272 P. 534 | Mont. | 1928
Lead Opinion
In this action the plaintiff seeks to recover from the defendants the sum of $539.20, royalty on oil produced from his land, alleged to have been by them wrongfully withheld from him. In his complaint the plaintiff alleges, in substance, that he was and is the owner of certain lands in Toole county, which on May 28, 1920, he leased for a period of twenty years to one Gordon Campbell for the exploration and development of oil and gas, which lease was thereafter *356 assigned and transferred to the defendant, the Sunburst Oil Refining Company; that subsequently, on May 19, 1924, the latter company entered into an operating agreement with the defendant Ohio Oil Company for the development and operation of a portion of the leased premises under the terms of the lease; that the Ohio Oil Company entered into the possession of the land, and on or about November 1, 1924, completed a well thereon, which has ever since been producing oil in commercial quantities; that immediately after the last-mentioned date the plaintiff notified the defendants that he desired payment of the royalty due him under the terms of the lease, delivered to his credit, or order, in pipe-lines with which the wells on the land were connected; that defendants failed and neglected so to do, withholding two per cent of the production, because of plaintiff's alleged liability to pay a license tax to that extent for engaging in and carrying on the business of producing petroleum within the state of Montana, pursuant to the provisions of sections 2397 to 2408 of the Revised Codes of Montana of 1921, as amended by Chapter 67 of the Laws of the Eighteenth Legislative Assembly.
Demurrers to the complaint having been overruled, the defendants answered separately, each alleging affirmatively the lawful right to retain two per cent of the royalty due under the terms of the lease on account of the plaintiff's proportion of the license tax due the state of Montana under the law, and alleging an estoppel because of statements rendered to the plaintiff and settlements made with him without objection or protest, constituting an account stated. Replies were filed to the answers, and upon issues so joined the parties submitted the case to the court for decision upon an agreed statement of facts supplemented by the testimony of witnesses. After submission of the controvery, the court made findings of facts and conclusions of law in the plaintiff's favor, and judgment was entered in accordance therewith for *357 the full amount by plaintiff alleged to be due, from which this appeal was prosecuted.
There is no conflict as to the facts, and sufficient thereof appear from the synopsis of the complaint above set forth.
Defendants' several assignments of error present two questions determinative of the controversy, viz.: (1) Were the defendants warranted in charging the plaintiff with his proportion of the gross production license tax imposed by the law upon persons engaged in producing oil within the state? And (2) did the statements rendered the plaintiff, with accompanying check for royalty, accepted by him, constitute an account stated, so as to prevent him from recovery in this action? These questions will be by us separately discussed, considered and determined.
1. As to the plaintiff's liability to pay his portion of the[1] tax imposed, we are required to construe and apply the language employed by the statute. It is by the Act provided that:
"Every person engaging in or carrying on the business of producing, within this state, petroleum, or other mineral or crude oil, or engaging in or carrying on the business of owning, controlling, managing, leasing or operating within this state any well or wells from which any merchantable or marketable petroleum or other mineral or crude oil is extracted or produced, sufficient in quantity to justify the marketing of the same, must, for the year 1923, and each year thereafter, when engaged in or carrying on any such business in this state, pay to the state treasurer, for the exclusive use and benefit of the state of Montana, a license tax for engaging in and carrying on such business in an amount equal to two per centum of the total gross value of all petroleum and other mineral or crude oil produced by such person within this state during such year." (Sec. 2398, Rev. Codes 1921, as amended by Chapter 67, Laws of 1923.)
