Summary
In Hughes v. Franklin, 201 Miss. 215, 29 So.2d 79 (1947), the lease bore the date October 8, 1943, but it was not delivered to the parties until November 26, 1943.
Summary of this case from Griggs v. Parsons Leasing, Inc.Opinion
No. 36282.
February 10, 1947.
1. MINES AND MINERALS.
An oil, gas and mineral lease did not become effective until delivery.
2. MINES AND MINERALS.
An oil, gas and mineral lease may be made to run from a specified date prior to the date of delivery except that if the specified date has so nearly expired on date of delivery that grantors cannot honestly insist upon the specified date rather than the date of delivery the latter may control.
3. MINES AND MINERALS.
Where oil, gas and mineral lease of the type known as an "unless lease," was dated October 8, 1943, but lease was not delivered until November 26, 1943, when down payment was made, the anniversary of the lease was October 8th, and rent not tendered until after that date was properly refused.
APPEAL from the chancery court of Simpson county. HON. LESTER CLARK, Chancellor.
Ernest L. Shelton, of Jackson, and Bee King, of Mendenhall, for appellants.
The evidence conclusively shows that the lease reflects the true intentions of the parties, (a) as to the date the delay rental was due, and (b) as to the amount of delay rental.
Wise v. Brooks, 69 Miss. 891, 13 So. 836; Ingram Day Lumber Co. v. Robertson, 129 Miss. 365, 92 So. 289; Wilczinski v. Louisville, N.O. T.R. Co., 66 Miss. 595, 6 So. 709.
The evidence shows conclusively that there was no mistake. Appellee's own interpretation of the lease was that the delay rental was due October 8th. The parties to the lease and their assignees all construed the delay rental to be due October 8th. We are not unmindful of the decisions of this Court on the great weight it will give to the findings of the chancellor. We feel that in this case a reading of the record will not only convince this honorable court that the finding of the chancellor is against the overwhelming weight of the evidence, but that there is no evidence upon which to base the reformation of this oil, gas and mineral lease, and therefore the finding and the decree based thereon is arbitrary and should not be allowed to stand in the light of this record. We say this with the utmost deference both to the learned chancellor and to this honorable Court. The record will speak for itself.
It is essential in order to obtain a decree rescinding or reforming a written conveyance, contract, assignment or discharge for mistake, that the facts necessary for the allowance of the remedy shall be proved by clear and convincing evidence and not by a mere preponderance.
Ross v. Wilson, 7 Smedes M. (15 Miss.) 753; Mosby Kyle v. Wall, 23 Miss. 81, 55 Am. Dec. 71; Norton v. Coley, 45 Miss. 125; Pheonix Fire Ins. Co. v. Hoffheimer, 46 Miss. 645; Crofton v. New South Building Loan Ass'n, 77 Miss. 166, 26 So. 362; St. Paul Fire Marine Ins. Co. v. McQuaid, 114 Miss. 430, 75 So. 255; Gray v. Roden, 24 Miss. 667; Jones v. Jones, 88 Miss. 784, 41 So. 373; Progressive Bank of Summit v. McGehee, 142 Miss. 655, 107 So. 876; Watson v. Owen, 142 Miss. 676, 107 So. 865; Rogers v. Clayton, 149 Miss. 47, 115 So. 106; 2 Restatement of the Law of Contracts, Miss. Annotations, Sec. 511.
The proof in this record does not rise to that degree required under these authorities to warrant the reforming of the oil, gas and mineral lease between the Hughes and D.M. Yelverton and assigned to the appellee, L.C. Franklin. Appellee has failed to meet the burden of proof and is not entitled to the relief sought in his bill of complaint.
No estoppel can be set up against appellants in this case. They notified the State Guaranty Bank of Magee, the depository, not to accept the delay rental after October 8, 1945. The delay rental was received by the depository on the 6th day of November, 1945. The appellee was notified that appellants refused to accept the delay rental and suit was filed by appellee, L.C. Franklin, on the 10th day of November, 1945. L.C. Franklin testified that he would not have received the delay rental if it had been tendered. The law does not require a vain and foolish act.
