Hayes v. Muller

• Decision Date: 29 April 1963
• Docket Number: No. 46472,46472
• Citation: 245 La. 356,158 So.2d 191
• Parties: Jack A. HAYES et al. v. Fritz J. MULLER.
• Court: Louisiana Supreme Court

Page 191

158 So.2d 191

245 La. 356

Jack A. HAYES et al. v. Fritz J. MULLER.

No. 46472.

Supreme Court of Louisiana.

April 29, 1963.

On Rehearing Nov. 12, 1963.

Dissenting Opinion Dec. 5, 1963.

Rehearing Denied Dec. 16, 1963.

Domengeaux & Wright, Lafayette, for plaintiffs-respondents.

Milling, Saal, Saunders, Benson & Woodward, H. H. Hillyer, Jr., Charles D. Lancaster, Bentley G. Byrnes, New Orleans, George J. Bailey, Victor A. Sachse, Baton Rouge, H. H. Hillyer, III, New Orleans, Charles S. Becnel, Vacherie, Thomas J. Keibert, for amici curiae.

Pugh, Buatt & Pugh, Edwards & Edwards, Crowley, Liskow & Lewis, Lafayette, for defendant.

SUMMERS, Justice.

Plaintiffs Jack A. Hayes and Milton Knox named Fritz J. Muller defendant in a suit seeking judgment ordering defendant to pay to each plaintiff the sum of $300,000.00, or alternatively, for an accounting as a result of a contract of joint adventure involving a certain oil, gas and mineral lease. Plaintiffs allege that the contract of joint adventure was violated by defendant Muller. Defendant filed an exception of no cause or right of action which was maintained by the trial court and plaintiffs' suit was dismissed.

Plaintiffs appealed to the Court of Appeal, Third Circuit, and that court reversed the judgment of the trial court, overruled the exception of no cause of action, and ordered the case remanded to the district court for further proceedings. However, upon application for rehearing the court of appeal granted a rehearing and certified certain questions to this court. See La.App., 146 So.2d 176.

Inasmuch as the record accompanies the certification, we treat this case in the same manner as if it had been appealed directly to this court. LSA-Const., art. 7, § 25; Grand v. American General Insurance Co., 241 La. 733, 131 So.2d 46 (1961); Rules of Supreme Court of Louisiana, rule 12, § 4 (Effective April 1, 1962), 8 LSA-R.S.

The petition sets forth that during October, 1953, and for several years prior thereto Knox was District Landman for Kirby Petroleum Company in Southwest Louisiana, and in this capacity had access to and acquired valuable and highly secretive information relating to the location of oil, gas and other mineral resources. Prior to October 1953 Knox, Hayes and Muller entered into joint adventures and in connection therewith Knox would furnish information used in purchasing royalties and leases. In these adventures the parties contributed capital and the knowledge, skill and know-how possessed by each. The proceeds and property resulting therefrom were equally divided.

On and prior to October 8, 1953, Knox, while thus employed by Kirby Petroleum Company, received and obtained valuable information concerning the oil and gas prospects of the Continental, W. Pettijean No. 1 Well in the Rayne Field. With his employer's knowledge and consent Knox decided to purchase royalties and leases in the 'Castille' area of the Rayne Field near the Pettijean well, and to bring about this result he would enter into a joint adventure with Hayes and Muller.

Accordingly, the next morning Knox contacted Muller imparting the information which he possessed concerning the prospect. This information, among other, included electrical logs and core analyses. Knox and Muller agreed to the adventure and to associate Hayes. When Hayes was contacted it was specifically agreed by all three parties that each would contribute $20,000.00, thereby making $60,000.00 available for the purchase of royalties and leases in the North Rayne and/or Castille area, and specifically in the area northeast of the W. Pettijean No. 1 Well concerning which Knox had obtained the valuable information. Their agreement was further to the effect that all available royalties and leases in the area would be obtained so long as the $60,000.00 was not exceeded and the costs and profits would be equally divided.

Later, on October 16, Muller sought information from Knox as to the advisability of buying royalties affecting properties adjoining the 'Sweeney Lease.' Knox advised this purchase and any other royalties or leases in the Castille area, for information he possessed indicated a good prospect of production in the area.

In furtherance of the joint adventure certain royalties were purchased in the names of Muller and Hayes. The sum of $46,013.80 was expended in these transactions, the costs were prorated among the parties to the joint adventure and the interests thus acquired were equally divided by assignments among the parties.

