Davis v. Schimmel, 5--5837

• Citation: 482 S.W.2d 785,252 Ark. 1201
• Decision Date: 24 July 1972
• Docket Number: No. 5--5837,5--5837
• Parties: C. G. DAVIS, Appellant, v. V. G. SCHIMMEL, Trustee, et al., Appellees.
• Court: Arkansas Supreme Court

Page 785

482 S.W.2d 785

252 Ark. 1201

C. G. DAVIS, Appellant, v. V. G. SCHIMMEL, Trustee, et al., Appellees.

No. 5--5837.

Supreme Court of Arkansas.

July 24, 1972.

McKay, Chandler & Choate, Magnolia, for appellant.

Keith, Clegg & Eckert, Magnolia, for appellees.

FOGLEMAN, Justice.

Appellant filed his petition in the chancery court on June 30, 1969, alleging that he was the owner of oil and gas leases covering an undivided .33517297 of the oil, gas and other minerals in certain lands in Lafayette County. He sought the appointment of a receiver to negotiate and execute leases on unleased interests in these lands. The proceedings were instituted under the provisions of Ark.Stat.Ann. § 52--201 et seq. (Repl.1971). Appellees (or most of them) were named as defendants in that action. All of them, except Frontier Oil & Gas Co., Inc., were nonresidents of Arkansas. Frontier was a foreign corporation having an agent for service in Arkansas, but no summons was served on this agent. All of the defendants were served by publication of a warning order, except for one resident of the state. Warning order was made on the date the petition was filed, and published on July 3, 10, 17 and 24, 1969. Proof of publication was filed on July 26, 1969. An attorney ad litem reported that he had made diligent search and inquiry as to the whereabouts of the nonresident defendants but had been unable to locate addresses for any of them. He asked that he be dismissed from any further participation.

On the 22nd day of July, 1969, the chancery court appointed William McGill receiver to lease the entire unleased mineral interests. The receiver was directed to report his actions to the court for approval or rejection within 30 days after the execution and delivery of the lease. No bond was required of the receiver. This order was filed on July 24, 1969. McGill filed his report on the same date. He reported that he had granted to appellant an oil and gas lease of the interests of all the defendants for a five-year term for a consideration of $15 per acre for the unleased mineral interests, or $797.79. He paid the rental into the registry of the court, and asked that he be discharged. This report was approved by the court on August 1, 1969, and the order of approval filed August 4, 1969. No pleading was filed by any of the appellees until on June 30, 1971 and subsequent dates, they filed motions to vacate the orders of the court appointing the receiver and approving his report. Each of the motions alleged that the movant had been prevented from defending by unavoidable casualty or misfortune in that these orders and decrees were entered without notice. The basis of the motion of Frontier was that the constructive service on it was void because it had an agent for service in Arkansas which had not been served with summons. The other appellees alleged that constructive service upon them was void because it was issued upon an insufficient affidavit. Some alleged that their places of residence were recited in the deeds under which they held their interests in the land. All alleged as meritorious defenses that: the orders were void, the service was void; the lease was not 'for the best interest of or compensation to' the defendants, in that appellant had paid a higher cash bonus and granted a royalty of one-fourth to other lessors having interests in the same lands; the lands were currently of greater value for oil and gas than previously; the consideration for lease was not 'fair and equitable'; the receiver did not negotiate for the lease, but simply permitted appellant to dictate its terms.

Appellant responded, contending that appellees had entered their appearance by filing their respective motions, and thereby cured any lack of previous notice, that there was no unavoidable casualty or misfortune, or meritorious defense alleged. Appellant also denied that the warning order was insufficient notice or that the affidavit therefor was insufficient. Appellees later amended their motions to allege that their separate interests were subject to valid oil and gas leases executed by them.

It was stipulated that Frontier was prevented from appearing by unavoidable casualty or misfortune. Each of the individual appellees testified that he had no notice (from the attorney ad litem or any other person, or by any other means) or knowledge of the pendency of the action until after April 1, 1970. It was shown that drilling was commenced on a well approximately one mile from the lands involved at 11:30 p.m. on July 3, 1969, where the Buckner Anhydrite was encountered about 9:30 p.m. on July 19, 1969, the Smackover Limestone about 4:30 p.m. on July 23, 1969, and one core was recovered at about 7:30 p.m. on July 23, 1969. It was also shown that a report on file with the Oil and Gas Commission showed that the well was commenced August 18, 1970, and completed August 24, 1970. A test on August 26, 1970, showed 358 barrels of net oil produced and 247 MCE of gas produced. Davis admitted that he had agreed to assign Shell Oil Company one-eighth of the production of oil, gas and minerals on demand as consideration for a lease dated June 9, 1969, but denied that there was any money consideration for the lease.

