First Nat. Bank and Trust Co. of Oklahoma City v. Sidwell Corp.

• Court: Kansas Supreme Court
• Writing for the Court: HOLMES
• Citation: First Nat. Bank and Trust Co. of Oklahoma City v. Sidwell Corp., 678 P.2d 118, 234 Kan. 867 (Kan. 1984)
• Decision Date: 18 February 1984
• Docket Number: No. 55091,55091
• Parties: The FIRST NATIONAL BANK AND TRUST COMPANY OF OKLAHOMA CITY and Virginia Eason Weinmann, Trustees Under the Will of Ada S. Eason, the First National Bank and Trust Company of Oklahoma City, Virginia Eason Weinmann and John G. Weinmann, Trustees Under the Will of T. Winston Eason, I. Wayne Woolsey, and Joan Woolsey, Appellees, v. The SIDWELL CORPORATION, Sidwell Oil and Gas, Inc., Robert Klabzuba, and David D. Read, Jr., Appellants.

Page 118

678 P.2d 118

234 Kan. 867

The FIRST NATIONAL BANK AND TRUST COMPANY OF OKLAHOMA CITY and Virginia Eason Weinmann, Trustees Under the Will of Ada S. Eason, the First National Bank and Trust Company of Oklahoma City, Virginia Eason Weinmann and John G. Weinmann Trustees Under the Will of T. Winston Eason, I. Wayne Woolsey, and Joan Woolsey, Appellees, v. The SIDWELL CORPORATION, Sidwell Oil and Gas, Inc., Robert Klabzuba, and David D. Read, Jr., Appellants.

No. 55091.

Supreme Court of Kansas.

Feb. 18, 1984.

Syllabus by the Court

1. Where the trial court has made findings of fact and conclusions of law, the function of an appellate court is to determine whether the findings are supported by substantial competent evidence and whether the findings are sufficient to support the trial court's conclusions of law.

2. On appeal, written instruments may be construed and their legal effect determined by the appellate court. It is not the function of an appellate court to judge the credibility of the witnesses or to weigh the evidence.

3. A person may be both an independent contractor and an agent for another.

4. Where the parties agree on a pretrial order, which is followed by the trial court and controls the subsequent course of the action, the parties may not enlarge the issues on appeal.

5. When the relationship of joint adventurers exists, the parties stand in a close relationship of trust and confidence and are bound by the same standards of good conduct and square dealing as are required of partners. Each party has the right to demand and expect from the other full, fair, open and honest disclosure of everything affecting the relationship.

6. The rule against perpetuities is that no future interest in property can lawfully be created which does not necessarily vest within twenty-one years after some life or lives presently in being, excluding from such computation of years the incipient life of infants in ventre sa mere.

7. A transaction which is exclusively contractual is not subject to the rule against perpetuities and the rule does not affect purely personal contracts not creating rights of property.

8. The rule against perpetuities springs from considerations of public policy. The underlying reason for and purpose of the rule is to avoid fettering real property with future interests dependent upon contingencies unduly remote which isolate the property and exclude it from commerce and development for long periods of time, thus working an indirect restraint upon alienation, which is regarded at common law as a public evil.

William R. Smith, of Hershberger, Patterson, Jones & Roth, Wichita, argued the cause and Jerome E. Jones, Wichita, of the same firm, was with him on the brief, for appellants.

Timothy E. McKee, of Martin, Pringle, Oliver, Triplett & Wallace, Wichita, argued the cause, and Robert Martin, Wichita, of the same firm was with him on the brief, for appellees.

HOLMES, Justice:

The defendants appeal from a decision rendered in a trial to the court wherein a constructive trust in favor of the plaintiffs was imposed upon a portion of defendants' interests in four oil and gas leases. Plaintiffs claimed their interests by virtue of an agreement entered into between plaintiff, I. Wayne Woolsey (hereinafter Woolsey) and defendant David D. Read, Jr. The appeal was transferred from the Court of Appeals pursuant to K.S.A. 20-3018(c). We affirm the judgment of the trial court in all respects.

Plaintiff Woolsey, a petroleum geologist, was engaged in 1971 in a joint venture with T. Winston Eason and his wife. Mr. and Mrs. Eason are both deceased and the other plaintiffs, except Joan Woolsey, are successors in interest to the Easons. Plaintiff Joan Woolsey is the ex-wife of I. Wayne Woolsey. Defendant David D. Read, Jr. is a landman in the oil and gas business and is associated, insofar as this case is concerned with the other defendants who are all connected with the oil and gas business in one way or another.

