Koenig v. Calcote

Full title: KOENIG v. CALCOTE et ux

Court: Supreme Court of Mississippi, In Banc

Date published: Apr 22, 1946

199 Miss. 435 (Miss. 1946)

25 So. 2d 763

Opinion

No. 36092.

April 22, 1946.

1. MINES AND MINERALS.

Relief against a mineral deed cannot be had merely on ground that grantor did not read the deed and that contents thereof were not explained.

2. CONTRACTS.

A person cannot avoid a written contract which he has entered into on ground that he did not read it or have it read to him and that he supposed the terms were different unless he was induced not to read it or have it read to him by fraudulent representations made to him by the other party on which he was entitled to rely.

3. MINES AND MINERALS.

Unless trial court found that proof was clear and convincing that grantors of mineral deed were induced not to read conveyance or have it read to them by fraudulent representations of grantee as to nature and character of the instrument, there could be no cancellation of deed for fraud.

4. APPEAL AND ERROR.

A decree cannot be reversed unless Supreme Court, under its view of evidence, finds that decree was manifestly wrong.

5. MINES AND MINERALS.

Cancellation of mineral deed conveying, subject to an outstanding oil and gas lease, an undivided half interest in all the oil, gas and other minerals in certain land, on the theory that deed was not ony subject to but expired with oil and gas lease, was error in light of express terms of lease and of deed.

6. MINES AND MINERALS.

Lessee under oil and gas lease, which provided that lease should remain in force for a ten year primary term and as long thereafter as oil, gas or other mineral was produced from the land, had an estate amounting to a determinable fee.

7. MINES AND MINERALS.

The estate of lessor under oil and gas lease for 10 year primary term and as long thereafter as oil, gas or other mineral was produced consisted of a reversionary fee interest in oil, gas and other minerals if lease was canceled or forfeited, right to receive rentals and royalties during life of lease and fee simple to soil.

8. MINES AND MINERALS.

Under mineral deed conveying, subject to an outstanding oil and gas lease, an undivided half interest in oil, gas and other minerals, grantee acquired undivided half interest in reversionary fee, which ripened into a fee-simple title in undivided half interest in oil, gas and minerals in place upon forfeiture of lease, and acquired right to half of rents and royalties under lease and in any future mineral leases as well as half of money rentals.

9. MINES AND MINERALS.

Where grantors of mineral deed, which they contended was procured by grantee by fraud, were advised by lessee that it had been furnished evidence that grantee held a one-half fully participating mineral deed from grantor which entitled grantee to receive one-half of rentals and thereafter for a number of years grantors received checks for half the rentals without protest, grantors had notice of facts equivalent to knowledge of facts a reasonably diligent inquiry would disclose and by their conduct ratified deed, precluding cancellation thereof for fraud.

10. CANCELLATION OF INSTRUMENTS.

Where a party with knowledge of facts entitling him to rescission of a contract or conveyance, without fraud or duress, ratifies the same by any act of recognition of contract as subsisting or any conduct inconsistent with an intention of avoiding it, he has no right to cancellation.

APPEAL from the chancery court of Lincoln county, HON. V.J. STRICKER, Chancellor.

Jones Stratton, of Brookhaven, and R.B. Shults and Ralph Shank, both of Dallas, Texas, for appellant.

The only question presented for determination by this court is whether or not under the mineral deed aforesaid the grantee acquired title in fee simple to one-half of the oil, gas and minerals under the lands described in said instrument.

As a premise to the discussion of this question we call attention to the fact that this Court has held that oil, gas and minerals are susceptible of separate ownership and that a conveyance of the minerals, or a part thereof, creates a severance.

Moss v. Jourdan, 129 Miss. 598, 92 So. 689; Stern et al. v. Great Southern Land Co., 148 Miss. 649, 114 So. 739; Pace v. State ex rel. Rice, 191 Miss. 780, 4 So.2d 270; Wight v. Ingram-Day Lumber Co., 195 Miss. 823, 17 So.2d 196.

Our legislature has also recognized separate ownership by provision for the assessment and taxation of oil, gas and minerals owned separately from and independently of the rights and interests owned in the surface of real estate.

Code of 1942, Sec. 9770.

The title to oil, gas and minerals in land, subject to the royalty covenants and reversions, is vested in the grantee under an oil, gas and mineral lease, and such a lease is in legal effect a lease of the land and a conveyance of an interest therein.

Stokely v. State, 149 Miss. 435, 115 So. 563.

The interest or estate conveyed by an oil and gas lease was in the nature of a determinable fee.

