Huffington v. Upchurch
| Decision Date | 02 April 1975 |
| Docket Number | No. 1083,1083 |
| Citation | 523 S.W.2d 44 |
| Parties | Roy M. HUFFINGTON, Individually and Roy M. Huffington, Inc., Appellant, v. Haden UPCHURCH, Appellee. (14th Dist.) |
| Court | Texas Court of Appeals |
Alfred H. Ebert, Jr., Paul E. Harris, Thomas L. Schubert, Andrews, Kurth, Compbell & Jones, Houston, Frank G. Harmon, Baker & Botts, Houston, for appellant.
Fred Parks, Houston, Sloan B. Blair, Howard G. Barker, Cantey, Hanger, Gooch, Cravens & Munn, Fort Worth, for appellee.
Appellant, Roy M. Huffington, (Huffington) and appellee, Haden J. Upchurch, (Upchurch) are business acquaintances and friends of long standing. Huffington is a well-educated and competent geologist. He also is a talented business man and fund raiser. Upchurch is a licensed lawyer but has never practiced law. He is an experienced landman as that term is understood in the oil industry. Huffington is joined as appellant by the corporation Roy M. Huffington, Inc. (Inc.) which he formed in 1958. From formation (until at least 1970) Huffington was its sole and only stockholder. He served as Chairman of the Board, President, and Treasurer of the corporation. The other directors were either attorneys or employees of the company. Under the circumstances it is not surprising that Huffington dominated his wholly owned corporation.
Inc. became involved in a number of activities including shrimping, a processing plant, real estate and oil and gas programs. In the latter connection, Inc. would put together oil and gas 'prospects' which it regarded as worthwhile and secured funds principally from those in a position to obtain tax benefits under our income tax laws. In general, these drilling programs provided for a certain portion of the money to be allocated to Inc. to cover its expenses. In the event the property proved productive, Inc. would obtain a reversionary interest upon pay-out of the original investment. Inc. was permitted to and did invest its own funds on occasion in the drilling programs it presented to its investors. Huffington contacted Upchurch in 1963 for his advice as to some competent landman that he might consider for employment. Upchurch suggested himself and became an employee of Inc. that year. R. E. Warren was already with the company as Chief Geologist and in 1964 Mr. Paul T. Scott joined Inc. as Production Engineer.
As an incentive to its key employees (Huffington, Upchurch, Warren and Scott) Inc. entered into written agreements giving such employees a percentage of the earned reversionary interests.
In 1965 the Fifth Circuit 1 decided a case which was subject to the debatable interpretation that the entire reasonable value of the reversionary interest earned by the employees of Inc. could be taxed as current income to the employee in the year of vesting even though no significant moneys had actually been realized. There is a dispute in the evidence as to the significance of this case in bringing about the formation of the partnership between the parties. Appellants contend that concern over this tax case was the sole reason for the formation of the partnership. Appellee takes the position that although the tax decision may have to some extent initiated discussions of the manner in which the parties had been doing business that inquiry revealed that there was no justifiable fear of the application of the Frazell case to Inc.'s manner of operation. Appellee asserts that the partnership was formed to go into the oil and gas business and not solely for tax reasons.
As we view it, this dispute becomes somewhat academic, because it is undisputed the Huffington, Upchurch, Warren and Scott entered into a written partnership agreement. This partnership agreement is set out in full as an appendix following this opinion. In accordance with its terms it was renewed in writing for the years 1966, 1967 and 1968. It was not renewed in 1969 and the partnership expired by its own terms at midnight December 31, 1968. It was, however, in force during the critical year of 1968.
As retained consultants for Inc., the members of Huffington Associates (the partnership) continued very much as they had as employees of Inc. Each occupied the dame office and performed the same functions and were compensated by partnership draws in the same amount as their previous salary. Also, the interest in the partnership was established so as to permit each of the partners to share in the earned reversionary interest at the same rate as they had enjoyed previously.
In early 1968, Huffington learned that General Sproul of Virginia International Company (Vico) had contacts in the Indonesian Ministry dealing with oil and gas matters. Huffington and Sproul arranged a series of meetings in Indonesia. During these negotiations Huffington Associates, the partnership, and Inc. were trying to conduct business as usual. No doubt, both the partnership and Inc. were somewhat handicapped by the absence of Huffington, their respective Managing Partner, President, Chairman of the Board, and Treasurer. Following one of Huffington's early trips to Indonesia, Upchurch faced him with the direct question as to whether the partnership was in the Indonesian deal. He replied 'Yes.' He later undertook to explain this by stating that he had in his mind that 'we could work out something.' He stated that he had no conception of how that could be done but 'we would see if we could get an interest in the project for each of them.'
