Whittington v. Whittington
| Decision Date | 23 November 1988 |
| Docket Number | No. 57672,57672 |
| Citation | 535 So.2d 573 |
| Parties | Wilmena W. WHITTINGTON v. Clyde E. WHITTINGTON, Sr. et ux, et al. Thomas G. KLEINPETER v. Wilmena W. WHITTINGTON. |
| Court | Mississippi Supreme Court |
David B. Gross, Jackson, for Wilmena W. Whittington.
Bryan C. Harbour, Robison & Harbour, McComb, for Thomas G. Kleinpeter.
H.B. Mayes McGehee, McGehee, McGehee & Torrey, Meadville, for Clyde E. Whittington and Freddie G. Whittington.
Robert W. Brumfield, Brumfield & Austin, McComb, for Robert R. Jacobs and Donald L. Smith.
Alex A. Alston, Jr., Beth C. Clay, Thomas, Price, Alston, Jones & Davis, Jackson, for John P. Weeks, Administrator of the Estate of Edward B. Launius.
En Banc.
ON PETITION FOR REHEARING
I.
The original opinion in this case was handed down June 3, 1988, affirming the learned chancellor as to all points and all parties. In due course, Wilmena W. Whittington (Appellant) filed a petition for rehearing alleging that the Court had erred in affirming as to the award of punitive damages of $40,000, as well as two other assignments of error. We find the petition for rehearing is well-taken as to the affirmance of the allowance of punitive damages, when no net worth of appellant had been established, but find no merit as to the other alleged errors. We withdraw the original opinion, modify it to deny punitive damages and hand down the following as the opinion of the Court.
On April 9, 1974, Clyde Whittington (Clyde) conveyed by quitclaim deed to Wilmena Whittington (Wilmena) all of his land, reserving one-quarter ( 1/4) of one-eighth ( 1/8) of eight-eighths ( 8/8) royalty, and one-quarter ( 1/4) of any bonus or delay rentals received on any lease which Wilmena should execute in the future on the minerals. The reservation was binding on all subsequent lessees and grantees. Clyde conveyed to Wilmena all rights to execute leases. On August 1, 1983, Clyde and Freddie G. Whittington filed suit in the Chancery Court of Amite County against Wilmena, Edward B. Launius, Robert R. Jacobs, Oil Star Corporation, Donald L. Smith, Tri-M Corporation, Coquina Oil Wilmena counter-claimed against Clyde, alleging she had no duty to tell him she had leased the property. Wilmena also cross-claimed against Launius, Jacobs, Oil Star, Tri-M, Smith, and Coquina, alleging fraud in that Launius concealed from her one-half ( 1/2) of the profits and working interest she was entitled to pursuant to the first of two side-letter agreements between Wilmena and Launius whereby she would share equally in profits from promoting the lease and any working interest retained by Launius.
Company, Thomas G. Kleinpeter, and some 28 other assignees of Wilmena to recover one-fourth ( 1/4) of the bonus consideration for a ten-year paid-up oil and gas lease executed by Wilmena to Edward B. Launius in 1975. Clyde alleges that Wilmena fraudulently concealed the bonus, in the form of a 5% overriding royalty interest and one-half ( 1/2) of the working interest retained in the lease by Launius, in a side-letter agreement entered into between her and Edward B. Launius on the same day as the oil and gas lease was executed.
Thomas Kleinpeter cross-claimed against Wilmena, alleging he is entitled to one-half ( 1/2) of said bonus by virtue of her conveyance to him in April 1977 of all the surface acres and one-half ( 1/2) of the mineral acres of the estate conveyed to her by Clyde.
Appropriate answers were filed as to all of these complaints. Pursuant to various motions for summary judgment and arguments thereon, Chancery Judge R.B. Reeves, in a pre-trial hearing, ruled that the obligation to make payments from the lease to Clyde was Wilmena's responsibility as sole owner of the executive rights, and her failure to do so in no way affects subsequent owners of the lease. He also granted the summary judgment motions in favor of several of the defendants because they were bona fide purchasers of their various interests in the lease. Wilmena's counter-claim against Clyde was struck as immaterial and irrelevant.
At the close of the pre-trial hearing on motions, the parties to the lawsuit were aligned as follows: Clyde Whittington claimed against Wilmena Whittington, Edward B. Launius, Robert R. Jacobs, Oil Star, Inc., Harold D. Baker, Thomas G. Kleinpeter, Tri-M Petroleum Company, Donald L. Smith and Coquina Oil Corporation. Wilmena Whittington cross-claimed against Launius, Jacobs, Oil Star, Tri-M Petroleum, Donald L. Smith and Coquina Oil Corporation. Thomas Kleinpeter cross-claimed against Wilmena Whittington. The complaint of Clyde Whittington against Edward B. Launius, and the cross-claim of Wilmena Whittington against Edward B. Launius were amended to claim against the estate of Edward B. Launius, John P. Weeks, Administrator C.T.A., because Edward B. Launius died four days after the original complaint was filed.
