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March 7, 1958


The opinion of the court was delivered by: Lemley, Chief Judge.

    This cause having been tried to the Court and briefed by the parties, and the Court being well and fully advised, doth file this memorandum opinion incorporating its findings of fact and conclusions of law, as authorized by Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A.

The plaintiff, Mrs. Lelia M. McCargo, a citizen of Prescott, Nevada County, Arkansas, has brought this action against the defendant, Miss Alma V. Steele, a citizen of Ohio, for the purpose of compelling the latter, individually and in her capacity as executrix of the estate of Charles F. Steele, deceased, who died testate in Nevada County on January 24, 1956, to specifically perform a certain written contract entered into between the plaintiff and the deceased on March 15, 1954, under which the plaintiff claims to be entitled to an undivided one-fourth interest in and to such real and personal property as the deceased owned at the time of his death located in Nevada County, which property includes certain mineral leases and royalties. The value of the interest which plaintiff seeks to recover is much in excess of the jurisdictional amount of $3,000.

The litigation was initially commenced by the plaintiff's filing a claim, based on the contract, against the estate of the deceased in the Probate Court of Nevada County. After an unsuccessful removal of the claim to this court, which resulted in a remand, the Probate Court transferred the matter to the Chancery Court, and thereafter it was again removed here.*fn1 After this second removal the plaintiff filed an "Amendment to Claim," and we shall refer to the claim and the amendment thereto as the "complaint."

It is the theory of the plaintiff that her contract with the deceased was and is valid, that she fully performed thereunder, that the deceased died without having executed certain contemplated assignments in her favor called for by the contract, that the defendant has wrongfully refused to recognize or to carry out the obligations of the contract, and that she is entitled to specific performance.

The defendant, on the other hand, takes the position that the contract was invalid at its inception for a number of reasons, hereinafter set forth, that it is unfair, harsh and oppressive and should not be specifically enforced, that it was mutually rescinded or abandoned by the parties, or that the plaintiff abandoned her rights under it, and that the plaintiff has been guilty of such laches as precludes her from obtaining the relief which she seeks.

We have considered these conflicting contentions in the light of the evidence produced at the trial (some of which was in dispute), and of what we deem to be the governing principles of Arkansas law, and we have come to the conclusion that the defendant's position cannot be sustained, and that the plaintiff is entitled to prevail.

As stated, the evidence was in certain respects disputed, but from it we find the following basic facts:

For many years prior to his death the deceased had been engaged in Nevada County, Arkansas in dealings in oil and gas leases and royalties under lands supposed to contain deposits of those minerals, which business necessitated considerable correspondence, the preparation of legal instruments of various kinds, including oil and gas leases, assignments, mineral deeds and overriding royalty agreements; it also entailed the payments of delay rentals on non-producing leases, the assessment and payment of taxes on his mineral interests, and numerous checkings of the land records of Nevada County. During his activities he was represented by the law firm of Denman & Denman of Prescott, whose secretary the plaintiff has been for about twenty years.

The evidence disclosed that the plaintiff did a considerable amount of Mr. Steele's stenographic work prior to his death, that for a time at least she prepared some of the checks signed by him in payment of delay rentals, and that she frequently would go to the Circuit Clerk's office to check land records for him. When Mr. Steele had work for the plaintiff to do, it was his custom to come to the office of Denman & Denman and there to dictate to her whatever letters or instruments he had for her to write or draw; and there was also evidence, which we credit, that on occasions on week-ends she would go to his home and there perform work. The work which the plaintiff performed for the deceased had nothing to do with her employment by Messrs. Denman & Denman, and there is no evidence that they supervised it or had anything to do with it.

During the last several years of his life Mr. Steele was in poor health, made frequent visits to his doctors, and required almost constant physical attention. There was no evidence, however, that his mental faculties were in any way impaired or that he was not fully competent to transact business and to protect his own interests in business dealings. He was never married, and all of his heirs are collateral kindred, the defendant being his sister.

At the time of his death he was the owner of substantial holdings in the newly developed Falcon oil field in Nevada County, and according to the defendant's evidence his holdings at the time of the trial were producing a gross income of about $3,100 or $3,200 per month, slightly less than they were producing at the time of his death. It is a well known fact that the Falcon field is a recent development, and there is little evidence bearing upon the deceased's financial situation prior to the discovery of oil in that field; that it was not affluent is indicated by the fact that he had made numerous small loans from the First National Bank of Magnolia, Arkansas, and on at least one occasion pledged his diamond ring as security.*fn2 At the time of his death he was indebted to the bank in a sum slightly in excess of $5,000.

