Bedford v. Kravis
| Decision Date | 12 August 1993 |
| Docket Number | No. 89-CA-1114,89-CA-1114 |
| Parties | Delores BEDFORD and Mamie Ruth Bedford Halford v. George F. KRAVIS, Sole Trustee for the Raymond F. Kravis Trust, Gary N. Huey, Harold M. Huey, Ronnie L. Huey, Marilyn Ann Babington Barlow, Margie Babington Sullivan, H.R. Babington, Jr., Adobe Royalty, Inc., and Kenoil Corporation. |
| Court | Mississippi Supreme Court |
The original opinion is withdrawn and this opinion is substituted therefor.
On March 3, 1986, Delores W. Bedford and Mamie Ruth Bedford Halford (hereinafter "Bedfords") filed a complaint for declaratory judgment and other relief seeking construction of documents of title, quieting and confirmation of title, accounting for proceeds of mineral production, and other equitable relief against the heirs and assigns of the grantee, N.B. Huey, of an instrument conveying certain mineral interests executed in 1944. The Bedfords later amended the complaint to include a request for reformation. Determining that the evidence offered by the Bedfords to reform the 1944 instrument was violative of the parol evidence rule, the chancellor found for the defendants. Aggrieved by the lower court's decision, the Bedfords appeal to this Court. Finding reversible error, this Court reverses and remands.
In 1944, Thomas G. Bedford and wife, Delores Bedford, executed and delivered to N.B. Huey a document designated Mineral Right and Royalty Transfer utilizing a standard Form No. R-101 then currently in use conveying " 1/2 interest in and to all of the oil, gas and other minerals of every kind and character in, on or under that certain tract...." The instrument also contained the following language typed after the land description:
Notwithstanding anything in this contract to the contrary the grantee waives all right and interest to share in any rentals due the grantor under any existing or future lease. The grantee further consents that the grantor may execute any lease hereafter without the grantee joining herein.
At the time of the conveyance, the property in question was subject to a lease in which a 1/8 royalty was reserved to the lessors.
N.B. Huey later executed and filed a Ratification and Rental Division Order containing the following language:
[W]hereas, it was the intention of Thomas G. Bedford and wife, Delores Bedford to convey a non-participating interest in deed dated August 22, 1944, in favor of undersigned, describing 1/2 interest in oil, gas and minerals in, on and under the above described land, reserving the right to execute further leases covering the entire mineral interest in said land and to receive bonuses therefor.
(emphasis added)
In 1984, the property was under a lease reserving 1/4 royalty to the lessors when the property was incorporated into a producing forty acre unit. The purchaser of the oil and gas production, defendant American Natural Crude Oil Acquisition, Inc., (hereinafter "ANCOA") being uncertain of the proper allocation of the royalty, paid 1/8 royalty to the Bedfords and placed 1/8 in escrow. Only 1/16 royalty is actually in dispute. The remaining 1/16 interest was suspended only because none of the holders of the severed royalty came forth to demand payment.
The Bedfords filed suit to establish title to the disputed 1/16 interest, asserting that the royalty conveyed was only equal to 1/2 of the royalty reserved in the lease current at the time of the conveyance, namely 1/2 of 1/8 ( 1/16). The defendants, however, argued that the interest conveyed was an ordinary mineral interest, less those rights reserved by the grantors, which implied that the royalty floated with the terms of each new lease.
Delores Bedford, Thomas Bedford's widow, and Mamie Ruth Bedford Halford, Thomas Bedford's daughter, each own 1/2 of Thomas Bedford's mineral interest in the property at issue. Kravis Trust, Kenoil Corp., Adobe Royalty, and the heirs of J.R. Babington, and the heirs of N.B. Huey were the only defendants that appeared at trial to defend.
ANCOA appeared in response to a subpoena stating that the funds were available for payment into the Court upon an Order to do so. Sun Exploration and Production appeared and disclaimed any interest in the property at issue, and waived further notice of proceedings. All other parties either defaulted or entered stipulations admitting to the schedule of interests set forth in the Complaint.
