*1 Lanz, Nora J. Plaintiffs LANZ and Wm. Respondents, man, personally, single NADDY, a
Martin T. doing un Naddy, business Martin T. style of name and firm the fictitious der Ap Syndicate, Defendant Oil Ohio pellant. 7611.
No.
Supreme Dakota. of North Court
May 1, *2 O. Bismarck, Austin, W. and John J.
Garaas, plaintiffs City, Watford for respondents.
MORRIS, Judge. appeal judgment from a is County District deter- Court of McKenzie pro- mining lease was gas oil and that an cured the defendant from the lease decreeing fraud and canceled null that it void and record.
The question lease is dated Lanz, between Wm. Lanz and Nora J. lessors, as Naddy, Martin lessee. T. It recites a consideration of one dollar County describes certain lands in McKenzie acres, containing more or less. years term is ten from the date of the or as long gas or either thereafter as oil or of them produced. particular clauses in controversy are
these: agrees The lessee “To pay the lessor One Hundred and Fifty (150.00) Dollars, each year or n gas at the well in advance, gas from each well only where gas * * found, *. operations “Unless for the drilling aof test well be pros- commenced and ecuted with due diligence upon the above described land or within a radius 10of miles therefrom on or before the day 25th September, 1953, this shall terminate as both parties, unless the lessee on or before the date pay shall lessor, or tender to the or to the lessor’s credit in the American State Bank at Wüliston, N. D. its successors, shall depository continue as the regard- changes less of in the ownership of land, said per the sum of acre 10‡ * * provided It is also that: Bismarck, “If Chapman, no well be de- commenced & Rausch said land appellant. within twelve months after fendant As a test second of said cause of action the completion abandonment allege fraudulently and mentioned, the defendant well hereinafter consent, approval, without un- parties, knowledge, both shall terminate as to *3 authority or the plaintiffs altered date of the the before less lessee on or the lease lessor, the statement inserting or to therein pay tender to the shall or exception above the italicized the of State the American credit in lessor’s name and depository. address its suc- Williston, D. or (Bank), at N. i t the as cessors, continue which shall According testimony to Lanz’ the Mr. the in changes depository of regardless lease signed was at His wife his home. of land, the sum ownership of said and Naddy present. Mr. He had Dollars, which per per year acre 10‡ never Naddy met Naddy he before. said the cover and as rental operate shall a was doing “Billings business for Oil the commence- deferring the privilege of Company” leasing and was interested in said from 18 months of a well for ment land for Naddy ten cents an “wrote acre. date.” up” the plaintiff lease and the his wife and ink parties it. All three of the then is interlined The first italicization in drove entered are into Alexander the acknowl- where italicizations and the other edgment printed notary completed the was before ink in contained lined blanks public. plain- Naddy the him but signed at took the lease with was form. lease promised ac- day copy was give copy. to Lanz a No same farm and later the tiffs’ the was ever public notary furnished and knowledged he before never saw the again lease or Alexander. became neighboring of aware of town its contents until after it was year recorded over a later. pleaded specifications fraud of There is direct complaint time conflict that the at the testimony are defendant the as to what was in of lease the procuring execution the lease at the of time it was signed, as well he as what falsely represented that actual agreement to was between parties ten payment immediate would make before the lease signed. was says Lanz signing per only parts cents acre as consideration that the of the blank lease; he that stated that had been that further filled out he at the time of signing date, ten pay descrip- the sum- of would land, tion of the but per per year rental and the name of the de- cents acre pository. The a blank other data contrary spaces he left in the blank to this yet had not upon been the date in. Lanz in the lease form for testified that later there was no talk delayed payments Naddy were to start about year deferring commencement fraudulently therein inserted of well for authority, eighteen knowl- months nor consent, was any there without the refer- alleged gas ence made might further plaintiffs. It is be recovered edge of the drilling a test well the execution within ten miles the time at premises fraudulently there was represented talk defendant no about lease the filling in blanks drilling signed. of an after the lease commence he would per The words premises per year” three months acre might within well oil on “10^ the lease and that un- have been in the lease the execution at the time it was lease, signed. According would cancel the he Lanz he he did so re- less per ceive ten cents acre nor was the as soon as the title was ever drilled no well appears had been checked. This alleged that the also canceled. lease falsely been in the nature of a bonus. If that the form of a well stated premises on generally .was not drilled form within was a standard per year receive industry. he was to ten cents oil acre used Lanz North Dakota law oil gas was drilled. leases until the well Naddy. be of it to certain form or wordage. handed in certain