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Maier v. Continental Oil Co.

February 21, 1941


Appeal from the District Court of the United States for the Southern District of Indiana, Evansville Division; Michael L. Igoe, Judge.

Author: Kerner

Before MAJOR and KERNER, Circuit Judges, and BRIGGLE, District Judge.

KERNER, Circuit Judge.

Plaintiff-appellee brought an action against the defendant-appellant seeking cancellation of an oil and gas lease. Defendant-appellant filed a counterclaim in which it sought a declaratory judgment upholding the validity of the lease. The case was tried by the court without a jury. A decree was rendered cancelling the lease. To reverse the decree defendant-appellant appeals.

Appellee was the owner of more than 2,500 acres of land in Gibson County, Indiana, and on July 12, 1937, agreed with one J. H. McClurkin to give him an oil and gas lease upon the same. McClurkin at that time prepared a lease, in duplicate, without descriptions and left one copy with appellee. July 27, 1937, at the request of McClurkin, she went before a notary public and executed the other copy of the lease the body of which at that time contained no descriptions but which had a paper containing various descriptions of real estate clipped or attached in some fashion to the back of it. The list of descriptions attached to the lease was the same as a list delivered a few days earlier by McClurkin to the appellee with instructions to attach to her copy of the lease. Appellee left the executed lease with the notary for delivery to McClurkin. September 28, 1937, McClurkin wrote the appellee, as follows:

"At the suggestion of the Abstracter corrections were made in descriptions in lease you executed to us so as to eliminate mention of Forest reservations, and we ask that you indly attach the enclosed corrected description on your copy of the lease, as the enclosed description is the one that will go on record.

"We wish to thank you for your spirit of cooperation and we assure you we shall do everything in our power to discover any oil pools in that area.

"With kindest regards from both Mrs. McClurkin and myself, I beg to be

"Most sincerey yours,

"J. H. McClurkin."

Enclosed with his letter was a purported, corrected copy of descriptions exactly the same as a copy that was then placed in the body of the executed lease at the instance of McClurkin, in lieu of the list attached to the back of the lease. Appellee received this letter on September 30. September 29 McClurkin, after removing the list of descriptions attached to the back of the lease and after having caused the corrected list of descriptions to be attached to the face of the executed lease, filed the same for record.

In plaintiff's Exhibit 2 (the list clipped to back of executed lease) there are found at least fifteen separate descriptions, such as: "Pt NE 1/4 T 3 S 13 W. 120 A.; Pt. NW 1/4 21 T3 13 W A 1 A; Pt. SE 1/4 20 T. 3 S 13 W 120A." In the corrected list of descriptions, attached to the executed document (referred to throughout this proceeding as plaintiff's Exhibit 3) there are at least five similar descriptions. Examples are: "Pt. of Sec. 1 T3 SR 14 W, containing 82.32 acres; Pt. of fract. Sec. 36 T. 2 SR 14 W, containing 49.40 acres; Pt. of W. 1/2 of N.W. 1/4 Sec 4 T 3 SR 13W, containing 1 acres."

All descriptions had been obtained and prepared by McClurkin pursuant to his arrangement with the appellee on July 12, 1937, when the forms of lease, except for descriptions, had been filled out. At the time of the execution of the lease there had been no oil or gas development in the vicinity of the lands in question, but thereafter McClurkin entered into negotiations with the appellant and by a contract, dated August 24, 1937, granted appellant the privilege of conducting certain surveys upon the lands in question. September 25, 1937, McClurkin executed an assignment of the lease to appellant. At the time of the assignment, appellant knew nothing of any changes or alterations of descriptions in the lease. This assignment was filed for record December 27, 1938.

The lease provided, among other things that if no well be commenced on the lands by July 12, 1938, the lease should terminate unless lessee should on or before that day pay to the lessor's credit in the Peoples Bank and Trust Company at Mt. Vernon, Indiana, the sum of $256.90 which should operate as a rental and cover the privilege of deferring commencement of a well for twelve months from said date. June 6, 1938, pursuant to the lease, appellant deposited to the credit of the appellee with said bank the sum of $256.90 which the bank credited to her account, and mailed a duplicate deposit slip to appellee showing that that amount had been deposited by appellant to appellee's credit and the purpose for which it was deposited. Appellee denied receipt of this, but she did, however, each month receive from the bank a statement of her account, which showed all deposits to her account. December 22, 1938, appellee, asserting that she for the first time gained personal knowledge of this payment, instructed the bank to return same to the appellant and the bank, ...

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