The lower court should have granted the relief prayed for in the cross-bill and cancelled the oil, gas and mineral lease as to the appellee, for the lease is unambiguous, the circumstances surrounding its execution, its purpose and the subsequent acts of the parties, including appellee, fix the annual delay rental to be paid on October 8th of each year.
An oil and gas lease is an exception to the general rule and construed in favor of lessor as against lessee.
Twin Hills Gas Co. v. Bradford Oil Corporation, 264 F. 440; Rechard v. Cowley, 202 Ala. 337, 80 So. 419; Sparks v. Albin, 195 Ky. 52, 241 S.W. 321; Gentry v. Fitzgerald, 212 S.W. 39; Thomas v. Standard Development Co., 224 P. 870; Stephenson v. Stitz, 225 S.W. 812; Boatman v. Andre, 12 P.2d 370; New State Oil Gas Co. v. Dunn, 182 P. 514; Kies v. Williams, 228 S.W. 40; Shaffer v. Marks, 241 F. 139; Williard v. Campbell, 91 Mont. 493, 11 P.2d 782; Thornton's Law of Oil and Gas (4 Ed.), p. 258, Sec. 85, p. 445; 9 Cyc. 588; 6 R.C.L., Contracts, Sec. 241; Summers Oil and Gas, Secs. 117, et seq., p. 372 et seq.; Summers Oil Gas (Per. Ed.), Secs. 372, p. 270, and Supplement.
The lease was terminated by the act of the lessee in failing to pay or tender the rental on or before October 8, 1945, no well having been commenced.
Chism v. Hollis, 152 Miss. 772, 118 So. 713; McGraw v. Pulling, Freem. Ch. 357, 373; Burge v. Purser, 141 Miss. 163, 106 So. 770; Crenshaw-Gary Lumber Co. v. Norton, 111 Miss. 720, 72 So. 140, L.R.A. 1916E, 1227-N; Hammons v. Flewellen, 48 S.W.2d 813; Texas Co. v. Davis, 113 Tex. 325, 254 S.W. 304, 255 S.W. 601; Humble Oil Co. v. Davis, 296 S.W. 285; Young v. Jones, 222 S.W. 691; Habermel v. Mong, 31 F.2d 822; Gillespie v. Bobo, 271 F. 641; Erie Crawford Oil Co. v. Meek, 81 N.E. 518; Rechard v. Cowley, supra; Sparks v. Albin, supra; Ford v. Cochrane, 223 S.W. 1041; Abell v. Bishop, 284 P. 525; 1 Thornton's Law of Oil and Gas (4Ed.), p. 239, Sec. 78-a.
An "unless lease" automatically terminates as to any rights of the lessee thereunder upon default of the lessee in failing either to drill a well or to pay the delay rental provided in the contract.