There is much detailed evidence of the negotiations in Indonesia. The operative fact is that on August 8, 1968, during the existence of the partnership, the managing partner, Huffington, procured a production sharing contract in the name of Inc. and for its benefit. Vico also, of course, had an original fifty percent interest in the production sharing contract. There is also much evidence concerning Inc.'s handling this interest after obtaining the concession. Essentially, Inc. entered into a joint venture agreement in May of 1969, effective August 8, 1968, as a result of which Inc. retained: (a) a 10% Working interest; (b) a 1% Overriding royalty interest; and (c) a right and option to convert the 1% Overriding royalty interest to a working interest as defined and provided for in said joint venture agreement.
Throughout this controversy, Upchurch has stoutly maintained his entitlement to his partnership share in the oil and gas production sharing agreement obtained by the Managing Partner of his partnership and placed in the name of the corporation wholly owned and controlled by such partner individually.
Upon refusal of his last demand, appellee instituted this suit. Briefly stated Upchurch asserted breach of the partnership contract; breach by Huffington of the fiduciary relationship of a partner (especially a managing partner); fraud and conspiracy to defraud; breach of the trust relationship between Inc. and Associates; and that the production sharing contract was a partnership asset by virtue of the terms of the partnership contract and that Inc. holds legal title to the asset as agent and nominee of Associates under the terms of the partnership contract. Other allegations were made, but are not essential to the disposition of this appeal.
The case was tried to a jury on special issues as follows:
SPECIAL ISSUE NO. 1
Do you find from a preponderance of the evidence that it was the intent of the parties to the partnership agreement, as evidenced by their conduct, that during the existence of Huffington Associates, Roy M. Huffington, Inc., acting through its President, Roy M. Huffington, could no longer engage in any new oil and gas activity for its own benefit and that any such activity entered into thereafter by Roy M. Huffington, Inc. had to be undertaken solely for the benefit of Huffington Associates?
Answer 'We do' or 'We do not'.
Answer 'We do'.
Do you find from a preponderance of the evidence that after the formation of the partnership it was the intention of the parties thereto, as evidenced by their conduct, that any partnership interest in any particular new oil and gas venture would be covered by a separate agreement between the partnership and other parties or entities.
Answer 'We do' or 'We do not'.
Answer 'We do not'.
Do you find from a preponderance of the evidence that Haden J. Upchurch offered to pay his share, if any, of the expenses incurred in connection with negotiations leading up to the execution of the Production Sharing Contract prior to August 8, 1968?
Answer 'We do' or 'We do not'.
Answer 'We do'.
The trial court impressed and enforced a constructive trust in favor of Upchurch of a 14.285% Share in and to all of the interest created or retained by the joint venture agreement above mentioned standing in the name of Inc. including but not limited to: (a) 10% Working interest; (b) 1% Overriding royalty interest; (c) a right and option to convert the 1% Overriding royalty interest to a working interest as defined and provided for in said contract along with same percentage share of all obligations, duties, responsibilities, expenses or payments attributable to the interests of Inc. created or retained by the joint venture agreement.
Appellants requested no special issues and did not object to the charge except to special issue number 3 on grounds not material to this appeal.
Appellants have assigned points making the following contentions: Appellants should have prevailed as a matter of law because (1) they owed no duty to appellee and (2) the partnership in general and appellee in particular could not and would not have accepted the project. Appellants further contend that their motion for new trial should have been granted because (a) the special issues submitted were not controlling; (b) appellee waived essential grounds of recovery; (c) appellee objected to issues number 1 and 2 and is estopped from recovering on...
To continue reading
Request your trial
-
Parks v. Huffington
...his share of the alleged abandoned interest. As so modified the judgment of the trial court was affirmed. Huffington v. Upchurch, 523 S.W.2d 44 (Tex.Civ.App. Houston (14th Dist.) 1975), rev'd. in part, 532 S.W.2d 576 (Tex.1976). On appeal to the Supreme Court, that court modified the Court ......
-
Huffington v. Upchurch
...a pro rata share of their abandoned interests. A full statement of the facts is contained in the opinion of the court of civil appeals. 523 S.W.2d 44. We reverse that part of the judgment of the court of civil appeals which awarded Upchurch a part of the partnership interest of Warren and S......