Court Opinion

ID: 3468913
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:36:20.237665+00
Date Added: 2024-06-11T13:54:34.885453
License: Public Domain

A rehearing was granted in this case upon the application of the plaintiffs and it is now submitted for our determination.
From the allegations in the plaintiffs' petition and the admissions in the defendant's answer the defendant acquired leases on 15,000 acres of land known as the "Abbeville Block" in his name for the plaintiffs during the year, 1933. The defendant acquired in his name for the plaintiffs mineral rights in 3,500 acres in this block. All the funds used to acquire the leases and mineral rights were furnished by the plaintiffs. It is admitted that the defendant was to receive a fourth interest in the leases for his services. The plaintiffs allege that the mineral rights were the property of the plaintiffs in its entirety. The defendant admits in his answer that the mineral rights were acquired for the plaintiffs but alleges that he was to receive a one-fourth interest in the minerals under the agreement between him and the plaintiffs. All of the leases were assigned *Page 497 
to the plaintiffs by defendant during the year 1933. The defendant in his answer alleges that, at the time the leases were transferred to the plaintiffs, it was understood that the plaintiffs owned all of the leases on the entire 15,000 acres and it was understood that the defendant should have the ownership of the entire mineral interests. On August 3, 1933, an escrow agreement was entered into between the various lessors in the Abbeville Block, on the one side, and Moore, the defendant, and N.R. Tanner, on the other side, wherein it was agreed that the lessors would execute ten-year lease contracts covering their respective tracts of land subject to the escrow agreement. This escrow agreement was entered into while the defendant was securing the leases and prior to the defendant's assignment of the leases to the plaintiffs. It was provided in the escrow agreement that the leases were to be placed in the bank at Abbeville with a copy of this drilling contract which was to be and serve as instructions for the bank in the holding and disposition of the leases; that the leases were to be subject to the condition that lessees were to begin drilling operations within 90 days from the date the leases were placed in the bank and the titles thereto approved; that the lessees were to drill a well 500 ft. deep unless oil or gas was found at a lesser depth; that in event the lessees failed to start the drilling operations at the time set forth, in such event, it was optional for the lessees to pay 50¢ per acre bonus for the leases; that in event the option was exercised the contract would be null and the leases were to remain in force for their primary term; that *Page 498 
such leases shall provide for an annual rental of 50¢ per acre; that if the first well started was junked or abandoned the lessees or their assigns were granted the privilege of drilling a second well within 90 days from the time of the abandonment of the first well; that the escrow bank is instructed and is to be governed thereby as follows: if operations have been started as above provided the bank is instructed to deliver all the leases and contracts covered by this contract to the lessees or their orders. All of the leases were dated November 6, 1933, and are identical in terms. It is provided therein that they remain in force for a term of ten years and as long thereafter as oil or gas is or can be produced on the land. The leases provided if operations were not commenced within one year that they are void unless the lessees shall pay the sum of $_____, hereinafter termed rental. The leases were assigned to the plaintiffs on November 25, 1933. Immediately thereafter, during the latter part of November, the plaintiffs began drilling operations and drilled to a depth of 800 ft. which terminated as a dry hole during the month of April, 1934. On June 6, 1934, the plaintiffs assigned to the defendant leases on 7,300 acres of the 15,000 acre block. On that date the defendant wrote the following letter to the plaintiffs:
"June 6, 1934.
"Mr. Claude B. Hamill,
"Mr. R.E. Smith,
"Houston, Texas.
"Gentlemen:
"I hereby agree that when I have finished the well that I am about to drill in the Abbeville Block of approximately 7300 *Page 499 
acres, if the well is a producer, I will assign to you three-fourths of all the mineral I now hold in my name; or, if the well is a dry hole, I will assign to you all of the minerals I now hold in my name.
"You have this day assigned to me approximately 7300 acres of the 15,000 acres under lease in your name in this area. It is understood that you will continue to carry me and my associates for a one-fourth interest in the remaining leases in this block.
"Very truly yours,
"(Sgn) J.C. Moore
"Accepted
"Claude B. Hamill "R.E. Smith"
During the month of August, 1934, within 90 days from the abandonment of the first well, the defendant began drilling operations and drilled to a depth of 400 ft. at which time a pipe fell in the hole and stopped the operations. Shortly thereafter a suit was filed against the defendant's drilling contractor and the drilling equipment was seized. Another suit was filed within a short time. After the suits were filed all of the pipe was pulled out of the well and it and all of the equipment moved away from the leased premises. The defendant has made no further effort to operate on the leased premises in any manner. The funds used by the defendant to drill the second well were acquired from a number of people in Abbeville by the defendant assigning to them 10/32 interest in the leases on the 7,300 acres of land. No rentals were ever paid on any of the leases in the *Page 500 
entire 15,000 acre block. On April 8, 1935, the plaintiffs wrote the following letter to the defendant:
"April 8, 1935.
"Mr. J.C. Moore,
"General Delivery,
"Dallas, Texas.
"Dear Sir:
"After talking with you in Dallas it is necessary, as I explained to you there, to show on our Income Tax a record of the money spent in Vermilion Parish in its entirety.
