Bolin v. Smith

294 S.W.2d 280, 6 Oil & Gas Rep. 1037, 1956 Tex. App. LEXIS 1836

• Court: Court of Appeals of Texas
• Decided: September 28, 1956
• Docket: No. 15733
• Status: Published

Opinions

BOYD, Justice.

Upon a jury verdict, judgment was rendered against appellant D. H.- Bolin- and in favor of appellees P. K. Smith, J. B. Nail, O. C. Egdorf, S. G. Denny, Kindel' Paulk, E. A. Denney, and The First National Bank of Wichita Falls, executor and trustee under the will of Theodore Beck, deceased, impressing a constructive trust upon an undivided one-half interest in á mineral leasehold estate in the Min' Gault 320 acre tract, which is the West ½ of what is known as the Howard land in Montague County, and for money recoveries aggregating approximately $500,000, consisting of the net proceeds received by appellant from the sale of oil from the interest impressed with the constructive trust, sums awarded in an accounting in connection with operations engaged in by the parties, and interest. Appellees John H. Arrington and J. R. Reagan were awarde’d small recoveries on some of the accounting features of the case.

As originally filed, the suit was by the appellees other than Arrington, Reagan and the executor Bank, primarily against appellant Bolin to impress constructive trusts upon the Howard leases and the Gist and Crownover “farmout” leases, and for an accounting.. Appellees Arrington, Reagan and the executor Bank were made parties defendant, but they answered and adopted the position of the plaintiffs. Before a trial on the merits, a summary judgment in favor of appellant was granted, from which appellees appealed. Detailed statements of the background of this controversy will be found in the opinion of this Court on that appeal in Smith v. Bolin, 261 S.W.2d 352, and in the opinion of the Supreme Court in Smith v. Bolin, 153 Tex. 486, 271 S.W.2d 93. The- summary judgment was affirmed as to the Gist and Crownover farmout leases and as to the accounting matters pertaining to the cost of the original Howard leases and of drilling the first Howard well. The judgment was reversed and remanded as to the interest of any of appellees ■ in the new Howard leases and as to other accounting matters.

The original contract declared upon by appellees was a written partnership agreement dated December 1, 1946, between appellant and appellees Paulk, Smith, Ar-rington, Reagan, Denny, Nail, Denney, and Egdorf. The agreement was entered into at appellant’s solicitation, and he was to be the managing partner. He alone transacted the partnership business. Appellees were business and professional men and not primarily engaged in the oil business. Appellant was an oil operator with many years’ experience. Appellees reposed implicit confidence in him. The partnership was formed for the purpose of “buying, selling, trading, exchanging, developing, equipping, and producing oil, gas, mining leases, real estate, royalties, and all other minerals and other property and interests therein within the State of Texas.” It was provided that appellant should pay into the common fund 1/3 and the other parties ⅜ of the total fund “with which such firm begins and thereafter continues to do business,” except that appellant was to pay ½ and the other parties of the expense of equipping any lease that the partnership might acquire. Appellant was to receive ½ of any profits and the other parties ½. Title to all properties acquired by the partnership was to be taken in the name of appellant as trustee. All funds were to be deposited in the bank to the credit of the partnership and checked out only by appellant or under his direction. The business was to continue so long as the parties might mutúally desire.

When deemed necessary, the original plaintiffs will be referred to as “plaintiffs,” the executor Bank as the “Beck Estate,” Arrington and Reagan by name, and all of the parties adverse to appellant as “appel-lees.”

From the beginning of operations until the partnership lease on the Howard land expired March 12, 1950, several oil drilling yentures were engaged in, resulting in the expenditure of many thousands of dollars, and all were; complete failures. The first ventures were the acquisition by the partnership from appellant of, and the drilling upon, the Scruggs and Oldham blocks in Oklahoma. Appellees Arrington and Reagan did not participate in any ventures after the Scruggs and Oldham failures. During the existence of the original Howard, leases, which were acquired from appellant individually by a group composed of appellant and the plaintiffs joined by Theodore Beck,, appellant, as drilling contractor for the partnership, drilled. two dry holes bn the Howard land, one on the Gault, or west Howard land, and the other on the Paine, or east Howard land. Appellant billed the other parties for their part .of the 'expenses incurred in all the failures, which they paid, At no time during, the period from'the execution of the written agreement on December 1, 1946, until after appellant acquired for his own account the new Howard leases in June, 1950,.did he intimate that he was not still acting under the terms of the agreement.

