Henshaw v. Texas Natural Resources Foundation, 11816.

• Decision Date: 19 May 1948
• Docket Number: No. 11816.,11816.
• Citation: 212 S.W.2d 241
• Parties: HENSHAW et al. v. TEXAS NATURAL RESOURCES FOUNDATION et al.
• Court: Texas Court of Appeals

212 S.W.2d 241

HENSHAW et al. v. TEXAS NATURAL RESOURCES FOUNDATION et al.

No. 11816.

Court of Civil Appeals of Texas. San Antonio.

May 19, 1948.

Rehearing Denied June 23, 1948.

Appeal from 94th District Court, Nueces County; Paul A. Martineau, Judge.

Suit by the Texas Natural Resources Foundation and others against Walter A. Henshaw and others to recover oil and gas leasehold estates in certain tracts of land.

Judgment for plaintiffs, and defendants appeal.

Affirmed.

Kelso, Locke & King, of San Antonio, Neel, King & Rachal, of Corpus Christi, for appellant.

Davenport & Ransome, of Brownsville, and Chas. H. Clark, of Corpus Christi, for appellee.

NORVELL, Justice.

Henshaw Brothers and Monday Oil Company (who claim under Henshaw Brothers) have appealed from a judgment which awards to Texas Natural Resources Foundation a recovery of oil and gas leasehold estates in a 178 acre tract of land referred to in the briefs as the "Grossman" and a 178.35 acre tract referred to as the "Boerner", both tracts being located in Jim Wells County. The judgment also made disposition of monies in the possession of Southern Minerals Corporation as a stakeholder and allowed that corporation certain sums for attorney's fees.

Trial below was to the court without a jury. Upon request, full findings of fact and conclusions of law were prepared and filed. The case turns upon the construction of detailed and involved contracts entered into between the parties and their predecessors in interest. The findings of fact and conclusions of law occupy seventeen pages of the transcript. After a careful examination of these findings and conclusions, we are of the opinion that the findings are in accordance with the evidence and the conclusions state the law properly applicable to the facts. We adopt such findings and conclusions as the findings and conclusions of this Court. Rule 453, Texas Rules of Civil Procedure. This will enable us to state in briefer form the controlling considerations which we believe call for the affirmance of the judgment appealed from.

The appellants contend that the judgment below had the effect of "forfeiting" their interests in the "Grossman" and "Boerner" leases. Appellees, upon the other hand, contend that no beneficial interest in and to the leases has ever vested in appellants under the contracts.

The fundamental difference between the parties is one of factual analysis. There are no questions of conflicts of decision or of distinguishing authorities presented. If appellants' analysis be accepted their position has abundant support in the authorities, and the same may be said as to appellees.

As we view it, a few elementary principles of law and the wording of the contracts control this case. The applicable rules of law may be stated as follows:

A trust arises upon the division of an estate into two parts, legal and equitable, and "a trust is the legal relationship between one person having an equitable ownership in property and another person owning the legal title to such property, the equitable ownership of the former entitling him to the performance of certain duties and the exercise of certain powers by the latter, which performance can be compelled in a court of equity." 54 Am.Jur. 21, § 4.

An equitable title in Texas has been defined as "the present right to the legal title. * * * Such an equitable title is available in the statutory action of trespass to try title." Pegues v. Moss, Tex.Civ.App. 140 S.W.2d 461, 471, wr. dism. agr.

When a trust becomes passive or dry the holder of the beneficial interest in property may recover the legal title from the trustee.

Appellees' pleadings of fact in the lower court were full and complete and their recovery essentially depends upon the principles or doctrines of law above stated.

The evidence discloses that on August 28, 1940, the Code Oil Company (predecessor in title of Texas National Resources Foundation) as "Company" and Walter A. Henshaw and Paul A. Henshaw as "Operators" entered into a written contract which they designated as a "joint venture agreement." This original contract is long and detailed and contains five major divisions, designated as "Operators' Contributions", "Company's Contribution", "Joint Operations", "Operators' Special Financing" and "General Provisions."

Attached to the contract as exhibits were a number of copies of written instruments, such as escrow agreements, assignments of oil and gas leases, etc.

On the first page of the contract under the heading "Operators' Contributions" appears the following provision:

"Operators have the right to acquire two certain assignments of oil, gas and mining leases (covering the Grossman and Boerner tracts) under an escrow agreement between C. G. Malott, Trustee, and J. Luther Knies, Trustee, as Parties of the First Part, and themselves as Parties of the Second Part, dated August 15, 1940, a copy of which agreement is attached hereto, marked Exhibit `A', and incorporated herein by reference, and in the event those assignments are delivered to Operators from escrow under the provisions of the escrow agreement, they shall be owned, held and handled pursuant to this agreement." (Italics ours.)

It seems clear enough at the outset that the contract purported to provide a means whereby operators could acquire an interest in certain oil and gas leases and that said leases when acquired would be held in trust and "owned, held and handled pursuant to (the) agreement."

Also, under the head of "Operators' Contributions", Henshaw Brothers agreed that they would, at their sole cost and expense, drill a well designated as "First Operation" and upon completion of said well as a commercial producer operators would assume, discharge and perform the operations designated as "Second Operation" and "Third Operation."

By the contractual provisions relating to "First Operation", Henshaw Brothers agreed to begin drilling within thirty days upon a designated location and drill to 5500 feet and 6000 feet, as the Company might designate, or until oil or gas in paying quantities was encountered and produced.

The contract provided for three varying results which would take place upon the completion of the well or cessation of drilling:

1. If the well should be a dry hole the operators were to be paid out of money deposited with the escrow agent by the Company at the rate of $1.60 per lineal foot and the contract would be considered as fully performed and "the venture terminated."

2. In the event the well be a commercial producer, the escrow agent out of money deposited by the Company agreed to secure delivery of the two lease assignments, in which operators were named as assignees and pay therefor the sum of $25.00 per acre. Operators agreed to assign to the...