MacDonald v. Follett

• Decision Date: 14 October 1943
• Docket Number: No. 11551.,11551.
• Citation: 175 S.W.2d 671
• Parties: MacDONALD et al. v. FOLLETT et al.
• Court: Texas Court of Appeals

175 S.W.2d 671

MacDONALD et al. v. FOLLETT et al.

No. 11551.

Court of Civil Appeals of Texas. Galveston.

October 14, 1943.

Rehearings Denied November 23, 1943.

Appeal from District Court, Brazoria County; M. S. Munson, Judge.

Trespass to try title by Lewis H. Follett and another against R. D. MacDonald and others. From a judgment on an instructed verdict granting plaintiffs partial relief, defendants appeal.

Affirmed in part and reversed and remanded in part. Motions by both plaintiffs and defendants for rehearing denied.

W. J. Howard and Merrill & Scott, all of Houston (Sam R. Merrill, of Houston, of counsel), for appellants.

Floyd Enlow, John C. Henderson, and Cleveland Davis, all of Angleton, for appellees.

MONTEITH, Chief Justice.

This action in trespass to try title was brought by appellees, Lewis H. Follett and Mrs. Lottie B. Follett, against appellants, R. D. MacDonald, his wife and others, and certain Oil Companies, to recover overriding royalties on 570 acres of land, a part of the M. B. Nuchols League in Brazoria County, Texas.

In addition to a statutory trespass to try title action, appellees pled in detail the grounds upon which they based their claim for the recovery of a 1/64 overriding royalty in the land in controversy, and an additional undivided 1/2 of 1/64 overriding royalty on said land which had been conveyed to appellant R. D. MacDonald by certain oil companies.

Appellants answered by defensive pleas and by a denial under oath of an alleged joint adventure agreement between Follett and MacDonald to divide said overriding royalties. They specially pled the statute of frauds against said alleged agreement; that there was no consideration to support it; that it was against public policy, void, and unenforceable, and that it had been rescinded by the parties. They also pled specially the four-year statute of limitation, laches, stale demand, and estoppel.

The case was tried before the court with a jury. At the conclusion of the evidence the plaintiffs and both groups of defendants filed their separate motions for an instructed verdict. The court granted the motion of the Harrison-Abercrombie group, and the motion of appellants as to the additional 1/2 interest in a 1/64 undivided royalty, but overruled the motion of appellants as to the 1/2 interest in the 1/32 overriding royalties, and as to that interest granted the motion of appellees and instructed a verdict in their favor. Verdict was rendered and judgment entered in accordance with such instructions.

The record shows that by instrument dated April 23, 1934, appellant R. D. MacDonald, through his secretary, J. L. Poutra, acquired from F. W. Mueller and his associates, the oil, gas, and mineral leases on the 570 acres in controversy, consisting of two tracts of 240 and 330 acres, respectively. The leases in question were ordinary commercial leases, with a primary term of three years. No development was had under these original leases and they expired on April 23, 1937. Said leases had been assigned by appellant, R. D. MacDonald, to the Harrison-Abercrombie oil interests during the year 1934. Prior to said assignment, R. D. MacDonald had caused J. L. Poutra, in whose name the leases had been taken, to assign to Lewis H. Follett a 1/32 overriding royalty under said leases, with the understanding that Follett would assign the 1/2 of the 1/32 interest, so assigned, to him, MacDonald. The 1/64 overriding royalty retained by Follett was conveyed to him as attorney's fees or compensation for his legal services to the owners of the land. The title to said 1/64 undivided royalty interest remained in Follett until the expiration of said leases on April 23, 1937. On April 2, 1937, R. D. MacDonald acquired through J. L. Poutra new or top leases on the 570 acres of land in controversy for a three-year period, at an increased bonus and increased yearly rentals. Shortly after these 1937 leases were acquired, appellee Follett asserted a claim to a 1/64 overriding royalty under them and demanded a conveyance of this interest from MacDonald. MacDonald refused to assign this interest to Follett. On or about April 12, 1937, these leases were assigned by Poutra to Harrison-Abercrombie. Poutra retained a 1/32 overriding royalty in the leases, which he later transferred to MacDonald. After the execution of said 1937 leases, no development having been done under them, MacDonald on or about October 10, 1938, purchased from the Mueller interests new or top leases on said lands to begin on April 2, 1940, at the expiration of the 1937 leases. These leases were assigned by MacDonald to Harrison-Abercrombie on June 2, 1939, MacDonald reserving to himself a 1/32 non-participating overriding royalty. The first oil produced from said land was produced under these last mentioned leases.