In November, 1949, appellant was urged to- secure for -the partnership farmout leases on the Gist and Crownover tracts, which lie immediately, north of the Howard land. Appellee Smith testified that he gave Kay’s geology on the area to appellant, which indicated that oil would be found on the north part of the ■ ‘west Howard land and’on the Gist and Crownover tracts; that he told appellant of the indications for production found by himself and bother associates in prior drilling ventures on the northwest part of the Howard land. On March 9th or 10th, 1950, while appellant 'was'negotiating with Standard Oil Company of Texas for the Gist and Crownover farmoutsj Standard showed him its geology on the area. Standard’s division exploration superintendent testified that in those conversations he wanted to know if the Howard land was under lease and that appellant said, “ ‘I have got it/ ” and that the witness said, “ 'Well, if it is your tract, it is ókey, * * * I don’t want somebody else to get it if we are going to be drilling a well in here.’ ” The Howard leases were owned by the partnership at that time.

Oliver, Standard’s geologist, testified that during these negotiations he discussed with appellant the geology in the vicinity of the Howard,. Gist and Crownover tracts, and that information which the appellant and his geologist gave Standard as to the first Howard well contained geologic data. Kendall, appellant’s geologist, wrote Standard on February 6, 1950, that a description of samples from the first Howard well, made by Martin, a consulting geologist, was significant in that Martin described “the 1900 ft. lime as ‘crinoidal.’ ” The letter further stated that a local reef condition .seemed indicated and “chances .are that we want to try to define this 1900 ft. reef possibility, since it did have a substantial oil show.”

Appellant ácquired the Gist and Crown-over farmouts for his own account on May 6, 1950, the negotiations therefor having been begun 1 and a tentative agreement reached before the expiration of the original Howard leases. ...When requested by some of the plaintiffs to renew- the Howard leases before their expiration on March 12, 1950, appellant refused to undertake to do so. He acquired for his own account new leases on the Howard land .on June 20, 1950,' after there was a good showing ‘of oil in his Gist farmout well from1 the same formation encountered in the first Howard well, which ■ showing appeared about June 18.

Appellant’s son testified that in behalf of his father he requested Edwards to approach the owners of the Howard land “to lease this land from them. * . * * I asked him to check and see if the lease was open and available, and what price.” Paine, a son- of one of the Howard land owners and a nephew of Mrs. Gault, the other owner, and who handled the leasing for his mother and aunt, testified that Edwards contacted him about leasing the tract a month or six weeks before the leases were executed on June 20, 1950; that Edwards first offered $3 per acre and witness asked $10; that Edwards later offered $5, which witness refused; that Edwards contacted witness several times, in person and by telephone; that after Edwards finally offered $10, witness made some investigation of the progress of the1 Gist farmout well and, learning there was'a good show of oil, he asked $15 per acre for the leases, which Edwards agreed to pay. The leases were made to appellant as lessee.

When plaintiffs and the Beck Estate' learned of these acquisitions, they offered tO' pay their pro rata part of the cost, which offer appellant refused. There were several producing oil wells on the Gault lease at the time of trial. Whether plaintiffs- and the Beck Estate are entitled to any interest in the new Howard leases is, aside from certain accounting matters, the question in this suit.

At plaintiff’s request, the court appointed an auditor who' filed a detailed report of the financial transactions of the partnership arid appellant’s financial transactions reláting to the acquisition and development of the new Gault (west Howard) lease.

