MacDonald v. Follett

• Citation: 180 S.W.2d 334
• Decision Date: 19 April 1944
• Docket Number: No. 8208.,8208.
• Parties: MacDONALD et al. v. FOLLETT et al.
• Court: Supreme Court of Texas

180 S.W.2d 334

MacDONALD et al. v. FOLLETT et al.

No. 8208.

Supreme Court of Texas.

April 19, 1944.

Rehearing Denied June 7, 1944.

Error from Court of Civil Appeals of First Supreme Judicial District; Brazoria County.

Action by Lewis H. Follett and another against R. D. MacDonald and others. A judgment granting plaintiffs partial relief was affirmed in part and reversed in part by Court of Civil Appeals, 175 S.W.2d 671, and both parties bring error.

Judgment of the Court of Civil Appeals affirmed.

W. J. Howard and Merrill & Scott, all of Houston, for plaintiffs.

Lewis H. Follett, John C. Henderson, Cleveland Davis, and Floyd Enlow, all of Angleton, for defendants.

HICKMAN, Commissioner.

This is an action in trespass to try title brought by Lewis H. Follett and Mrs. Lottie B. Follett against R. D. MacDonald and others to recover, upon the theory of a constructive trust, an undivided 1/2 interest in a 1/32 overriding royalty under mineral leases executed in 1938. As will be disclosed below, leases were executed in 1934, renewed in 1937 and again in 1938, but the interest sought to be recovered in this case was carved out of the 1938 leases. In the trial court a peremptory instruction was given and judgment entered in favor of the defendant oil companies who were operating the leases and certain interest holders thereunder. No challenge was made in the Court of Civil Appeals of that portion of the trial court's judgment and same was accordingly affirmed. It is still unchallenged and will not be disturbed here. As between the Folletts and the MacDonalds the trial court peremptorily instructed a verdict in favor of the former against the latter and judgment was entered awarding them a 1/2 interest in the overriding royalty. Our opinion will be confined to a consideration of the case as between them. The Court of Civil Appeals on this phase of the case reversed the trial court's judgment and remanded the cause. 175 S.W.2d 671.

The principal parties are Lewis H. Follett and R. D. MacDonald. Each filed an application for writ of error and both applications were granted, the result being that each is both petitioner and respondent and, in order to avoid confusion, we shall refer to them by their names and discuss the case just as if they were the sole parties to the litigation.

Our opinion will first be directed to a consideration of MacDonald's contention that no relationship of trust and confidence existed between him and Follett; that there was no basis for the application of the doctrine of constructive trusts, and that therefore a peremptory instruction in his favor should have been given. In considering that question we must view the case from Follett's standpoint and state the evidence in the light most favorable to him. Thus stated the material facts are substantially as follows:

The case stems back to negotiations had in 1932. At that time it was thought that the territory adjacent to a lake called Old Ocean, in Brazoria County, was prospective oil territory. Bernard River Land Development Company, a corporation, of which MacDonald was president and largest stockholder, owned large tracts of land in the vicinity of Old Ocean as did also certain citizens of Iowa, who will be referred to as the Muellers. For many years prior to 1932 Follett had represented the Muellers as their attorney in Brazoria County. In July, 1932, MacDonald wrote the Muellers asking whether they would be interested in joining him and another landowner in getting up a block of leases in the vicinity of Old Ocean with a view of procuring someone to make a test for oil. In reply the Muellers expressed an interest in the proposition, but referred MacDonald to their attorney, Follett, who was to approve the terms of any lease which they might thereafter execute. As a result of this correspondence Follett and MacDonald met several times in the late summer of 1932. In the course of these meetings they entered into an agreement for the acquisition by them personally in the future of overriding royalties under leases to be negotiated for MacDonald's company and Follett's clients, the Muellers. Follett testified that he and MacDonald agreed that to the extent he had authority to do so, he would include the Mueller lands with the lands of MacDonald's company to try to interest some operators. Follett did not charge the Muellers for his service in looking after the leasing of their land, but was privileged by them to procure, if he could, overriding royalties. He testified that it was agreed between him and MacDonald that whatever "overrides" they would receive they would divide, subject to the approval of the Muellers. By the term "overriding royalty" as used herein is meant a given percentage of the gross production carved from the working interest but, by agreement, not chargeable with any of the expenses of operation.

In 1934 certain oil companies agreed with MacDonald that they would pay a certain cash bonus for two leases on the Mueller land totalling 570 acres, and that they would carry 1/32 overriding royalty interest to be owned by MacDonald and Follett. With the consent of the Muellers, Follett and MacDonald agreed that such overriding royalty should be so acquired and owned by them. By agreement of Follett, MacDonald and the Muellers one Poutra, MacDonald's secretary, was named as the lessee in such leases and the transaction was handled in this manner: Poutra conveyed the 1/32 overriding royalty to Follett to be held by him for himself and MacDonald. Follett accepted the conveyance and in turn conveyed 1/2 thereof to MacDonald. Poutra then assigned the leases to the oil companies, which paid the Muellers the agreed bonus.

The primary term of the leases above mentioned was three years. Follett testified that between the date of their execution in 1934 and their termination in 1937 he and MacDonald had several conversations with regard to such leases and their overriding royalty interests held under them. MacDonald told him that the two leases assigned to the oil companies were quite valuable, and that, if the companies did not drill same before the expiration of the primary term, he wanted to secure renewals in order that the overriding royalty interest of both parties could be continued in force. Follett further testified that he told MacDonald that it was a very fine idea, and that the two would work together so that all parties would be protected. One specific meeting between MacDonald and Follett was described as follows: "I met Mr. MacDonald at the corner of Texas and Main. The meeting was not prearranged, an accidental meeting. I stopped him and told him that the time was getting short on these leases,...