Dudley v. Fridge

• Decision Date: 02 December 1983
• Citation: 443 So.2d 1207
• Parties: A. Bruce DUDLEY, Jr., et al. v. John C. FRIDGE, et al. 81-1044.
• Court: Alabama Supreme Court

Page 1207

443 So.2d 1207

A. Bruce DUDLEY, Jr., et al. v. John C. FRIDGE, et al.

81-1044.

Supreme Court of Alabama.

Dec. 2, 1983.

Barry Hess of Hess, Atchison & Horne, Mobile, for appellants.

Vincent F. Kilborn, III of Kilborn & Gibney, Mobile, for appellees.

ALMON, Justice.

This appeal involves a mineral royalty interest deed. The grantors brought this action to have the deed construed as advocated by the grantors or, failing this, to have the deed reformed. The trial court denied relief, holding that the deed was to be construed as advocated by the grantees and that the evidence did not support reformation of the deed.

The plaintiffs are A. Bruce Dudley, Jr., John N. Horner, J.H. Spencer, R.H. McLeod, and Larry U. Sims. In 1971 these five men purchased 100 acres of land in Mobile County with one-half the mineral rights. This 100-acre tract was subject to a lease referred to herein as the Daws lease, which reserved a 1/8 royalty to the lessor. The plaintiffs later purchased 20.5 acres in an adjoining section with full mineral rights and no existing lease.

In 1974 Larry Sims heard that Harris Anderson was knowledgeable in oil and gas matters and was handling some oil business in the area for a friend of Sims's. Sims called Anderson and went to his office to learn about oil and gas transactions.

According to Sims, a man from Mississippi offered plaintiffs a proposal whereby he would lease the 20.5 acre parcel from them for a 1/8 royalty plus $1000 per acre bonus if the plaintiffs would also convey five royalty acres on the 100-acre tract for $2,400 per acre, or $12,000. A royalty acre is defined as a 1/8 royalty on the full mineral interest in one acre of land. Sims asked Anderson for advice on the proposal and, according to Sims, Anderson offered to better the proposal by offering a 3/16 royalty and $1000 per acre bonus on the 20.5 acres, provided that the plaintiffs deeded five royalty acres to Anderson.

The plaintiffs did in fact execute a lease with a 3/16 royalty on the 20.5 acres and a royalty deed relating to the 100-acre parcel. Defendant Harris Anderson was named as the lessee in the former instrument and the grantee in the latter. Both instruments are dated December 2, 1974. Because the meaning and application of the royalty deed are at issue in this case, we shall set the deed out in full:

ROYALTY DEED

"KNOW ALL MEN BY THESE PRESENTS that [the plaintiffs and their wives], (hereinafter called Grantor), for and in consideration of the price and sum of TEN AND MORE ($10.00 and More) DOLLARS and other valuable considerations, cash in hand paid by Harris G. Anderson (hereinafter called Grantee), has granted, bargained, sold and conveyed, and does by these presents grant, bargain, sell and convey, unto the said Grantee the mineral royalty interest only, as hereinafter set out affecting and relating to the property described below:

"An undivided one-tenth ( 1/10) royalty interest only in and to that part of the minerals owned by Grantor in, on or under the following described property in SECTION 35, TOWNSHIP 1 SOUTH, RANGE 1 WEST:

"South Half (S 1/2) of Northeast Quarter (NE 1/4) and East Half (E 1/2) of Southeast Quarter (SE 1/4) of Northwest Quarter (NW 1/4) of Section 35, Township 1 South, Range 1 West, Mobile County, Alabama.

"said interest being subject to the present oil, gas and mineral lease from H.H. Myers and wife, Hermena D. Myers to S.B. Daws, dated March 11, 1971 and recorded in Real Property Book 1032, page 383, of the records of the Office of Probate Judge of Mobile County, Alabama, and to be subject to any and all further leases at Grantor's option.

"This sale and transfer is made and accepted subject to an oil, gas and mineral lease now affecting said lands, but the royalties hereinabove described shall be delivered and/or paid to the Grantee out of and deducted from the royalties reserved to the Grantor arising out of said lease. This sale and transfer, however is not limited to royalties accruing under the lease presently affecting said lands, but the rights herein granted are and shall remain a charge and burden on the land herein described and binding on any future owners or lessees of said lands and, in the event of the termination of the present lease, the said royalties shall be delivered and/or paid out of the whole of any oil, gas or other minerals produced from said lands by the owner, lessee or anyone else operating thereon.