Lloyd's Estate v. Mullen Tractor Equipment Co., 192 Miss. 62, 4 So.2d 282; Merrill Engineering Co. v. Capital National Bank, 192 Miss. 378, 5 So.2d 666.

This leaves a possibility of reverter in the lessors, and while under the common law a mere possibility of reverter was not alienable, it is settled in Mississippi that by our statute, appearing now as Section 831 of the Code of 1942, such an interest is transferable and that a warranty deed carries with it the reversionary interest of the grantors.

Hamilton et al. v. City of Jackson, 157 Miss. 284, 127 So. 302; Ricks et al. v. Merchants National Bank Trust Co., 191 Miss. 323, 2 So.2d 344.

The granting clause conveys half of the minerals in fee.

Patek v. Duncan (Tex.), 178 S.W.2d 577, rehearing denied March 1, 1944; Richardson v. Hart, 143 Tex. 392, 185 S.W.2d 563; Clemmens et ux. v. Kennedy et al., 68 S.W.2d 321; Spell et al. v. Hanes, 139 S.W.2d 229; Jones v. Bedford, 56 S.W.2d 305; Tipps et al. v. Bodine (Tex.), 101 S.W.2d 1076; 3 Summers on Oil and Gas 502, Sec. 606.

The clause subjecting grant to lease is effective to do so. The only effect of the recitation in the deed that same was conveyed subject to the existing oil and gas leases was that the grantee Koenig accepted the title with knowledge that said lease contract was in existence, and that appellants to that extent would not be liable on their warranty.

Patek v. Duncan, supra; Hoffman v. Magnolia Petroleum Co., 273 S.W. 828; Bibb v. Nolan, 6 S.W.2d 156.

The lease cancellation or forfeiture clause is broad as the granting clause. The clause in the mineral deed from Calcote and wife to Koenig does not restrict or limit the prior granting clause, but rather is coextensive with the granting clause.

Reddoch v. Williams, 129 Miss. 706, 92 So. 831; Connecticut General Life Ins. Co. v. Planters Trust Savings Bank, 182 Miss. 463, 181 So. 724; Barksdale v. Barksdale, 92 Miss. 166, 45 So. 615; Freeman v. Magnolia Petroleum Co., 171 S.W.2d 339; Garcia v. King, 164 S.W.2d 509; Patek v. Duncan, supra; Annotation, 115 A.L.R. 195; 16 Am. Jur. 570, Sec. 237.

Whatever is expressly granted, or covenanted, or promised, cannot be restricted or diminished by subsequent provisions or restrictions, but general or doubtful clauses precedent may be explained by subsequent words and clauses not repugnant or contradictory to the express grant, covenant or promise.

Barksdale v. Barksdale, supra.

The habendum and warranty clauses are broad as granting clause. In the deed now before the Court both the granting clause and the habendum clause are clear, unambiguous and do not conflict or contradict in any particular. The granting clause says that the grantors have granted, sold, conveyed, assigned, and delivered, and by these presents do grant, sell, convey, assign and deliver unto the said grantee an undivided one-half interest in and to all of the oil, gas and other minerals in and under and that may be produced from the following described land, situated in Lincoln County, Mississippi, to-wit: (Describes land), together with the right of ingress and egress at all times for the purpose of mining, drilling and exploring said land for oil, gas and other minerals and removing same therefrom. We do not believe any words could make the granting clause clearer than this. The habendum clause provides: "To have and to hold the above described property, together with all and singular the rights and appurtenances thereto in anywise belonging unto the said grantee herein, and grantee's successors, heirs and assigns, forever." The warranty clause provides: "Grantor does hereby bind their successors, heirs, executors and administrators, to warrant and forever defend all and singular the said property unto the said grantee herein . . ."

In the instant case the construction placed on the deed by the parties themselves was evidently the same construction placed on the deed by the attorneys for the complainants, because, as heretofore shown, no intimation of any other construction was contained in the original bill or in the amended bill, which was filed after the lawyers had been in the case for nearly a year. Turning now to the question of the legal construction of the instrument, we find the facts, other than the acts of the parties indicating a construction, to be also undisputed. These facts are, first, that in 1934, Calcote and his wife executed and delivered an oil, gas and mineral lease, which was promptly assigned to the Sun Oil Company, and which lease was to continue for ten years and so long thereafter as the grantee might be engaged either in drilling or in producing oil, gas and minerals; and second, about a year after the execution of the lease, Calcote and his wife executed and delivered to appellant the mineral deed here in question; and third, that about nine years after the execution of the mineral deed the Sun Oil Company forfeited its rights under the lease and same became cancelled by reason of the failure of the oil company to enter upon said land and begin exploration or drilling operations. The lease was for a primary term of ten years, and "as long thereafter as oil, gas or other mineral is produced from said land, or as long thereafter as lessee shall conduct drilling or reworking operations thereon, with no cessation of more than 60 successive days until production results, and if production results, so long as any such mineral is produced." Under the evidence, which is undisputed, the Sun Oil Company did not enter upon said land and conduct drilling or reworking operations, or produce minerals from said land, and because of its failure so to do considered its lease cancelled and forfeited. Thereafter, Calcote sold Sun Oil Company, a new lease on his one-half of the minerals.