The facts, as adduced during seven days of trial, including some 103 exhibits, follow.
II.
On April 9, 1974, the same day he was granted a divorce from Wilmena Whittington, Clyde Whittington conveyed to Wilmena all of his land, including the mineral estate, reserving one-fourth ( 1/4) of one-eighth ( 1/8) of eight-eighths ( 8/8) non-participating royalty. All rights to execute leases were also conveyed to Wilmena in return for one-fourth ( 1/4) of any bonus or delay rentals received for the execution of any future leases. These reservations were binding on all subsequent lessees and grantees. The conveyance was recorded in Amite County, Mississippi. In 1982, Clyde became aware that drilling had commenced on the property when he drove by and saw the rigs. Without contacting anyone about the status of any bonus payment that might be due him, Clyde filed this lawsuit against Wilmena and some 38 assignees of the lease interest to recover his share of the bonus, and asked for punitive damages against Wilmena for fraudulently concealing the bonus she received for executing the lease.
On April 3, 1975, Wilmena leased all her minerals to Edward B. Launius in a paid-up lease with a primary term of 10 years, reserving a one-eighth ( 1/8) royalty. The On April 25, 1977, Wilmena sold all her surface estate and one-half ( 1/2) of her mineral estate to Thomas Kleinpeter, subject to all prior reservations and leases. This conveyance was recorded in Amite County. The warranty deed does not except bonus payments; however, Kleinpeter was not aware that the minerals were leased to Launius and was not aware of the side-letter agreement which provided for bonus, when he bought the property. Kleinpeter did not check any land records before he purchased the property, but accepted the Federal Land Bank's mortgage record that the title was clear. Although Kleinpeter did not expect to receive any royalty when he purchased the property since he was not aware that the minerals were leased, he has been receiving royalty checks since production was obtained from the wells.
bonus stated on the face of the lease was $10. The lease was recorded in Amite County. On the same day, Wilmena entered into an unrecorded side-letter agreement with Launius that stated that, as a bonus for executing the lease, Launius would at some time in the future give Wilmena a one-sixteenth ( 1/16) overriding royalty, one-half ( 1/2) of all the money he received for promotion of the lease, and one-half ( 1/2) of any working interest Launius retained in promotion of the lease.
On April 28, 1978, Launius assigned the "Wilmena" lease to Oilstar Corp., a corporation solely owned and operated by Launius. On June 27, 1978, Oilstar assigned the "Wilmena" lease to Coquina Oil Corp., reserving a 7- 1/2% overriding royalty. Coquina paid Oilstar $25,000 for the lease, which Launius kept as his expenses in promoting the lease. Thereafter, Coquina discovered a title failure on 137.5 acres under the lease, which Launius could not reimburse, so Coquina bought leases from the holders of the 137.5 acres. Coquina did not record the lease from Launius for four and one-half (4 1/2) years, because there was no landman in Coquina's Jackson office; their Midland, Texas office had the lease; and everyone forgot about it. Furthermore, Coquina was not particularly interested in developing the lease acres, so there was no push to complete an entire drilling block, which is customary in the industry to do before recording leases. However, all of the clean-up leases obtained by Coquina were recorded in October 1978. At the time it bought the "Wilmena" lease, Coquina had no knowledge of the collateral agreement between Wilmena and Launius; therefore, Coquina asserts it had no responsibility to inform Wilmena it had the lease. (The trial court granted summary judgment on this particular issue as to Coquina.) There was no agreement between Launius and Coquina that Coquina would not record the lease in order to conceal the fact that Launius had sold the lease for $25,000.
On July 24, 1978, Launius and Wilmena entered into a second letter agreement whereby Launius would pay Wilmena, as a bonus, a 5% overriding royalty (reduced from the original one-sixteenth or 6.25%) and one-half ( 1/2) of any working interest he retained in the lease. They dropped the requirement that Launius would pay her one-half ( 1/2) of the revenue from promotion of the lease. Wilmena claims that Launius tricked her into signing this second letter agreement by telling her that this paper was one of a stack of papers she must sign in order to correct the title description to exclude the 137.5 acres from the lease. Launius did not tell her he had assigned the lease to Coquina or that he had received $25,000 for the assignment. Neither did he tell her at that time that he had previously assigned the lease to Oilstar, his corporation. Wilmena claims she became aware of the second letter agreement only after this lawsuit was filed; therefore, she does not acknowledge the...
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