It is alleged that at this same time, on October 16, 1953, Muller, relying upon the information obtained from Knox and Hayes, obtained an oil and gas lease which will be referred to as the 'Sweeney Lease.' This lease named Muller as lessee and was obtained at a cost substantially less than the amount thereto expended by the parties for the royalty purchases. Upon being informed of Muller's purchase of the 'Sweeney Lease' Knox and Hayes inquired of Muller why he had not advised them of the purchase and why they had not been asked for payment for their interest. Thereupon Muller advised them that this matter would be discussed at a later late. As activity in the area was then dormant, Knox and Hayes did not again question Muller concerning this lease for several months.

Early in 1959 Knox again inquired about the 'Sweeney Lease' and Muller again advised that the matter would be discussed later. It was the practice of these parties to handle these matters verbally. Royalties and leases were placed in the name of one of the parties with the understanding that the interest of all parties would in due time be properly assigned. It is alleged that this practice and custom is common in the oil and gas industry and therefore Muller's intentions as to the 'Sweeney Lease' were not seriously questioned.

Thereafter on December 10, 1959, Muller sold the 'Sweeney Lease' which stood in his name to Louisiana Gas Corporation for $900,000.00. Knox and Hayes then made demand upon Muller for their one-third interest in the proceeds from the sale of the lease. Muller denied their claim and refused to pay their interest or to account to them for any proceeds from the joint adventure entered into in October 1953.

The petition alleges fraud and bad faith on the part of Muller in his refusal to pay Knox and Hayes their share of the profits and in that he induced them to forego formal demand until he had an opportunity to transfer the 'Sweeney Lease' to third parties.

Muller is further alleged to have breached the contract of joint adventure in failing to account to Knox and Hayes for the profits realized from their joint enterprise, for the parties had agreed that all available royalties and leases in the 'Castile Area', which includes the 'Sweeney Lease', would be obtained so long as the $60,000.00 was not exceeded and that the costs and profits would be equally divided among them. For these reasons plaintiffs allege they are entitled to specific performance of the joint adventure agreement relating to the division of profits and to an accounting of all profits and to receive one-third of all profits resulting from the joint adventure, specifically those profits derived from the 'Sweeney Lease.' Then follows the prayer for the payment to each of plaintiffs the sum of $300,000.00, or, alternatively, for an accounting of the profits from the 'Sweeney Lease.'

Plaintiffs' demand for the accounting is met by the defendant's exception of no right or cause of action. In support of his exception defendant contends that because the agreement of joint adventure is verbal, parol evidence cannot be used to prove that agreement, for the object of the agreement was to acquire and to dispose of immovable property (oil, gas and mineral leases and royalties) and to share in the profits therefrom.

The premise of this contention is in part the proposition that by Act 205 of 1938, as amended by Act 6 of the Second Extraordinary Session of 1950 (LSA-R.S. 9:1105), oil, gas and mineral leases were classified as real rights and incorporeal immovable property; this provision being further clarified by the 1950 amendment 'as substantive as well as procedural so that the owners of oil, gas and other mineral leases and contracts within the purpose of this Section shall have the benefit of all laws relating to the owners of real rights in immovable property or real estate.' It is noted in this connection that while the rights actually obtained by the mineral lessee are not real rights in the sense that the lease is a charge and burden upon the land, as is a servitude, the legislature has seen fit to place owners of mineral leases on the same level as owners of land, by conferring upon them 'the benefit of all laws relating to the owners of real rights in immovable property or real estate.' Reagan v. Murphy, 235 La. 529, 105 So.2d 210 (1958). It follows from this, according to defendant's contention, that plaintiffs cannot assert title to the 'Sweeney Lease' for the owners of that lease are entitled to require that an agreement affecting its title be in writing. LSA-Civil Code, arts. 2275, 2440. This being a 'benefit' accorded to owners of real property to which a mineral lessee is also entitled. See Ingolia v. Lobrano, 244 La. 241, 152 So.2d 7 (1963).

He asserts, too, that a joint adventure is legally a partnership and, therefore, plaintiffs cannot prove that agreement, for Article 2836 of the LSA-Civil Code requires that if any part of the stock of the partnership consists of real estate, it must be in writing and the mineral lease referred to is 'stock' of the partnership.

It is conceded that plaintiffs have alleged the existence of a verbal contract of joint adventure. Also, there is no dispute between plaintiffs and defendant that a joint adventure can properly be defined as a special combination of two or more persons who jointly seek a profit through a specific adventure without any...