"Am enclosing instruments which I spoke to you about and am asking you to sign them and then return them to this office. We will then have Buddy Tanner sign the one he should sign.
"You mention to your attorney that you have a letter showing our agreement which will protect you under the terms set forth, as that is the status that we have been existing under for some time. Am sure that your attorney will understand the fairness of the request. Under no condition change anything in these instruments. Either sign them or write us a letter, or have your attorney do it, advising us your stand in the matter.
"I do not want to have to come to Dallas, but if my presence there is necessary to final this matter, I now give you my word, please advise your attorney accordingly, that I will come to Dallas and stay there until this matter has been settled.
"I also give you my word that the value of the royalty, in my opinion, is nothing, *Page 501 
but the principle in the matter is all that is involved.
"You mentioned that you wanted the block of leases kept intact for purposes of drilling a well. The changing of the title of the royalty cannot in any way effect this, as I am now telling you that we will do everything that we said we would, just as we have done in the past and will continue to do so, and will do anything to assist you in the carrying out of plans for additional operations in that section.
"Now, J.C., do not misunderstand this statement nor let any bad advice cause you to err in judgment. We rate the consideration that we are asking, so am suggesting that you read this letter personally; that you think carefully before you act in this matter, and then get in touch with us.
"It does not make any difference where you happen to be located, nor when, as this matter must be attended to. Am not even suggesting as to what course you shall take. So advise us as quickly as possible because it is necessary, as our time is limited.
"Since talking to you we have completed our records in regard to the above; also have written Abbeville, and your obligations have been taken care of there, as you mentioned to me; and the royalty is clear.
"Thanking you in advance for your immediate attention.
"Yours truly
"(Sgd) R.E. Smith
"RES:t
"J.C: — Please execute both copies of all three instruments 
return all to this office.
"T." *Page 502 
The instant suit seeking specific performance was filed on January 28, 1936, and is based on the agreement set out in the letter of June 6, 1934. Upon trial the district court dismissed the plaintiffs' demand. An appeal was taken to this Court. Upon trial of the appeal the judgment of the district court was affirmed. A rehearing was granted and the case is now submitted for our determination.
It was clearly provided in the escrow agreement that the bank was not to deliver the leases and contracts covered by the escrow agreement until drilling operations began. This clearly shows that the parties contemplated drilling operations to keep the leases operative. It was provided in the escrow agreement that if the parties failed to start the drilling operations, in such event, the leases could be kept operative by the payment of 50¢ per acre bonus. Under the escrow agreement if the parties exercised this option the drilling contract would be null. However, the parties did not avail themselves of the option, but began drilling operations. According to the escrow agreement if the first well was abandoned the parties or their assigns were granted the right to drill a second well within 90 days from the time the first well was abandoned. The first well was drilled within the period set out in the escrow agreement by the plaintiffs and the second well was drilled, after the letter of June, 6, 1934, by the defendant within 90 days or the period of time set out in the escrow agreement. It would appear therefore that all the operations were within the time set out in the escrow agreement and the parties *Page 503 
never contemplated the payment of any rentals on the leases. If we were to interpret the letter of June 6, 1934, as is contended for by the defendant's counsel, in the light that the plaintiffs were to continue to carry the defendant and his associates for a one-fourth interest in the remaining leases by the payment of rentals, it would be seemingly strange that no provision was made to keep the leases on the 7,300 acres in effect by the payment of rentals. The manner under which the leases had been kept in effect prior to the letter of June 6, 1934, was not by the payment of rentals but by drilling operations. If the plaintiffs were to continue to carry the defendant and his associates for an interest in the remaining leases it would appear that since the word "continue" is used it would mean the continuation of the manner in which the leases had been previously kept in effect. There having been no rentals paid in the first instance the provision of continuing to carry could not refer to the payment of rentals. It appears in the various transactions between the plaintiffs and the defendant that the letter of June 6, 1934, does not embody the entire agreement but only states the agreement in general. This is borne out by the defendant's answer. The defendant in his answer alleges that at the time he transferred the leases in the 15,000 acre block in their entirety to the plaintiffs that it was understood that the plaintiffs were to own the leases in their entirety and that he the defendant was to retain the mineral rights and own them in their entirety under their agreement. This refutes the interpretation of the defendant's counsel that the provisions to "continue to *Page 504 
