Central Land Co. v. City of Grand Rapids

This is an action in ejectment wherein the plaintiff-grantor charges the defendant city has breached a condition subsequent and that in consequence thereof title to the land in suit has reverted to plaintiff. On trial without a jury defendant city had judgment. Plaintiff has appealed.

By a deed dated October 22, 1937, plaintiff conveyed to defendant city two pieces of property in Kent county containing approximately 25 acres for park, street and boulevard purposes. The consideration is stated to be "one dollar and other good and valuable considerations." Defendant city claims that it paid consideration by means of contracting to build a road which would benefit plaintiff's remaining land. Plaintiff sought to show that the conveyance was a gift. The deed contains the following condition:

"This conveyance is given upon the express condition that the two parcels of land above described shall be used solely for park, highway, street, or boulevard purposes; and if any part thereof be not used for any of such purposes, or at any time cease to be used for such purpose, or at any time be used for any other purpose, said part or parts shall immediately revert to the grantor, its successors or assigns; and it shall be lawful for the grantor, its successors, or assigns to reenter and repossess the same or any part or portion thereof, and thereafter to peaceably hold and enjoy the same as if these presents had not been made."

All went well until 1939. The city had undertaken to build the highways it had agreed to construct. In 1939, plaintiff found oil on its adjacent lands and commenced drilling operations. On July 12, 1939, defendant city entered into a contract with defendant Rex Oil Gas Company whereby the latter was to drill for oil on the land which plaintiff had conveyed to defendant city for park, street and boulevard purposes.

Plaintiff immediately took steps to protect its claimed rights under the above condition in the deed. It wrote a letter to the city protesting and charging that the land would revert to it if such drilling should occur. Shortly thereafter, plaintiff served notice that it considered that the city had breached the condition and that the city should surrender up the property. Finally, plaintiff brought this action against the city. Rex Oil Gas Company intervened as a party defendant.

The main questions involved in this case are: 1. Did title to the oil and gas under the lands plaintiff conveyed to defendant vest in the city? 2. Was there a breach of the condition above quoted which has caused a reverter of all the land, or of the parts actually used in the drilling operations?

Title to the land here involved was conveyed by plaintiff to the defendant city in fee subject to condition subsequent. Upon conveyance in fee title to the oil and gas under the land passed by the grant from plaintiff to the city, see Attorney General v. Railway Co., 263 Mich. 431 (94 A.L.R. 520); Quinn v.Railway Co., 256 Mich. 143. In the latter case we said:

"The deed contains no reservation to grantors. The grantee took title to the gas and oil in place. If there is a pool common to the lands of both parties, then, if defendant may not drill, plaintiff, by tapping the pool, may take oil belonging to defendant. Such a result could not be sanctioned."

To the same effect see 24 Am. Jur. p. 535, wherein it is also stated: "Thus, it appears to be settled that when the fee to land has been granted or dedicated to the public for use as a street or highway, any subterranean deposits of gas or oil therein pass with the fee and do not remain in the grantor or dedicator." Plaintiff herein cannot successfully charge that the giving of an oil lease by the city was ultra vires. Quinn v. Railway Co.,supra, holds only the State may raise this question.

The primary question in this case is whether there was a breach of condition subsequent by the city in giving an oil lease to defendant Rex Oil Gas Company. The factual background of the case must be borne in mind in passing upon this question. Plaintiff herein is an agency or subsidiary of the Pere Marquette Railway Company. In August, 1937, these two corporations entered into a contract with the city of Grand Rapids in consequence of which the city acquired title to the property involved in this suit. The agreement recited that title to the land was to be conveyed to the city "upon the terms and conditions and for the consideration hereinafter expressed, to which the city agrees." Among such terms and conditions it was provided that the city should convey to the railway company a parcel of land containing 4.07 acres and should construct certain streets or highways. The land was conveyed to the railway company and the highways were constructed at a cost of more than $400,000. Clearly, there was consideration for the conveyance of land in suit to the city.

At first blush it might seem that the maintenance and operation of one or more oil wells on this park property would be in violation of the restricted purposes for which the land was conveyed to the city; but in determining whether there has been such a real and substantial violation of the condition in the deed to the city, consideration should be given to the purpose obviously sought to be accomplished by the condition embodied in the grant. This park land was so located and of such a character that it might have well been used for commercial or industrial sites. Plaintiff and the railroad company had nearby acreage of like character. Obviously, and we think primarily, plaintiff and the railroad company were interested in having the grant to the city limited in such a way that the property conveyed to it could not be developed as commercial or industrial sites in competition with like property owned by plaintiff or the railroad company. It also seems reasonably certain that in a strict sense it was not contemplated by the city's grantor that the land in suit should be used only for boulevard, street and park purposes. This would seem to appear from the fact that in the deed to the city the grantor reserved to itself and to its successors and assigns "the perpetual right and easement to lay and maintain one or more pipelines on, over and across the parcel of land herein first above described," being the 17-acre parcel of park land.