LeRosen v. North Central Tex. Oil Co., 169 La. 973, 126 So. 442; Epperson v. Helbron, 145 Ark. 566, 225 S.W. 345; Ohio Oil Co. v. Detamore, 165 Ind. 243, 73 N.E. 906; Dill v. Fraze, 169 Ind. 53, 79 N.E. 971; McNamer Realty Co. v. Sunburst Oil Gas Co., 96 Mont. 332, 247 P. 166; Abell v. Bishop, supra; Meek v. Cooney, 5 Ohio C.C. (N.S.) 266, 26 Ohio C.C. 553; Frank Oil Co. v. Belleview Gas Oil Co., 29 Okla. 719, 119 P. 260; McKinley v. Feagins, 82 Okla. 193, 198 P. 997; Jones v. Murphy, 253 S.W. 634; Young v. McIllhenny, 116 S.W. 728; Chi.-Okla. Oil Gas Co. v. Shertzer, 105 Okla. 111, 231 P. 877; Sparks v. Albin, supra; Union Gas Oil Co. v. Indian Tex. Petroleum Co., 202 Ky. 236, 259 S.W. 57; Risch v. Burch, 175 Ind. 621, 95 N.E. 123; Weiss v. Claborn, 219 S.W. 884; Gillespie v. Bobo, supra; McLaughlin v. Brock, 225 S.W. 575; Garfield Oil Co. v. Champlin, 103 Okla. 209, 229 P. 824; Ireland v. Chatman, 87 Okla. 223, 209 P. 408; Hitson v. Gilman, 220 S.W. 140; N.W. Oil Gas Co. v. Branine, 71 Okla. 107, 175 P. 533, 3 A.L.R. 344; Skien v. Injunction Oil Gas Co., 80 Okla. 41, 193 P. 988; Duffield v. Michaels, 42 C.C.A. 649, 203 F. 820; Rosson v. Bennett, 294 S.W. 660; Lovenberg v. Henry, 140 S.W. 1079; 15 A.L.R. 597.
There was no payment or tender of payment prior to October 8, 1945, to extend the lease upon that date and the lease was by its provisions terminated.
Adkins v. Huntington Development Co., 168 S.E. 366; Garfield Oil Co. v. Champlin, 78 Okla. 91, 189 P. 515; Eastern Oil Co. v. Smith, 195 P. 773; Milner v. McGuire, 230 S.W. 421; Ireland v. Chatman, supra.
The court does not declare a pure forfeiture but simply finds that the contract has been terminated and is therefore null and void under its own terms.
Young v. Jones, 222 S.W. 691; Gillespie v. Bobo, supra; Hammonds v. Flewellen, supra.
One of the counsel for appellee who interrogated the witnesses in this case in the lower court, Honorable J.B. Sykes, a very resourceful lawyer, so framed his questions as to inject into the case the only evidence upon which the lower court could remotely base a decision, and that is that the bonus of $260 paid the rental for a period of twelve months, and throughout the trial of the case has confused the term "bonus" with the term "rental," as has counsel on this appeal to this Court, and counsel in the lower court sought to confuse, and did confuse, witnesses and the court by reason of their unfamiliarity with the meaning of the term "bonus" and the term "rental." However, in order that there may be no further misunderstanding on the meaning of the term "bonus" as applied to this lease, the original lease contains the following provision: "The down cash payment is consideration for this lease according to its terms and shall not be allocated as a mere rental for a period." So by the terms of the lease itself, which is unambiguous, the bonus of $260 was the amount paid for the lease itself. It has always been so understood and the authorities so hold that the bonus is the consideration for the lease and has nothing whatsoever to do with the delay rental.
Carroll v. Bowen, 18 Okla. 215, 68 P.2d 773, 775; Geller v. Smith, 130 Cal.App. 485, 20 P.2d 102, 104; Ellisnore Oil Co. v. Signal Oil Gas Co., 3 Cal.App.2d 570, 40 P.2d 523, 524; 5 Words Phrases (Per. Ed.), p. 672, 673; 15 Okla. St. Ann., Sec. 160.
Since the instrument is definite and unambiguous, in order to justify a reformation the evidence must be practically conclusive.
Jones v. Jones, 88 Miss. 784, 41 So. 373; Progressive Bank of Summit v. McGehee, 142 Miss. 655, 107 So. 876.
Appellant admits that an oil, gas and mineral lease creates an interest in land. Appellant is familiar with Sections 831 and 832 of the Code of 1942, providing that conveyances of land shall be by writing, signed and delivered. But the question, when did the lease become legally effective, is beside the point as the parties had the right to contract for any date for a well to be commenced and if no well was commenced for the delay rental to be paid. They chose October 8th.
A deed operates inter partes from the date of its actual delivery, and the acknowledgment need not fix the date thereof.
Caruthers v. McLaran, 56 Miss. 371; Cannon v. Holburg Mercantile Co., 108 Miss. 102, 66 So. 400.
