Keans, Springmann & Stipek, Inc. v. Alphonzo E. Bell Corp.

The complaint is titled, “Complaint for Specific Performance of Contract and to Enforce a Trust and Accounting and, in the Alternative, for Damages and for Other Relief. ’ ’ Plaintiff sought a decree as follows: declaring that defendant holds in trust for plaintiff % of 1 per cent of all oil and gas produced from certain land under a leasehold interest of defendant; compelling defendant to perform a certain agreement, set forth in the complaint, by conveying to plaintiff an overriding royalty interest; requiring defendant to account for receipts from said royalty interest; or, in the alternative, for damages. Judgment was for defendant. Plaintiff appeals.

Plaintiff corporation, which is licensed as a real estate broker and as an oil and gas broker, is in the business of obtaining oil leases for oil companies. Defendant corporation is in the oil production business.

On October 13, 1947, Rodman Cross, an independent consulting geologist, and defendant entered into a written agreement whereby defendant employed Cross for six months to render services of a geologic nature for defendant with respect to land designated by defendant—it being understood that Cross would make available for defendant 50 per cent of his time, and that Cross would be permitted to devote his other time in behalf of himself or others in developing areas of potential oil land. On March 15, 1949, defendant and Cross agreed to modify said agreement as to the matter of compensation.

In June, 1948, the Humble Oil Company employed plaintiff to determine what lands in the Cuyama Valley were not leased for oil production and to acquire oil leases thereon. Thereupon, pursuant to that employment, Ray Stipek, vice president of plaintiff, and several employees of plaintiff, made an investigation of that valley for approximately three months. During that time Stipek and the employees investigated, and negotiated for the lease of, the Johnston property which was about 10 miles southeast of the discovery well and in an area later known as the South Cuyama Field. The Johnston property consisted of two parcels—in one parcel there were about 325 acres, and in the other about 160 acres. In November, 1948, Mr. Johnston indicated to plaintiff that he would be willing to lease his land to the Humble Oil Company for $25 an acre a year; but Stipek refused the offer because, at that time, the oil company was not interested in the property.

On March 18, 1949, Cross went to the office of plaintiff and told Stipek that he (Cross) was interested in having plaintiff examine lands, in three designated sections of the area that later became the South Cuyama Field, for the purpose of determining the availability of such lands -for oil leases. Stipek replied that plaintiff was available for that assignment, and that plaintiff had done work in that area. Then Stipek brought out a map and some of plaintiff’s records covering that area. He told Cross that substantial portions of those lands were under lease to Richfield Oil Company, but it appeared that the Johnston land was open. Cross inquired as to the basis upon which plaintiff would undertake the work, and he (Cross) suggested that the work be done upon the same basis that plaintiff was then doing work in the Santa Cruz area, in which area Cross was interested. Stipek replied that plaintiff would do the work for its out-of-pocket expenses, which covered $25 a day, plus travelling and living expenses and 10 per cent interest in any benefits accruing to Cross or his client. Cross told Stipek (on Friday, March 18) to go to Cuyama Valley and see if he could get a three-year lease on the Johnston land for $10 an acre a year, and then to check plaintiff’s records as to the availability of other lands. Cross said that he would be in

After that Friday and before the following Monday, Stipek checked plaintiff’s records regarding the availability of other lands, and on Monday he telephoned Cross at Santa Maria and told him that the only lands available were the Johnston lands. In that telephone conversation, Cross told Stipek to proceed with the employment. The next day Stipek went from Los Angeles to the Johnston land, and in the evening of that day or the morning of the following day he told Mr. and Mrs. Johnston that plaintiff had a client who was interested in leasing the Johnston land for three years at $10 an acre a year and one-eighth royalty. Mr. Johnston said that the offer was of no interest to him, because he had a better offer from a Bakersfield concern. Mr. Johnston did not state the name of the concern but said that its offer was $25 an acre and one-eighth royalty. He also said that the offer was open for his acceptance until the end of March; that, in order for plaintiff to obtain a lease from him, plaintiff would have to meet those terms; he expressed confidence in plaintiff. Stipek said that he would develop the matter further with plaintiff’s client and get in touch with Mr. Johnston later.