A contemporaneous construction of the deed by the grantor and grantee fixed the true meaning and intent of the parties.

Sumter Lumber Co. v. Skipper, 183 Miss. 595, 597, 184 So. 296, 835; Kersh v. Lyons, 195 Miss. 598, 15 So.2d 768.

Cross-appellant's own testimony is insufficient against a written instrument.

Alliance Trust Co. v. Armstrong, 185 Miss. 148, 186 So. 633; Continental Jewelry Co. v. Joseph, 140 Miss. 582, 105 So. 639; Gunter v. Henderson Molpus Co., 149 Miss. 603, 115 So. 720; Fornea v. Goodyear Yellow Pine Co., 181 Miss. 50, 178 So. 914; McCubbins v. Morgan et al., 199 Miss. 153, 23 So.2d 926.

The testimony wholly fails to rise to that degree required to support the charge of fraud.

The New York Life Ins. Co. v. Gill, 182 Miss. 815, 182 So. 109; Martin v. Gill, 182 Miss. 810, 181 So. 849; Hunt v. Sherrill, 195 Miss. 688, 15 So.2d 426; Metropolitan Life Ins. Co. v. Hall, 152 Miss. 413, 118 So. 826; Truckers Exchange Bank v. Conroy, 190 Miss. 242, 199 So. 301.

Where a party with knowledge of facts entitling him to rescission of a contract or conveyance, afterward, without fraud or duress, ratifies the same, he has no claim to the relief of cancellation.

Georgia Pacific Railway Co. v. Brooks et al., 66 Miss. 583, 6 So. 467; Hanson v. Field, 41 Miss. 712; Johnson v. Jones, 13 Smedes M. (21 Miss.), 580; Edwards v. Roberts, 7 Smedes M. (15 Miss.), 544; Ayres v. Mitchell, 3 Smedes M. (11 Miss.), 683; 9 C.J. 1198, Sec. 77; 12 C.J.S. 996, Sec. 38.

The doctrine of laches and estoppel should be applied in this case.

Sample v. Romine, 193 Miss. 706, 8 So.2d 257; Twinlick Oil Co., etc., v. Marbury, 91 U.S. 587, 23 L.Ed. 328; Starkweather v. Jenner et al., 216 U.S. 524, 54 L.Ed. 602; Winn v. Shugart, 112 F.2d 617; Bourdieu v. Pacific Western Oil Co., 8 F. Supp. 407.

This is a suit in "fraud and deceit" and is barred by the six-year statute of limitations, and the time was not suspended by the mere absence or non-residence of the defendant.

Dunn v. Dent, 169 Miss. 574, 153 So. 798; New York Life Ins. Co. v. Gill, supra; Fleming v. Grafton, 54 Miss. 79; Young v. Cook, 30 Miss. 320; Newman v. J.J. White Lumber Co., 162 Miss. 581, 139 So. 838; French v. Davis, 38 Miss. 218; Cook v. Farley, 195 Miss. 638, 15 So.2d 352; Deaton v. Rush, 252 S.W. 1025; Lott v. Van Zandt, 107 S.W.2d 761; Brazil v. Silva, 185 P. 174-178; Beresford v. Marble, 50 So. 68; Code of 1942, Sec. 722; 118 A.L.R. 199.

A.A. Cohn, R.P. Phillips, Jas. F. Noble, and Tullius Brady, all of Brookhaven, for appellees.

The decree of the chancellor should be affirmed as to the interpretation and construction of the deed.

Moss v. Jourdan, 129 Miss. 598, 92 So. 689, 690; Cook v. Farley, 195 Miss. 638, 15 So.2d 352; Gulf Refining Co. v. Stone, 197 Miss. 713, 21 So.2d 19; Federal Land Bank of New Orleans v. Cooper, 190 Miss. 490, 200 So. 729; Serena v. Rubin, 146 Kan. 603, 72 P.2d 995; Patek v. Duncan, 178 S.W.2d 577; O'Brien v. Jones, 239 S.W. 1013; 3 Summers Oil and Gas 502, Sec. 606; 7 Summers Oil and Gas, Secs. 1463-1468.