The lease form used was a standard form of lease "Producers 88 (Rev. 2-43) D-9803 — With Pooling Provision," printed by Hederman Brothers, Jackson, Mississippi. The blanks in this lease are all filled in in the regular way and it is regular in every respect. The lease was not acknowledged and delivered the exact day the parties thereto agreed on the trade and on which date they inserted at the beginning of the lease the controlling date. Appellee wishes this Court to declare this lease ambiguous. If this lease is ambiguous, then the majority of leases on record in this state and other states are ambiguous for the reason, as testified to by Mr. Yelverton, that it is almost impossible to get all of the parties to the lease to acknowledge it on the date the agreement is reached. Then, too, it is a common practice for the parties to the lease to agree, draw up and date the lease that day, attach a draft thereto, the draft and the lease to be delivered upon the abstracting and approval of the title to the property involved.
There was no mistake in this case. The controlling date was October 8th and the parties to the instrument so agreed and all of the parties, including the appellees, so recognized that date until appellee failed and neglected to pay his rental on or before October 8, 1945, as he had done the previous year. Then for the first time he contends that it was the intention of the original parties that the date of the acknowledgment, delivery and payment of the consideration was to control. He filed a suit alleging a mutual mistake seeking to reform the original lease and every instrument thereafter in the chain of title, and, by Jove, he wins it in the lower court. J. Ed. Franklin, Lamar F. Easterling and L.C. Franklin, Jr., all of Jackson, and J.B. Sykes, of Mendenhall, for appellee.
A construction of the lease in the light of the circumstances at the time of its execution shows that the effective date thereof is November 26, 1943.
An oil and gas lease creates an interest in land.
Stokely v. State ex. rel. Knox, 149 Miss. 435, 115 So. 563; Pace v. State ex rel. Rice, 191 Miss. 780, 4 So.2d 270; Lloyd's Estate v. Mullen Tractor Equipment Co., 192 Miss. 62, 4 So.2d 282; Koenig v. Calcote, 199 Miss. 435, 25 So.2d 763.
An oil and gas lease is not effective until reduced to writing, signed and delivered.
Code of 1942, Secs. 831, 832.
The original parties to the lease fully intended that the bonus and rental dates be computed from the date of signing and delivery of the lease.
Where a lease is ambiguous, it is construed against the lessor and in favor of the lessee.
Newman v. Supreme Lodge, Knight of Pythias, 110 Miss. 371, 70 So. 241, L.R.A. 1916C, 1051; Allen v. Boykin, 199 Miss. 417, 24 So.2d 748; Love Petroleum Co. v. Atlantic Oil Producing Co. et al., 169 Miss. 259, 152 So. 829, 153 So. 389; Armstrong v. Bell, 199 Miss. 29, 24 So.2d 10; Fatherree et al. v. McCormick et al., 199 Miss. 248, 24 So.2d 724; Ingram Day Lumber Co. v. Robertson, 129 Miss. 365, 92 So. 289; Stonegap Colliery Co. v. Kelly Vicars, 115 Va. 390, 79 S.E. 341, 48 L.R.A. (N.S.) 883; Yoke v. Shey, 47 W. Va. 40, 34 S.E. 748; 13 C.J. 542; 36 Am. Jur. 310, Sec. 42; Summers on Oil Gas, Sec. 372; Glassmire, Oil Gas Leases Royalties (2 Ed.), pp. 172, 173, Sec. 49; Jas. A. Veasey, "Rules of Construction," 18 Mich. Law Rev., p. 660.
When the date and the day of execution and delivery of an oil and gas lease are in conflict, the latter governs.
Bettes v. Mid-Texas Petroleum Co. (Tex.), 243 S.W. 753; Glassmire, Oil Gas Leases Royalties (2 Ed.), p. 205, Sec. 55.
The appellants are estopped to deny the adequacy of the rental payment as extending the lease.