Stipek returned to Los Angeles, and on March 24 he telephoned Cross (at Santa Maria) and said that he had contacted Mr. Johnston and that Mr. Johnston had a pending offer from a Bakersfield concern for a lease for $25 an acre and that the offer was open for acceptance until the end of March; and that he (Stipek) believed that the term was for three years and that the royalty was one-eighth. According to the testimony of Stipek, Cross told Stipek to await

About March 28, Cross telephoned Mr. Bell, president of defendant corporation, and “went into the matter of the Johnston property” for the defendant, and told him that the property was available for $25 an acre. Then (on March 28 or 29) Cross went to the office of Bell and they discussed the Johnston property. He told Bell that Stipek had said that the Johnstons had an offer from a Bakersfield concern for $25 an acre and one-eighth royalty. Cross also told Bell that an oil well (later known as Homan well) was about to be drilled. Bell told Cross that he was willing to pay $25 an acre for the property. Cross urged Bell to have Stipek approach the Johnstons for a lease on the property. Within a day or two after that conversation, Bell told Cross to tell plaintiff to contact Johnston and try to obtain a lease for $25 an acre and one-eighth royalty. The Homan well, which was about 1% miles from the Johnston land, was spudded in on April 2.

On Friday, April 8, Cross went to the office of plaintiff and asked Stipek and Keans (an officer of plaintiff) if plaintiff would be available to attempt again to get a lease on the Johnston land. Cross said that the Bell Corporation (defendant) was interested in getting a lease on the property for $25 an acre a year and one-eighth royalty, and that the lease was to be for defendant. He asked Stipek as to the basis upon which plaintiff would perform the work. Stipek replied that he thought it should be similar to the terms under which plaintiff had done previous work for defendant in the Santa Tnez Valley, which would be out-of-pocket expenses including $25 a day and travelling and living costs and one per cent overriding royalty. According to the testimony of Stipek, Cross said that defendant would object to paying plaintiff more than % of 1 per cent overriding royalty; Stipek then suggested % of 1 per cent overriding royalty, and Cross assented thereto but stated that he wanted to confirm it with Bell. Then the representatives of plaintiff went out of the room, and Cross telephoned Bell and told him that plaintiff would expect a fee of 1 per cent overriding royalty plus $25 a day. After said telephone call, Cross told Stipek that the arrangement was agreeable with Bell.

On the morning of April 9, 1949, Stipek went to the John

The following day (April 10) Cross telephoned Bell and reported the information which he had obtained from Stipek in said telephone conversation. Cross told Bell, at that time, that he thought the Johnston property should be obtained if possible, and that he (Cross) should see whether Stansbury, Inc., would assign its lease to defendant corporation.

After that conversation Cross went to Bell’s office, and Bell suggested that Cross go to Stansbury, Inc., in Bakersfield and see if a deal could be made with it. On the following morning (April 11), Cross went to the office of Stansbury, Inc., in Bakersfield and asked Bert and Curly Stansbury if they were willing to make a deal on the Johnston property. They replied that they were willing to make a deal if the terms were correct. Curly then left the office. After further negotiations at that time, Bert said that it was agreeable with him to assign the lease on the parcel of 325 acres for $50 an acre and one-sixth royalty. Cross telephoned Bell from the Stansbury office and reported the conversation which he had with Bert Stansbury, and Bell replied that the terms were satisfactory with him. Cross told Bell that he should have his attorney prepare an assignment immediately. Cross then told Bert that Bell had approved the deal. On April 12, defendant’s attorney prepared an assignment of the lease and, after talking with the attorney for Stansbury, Inc., mailed the assignment to Stansbury, Inc. That proposed assignment recited a consideration of $16,250 and a royalty of 4-1/6 per cent. On April 18, defendant’s attorney talked with the attorney for Stansbury, Inc., and on April 19 defendant’s attorney redrafted the assignment and sent copies of it to Stansbury’s Inc.

On May 4, 1949, the Homan well produced oil. On May 6, Cross, Bell, and defendant’s attorney went to Bakersfield and met the Stansburys. At that time the defendant and Stansbury, Inc., entered into an agreement whereby Stansbury, Inc., assigned a part of the Johnston lease, namely, 245 acres to defendant corporation for $121,875 and a royalty of 12% per cent. (This was a part of the parcel of 325 acres previously involved in their negotiations.) The agreement also provided that defendant would drill a well within 90 days. Defendant’s attorney prepared the agreement in the office of the Stansburys. On said day the assignment was signed by the Stansburys, Bell wrote a cheek for $121,875, and “the deal was closed.”