The chancellor was in error when he held that no legal fraud was perpetrated by Koenig when he procured the mineral deed in question from Calcote and his wife.

White v. Union Producing Co., 140 F.2d 176.

Wells, Wells, Newman Thomas, of Jackson, amici curiae.

Appellant was vested with a one-half undivided interest in the mineral fee estate, which was unaffected by the termination of the lease owned by the Sun Oil Company, except that his one-half interest was relieved of said lease.

Pace et al. v. State ex rel. Rice, 191 Miss. 780, 4 So.2d 270; Stern et al. v. Great Southern Land Co., 148 Miss. 649, 114 So. 739; Whelan et al. v. Johnston et al., 192 Miss. 673, 6 So.2d 300; Lloyd's Estate et al. v. Mullen Traction Equipment Co., 192 Miss. 62, 4 So.2d 282; Soria v. Harrison County, 96 Miss. 109, 50 So. 443; Yazoo M.V.R. Co., v. Lakeview Traction Co., 100 Miss. 281, 56 So. 393; Gulf S.I.R. Co. v. Patten et al., 180 Miss. 756, 178 So. 468; Goff v. Avent, 122 Miss. 86, 84 So. 134; Dunn v. Stratton et al., 160 Miss. 1, 133 So. 140; Nixon's Heirs v. Carco's Heirs, 28 Miss. 414; Goosey et al. v. Goosey et al., 48 Miss. 210; Miller et al. v. Board of Supervisors of Tunica County, 67 Miss. 651, 7 So. 429; Barksdale et al. v. Barksdale et al., 92 Miss. 166, 45 So. 615; Reddoch et al. v. Williams et al., 129 Miss. 706, 92 So. 831; Hager et al. v. Stakes et al., 116 Tex. 453, 294 S.W. 835; Caruthers v. Leonard (Tex.), 254 S.W. 779; Hogg v. Magnolia Petroleum Co. et al. (Tex.), 267 S.W. 482; Queen et al. v. Turman et al. (Tex.), 257 S.W. 1092; Wright v. Carter Oil Co. (Okla.), 223 P. 835; Elkhorn Coal Corporation v. Slone (Ky.), 276 S.W. 826; Olvey et al. v. Jones et al. (Tex.), 95 S.W.2d 980; Segars et al. v. Goodwin et al., 196 Ark. 221, 117 S.W.2d 43; Patek v. Duncan et al. (Tex.), 178 S.W.2d 577, rehearing denied March 1, 1944; 3 Summers Oil Gas 486, Sec. 601, p. 502, Sec. 606.

Robert L. Genin, of Bay St. Louis, amicus curiae.

There appear to be only three factors, all undisputed, which are material to the question here involved. They are, (1) in 1934, Calcote and wife executed and delivered an oil, gas and other mineral lease (later assigned to Sun Oil Company) for a primary term of ten years; (2) in 1935, Calcote and wife executed and delivered to Koenig the mineral deed now here in question; and (3) thereafter, the lease first mentioned expired by his own terms.

It is submitted that, in order to reach a proper conclusion, it is first essential to determine (1) what estate, or estates, Calcote and wife conveyed by their lease in 1934; and (2) what estate, or estates, Calcote and wife had left in them after their execution of the lease in 1934. It will then follow that the remaining question is, (3) Out of the estate or estates, which Calcote and wife had left after execution of the lease, what did they convey to Koenig?

In the lease of 1934, Calcote and wife conveyed to the lessee a determinable fee estate in the oil, gas and other minerals in the land.

Stokely v. State, 149 Miss. 435, 115 So. 563, appeal dismissed 278 U.S. 584, 49 S.Ct. 249, 73 L.Ed. 520; Lloyd's Estate v. Mullen Tractor Equipment Co., 192 Miss. 62, 4 So.2d 282; Merrill Engineering Co. v. Capital National Bank, 192 Miss. 378, 5 So.2d 666; Moss v. Jourdan, 129 Miss. 598, 92 So. 689; Stern et al. v. Great Southern Land Co., 148 Miss. 649, 114 So. 739; 1 Summers, Oil and Gas (Perm. Ed.), p. 332, Sec. 135.

Calcote and wife, after the execution of their lease in 1934, owned three distinguishable legal interests in the land and minerals; i.e., (1) a reversionary fee interest in the minerals in place, (2) the rights to the rentals and royalties under the lease, and (3) they owned the land subject to the lease.

