Smith v. Bolin

271 S.W.2d 93, 153 Tex. 486, 3 Oil & Gas Rep. 1534, 1954 Tex. LEXIS 516

• Court: Texas Supreme Court
• Decided: July 14, 1954
• Docket: A-4398
• Status: Published

Opinions

Mr. Justice Smith

delivered the opinion of the Court.

This appeal is from a summary judgment. The petitioners filed suit in equity against the respondent, D. H. Bolin, and against the other respondents who are his assigns, to recover an interest in certain oil properties in Montague County, Texas, by means of a constructive trust. The trial court’s action in granting respondent’s motion for summary judgment has been affirmed by the Court of Civil Appeals. 261 S.W. 2d 352.

Petitioners assert that the following issues of fact were raised which preclude the rendition of summary judgment:

1. That in acquiring for his personal benefit renewals of oil and gas leases on the Howard lands Bolin violated a fiduciary duty to petitioners.

2. That in acquiring for his benefit the farm-out leases on the Gist and Crownover tracts he likewise violated a fiduciary duty to petitioners.

3. That Bolin obtained geological information in the drilling done on the Howard leases while active in a fiduciary relationship to the petitioners, which partly induced him to purchase the farm-out leases and to obtain the renewal of the Howard leases for his personal benefit.

In determining the question of whether or not material issues of fact were raised by the evidence, the court must, under the law, first view all the evidence in the light most favorable to the petitioners; disregard the conflicts in the testimony; and indulge, in favor of the petitioners, every intendment reasonably deducible from the evidence. White v. White, 141 Texas 328, 172 S.W. 2d 295; Fitz-Gerald v. Hull, 150 Texas 39, 237 S.W. 2d 256. A summary judgment is not proper if the evidence raises issues of fact to be determined by a court or jury. See McDonald on Texas Civil Practice, Vol. 4, Sec. 17.26, pp. 1380,1382.

The suit was based upon a written partnership agreement entered into between the parties on December 1, 1946. Whether the relationship between D. H. Bolin and the petitioners was a continuous 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. In an appeal from a summary judgment, this Court should only determine the question of whether or not a fact issue was raised by the pleadings, affidavits and evidence.

Some of the evidence, which raises a fact or fact issues as to the Howard leases, is as follows:

The petitioners are doctors and business men. They were never engaged primarily in the oil business. Respondent, D. H. Bolin, has been actively engaged in the oil business for more than 30 years; the petitioners trusted respondent, D. H. Bolin, and had complete confidence in his integrity. On December 1, 1946, by written partnership agreement, they designated Mr. Bolin as the business manager of the partnership; they agreed to pay into the common fund to enable operations to begin two-thirds (2/3) thereof and respondent one-third (1/3). All funds were to be deposited to the credit of the partnership, .to be checked out only on checks duly signed by D. H. Bolin, or under his direction. D. H. Bolin alone transacted the partnership business. This partnership was entered into at the solicitation of respondent, D. H. Bolin. At no time during the period from December 1, 1946 until sometime in June, 1950, did he inform petitioners that he was not acting under the terms of the written partnership agreement of December 1, 1946. The written agreement provided that the business activities of the parties should continue so long as the parties might mutually desire. Respondent also acted as contractor in drilling wells on leased property, which included the property referred to as the Howard leases in Montague County, Texas. The Howard leases, as well as all other leases, were originally taken in the name of D. H. Bolin. The Howard leases were to expire on March 12, 1950. When a^ke.d, in. February 195.0, ,to secure- renewals or extensions of the Howard. leases for: the partnership, Mr. Bolin replied: “We cé.ühj.no more get that then we could get wings-and- fly to Heaven this afternoon.” When, urged, in November 1949, to obtain the. .farm-ou't leases for the partnership on the Gist leases,. Mr. Bólin advised., one of the petitioners that he had' checked the geology and was not interested in those farm-outs. On March 9th or 10th, before the expiration of the Howard leases, respondent began negotiations with. Standard Oil Company of Texas and. Bend Oil Company, owners of the Gist and Crownover leases, which resulted in respondent obtaining the farm-outs on these two leases. The farm-out agreement was dated April 4, 1950, and was approved and accepted by respondent, D. H. Bolin, on lÜay 6, 1950. On March 9th or March 10th, 1950, Standard Oil Company of Texas showed respondent the geology in the area. Bespondent had theretofore drilled two wells on the. Howard leases,- both dry holes. G. W. Oliver, superintendent of Standard Oil Company of Texas, testified that the drilling of the two wells, on the Howard lands by the partnership did contribute to the geological overall picture in the area. Bespondent knew these facts before the expiration of the original Howard leases. Mr. Oliver testified that all this information had value from the geological-point of view. Prior to the drilling of the two wells on tibe Howard lands, one of the petitioners had urged respondent to drill the Howard #2 well in the northwest corner of the Howard lands. This location would have been nearer and more adjacent to the Gist and Crownover farm-outs. Mr. Bolin drilled in the southeast corner, and the well was a dry hole. On March 9th or 10th, 1950, respondent had before him the report of his geologist, N. A. Kendall, which reflected that a local reef condition seemed indicated.' Kendall’s report was also made to Standard Oil Company of Texas on February 6, 1950. When Mr. Kendall made this report the Howard leases were still in force, and the original agreement was in effect, according to the contention of petitioners. The report contains the following: “* * * as to your inquiry about our next location, on the west 32,0 acres of the Howard tract, we are yet undecided, but chances are that we want to try to define this 1900-ft. reef possibility, since it did have a substantial oil show. If you folks could suggest a location that would suit this purpose and at the same time can furnish information that would be of value to you, we would be glad to get together with you. Inasmuch as we will probably wind up our present well in the next week or 10 days, we would like to have an eventual joint location agreed upon by that time.” The report or letter was signed “Bolin Oil Company, by N. A. Kendall;”; -

