Schnitt v. McKellar, 5--4208

• Decision Date: 18 March 1968
• Docket Number: No. 5--4208,5--4208
• Citation: 244 Ark. 377,427 S.W.2d 202
• Parties: Abe SCHNITT, Appellant, v. Lyman S. McKELLAR et al., Appellees.
• Court: Arkansas Supreme Court

Page 202

427 S.W.2d 202

244 Ark. 377

Abe SCHNITT, Appellant, v. Lyman S. McKELLAR et al., Appellees.

No. 5--4208.

Supreme Court of Arkansas.

March 18, 1968.

As Amended April 29, 1968.

Simon, Carroll, Fitzgerald & Fraser, Shreveport, La., and Arnold & Arnold, Texarkana, for appellant.

McKay, Anderson & Crumpler, Magnolia, for appellees.

FOGLEMAN, Justice.

This case involves a determination whether the trial court was correct in finding that certain instruments executed by certain McKellar heirs conveyed their interest in an undivided one-fourth working interest in oil, gas and minerals to J. H. Carmichael, Jr. and J. C. Stevens.

Appellant is the successor in interest to some of the McKellar heirs who were parties to these instruments. He filed this action for a declaratory judgment to determine the interests of Carmichael and Stevens and their respective wives under the instruments and for partition of all surface and mineral interests. Inasmuch as the evidence bears out factual recitations contained in these instruments, ¹ and the intention of the parties to the instrument must be gathered from its four corners, we set out pertinent portions thereof:

'THIS CONTRACT, made and entered into on this 13 day of May, 1940, by and between * * * (hereinafter called clients) and J. H. Carmichael, Jr. and J. C. Stevens, Attorneys at Law, (hereinafter called attorneys)

WITNESSETH: That the said Clients own the following described lands, to-wit: * * *

THAT, Whereas, there were executed certain oil, gas and mineral leases on said lands, and there was discovered oil on said lands, and said lessess and assigns have failed to carry out the terms and conditions, both expressed and implied, in connection with said lease agreements, and have failed to properly develop and operate said lease, which has caused the said Clients to suffer great loss and damage.

THAT said failure on their part amounts practically to abandonment, for a period of over twelve (12) months. They have permitted said lands to be drained and said lease should forfeit to the original owners, and in addition they are entitled to damage in a large sum, sufficient to compensate them for all ther loss.

WHEREAS, the said Clients are desirous of prosecuting their claims in every way possible, in order to recover their seven-eighths (7/8) working interest in said lands and in addition all claims of damage, and all other matters connected with said property and the clearing of the title, and for these purposes the said Clients hereby employ J. H. Carmichael, Jr. and J. C. Stevens to represent them in these matters and agree to pay them as their fee two- eighths (2/8) of their seven-eighths (7/8) interest, leaving said Clients five-eighths (5/8) working interest, and in addition agree to pay them the same proportionate amount of all sums recovered by way of damage or in any other way, said fee to be paid whether recovered in court action or by compromise.

SAID Attorneys are empowered and directed to take any and all steps they deem necessary to prosecute said claims and do any and all things desired in handling said matters. Said attorneys hereby accept the employment and fee as set out above and agree to represent said Clients to the best of their ability. NOW, THEREFORE: KNOW ALL MEN BY THESE PRESENTS:

That We, * * * for and in consideration of the sum of One Dollar ($1.00), cash in hand paid, receipt of which is hereby acknowledged, and other valuable consideration, do hereby grant, bargain, sell and convey unto the said J. H. Carmichael, Jr. and J. C. Stevens, and unto their heirs and assigns forever, an undivided one-fourth (1/4) working interest as set out above, in and to all of the oil, gas, and other minerals in, under, and upon the following described lands lying within the County of Miller and State of Arkansas to-wit * * *

TO HAVE AND TO HOLD the above described property, together with all and singular the rights and appurtenances thereto in any wise belonging, unto the said J. H. Carmichael, Jr. and J. C. Stevens, and unto their heirs and assigns forever.

And We, * * * for and in consideration of the said sum of money and other valuable consideration, do hereby join in the execution of the foregoing conveyance and do hereby release and relinquish unto the said grantees all of our rights and claims to dower and homestead in and to the above described property, to the extent of the rights and interest hereinabove described.

