Allred v. Fairchild

• Citation: 785 So.2d 1064
• Decision Date: 31 May 2001
• Docket Number: No. 1999-CA-00795-SCT.,1999-CA-00795-SCT.
• Court: United States State Supreme Court of Mississippi
• Parties: William Wallace ALLRED v. Wiley FAIRCHILD, Fairchild-Windham Exploration Company, A Partnership, John M. Fairchild, Michael B. Moore, Mark A. Fairchild, as the Trustees of the Marie I. Fairchild Life Insurance Trust and the Marie I. Fairchild Life Insurance Trust.

785 So.2d 1064

William Wallace ALLRED v. Wiley FAIRCHILD, Fairchild-Windham Exploration Company, A Partnership, John M. Fairchild, Michael B. Moore, Mark A. Fairchild, as the Trustees of the Marie I. Fairchild Life Insurance Trust and the Marie I. Fairchild Life Insurance Trust.

No. 1999-CA-00795-SCT.

Supreme Court of Mississippi.

May 31, 2001.

Otis Johnson, Jr., Keith R. Raulston, Jackson, for Appellant.

Jerry L. Mills, Carolyn Buttles Mills, Ridgeland, for Appellees.

Before BANKS, P.J., COBB and DIAZ, JJ.

DIAZ, Justice, for the Court:

¶ 1. In December 1990, William Wallace Allred filed suit in Covington County Chancery Court seeking to recover damages and other relief stemming from a multi-million dollar oil and gas transaction in 1974. In his complaint, Allred alleged that Wiley Fairchild and he entered into an oral contract whereby Allred was to receive a 10% interest in certain oil and gas leases "after payout" for helping arrange the agreement between Fairchild and Ledrew Windham for the purchase of those oil, gas and mineral leases. Allred further alleged that Fairchild owed him a commission for services rendered in connection with the sale and had made fraudulent representations concerning the status of the transaction in an effort to hide the true "payout" date. This, Allred claims, is the cause of the 16 year delay between the closing and filing suit.

¶ 2. After eight years of discovery, motions, hearings, and a counterclaim, Chancellor Percy L. Lynchard, Jr. ruled in favor of Fairchild. In his opinion, Chancellor Lynchard held that while Allred had rendered a valuable service worthy of compensation and there was evidence of an agreement between the two parties, the statute of limitations and the statute of frauds barred Allred's claims for recovery. Judgment was entered dismissing Allred's claims, as well as Fairchild's counterclaim. Allred now appeals that order and opinion contending that the chancellor erred by not imposing a constructive trust for his benefit and in applying the statute of frauds and statutes of limitations to his claims. According to Allred, the chancellor improperly applied the law and did not adequately consider relevant facts (i.e. Fairchild's fraudulence) that should have been determinative.

FACTS

¶ 3. These facts are based largely upon the findings of the chancellor and supported by the record. Since the suit itself covers 10 years and its factual basis spans thirty years, the facts have been restricted to those relevant to the issues now on appeal. ¶ 4. Over thirty years ago, William Allred and Wiley Fairchild began doing business with each other in the area of oil, gas, and minerals. During the course of their business relationship, Allred generally would secure mineral or other interests, and Fairchild would finance the ventures. As compensation for his efforts, Allred usually was paid either by commission or by a conveyance of a percentage of the newly acquired mineral interests. These transactions were mostly oral arrangements with no written contract of the agreement. Sometimes, Allred's compensation was not settled until long after the transaction had been completed.

¶ 5. During the early 1970s, Allred twice secured options for the purchase of the Windham's vast oil, gas, and mineral interests. After extensive research in determining the exact extent of the Windham properties, Allred approached Fairchild concerning the possibility of financing the project, as had been done with several other transactions in the past. Upon Fairchild's assent, Allred successfully negotiated a deal whereby Fairchild purchased all of the Windham oil, gas, and mineral interests located throughout the Southeast. The purchase of the Windham properties was finally closed on February 1, 1974. As for Allred's compensation, he and Fairchild agreed that a 10% interest in the Windham properties would be conveyed to Allred "after payout." In his final order, the chancellor held that payout "is a term commonly used in the oil, gas, and mineral business which refers to a point in time in which the acquisition costs of a mineral interest are paid, and with the exception of some overhead, the income derived from that interest is profits." Unfortunately, there was never any written documentation of this agreement.