carry", etc., was to the effect that the plaintiffs were to "continue to carry" the defendant and his associates the interest in the leases by the payment of rentals. According to the defendant's answer, the defendant had no interest in the remaining leases unless there was some subsequent agreement to the effect that the defendant and his associates were to have a one-fourth interest in the leases which we do not find in the letter of June 6, 1934. The provision of "continue to carry", etc., presupposes that the defendant already owned an interest in the remaining leases. It does not embody the complete and full agreement of the parties herein. Such being the case, parol evidence is admissible to explain that part of the agreement which refers to the continuing to carry the defendant and his associates for a one-fourth interest in the leases. This part of the agreement does not refer to real rights but deals with personal rights because prior to Act No. 205 of 1938, which classified mineral leases as real rights, they were considered personal rights. Gulf Refining Co. v. Glassel, 186 La. 190,171 So. 846; DeJean v. Whisenhunt, 191 La. 608, 186 So. 43. This being an incomplete contract, the parol evidence is admissible. Davies v. Bierce, 114 La. 663, 38 So. 488; New Orleans  C.R. Co. v. Darmes, 39 La.Ann. 766, 2 So. 230; Board of Trustees v. Campbell, 48 La.Ann. 1543, 1549, 21 So. 184; Walker v. Villavaso, 18 La.Ann. 715, 717; Bass v. Roby Motors Co., 14 La.App. 374, 124 So. 596; Denis, Danziger  Tessier v. Tilton, 120 La. 226, 45 So. 112; Flash, Preston  Co. v. American Glucose Co., 38 La.Ann. 4, 7; Redman v. Murrel, 117 La.[516], 520, *Page 505
42 So. 49. Moreover, the language used in the agreement with reference to "continue to carry", etc., is ambiguous and does not set out in what manner or for what period of time the plaintiff was to so do. The parol evidence would be admissible not to contradict or destroy the provision in the contract, but to explain it. From the testimony of the plaintiff and three of the defendant's associates, it is clear that there never was any intention on the part of the parties to continue the leases by the payment of the rentals but the whole venture depended on drilling operations to keep the leases in effect. Moreover, the defendant gives as the sole and only reason why he did not transfer the minerals to the plaintiffs was because he had not finished drilling the well and that he intended whenever he could raise the funds to repair the well and drill it deeper. We will quote some of the questions propounded to the defendant and his answers thereto, viz:
Tr. page 162 — (Defendant's testimony)
"Q. Upon what ground did you predicate that refusal? A. On the ground that I wasn't entitled to assign for the reason I hadn't finished the well.
Tr. page 167 — (Defendant's testimony)
"Q. Boiled down your only reason for not complying with your contract of date June 6th, 1934, with Mr. Claude Hamill and Mr. R.E. Smith by assigning to them the minerals mentioned in that instrument is because you claim you never finished the hole, the well? A. That was the reason, I didn't finish the well.
Tr. page 234 — (Defendant's testimony) *Page 506 
"Q. Mr. Moore, I understand you to say that when you met Mr. Smith in Houston that you gave him as a reason for not wishing to sign over these minerals was because you had not finished your well, or in Dallas, and that was or date April 5th or 6th, 1935, is that correct? A. I told him in Dallas I hadn't finished the well and I would have to have the advice of my attorney before I would assign him the minerals.
Tr. page 236 — (Defendant's testimony)
"Q. Mr. Moore, I understand that your sole and only reason for not complying with your contract of June 6th, 1934, made the basis of this suit and assigning to them the minerals therein mentioned is predicated solely upon the excuse that you haven't finished the well, is that correct? A. The advice I had I wasn't supposed to turn them over because I hadn't finished the well.
Tr. page 160 — (Defendant's testimony)
"Q. What was your position with reference to those minerals prior to the institution of this suit, that is, did you refuse to convey the minerals mentioned in this agreement to Hamill and Smith? A. I haven't finished my contract yet, that is, I haven't completed my hole.
At the time that this suit was instituted the defendant had made no effort to clean out the well or make any further operations thereon for a period of two years. The well was abandoned. The defendant's testimony is very uncertain as to whether he will ever be able to obtain any funds to drill or when he will be able to do so. Under the doctrine laid down in the cases of Louisiana Petroleum Co. v. Broussard, *Page 507 172 La. 613, 135 So. 1; Prince, et al. v. Standard Oil Co. of Louisiana, 147 La. 283, 84 So. 657, the well has been abandoned.
The uncontradicted testimony of Mr. Smith, one of the plaintiffs, was to the effect that the provision in the letter of June 6, 1934, "continue to carry me and my associates for a one-fourth interest in the remaining leases," was put in the letter for the purpose that the defendant and his associates would be carried for that proportionate interest in the leases so long as the title remained in the plaintiffs' hands. He testified to the effect that it was agreed that there would be no rentals paid in event of the failure of the well that the defendant was to drill. This seems to be a reasonable explanation of what was contemplated by the parties.
For the reasons assigned, our former decree herein is set aside and the judgment of the district court is reversed and set aside. It is now ordered, adjudged and decreed that there be judgment in favor of the plaintiffs, Claude B. Hamill and R.E. Smith, and against the defendant, J.C. Moore, decreeing C.B. Hamill and R.E. Smith the owners of the mineral rights described in the plaintiffs' petition; it is further ordered and decreed that the defendant J.C. Moore sign, execute and deliver by authentic act the mineral rights described in the plaintiffs' petition to the plaintiffs and in default of the said J.C. Moore executing the deeds within 30 days after final judgment then, in that event, this judgment shall operate as a full and complete transfer of the mineral rights described herein. All costs to be paid by the *Page 508 
defendant. The right of the defendant to apply for rehearing is reserved.
O'NIELL, C.J., dissents.
LAND, J., dissents, and adheres to the original opinion.
ODOM, J., dissents, being of the opinion that the original opinion is correct.