The 1934 leases were made by J. L. Poutra as lessee on April 23, 1934. They expired, by their own terms, in the absence of production or drilling operations, on April 23, 1937. The 1937 leases were dated April 2, 1937. They were made to J. L. Poutra as lessee and also expired by their own terms on April 2, 1940, in the absence of production or drilling operations.

The 1938 leases were made to R. D. MacDonald, lessee. They were dated October 10, 1938, and their primary term was for a period of two years from April 2, 1940. The overriding royalty interests involved in this suit are based upon and grow out of the 1938 leases upon which production was had.

The consideration paid to the lessors for the 1934 leases was $1,710. The leases provided for a yearly payment during the primary term of $1.50 per acre in lieu of development. These payments were made by the Oil Companies.

The consideration paid to the lessor for the 1937 leases was $2,280. The cash consideration for each of these leases was paid by the check of R. D. MacDonald.

The first drilling operations were shown to have been begun on May 30, 1941, after the 1937 leases had expired by their own terms.

Appellees contend that R. D. MacDonald and Lewis H. Follett were tenants in common in the ownership of the royalty interest involved herein, in that each owned a 1/64 royalty interest carved out of the 7/8 working interest in the 1934 leases, under such circumstances that each occupied such a fiduciary relationship to the other that, as a matter of law, the action of appellant MacDonald in taking additional mineral leases on the same property and retaining therein a 1/32 overriding royalty in himself, inured to the benefit of appellee Follett and constituted appellant, R. D. MacDonald, a trustee of an undivided 1/2 interest in the royalty retained by MacDonald.

It is now well settled that overriding royalties similar to those held by MacDonald and Follett under said 1934 leases were real property and that they, as royalty owners thereunder, were joint owners or joint tenants in the land in question. Veal v. Thomason, 138 Tex. 341, 159 S.W.2d 472, and cases therein cited.

While there is a general rule in this state that the purchase by a joint tenant of an outstanding title in the common property inures to the benefit of his cotenant, it is the settled law that this rule does not forbid one joint tenant or cotenant from acquiring his cotenant's share in the common property where it is shown that the sale was not the result of collusion and that the property brought a fair price. This exception to the general rule is based on the fact that a cotenant is under no legal or moral obligations to protect the other owners of the common property in their enjoyment thereof. Vaughn v. Kiesling, Tex.Civ.App., 150 S.W.2d 435; 11 Tex. Jur. 470.

It is also held that the general rule, above referred to, has no application where the claimants are asserting hostile claims against each other to the common property, in which case either party may buy the real title for himself (Niday v. Cochran, 42 Tex.Civ. 292, 93 S.W. 1027; 62 Corpus Juris, 461), and that, in order for the general rule to apply, there must be a relation of mutual trust and confidence between the parties. The whole doctrine is one of equity predicated upon trust and where the facts do not create a trust nothing forbids one cotenant from acquiring an outstanding title or equity individually. The rule, however, presumes the utmost fairness in the transaction. Brougham et al. v. Thompson, Tex.Civ.App., 145 S.W. 2d 1115; Bennet v. North Colorado Springs L. & Improvement Co., 23 Colo. 470, 48 P. 812, 58 Am.St.Rep. 281; 11 Tex. Jur. 440, par. 25.

Appellants contend that any rights or equities which Follett might have acquired by virtue of a fiduciary relationship in the ownership of the earlier leases cannot now be availed of by him by reason of his alleged acts and conduct in attempting to obstruct and hinder MacDonald in his effort to procure the 1937 leases, and that by reason of such actions and conduct MacDonald owed him no duty with respect to the subsequently procured leases.

There is evidence in the record to support a finding that appellee Follett did in fact attempt to obstruct and hinder MacDonald in his efforts to procure the 1937 leases, and that the relationship of trust and confidence between them had ceased to exist. These questions should, we think, have been submitted to the jury, under the above authorities, for the purpose of determining whether MacDonald was released from any claim by Follett to royalties acquired by MacDonald under subsequently acquired leases.

Appellees also base their asserted rights to recover the royalty interests in question on the alleged existence of a relationship of joint adventure, or special partnership, between Lewis H. Follett and R. D. MacDonald at the time the 1934 leases were acquired, and that, by reason thereof, one-half of the overriding royalties acquired by MacDonald under the 1937 and 1938 leases vested in Follett. Appellants denied the alleged joint adventure agreement under oath and on the trial...