Thlocco v. Magnolia Petroleum Co.

• Decision Date: 23 May 1944
• Docket Number: No. 10775.,10775.
• Citation: 141 F.2d 934
• Parties: THLOCCO et al. v. MAGNOLIA PETROLEUM CO.
• Court: U.S. Court of Appeals — Fifth Circuit

141 F.2d 934 (1944)

THLOCCO et al. v.MAGNOLIA PETROLEUM CO.

No. 10775.

Circuit Court of Appeals, Fifth Circuit.

April 12, 1944.

Rehearing and Motion to Amend or Supplement Opinion Denied May 23, 1944.

Orel Busby, of Ada, Okl., and J. W. Gormley, of Dallas, Tex., for appellants.

Earl A. Brown, Walace Hawkins, and Chas. B. Wallace, all of Dallas, Tex., and Hugh Carney and Howard A. Carney, both of Atlanta, Tex., for appellee.

Before HUTCHESON and HOLMES, Circuit Judges, and BORAH, District Judge.

HUTCHESON, Circuit Judge.

Brought by Magnolia Petroleum Company, claiming to be the owner of record and by limitation,¹ this suit was to remove the cloud of defendantAmey Thlocco's claim from, and to quiet title to, an oil and gas lease on 130¾ acres of land in Titus County, Texas.Voluminous testimony was taken, the record running to more than 800 pages, but no claim was made and no testimony given that the plaintiff in taking the lease and in developing and operating under it had been guilty of fraud or overreaching.²

Defendant's whole case against plaintiff's showing of record title by deed from Mainard, trustee, and of limitation title by adverse possession was (1) that the property was restricted property of an Indian, and under the federal statutes³ for the protection of Indians as to such property, no title could be acquired to it by limitation and none by purchase except in accordance with the statutes governing restricted property; and (2) if it was not restricted, the defendant had been declared an incompetent under Oklahoma laws and placed under guardianship, and because of this, her title could be divested neither by limitation nor by the deed of her trustee unless it was authorized under and in conformity with Oklahoma law governing the sale of property of an incompetent under guardianship.

The District Judge, on evidence fully supporting his findings, found in plaintiff's favor every fact it had pleaded and relied on to support its claim for judgment.⁴Based upon these findings, he concluded in effect (1) that within the provisions of Art. 7425a et seq. of the Vernon's Annotated Revised Statutes of Texas,⁵Kenneth Mainard held title by "a trust""created" by "but not contained or declared in the conveyance to the trustee" by "a conveyance or transfer made to a trustee without disclosing the name of the beneficiary or beneficiaries"; (2) that under that statute as construed in Gulf Production Co. v. Continental Oil Co., 139 Tex. 183, 132 S.W. 2d 553, 164 S.W.2d 488, Mainard, as trustee, had "the power to convey, transfer, or encumber" it, and that his "conveyance or transfer" is not subject "to question by anyone claiming as a beneficiary under the trust"; (3) that plaintiff, in good faith and for value, having purchased and paid the consideration for the lease in reliance on Mainard's power and right to sell it, with no notice or knowledge that he did not have that power and right, the right or title it derived for such consideration in reliance upon the trustee's conveyance cannot "be impeached or called in question in consequence of a misapplication", if any, "by the trustee of the money so paid"; and (4) that the property was not restricted in any way, but that if it was, this would not prevent plaintiff's acquiring good title by the purchase in reliance on the statute, nor prevent a title by limitation ripening in the plaintiff under the facts of adverse possession in this case, and that plaintiff had acquired full title by limitation.

Appellant is here urging upon us that the judgment may not stand.Confronted with the court's finding that plaintiff was a bona fide purchaser of the lease and its conclusion that under the Texas Statute, Art. 7425a, as construed in Gulf Production Co. v. Continental Oil Co., 139 Tex. 183, 132 S.W.2d 553, 164 S.W.2d 488, it took good title unimpeachable by defendant, appellant argues (1) that the finding of innocent purchase is not supported by the evidence and is contradictory of the special finding the court made that Mainard, the trustee, after making the lease to Shunatona had himself conducted the negotiations for its sale to plaintiff, and (2) that if it is supported, this would not avail plaintiff for the statute in terms and by construction applies only to express trusts and the trust here was not an express but a resulting trust.Confronted with the further finding on undisputed evidence that plaintiff has had open, notorious, hostile and adverse possession under a deed duly recorded, paying all taxes as they accrued, for more than five years, and therefore has acquired title by limitation, the appellant lamely urges upon us(1) that her adjudication as an incompetent has prevented the Texas statute from running and (2) that the property is restricted Indian property, and though it is Texas land and subject to Texas laws, the restriction removes it from the operation of the Texas statutes of limitation.Confronted with the finding that she was not of unsound, but of sound, mind, that she knew that plaintiff had a lease on the property and that, so understanding, she had received royalties from the lease and had acted so as to ratify it and to estop herself from objecting to it, she insists that the property was restricted and she was an incompetent and therefore she could not do by ratification or assent what she could not have done directly without compliance with the formalities the Oklahoma statutes required.

Taking these points up in order, we think it clear that the finding that plaintiff was an innnocent purchaser is fully sustained by the evidence and that there is nothing in the finding that Mainard conducted the negotiations for the sale of the lease which is in any manner in conflict with this view.The statute governing dealings with trustees expressly provides that persons may deal with a trustee of this sort without inquiry as to the beneficiaries and without concern or responsibility as to the application of the proceeds.If this statute applied, plaintiff was entitled to deal with the trustee here in respect of the sale of the lease, whether he purported to be acting for himself or for Shunatona, his lessee, in full reliance upon his power to act, and with complete freedom of accountability to the beneficiary.

Upon the issue of whether the statute applied, we need not canvass the authorities appellant cites, or determine whether the limitation she seeks to put upon the statute is in fact contained in it.It is sufficient to say that under the findings of the court and under the facts as the record presents them, it is quite clear that the trust in question here was neither resulting nor constructive, but an express trust created for the purpose of enabling Mainard, as trustee, to deal freely with the Texas lands, and that in terms and in fact it is directly within both the purpose, and the language of the statute.

Of appellants' contention that the land is restricted and because restricted, neither the invoked Texas statute as to dealing with trustees, nor the statutes of limitation, can affect the title to it, it is sufficient to say that the District Judge, on facts fully supporting his finding, found that the land in question was not and never had been restricted land.But if we should assume that the land was restricted, nothing in the federal statutes nor in the decisions construing them gives warrant for appellant's claim that they operate to remove land in Texas from the operation of Texas laws, and particularly nothing in them operates as a barrier to the running of the Texas Statutes of Limitation.

As to her claim that because she had been adjudged incompetent, the statutes of limitation may not run against her, it is sufficient to say that the disability which prevents the Texas statutes from running is not an adjudication of incompetency, but the disability of an unsound mind, and that not only did the District Judge find as a fact that defendant was not of unsound but of sound mind, but it is not even contended that her adjudication as an incompetent is an adjudication that she was of unsound mind.Section 16,Title 15,Oklahoma Statutes 1941, provides:

"Persons of...