"The grantor herein reserved [sic] the right to grant future leases affecting said lands so long as there shall be included therein, for the benefit of the grantee herein, the royalty rights herein conveyed; and the grantor further reserves the right to collect and to retain all bonuses and rentals paid for or in connection with any future lease or accruing under the lease now outstanding.

"TO HAVE AND TO HOLD said royalty rights unto the said Grantee, forever; and the said Grantor hereby agrees to warrant and forever defend said rights unto the said Grantee against any person whomsoever lawfully claiming or to claim the same.

"WITNESS the signature of Grantor, this the 2nd of December, 1974.

[Signatures and Notarizations]

"Indorsement as required by Alabama Law: This instrument prepared by Larry U. Sims of Hand, Arendall, Bedsole, Greaves & Johnston, Lawyers, 3000 First National Bank Building, Mobile, Alabama."

Sims took most of the language in this deed from a royalty deed form given him by Anderson, although he made changes throughout the form. The paragraph containing the property description and the description of the interest conveyed was entirely inserted by Sims. The portion of the deed most acutely in dispute is the description of the interest conveyed as a " 1/10 royalty interest."

Anderson assigned his interest in the royalty conveyed by the deed to the other named defendants. In January 1976 the plaintiffs executed a new lease on the 100-acre parcel to AMAX Petroleum Corporation. AMAX was an assignee of Daws's interest as lessee under the Daws lease, which was due to expire in March 1976. The AMAX lease recites on its face that it supersedes the Daws lease. In the AMAX lease, the plaintiffs reserved to themselves a 1/4 royalty.

The dispute which precipitated this case arose in 1977 when the Getty Oil Company began drilling in the area as assignee of the AMAX lease. Getty apparently proposed to pay defendants 1/10 of 1/8 royalty, whereupon Anderson wrote to AMAX and Getty in June and July 1977 claiming 1/10 of 1/4 royalty. Sims contested this claim, saying that defendants were only entitled to 1/10 of 1/8 royalty. Getty then wrote to Anderson, stating that "Mr. Sims advises in substance that your claim to an additional 5 net royalty acres under the December 2, 1974 royalty deed ... is not in accordance with the intent of the transaction," and suspended payment of the disputed 1/10 of 1/8. ¹

Plaintiffs filed this suit on November 2, 1977, seeking by the first cause of action of the complaint to have the court:

"declare that the Plaintiffs sold to Defendant, Harris G. Anderson, five royalty acres only; that Defendant Anderson's subsequent assignees be bound by such declaration; that said royalty deed ... be so construed by order of this Court; and that said assignments ... also be so construed."

The second cause of action of the complaint, as amended, averred that "through fraud, mutual mistake of the parties, or a mistake of one party which the other party at the time knew or suspected," (see Code 1975, § 35-4-153) the deed did not "truly express the intention of the parties as to the exact royalty interest conveyed." The averments continued that defendants were insisting upon an interpretation that plaintiffs conveyed to Anderson "a one-tenth interest in any and all royalties received by Plaintiffs instead of the true intent of the agreement that Plaintiffs convey to Defendant Anderson five permanent royalty acres." This count requested the court to revise and reform the deed to express the intention urged by the plaintiffs, and further prayed that the assignments be construed as conveying only the 5 royalty acres intended to be conveyed.

The defendants answered, denying that the intent was to convey only five royalty acres and stating that the deed granted them a 1/10 royalty interest "not only in the existing S.B. Daws lease, but by its express terms a one-tenth ( 1/10) royalty interest in any additional oil, gas and mineral lease which the Grantors might execute on the minerals which they own." They alleged that they were entitled to 1/10 of the 1/4 royalty because the AMAX lease "provides for a 1/4 royalty payment to mineral royalty owners including the Defendants." As to the second cause of action, the defendants denied that there was any fraud, mutual mistake of the parties, or mistake of one party which the defendants at the time knew or suspected. They further alleged that, under § 35-4-153, Code 1975,

"even if the allegations of the Second Cause of Action are true, which Defendants deny, any revision of the royalty deed by the Court would prejudice the rights of the Defendants other than Harris Anderson, which Defendants acquired their interests as third parties in good faith and for value."

Sims and Anderson gave depositions, which were introduced as exhibits at trial. The trial court heard the case without a jury. Only Sims and Anderson testified. The trial court entered a judgment finding that the evidence did not support either the construction of the deed requested by the plaintiffs or reformation of the royalty deed; that there was no fraud, mutual mistake, or mistake of one party which the other at the time knew or suspected; and that the royalty deed truly expressed the intent of the parties. The court therefore ordered that the plaintiffs' request for relief be denied, that the royalty deed is a valid and binding deed on the parties, and that the defendants are entitled to 1/10 of the 1/4 royalties...