It is the contention of the defendants that, while the tax imposed by the Act is a license tax, it applies to the land *358
owner, royalty holder or lessor equally with the producer or lessee, to the extent of his interest; that the land owner, royalty holder or lessor is engaged in the business of owning and leasing wells, and therefore comes within the provisions of the Act. The language employed appears clear, free from ambiguity and is easy of interpretation. It imposes an occupation license tax, as distinguished from a property tax (Mid-Northern Oil Co. v.Walker,
The word "leasing," as used in the statute has reference to persons who engage in the business of obtaining such leases, rather than to the owner of the land who leases it. Clearly, it has application alone to those who operate wells on the land from which the oil is produced in paying quantities, as distinguished from the owner of the land. The correctness of this conclusion is further demonstrated by provision in the Act, in the same section, as to the method of determining the tax. It is provided that "in determining the amount of such tax there shall be excluded from consideration all petroleum, or other crude or mineral oil produced and used by such person during such year in connection with his operations in prospecting for, developing and producing such petroleum, crude or mineral oil."
It will be noted that the tax is expressly imposed upon the person engaged in the business of producing the oil, and thus it is made plain that it applies only to the operator. The exclusion from consideration of oil used in connection withoperation in computing the amount of the tax, can have reference only to the operator. However, all possible *359 question is completely removed by further provision contained in the same section: "That in the doing of any such work, or in the drilling of any oil well, or in such prospecting, exploring or development work, any merchantable or marketable petroleum or other mineral or crude oil in excess of the quantity required by such person for carrying on such operation shall be produced sufficient in quantity to justify the marketing of the same,then such work, drilling, prospecting, exploring or developmentwork shall be deemed to be the engaging in and carrying on ofsuch business within this state within the meaning of thissection."
The character of the occupation to which the tax applies is, in our opinion, clear and explicit. It applies to the operator, and not to the owner of the lands leased, from which the operator produces the oil from wells drilled thereon. Texas has a like enactment, which has been given similar interpretation by the supreme court of the United States. (Oklahoma v. State ofTexas,
2. Under the terms of the oil and gas lease it was the duty of the defendants to deliver to the plaintiff's credit "free of cost in the pipe-lines to which they [the defendants] may connect their wells, or in tanks at the wells, the equal of 12 1/2 per cent of all of the oil produced and saved" from the premises, "or will pay in cash the equal of 12 1/2 per cent of the market value" of the oil, method of payment to be "optional" with the plaintiff. Notwithstanding such provision in the contract, it is agreed that during all of the time subsequent to the completion of the first well upon the land, and prior to the first day of December, 1925, the defendant Ohio Oil Company made full and correct monthly statements, which disclosed upon their face the total amount of oil produced from the land each month and the amount to which the plaintiff was entitled under the terms of the lease, all of which were regularly transmitted and received by the plaintiff, payments being made each and every month to the plaintiff, in manner and form as demanded by him, which were accepted and received without objection, protest or complaint, and with plaintiff's knowledge at the time that two per cent of the amount of the total royalty agreed to be paid was deducted for the purpose of defraying and liquidating the plaintiff's proportionate share of the oil producer's license imposed by law; in fact, after he had made assertion of his legal rights.
The district court held that the defendants never made any settlement with the plaintiff, precluding his right of recovery in this action, and entered judgment surcharging the accounts rendered with the deductions made because of the tax as by the plaintiff demanded. In our opinion, the court was in error, and the judgment cannot be upheld.