Merrill Engineering Co. v. Capital National Bank, supra; 3 Summers Oil and Gas (Perm. Ed.), p. 486, Sec. 601.

On its face, the deed to Koenig purports to convey three things: (1) "an undivided one-half interest in and to all of the oil, gas and other minerals," (2) "one-half of all of the oil royalty and gas rental or royalty, due and to be paid under the terms of said lease" to which the deed is subject, and (3) "one-half of the money rentals, which may be paid on the above described land, to extend the term within which a well may be begun under the terms of said lease." Inasmuch as the lease of 1934 has, before this suit was brought, expired by its own terms, there are no longer in existence any benefits which might accrue to Koenig under the conveyance of the undivided interests in rentals and royalties under such lease. Hence, the only conveyance left which this Court can consider is the first or the conveyance of the undivided interest in all of the oil, gas and other minerals. The only other clauses in the instrument are (1) the warranty clause, (2) the habendum and tenendum clause, running to the grantee, his heirs and assigns forever, and (3) the clause providing that in the event the lease then in existence "becomes canceled or forfeited" for any reason, "Grantee shall own one-half of all oil, gas and other minerals" together with a like interest in the bonus, royalties and rentals provided for in future leases. We then have (1) a conveyance of one-half interest in the minerals (2) forever (3) subject to the lease (4) and if that lease becomes cancelled or forfeited, the grantee shall have the one-half interest.

A transfer by a lessor of (a) the land without reservation, or (b) the mineral separate from the surface, or (c) the royalty, places the purchaser in the shoes of the lessor subject to the rules of innocent purchaser. Thereafter, the purchaser is entitled to delay rentals, to royalty and to reversion, or reverter upon the expiration of the lease.

O'Brien v. Jones (Tex.), 239 S.W. 1013, 251 S.W. 208; Olvey v. Jones (Tex.), 95 S.W.2d 98; Hocksprung v. Stevenson (Mont.), 266 P. 406; Krutzfeld v. Stevenson, 284 P. 553; Broderick v. Stevenson Consolidated Oil Co., 290 P. 244; Glassmire, Oil and Gas Leases and Royalties (2 Ed.), p. 351, 407; 36 Am. Jur. 298; Mills Willingham Law of Oil Gas, p. 28, Sec. 19, p. 202-3, Sec. 138, p. 205, Sec. 140; 3 Summers Oil and Gas (Perm. Ed.), Secs. 602, 603, 604, 605, 606, note 70. James A. Alexander, of Jackson, R.W. Heidelberg, M.M. Roberts, and Tom P. Caldwell, all of Hattiesburg, and Rex G. Baker, Robert F. Higgins and H.P. Pressler, all of Houston, Texas, amici curiae.

Fraud, in the legal sense and requirement of proof in procuring the document, has not been shown.

McCubbins v. Morgan, 199 Miss. 153, 23 So.2d 926;

All of the controlling provisions of the conveyance unambiguously place the one-half mineral fee and its appurtenances in Koenig, subject only to a present and defeasible right in Sun Oil Company, upon the expiration of which, both by virtue of the controlling provisions of the instrument and by its explanatory clauses, the full enjoyment of the reverter as to the one-half interest would ripen in Koenig.

Lloyd's Estate v. Mullen Tractor Equipment Co., 192 Miss. 62, 4 So.2d 282; Stokely v. State, 149 Miss. 435, 115 So. 563, 566; Armstrong v. Bell, 199 Miss. 29, 24 So.2d 10; Stephens County v. Mid-Kansas Oil Gas Co., 113 Tex. 160, 254 S.W. 290, 29 A.L.R. 566; Dabney-Johnson Oil Corporation v. Walden, 52 P.2d 237; Harris v. Curree (Tex.), 176 S.W.2d 302; Wright v. Carter Oil Co. (Okla.), 223 P. 835; Patek v. Duncan (Tex.), 178 S.W.2d 237; O'Brien v. Jones, 239 S.W. 1013; Olvey v. Jones, 95 S.W.2d 980; Broderick v. Stevenson (Mont.), 290 P. 244; 16 Am. Jur., Deeds, Secs. 165, 168, 170, 172, 173, 232, 241; 2 Summers, Oil Gas 213; 3 Summers, Oil Gas, p. 175, 485, 486-487, 489, 503, Sec. 606; 7 Summers, Oil Gas, Sec. 1461, et seq.

Argued orally by R.L. Jones, for appellant, and by A.A. Cohn, for appellees.

McGehee, J., delivered the opinion of the court.

