Crocker National Bank v. McFarland Energy, Inc.

Opinion

AMERIAN, J.

In 1965 Joseph M. Thomas conveyed certain property to a trust he had created two years before for the benefit of his children. The instrument was entitled, “Conveyance of Perpetual, Expense And Deduction Free Royalty. ” The property in question was a one-sixth interest in oil, gas and other hydrocarbon substances produced from described real estate in Kern County.

The conveyance included paragraph 7 requiring grantor to pay certain taxes. That paragraph contained the following provision: “Grantor shall pay and discharge before delinquency all taxes, assessments and other governmental charges upon or referable to any operations or acts of Grantor or on Grantor’s behalf of Said Lands, including (without limiting the generality of the foregoing) the drilling or operation of any well or wells, the production, extraction,

[8]

severance or removal of any hydrocarbon, the processing, storage or use thereof, the sale of any such hydrocarbon or of any product thereof, or the transportation thereof away from Said Lands. Grantor shall also pay and discharge before delinquency any and all assessments, charges and obligations of any kind which by reason of any operator of Grantor may be or might become a lien upon or charge against Said Lands or any part thereof or any well thereon or production therefrom, and which are created by or shall arise under or by reason of any present or future law, ordinance, regulation or order whatever, including (without limiting the generality of the foregoing) any charge, assessment, claim or obligation created by or arising under the California Public Resources Code or any act amendatory thereof or supplemental or additional thereto.”

The conveyance also provided in another paragraph, “It is the purpose and intent of this conveyance of royalty that it shall (except as specifically set forth herein) be free and clear of all expenses and deductions of every kind and nature, all of which expenses shall be paid by or for the account of Grantor and shall be without any reimbursement by Grantee.”

Appellant McFarland Energy, Inc. (herein appellant) succeeded to the interest of Joseph M. Thomas in 1974. Respondents Crocker National Bank and R.A. Ganong (herein respondents) are the trustees of the trust.