WITNESS our hands and seals this 13 day of May, 1940.

* * * CLIENTS.'

Carmichael and Stevens were associates in the practice of law at the time of the execution of the instruments. Carmichael testified that the two of them performed legal services for the heirs who signed the documents in proceedings in bankruptcy in the Federal Court in Little Rock and in a suit in the Chancery Court of Miller County to recover working interests given other parties by numerous standard oil, gas and mineral leases. He also stated that all services called for by the contract were performed by him and Stevens after the expenditure of years of time and thousands of dollars of money, for which they had received no compensation or reimbursement. The instruments were prepared by Carmichael and Stevens. Records in the Federal Court in Little Rock indicated that there was production of oil from the lands. Carmichael testified this was stopped at the time he and Stevens filed an intervention on behalf of their clients in the Federal Court. It is stipulated that neither Carmichael nor Stevens has ever attempted oil or gas development, executed or received leases or any agreement or contract with any other party dealing with the mineral interests. Carmichael said that he had paid taxes on the mineral rights for almost twenty years. There was no oil or gas lease on the property when this action was filed.

Appellant states twelve points on which he relies but all relate to the validity and construction of the instruments. He contends that the instruments are not deeds of conveyance but simply contracts of employment not creating any present interest, but if they were, the interest transferred was simply a lease without a term which had been abandoned by failure of appellees to develop for oil, gas and minerals within a reasonable time. Other contentions are that if this lease has not been abandoned, appellees are obligated to develop the properties when called upon to do so and that the instruments were void as contravening the rule against perpetuities.

Appellant places stress upon the following factors to sustain his position that there was no conveyance, or, at best, only a conveyance in the nature of a lease:

1. The instruments are labeled 'CONTRACT'.

2. That all Carmichael and Stevens were to receive was a one-fourth 'working interest' or two-sevenths of the rights the lessees has under leases in existence at the time of the employment--the right to develop for oil, gas and minerals and to retain seven-eighths of the proceeds.

3. That the only result of the activities of Carmichael and Stevens was the loss by the McKellar heirs of such production as they then had.

4. That the contract was drawn by Carmichael and Stevens and should be construed more strongly against them.

5. That the instruments were so vague and uncertain as to render them void and inoperative.

A deed, or any other contract, should be examined to determine the intention of the parties. Smart v. Gunnels, 234 Ark. 567, 353 S.W.2d 153. We find that it was the intention of the parties that the instrument convey, and that it did convey, the grantors' interests in an undivided one-fourth interest in the oil, gas and minerals under and upon the lands involved. The instrument names the parties as grantors and grantees. It has a granting clause using the words 'grant, bargain, sell and convey.' The habendum clause is in the form commonly utilized in conveyances. The instrument conveys the grantors' interests in the one-fourth interest not only in oil and gas, but in other minerals in, under and upon the lands. There is no provision for a time when drilling shall be done or provision for delay payments contained in the usual oil lease. It is hardly reasonable to suppose that these lawyers would have accepted employment which they could reasonably assume would require their services over a long period of time and the expenditure of considerable sums of money for compensation contingent upon profitable production on the lands obtained, if at all, through their efforts and expenditures. Nor is it plausible that they woud, after performing the required services, do nothing at all to obtain production if they had accepted such a contract. It seems unlikely that the parties who signed this agreement, being already dissatisfied with production by a lessee in the business, would be satisfied to risk their possibility of improvement to two lawyers. It is also unlikely that parties who were so anxious to cancel leases on which they had unsatisfactory production would delay so long in asking cancellation of a contract abandoned by the opposite party. It is the terms of an instrument, not its name, which determine its character.

A portion of the preamble to the instrument having significance is the clause setting out specifically what Carmichael and Stevens are to do--represent the signers in prosecuting certain claims. Nothing whatever is said about their doing anything else. The 'whereas' clauses set forth the reasons or inducements for entering into a contract and must be considered in determining the true intentions of the parties thereto. United States Fidelity & Guaranty Co. v. Sellers, 160 Ark. 599, 255 S.W. 26. There is no language in the instrument that places any other responsibility on the lawyers. It seems logical to us that if they had also had the responsibility of developing the lands for oil and gas, this would also have been stated somewhere in the preamble.

We...