APC Operating Partnership v. Mackey

Decision Date11 March 1988
Docket NumberNo. 85-2507,85-2507
Citation841 F.2d 1031
PartiesAPC OPERATING PARTNERSHIP, Plaintiff/Appellee. v. Dale G. MACKEY and Evelyn C. Mackey; and Darrell E. Mackey and Lovell H. Mackey, Defendants/Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

Philip D. Hart (Gary W. Catron, with him on the brief), McAfee & Taft, Oklahoma City, Okl., for plaintiff/appellee.

Charles B. Lutz, Jr. (Arnold T. Fleig, with him on the briefs), Speck, Philbin, Fleig, Trudgeon & Lutz, Oklahoma City, Okl., for defendants/appellants.

Before LOGAN and ANDERSON, Circuit Judges, and CONWAY, * District Judge.


Dale and Evelyn Mackey, and Darrell and Lovell Mackey, landowners and lessors, appeal from an order of the United States District Court for the Western District of Oklahoma quieting title in certain oil and gas leases in APC Operating Partnership. We affirm.


We substantially adopt the following statement of facts, from the district court's order. On February 1, 1976, defendants Dale and Evelyn Mackey, husband and wife, as lessors, granted to G.B. Nathan, as lessee, mineral rights to three tracts of land in Beckham County, Oklahoma. A separate lease was executed for each tract. On February 2, 1976, defendants Darrell and Lovell Mackey, husband and wife, as lessors, granted to G.B. Nathan, as lessee, an oil and gas lease concerning certain lands in Beckham County, Oklahoma. The initial primary term of the leases was for five years, expiring on February 1 and February 2, 1981, respectively. The leases were properly recorded and through various assignments came to be owned by APC Operating Partnership (APC), the plaintiff below.

The substantive terms of all four leases are identical. They provide for a primary term of five years with an option to renew the lease for an additional five year term. The renewal option reads as follows:

"In the event this lease is not continued beyond the primary term by the provisions herein contained, Lessee has the option to renew this lease for an additional term of 5 years from the 1st day of February, 1981, and as long thereafter as oil and gas or either of them is produced from said land by Lessee, said renewal to be under the same terms and conditions as contained in this lease. Lessee may exercise this option to renew by tendering to Lessor or to Lessor's credit in the above named depository bank the sum of $75.00 Dollars per net mineral acre covered by this lease, on or before the expiration date of the first primary term of this lease." 1

R. Vol. I. tab 5, at 5.

In September, 1980, defendants mailed to APC letters purporting to change the depository for payments of delay rentals 2 and the option payments from the stated banks to Darrell and Dale Mackey "in person" at their home addresses in Sayre Oklahoma. In January 1981, prior to the expiration date of the initial primary term, agents for APC's predecessor in interest attempted to personally deliver the renewal option payments by making eight trips to the home of Darrell Mackey and eight trips to the home of Dale Mackey on January 26, 27 and 28, 1981. On January 29, 1981, these agents mailed checks for the renewal of the leases at the U.S. Post Office in Sayre, Oklahoma by registered mail, postage paid, return receipt requested, to the Mackeys at their respective addresses in Sayre. Postal records show that the Post Office delivered notice to the lessors of the registered mail on January 30, 1981, but the Mackeys failed to claim the mail and it was subsequently returned.

In 1985, APC initiated this diversity action against the Mackeys seeking to quiet title in the oil and gas leases and asking for an order compelling the Mackeys to accept the renewal payments and delay rentals. Subsequently, APC moved for summary judgment, arguing that the mailing of the renewal checks was an effective exercise of the option provisions of the leases. The district court granted the motion.


"When reviewing a grant of summary judgment, this court must examine the record to determine whether any genuine issue of material fact pertinent to the ruling remains and, if not, whether the substantive law was correctly applied." Franks v. Nimmo, 796 F.2d 1230, 1235 (10th Cir.1986) (citations omitted). The material facts here are not in dispute, so we are left to determine if the district court correctly applied the substantive law. "In reviewing the trial court's construction of the contract, it should be noted that ordinarily the construction of a contract is a question of law for the court." Resort Car Rental Sys., Inc. v. Chuck Ruwart Chevrolet, Inc., 519 F.2d 317, 320 (10th Cir.1975); see also Worms v. Burgess, 620 P.2d 455, 456 (Okla.Ct.App.1980) ("the construction of an unambiguous contract is an issue of law for the courts"). In reviewing questions of law, we are not bound by the district court's conclusions. See also Energy Oils, Inc. v. Montana Power Co., 626 F.2d 731, 734 (9th Cir.1980); 9 C. Wright and A. Miller, Federal Practice and Procedure, Civil Sec. 2588, at 750 (1971) ("it is frequently held ... that the interpretation and the construction of written contracts are matters of law and freely reviewable as such").

