Kelly v. Universal Oil Supply Co.

FINCH, P. J.

Plaintiffs brought this action for the cancellation of an agreement, a lease and a promissory note and mortgage. The defendant Glendale National Bank filed a cross-complaint to recover the amount of the promissory note and to foreclose the mortgage. The action was dismissed as against defendant Hoggins. The bank held the note and mortgage as security for a loan made by it to de

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fendant Hamil in the sum of $3,500. The court gave the bank judgment against plaintiffs for the sum of $3,500 and unpaid interest and counsel fees in the sum of $350 and entered judgment in favor of plaintiffs against the other defendants for the cancellation of all the aforesaid instruments. The plaintiffs and the bank have appealed on a single record. The question raised by the appeals is whether the facts found by the court support the judgment. The findings of the court are substantially as follows:

October 28, 1920, plaintiffs agreed to lease certain lands to Hoggins for a term of twenty years “for the purpose of mining and prospecting for oil and gas.” The agreement provided that Hoggins should begin drilling operations within four months after the execution of the lease 'and “pay a royalty of one-sixth of all oil taken from the ground ’ ’; that within thirty days Kelly would purchase from Hoggins 5,000 shares of the capital stock of the defendant company for the sum of $5,000, “to be paid by the execution of a note by said Kelly and his wife,” payable three years after date, with interest at seven per cent per annum, payable quarterly, and secured by a mortgage on other lands belonging to Kelly; that “the five thousand dollars above mentioned is to be expended in the development of the lease”; that “if drilling is not commenced within the time mentioned, in the above, the lease herein mentioned shall be canceled and the sale of stock rescinded.” The “plaintiffs expected and intended that said ft. G. Hoggins should negotiate the sale of said promissory note and mortgage and use the proceeds thereof in developing the lease therein mentioned.” November 6, 1920, the lease provided for by the agreement was executed. On the same day Kelly purchased 5,000 shares of "the capital stock of the defendant company and he and his wife, lone Kelly, in payment therefor, gave Hoggins their promissory note, as provided in the agreement, in the usual form, secured by a mortgage, executed by them, on lands other than those leased. Neither the note nor mortgage contains any reference to the purchase of the stock or to the aforesaid agreement or lease, but the execution of all of said instruments constituted one transaction as between the parties thereto. December 5, 1920, for the purpose of assisting Hoggins “to negotiate said note and mortgage,” Kelly caused the National Bank of Bakersfield to telegraph Hog-