signed the lease and Naddy relied He did not read proceeding This is a equity agree- fill in accordance it out rescind and cancel an gas oil Mrs. during negotiations. ment arrived at fraud perpetrated claimed to have been hus- her Lanz testified and corroborated the lessors were induced major particulars. testimony in all band’s specific execute the lease. The relief testimony the defendant According to rescission of a written ad leases seventeen sixteen or *4 obtained judged if the consent the party of rescind about period of during a County McKenzie ing was through obtained fraud. Section of week days included ten 9-0902, 32-0421 and Section NDRC 1943. obtaining in used procedure The 1950. in equity “Fraud includes all willful he made and the same these leases acts, or omissions, intentional and con- each of to fact same statements details cealments which a involve breach remember doesn’t He lessors. trust, either legal equitable duty, lease. or or Lanz of the surrounding signing confidence, op- injurious and are an- to the store in signed it was He thinks other, by which or un- took or an undue who public notary by the erated notary tes- conscientious is advantage over another However, the acknowledgment. Pomeroy’s signed Equity obtained.” already been lease had tifies that the Juris- prudence, Edition, Section 873. be acknowl- Fifth in to Naddy brought it when anything remember Naddy does edged. 9-0308, 1943, provides Section NDRC discussion, or execution, the about the that: lease. Lanz reference signing with out filled “Actual fraud leases within the meaning of the seventeen Most of blanks The this any title consists in lessors. of the the homes of follow- in pro- all by party and acts committed a in at that time payments contract, connivance, rental his with the deferment vided for intent to deceive party another September 1953. until thereto or to induce him to enter the con- into three other plaintiffs In addition tract : procedure as testified lessors accompanied “1. The suggestion a preceded or as fact agreement by Naddy. is not Their true one does who their leases signing of true; believe it to that of be respect testimony in is similar this par- major in all this action positive assertion, “2. The in a man- of the evi- preponderance The ticulars. ner not warranted the information the transac- supports the version dence person it, of the making of that which plaintiffs. now given It becomes tion though is not true he believes it to be legal its necessary determine effect. true; printed a form in is on The lease suppression “3. The of that which printed as defendant’s name true having one knowledge or part. upper In the left hand second fact; belief of the appears “88 Oil Gas Standard corner promise “4. A any made without in- a form that the defendant Lease.” it; tention of performing printed and had Montana known obtained 88”. It is established that the “Montana Any “5. other act fitted deceive.” form not a standard or the usual lease was preponderance Dakota at the time it was evidence use in North requirement agreed upon that the lease is no shows and that there between
§13 representation done provide something will be Naddy plaintiffs was to and the Naddy as soon the future that even payable a cent acre bonus ten agreed pro delay rental should contain a was checked as the title per year, while visions as his failure to contend per acre cents of ten comply provided a breach agreement actually the lease as written being promise was of that rental but payments no no bonus do something over cannot be con payable September future it until lease, and sidered fraud. years It is true that statement three after the date merely if the of intention cannot payable even then amount to rental was not present misrepresentation only prom within a test well drilling lessee commenced prepon- something ise do in the future. Pom leased land. ten miles of the eroy’s Edition, Equity Jurisprudence, Fifth shows that the also derance of the evidence 877c; Am.Jur., Section Fraud and De be- provision never latter ceit, 38; Section Fraud appears parties. There also § tween the C.J.S. provision conflicting a somewhat the lease promise But under our “A statute *5 whereby which the lessors never to made any without performing intention of land with- if well on the no was commenced it” made with the intent to induce anoth completion or in twelve months after the party er to enter into actual a is well the lease abandonment of the test 9-0308, fraud. Section NDRC 1943. paid lessee would terminate unless the statutory provision in with the is accord deposited credit ten cents to the lessors’ general prevails rule that in the absence of operate to per year which would acre statute. Restatement of the Law of Con of a well on defer the commencement tracts, II, 473; Pomeroy’s Volume Section ap- premises eighteen It also months. Equity Jurisprudence, Edition, Sec Fifth pears Naddy promised give the that 877d; Deceit, Am.Jur., tion 23 Fraud and copy was never a the lease which lessors 41; Contracts, Section Williston on Re him and it He took the lease with done. Edition, vised Section 1496. 