This is a suit to cancel a mineral deed executed by the appellees, Boyd Calcote and wife, on October 4, 1935, in favor of the appellant, E.J. Koenig, for an undivided one-half interest in all of the oil, gas and other minerals under approximately 238 acres of land owned by them in Lincoln County, on the ground that the said instrument is alleged to have been obtained through fraud.

The conveyance in question was made subject to an outstanding oil and gas lease held by the Sun Oil Company, executed on October 12, 1934, and all of the material provisions thereof are such as are common to the better forms of mineral deeds when taken subject to an oil and gas lease. At least such is the view expressed in 3 Summers on Oil and Gas, Perm. Ed., p. 502, sec. 606. In addition to the granting, warranty and habendum clauses which are in the language usually employed in formal conveyances of real estate, the deed contains the following provisions:

"Said land being under an oil and as lease executed in favor of Sun Oil Company, it is understood and agreed that this sale is made subject to the terms of said lease and/or any other valid lease covering same, but covers and includes one half of all of the oil royalty and gas rental or royalty due and to be paid under the terms of said lease, in so far as it covers the above described land.

"It is understood and agreed that one half (1/2) of the money rentals, which may be paid, on the above described land, to extend the term within which a well may be begun under the terms of said lease, is to be paid to the said Grantee; and, in event that the above described lease for any reason becomes canceled or forfeited, then and in that event, Grantee shall own one-half of all oil, gas and other minerals in and under said lands, together with a like ____ (1/2) interest in all bonuses paid, and all royalties and rentals provided for in future oil, gas and mineral leases covering the above described lands."

As heretofore stated, the cancellation of the conveyance was sought on the ground of alleged fraud on the part of the grantee Koenig in its procurement. That issue alone is presented by the bill of complaint and constitutes the sole ground relied on in the trial court by the appellees for relief, but the answer of the defendant Koenig sets up the defense of laches, the statute of limitation, and the question of whether or not there was a subsequent ratification of the deed by the grantors after being advised of its import.

The testimony is in sharp conflict as to whether or not at the time of the execution of the instrument in question the grantee represented it to be a mere lease, and it is also disputed as to whether or not he explained its provisions which are found to be to the contrary. The trial court did not find as a fact that the alleged fraudulent representations were made, or that the grantors were induced by any misrepresentations not to read the deed before executing the same. But on the contrary the court found that fraud in the legal sense had not been shown; although the court was of the opinion that obviously the grantors did not have nor could have had the import of the conveyance in mind, as written, at the time they signed the same.

However, this Court held in the case of McCubbins v. Morgan et al., 199 Miss. 153, 23 So.2d 926, 927, that relief against a conveyance cannot be had merely on the ground that the grantor "did not read the deed, and that the contents thereof were not explained." In support of this announcement the Court quoted its former holding to the effect that "A person cannot avoid a written contract which he has entered into on the ground that he did not read it or have it read to him, and that he supposed the terms were different, unless he was induced not to read it or have it read to him by fraudulent representations made to him by the other party, on which he was entitled to rely", — citing the cases of Continental Jewelry Co. v. Joseph, 140 Miss. 582, 585, 105 So. 639; Gunter v. Henderson Molpus Co., 149 Miss. 603, 621, 115 So. 720; Fornea v. Goodyear Yellow Pine Co., 181 Miss. 50, 64, 178 So. 914; Alliance Trust Co. v. Armstrong, 185 Miss. 148, 163, 186 So. 633.

Therefore, unless the trial court had found that the proof was clear and convincing to the effect that the grantors in the instant case were induced not to read the conveyance or have it read to them by reason of fraudulent representations of the grantee as to the nature and character of the instrument, then the action of the court in failing to cancel the same on the ground of fraud cannot be reversed, unless under our view of the evidence the failure to so find was manifestly wrong.

The trial court held, however, that the deed should be canceled upon the theory that the same was not only subject to, but fed upon and by its own terms expired with the oil and gas lease of the Sun Oil Company; that the oil and gas lease did not "for any reason become cancelled or forfeited," but was kept in force to the end by the payment of the annual rentals due; that since the oil and gas lease gave to the Oil Company the exclusive right to explore for and produce oil, gas and other minerals during the life of such lease, and reserved only a one-eighth thereof as a royalty, it conveyed seven-eighths of the same to the said lessee, and that, therefore, the lessors did not have left to them such an interest therein as to entitle them to convey by warranty deed a one-half of all the oil, gas and other minerals to the appellant Koenig on October 4, 1935; and further held that the last paragraph hereinbefore quoted from the mineral deed to Koenig merely provided for an enlargement of his estate from the "one-half of the one-eighth of the oil and gas" to a one-half of all of the oil and gas in place in the event the Sun Oil Company should forfeit its lease during the ten year primary period thereof, and that this condition precedent did not happen; and he, therefore, further held that the mineral deed should be canceled as a cloud upon the title of the Calcotes in its entirety, notwithstanding that he had found that it had at least conveyed to Koenig a one-half of the one-eighth of the oil and gas reserved in the lease in favor of the Sun Oil Company.

