Opinion ID: 1717411
Heading Depth: 1
Heading Rank: 2

Heading: Limitations, estoppel, and laches

Text: Anadarko argues that the claim of Venable is barred because he signed and accepted Division Order # 0323428 which sets out his interest and at no time did he dispute the calculation of his interest nor did he revoke or rescind the order. The Division Order is a multi-paged document which states in relevant portion: The undersigned, and each of us, certify and guarantee that we are the legal owners of and hereby warrant the title to our respective interests as set out below in the oil and casinghead gas....  Effective first production and until further notice, subject to the conditions, covenants and directions hereof, you are authorized to sell and deliver Products from the property above described and until further notice give credit for said Product as follows:.... A division order is [a] contract of sale to the purchaser of oil or gas. The order directs the purchaser to make payment for the value of the products taken in the proportions set out in the division order. Williams & Meyers, Manual of Oil and Gas Terms § 258 (1985). The division order is typically terminable at the will of either party and may as is alleged here inaccurately reflect the interest owned by a party. Generally under such circumstances the purchaser of the minerals may rely on the division order in making payments to the owners and not be liable in contract or tort for underpayment. 4 Williams & Meyers, Oil and Gas Law § 704.5 (1984). In Hemingway, Law of Oil and Gas § 7.5 (3d ed. 1991) the following appears: [b]y the better view, an owner of production who has executed a division order is not so contractually bound or estopped by the division order that he cannot recover for underpayment from owners of production who have been overpaid. He may not recover from the purchaser of production. Anadarko's argument is that the signing and acceptance of the Division Order calculation should bar Venable from claiming any other formulation under several theories. First Anadarko argues that Venable is barred by the statute of limitations. Arkansas Code Ann. § 16-56-111 (Supp.1991) provides a five-year limitation on actions concerning instruments in writing. Anadarko claims the statute ran in 1988 on the 1983 division order. The statute provides, however, partial payment... shall toll this statute of limitation. In Johnson v. Gammill, 231 Ark. 1, 328 S.W.2d 127 (1959), the parties entered into a written stipulation as to a longstanding indebtedness on January 26, 1952. Several payments were made subsequent to that date and before suit was filed on February 8, 1957. A statute of limitations defense was raised which we rejected, holding that the stipulation constituted the written instrument and the part payments interrupted or tolled the statute with respect to the entire indebtedness. Assuming the division order constitutes the written instrument for purposes of triggering the statute in this case, the earlier payments made under the order tolled the statute. Second Anadarko claims laches and estoppel bar this claim. It is clear from the language above that all that Venable's signature on the division order represents is the warranting of his title and an authorization for Anadarko to sell the products, giving him credit for his share as calculated. It does not in any way indicate Venable's ratification of the calculation or a waiver of his right to challenge that calculation. We have never been called upon to interpret execution of a division order in the manner suggested by Anadarko. We have, however, considered other arguments concerning the effect of such a document. In Shreveport-El Dorado Pipe Line Company v. Bennett, 172 Ark. 804, 290 S.W. 929 (1927), we rejected an estoppel argument against a royalty owner based on the contents of a division order directed to the Pipe Line Company. The division order directed giving credit for a share of production to a party who had no right to a share. The oil company argued it had no knowledge its payment was in error because the information in the division order setting out an interest to others justified the payment it had made. We found that the oil company's notice of the leases underlying that division order was sufficient notice that the payment was incorrect. In Pope v. Pennzoil Producing Co., 288 Ark. 10, 701 S.W.2d 366 (1986), we said that a division order and a 13-year delay in raising any objections, combined with a ratification and adoption clause in the division order, barred royalty owners by laches and estoppel from challenging the distribution. The document provided in relevant part: We ... do hereby adopt, ratify and confirm each of Pennzoil Producing Company's leases covering these tracts and provided Pennzoil pays royalties in the proportions set out, same will be maintained in full force and effect. We said: We have consistently held that oil and gas properties are unusual and require diligence on the part of parties claiming a property interest. Walker-Lucas-Hudson Oil