1951. It was not recorded until clearly as re- that the lease is established Dwire, In Foster v. 51 N.D. 199 N. up- materially is different from that corded 1017,1021, 51 W. A.L.R. this court said: parties agreed. on promise made, prom- “When a is The evidence is not clear to what extent by necessary isor, implication, asserts the blanks in the lease had been in filled at present a and bona fide intention to signed. the time it was testimony The if, however, perform; notwithstanding point. conflicting Naddy says on this that implied such assertion of a fact in- practice in taking was his these leases perform present, tention to be not there fill in the blanks before the lease was misrepresentation is a upon of a fact signed. hand, On the other predicated. which fraud The and three other lessors who testified assert gist real of the fraud in such a case is portions that material of the lease were agreement per- not the breach of the written into the at blanks some later time form, but the fraudulent intent of the they Naddy did not authorize promisor, representation false they fill in blanks in the form in which now existing perform, intention to appear. certain, however, Naddy It where such intent is fact nonexist- did fill the blanks either before or after ent.” the lease was and that were not agreement. in in accordance with According to the defendant’s tes procedure
timony he used the same representations the same argues defendant that fraud made to lessors The predicated upon promise procuring cannot be a or a some seventeen leases within that the signatures his of the days. To that extent space of ten representations plaintiffs’ obtained by the fraudulent testimony agrees with Authority of the defendant. divided execution witnesses. question series who signs of a of whether one but one not instance an isolated paper con- reading it is so far concluded part of without acts on written pattern. up signature that he cannot set that his forming general ato signa- representation lessors’ induced he obtained a fraudulent leases to which conformity actual Am.Jur., to its Fraud contents. 23 and De- tures were not He ceit, 171; Wright, lessors. Section Bixler v. he made did copies he promised 467, L.R.A.1917F, lessors Me. A. clearly recorded were not We fraud is The leases believe that where furnish. execu- their shown injury which has resulted until more than party represented of a through lessors the execution written tion. He forms party out on standard instrument the failure defraud- were made leases it, in use signs no such forms ed to before he when read the instrument there especially no such at that time and North Dakota where the circumstances are such The form that the provided by law. defrauded has reason re- forms representation him, present ly representations made lease constituted knew that will promise. preclude Whether he asserting and not a him from form fraud. not of a standard lease was time existed at the no form such In Federal Land Bank of Omaha v. is immaterial. representation made the *6 Houck, 449, 68 4 217, S.D. N.W.2d 213, part least which in at representation was a Supreme the Court of South Dakota said: wholly inex- were plaintiffs, who induced leases, exe- respect to oil to perienced with “As between the alternatives of lend- him to They on instrument. relied ing cute use the of the courts as a shield the to lease in accordance prepare fill out the careless victim or as an instrument to of understanding and perpetrator with the aid the gather- of in fraud concluded that court parties. trial ing perfidy, the the fruits of his we have procured by fraud. question was difficulty the lease in little a making choice. conclusion. that agree We Where origi- the is between issue the parties nal we think neither reason nor by person A who has been induced policy justifies reception the of a show- representations to a fraudulent enter into part negligence of on the of him legal open two to contract has remedies overreached, who is a as countervail- may rescind the contract or he him. He ent or neutralizer of fraud. We there- may what he has received under retain expressed fore adhere to views bring damages action and an for Chicago, M. & St. Herreid v. P. Rail- by injuries sustained reason of the way Co., 68, supra S.D. 159 N.W. [38 Land Bank Paul Federal of St. v. fraud. 1064].” 322, 271 Koslofsky, 67 N.D. N.W. 907. Burkholder, Davis Tex.Civ.App., v. 218 1101, 1104, S.W. action to cancel failing that to read is asserted an oil had been lease. The lessors induced neg guilty of lease precluded by representations false thereby defendant ligence are . from and notary and a who took the acknowledgment of the contents the instrument questioning signatures sign their proposition, of different they signed. lease that they spaces intended course, sign. the blank from that which assumes out, lessors did not read the lease as the con The but relied lease'were representations as plaintiffs. signed by on lessee’s its con- tends, it was before and on certain statements already reached conclusion tents made We have
815 Long delay it contained. prove to what tends to public as ratification. notary Bank, lower court Westerland v. First National 38 N.D. upholding decree In 24, appeals 323, 164 7 the court N.W. A.L.R. 562. canceling the said: points The defendant out that the oil and gas prove sought which is allege and to be appellees canceled
“The
21,
this action
integrity
was executed
and
honor
and
relied
read
notary,
did not
and
summons
the action
dated
Davis
19, 1951,
November
confi-
argues
such
because
instrument
delay in
parties
false
starting
being
made
the action
dence,
that such
and seven
operates
accord-
months
which were
representations,
waiver
estoppel
plaintiffs’
agreement,
right
verbal
with the
rescind.