The foregoing conclusions of the trial court seem to have not taken into account a provision in the oil and gas lease to the effect that "this lease shall remain in force for a term of ten years from this date, called primary term, and as long thereafter as oil, gas or other mineral is produced from said land, or as long thereafter as lessee shall conduct drilling or re-working operations thereon with no cessation of more than sixty consecutive days until production results, and after production results, so long as such mineral is produced." Said conclusions also fail to take into account the fact that the estate held by the Sun Oil Company at the time of the execution of the deed was a determinable fee, Lloyd's Estate et al. v. Mullen Tractor Equip. Co., 192 Miss. 62, 4 So.2d 282, and authorities therein cited, and also the Texas cases of Hager et al. v. Stakes et al., 116 Tex. 453, 294 S.W. 835; Caruthers v. Leonard (Tex. Com. App.), 254 S.W. 779; and Hogg v. Magnolia Petroleum Co. et al. (Tex. Com. App.), 267 S.W. 482; the trial court's conclusions also fail to take into account that when the Calcotes executed the oil and gas lease in favor of the Sun Oil Company they had left to them, first, a reversionary fee interest in the oil, gas and other minerals, if and when the oil and gas lease should "for any reason" become canceled or forfeited, second, the right to receive the rentals and royalties during the life of the lease, and, third, the fee-simple title to the soil, Armstrong v. Bell, 199 Miss. 29, 24 So.2d 10, and 3 Summers Oil and Gas, Perm. Ed., p. 486, sec. 601, wherein Mr. Summers states that "it necessarily follows that after a fee owner of land has leased it for oil and gas purposes he has three distinguishable legal interests in the land and minerals. He has ownership of the land subject to the lease, the right to receive the rents and royalties under the lease, and a reversionary fee interest in the minerals in place." This reversionary fee interest in the minerals in place, or any part thereof, is capable of conveyance apart from the ownership of the land.

The cash consideration provided for in the oil and gas lease is the sum of $23.85 and the further payment of a like amount annually as delay rental. The lease was not canceled or forfeited by reason of a failure to pay the annual rental, but it was canceled and forfeited, or at least forfeited by the failure of the lessee to have the land in production at the expiration of the ten year primary period and by its failure to be then engaged in conducting any drilling operations thereon. If the land had been in production at the expiration of the ten year period, the lease would have remained in force and effect so long as production continued. Therefore, the lessee forfeited its right under the lease by reason of the fact that a producing well was not in existence at the expiration of the primary term. Having the land in production would have deferred the end of the term just as effectually as the payment of rentals would have done during the said period.

The granting clause in the mineral deed to Koenig is not unlike that employed generally in conveyances of the mineral fee or interest therein, according to 7 Summers Oil and Gas, Perm. Ed., sec. 1461 et seq. Nor is the mineral deed here in question at all dissimilar in its material aspects and provisions to that involved in the case of Patek v. Duncan, decided by the Court of Civil Appeals of Texas on February 10, 1944, reported in 178 S.W.2d 577, 579, rehearing denied by the Supreme Court of Texas March 1, 1944, wherein the Court said that "the effect of the execution and delivery of said deed by William Patek to Rose and Sample, was to vest in Rose and Sample the fee simple estate to an undivided half of the minerals, except as the express words used in said deed imposed a limitation upon the estate thereby granted." The Court then pointed out that the limitation imposed by the deed upon the estate thereby granted, which prevented it from being a fee-simple estate of the oil, gas and other minerals, was the limitation that the conveyance was made subject to an oil and gas lease in favor of the Gulf Production Company, and that the conveyance vested in the grantees a fee-simple estate to an undivided one-half interest in the minerals, less the estate vested in the said Gulf Production Company in virtue of its lease. The Court therefore said, "It necessarily follows that, when the determinable fee to the minerals was lost by the Gulf Production Company because the lease terminated at the expiration of its primary term, Rose and Sample then owned the fee simple estate to an undivided half interest of the minerals, free of the said outstanding determinable fee to the minerals."