An account stated is defined by Bouvier as "an agreed balance[3] of accounts; an account which has been examined and accepted by the parties." And this definition *361
is generally accepted as correct. (1 Cal. Jur., p. 189.) Entirely consistent with it, this court has heretofore defined an account stated as "a new contract arising out of an account existing between the parties — an agreement that the items of the account and the balance struck are correct, with an agreement, express or implied, for the payment of such balance. The consideration for the new contract is the original account (Martin v. Heinze,
Where, at the time of stating an account and making settlement, the adverse party knew of the error, or should have[4-6] known thereof, having had ample means of knowledge before him, such an account will not be reopened, in the absence of proof of fraud or mistake. (Johnson v. *362 Gallatin Valley Milling Co., supra.) In the case of O'HanlonCo. v. Jess, supra, this court said correctly: "It is quite generally held that, where parties have been engaged in a course of dealings, and there is an antecedent indebtedness in favor of one as against the other, and an account or bill purporting to be a statement of the account is rendered by the creditor to the debtor, who retains the same for an unreasonable length of time without objection, this is evidence of his assent to the correctness of the account, and, accordingly, is an account stated." "No practice could be more dangerous than that of opening accounts which the parties themselves have adjusted, on suggestion supported by doubtful or by only probable testimony." (Chappedelaine v. Dechenaux, 4 Cranch (U.S.), 306,
Applying such basic principles of law to the admitted facts, it is clear, as a matter of law, that the plaintiff is debarred of right of recovery. Under the law he was not required to pay the tax, and the defendants had no right to charge him with any part thereof, and by the express terms of his contract, with the terms of which he was familiar he was entitled to all of his royalty oil or payment of the market value thereof "free ofcost" to him. He was chargeable with notice of his legal rights under the law and the express terms of the contract. However, the plaintiff regularly received the monthly statements rendered by the defendants, and accepted and received settlements made in accordance therewith without objection during a course of dealing of more than two years, with full knowledge that deductions were regularly made of two per cent of the total royalty agreed to be paid in liquidation of his alleged proportion of the tax. It must be held that this constituted an implied account stated by acquiescence, and the plaintiff may not now recover the deductions so made from the royalty to which he was rightfully entitled under the law and the terms of the contract.
While, in our opinion, the monthly accounts so settled *363 are final and conclusive, yet as to subsequent settlements, made or to be made, the plaintiff is not estopped by his previous course of conduct from insisting upon payment of the royalty due him without such deduction. The law and his contract are controlling as to his rights, except as to past settlements, settlements made and accepted upon implied agreement to such deductions.
Plaintiff's learned counsel argues that the doctrine of accord and satisfaction is applicable, rather than account stated; but, whether the transactions noted be treated as an account stated or an accord and satisfaction, the result is the same. An accord is an agreement whereby something different is accepted in extinction of the obligation, something different or less than a person is legally entitled to. (Sec. 7556, Rev. Codes 1921;State ex rel. Bishop v. Keating,
For the reasons stated, the judgment is reversed and the cause remanded to the district court of Toole county, with direction to enter judgment against the plaintiff.
Reversed and remanded.
MR. CHIEF JUSTICE CALLAWAY and ASSOCIATE JUSTICES MYERS, STARK and MATTHEWS concur.
Addendum
After carefully considering all arguments on rehearing, both oral and written, and the authorities cited by counsel, we are constrained to adhere to our opinion on the subject as originally expressed. This case, like all others, must be finally decided upon its own peculiar facts, which, in our opinion, clearly distinguish it from the numerous authorities cited and relied upon by learned amici curiae.
Here we have an oil lease, by virtue of which the operator is by the owner given the right to enter upon and occupy the land in the exploration and development of oil, and to market the oil produced therefrom; the lessor reserving to himself a stipulated royalty which the operator agrees to yield or pay. Monthly statements have been made and rendered by the operator to the lessor, all showing a deduction of two per cent on account of the state tax, and settlements were made with him by the operator each and every month for two and a half years in accordance with such statements of account, without objection or complaint, although it appears that he knew of such deduction and the reason therefor, and at the commencement of oil production from the land, as well as subsequently, asserted to the defendant Sunburst Oil Refining Company his right to the royalty oil or its market value without the deduction of two per cent or any other amount, on account of the state occupation tax, or otherwise. Furthermore, he appears to have been advised by a representative of the latter company that he would not be paid the amount of such deductions made to cover the tax unless the supreme court so held. Notwithstanding, upon the basis of such statements, he accepted the settlements thereby shown, without objection or protest. There is *365 no suggestion of fraud in the making or rendition of the monthly statements, or in the settlements made in accordance therewith, or, in fact, as to any of the dealings between the parties. Each statement rendered and settlement made, in accordance therewith, constituted a complete adjustment between the parties for the month preceding, unless the contentions of the amici curiae were to be upheld.