The evidence shows that on March 9th or 10th, 1950, respondent gained further geological information. The negotiations resulted in respondent obtaining the farm-outs and the Howard leases. The well on the Gist land was completed as a commercial producer in June, 1950. Respondent first represented to petitioners that Standard Oil Company of Texas was the producer of these wells, then later, admitted he was the producer and also had the Howard leases. The well was produced from the “Cronoidal” or “Crinoidal” lime, the same as mentioned in the report of February 6, 1950. Respondent acquired the renewal leases on the Howard lands in June, 1950, before the completion of the Gist well. The wells on the Howard lands are producing from the same formation as the Gist lease. There were eleven producing wells on the Howard lands at the time of the hearing of the motion for summary judgment. The respondent billed petitioners for their part of the operating expense, and they paid their part for all the dry holes, but when oil was finally produced the petitioners were told they had no interest in the producing wells. The statement of facts consists of 728 pages. We wish to reiterate that we do not decide the evidence in favor of or against either party, but we hold it 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.

The extent of the geological knowledge and information obtained by D. H. Bolin in the development of the Howard lands, jointly with petitioners, and whether this geological information was a motivating circumstance in his acquisition of renewal leases covering the Howard lands are matters principally within the mind of Mr. Bolin.

The rule with respect to the use of knowledge or information by one who stands in a confidential or fiduciary relationship is well stated in Restatement of the Law, Restitution, Chap. 12, Sec. 200; Fitz-Gerald v. Hull, supra; Pomroy’s Equity Jurisprudence, 4th Ed., Vol. 3, par. 1050 ; Schiller v. Elick, 150 Texas 363, 240 S.W. 2d 997; Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 62 A.L.R. 1; Ballard v. Claude Drilling Company, 149 Kan. 506, 88 Pac. 2d 1021, 1023.

In the case of Meinhard v. Salmon, supra, Salmon negotiated and obtained for himself a new lease on certain property which had been under lease by Salmon and Meinhard operating undér a joint venture agreement. Salmon was the sole manager of the property.- The new lease included some adjoining property not included in the original lease. The court sustained Meinhard’s suit to establish his interest in the property, both the original and the adjoining property, on the theory of constructive trust for his benefit. The court, in an opinion by Chief Justice Cardozo, (249 N.Y., 463, 464) said:

“Joint adventures, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of conduct permissible in a workaday world for those acting at arm’s length are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions. Wendt v. Fischer, 243 N.Y. 439, 444, (154 N.E. 303). Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court.”

As managing partner of their partnership enterprise, respondent owed his partners even a greater duty of loyalty than is normally required. In the Meinhard v. Salmon case, supra, the court said: “Salmon had put himself in a position in which thought of self was to be renounced, however hard the abnegation. He was more than a coadventurer. He was a managing co-adventurer. * * * For him and for those like him, the rule of undivided loyalty is relentless and supreme.” MacDonald v. Follett, 142 Texas 616, 180 S.W. 2d 334.