Among other things, the jury found: that appellant gained some geological information as to the Howard land from drilling the two wells thereon prior to March 12, 1950, and that such information was a motivating circumstance influencing him to -acquire the new leases; ..that as the acting manager of the partnership affairs, appellant gained geological information from other sources as to the Howard land which was a motivating circumstance influencing him to take the new leases; that the relationship entered into by the parties was a continuing one which had not ¿nded prior to June 20, 1950, and that appellant occupied a fiduciary relationship to plaintiffs and the Beck Estate when he acquired the' new Howard leases; that because of the failure of appellees to file suit prior to June 22, 1952, appellant’s situation had not become so changed that he could not be restored to his former condition; and that appellant’s action in drilling the new Howard lease was not taken in good faith in reliance upon a belief that the plaintiffs would not institute suit against him asserting claims in such leases.

Appellant assails the judgment under nine groups of points, covering 138 assignments. The complaints in the groups of points are summarized as follows: (1), the court’s failure to treat the former judgment as res judicata of all matters concerning the farmout leases; (2) the court’s failure to treat the former judgment as res judicata of the accounting matters as to acreage and well costs; (3),. the court’s error in refusing appellant’s motion for a separate trial on the issues as to the Howard lease from the accounting issues; (4) the court’s failure to sustain appellant’s motions for instructed verdict, for judgment on the verdict and for judgment non obstante veredicto,; (5) errors in trying the defensive issues of dissolution, abandonment and termination of prior adventures; (6) other errors in regard to the trial of accounting matters prior to March 12, 1950; (7) errors in the court’s judgment as to the accounting- pertaining to the cost of drilling the second Howard well, and the cost of the development of the new Howard lease, and other findings and holdings in the judgment; (8) errors of the court in overruling appellant’s exceptions to allegations as to the state of health of Theodore Beck and his exceptions to a portion of the auditor’s report; and (9) the cumulative effect óf' errors pointed out resulting in denying appellant a fair trial.

On this trial,- plaintiffs and the Beck Estate did not seek recovery as to the Gist and Crownover farmouts; ho issues were submitted as a basis for any such recovery; and no recovery was had thereon. We therefore think the court did not fail to “treat” the former judgment as res judicata as to the farmouts. Appellant complains of the court’s action in overruling his exceptions to the pleadings setting out appellant’s transactions in negotiating for'and acquiring the farmout leases, and the overruling of his motions to strike from the record evidence ' introduced bearing upon those transactions. We fail to find where appellant objected to such evidence when it was offered. In fact, appellant offered some evidence relating to acquiring the farmouts. We do not think the first group of points reflects error. 3-A Tex.Jur., sec. 166, p. 213; 31 Texas Law Review, p. 128; Chesshir v. Nall, Tex.Civ.App., 218 S.W.2d 248; Poole v. State Highway Department, Tex.Civ.App., 256 S.W.2d 168; Fleming Oil Co. v. Watts, Tex.Civ.App., 193 S.W.2d 979. Moreover, we think the Supreme Court held that the transactions relative to appellant’s acquisition ' of the farmout leases constituted “Some of the evidence, which raises a fact or fact issues as to the Howard leases, * * Smith v. Bolin, ' 271 S.W.2d 93, 94.

, Under his second group of points, appellant insists that the judgments of, this Court and the Supreme Court, on the appeal from summary judgment affirmed the summary judgment as to the accounting involved in the acquisition of the' Scruggs and Oldham blocks and as to the cost of drilling the second Howard well. We do not so construe those' judgments. The only accounting matters foreclosed were those pertaining to 'the cost of the acquisition of the original Howard leases an'd the drilling of the first Howard well. The accounting mattefs between the parties to the original partnership agreement were remanded by this- Court in'this language, “Judgment of the trial court is affirmed except as to the accounting upon the deláy rental payments due and paid on the Howard land leases in 1948 and 1949, and as to the accounting as to the dissolution of partnership of December, 1946. Judgment of the trial court is reversed and the cause remanded for a trial of the issues upon these accountings.” We understand that this part of the judgment of this Court was affirmed by the Supreme Court. The remanded portion of the accounting features of the case includes the cost of the Scruggs and Oldham blocks. That venture was undertaken by the identical persons who signed the written partnership agreement. As heretofore indicated, we agree with appellant that the accounting matters pertaining to the acquisition of the original Howard leases and as to the drilling of the first Howard well have been adjudicated by the prior judgments.