Defendants have taken rather extraordinary care in so operating the oil wells on the park property that this activity does not materially impair the use of the land for the purposes for which it was conveyed to the city. No storage tanks are maintained on the property, but instead they are somewhat distantly located on other property. The pipelines leading from the wells to the storage tanks are for the most part, if not wholly, laid underground in the park area, excepting where such pipes extend along or across the highway passing through the park. Only a small, and not particularly unsightly or objectionable, structure is maintained at the location of each well. These buildings are not of a different character than an ordinary tool house or comfort station, such as are commonly maintained in park areas. And whether such buildings are particularly objectionable may well be considered in the light of the fact that on adjacent property oil development and operation of oil wells are being carried on, and this is true of adjacent property owned by plaintiff. The city's lease with defendant Rex Oil Gas Company provides that the latter must use care in not interfering with the park facilities; and we think the record discloses there has been reasonable compliance with this provision. Another rather important phase of this record is that all proceeds from oil produced in this park area have been earmarked by the city for use of its parks and for boulevard purposes only. Then there is the further fact that in carrying out the plan contemplated at the time this property was deeded to the city it has expended upwards of $400,000 in the construction of roadways, some of which are to the material advantage of other lands held by plaintiff or the railroad company. This presents a situation wherein the former status of the respective parties could not be restored in the event of an adjudicated reversion of title to plaintiff; and we think this circumstance must be considered in reaching decision in the instant case. One more rather important aspect of the record is the testimony that oil production on these premises probably will not continue for more than approximately two years; and the value of the total estimated production will probably not exceed one-twentieth of the amount expended by the defendant city incident to improving the park property and constructing roadways.

"Debasing of fee in grant to railroad company is not favored by law, but provisions tending thereto are to be construed against grantor." Quinn v. Railway Co. (syllabus), supra.

In Los Angeles University v. Swarth, 46 C.C.A. 647 (107 Fed. 798, 54 L.R.A. 262), in considering whether the fact that the University permitted a lessee to drill for oil on its land was a breach of a condition that the land be used for educational purposes, the court said:

"The general purpose of the original grant will not be defeated, but may be materially advanced in the pecuniary results to be derived from the development of the wealth supposed to be under the surface of the land."

While it may be in the nature of dictum, in Town of Castleton v. Langdon, 19 Vt. 210, the court in effect said that where rents from lands conveyed for use as a school were applied to the purposes of education, the condition was satisfied. Bailey v.Wells, 82 Iowa, 131 (47 N.W. 988), and Chapin v. SchoolDistrict No. 2 in Winchester, 35 N.H. 445, are authorities for broad or liberal construction by courts when passing upon challenged compliance with conditions embodied in title instruments under which land is held. Numerous decisions of this court, such as Barrie v. Smith, 47 Mich. 130, hold that conditions subsequent, tending as they do to forfeit estates, are to be strictly construed. In Adams v. First Baptist Church ofSt. Charles, 148 Mich. 140 (11 L.R.A. [N.S.] 509, 12 Ann. Cas. 224), the headnote reads:

"Land was devised to a church ``to be used as a parsonage and nothing else, and to be kept for that purpose and used for nothing else.' There was no devise over. The house was not suitable for a residence for the minister, and it was his custom to rent it and live elsewhere. On ejectment by the residuary legatee, held, that there was no breach of condition subsequent which should work a forfeiture."

We may say in the instant case, as Justice MOORE said in the last cited case: "From whatever point of view the record before us is examined, in the light of these authorities, it does not disclose a breach of a condition subsequent, which should work a forfeiture of the property devised."

Plaintiff disagreed with defendants' contention as to the actual consideration for the deed to the city, and sought by showing negotiations which preceded the execution of the preliminary contract to prove that the conveyance to the city was without consideration, rather than for the consideration stated in the contract. This testimony was taken in the trial court, but finally it was ruled the testimony should be stricken. Our consideration of this testimony which is in the record before us, and also of this phase of appellant's brief, satisfies us that if the testimony had not been stricken it could not have altered final determination of the case. Under such a record the ruling of the trial court did not constitute reversible error. 3 Comp. Laws 1929, § 15518 (Stat. Ann. § 27.2618).

Our conclusion is that this record does not disclose any real or substantial violation of the condition subsequent embodied in the deed under which the city of Grand Rapids took title from plaintiff. Neither the park property as a whole nor any substantial portion thereof is being used in any way or for any purpose which in any substantial degree interferes with the uses for which the property was conveyed to the city. 3 Comp. Laws 1929, § 12966 (Stat. Ann. § 26.46). The judgment entered in the circuit court is affirmed, with costs to appellees.

STARR, BUTZEL and BUSHNELL, JJ., concurred with NORTH, J.