Warner v. Winn

• Decision Date: 06 November 1946
• Docket Number: No. A-915.,A-915.
• Citation: 197 S.W.2d 338
• Parties: WARNER v. WINN.
• Court: Texas Supreme Court

197 S.W.2d 338

WARNER v. WINN.

No. A-915.

Supreme Court of Texas.

November 6, 1946.

Rehearing Denied December 4, 1946.

Error to the Court of Civil Appeals of Tenth Supreme Judicial District.

Action by Thor Warner against William H. Winn for slander of title to an oil and gas lease. A judgment for plaintiff was reversed, and judgment for defendant rendered by the Court of Civil Appeals, 193 S.W.2d 867, and plaintiff brings error.

Reversed and remanded.

G. C. Mann, of Laredo, W. H. Kennon, Johnson & Rogers, and Nat L. Hardy, all of San Antonio, for petitioner.

Arnold & Cozby and C. M. Gaines, all of San Antonio, for respondent.

SMEDLEY, Justice.

Petitioner Warner sued respondent Winn for damages, both actual and exemplary, alleging that respondent slandered his title to an oil and gas lease, executed by C. P. Quinlan, of 41.66 acres of land known as Share 4 in the Lopena Gas Field in Zapata County, by making and filing for record an affidavit falsely asserting that respondent by agreement with petitioner was entitled to an assignment of a two-thirds interest in the gas rights under the lease.

The jury found that the execution and recording of the affidavit "was the proximate cause of plaintiff being prevented from commencing the drilling of a well for gas on Share 4 prior to June 15, 1940" and that respondent in executing and causing the affidavit to be recorded was actuated by malice and did not act in good faith. It found the amount of actual damages to be $23,000 and awarded $11,500 as exemplary damages. Judgment was rendered by the trial court in accordance with the verdict.

The principal defense made by respondent is that the affidavit was true, in that by reason of the relation of the parties and the undisputed facts in the record he had become, before the affidavit was filed, the owner of an equitable right or title to a two-thirds interest in the gas rights under the lease of Share 4. The Court of Civil Appeals sustained this defense, reversed the trial court's judgment and rendered judgment for respondent. 193 S.W.2d 867.

On February 2, 1937, petitioner Warner, as owner, and respondent Winn as operator, executed a written contract, which is set out fully in the opinion of the Court of Civil Appeals. The most important provisions of the contract are as follows: The owner has sold and assigned to the operator an undivided two-thirds interest in certain oil and gas leases of certain lands in Zapata County, in so far as the same cover all minerals conveyed by the leases, except oil and oil rights, which are reserved by the owner, it being recited that the rights and interests therein conveyed are expressly set out in the assignment executed and acknowledged on the date of the contract. Then follows this provision: "and this agreement relating to and governing the rights of the parties in the operation, maintenance, management and control of said premises, and such assignment and this agreement together constituting the full agreement between the parties hereto, and such oil, gas and mineral leases in which the rights, title and interests have been assigned by owner to operator are as follows:" The quoted provision is followed by a full description of each of the seven leases in separate paragraphs, giving as to each lease the date, a description of the land, the number of acres, and the book and page where recorded. The contract does not describe the lease on Share 4 and makes no reference to it. The operator agrees within fifteen days from the date of the contract to commence the drilling of a well at a location on the land described in the contract to be agreed upon by owner and operator, and to drill the well with diligence "to the present gas producing horizon of gas wells now producing gas in the vicinity of such leases, which horizon is approximately 2350 feet." The operator agrees within thirty days after the first well is completed to begin the drilling of a second well, and to complete it in the same manner. After completion of the two wells the operator will drill a third well and a fourth well when in his judgment the market demand justifies drilling them. Expenses in connection with the operation and maintenance of the wells, except the drilling and completion of the first four, shall be borne two-thirds by the operator and one-third by the owner, and the wells shall belong jointly to the owner and operator under the terms of the agreement. Net profits from wells on the premises shall be divided between the owner and the operator, three-fourths to the operator and one-fourth to the owner, until the cost and expenses of completing the first four wells shall have been returned to the operator, and after he has been so repaid the net profits shall be divided two-thirds to the operator and one-third to the owner. Elaborate provisions are made for the protection of the owner in the oil reserved by him. The contract has twenty-two separate paragraphs, sets out in detail the rights and obligations of each of the parties, and contains the agreements usually appearing in operating contracts for the protection of both parties.

On the day when the contract was executed, petitioner executed and delivered to respondent an assignment of a two-thirds interest in each of the oil and gas leases described in the contract, with reservation, however, of the oil and all oil rights.

The Lopena Gas Field covers about 2,900 acres of land, and when the contract between petitioner and respondent was made there were ten producing gas wells in the field. There were twenty-two producing gas wells in the field at the time when this case was tried. After the execution of the contract Winn drilled four wells on the land described in the contract and the assignment, from which gas was produced and sold in large quantities, and receipts from the gas were applied to the expenses of development and operation, and the profits were shared by petitioner and respondent in the manner and proportions directed by the terms of the contract.

At the time when the contract and the assignment above referred to were executed, petitioner Warner was the owner of an oil and gas lease on Share 4 containing 41.66 acres, which lease, executed June 15, 1934, was for a term of five years, with all rentals paid in advance. Warner testified that the title was defective because one of the four lessors was not joined by her husband in the execution of the lease.

When C. P. Quinlan became the owner of Share 4 subject to the lease held by petitioner, the defect in the title was cured, and a short time before that lease expired Quinlan, without the payment of a cash consideration, executed and delivered to petitioner on May 8, 1939, an oil and gas lease of Share 4 for a term of one year from June 15, 1939, and as long thereafter as oil or gas might be produced from the land. This lease contained the limitation that it would terminate as to both parties if no well was commenced on the land on or before June 15, 1940.

The affidavit of respondent, in which he asserted that he was entitled to an assignment of a two-thirds interest in the gas rights of the leasehold interest in Share 4, was filed for record on February 1, 1940. Petitioner, after procuring the second lease, that executed by Quinlan, entered into a written contract with H. L. Skaggs on January 18, 1940, for the drilling of a gas well on Share 4, the contract providing that actual drilling should begin on or before February 10, 1940, and should continue diligently to completion, and assigning to Skaggs one-half of the gas rights under the lease, with reservation to petitioner of a seven-sixteenths overriding royalty in the gas. Skaggs, who was financially able to drill the well, promptly went upon the land and cleared the location. Before beginning actual drilling, however, he discovered the affidavit which respondent had filed for record, and because of the claim made in the affidavit refused to drill the well. Thereafter petitioner made agreements with two other contractors for the drilling of a gas well on Share 4, and both refused to drill because of respondent's affidavit. After the lease from Quinlan to petitioner terminated for failure to commence drilling a well on or before June 15, 1940, Skaggs drilled a producing gas well on Share 4 for Thompson, a subsequent lessee.

The Court of Civil Appeals in its elaborate and careful opinion, after a full statement of the facts, expressed the conclusion that petitioner and respondent were engaged in a joint venture, the common enterprise of producing and selling gas from the Lopena Field. It quoted from Corpus Juris the important and generally recognized equitable rule that persons engaged in a common enterprise by way of joint adventure stand, within the scope of the enterprise, in a fiduciary relation each to the other and are bound by strict...