Manges v. Guerra

• Decision Date: 16 July 1981
• Docket Number: No. 6199,6199
• Parties: Clinton MANGES, Appellant, v. J. C. GUERRA, et al., Appellees.
• Court: Texas Court of Appeals

Page 652

621 S.W.2d 652

Clinton MANGES, Appellant, v. J. C. GUERRA, et al., Appellees.

No. 6199.

Court of Civil Appeals of Texas, Waco.

July 16, 1981.

Rehearing Denied Sept. 4, 1981.

Royal D. Adams, Adams & Hunter, San Antonio, Daniel & Daniel, Liberty, Luther E. Jones, Jr., Corpus Christi, Murray Watson, Jr., Watson & Henderson, Waco, for appellant.

Lloyd Lochridge, McGinnis, Lochridge & Kilgore, Austin, T. Kellis Dibrell, Dibrell, Dotson, Dibrell & Dibrell, San Antonio, Garland F. Smith, Smith, McIlheran, Lauderdale & Jones, Weslaco, H. P. Guerra, III, Pope, Pope & Guerrero, Rio Grande City, David H. Guerra, Flores, Sanchez, Vidaurri, Munds & Guerra, McAllen, Rufus Wallingford, Fulbright & Jaworski, Houston, for appellees.

OPINION

JAMES, Justice.

This is a suit to remove a cloud from the title to an interest in certain lands located in Jim Hogg County and Starr County, Texas, and for damages resulting from inability to lease such estate as a result of the cloud. Plaintiff-Appellee J. C. Guerra originally brought this suit against the Defendant-Appellant Clinton Manges, Defendant Gas Producing Enterprises, Inc. (hereinafter called "GPE") and Defendant Bank of the Southwest National Association. Joined as involuntary Plaintiffs were V. H. Guerra, M. A. Guerra, Ruben R. Guerra, H. P. Guerra, Jr., Garland F. Smith, Trustee, Louise T. Guerra, David Guerra, Virginia G. Jeffries and husband, James A. Jeffries, Gladys Guerra, Individually and as Executrix of the Estate of M. Guerra, Jr., Deceased, Maria Evangelina Guerra, Maria Del M. Guerra, Mary Frances Romero Tubbs, Gaynell Louise Romero Fox, Jeannine Marie Romero Richard, A. V. Margo, Independent Executor of the Estate of G. A. Guerra, Deceased, and Stanley Keylon. After trial before a jury, judgment was rendered (1) removing Manges as holder of the executive rights to the plaintiffs' mineral interests; (2) cancelling the Manges to Manges lease as of the date of its execution (April 20, 1977); (3) adjudging Manges to be a drilling and producing cotenant with the plaintiffs in three producing wells and two dry holes drilled by him; (4) requiring an accounting by Manges of income from production from the producing wells, less necessary and reasonable costs of drilling and producing; (5) awarding the plaintiffs actual damages against Manges of $382,608.79 plus $500,000.00 exemplary damages; (6) adjudging the Bank of the Southwest Association deed of trust to be of no force or effect insofar as it purports to cover plaintiffs' mineral interests and executive rights; and (7) cancelling the two GPE contracts insofar as they purport to cover plaintiffs' mineral interests and executive rights.

Manges brings this appeal from the trial court's judgment. Gas Producing Enterprises appealed separately, but its appeal has been voluntarily dismissed.

The M. Guerra & Son Partnership lands (MGS lands) consist of some 72,000 surface acres and an estimated 55,000 to 60,000 mineral acres in Starr and Jim Hogg Counties. The Virginia C. Guerra lands (VCG lands) lying in Starr County, consist of 21,000 surface acres and an estimated 15,000 to 18,000 mineral acres.

On March 31, 1969, the Defendant Clinton Manges, entered into a contract to purchase the MGS lands from the M. Guerra & Son Partnership for $3,575,000.00. Included in the contract and conveyance to Manges were the 72,000 surface acres and one-half of the minerals, together with the executive rights to execute oil, gas and mineral leases on the remaining half of the minerals, without the joinder of the owners but with their receipt of half of any lease bonus, rentals and royalties. Controversies developed among the Guerra heirs, and between such heirs and Clinton Manges, which led to litigation and finally a receivership in 1971. See M. Guerra & Son v. Manges, 442 S.W.2d 441 (Tex.Civ.App. Waco, 1969, writ dism'd).

The receiver executed a deed August 20, 1971 conveying certain properties to Manges consisting of all the surface acres, except town lots and certain surface acres set aside to R. R., Virgil H., and H. P. Guerra, Jr., and consisting of 53.41625% of the minerals in such lands. The litigation, however, continued until June 11, 1974, when an agreed judgment was entered in Cause Number 3953 in the 229th District Court of Starr County confirming the receiver's deed to Manges and settling the Guerra and Manges accounts. The judgment further adjudged to the Guerras one-half of all bonuses, delay rentals, royalties, overriding royalties and payments out of production to be paid under any lease on the premises; that Manges would hold the executive right to lease the Guerras' 46.58375% interest in the minerals, but that any lease of the premises should provide for a minimum royalty of 1/8th.

