Lemm v. Sparks

• Decision Date: 23 February 1959
• Docket Number: No. 5-1662,5-1662
• Citation: 321 S.W.2d 388,230 Ark. 105
• Parties: George P. LEMM et al., Appellants, v. J. W. SPARKS et al., Appellees.
• Court: Arkansas Supreme Court

Page 388

321 S.W.2d 388

230 Ark. 105

George P. LEMM et al., Appellants, v. J. W. SPARKS et al., Appellees.

No. 5-1662.

Supreme Court of Arkansas.

Feb. 23, 1959.

Rehearing Denied March 30, 1959.

Virgil Roach Moncrief and John W. Moncrief, Stuttgart, for appellants.

Coleman, Gantt & Ramsay, E. Harley Cox, Jr., Pine Bluff, for appellees.

McFADDIN, Justice.

The appellees (plaintiffs), J. W. Sparks and Herbert Hunter (doing business as Gregg Oil Company, a partnership), filed action against the appellants (defendants), George P. Lemm and Jerry Maiatico, to recover a claimed balance of $15,798.89 for labor and services alleged to be due under both written and oral contracts. In addition to a general denial, the defendants denied any oral contract, claimed that plaintiffs had not fully performed the written contract, and denied owing any amount to the plaintiffs. The jury's verdict was for the plaintiffs for $6,000; and defendants bring this appeal, assigning 25 errors. Most of these relate to instructions; and we group and dispose of the twenty-five points in suitable topic headings.

I. The Alleged Oral Contract. In 1956 John H. Hall acquired oil and gas leases on more than 12,000 acres of land in the western part of Arkansas County, and was desirous of finding someone who would finance the drilling of exploratory wells. The territory was entirely 'wildcat'. Hall met the plaintiff, Hunter, who was anxious to do the actual drilling, if someone would finance the operations. Hunter's partner, Sparks, knew a Mr. Kibler in Washington, D. C., who, in turn, knew parties that might be induced to provide the finances. So Sparks and Hall went to Washington and were introduced to the defendants, Lemm (an attorney) and Maiatico (a building contractor). Hall sold Lemm and Maiatico leases covering 10,000 acres.

Lemm and Maiatico entered into a drilling contract with the Gregg Oil Company by which they agreed to pay Gregg Oil Company $18,000 for drilling the first well and $17,000 for drilling the second well. The location of each well was stated. Gregg Oil Company agreed, inter alia, to drill each well to a depth of 4,200 feet '* * * unless oil and gas in paying quantities is encountered at a lesser depth', or unless it became impossible to drill because of the formation encountered. Also, Gregg Oil Company agreed, inter alia, to take three drill stem tests in each well and to '* * * take up to twenty side wall cores'. ¹

The plaintiffs claimed that immediately after the signing of the drilling contract, Sparks told the defendants, Lemm and Maiatico, that if a showing of oil should be encountered in either of the wells covered by the contract, then considerable additional expenses would be entailed, such as casing, cementing, delay time, etc.; and plaintiffs claimed that an oral contract was mad between the parties as to such additional items of expense. ² The first well provided for in the contract was duly commenced within the time and at the location stated in the contract. John H. Hall was at the drilling location during most of the time. When the well reached a depth of about 1,600 feet there was a slight showing of oil. The driller obtained cuttings and showed them to Hall, ³ thinking that he was representing Lemm and Maiatico. Here is Hunter's testimony as to the occurrence:

'We were drilling in an unproven area and we didn't know what we might run into at any depth so when that cutting came to the surface oil was on top of the pit--not in large quantities but a good large scum. Dr. Hall was there. * * * We looked that over and then we carefully looked at the next hundred feet that we drilled just a little at a time * * * we would circulate out and watch it, * * * and it looked like it was possible that we might have something worth keeping at that point. We had the samples and we put them in individual bags and numbered the depth that they came from and turned them over to them, and Dr. Hall recommended to set up pipe at that depth; and I said you get in touch with the people in Washington but we have a contract to keep here, to go deeper than this unless we do get orders to set pipe; * * * I am going to continue to make hole until I get orders to stop, so we continued drilling * * *.'

When Mr. Lemm came down from Washington the well was at a depth of 3,917 feet. Lemm decided to set caising and test the horizons ⁴ between 1,600 and 1,700 feet. At all events, beginning on August 31st and continuing until the second well was abandoned ⁵ the plaintiffs spent thousands of dollars for casing, cementing, shut-down time, etc.: so that the written contract calling for $35,000 for two wells grew (with the disputed oral contract) into expenditures totalling in excess of $100,000. The defendants do not deny that they have paid the plaintiffs a total of $96,500 on the two wells; and the plaintiffs claim that there remains due a balance of $15,798.89.

