Nafco Oil and Gas, Inc. v. Appleman

• Decision Date: 08 August 1967
• Docket Number: No. 8772.,8772.
• Citation: 380 F.2d 323
• Parties: NAFCO OIL AND GAS, INC., a corporation, Appellant, v. Nathan APPLEMAN, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

380 F.2d 323 (1967)

NAFCO OIL AND GAS, INC., a corporation, Appellant, v. Nathan APPLEMAN, Appellee.

No. 8772.

United States Court of Appeals Tenth Circuit.

July 3, 1967.

Rehearing Denied August 8, 1967.

Thomas H. Lee, Houston, Tex. (Thomas J. Binig, Houston, Tex., with him on the brief), for appellant.

A. F. Ringold, Tulsa, Okl. (C. H. Rosenstein, Tulsa, Okl., with him on the brief), for appellee.

Before PICKETT and SETH, Circuit Judges, and CHRISTENSEN, District Judge.

SETH, Circuit Judge.

This action was brought by the appellee, who was the grantor in a conveyance of certain oil and gas interests, against the successor in interest of the original grantee. The action is for a declaratory judgment seeking to establish the grantor's right to receive $1,000 a month for audit and overhead expense from the grantee for so long as a production payment reserved in the conveyance remains in effect.

Both parties sought summary judgment in the trial court and judgment was entered in favor of the plaintiff. The trial court concluded that the audit and overhead expense provision of the conveyance was ambiguous and incomplete because it did not name the person to whom payment was to be made for such expenses nor the length of time over which payment was to be made; and consequently, parol evidence was admissible to ascertain the intent of the parties to the agreement. From the evidence before it, which was primarily depositions and letters of the interested parties and the evidence as to how the parties had construed the contract over a period of several years, the trial court concluded that the parties had agreed that the grantor-plaintiff was to receive the $1,000 per month so long as the production payment payable to the grantor remained in effect.

The contract provision contained in the conveyance of the oil and gas rights with a reservation of a production payment, and which was the subject of the litigation, reads as follows:

"(1) There shall first be taken, as incurred, the amount of all of Grantee\'s direct outlays * * * in developing, equipping and operating the oil and gas leases * * * to the extent of Grantor\'s interest therein hereby conveyed and assigned, including outlays in the nature of delay rentals on undeveloped acreage and direct taxes, * * * There shall also be added to the expenses of the Grantee as set forth above a fixed charge for audit and overhead expense of $807.70 per month * * *."

There is no issue but that the appellee is the grantor as appears in the above quotation, and that the appellant corporation as successor in interest is the grantee therein. A similar contract was executed by appellee's wife as grantor with a similar charge for a part of the overhead expense, but in a lesser amount. For the purpose of trial and appeal, the parties considered both contracts as one.

The record before us does not of course disclose the exact theories upon which the parties relied to support their cross-motions for summary judgment. The appellant here has advanced alternative arguments to show that the disposition of the...