Milner v. McGuire, 230 S.W. 421; Bowers, Law of Waiver, p. 56; Mills, Law of Oil Gas, p. 142, Sec. 92; Thuss, Texas Oil Gas, p. 87, Sec. 62.
The lessor's retention of the cashier's check is tantamount to acceptance of the rent.
Love Petroleum Co. v. Atlantic Oil Producing Co. et al., supra; McNutt v. Whitney (Ky.), 232 S.W. 448; Satterfield v. Gallaway (Ky.), 234 S.W. 448; Kachelmacher v. Laird (Ohio), 110 N.E. 933; Carter Oil Co. v. Samuels (Okla.), 73 P.2d 453; Glassmire, Oil Gas Leases Royalties (2 Ed.), p. 203, Sec. 55.
Equity will not impose a forfeiture herein.
Decker v. Kirlicks et al. (Tex.), 216 S.W. 385; Kies v. Williams, 228 S.W. 40; Summers on Oil Gas, Sec. 344.
Appellants, W.F. Hughes and his brother, W.A. Hughes, were, on October 8, 1943, the owners as tenants in common of the land in Simpson County, Mississippi, here in question. W.A. Hughes was then temporarily in Baltimore, in the State of Maryland. Sometime during the month of September 1943, D.M. Yelverton, who was in the business of obtaining such leases, approached W.F. Hughes at his home in the county where the land is located and offered to purchase an oil, gas and mineral lease on the land consisting of approximately 131 acres. W.F. Hughes informed Yelverton that it would be necessary to communicate with his brother in Baltimore, and this was done by W.F. Hughes, who, in due time, was informed by his brother that it would be satisfactory with him that his brother, W.F. Hughes, make the proposed deal with Yelverton.
W.F. Hughes thereupon, and on the 8th day of October, 1943, went to the office of Yelverton and they arrived at an agreement, and on that day, October 8, 1943, Yelverton drew up the lease, dating it that day. It was promptly sent to the brother in Baltimore for his signature and acknowledgment. The brother in Baltimore promptly signed and acknowledged it and sent it to his brother in Simpson County, who took it to Yelverton, but the Baltimore acknowledgment was not in proper form, as Yelverton thought, and thereupon either the same instrument was returned to Baltimore for a corrected acknowledgment, or a new instrument dated as the original was dated, to wit: October 8, 1943, was sent, the witnesses not being certain as to whether the original was returned or a new instrument, a duplicate of the original, was then sent to Baltimore. The instrument thus last sent was properly signed and acknowledged in Baltimore November 20, 1943, and on arrival in Simpson County was signed and acknowledged by W.F. Hughes on November 26, 1943, and was delivered to and accepted by Yelverton on the latter day.
The only date anywhere in the lease preceding the signatures of the grantors was October 8, 1943, the opening sentence of the lease being, to quote, "This agreement made this the 8th day of October, 1943," and the concluding sentence was, to quote, "In witness whereof this instrument is executed on the date first above written," there being no other date anywhere in the lease instrument, as already mentioned.
The lease was in the standard form commonly in use in this state, and was what is sometimes called an "unless lease" or a delayed rental lease, that is to say, that unless drilling operations are actually begun within one year from the date of the lease, it will expire at the end of that year unless the lessee or his assigns shall pay on or before the expiration of that year, a stipulated annual rental and so on for each successive year through the primary period of ten years.
On December 3, 1943, Yelverton assigned or transferred the lease to appellee, the assignment of transfer stating in its opening recital, to quote: "Whereas on the 8th day of October, 1943, W.F. Hughes" (and naming the original lessors in full) "made and entered into a certain oil lease," etc., and appellee remitted the annual rental due in 1944 on September 16, 1944, stating with his remittance that it was for the annual rental for the period from October 8, 1944 to October 8, 1945. For the annual rental due in 1945, he failed to remit until November 5, 1945, his contention being that it was not due until November 26, 1945, and this by calculating the annual periods from the date of the delivery of the original lease, which was on November 26, 1943, instead of the date mentioned in the lease itself, all as already stated. The lessors decline to accept the tender made on November 5, 1945, on the ground that the lease under its express terms had expired on October 8, 1945, by reason of the failure to renew it by payment on or before October 8, 1945. The controlling question in this case is, therefore, whether the annual renewal date is October 8th of each year or whether November 26th.