In 1971, Woolsey had studied an area in Comanche County and assembled a block of oil and gas leases covering the Mule Creek Northeast Prospect. This acreage consisted of 960 acres described as the East half of the East half of Section 7, the West half of Section 8, the West half of Section 17, and the East half of the East half of Section 18, Township 31 South, Range 17 West, Comanche County, Kansas. On October 1, 1971, Woolsey entered into an agreement with Read for development of the acreage. Portions of the agreement pertinent to this appeal provide:

"At the date of this agreement we contemplate the acquisition of additional oil and gas leases on acreage that is contiguous to this block and in the area of mutual interest as described in Exhibit 'A'; and if I acquire any oil and gas leases on any of such lands in this area, then you shall have the option of paying all of the bonus consideration for such leases, plus the necessary broker's commission, and receiving an assignment of an undivided 3/4ths interest in such lease or leases. If you acquire any leases on any of such lands you shall assign to me an undivided 1/4th interest in such leases free and clear of cost to me.

....

"As to these leases in which we may own a joint interest, Sidwell Oil & Gas, Inc. shall be the operator of all jointly owned leases and, at an appropriate time, we will enter into an operating agreement on the form attached hereto as Exhibit 'B'.

".... Our respective rights and obligations hereunder are those of independent contractors and nothing herein contained shall be deemed to create any relationship of mining or other partnership as between us."

The "area of mutual interest" consisted of all of Sections 7, 8, 17 and 18, the South half of Section 5, and the South half of Section 6, all in Township 31 South, Range 17 West of the Sixth P.M., Comanche County, Kansas. The following diagram shows the area of mutual interest including the Mule Creek Northeast Prospect, and the location of the Huff, Nielsen, Booth and Fisher leases and wells.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Woolsey and the defendants cooperated in the drilling of the Huff # 1 well in the Southeast quarter of the Southeast quarter of Section 18 which was completed as a commercial producing gas well in late 1971. Prior to that time Woolsey and the defendants acquired the Booth lease covering 37 acres of the Southwest quarter of the Southeast quarter of Section 18. The Booth lease, dated October 5, 1971, had a primary term of five years and was located within the area of mutual interest. During the primary term of the Booth lease Lee Banks, another oil operator, acquired the three Nielsen leases located North and West of the Booth lease and within the area of mutual interest. In 1974, Banks completed a commercial gas well, the Nielsen # 1, in the Northwest quarter of the Southeast quarter of Section 18.

Unbeknownst to the plaintiffs, the defendants in April, 1977, obtained a new lease on the Booth property and shortly thereafter acquired interests in the three Nielsen leases including the Nielsen # 1 well. None of these acquisitions were made known to the plaintiffs and defendants did not assign a one-fourth of their working interest in the leases to Woolsey. The trial court found defendants had breached a fiduciary duty owed to plaintiffs under the original Woolsey-Read area of mutual interest agreement and imposed a constructive trust upon defendants' interests in the Booth and Nielsen leases. Defendants have appealed. Additional facts will be set forth as they become pertinent to the numerous assertions of error.

At the outset defendants contend that the evidence in this case is "largely documentary" and that the testimony on the issues was "largely uncontroverted" and therefore we "have substantially the same power as the trial court to interpret the documents and other evidence." Our role on appeal, however, does not extend to re-trying the case. Where the trial court has made findings of fact and conclusions of law, the function of this court on appeal is to determine whether the findings are supported by substantial competent evidence and whether the findings are sufficient to support the trial court's conclusions of law. City of Council Grove v. Ossmann, 219 Kan. 120, Syl. p 1, 546 P.2d 1399 (1976); Sunflower Electric Coop., Inc. v. Tomlinson Oil Co., 7 Kan.App.2d 131, 137, 638 P.2d 963 (1981), rev. denied 231 Kan. 802 (1982). The record in this case discloses one hundred fifty-six exhibits were presented to the trial court and eleven witnesses, several of them experts, testified during a five-day trial resulting in a transcript of six hundred fifty-nine pages. While it is true that on appeal written instruments may be construed and their legal effect determined by the appellate court [Stanfield v. Osborne Industries, Inc., 232 Kan. 197, Syl. p 1, 654 P.2d 917 (1982) ], our freedom in this regard is limited to the documents alone. It is not the function of an appellate court to judge the credibility of the witnesses or to weigh the evidence. The trial court imposed liability on the defendants for two principal reasons: first, the area of mutual interest obligation designated in the original Mule Creek Northeast Prospect agreement was never terminated; and second, in acquiring interests in this area, defendants breached fiduciary duties owed to plaintiffs.

As their first point defendants assert error by the trial court in finding that the area of mutual interest obligation had not terminated. Defendants' principal argument that the Woolsey-Read agreement had been terminated is based upon a letter written by Woolsey to Read under date of July 9, 1976. That letter, excluding the salutation and closing, provided in its entirety:

"This letter is written to confirm our recent telephone conversation concerning areas of mutual interest established in the Wilmore and Mule Creek NE Prospects...