APPEAL from the Circuit Court of Jefferson County; the Hon.
ROY O. GULLEY, Judge, presiding.
MR. JUSTICE BRISTOW DELIVERED THE OPINION OF THE COURT:
Appeal has been taken in this case from a decree of the circuit court of Jefferson County confirming and establishing title to an undivided one-half interest in the oil and gas underlying a 40-acre tract of land. A freehold is involved. Murbarger v. Franklin, 18 Ill.2d 344.
On February 23, 1928, Henry Ray was the owner of the NE 1/4 of the SW 1/4 of section 9, township 1 south, range 2 east, Jefferson County, which shall be referred to herein as the North 40. On the day named, Ray conveyed the premises to his wife, Lucy Maude Ray, "for and during her natural life or remarriage, reversion and remainder to our children, Flossie Etenburn, Everett Ray, Ruth Phelps and Thelma Ray." Thereafter, but prior to June 18, 1937, the son, Everett Ray, died intestate, unmarried and childless.
In 1931, Henry Ray acquired title to the SW 1/4 of the SE 1/4 of the same section, referred to herein as the South 40. Subsequently, on December 10, 1935, Ray and his wife executed an oil-and-gas lease embracing both tracts to one Schock, which lease was for a primary term of ten years, or as long thereafter as oil or gas should be produced from the said land. This lease was later assigned to Carter Oil Company.
Title to the two tracts was vested as described above, when, on June 18, 1937, Ray, his wife, the three daughters and the spouses of the latter executed an oil-and-gas lease to Carter Oil Company covering their interest in the North 40, all signatures being acknowledged by Floyd W. Purcell, notary public. On the same day, Ray, his wife and the three daughters executed the mineral deed which is at issue in this case, and their signatures were again acknowledged by Purcell. The husbands of the three children signed the following day and a different notary acknowledged their signatures. The deed, which was a standard printed form of a mineral deed, conveyed to Thomas B. Scott, Jr., an undivided 1/2 interest in all the oil and gas in and under "the following described lands, for a term remaining in force until December 10, 1945, and for as long thereafter as oil or gas or both shall be produced therefrom, these lands being situated in Jefferson County, State of Illinois, to-wit: NE 1/4 SW 1/4 Sec. 9, T. 1 S., R. 2 E. and SW 1/4 S.E. 1/4, Sec. 9, T. 1 S., R. 2 E. containing eighty acres, more or less, * * *."
By subsequent conveyances, Scott conveyed the undivided 1/2 interest as follows: February 15, 1938, a 1/4 interest to J.D. Dickerson; March 25, 1938, a 1/16 interest to H.G. Weeks, (who in turn conveyed a 1/32 interest to J.O. Potter;) and on October 18, 1941, a 3/16 interest to Brookhaven Oil Company. The same standard form of mineral deed was employed in all of these conveyances and, in each instance, the conveyance was of an undivided interest in the oil and gas underlying the 80 acres for the same term as fixed in the deed to Scott. These deeds, as did the deed to Scott, provided that they were subject to any valid oil and gas leases of record, and that the grantees would participate in royalties and other benefits thereunder. It is the grantees of these conveyances who are the plaintiffs in this suit.
Under the leases previously noted, and prior to December 10, 1945, Carter Oil Company produced oil and gas from both 40-acre tracts. Production from the South 40 has continued uninterrupted to date, but production from the North 40 was terminated in October, 1950, and later, in February and June, 1951, Carter Oil Company released its oil-and-gas leases as to the North 40. In the meantime, Henry Ray died intestate survived by his wife and three daughters, his survivors being the principal defendants in this proceeding.
The next event of consequence occurred on November 18, 1951, when plaintiffs, with the exception of Brookhaven Oil Company, joined with defendants in executing an oil-and-gas lease of the North 40 to R.J. McFarland. Among other things, this lease provided that all of the parties of the first part were designated as lessor and were to receive: "(a) the equal 1/8 part of all oil produced and saved from the leased premises, (b) 1/8 at each well where gas only is found while the same is being used off the premises, (c) for gas produced from any oil well used off of the premises or for the manufacture of casinghead gas, 1/8 at the market price at the well for the gas so used." All of the lessors further warranted and agreed to defend the title to the lands described. A separate and similar lease to McFarland was executed by plaintiff, Brookhaven Oil Company, on November 23, 1951. McFarland, in turn, assigned fractions of his leasehold interest to various of the nominal defendants in this proceeding, but their interests, as well as that of a devisee under McFarland's will, are not contested.