No error is perceived in the court’s action in overruling appellant’s motion to try separately the issues as to the Howard leases from the accounting issues. Appellant invokes Rule 174, subd. (b), Texas Rules of Civil Procedure, which provides that the court, in order to avoid prejudice, may order a separate trial of any claim or separate . isspe. He concedes, , hpwever, that the application of the Rule rests in the sound discretion of the trial court. .We are constrained to hold that no abuse of discretion is shown by this record'in the action of the court on that motion. Montgomery v. Willbanks, Tex.Civ.App., 202 S.W.2d 851. ' ■’

Appellant in his fourth group of points complains of the action of the court in overruling his motions for instructed verdict, for judgment upon the verdict,, and for, judgment non. obstante veredicto. It seems to us that appellant is here seeking to have decided favorably to himself issues which were foreclosed against him by the holding of the Supreme Cojirt on the appeal from summary judgment. In his argument in support of this group of points appellant contends that under the evidence, as. a matter, of, law, plaintiffs and the Beck Estate are not entitled to recover any interest in the Howard leases or in the net proceeds of the oil produced therefrom, or to impress a constructive trust upon the property; and that if they ever had any such right they had lost it by laches. His position is that the evidence fails to raise any issue as to the continuing nature of the partnership relation or whether appellant occupied any fiduciary relation to the other parties when he acquired for his own account the new Howard leases, and that therefore there was no issue for the jury’s determination on that phase of the case or any support for the judgment rendered thereon by the court.

On appeal from summary judgment, and on evidence essentially the same as that in the record now before us, the Supreme Court, after summarizing the evidence, held that it was a question of fact as to whether the relationship between the parties was a continuing one or whether it was a series of separate and distinct relationships; that it was a question of fact whether a' fiduciary relationship existed between appellant and plaintiffs and the Beck Estate at the time appellant acquired the new Howard leases; and that the evidence '“raises a fact question or fact questions as to the Howard leases to be determined by" a trial court or jury, and not this Court or the Court of Civil Appeals.” These questions have been determined, and unfavorably to appellant, by the jury and the trial court.

In this connection, we deem it unnecessary further to detail the evidence. But we have given careful consideration to all the evidence, and are-unable to bring ourselves-to the conclusion that it is insufficient to support the - verdict of the jury and the judgment of the trial court as to the nature and duration of the relationship between the parties and the right of plaintiffs and the Beck Estate to impress a constructive trust on the west Howard lease and to share in the proceeds of minerals already recovered therefrom. We refer to ■ the opinion of the Supreme Court on the appeal from summary judgment. Smith v. Bolin, 271 S.W.2d 93, and authorities there cited.

' In appellant’s fifth group of points it is contended that as a matter of law, under the evidence, all ventures were terminated no later than March 12, 1950, the date on which the original Howard leases expired, and that the court erred in overruling his motion to disregard the answers of the jury to the effect that the relationship between appellant and plaintiffs and the Beck Estate was a continuing one and that appellant occupied a fiduciary relation to the other parties when he acquired the new Howard leases.

We think it would serve no useful purpose to detail the evidence on these issues. In all essential respects, the evidence is the same as it was on the motion for summary judgment. We quote from the Supreme Court’s opinion on that appeal: “Whether the relationship hetween D. H. Bolin and the petitioners was a continuing relationship until about June 1950, as contended by the petitioners, or whether it was a series of separate and distinct relationships as contended by respondent, D. H. Bolin, is a question of fact.” Smith v. Bolin, 271 S.W.2d 93, 94.