ance
rule
induced them
of prompt
representations
rescission however is
by such
established,
subject
qualification
lease.
It is
that it
does not
execute
operate
party ought
legal
where
think,
justification
excuse or
we
representa-
delay
for the
Burnham,
fraudulent
is shown. Annis v.
profit
his own
its conse-
15 N.D.
549;
relief from
N.W.
Bauer
or obtain
v. Na
tions
could
Co.,
tional
the one deceived
Union
because
Fire
quences
Insurance
N.D.
had
546;
he
the fraud
198 N.W.
learned of
Rudman,
v.
N.
have
Fedorenko
frequently
D.,
been
diligent.
It has
71 N.W.2d
been
representations
if the
said,
Shaffer,
In Rohr
Iowa
160 N
com-
induce the
as to
character
such
279, 282,
W.
it is said:
them,
he
rely
plaining
be
true, this would
them to
believed
charge
“To
the complaining party
relief,
though
sufficient
asking
or laches in
relief on
discovered
investigation
ground
appear
of fraud it must
truth.”
knowledge
of such fraud or of
naturally
such facts as would
suggest
failure of
case the
In this
*7
person
it and
ordinary
cause
of
pru-
prevent
them from
does
read the lease
investigate
dence to
and ascertain the
of
instrument on
obtaining cancelation
he
truth
failed to
has
invoke the aid of
of fraud.
ground
promptness.
the courts with
apply-
In
infrequently hap-
this rule it not
is induced
fraudu
who
One
pens that
right
up-
of rescission is
into a
representations to enter
contract
lent
years
held after months and even
have
discovery
upon
of
contract
may rescind the
674,
alleged
intervened
Goulet,
between the
wrong
57 N.D.
fraud. Raasch v.
legal
institution of
proceedings.
Lee & Son
808;
K. O.
Kramer v.
223 N.W.
example,
permitted
For
we have
166;
or
28,
v.
237 N.W.
Schaff
Co.,
N.D.
61
sustained a rescission
an exchange
of
N.D.,
538.
Kennelly,
61 N.W.2d
years
of lands five
after the contract
seeking to
statutory
one
rule that
is a
It
Campbell
was consummated. See
v.
a contract
rescind
Spears,
670,
120 Iowa
tana, on affirmed. North Dakota after the lease left fendant never took with him. He signed he it was GRIMSON, J.,C. and SATHRE and plaintiffs copy as he the furnished BURKE, JJ., concur. not be recorded He did cause
to do. register the of deeds until office of in. the 1951, JOHNSON, J., disquali-
April deeming over a after it -28, himself plaintiffs participate; LUNDBERG, and the fied did not signed did learn Dis- sitting Judge, of the lease and the defendant’s contents trict his stead.
