Smith v. Shar-Alan Oil Co.

799 S.W.2d 368, 1990 WL 154249
CourtCourt of Appeals of Texas
DecidedNovember 15, 1990
Docket10-89-223-CV
StatusPublished
Cited by4 cases

This text of 799 S.W.2d 368 (Smith v. Shar-Alan Oil Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Shar-Alan Oil Co., 799 S.W.2d 368, 1990 WL 154249 (Tex. Ct. App. 1990).

Opinion

OPINION

MEANS, Justice.

Oron Smith and Willie Bell Handsbor-ough Browder, Appellants, sued Shar-Alan Oil Company, Harken Exploration Company and David Free, Appellees, requesting that the trial court declare unenforceable two oil and gas leases executed by Smith and Browder, 1 and that they recover damages for fraudulent misrepresentations and their attorney’s fees. After a jury found all questions in favor of the Appellees, the court awarded judgment against Smith and Browder and ordered them to pay Appel-lees’ attorney’s fees incurred in defending this action. Smith and Browder appeal from this judgment by six points of error claiming that certain jury questions should not have been submitted. These points will be overruled and the judgment affirmed.

The evidence at trial revealed the following sequence of events:

1. Richard Davis, the owner of 255 acres covered by the oil and gas leases in issue in this case, died intestate in 1957. Shar-Alan acquired from Davis’s legitimate heirs oil and gas leases covering this property and, on August 16, 1985, spudded a well on the tract. Thereafter, David Free, the County Surveyor of Leon County, heard that Smith and Browder were the illegitimate children of Davis and therefore had a possible ownership interest in the land.
2. On approximately August 30, 1985, Smith and Browder each executed and returned an oil and gas lease covering the tract to David Free. At that time, Free tendered to each of them a check in the amount of $100 bearing the words, “For Richard Davis Lease.” Free testified that he told Smith and Browder that he would pay, in addition to the $100, $250 for each mineral acre they established title to, conditioned on the approval of that title by an attorney. Free originally calculated this amount to be $5,875 each, based upon the interest he believed they would own as heirs of Davis. He handed each of them a draft in that *370 amount along with the two $100 checks when he was delivered the leases. Across the top of both drafts, Free wrote “60 day clearance-contingent upon attorney approving title.” According to Free, this meant “that sixty days after they were declared to be an heir of Richard Davis, the drafts would be honored.” The leases were filed for record on September 17, 1985.
3. After the leases were filed, the legitimate heirs of Davis refused to recognize Smith and Browder as Davis’s children. Subsequently, Smith and Browder filed an heirship case, resulting in a jury verdict and trial court judgment in their favor in September of 1987.
4. Because Browder tried to negotiate her $5,875 draft after the heirship case was filed, on October 7, 1985, A. Keller Doss, an attorney representing Shar-Alan, wrote a letter addressed to both Smith and Browder setting forth his understanding of the terms of the transactions of August 30, 1985. Specifically, Doss wrote: “Mr. Free has previously informed you, both verbally and in writing, that he cannot honor the draft for the balance of the bonus to be paid on the lease until such time as the Court in Leon County, Texas declares you to be an heir of Richard Davis.” (Shar-Alan was responsible for this letter instead of Free because there was a verbal agreement at this time for Free to assign the leases to Shar-Alan. The assignment was made in writing in December, 1985.)
5. In 1986, during the pendency of the heirship case, Shar-Alan drilled another well on the tract. Shar-Alan asserts that this second well would never have been drilled had it known that Smith and Browder were going to question the validity of the leases.
6. As soon as the heirship case established that Smith and Browder were heirs of Davis, Free tendered each of them a cashier’s check in the amount of $9,375 which was based upon their respective ownership interests in the property. On the advice of their counsel, Smith and Browder refused to accept the checks.
7.In December, 1988, Shar-Alan sold substantially all of its assets to Harken. However, the purchase agreement between Shar-Alan and Harken excepted the leases in issue in this case, but provided for an assignment of such leases if this case is resolved “in a manner permitting the conveyance of all or any portion of the withheld leasehold interests ... free of any claim by the plaintiffs.” Smith and Browder allege that they joined Harken in this case as a defendant “for accounting purposes due to its position as a succeeding operator.”

The argument underlying almost all of Appellants’ points of error is that the leases were ineffective because of the failure of a condition precedent, i.e. the honoring of the drafts within sixty days. However, this argument assumes that the honoring of the drafts within sixty days was actually a condition precedent to the formation of the contract. Smith and Browder assert, citing Sun Exploration and Production Co. v. Benton, 728 S.W.2d 35 (Tex.1987), that the “sixty day clearance” language written on the drafts required Free to approve title and honor the drafts within sixty days from the date they were tendered, and because this “condition precedent” was not performed, the leases should be set aside. The court in Sun held:

A contemporaneously exchanged draft and deed must be construed together. Puckett v. Hoover, 146 Tex. 1, 202 S.W.2d 209, 211 (1947). Here, the language on the face of the draft made Sun’s approval of title a condition precedent to formation of the contract. Where the grantee imposes certain conditions precedent to acceptance, title does not pass under the deed until fulfillment of such conditions.

Id. at 37. Sun is not analogous to this case. In Sun, the items exchanged by the *371 parties indicated that the contract was conditional. In that case, the prospective lessor was not trying to set aside the lease; he was trying to show that the oil company had breached the contract by not honoring the draft. Because of the notation on the draft, “15 days after sight and upon approval of title,” there was a condition precedent both to the liability on the draft and the formation of the lease contract. Id. Here, we do not have two sets of items to be construed together, but three — the leases, the drafts, and the checks. In interpreting the contract, the court not only had to consider the “sixty day clearance” language on the drafts, but also the leases, the checks and the checks’ notations, “For Richard Davis Lease.”

In their first two points of error, Smith and Browder complain that the court erred when it denied their motion for instructed verdict and submitted Jury Question Number One which asked:

Do you find that on or before August 30, 1985 there was an agreement between David Free, Oron Smith and Willie Bell Handsborough Browder that the oil and gas leases in question would be returned if the drafts in the sum of $5,875.00 each were not paid within sixty days of August 30, 1985?

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799 S.W.2d 368, 1990 WL 154249, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-shar-alan-oil-co-texapp-1990.