On June 14, 1949, the defendant and the Stansburys entered into negotiations relative to an assignment of the remainder of the Johnston lease to defendant. (The remainder covered 240 acres—being the remaining 80 acres of the first parcel and the 160 acres in the second parcel.) On June 27, said remainder of the lease was assigned to defendant by the Stansburys for $100,000 and a royalty of 17% per cent.

After April 9 (when Stipek told Cross that the Johnston land had been leased), and during the time defendant was obtaining the assignments from Stansburys, Cross and Stipek had various conversations regarding other transactions, such as the Santa Cruz matter and the Temblor leases, but nothing was said respecting the Johnston land transaction. About April 29, Cross asked Mr. Keans, an officer of plaintiff, to submit bills for the employments on March 18 and April 8. On April 29, plaintiff sent a bill to Cross for services from

After the Stansburys had information that cores from the Homan well showed good oil sands, they tried to sell their Johnston lease. Also other companies, which were associated with the Stansburys in acquiring the Johnston lease, tried to sell the lease. Those companies were Crown Drilling Company and Hoover Drilling Company. Also one Bender, who had an interest in the lease, tried to sell it. Offers to sell or offers to buy the lease were made to or received from several oil companies, including Standard Oil, Union Oil, Superior Oil, Humble Oil, and General Petroleum. It thus appears that it was generally known that the Johnston land had been leased to the Stansburys and that the léase might be purchased from the Stansburys if their purchase price demands were met.

Stipek testified that about the middle of June, 1949, he learned that the lease on the Johnston property had been assigned to defendant. On July 15, 1949, plaintiff sent a letter to defendant in which it was stated that while plaintiff was awaiting further instructions regarding a lease on the Johnston land it learned that defendant had acquired the leasehold rights on the Johnston property, and that “As you elected to conclude such negotiations yourself for the Johnston lands, we assume that it is your intention to convey to us an undivided % of 1 per cent overriding royalty interest therein pursuant to our understanding.” On July 19,1949, defendant replied thereto by letter stating that plaintiff was never retained or requested by defendant to negotiate with Stansbury, Inc., for an assignment of the lease, and that defendant therefore rejected plaintiff’s claim.

The court made findings, as shown in the following 12 paragraphs:

On April 8, 1949, plaintiff and defendant entered into an oral agreement under which plaintiff was to act as defendant’s broker (a) to negotiate for an oil and gas lease with the owners of the Johnston property; and (b) to obtain from the owners an oil and gas lease of all the property. It was agreed therein that said lease should contain the following provisions: the name of defendant as lessee; the period within

Plaintiff did not perform any of the things to be performed by it under the said oral agreement of April 8, 1949, except that it did attempt to negotiate for an oil and gas lease on said property but was unable to obtain such lease. Plaintiff did not at any time state to defendant that it stood ready to negotiate for a leasehold interest in said property from Stansbury, Inc., and plaintiff did not at any time stand ready to so negotiate. Defendant did not, on April 9, 1949, or at any other time, give plaintiff any order that it should await further instructions from defendant, or that plaintiff should do anything further for defendant in connection with obtaining any assignment to defendant of any interest under either lease to Stansbury, Inc. The employment of plaintiff by defendant under said oral agreement terminated on April 9, 1949. About June 9, 1949, plaintiff billed defendant for its services on the basis of “two days per diem” plus out-of-pocket expenses, and defendant paid the bill.

On May 6 and June 27, 1949, defendant, exclusively by its own efforts, obtained from Stansbury, Inc., the said assignments of its rights under the leases on the Johnston land. Defendant did not employ plaintiff to render any services of any nature in connection with said assignments of the leases.

Defendant did not negotiate and obtain said assignments for the purpose of depriving plaintiff of a broker’s fee. Defendant acted in good faith in obtaining said assignments and fully performed everything required to be performed by it under its agreement with plaintiff. Plaintiff did not render any services to defendant which entitled plaintiff to any overriding royalty.

Defendant has drilled several wells upon said property and produced large quantities of oil, the exact amount of which is unknown to plaintiff. The value of an overriding royalty interest of % of 1 per cent of the production under said assignments is unique and not susceptible of exact computation.