817 5, LUNDBERG, 1951. The Judge (dissent- lease was recorded on District 28, 1951, nearly seven months before ing). action was brought. further The record I feel reluctance It is with some plaintiffs shows took no action re- disagree compelled from and dissent garding alleged fraud of the defendant by the Court arrived at the result they until approached by Frank one ex- majority some of views and Bell and one R. fall of E. Smith the late First, I pressed majority opinion. in the 1951, proposed who to take oil another myself agree find that the evi- unable lease on the same lands which had been fraud— dence that the defendant’s shows leased to the then defendant. record goes to the inducement. whatever it was— shows, admits, plaintiff and the en- Rather, I the evidence shows that think tered into gentle- with these plaintiffs had executed instru- after men under which were to undertake spaces ment some involved and left blank expense all and responsibility of break- defendant, by to be the defend- filled in ing defendant’s lease order that provisions ant then in certain other plaintiff gave to them then be effec- would verbally than had dis- those which been tive. Drafts for several hundred dollars parties. appears cussed to me given by plain- and Bell to Smith legal that the authorities hold that certain tiffs, payable days judg- five final equitable consequences and follow. See ment of the should held Court de- 76 Reformation of Instruments § C.J.S. fendant’s invalid. The selection 29, p. 369 and also 53 note C.J. lawyers payment expenses of all citing Casserly, N.D. Johnson litigation were be to made Smith and Sigbert N.W. 539 and Awes Co. v. M. Bell. Accordingly, were com- Haslam, 37 N.D. 265. The N.W. puppets before the Court as of Smith rule set forth holds that if the fraud is in and Bell. inducement, may then cancellation for, asked if the fraud not in the recognized This state of affairs inducement subsequently, or occurs then majority opinion near its conclusion but the only Apparently reformation be had. something matter is that the dismissed theory the underlying is that if the fraud raise, he third being cannot was in the inducement then there no obviously champertous agree- real contract entered into Court ment between Smith made parties something cannot make that the had recognize Bell. I there is such rule But, made. the fraud is matters cited. This rule how- the authorities under inducement, par- other than then the ever, subject another and more funda- upon ties did agree and if the equity, court of rule that a its mental express instrument did not sponte”, cog- motion “sua will take own agreement, either reason or mistake or protect necessary its of matters nizance fraud, remedy is to reform it. prevent being integrity it from own *9 inequi- However, illegal the attainment matter used another there*is more Equity objectives. See 30 fundamental myself where I find table §§ in dis- C.J.S. 99, 487, pp. and also note 498-499 which relates to facts appearing 45 on illegality in the and note violations though pleaded record even by on application parties. doc- policy. In these public The record shows that equity have not April 21, 1950, on courts of limited was made trines directly involved in action to matters it aside was by set commenced themselves gone but have into mat- complaint case it before dated November 1951—about history and thus connect- nineteen related to its after the lease ters had been months it, certainly true entered with which here. into and about months ed seven part on the oil had Tioga been discovered in Even disconnected conduct provided remedy— ample would have has been relief seeking affirmative those if “clean even forgotten had defendant’s maxim considered under equity- they copy name and if Courts of were without hands.” 21 185-186. C.J. reading they unlaw- had first always effect to without giving have avoided remedy However, public it. contrary is the reformation ful or matters contracts granted, prejudiced matter defendant is not policy remotely related to even plaintiffs’ Jurisp. Pomeroy’s Equity Section laches. in hand.
1276. “pub- Much might regarding be said rules
Plowever, urge ap- policy” I do not lic decision that effects of a applied as to just pears be so point referred to should easy ways of circumvent- con- deny On the plaintiffs all statutory prohibitions against bar- relief. only trary, should I that the rules ratry, champerty believe maintenance Ch. necessary ef- applied 12-17, every be insofar as is indication With NDRC 1943. words, the purpose. In other development growing fectuate their that our oil portion of operations, should denied that those be would seem that such case, their their relief which is tainted of Smith in this and Bell as disclosed can Bell. should be agreements discouraged with Smith and if the courts are reformation granting litigation engendered. them so be done flooded requiring denying them cancellation grounds For the reasons and by the equity by being bound them to do stated, opinion here I am of the they made they admit appealed judgment from be modified should they declare the defendant by returning the same to the District Court only with had would have been satisfied reformation in accordance with dis- which had been the conditions inserted facts found to and that as so re- exist I look with them. While cussed between formed the lease should be held valid. plaintiffs’ evidence suspicion on much of interest, agree- under the of their because breaking the Bell for
ment with Smith judge, who
lease, recognize that the trial I witnesses, best is in the and saw the
heard testimony and he
position their to evaluate than provisions, other that certain
found upon, had been inserted those PEARSON, Donald E. Plaintiff and lease after its execution. Appellant, plaintiffs are entitled to I feel that relief, spite delay in taking of their such Erb, ERB and Omar Paul Defendants and change spite of circum- action and Cross-Appellants. place between taken stances No. 7670. made and the lease was action time that the say commenced. To Supreme Court of North Dakota. fact justified April 10, 1957. State, appears to me to com- left the had provisions ignore May pletely Rehearing Section Denied 28-0620, NDRC service of by publication. existing Under summons placed have been could
law the defendant *10 forty-five days from the
in default publication of summons the first
date against him. brought action And
in an 32-17, NDRC provisions of Ch.