¶ 6. Over the course of a few years, Allred inquired as to the status of the Windham properties and thus, his "commission" of 10% interest. According to Allred, Fairchild consistently and repeatedly reported that payout had not yet occurred. In fact, at trial an expert for Allred concluded that payout actually would have occurred no later than July 1981. After having received no documentation despite repeated requests and suspecting Fairchild of misrepresenting the facts (the parties had a falling out in the late 1970s or early 1980s), Allred finally brought suit in 1990.

DISCUSSION

I. WHETHER THE TRIAL COURT ERRED IN NOT IMPOSING A CONSTRUCTIVE TRUST FOR THE BENEFIT OF ALLRED.

¶ 7. Before we can determine whether the chancellor erred, we must first determine what is necessary to justify the imposition of a constructive trust.

A constructive trust is one that arises by operation of law against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, to hold and enjoy.

Sojourner v. Sojourner, 247 Miss. 342, 153 So.2d 803, 807 (1963) (citing 54 Am.Jur., Trusts, § 218). Essentially, a constructive trust is an operation of equity. When one party holds title and benefits from land that he/she should not rightfully possess, a constructive trust is imposed for the benefit of another party who is rightfully entitled to a part or the whole. Sojourner, 153 So.2d at 808-9 (citing Russell v. Douglas, 243 Miss. 497, 138 So.2d 730 (1962)).

The determination of the existence of a constructive trust is a matter of law and thus, subject to de novo review. McNeil v. Hester, 753 So.2d 1057, 1063 (Miss.2000). There is no question that Fairchild possesses the Windham properties. We need only determine whether Allred is due an interest in those properties.

¶ 8. In his original motion as well as in appeal briefs, Allred cites to an extensive list of alleged discovery violations in support of his assertion that Fairchild committed fraud. Allred's contention is that Fairchild purposefully lied, withheld evidence, and did everything possible to cover up the fact that he owed Allred a percentage of the Windham properties. This fraud has allowed Fairchild to benefit from the 10% interest due Allred per their oral agreement. As such, Fairchild should not be allowed to benefit from his wrongdoing as a matter of law.

¶ 9. In addition, the evidence indicates that Allred and Fairchild shared a special relationship based upon trust and mutual respect. "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...." Sojourner, 153 So.2d at 807. In harmony with the equitable purpose of constructive trusts, we are careful not to apply too narrow a definition of confidential relationship. "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 relation is a moral, social, domestic, or merely personal one." Id. at 808. Allred's and Fairchild's long and informal business relationship is a clear indication that a confidential relationship existed. After all, the two did business for over 20 years based on little more than a handshake. It was this confidential relationship that allowed Fairchild to conceal the truth concerning payout for so long.

¶ 10. Finally, on multiple occasions, while denying the very existence of an oral agreement, Fairchild stated that he never intended to give Allred any interest in the Windham properties. The lack of any intention to fulfill an agreement is strong evidence that a constructive trust would be appropriate. "[A] constructive trust will be raised where at the time the promise is made the grantee does not intend to perform it...." Id. Although these last two elements are not technically necessary to establish a constructive trust, they strongly weigh in favor of creating one.

¶ 11. The present situation is tailormade for the imposition of a constructive trust. Fairchild owns and profits off the Windham properties because he fraudulently hid the date of payout from Allred with whom he shared a confidential relationship. A constructive trust is a fitting remedy to right such unjust enrichment. Id. at 807. The chancellor erred in not imposing a constructive trust for Allred's benefit. Therefore, we reverse the chancellor's order and remand the case for determination of the value of the trust.

II. WHETHER THE TRIAL COURT ERRED IN APPLYING THE STATUTE OF FRAUDS TO A "COMMISSION" PAYMENT SITUATION.

¶ 12. Whether the chancellor erred in applying the statute of frauds hinges upon whether the present situation classifies as a commission or an interest in land. There are certain basic rules concerning the statute of frauds that are fundamental to the determination of this issue. First, oral contracts are generally as enforceable as any other form. Putt v. City of Corinth, 579 So.2d 534, 538 (Miss. 1991). Since Fairchild failed to cross-appeal upon the chancellor's finding that a valid oral contract existed, the fact that the contract was oral alone does not sound the death knell for Allred's case. Steinwinder v. Aetna Cas. & Sur. Co., 742 So.2d 1150, 1151 (Miss.1999). However, the...