One-seventh of the VCG lands was purchased by Manges through the M. Guerra & Son Partnership which had purchased the interest of J. J. Guerra. The remaining six-sevenths were purchased by Manges from Virginia C. Guerra's other heirs and successors in 1968 and 1970. Only the title to the one-seventh interest acquired from the partnership is claimed to have been clouded. All the separate deeds to Manges conveyed the surface, one-half of the minerals and the executive leasing rights on all the minerals with one-half bonus, rentals and royalties being reserved to Grantors.

On May 10, 1974, a month before the agreed judgment was rendered, Manges, his wife, and Duval County Ranch Company (DCRC) executed to Herbert F. Poyner, Jr., trustee, a Deed of Trust, Assignment and Security Agreement to secure Bank of the Southwest National Association in the payment of a note in the principal amount of.$7,028,346.00. The deed of trust conveyed to the Bank as security "all of oil, gas and other mineral interests ... including executive rights and powers" owned or claimed by Manges and affecting lands in Starr and Jim Hogg Counties.

On September 11, 1974, Manges, his wife, and DCRC joined in the execution of two instruments to Gas Producing Enterprises (GPE). One of the instruments was an "Option Contract" and the other was a "Repayment Agreement, Collateral Assignment and Security Agreement." These instruments included the above described properties along with properties in a total of 13 Texas Counties. Plaintiff-Appellees contend that the arrangement factually and legally withdrew the Guerra minerals from the market for leases to third parties. The arrangement involved a beginning loan of $2,800,000.00 (later increased to $5,000,000.00) to Manges by GPE to be used by Manges in drilling and developing minerals owned by him in some 13 counties, with no provision for bonus or delay rentals for the Guerras, and no obligation to drill or develop the minerals on the Guerra lands and gave GPE an option to buy oil, gas and other hydrocarbons produced from said lands. The Guerras had no income from leasing of any lands controlled by Manges' leasing rights from the date of his initiation of Cause No. 3953 in 1968 to date of trial in February 1979. For seven years, the GPE contracts tied up the Guerra lands with no bonuses or delay rentals for the Guerras.

A new round of litigation began December 6, 1974, in a suit by Manges in Starr County against Ruben Guerra to invalidate a lease in which suit Ruben and other Guerras filed a cross-action. Manges took a nonsuit in the Starr County suit. Cove Investments, Inc. intervened, asserting an interest in any interest owned by Manges in the Guerra lands and minerals.

On September 19, 1975, J. C. Guerra filed this suit in Jim Hogg County against Manges, GPE, and Bank of the Southwest Association. On the same day R. R. Guerra filed a similar suit as a cross-action in Starr County, Texas, and immediately filed a Notice of Lis Pendens. In that same suit, Cove Investments, Inc. as Intervenor, claimed title to all, or alternatively one-half, of the minerals and executory rights owned by Manges as to the lands involved in this suit and filed a Lis Pendens notice of that claim on the day this suit was filed. Plaintiff J. C. Guerra later, on January 23, 1979, filed his Second Amended Petition in which he made Cove Investments, Inc. a defendant and all other Guerra owners involuntary plaintiffs.

After this suit was filed, Manges discovered that there were offset wells of Exxon draining part of the property. Manges, claiming that he was unable to lease to anyone else because of the Lis Pendens notices, leased 25,911 acres to himself on April 20, 1977. Purporting to act under such lease, Manges drilled five offset wells, three of which were producing, and at the time of trial had produced over $2,000,000.00 held in suspense. He also entered into a farm-out agreement on July 16, 1977, with Joe Schero under which sixteen to eighteen other wells were drilled. On the same day, July 16, 1977, Manges purportedly gave to Schero a top lease. Such top lease was not filed for record until February 5, 1979, the date this case went to trial. Plaintiffs assert that this top lease was a sham and reflects further the total bad faith of Manges and Schero in that with full knowledge of Manges' nonpayment and other mistreatment of the other interest owners the parties contracted that any funds accruing to them should be paid to Manges.

Subsequent in time to the farm-out agreement of July 16, 1977, the Guerra parties took a nonsuit in the Starr County suit filed December 6, 1974, and joined the other involuntary Guerra plaintiffs. Summary judgment was granted to Manges against Cove Investments, Inc., in the Starr County suit, and the claim asserted by Cove in this Jim Hogg County case against Manges was severed and docketed as a separate cause. Subsequently, the summary judgment against Cove was reversed and the cause remanded to the trial court for trial on the merits. See Cove Investments, Inc. v. Manges, et al., 602 S.W.2d 512 (Tex.1980).

In the meantime, this case went to trial February 5, 1979, in Jim Hogg County. The case...