Co. v. Hudson, 168 Ark. 1098, 272 S.W. 836 (1925). In Sanders v. Flenniken, 180 Ark. 303, 21 S.W.2d 847 (1929), this court cited with approval the following language from Patterson v. Hewitt, 195 U.S. 309 [25 S.Ct. 35, 49 L.Ed. 214] (1904): There is no class of property more subject to sudden and violent fluctuations of value than mining lands. A location which today may have no salable value may in a month become worth millions. Years may be spent in working such property, apparently to no purpose, when suddenly a mass of rich ore may be discovered from which an unusual fortune is realized. Under such circumstances, persons having claims to such property are bound to the utmost diligence in enforcing them, and there is no class of cases in which the doctrine of laches has been more relentlessly enforced. In Sanders we continued discussion of the concept as follows: From these citations it will be seen that this court, as well as the Supreme Court of the United States, has uniformly recognized that, on account of the fluctuating and uncertain values of oil and gas lands, parties asserting title thereto must act more promptly than in ordinary cases in which the values remain practically the same. Of course, it is equally well-settled that, when the question of laches is an issue, the plaintiff is chargeable with such knowledge as he might have obtained upon inquiry, provided the facts already known to him were such as to put the duty of inquiry upon a man of ordinary intelligence. These cases establish that laches or estoppel may flow from execution of a division order; however, in this case Venable first sought an accounting for and then judgment for the proceeds which were withheld under Anadarko's calculation in the division order. The equitable doctrine of laches is not applied in actions for damages, for accounting, for the recovery of money or property fraudulently obtained, and the like. [Emphasis supplied.] Peek v. Brickey, 300 Ark. 354, 779 S.W.2d 152 (1989); S. Symons, Pomeroy's Equity Jurisprudence, 917, p. 600 (5th ed. 1941). Additionally, laches is based on the theory that it is the unreasonable delay of the party seeking relief under such circumstances as to make it inequitable or unjust for the party to seek relief now. Reynolds v. Smackover State Bank, 310 Ark. 342, 836 S.W.2d 853 (1992). Venable asserts he had no knowledge of the contents of the 1980 leases prior to filing suit. There is nothing in this record to contradict that assertion, and we must assume that the Chancellor believed this to be the case. The Chancellor is in the best position to assess the credibility of witnesses, and where an issue turns heavily upon credibility, we will defer to the Trial Court. First Nat'l Bank v. Mercantile Bank, 304 Ark. 196, 801 S.W.2d 38 (1990). Also in the Reynolds case we pointed out that for silence to constitute an estoppel there must be both the opportunity and the duty to speak. Lavaca School Dist. No. 3 v. Charleston School Dist. No. 9, 304 Ark. 104, 800 S.W.2d 703 (1990). The action of the person asserting the estoppel must be the natural result of the silence, and the silent party must be in a situation to know that someone is relying on the silence to his detriment. Again, Venable's lack of knowledge precludes the doctrine of estoppel from barring his claim. Finally, in Worth v. Civil Serv. Comm `n, 294 Ark. 643, 746 S.W.2d 364 (1988) we said: Estoppel is a doctrine which involves both, not just one, of the parties. Continental Ins. Companies v. Stanley, 263 Ark. 638, 569 S.W.2d 653 (1978). The party claiming estoppel must prove he relied in good faith on some act or failure to act by the other party, and that, in reliance on that act, changed his position to his detriment. Christmas v. Raley, 260 Ark. 150, 539 S.W.2d 405 (1976). Here, the appellee civil service commission has not shown that it detrimentally changed its position based upon an act or failure to act by appellant. Thus, the doctrine of estoppel is not applicable against the appellant. Similarly, the doctrine of laches is not applicable because it too requires a detrimental change in the position of the one asserting the doctrine as well as an unreasonable delay on the part of the one against whom it is invoked. Padgett v. Bank of Eureka Springs, 279 Ark. 367, 651 S.W.2d 460 (1983). Here, twelve months did not amount to an unreasonable delay in filing the suit, and the commission simply did not change its position as the result of a delay. The scant record in this case has given us problems with resolving this matter. It is absolutely devoid of any information regarding any payments made by Anadarko. As far as we can tell, however, there was no issue before the Chancellor with respect to any rights of innocent third parties which might have an effect on Venable's entitlement. As we cannot say the Chancellor erred in determining the amount due to Venable pursuant to the 1939 deed, and as we conclude Venable's claim was not barred by a statute of limitations, estoppel, or laches, the decree is affirmed. CORBIN, J., not participating.