It is not true that there was any understanding of the parties that plaintiff had the exclusive right to negotiate and obtain said leasehold interest for defendant.

The information received by plaintiff from Johnston on April 9, 1949, and reported on said date by plaintiff to defendant, was not on said April 9 a matter of public knowledge. Said information was not given to plaintiff by Johnston in confidence and said information was not intended by plaintiff to enable, and did not in fact enable, defendant to obtain said assignments.

The agreement of April 8, 1949, was one employing an agent or broker to purchase real estate for compensation or a commission; said agreement was not in writing and there is no note or memorandum thereof subscribed by defendant or its agent.

The agreement of April 8, 1949, was one for the sale of an interest in real property by defendant to plaintiff; said agreement was not in writing and there is no note or memorandum thereof subscribed by defendant or its agent.

The agreement of April 8, 1949, was for the sale of an interest in real property and it was made by an agent of defendant; there is no writing subscribed by defendant stating the authority of such agent to make the agreement for defendant; and by reason of the foregoing the alleged agreement is invalid.

In view of the findings, the necessity for trial of the issues at law, alleged in the fifth and seventh causes of action, is obviated.

Appellant contends that the court erred (1) in determining in effect that the contract of employment (of plaintiff by defendant) was special and not general, and that the employment terminated on April 9, 1949, when plaintiff did not obtain a lease from the Johnstons upon the terms indicated by defendant; (2) in finding that defendant acted in good

As to the first contention, namely, that the court erred in finding in effect that the contract of employment was a special contract, appellant. argues that defendant did not indicate to plaintiff that its offer of $25 an acre for a three-year lease was its maximum offer, or the only basis on which it would deal, or that plaintiff’s authority would cease if it could not conclude a lease on that basis; that Bell told Cross that defendant would want to reconsider the matter of rental if “it was any more”; that the price of $25 an acre was merely a “guide to negotiation” rather than a special limit imposed by defendant. The evidence shows that on March 18, 1949, Cross, acting for himself or an undisclosed principal (not defendant), employed plaintiff to locate land in Cuyama Valley which was available for leasing, and told Stipek to see if he could get a three-year lease on the Johnston property for $10 an acre. At that time Cross gave Stipek a memorandum which in substance directed Stipek to lease the Johnston land for three years for $10 an acre and one-eighth royalty; on March 24 (after Stipek had talked to the Johnstons), Stipek told Cross that Johnstons had an offer of $25 an acre from a Bakersfield concern and the offer was open for acceptance until the end of March. The evidence shows further that on April 8, Cross, acting as agent for defendant, told representatives of plaintiff that defendant would like to get a lease on the Johnston property for $25 an acre and one-eighth royalty, and he asked Stipek as to the basis upon which plaintiff would perform the work. Stipek replied that plaintiff would do the work for $25 a day, and out-of-pocket expenses, and % of 1 per cent royalty. Cross told Stipek that the arrangement was agreeable with Bell. The court found that under the oral agreement of April 8, 1949, between plaintiff and defendant the plaintiff was to obtain from the owners of the Johnston property an oil and gas lease of all the property;

The evidence also shows that Stipek called upon the John- . stons on April 9 and ascertained that the land had been leased to Stansbury, Inc.; and on that day Stipek told Cross that the land had been so leased. There was a conflict in the evidence as to what was said by Cross after Stipek reported that the land had been leased—Stipek testified that Cross told him to await further instructions; Cross testified that he told Stipek that Cross or Bell would contact Stipek if defendant wanted anything further. The court found that defendant did not give plaintiff any order that it should await further instructions or that plaintiff should do anything further for defendant. Also, the court found that the employment of plaintiff under said oral agreement was terminated on April 9, 1949. Those findings were supported by the evidence. It cannot be said that the provision in the oral agreement specifying $25 an acre for a lease from the Johnstons was a mere guide for negotiation and was not a special limitation imposed by defendant.