Oklahoma law interpreting renewal option clauses in definite term oil and gas leases is scarce, thus the district court reached its decision by reference to the law governing the payment of delay rentals. The district court's decision can be affirmed on that ground, or by a straightforward interpretation of the language in the lease provision. We turn first to an interpretation of the lease contract.

Under the terms of the lease, the lessee had the power to exercise the "option to renew by tendering to Lessor or to Lessor's credit in the above named depository bank the sum of $75.00 Dollars per net mineral acre covered by this lease, on or before the expiration date of the first primary term." At issue is whether APC's predecessor in interest effectively exercised the renewal option in 1981. The Mackeys argue that mailing of the payment by the Lessee does not constitute "tendering to Lessor" as required by the renewal clause. Because the lease did not explicitly authorize tender by mail, the Mackeys would have us read the lease to require personal delivery of the payments to them or the depository bank to effectively exercise the option. We believe that such a narrow reading of the clause is unreasonable and conflicts with Oklahoma law. The Oklahoma Supreme Court has held that "oil and gas leases, ... are to be construed and interpreted as other contracts." Cronkhite v. Falkenstein, 352 P.2d 396, 398 (Okla.1960). 3 The language in a contract is given its plain and ordinary meaning unless some technical term is used in a manner meant to convey a specific technical concept. Mercury Inv. Co. v. F.W. Woolworth Co., 706 P.2d 523, 529 (Okla.1985) (citing Okla.Stat.Ann. tit. 15, Sec. 160 (West 1983)).

In these circumstances, "tender" should be read to include an offer by mail for three reasons. First, the common usage of "tender" implies no requirement of personal delivery. See Black's Law Dictionary, 1315 (5th ed. 1979) ("Tender" is defined as "[a]n offer of money"; "a readiness and willingness to perform"). See also Davidson v. Rogers, 471 P.2d 455, 458 (Okla.1970) ("At common law, a tender of money is an unconditional offer by a debtor or obligor to pay another, in current coin of the realm, a sum not less than the amount then due on a specified debt or obligation.") (emphasis omitted). Second, an interpretation requiring personal delivery of the rental payments would effectively give the lessor the power to revoke the option--a power inconsistent with the very nature of an option contract. See Ollie v. Rainbolt, 669 P.2d 275, 279 (Okla.1983) ("An option is essentially a continuing and irrevocable offer by the optioner, which cannot be withdrawn by him during the stated period.") If the option to renew the lease could be exercised only by personal delivery, the lessor could simply designate a remote depository bank and then disappear, frustrating attempts at personal delivery of the payments. 4

Finally, Oklahoma statutes direct us to this conclusion. 5 Okla.Stat.Ann., tit. 15, Sec. 68 (West 1983) provides: "If a proposal prescribes any conditions concerning the communication of its acceptance, the proposer is not bound unless they are conformed to; but in other cases any reasonable and usual mode may be adopted." In this case, no means of acceptance were prescribed, and we hold that acceptance of the option to renew by registered mail was "reasonable and usual" under the circumstances. See Farmers' Produce Co. v. McAlester Storage and Comm'n Co., 48 Okl. 488, 150 P. 483, 485 (1915) ("a fair and reasonable construction of [predecessor statute to Sec. 68] is conclusive of the question in hand, and ... a reasonable and usual mode of acceptance was adopted by use of the mail.") The following section governs when that acceptance is effective: "Consent is deemed to be fully communicated between the parties as soon as the party accepting a proposal has put his acceptance in the course of transmission to the proposer, in conformity to the last section." Okla.Stat.Ann. tit. 15, Sec. 69 (West 1983). In this section, Oklahoma has codified the "mailbox" rule, that acceptance of an offer is effective when it is mailed. Furthermore, Oklahoma has chosen to extend the "mailbox" rule to option contracts. 6 In Worms v. Burgess, 620 P.2d 455, 458-59 (Okla.Ct.App.1980) the Oklahoma court relied on a decision of the California Supreme Court, Palo Alto Town and Country Village, Inc. v. BBTC Co., 11 Cal.3d 494, 521 P.2d 1097, 113 Cal.Rptr. 705 (1974) 7 to hold that an option was properly exercised where the acceptance was mailed, even though it was never received. In any event, this provision is not strictly necessary to determine the outcome here, because the payments were mailed in sufficient time...

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