Anadarko Petroleum Co. v. Venable

850 S.W.2d 302, 312 Ark. 330, 127 Oil & Gas Rep. 272, 1993 Ark. LEXIS 192
CourtSupreme Court of Arkansas
DecidedMarch 22, 1993
Docket92-1009
StatusPublished
Cited by27 cases

This text of 850 S.W.2d 302 (Anadarko Petroleum Co. v. Venable) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Anadarko Petroleum Co. v. Venable, 850 S.W.2d 302, 312 Ark. 330, 127 Oil & Gas Rep. 272, 1993 Ark. LEXIS 192 (Ark. 1993).

Opinion

David Newbern, Justice.

This is an appeal involving a question in the law of oil and gas which arises out of the interpretation given three deeds executed and recorded in 1939 and the interest conveyed by the deeds. The grantors in the three separate deeds were, respectively, the Royalls, the Pattons, and the Wigginses. Each deed contained, in effect, two granting clauses of mineral interests. The first clause contained an outright grant, and the second granted an amount dependent upon the amount granted in a certain lease. An issue before the Chancellor, and before us now on appeal, was whether the grant based on the lease was only explanatory of the first grant in each lease or was intended to convey to the grantee of each deed whatever the lease provision would yield. Another issue is whether the claims of the appellee, Robert Venable, are barred by a statute of limitations, estoppel, or laches. The Chancellor held that the second granting clause in each deed, i.e., the one referring to the lease was controlling. He also found the claim of Venable was not barred. We affirm the holding.

Each of the deeds was entitled “Warranty Deed and Perpetual Royalty” and contained the following:

[A]nd the Grantee [F.W. McClanahan and R.H. Venable] shall at all times subsequent to the execution of this instrument, receive a (13/1920ths) [Royall deed]; (4/ 1440ths) [Patton deed]; (18/1440ths) [Wiggins deed] part of all oil, gas and other minerals produced and saved from the above described land, free and clear of any expense of drilling any well or wells for the production of said minerals, or any of them, or of the mining of said minerals, or any of them, or of the operation of any well or mine from which said minerals are produced, or from which any one of said minerals is produced, which provision and agreement is a covenant which shall run with the land to the end that it shall be binding upon the Grantors and their heirs and assigns forever.
It is understood that this land is encumbered with an oil and gas lease executed by J.G. Tissue, a widower as Lessors, to Record Owners as Lessee, on_, which lease is recorded in Book_, at Page_, of the Deed Records of Columbia, County, Arkansas.
And for the same consideration the Grantors do hereby bargain, grant, sell, convey and set over onto the Grantee an undivided (13/240ths) [Royall deed]; (4/180ths) [Patton deed]; (18/180ths) [Wiggins deed] part of all royalties on oil or gas produced from the above described land during the term of said lease, or any extension thereof.
However, the Grantee shall have no interest in the purchase price to be paid for any oil and gas lease or leases, or other lease or leases on the land, or any part thereof, made by the Grantors in the future; and the Grantee shall not be entitled to receive any portion of any sum or sums to be paid as delay rental under the terms of any oil and gas lease now or hereafter affecting the land, or any portion thereof or any interests therein, to defer the commencement of a well during the primary term thereof; and the Grantee, his heirs or assigns, shall not be entitled to join in the execution of any such future lease or leases on the land.

The appellant, Anadarko Petroleum Co. (Anadarko), has two producing wells within the Atlanta Field which are subject to the royalty interests conveyed by the deeds. Anadarko executed Division Orders and paid royalties to Venable from 1983 until the filing of the lawsuit in 1991 based on its interpretation of the deeds as granting the Venable interests a right to a fractional share of the proceeds from production equivalent to a one eighth C/sth) royalty, the same royalty interest retained in the Tissue lease which was in place in 1939. Appellee Venable argued that his interest should have been determined from leases which were executed in January, February, and March of 1980 by the descendants of the original mineral lessor mentioned in the deeds. In two of these leases there was provided an overriding three sixteenths (3/i&ths) royalty interest.

Anadarko argued that Venable was entitled to a lesser proportion limited to that provided in the granting clauses of the 1939 deeds and that any other claim was barred by estoppel, laches, and the statute of limitations. The matter was presented to the Chancellor for consideration on the arguments of counsel and the documentary record supported by trial briefs. The Chancellor found that Venable was due a royalty based on a computation derived from the 1980 leases, two of which provided for 3/16ths rather than the 1 /8th as provided in the 1939 lease. The Chancellor also found the claim was not barred by estoppel, •laches, or the running of a statute of limitations.

Anadarko argues first that the Chancellor erred in granting Venable a greater interest than that conveyed by the 1939 deeds. We find no error in the Chancellor’s determination that the intent of the 1939 deeds was to convey to Venable whatever royalty rights were held by the grantors as determined by the Tissue lease or leases and that the computation of the royalty using the 3/16th figure in the 1980 leases was proper.

1. Interpretation of the deeds

Anadarko calculated Venable’s interest in the Division Orders based solely on the deed’s initial granting clause without consideration of the subsequent language concerning the lease because it interpreted the latter language to be explanatory only. In support of its position it relies on the decision in Barret v. Kuhn, 264 Ark. 347, 572 S.W.2d 135 (1978), which essentially held that we would construe deeds in such a way that the granting clause of the deeds would be controlling in the event of an irreconcilable conflict between the mineral deeds granting clause and other clauses.

In the Barret case the appellees, or their predecessors, during the 1940s granted essentially identical non-participating royalty interests to the appellants. These deeds gave a fixed interest in any money paid from production of oil and gas from the lands. Subsequently the appellees negotiated with another party and signed other oil and gas leases on the property, granting the working interests. These leases all provided for the appellees to have an overriding royalty if production was obtained. In some instances the overriding royalty amounted to one-eighth (1 /8th) and in others a one-sixteenth (1 /16th) overriding royalty in addition to the usual one-eighth royalty that was reserved in these leases by the owner. There was no mention in the negotiations for the leases, nor in the leases themselves, of the non-participating royalty holders.

When production was obtained, a division order was prepared setting forth in detail who was to be paid a royalty and in what amount. The division order was the first notice to the parties that the non-participating royalty holders were making a claim to the overriding royalty payments to be paid to the appellees. The royalty deeds in question were form instruments, headed in bold type “ROYALTY DEEDS”, beneath which was the word, “nonparticipating”. The granting clause in the royalty deeds read:

That_for and in consideration of. __, ...

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Bluebook (online)
850 S.W.2d 302, 312 Ark. 330, 127 Oil & Gas Rep. 272, 1993 Ark. LEXIS 192, Counsel Stack Legal Research, https://law.counselstack.com/opinion/anadarko-petroleum-co-v-venable-ark-1993.