Smith v. Bolin

• Citation: 271 S.W.2d 93,153 Tex. 486
• Decision Date: 14 July 1954
• Docket Number: No. A-4398,A-4398
• Parties: SMITH et al. v. BOLIN et al.
• Court: Supreme Court of Texas

Page 93

271 S.W.2d 93

153 Tex. 486

SMITH et al. v. BOLIN et al.

No. A-4398.

Supreme Court of Texas.

July 14, 1954.

Rehearing Denied Oct. 13, 1954.

C. J. Brannan, Rogers & Eggers and Nelson, Montgomery, Robertson & Sellers, Wichita Falls, for petitioners.

John E. Kilgore, Dallas, for respondents.

SMITH, Justice.

This appeal is from a summary judgment. The petitioners filed suit in equity against the respondent, D. H. Bolin, and against the other respondents who are his assigns, to recover an interest in certain oil properties in Montague County, Texas, by means of a constructive trust. The trial court's action in granting respondent's motion for summary judgment has been affirmed by the Court of Civil Appeals. 261 S.W.2d 352.

Petitioners assert that the following issues of fact were raised which preclude the rendition of summary judgment:

1. That in acquiring for his personal benefit renewals of oil and gas leases on the Howard lands Bolin violated a fiduciary duty to petitioners.

2. That in acquiring for his benefit the farm out leases on the Gist and Crownover tracts he likewise violated a fiduciary duty to petitioners.

3. That Bolin obtained geological information in the drilling done on the Howard leases while active in a fiduciary relationship to the petitioners, which partly induced him to purchase the farm-out leases and to obtain the renewal of the Howard leases for his personal benefit.

In determining the question of whether or not material issues of fact were raised by the evidence, the court must, under the law, first view all the evidence in the light most favorable to the petitioners; disregard the conflicts in the testimony; and indulge, in favor of the petitioners, every intendment reasonably deducible from the evidence. White v. White, 141 Tex. 328, 172 S.W.2d 295; Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256. A summary judgment is not proper if the evidence raises issues of fact to be determined by a court or jury. See McDonald on Texas Civil Practice, Vol. 4, Sec. 17.26, pp. 1380, 1382.

The suit was based upon a written partnership agreement entered into between the parties on December 1, 1946. Whether the relationship between D. H. Bolin and the petitioners was a continuing relationship until about June 1950, as contended by the petitioners, or whether it was a series of separate and distinct relationships as contended by respondent, D. H. Bolin, is a question of fact. In an appeal from a summary judgment, this Court should only determine the question of whether or not a fact issue was raised by the pleadings, affidavits and evidence.

Some of the evidence, which raises a fact or fact issues as to the Howard leases, is as follows:

The petitioners are doctors and business men. They were never engaged primarily in the oil business. Respondent, D. H. Bolin, has been actively engaged in the oil business for more than 30 years; the petitioners trusted respondent, D. H. Bolin, and had complete confidence in his integrity. On December 1, 1946, by written partnership agreement, they designated Mr. Bolin as the business manager of the partnership; they agreed to pay into the common fund to enable operations to begin two-thirds (2/3) thereof and respondent one-third (1/3). All funds were to be deposited to the credit of the partnership, to be checked out only on checks duly signed by D. H. Bolin, or under his direction. D. H. Bolin alone transacted the partnership business. This partnership was entered into at the solicitation of respondent, D. H. Bolin. At no time during the period from December 1, 1946 until sometime in June, 1950, did he inform petitioners that he was not acting under the terms of the written partnership agreement of December 1, 1946. The written agreement provided that the business activities of the parties should continue so long as the parties might mutually desire. Respondent also acted as contractor in drilling wells on leased property, which included the property referred to as the Howard leases in Montague County, Texas. The Howard leases, as well as all other leases, were originally taken in the name of D. H. Bolin. The Howard leases were to expire on March 12, 1950. When asked, in February 1950, to secure renewals or extensions of the Howard leases for the partnership, Mr. Bolin replied: 'We could no more get that than we could get wings and fly to Heaven this afternoon'. When urged, in November 1949, to obtain the farm-out leases for the partnership on the Gist leases, Mr. Bolin advised one of the petitioners that he had checked the geology and was not interested in those farm-outs. On March 9th or 10th, before the expiration of the Howard leases, respondent began negotiations with Standard Oil Company of Texas and Reno Oil Company, owners of the Gist and Crownover leases, which resulted in respondent obtaining the farm-outs on these two leases. The farmout agreement was dated April 4, 1950, and was approved and accepted by respondent, D. H. Bolin, on May 6, 1950. On March 9th or March 10th, 1950, Standard Oil Company of Texas showed respondent the geology in the area. Respondent had theretofore drilled two wells on the Howard leases, both dry holes. G. W. Oliver, superintendent of Standard Oil Company of Texas, testified that the drilling of the two wells on the Howard lands by the partnership did contribute to the geological overall picture in the area. Respondent knew these facts before the expiration of the original Howard leases. Mr. Oliver testified that all this information had value from the geological point of view. Prior to the drilling of the two wells on the Howard lands, one of the petitioners had urged respondent to drill the Howard No. 2 well in the northwest corner of the Howard lands. This location would have been nearer and more adjacent to the Gist and Crownover farmouts. Mr. Bolin drilled in the southeast corner and the well was a dry hole. On March 9th or 10th, 1950, respondent had before him the report of his geologist, N. A. Kendall, which reflected that a local reef condition seemed indicated. Kendall's report was also made to Standard Oil Company of Texas on February 6, 1950. When Mr. Kendall made this report the Howard leases were still in force, and the original agreement was in effect, according to the contention of petitioners. The report contains the following: '* * * as to your inquiry about our next location, on the west 320 acres of the Howard tract, we are yet undecided, but chances are that we want to try to define this 1900 ft. reef possibility, since it did have a substantial oil show. If you folks could suggest a location that would suit this purpose and at the same time can furnish information that would be of value to you, we would be glad to get together with you. Inasmuch as we will probably wind up our present well in the next week or 10 days, we would like to have an eventual joint location agreed upon by that time'. The report or letter was signed 'Bolin Oil Company, by N. A. Kendall'.

The evidence shows that on March 9th or 10th, 1950, respondent gained further geological information. The negotiations resulted in respondent obtaining the farmouts and the Howard leases. The well on the Gist land was completed as a commercial producer in June, 1950. Respondent first represented to petitioners that Standard Oil Company of Texas was the producer of these wells, then later, admitted he was the producer and also had the Howard leases. The well was produced from the 'Cronoidal' or 'Crinoidal' lime, the same as mentioned in the report of February 6, 1950. Respondent acquired the renewal leases on the Howard lands in June, 1950, before the completion of the Gist well. The wells on the Howard lands are producing from the same formation as the Gist lease. There were eleven producing wells on the Howard lands at the time of the hearing of the motion for summary judgment. The respondent billed petitioners for their part of the operating expense, and they paid their part for all the dry holes, but when oil was finally produced the petitioners were told they had no interest in the producing wells. The statement of facts consists of 728 pages. We wish to reiterate that we do not decide the evidence in favor of or against either party, but we hold it raises a fact question or fact questions as to the Howard leases to be determined by a trial court or jury, and not this Court or the Court of Civil Appeals.

The extent of the geological knowledge and information obtained by D. H. Bolin in the development of the Howard lands, jointly with petitioners, and whether this geological information was a motivating circumstance in his acquisition of renewal leases covering the Howard lands are matters principally within the mind of Mr. Bolin.

The rule with respect to the use of knowledge or information by one who stands in a confidential or fiduciary relationship is well stated in Restatement of the Law, Restitution, Chap. 12, Sec. 200; Fitz-Gerald v. Hull, supra; Pomroy's Equity Jurisprudence, 4th Ed., Vol. 3, par. 1050; Schiller v. Elick, 150 Tex. 363, 240 S.W.2d 997; Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545, 62 L.R.A. 1; Ballard v. Claude Drilling Company, 149 Kan. 506, 88 P.2d 1021, 1023.

In the case of Meinhard v. Salmon, supra, Salmon negotiated and obtained for himself a new lease on certain property which had been under lease by Salmon and Meinhard operating under a joint venture agreement. Salmon was the sole manager of the property. The new lease included some adjoining property not included in the original lease. The court sustained Meinhard's suit to establish his interest in the property, both the original and the adjoining property, on the theory of constructive trust for his benefit. The court, in an opinion by Chief Justice Cardozo, said (249 N.Y. 458, 164 N.E. 546):

'Joint adventurers, like copartners, owe to one another, while the enterprise continues, the duty of the finest loyalty. Many forms of...