Osuna v. Russell

MONROE, J. pro tem.* Prior to March, 1956, the appellants and defendants Russell and Duvall became the owners of mining claims in Orange and Riverside Counties. It appears from the record that they had some transactions with the defendants Rodgers and Watson directed to the object of bringing about some contract or arrangement for the development and mining of the claims. As the result of these transactions, the defendants Rodgers and Watson made contact with the plaintiff and brought about the execution of a written agreement dated March 17, 1956, whereby the plaintiff undertook to work the claims and to carry on by mining operations the extraction of minerals therefrom and to pay to the defendants royalties on minerals so extracted. The agreement is denominated a “license.” It is for the period of five years with options to renew and extend the agreement for two similar five-year periods at increased royalties. Plaintiff undertook to pay to defendants the total royalty of 25 cents per ton for minerals taken from the property, with a minimum royalty of $100 per month for the first year and $250 per month thereafter. The contract provided that plaintiff could extract the first 1,000 cubic yards of material free of royalty for his efforts towards the development. It was further provided, among other things, that the 25-eent royalty should be paid in the following shares -. 7% cents to defendant Laura [112]Duvall, 7½ cents to defendant Clifford Russell, 5 cents to defendant Rodgers and 5 cents to defendant Watson. The contract contained provisions for its termination in case of a failure to comply with the obligations thereof, provided that plaintiff be in default of performance and had not cured the default within 30 days after notice. It further provided that in case the default be not cured the contract might be terminated by defendants Rodgers and Watson as the agents and assignees of their codefendants. In October, 1956, the defendants Duvall and Russell served upon plaintiff a written notice of revocation.

Plaintiff brought this action for declaratory relief to determine his rights as against the defendants under the contract. He alleged, among other things, that subsequent to the giving of the notice the defendants Duvall and Russell had taken possession of the property and excluded him therefrom and he asked that it be adjudicated that he had the exclusive right to the occupation and control of the property under the license agreement. A judgment was rendered in plaintiff’s favor and the defendants Duvall and Russell have appealed.

The main question involved upon this appeal arises from the contention of defendants and appellants that the contract in question was void as being in violation of the Corporate Securities Act, Corporations Code, section 25000 et seq., for the reason that it purported to create an interest in profits to be derived from mining operations without the issuance of a permit for the issuance of such “securities.”