Russell v. Texas Co.
238 F.2d 636 (1956)
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Rule of Law:
A grantee is estopped from challenging the validity of a mineral reservation contained in the same deed through which the grantee claims title. Furthermore, where an offer states that a particular act will constitute acceptance, an offeree who performs that act is bound by a contract, especially if the act is tortious, regardless of the offeree's subjective intent.
Facts:
- In 1918, Northern Pacific Railway Company sold a parcel of land, section 23, to the predecessors of Russell.
- The warranty deed for the sale contained an express reservation, granting Northern Pacific all mineral rights, including oil and gas, and the right to use the surface for extraction.
- Northern Pacific later granted an oil and gas lease for section 23 to The Texas Company.
- Beginning in 1952, The Texas Company conducted drilling operations on section 23.
- The Texas Company also used the surface of section 23 (roads, water, and rock) to support its separate operations on adjacent lands, a use not authorized by the mineral reservation.
- On October 30, 1952, Russell sent The Texas Company an offer for a revocable license to continue this unauthorized use for $150 per day.
- The offer specified that The Texas Company's "continued use of the roadway, water and/or materials will constitute your acceptance of this revocable permit."
- After receiving the offer, The Texas Company continued to use the surface of section 23 for its operations on adjacent lands until November 22, 1952.
Procedural Posture:
- Russell instituted an action against Northern Pacific Railway Company and The Texas Company in the United States District Court.
- The first cause of action was to quiet title to mineral rights, while the second and third sought damages from The Texas Company for use of the land surface.
- The district court, acting as the trier of fact, entered judgment for Northern Pacific on the first cause of action, upholding the mineral reservation.
- The district court entered judgment for Russell against The Texas Company, finding a contract was formed for a revocable license and awarding $3,600, plus an additional $237.60 for use permitted by the original deed.
- Russell appealed to the U.S. Court of Appeals for the Ninth Circuit from the judgment in favor of Northern Pacific and from the amount of damages awarded against The Texas Company.
- The Texas Company cross-appealed to the U.S. Court of Appeals for the Ninth Circuit from the portion of the judgment finding it had accepted the license.
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Issue:
Is a grantee who claims title to land through a deed estopped from challenging the validity of a mineral reservation expressly stated in that same deed, and does an offeree's continued tortious use of property constitute acceptance of a license offer that specifies such use as the mode of acceptance?
Opinions:
Majority - Halbert, District Judge
No as to the first question and yes as to the second. A grantee is estopped from challenging a reservation in the deed that constitutes the foundation of their title, and an offeree's tortious use of property constitutes acceptance of a license offer that explicitly designates such use as the method of acceptance. Regarding the quiet title action, a plaintiff must succeed on the strength of their own title. Russell's title comes from the very deed containing the mineral reservation he seeks to void. He cannot claim the benefits of the deed while simultaneously attacking its provisions; he is therefore estopped from challenging the reservation. Regarding the contract claim, The Texas Company's use of section 23 for operations on adjacent lands was tortious. Russell offered a license making it clear that continued use would be acceptance. Citing the Restatement of Contracts § 72(2), the court found that when an offeree's exercise of dominion over offered property is tortious, the offeror may treat it as an acceptance, even if the offeree manifests an intention not to accept. By continuing its tortious use, The Texas Company accepted Russell's offer and formed a binding contract.
Analysis:
This case strongly affirms the doctrine of estoppel by deed, preventing a party from selectively invalidating provisions of an instrument that is the source of their own property rights. It solidifies the principle that one cannot accept the benefits of a conveyance while rejecting its burdens. The decision also provides a classic illustration of contract formation by performance, clarifying that an offeree's subjective intent is irrelevant when their conduct unambiguously matches the mode of acceptance specified by the offeror, particularly when the conduct is tortious. This holding reinforces the objective theory of contract formation and limits an offeree's ability to benefit from their own wrongdoing while disclaiming contractual liability.