Also in the case of Olvey et al. v. Jones et al. (Tex. Civ. App.), 95 S.W.2d 980, the Court construed a deed similar in all of its essential features to the one here involved, and held that under such a conveyance the grantee was entitled to a one-half undivided interest in the royalty, delay rentals and in the possibility of reverter.

To the same effect is the holding in the case of Segars et al. v. Goodwin et al., 196 Ark. 221, 117 S.W.2d 43, wherein the Court said: "Where landowner conveyed an undivided one-half interest in all oil, gas, and other minerals in land, subject to a prior oil lease, and an undivided one-half interest in all oil royalties and gas rentals due under the excepted lease, the purchaser became the owner of an undivided one-half interest to the oil, gas, and other minerals and was entitled to one-half interest in royalties from excepted lease, and, if a forfeiture of the excepted lease should occur, the purchaser and the owner of the premises would be joint owners of all minerals under the lands, each owning a one-half interest."

We are, therefore, of the opinion that the appellant acquired under his deed of conveyance at the time of the execution and delivery thereof an undivided one-half interest in the reversionary fee in the minerals in place and that upon the forfeiture of the outstanding oil and gas lease in favor of the Sun Oil Company this interest ripened into a fee-simple title in a one-half undivided interest in all of the oil, gas and other minerals in place, and that by virtue of the express provisions of the deed of conveyance he was entitled to one-half of the rents and royalties under the existing lease and under any future oil, gas and mineral leases covering the said land, as well as one-half of the money rentals, if any such additional sum had been paid to extend the terms within which a well may be begun under the terms of the lease or leases. From a final decree to the contrary, canceling the mineral deed as having expired by its own terms, the grantee Koenig has prosecuted a direct appeal, and from a finding of fact to the effect that there was no fraud practiced in procuring the deed the grantors have prosecuted a cross-appeal.

But whether or not there was fraud practiced in procuring the deed is not controlling in the instant case for the reason that the grantors were advised on December 18, 1936, by letter from the Sun Oil Company that it had been furnished evidence that the grantee Koenig held a "one-half fully participating mineral deed" from them, and "which entitled him to receive one-half of the rental which we may pay under our lease." That "the October 12th, 1935," annual rental was paid by checks, "one-half or $11.93, to you and Mrs. Calcote, which the writer has before him endorsed by you and Mrs. Calcote and the other half to E.J. Koenig." The letter further stated that "the October 12, 1936, annual rental was paid in the same manner and amount, except that the 1936 rental of $11.93 to which you and Mrs. Calcote were entitled, was placed to your credit in the Brookhaven Bank Trust Company, Brookhaven, Mississippi." This letter from the Oil Company was in response to an inqury from Mr. Calcote on behalf of himself and wife, which stated that "we have received the first check of $11.93 (the 1935 check), but we have not received the second check (the one for 1936 which had been placed to his credit at the bank as aforesaid)." Moreover, when testifying at the trial, Mr. Calcote was asked, "How did you ascertain that you had signed a mineral deed instead of a lease, and when did you find it out?" and he replied that he "heard it talked in the community when my check was split, that Mr. Koenig had executed a mineral deed on us and that he was going to draw half of our rental. When that check came split, that is when I wrote the Sun Oil Company that I didn't execute any part of my rentals to Mr. Koenig."

Thereafter, the said grantors continued to receive annually only one-half of the $23.85 provided for as rental under the oil and gas lease held by the Sun Oil Company throughout the remainder of the ten year period, and without further protest to anyone, the checks in that behalf having recited that the $11.93 was being paid as rental for "Und. 1/2 Int. in 238.5 acres" or as "rental for 238.5 acres, your portion." Then too, the mineral deed was of record at the county courthouse in 1936 when Mr. Calcote "heard it talked around in the community, when my check was split, that Mr. Koenig had executed a mineral deed on us," it having been shown that numerous other conveyances of like nature had been obtained by Mr. Koenig in the community where the Calcotes reside. They thus had notice of facts and circumstances which in the eye of the law was equivalent to knowledge of all the facts a reasonably diligent inquiry would disclose.

In 12 C.J.S., Cancellation of Instruments, sec. 38, p. 996, it is stated that "where a party, with knowledge of facts entitling him to rescission of a contract or conveyance, afterward, without fraud or duress, ratifies the same, he has no claim to the relief of cancellation. An express ratification is not required in order thus to defeat his remedy; any acts of recognition of the contract as subsisting or any conduct inconsistent with an intention of avoiding it, have the effect of an election to affirm."

We are, therefore, of the opinion that the decree of the trial court should be reversed and a judgment rendered here for the appellant on the direct appeal, and that the case should be affirmed on the cross-appeal.

So ordered.