When Bolin Oil Company, through Mr. Kendall, made its geological report to Standard Oil Company on February 6, 1950, the original Howard leases had not expired. Respondent was managing the partnership, drilling the wells and performing his obligations under the agreement of December 1, 1946. Under the evidence, Standard could have believed respondent owned the lease in his own right and that no one else was interested. In fact, he was holding the lease as a fiduciary for himself and the petitioners. As said in the Salmon case, supra, “* * * the pre-emptive privilege, or, better the pre-emptive opportunity, that was thus an incident of the enterprise, Salmon appropriated to himself in secrecy and silence, He might have warned Meinhard that the plan had been submitted, and that either would be free to compete for the award. If he had done this, we do not need to say whether he would have been under a duty, if successful in the competition, to hold the lease so acquired for the benefit of a venture then about to end, and thus prolong by indirection its responsibilities and duties. The trouble about his conduct is that he excluded his coadventurer from any chance to compete, from any chance to enjoy the opportunity for benefit that had come to him alone by virtue of his agency. This chance, if nothing more, he was under a duty to concede. The price of its denial is an extension of the trust at the option and for the benefit of the one whom he excluded.”

Petitioners alleged that they reposed the utmost confidence and trust in the said D. H. Bolin. Petitioners proved that the respondent made many reports to them with reference to the dry holes and they paid out many thousands of dollars in such operations, and that they participated in the expense incident to securing the geological information which respondent obtained and later used to his personal advantage and to the exclusion of petitioners. Petitioners alleged that respondent, D. H. Bolin, “* * * wilfully concealed from these plaintiffs his negotiations to acquire farm-outs on said adjoining leases.”

While the new leases on the Howard lands were not actually obtained until after March 12, 1950, the evidence presents a fact issue as to whether a fiduciary relationship existed at the time of acquisition of such rights in the name of Bolin to the exclusion of petitioners. This Court in the Case of Fitz-Gerald v. Hull, supra, (150 Texas 39, 237 S.W. 2d 261), said:

“ ‘While a confidential or fiduciary relationship does not in itself give rise to a constructive trust, an abuse of confidence rendering the acquisition or retention of property by one person unconscionable against another suffices generally to ground equitable relief in the form of the declaration and enforcement of a constructive trust, and the courts are careful not to limit the rule or the scope of its application by a narrow definition of fiduciary or confidential relationships protected by it. An abuse of confidence within the rule may be an abuse of either a technical fiduciary relationship or of an informal relationship where one person trusts in and relies upon another, whether the relationship is a moral, social, domestic, or merely personal one.’ Sec. 225, 54 Am. Jur., ‘Trusts,’ p. 173.”

Thes application of the summary judgment rule is well stated in McDonald on Texas Civil Practice, Vol. 4, Sec. 17.26, pp. 1380 and 1382, and in the case of Gulbenkian v. Penn, 151 Texas 412, 252 S.W. 2d 929, 931, 932. In the latter, this Court said:

“* * * The duty of the court hearing the motion for summary judgment is to determine if there are any issues of fact to be tried, and not to weigh the evidence or determine its credibility, ❖ ❖ ❖

“The general rule is that if a motion involves the credibility of affiants or deponents, or the weight of the showings or, it is said, a mere ground of inference, the motion will not be granted

We are of the opinion that the trial court correctly sustained respondent’s motion for summary judgment with regard to the property described as to the Gist and Crownover leases, and therefore as to such leases the action of the trial court and the Court of Civil Appeals is sustained.

The petitioners, as a part of their cause of action, prayed for an accounting and the appointment of an auditor to audit the partnership books kept by Bolin in connection with the partnership. The action of the trial court in granting respondent’s motion for summary judgment also denied the prayer for an accounting. The Court of Civil Appeals has affirmed such action, except as to the plea for an accounting upon the delay 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. The respondent does not complain of the judgment of reversal as to the plea for accounting.

The judgment of the Court of Civil Appeals is affirmed as to the plea for an accounting and the judgments of the trial court and Court of Civil Appeals are affirmed as to the property described as the Gist and Crownover farm-out leases and reversed and remanded to the trial court for trial on the merits as to the Howard leases.

Opinion delivered July 14, 1954.