A new well was drilled on the North 40 under the McFarland leases and when it commenced the production of oil, which continues to date, this litigation was born. By the pleadings filed in the cause plaintiffs, as successors of Scott, claim to own an undivided 1/2 interest of the oil and gas under the tract, while the principal defendants, Lucy Ray and her daughters, claim ownership of the entire interest. In view of the dispute, the purchaser of the oil being produced from the North 40 had impounded the proceeds inuring to 1/2 the royalty, and filed a bill of interpleader in this cause for directions as to the disposition of the fund and the payment of future royalties.
Briefly stated, the issue presented is the construction of the mineral deed given to Scott on June 18, 1937, to arrive at a determination of whether or not production from either of the separate tracts described therein serves to continue the undivided 1/2 interest of the grantee, and his successors, in the other tract. Generally speaking, it is the plaintiffs' contention that mineral deeds in the nature of the one in question have a settled meaning, and that in the absence of ambiguity in the present deed, parol evidence is inadmissible to vary, contradict, or explain its contents. Defendants, however, assert that the meaning of the deed is not settled and claim in the alternative that ambiguity in the present deed, permits the introduction of parol evidence to arrive at the true intent of the parties.
Before examining these contentions in detail, it will be recalled that the deed in question conveyed an undivided 1/2 interest in and to all of the oil and gas in and under "the following described lands, for a term remaining in force until December 10, 1945, and for so long thereafter as oil or gas or both shall be produced therefrom." Appearing immediately after this language is a specific description of the land and the words "containing eighty acres, more or less." Based upon decisions treating upon the construction of deeds, mineral term deeds and oil-and-gas leases, it is the contention of plaintiffs that the language of the deed is clear and unambiguous and that, under the plain meaning of the terms employed, continuous production on any part of the 80-acre tract served to continue their undivided 1/2-interest in the entire tract. Specifically, plaintiffs point out that the word "therefrom," in the phrase quoted above, can only refer to "the following described lands," and from this concludes it is clear the grantee acquired an undivided 1/2 interest in the oil and gas under 80 acres of land, and that such interest was to continue for so long as oil and gas was produced from any part of the 80-acre tract.
Defendants, on the other hand, contend that the undivided 1/2 interest conveyed by the deed expired as to the North 40 by reason of the cessation of production therefrom in October, 1950, together with the release of existing leases as to such tract, and insist this result obtains even though production from the South 40 continued. It is their theory that because the North 40 and the South 40 were, to the knowledge of the parties and to the constructive knowledge of the plaintiffs, separately owned, production as to each 40-acre tract, without regard to production from the other, is what determines the duration of the term in each of the respective tracts. In short, it is defendants' claim that because of the separate ownership, a fact which plaintiffs could have determined by the inspection of public land records, the deed must be construed as if it had effected separate conveyances of the separate tracts.
As an alternative theory defendants alleged in their answer that the deed to Scott was ambiguous because the two tracts were separately owned, and that the ambiguity should be resolved in their favor because (1) the deed was prepared by the grantee or his agent; and (2) the lands were all included in one deed at the suggestion of the grantee and upon his representation that the use of a single deed would not alter "the understanding of the parties" that the tracts were to be considered separate in all respects. In pursuit of this theory, one of the defendants, Ruth Phelps, was permitted to give testimony, over an objection that parol testimony could not alter the terms of the deed, to the effect that Purcell, the grantee's agent, was present and listened in silence while two of the grantors, the witness and her father, discussed their understanding that although the deed described 80 acres it was intended to be the same as if there were two separate deeds signed covering the respective 40-acre tracts.
The decree appealed from, which appears to be predicated on defendants' alternate theory, found that the interest in the North 40 conveyed by the deed had expired in 1950, that the defendants are the owners of all the oil and gas underlying the North 40, and directed the purchaser of ...