It is argued earnestly that, since the rights of the parties are fixed by contract, there was a mistake of law in the settlements made with the plaintiff, and the accounts rendered upon which the settlements were made do not constitute accounts stated, sufficient to prevent the plaintiff from surcharging the accounts by this action.
In approaching decision of the question presented, it will be noted from the facts that this case does not present a mutual mistake of all of the parties by reason of a misapprehension of the law, all supposing they knew and understood it, and all making substantially the same mistake, constituting a mistake in law (sec. 7486, Rev. Codes, 1921; Brundy v. Canby,
The doctrine is settled that, in general, a mistake of law,[7] pure and simple, is not adequate ground for relief. Where a party, with knowledge of all the material facts, and without any other special circumstances giving rise to an equity in his behalf, enters into a transaction affecting his interests, rights, and liabilities, under a misapprehension of the law, courts will not relieve him from the consequence of his own mistake. And more especially should a party be denied relief from alleged mistake of law, where, as here, the party relying on a mistake of law, not only knew of his legal rights, but asserted them, before accepting monthly settlements on a disputed basis. (Pomeroy's Equity Jurisprudence, 4th ed., sec. 842; Johnson v.Gallatin Valley Milling Co., supra.)
The case of Bank of United States v. Daniel, 12 Pet. (U.S.) 32,
The case of Heath Milligan Mfg. Co. v. National LinseedOil Co.,
Chancellor Kent says: "The courts do not undertake to relieve[8] parties from their acts and deeds fairly done on a full knowledge of facts, though under a mistake of the law. Every man is to be charged at his peril with a knowledge of the law. There is no other principle which is safe and practicable in the common intercourse of mankind. And, to permit a subsequent judicial decision in any one given case, on a point of law, to open or annul everything that has been done in other cases of the like kind, for years before, under a different understanding of the law, would lead to the most mischievous consequences. Fortunately for the peace and happiness of society, there is no such pernicious precedent to be found. This case, therefore, is to be decided according to the existing state of things when the settlement in question took place." (Lyon v. Richmond, 2 Johns. Ch. (N.Y.) 51.) And all of the later adjudications appear to be in accord with the doctrine so forcibly stated by the learned chancellor.
The law favors the settlement of business transactions by the parties, and when they have made such settlements they will be held bound thereby, in the absence of fraud or mistake. And, as is made clearly to appear in this case, there was no mistake made by the plaintiff in acceptance of the monthly settlements. He was fully conversant with his rights under the law, as well as the terms of the contract, by reason whereof, under our own previous holding in Johnson v. Gallatin Valley Milling Co., supra, the plaintiff will not be permitted to surcharge the accounts and recover the difference.
On every principle of justice and fair dealing, it was the plaintiff's duty, on receipt of the monthly statements, and before accepting and retaining remittances made in settlement in accordance with such statements, to have made examination of the accounts (and the presumption is that he did so), and, if dissatisfied with the computation made, to have raised objection thereto and refused the remittance as a settlement in full of his rights. (Long-Bell Lumber Co. v. Stump (C.C.A.), 86 Fed. 574.) *370
It would be as mischievous as an ex post facto law to permit a subsequent decision to overturn the fair compromises and contracts of individuals made under a different, though incorrect, view of the law. The community would be in a miserable condition, if at every change of opinion upon questions of law, all previous contracts and settlements were to be overturned. Men could never know the end of their controversies were such rule to prevail. (Cooley v. County of Calaveras,
The correct principles of law having been applied to the facts, we are satisfied with the result reached in our previous holding, and find no reason to recede therefrom.
MR. CHIEF JUSTICE CALLAWAY and ASSOCIATE JUSTICES MYERS, STARK and MATTHEWS concur.