The instrument in suit, which is a typewritten document signed by both parties but not witnessed or acknowledged,*fn3 is entitled "Contract & Agreement," and commenced with a recitation of Mr. Steele's poor health and short life expectancy, and of his need to have someone help him to look after his affairs. It then provides in substance that in consideration of the mutual promises of the parties, and of services rendered and to be rendered by the plaintiff, the deceased would "assign" to her an undivided one-fourth interest in and to all property, both real and personal, including mineral rights and interests, of which he might die seized and possessed in Nevada County, and that until proper assignments should be executed, he would defray her expenses for gasoline and oil incurred by her in looking after his interests. The services that the plaintiff was to perform were those of a "stenographer and assistant business manager," and she affirmatively undertook to perform those services for the remainder of Mr. Steele's life. It was further agreed that after his death she was to continue to advise and assist his "heirs, successors and assigns" in looking after his estate at "a reasonable salary to be agreed upon," and, further, that should the estate stand in need of legal services, the plaintiff was to employ a firm of lawyers of her own choice, namely, Messrs. Denman & Denman, and that should the services of that firm not be available, then she should select some other firm of her choice. The contract obviously contemplated that it was to be implemented by the execution and delivery to the plaintiff of one or more inter vivos assignments covering the interest to be conveyed to her, but it stipulated that if Mr. Steele should die before the execution of such assignments, then "this contract and agreement shall serve as an assignment to an undivided 1/4th interest in and to all properties of which I may die seized and possessed in Nevada County, Arkansas." It was further agreed that if the plaintiff should die before Mr. Steele and before the execution of the contemplated assignment, then Mr. Steele would pay to her daughter the sum of $25,000 in full settlement of any claim that plaintiff might have had against him. The agreement recited that it was to continue from month to month and year to year "until terminated by death," and that it should be binding not only upon the immediate parties but also upon their heirs and assigns.

On April 26, 1954, about six weeks after the contract had been signed, Mr. Steele executed his last will and testament, which was witnessed by the plaintiff, and by Mr. W.F. Denman, Jr. In that instrument the testator directed the payment of his just debts and funeral expenses, and then devised and bequeathed his entire residuary estate to his sister, the defendant here, who was designated as sole executrix to serve without bond.

Shortly after the will was made, Mr. Steele appeared in the company of his sister at the First National Bank of Magnolia and arranged with Mr. Winston Wilson, vice president of that institution, to assist her in the management of the estate after his death, and sometime in December, 1955, shortly prior to his death, when he was in the bank in connection with making a loan, he advised Mr. W.C. Blewster, the president of the bank, in Mr. Wilson's presence, that the latter would be the man who would be looking after his affairs after he was gone. There is no evidence, however, that the plaintiff knew anything of these arrangements during Mr. Steele's lifetime.

In September, 1954 Mr. Steele employed a Mr. John Savage in the capacity of a bookkeeper, his duties being primarily to reconcile the former's bank statements and cancelled checks with his check stubs, and to record his receipts and disbursements. Mr. Savage was employed on a full time basis for about a year, and worked part-time after that. Mr. Savage's employment, however, did not conflict with or overlap that of the plaintiff since she had never been employed as a bookkeeper, and, as has been said, she continued to work for Mr. Steele up until the time of his death, performing such tasks as she was called upon from time to time to perform.

Between the date of the contract and his death Mr. Steele drew twelve checks in favor of the plaintiff, which she cashed, in the total sum of $395, some of which bore notations to the effect that they had been given in payment of services rendered or for "extra work." Eight of these checks were written in 1954, three in 1955, and the final one on January 12, 1956, less than two weeks prior to his death. The final check bore no notation of any kind.

While the defendant points to the execution of the will, witnessed by the plaintiff, to the employment of Mr. Savage, and to the checks that have been mentioned as evidencing an abandonment by the plaintiff of her rights under the contract or of a mutual rescission of that agreement, the plaintiff's evidence, which we again credit, showed that less than a month before his death Mr. Steele on two separate occasions by his acts and declarations recognized the contract as being in force, and, in effect, republished it, once in the presence of Mrs. Esther Husky, and again in the presence of Mr. J.D. Franks, both of Prescott.

Mrs. Husky testified in substance that between Christmas, 1955, and New Year's day, 1956, Mrs. McCargo requested her to come down to her nearby house one evening; that she acceded to this request and upon her arrival found Mr. Steele present. Mr. Steele desired to borrow $5,000 from her, the purpose of the loan being "something about income tax." Mrs. Husky inquired of Mr. Steele concerning security and he turned to Mrs. McCargo and instructed her to get her contract with him and show it to Mrs. Husky. This was done and Mrs. Husky read the contract. She then told Mr. Steele that her money was otherwise invested and the subject was dropped. While it does not clearly appear why Mr. Steele had Mrs. McCargo produce her contract when Mrs. Husky made inquiry about security, it is at least inferable that had Mrs. Husky manifested any interest in making the loan, Mr. Steele might have made her a proposal similar in nature to his agreement with the plaintiff and to an agreement with a Mr. Oswalt which is in evidence in this case.

Mr. Franks testified that he and Mr. Steele had been friends for many years; that he had done a considerable amount of notarial work for Mr. Steele, and that the latter referred to him as "his notary." He further testified that on an occasion late in December, 1955 he was called to the office of Denman & Denman; that Mrs. McCargo and Mr. Steele were in the office, no one else being present; that he was shown the contract in suit, and that Mr. Steele asked him to read it and take an acknowledgment thereof, which he was unable to do because he had permitted his ...

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