In the sixth group of points contention is made that the court erred in overruling appellant’s motion for judgment non ob-stante veredicto as to accounting matters involving the cost of acquiring and drilling the Scruggs and Oldham blocks and of acquiring the original Howard leases and of drilling the first Howard well. We have already said that we think the matter Of the cost of acquiring the original Howard leases and of drilling the first Howard well was adjudicated by the summary -judgment, which in that respect was affirmed. Left for trial, however, by the remand, were accounting matters pertaining to the, cost of acquiring and drilling the Scruggs and Oldham blocks. • ,

The points in the seventh group relate, to-alleged errors in the judgment pertaining to the accounting, as to the cost of drilling the .second Howard well and the cost of developing the. new Howard leases by appellant; also in this group are points challenging certain findings and holdings of the trial court as contrary to the law or not supported by the evidence. We have studied all of these points in the light of appellant’s thorough brief and oral argument, but do not think that error is reflected. Most of his argument is an elaboration of appellant’s principal contention that under the law and the evidence appellees are not entitled to recover, and that appellant’s association with the other parties was a series of separate and distinct relationships, all of which had terminated before his reacquisition of the Howard leases. These questions are not matters of first impression. We think the Supreme Court has outlined the duty of the trial court in having such issues determined by the triers of the facts, and, since we believe the evidence is sufficient to support the jury’s verdict and judgment of the court, such findings and holdings are binding on this court.

In appellant’s eighth group of points complaint is made of the court’s action in overruling appellant’s exceptions to that part '.of the Beck Estate’s pleading which alleged the-state’of mind and health of Theodore Beck, and appellant’s exception to a portion of the auditor’s report.

Beck died on May 31, 1950, after the expiration of the original Howard leases and before appellant acquired the new lease on.such tract. The allegations as to Beck’s health were substantially that illness had rendered him unable to attend to his business affairs, and that he had no knowledge or potice that appellant had breached any fiduciary duty, or that appellant had ever contended that the partnership relation had terminated. There was medical testimony, elicited without objection, that during the last three- or four months of his life Beck was virtually an invalid. Regardless of whether such pleading was relevant to any material issue, we are of the opinion that overruling such' exceptions did not constitute reversible error. Rules 434 and 503, T.R.C.P.

The part of the auditor’s report to which this exception was leveled pertained to the cost to appellant and his charge to plaintiffs and the Beck Estate covering the acquisition of the original Howard leases. Appellant charged and the other parties paid on the basis of $6 per acre, or $3,480. The auditor’s report listed'appellant’s cost at $1,517.65, and plaintiffs and the ■ Beck Estate were awarded recovery for the alleged overcharge . with interest. The matter of the accounting as to the cost of the original Howard leases was determined in appellant’s favor by the affirmance of that part of the summary judgment. Smith v. Bolin, Tex.Civ.App., 261 S.W.2d 352 and 153 Tex. 486, 271 S.W.2d 93. This point is sustained.

We are unable to agree with the contention presented in appellant’s last point, which is designated aS ‘group nine, that even if reversible error is not shown by any .single matter standing alone, the. cumulative effect of all of such alleged errors resulted in denying appellant a fair, trial. If we thought this record was replete with errors, no one of which would require a reversal, but the total effect of which was such that we felt, in the due administration of justice the judgment ought to be set aside, a different situation would bé presented.

The record is voluminous and, very complicated, and a study of it shows that the proceedings were guided by an alert and able trial court,;.

We do not extend" an already lengthy opinion to discuss" severally'the 138 points of error presented by appellant. But every point has been carefully considered in the light of the lucid and comprehensive briefs and oral arguments submitted by all parties, and, in our opinion', error requiring a remand is not reflected.

By eliminating the recoveries, including interest, awarded to plaintiffs and the Beck Estate on the-accounting matters covering the cost of the original Howard leases and of drilling the first Howard' well, the judgment is- reformed so as to reduce the money recovery awarded to appellee Smith by $480.48, and the money recoveries awarded to appellees Nail, Egdorf, Denny, Paulk, Denney, and the Beck Estate each by $240.24.

As reformed, the judgment is affirmed. Costs of appeal are taxed against appellant.