidence sufficiently supports the court’s finding in this regard. The court also found that the waters of this creek were not intended by the parties as such a source of water supply as was intended to come within the provision for the exclusion of any ten-acre parcel “upon which is located any water well, spring or other water supply now used.” It seems rather incredible that it should have

Technically, but not equitably, the most serious question presented is whether the provision of the judgment giving the appellant an easement to use all of the waters of Poso Creek instead of allowing him to retain the legal title to a particular ten-acre parcel can be sustained. The court found in accordance with the evidence that upon one of the ten-acre parcels as now outlined by the appellant there was, at the time the leases were executed, a well which had been used for watering cattle, and that this well had been abandoned many years before the trial. While that is true, the exception provision of the options relates to land upon which a water supply existed at that time. It happens that the ten-acre parcel, as outlined by the appellant, upon which this water well then existed was one of the three ten-acre parcels, as thus outlined, over which Poso Creek now flows and in which the appellant was given an easement for the use of all of the water. While this easement gives the appellant more than he is entitled to, insofar as the use of the water is concerned, this portion of the judgment does not strictly follow the provisions of the options. On the other hand the appellant, although he had the right to have excepted from any conveyance and to reserve the fee title to a ten-acre parcel upon which there had been a water well, he was not entitled under the court’s interpretation of the contract to make an arbitrary selection of a square ten acres constituting a one-fourth part of the forty-acre tract according to legal subdivision thereof. It appears that it was perfectly possible to select a ten-acre parcel upon which this old water well existed without interfering with any of respondents’ oil wells. As a matter of fact, it appears that it would be possible to select a ten-acre parcel including both this old water well and all of Poso Creek which now flows over the lands in question, without interfering with any of these oil wells. This the appellant did not desire to do and refused to do. Moreover, no point is here raised attacking the judgment for this particular reason and to the end of obtain

The only other point requiring consideration is that the court erred in refusing to admit into evidence two exhibits consisting of letters. The first of these was from a brother of Miss Kelley, who had no interest in the land and who had since died, and the statements in the letter were not only hearsay but were merely cumulative to the other evidence in the same connection. The second exhibit was entirely immaterial and no error in either connection appears.

For the reasons given the judgment is affirmed.

Marks, J., and Griffin, J., concurred.

Appellant’s petition for a hearing by the Supreme Court was denied May 14, 1942.