Appellant contends further, as above stated, that the court erred in finding, in effect, that defendant was free to accept the benefit of plaintiff’s work and deal directly with Stansbury, Inc. It argues that the evidence shows that plaintiff imparted to defendant, in confidence, information regarding the availability of the Johnston land which information resulted in the eventual assigning of the Stansbury leases to defendant; that the information, at the time it was reported to defendant, was not a matter of public knowledge; that defendant received benefits from the employment of plaintiff and it cannot deprive plaintiff of its contingent fee by dealing directly with Stansbury, Inc. The court found (1) that plaintiff did not perform any of the things to be performed by it under the oral agreement, except that it did attempt to negotiate for a lease and did not obtain it, and except that it did report to defendant that Johnston had leased the land to Stansbury, Inc., for certain rental and royalty; (2) that defendant obtained the assignments by its own efforts ; (3) that the information given by Johnston to plaintiff was not given in confidence. The evidence shows that the oral statement of Bert Stansbury, made on April 11, to the effect that he was willing to assign a part of the lease for $50 an acre

Appellant also contends, as above stated, that the court erred in denying appellant’s request for a jury trial. It argues that issues of law presented by the complaint should have been tried first by a jury; that some of the issues of law, so referred to, were: What were the terms of the agreement. Did plaintiff perform the agreement? Did defendant breach its agreement ?

In the first cause of action there were allegations regarding "the making of the alleged oral agreement, the discovery that the Johnston land had been leased to Stansbury, Inc., and the report thereof to defendant; that defendant told plaintiff

On the second day of the trial, plaintiff amended its complaint by adding a sixth and a seventh cause of action. The sixth cause of action alleged that about March and April, 1949, at the request of defendant, plaintiff investigated the possibility of acquiring oil leases in the South Cuyama Field; the said services to be in consideration, in part, of a conveyance to plaintiff of a % of 1 per cent royalty under such lease as might be required by defendant; and that plaintiff be compelled to perform said agreement by conveying to plaintiff said royalty interest. The seventh cause of action alleged that plaintiff has been damaged in the amount of $200,000 as a proximate result of defendant’s refusal to convey the royalty interest to plaintiff.

The defendant alleged as a second affirmative defense that the agreement mentioned in the complaint purports to employ plaintiff, a broker, to purchase real estate for a commission; that said agreement was not in any writing subscribed by defendant or its agent, and there was no memorandum thereof subscribed by the defendant or its agent." When the case was called for trial, defendant filed its third and fourth affirmative

When the case was called for trial, the defendant objected to a trial by jury upon the ground that the issues were exclusively within the equity jurisdiction of the court, and defendant made a motion that the ease be tried without jury. Plaintiff argued that the issue in the case was primarily the legal issue. The court ruled that the first four, causes of action would be tried without a jury, and the fifth cause of action, if the case proceeded that far, would be tried by a jury. (It is to be noted that when said ruling was made there were only five causes of action—the sixth and seventh causes of action were added during the second day of the trial.) In summary, the first four causes of action presented equitable issues—to declare a trust and for specific performance; the fifth cause of action was for damages; the sixth was for specific performance; and the seventh was for damages. In Peterson v. Peterson, 74 Cal.App.2d 312 , it was said at page 321 [ 168 P.2d 474 ] : “In Connell v. Bowes (1942), 19 Cal.2d 870 , 871 [ 122 P.2d 456 ], the court points out that ‘It is now established in this state . . . that if a complaint states two complete rights of action, one legal and one equitable, a jury trial may be obtained upon the issues raised by the legal cause.’ In such circumstances, however, ‘the equitable issues are tried first, and then, if any legal issues remain, a jury may be called. ’ [Citation.] The practical reason for this procedural rule is that the trial of the equitable issues may obviate the necessity of a trial of legal issues [ Citation]. ’ ’ The trial court did not err in its ruling regarding a jury trial. In determining the equitable issues the court determined issues which obviated a trial by jury of the legal issues.

Appellant also contends that the court erred in determining that the oral agreement of employment was within the statute of frauds. The allegations in the three affirmative defenses were to the effect that the oral agreement was invalid under

Appellant contends further that the signed deposition of Mr. Bell, president of defendant corporation, was a

If a detailed discussion were made regarding the other writings referred to by plaintiff as being sufficient to satisfy

The findings to which we have referred are sufficient to show that defendant was not estopped to rely upon the statute of frauds.

By reason of the above conclusions, it is not necessary to discuss other contentions on appeal.

The judgment is affirmed.

Shinn, P. J., concurred.

A petition for a rehearing was denied July 15, 1954, and appellant’s petition for a hearing by the Supreme Court was denied August 26, 1954.