Appellee filed his bill on December 3, 1945, praying a decree of the court to the effect that the anniversary date of the lease is November 26th, instead of October 8th; and in furtherance of his bill he alleged that it was by a mutual mistake of the parties to the original lease that the date therein was not recited to be November 26th, instead of October 8th, and averring that it was the intention of the parties in the execution of the original lease that the annual renewal date should be November 26th. The case was heard on full pleadings and upon oral and documentary evidence, but the testimony failed to show that there was any mutual mistake or any mistake at all in the date of the original lease. The great weight of the testimony was that October 8th was the date agreed upon, and that certainly that was the date understood by the lessors. At any rate, the evidence was manifestly not sufficient to measure up to the requirements as to the quantum thereof essential in cases to reform written instruments. The court held, nevertheless, that inasmuch as the lease did not become effective until November 26th, when it was delivered, the anniversaries of the successive rentals should be calculated from November 26th, and so decreed. In short, although there was insufficient evidence to reform the lease, the court nevertheless, in effect, reformed it.
It is plain, of course, that the lease did not become effective in a legal sense until it was delivered. But it is equally plain that in such a contract, as in others, stipulations for performance periods may be made to run, in the matter of the calculations thereof, from a specified date prior to the date of delivery and with as much freedom to the parties in that respect as they had to contract for long or short periods for performance, an exception being that if the end of the stipulated period for performance has, on the date of delivery, so nearly expired that the grantors cannot then honestly insist upon the stipulated date rather than the date of delivery, the latter may be held to control as was in reality the case in Bettes v. Mid-Texas Petroleum Co., Tex. Civ. App., 243 S.W. 753, relied on by appellee. There is no such case here.
Appellee contends, and not without some force, that, taking parts of his testimony, Yelverton understood that the initial payment of $260 made by him on November 26, 1943, would cover a year's rental from that date, and if such were the case the annual rentals thereafter could not be due before November 26th without cutting off part of the first year for which payment had been made. Of this it might be enough to say that according to the evidence, the lessors did not so understand it, but because of the importance of the question now before us, we pursue the matter further. Mr. Yelverton also testified as follows:
"Q. That lease from the Hughes brothers contains your agreement with the Hughes brothers? A. Yes.
"Q. Were you satisfied with the lease? A. I was.
"Q. Are you satisfied now. A. I am.
"Q. Do you recall the date of the lease? A. October 8th.
"Q. When the lease was delivered to you and you paid over your money to Mr. Hughes, were you satisfied with that date? A. I was.
"Q. There was no misunderstanding between you and Mr. Hughes about the date? A. No, sir."
He further testified in effect and from experience in a thousand cases, that when a trade is made for such a lease, the lease is drawn up and the date thereof is then inserted in the lease agreement, and that thereafter it is carried or sent around to the various owners whose signatures and acknowledgments are necessary, it being hard in many cases to get all of the signatures at the time. "Q. You start out at the head of the lease and put the date at the head of the lease and then you go out and get your signatures? A. That is correct." Thus the pertinency and evident purposes of the following provision which was contained in this lease, as well as in other standard leases, to quote, "The down cash payment is consideration for this lease according to its terms and shall not be allocated as a mere rental for a period."
We are, therefore, of the opinion that the date carried in the lease itself, to wit, October 8th, is the dominant date, and not the date of delivery. Any other ruling would introduce endless controversy and confusion into this business, now enormous in this state, wherefore we have dealt with the matter more at length than we would otherwise have done.
Reversed, and decree here for appellants.