At trial, Delores Bedford testified that she was present at the time of the execution of the deed in question. 1 N.B. Huey and H.R. Babington, both local bankers, brought the deed to the Bedford home for signing. She testified that Webb Crecink, the county tax assessor, advised Mr. Bedford to sell a "non-participating interest" and that the quantum that was intended to be sold was 1/2 of the royalty reserved in the lease, or 1/2 of 1/8. Also, the consideration was $400 based on $5.00 per royalty acre for eighty royalty acres. According to Mrs. Bedford, she was familiar with the definition of "royalty" at the time the instrument was signed, and she equated royalty with a 1/8 reservation because "back in those days that's ... all anybody ever got...."
Mrs. Bedford stated that she was not familiar with the term "bonus" in 1944. She thought that the term "rental" as used in the conveyance was sufficient to include the money paid to a land owner for execution of a lease and that such a sum was ordinarily referred to by herself and others as "lease money." Mrs. Bedford further testified that five or six subsequent mineral leases had been executed since the conveyance in question and no demand had ever been made on her for any portion of bonus received on those leases.
Counsel for the defendants timely objected to Mrs. Bedford's testimony. The chancellor reserved his ruling on the objection. The defendants also objected to the admission of copies of subsequent leases referred to by Mrs. Bedford in her testimony.
The Bedfords also sought to introduce into evidence the Ratification and Rental Division Order executed by N.B. Huey on May 4, 1948, and filed on August 11, 1948, and a deposition taken in 1964 in Payne v. Campbell, 250 Miss. 227, 164 So.2d 780 (1964), for the purpose of establishing royalty prices in Southwest Mississippi at the time the deed was executed.
Counsel for the defendants timely objected to the admission of the Ratification and Rental Division Order and to the admission of the deposition. The chancellor reserved his ruling on the objection to the admission of the Ratification and Rental Division Order and sustained the objection to the admission of the deposition.
The chancellor took the admissibility of the Bedfords' evidence under advisement, and the defendants rested without presenting any evidence.
The chancellor held that the Bedfords were barred by the parol evidence rule from presenting evidence to show that bonus was intended to be reserved from the original conveyance, and in accordance with that ruling, all of the Bedfords' evidence in support of reformation was excluded. The chancellor held that the 1944 instrument was unambiguous and must be construed on its face. Since the Bedfords failed to meet the burden of proof as to reformation, the chancellor ruled that the conveyance at issue was a mineral interest less executive right and delay rental interest based on Thornhill v. System Fuels, Inc., 523 So.2d 983 (Miss.1988). Thus, the quantum of royalty floated so as to accommodate the reservation in each new lease rather than remaining fixed.
The defendants were held to be entitled to the entire 1/8 royalty held in suspense. Prior default judgments against non-responding parties were also set aside. As a result of Sun Exploration's disclaimer, a naked bonus interest which otherwise would have belonged to it under the chancellor's ruling, revested in the Bedfords as holders of the executive right. All parties who had originally executed stipulations assenting to the claims set forward in the Complaint were released from said stipulations on Plaintiffs' motion and all unrepresented mineral and royalty owners were placed in the position of prevailing parties.
The Bedfords contend that the lower court erred in excluding evidence presented in support of their claim for reformation to include "bonus" among the rights reserved in the original conveyance. Mrs. Bedford's testimony and the Ratification and Rental Division Order were offered in an attempt to prove that the Bedfords only intended to convey a royalty interest. In the 1944 conveyance, there was no mention of "bonus." Mrs. Bedford testified at trial that at the time of the conveyance she was not familiar with the term "bonus." She thought that "rentals" encompassed all monies paid in executing a lease. Furthermore, approximately five or six leases were executed in the past forty years and no one ever claimed any bonus.
The Bedfords also attempted to introduce the Ratification and Rental Division Order executed by N.B. Huey to demonstrate that Mr. Huey was also under the impression that the 1944 conveyance was intended to reserve bonus to the grantors. The lower court excluded all of this evidence under the parol evidence rule, and as a result, the Bedfords were unable to establish their claim of mutual mistake.
In Smalley v. Rogers, 232 Miss. 705, 100 So.2d 118 (1958), this Court stated:
One of the assignments argued by the appellants is that the court erred in admitting...
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