The chancellor heard appellees' motions on November 19, 1970, and the decree from which this appeal comes was filed April 5, 1971. In granting the motions, the court found that: the orders appointing the receiver and confirming his report were entered without notice, actual or constructive to appellees, and were void; the court lacked jurisdiction to enter them; all proceedings thereunder, including the receiver's lease, were void. On these findings the court set aside the orders and the lease. The chancellor held that the showing of a meritorious defense was not required but that each of the appellees had made a prima facie showing of a meritorious defense. In his memorandum opinion, the chancellor held that: under Ark.Stat.Ann. § 29--107 (Repl.1962), a judgment rendered without notice is a nullity; the affidavit for warning order was void because it was not signed by the affiant, but by his attorney; the order appointing the receiver was entered prior to the lapse of 30 days from the date the warning order was issued and prior to the filing of the report of the attorney ad litem; the challenge to the jurisdiction itself was a meritorious defense; the defendants had a right to defend at every stage of the proceeding, including the right to object to the appointment of the receiver on the ground of his lack of qualifications and impartiality, and to the making of the lease on the ground that it was not favorable to the mineral owners and the defendants, some of whom were shown to be oil operators themselves and willing to participate in the risk and expense of drilling operations; the appellees had not entered their appearance in a manner sufficient to validate the proceedings.

Appellant contends that Ark.Stat.Ann. § 52--203 under which the original proceedings were had, by its own language barring any attack upon the lease entered into by the receiver 'except by direct appeal in the manner provided by law,' renders appellees' method of attack unavailable to them. He argues that the language of the statute is to be taken literally and that no action to set aside the decree appointing the receiver or approving the lease entered into by him except by appeal to this court from that decree, even by one who has no notice of the proceeding in which it is rendered and no reasonable opportunity to be heard. We cannot construe the language of the statute as appellant does, because to do so would render it unconstitutional. Constitutional due process requires that no one be deprived of his property or rights therein without being given an opportunity to be heard. Meserve v. Edmonds, 223 Ark. 297, 265 S.W.2d 704; Boddie v. Connecticut, 401 U.S. 371, 91 S.Ct. 780, 28 L.Ed.2d 113 (1971); Mullane v Central Hanover Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). See also, City of Texarkana v. Brachfield, 207 Ark. 774, 183 S.W.2d 304; Craig v. Russellville Waterworks Imp. Dist., 84 Ark. 390, 105 S.W. 867; McLean v. City of Ft. Smith, 185 Ark. 582, 48 S.W.2d 228; Pulaski County v. Commercial National Bank, 210 Ark. 124, 194 S.W.2d 883; Massey v. Arkansas & Missouri Highway District, 163 Ark. 63, 259 S.W. 387.

Due process requires, at a minimum, that one be given a meaningful opportunity for a hearing, appropriate to the nature of the case and preceded by notice, before he is deprived of any significant property interest, except where some valid, overriding state interest justifies postponing the hearing until after the event. Boddie v. Connecticut, supra; Board of Levee Commissioners v. Johnson, 178 Ky. 287, 199 S.W. 8, L.R.A.1918E 202 (1917). Due process requirements are satisfied if the property owner has reasonable notice and a reasonable opportunity to be heard and to present his claim or defense, or to protect and enforce his rights, before a tribunal having power to hear and rule his cause, due regard being had to the nature of the proceeding and the character of the rights which may be affected by it. Dohany v. Rogers, 281 U.S. 362, 50 S.Ct. 299, 74 L.Ed. 904, 68 A.L.R. 434 (1930); State ex rel. Sweezer v. Green, 360 Mo. 1249, 232 S.W.2d 897, 24 A.L.R.2d 340 (1950), (overruled on another point, State v. Kirtley, 327 S.W.2d 166 (Mo.1959)).

A purely arbitrary or capricious exercise of legislative power, whereby a wrongful and highly injurious invasion of property rights is practically sanctioned and the owner stripped of all remedy is wholly at variance with the principles of due process. Truax v. Corrigan, 257 U.S. 312, 42 S.Ct. 124, 66 L.Ed. 254, 27 A.L.R. 375 (1921). In the concrete, due process means that in a contest concerning rights of life, liberty or property, a citizen will be given a reasonable opportunity to contest the propriety...