Thus, we come to the matter of the oral contract for casing, cementing, shut-down time, etc. It is well recognized that when the written contract is plain and unambiguous and complete in its terms, then parol contemporaneous evidence is inadmissible to contradict or vary the terms of the valid written instrument. Outcault Adv. Co. v. Bradley, 105 Ark. 50, 150 S.W. 148; Anderson v. Wainwright, 67 Ark. 62, 53 S.W. 566; and Cox v. Smith, 99 Ark. 218, 138 S.W. 978. But, here, it is not a matter of a contemporaneous oral contract varying the terms of a written contract; rather, this is a case of an oral contract being in addition to the written contract. As such, the evidence was admissible concerning the oral contract. Burgie v. Bailey, 91 Ark. 383, 121 S.W. 266, 18 Ann.Cas. 389. In Cox v. Smith, 99 Ark. 218, 138 S.W. 978, 980, Mr. Justice Frauenthal stated the rule: '* * * a separate, independent verbal agreement, relating to a matter not embraced in the written contract may be proved by parol testimony.'

Certainly the parties had some sort of understanding in addition to the written contract heretofore copied, because it only required the defendants to pay a total of $35,000, and yet they do not deny having paid the plaintiffs a total of $96,950. Some explanation was proper as to the payments; and the evidence established that labor, services and materials were furnished under an oral contract in addition to the written contract. So the Court was correct in allowing evidence to be heard concerning the oral contract.

II. Plaintiffs' Instruction No. 1. Over the defendants' objection, the Court instructed the jury:

'If you find from a preponderance of the evidence, that the plaintiffs and defendants entered into a contract in writing for the plaintiffs to drill on behalf of the defendants two oil wells in Arkansas County, Arkansas, and that after that contract in writing the plaintiffs and defendants entered into one or more additional agreements orally, and if you find that the plaintiffs have completed all their obligations under these contracts, and if you further find that there is a balance remaining unpaid under these contracts when considered together, then you shall find for the plaintiffs in the amount remaining unpaid, if any.' ⁶

Much of what we have said in Topic I, supra, applies to this instruction. The defendants say that this instruction was a 'roving commission' to the jury; but we do not consider the instruction fatal as against the defendants' objections. The plaintiffs assumed the tremendous burden of establishing that they had completed '* * * all of their obligations under these contracts'. They filed an itemized account of thirteen single-spaced typewritten pages, which purported to show each item of debit and credit from July 1956 (the signing of the written contract) to and including November 14, 1956, which was after the abandonment of the second well. This account showed a claimed balance due plaintiffs of $15,798.89. The plaintiffs were interrogated at length about the various items; the jury had the account and all evidence about it, together with the instruction No. 1; and the verdict of the jury was for the plaintiffs for $6,000. There was substantial evidence to sustain the verdict.

III. Waiver. During the presentation of the evidence, and also in several requested instructions, defendants insisted that the plaintiffs had never completely performed the written contract. Some instances of non-performance, as urged by the defendants, were: (a) the first well was only drilled to 3,917 feet instead of 4,200 feet; and (b) the written contract called for three drill stem tests in each well and none was made. Because of these matters (and others of which these are typical), defendants urged that an instructed verdict should have been given in their favor.

The defendants also requested an instruction which read:

'The Court instructs the jury that under the contract sued on by plaintiffs, it was the duty of plaintiffs to make three drill stem tests in hole or well number 1 and it was also the duty and obligation of the plaintiffs, Hunter and Sparks, to make three drill stem tests in well or hole number 2, and it was the duty and obligation of plaintiffs to take twenty side wall cores in well or hole number 1, and it was the duty and obligation of plaintiffs to take twenty side wall cores in hole or well number 2, * * *.'

The Court refused the instruction as requested; but modified it and gave it by adding these words at the conclusion of the requested instruction:

'* * * unless you further find from a preponderance of the testimony that the defendants had an authorized agent who had the authority to waive such conditions, unless you further find the defendants themselves waived such conditions.'

Likewise, in another instruction, the defendants insisted that the plaintiffs had not located the second well at the place provided in the contract; and the Court added these words to the requested instruction: '* * * unless the provisions of the...