*1 et v. al. SMITH al. et BOLIN
No. 15440. Appeals Texas.
Court Civil
Fort Worth.
Sept. 11, 1953.
Rehearing Denied Oct. *2 C. Nelson, Brannan and Montgomery, J. Sellers, Robertson Falls, & Wichita appellants Nail, Smith, Dr. P. K. B. Dr. J. O. Egdorf, Denny, Dr. C. G Kindel S.
Paulk, E Denney, A. Arrington Dr. John Reagan. Dr. R. J. Rogers Eggers, Falls, ap- & Wichita for Falls, pellant Bank First of Wichita Nat. independent executor of the estate of, testamentary under will trustee Beck, Theo W. deceased. Kilgore Kilgore, Dallas, appellee for D. H. Bolin. Cal., Kline, Mortimer Angeles, A. Los appellees Maree, Morgan Jr., Rich- A. Brooks, Stanley
ard Wilde Morner, Cornel and Patricia K. Wilde.
MASSEY, Chief Justice. fundamentally This suit brought one groups plaintiffs, two group each composed personnel other, impose a upon constructive oil leases producing located, oil wells ac- thereon quired primary Bo- defendant, H.D. Some of the leases had lin. ,the been those as to which of one -members groups prior of such had at a co- time been primary along tenants with the defendant upon they, -joined by him, which had .drilling operations conducted fruitless dur- ing.the life of Said leases estates. expired re-acquisi- . prior date had primary tion defendant. pri- along named with' the Defendants mary and cor- defendant individuals were primary porations to whom which the conveyed in- mortgaged had defendant upon which construc- leases terests imposed. sought tive'trusts accounting plaintiffs also sued for all in connection with transactions all primary defend- acquired development thereon 1950and ant primary handled —upon transactions connec- as a trustee for them defendant years during the with activities tion upon and in connection members one leases the alleged (and cotenants had then groups defendant, primary partners)'along wells, —and other of drill an July all transactions the oil well or and in partner- 1947, groups engaged drill- members of the above ship primary- exploratory ed an the life of well at about the center managing partner. defendant of the west proved had been This lease. dry depth to be a hole. It drilled was to a summary judg- moved Defendants 2,020 1,890 depths feet. At feet to Upon trial ment. hearing this motion I,930 feet a “crinoidal lime” formation court entered in behalf of judgment encountered in which there was oil “good appealed. plaintiffs defendants. The tested, staining”. The formation but *4 production. failed of On or date of about Judgment part affirmed in and reversed July plugged the well was and part. and remanded in was abandoned. There was drill- no other ing activity progress on land the Howard 20, 1950, On date of Bo- June time, leases at this in- and there none was lin, primary appellee herein, by secured by any one after for stituted that date a lease from the surface in owners mineral period half, approximately year and a leases, adjacent under two together terests when a well” “farmout was drilled on the comprising what is termed the Howard part by southern east Howard lease leases, may land and which also be termed Hawley. proved M. well dry The J. the west Howard lease and the east Howard was The “farmout” made abandoned. was The gas lease. lease for oil and min was. Hawley questionable to Bolin under au- erals; It has been that such a lease said thority, any but the act him was event all, actually type is not a but is a lease acceptance ratified cotenants’" exploration pro purposes license for part their of the consideration him license, As a such creates in duction. an therefon corporeal Cox, hereditament. Huston v. 103 Kan. Though oc P. 992. acquisition After of the fractional casion for does distinction not exist as to ownership interests in cotenancy in the questions posed by "appeal, con land leases in Howard and before the sciousness thereof is of aid analysis. in our of the well at approximately lease, center west Howard P.Dr. K. The land not been had under for lease conveyed had pos- Smith information in his approximately months, prior" three but session to Bolin and the other members 12, 1950, March date of it had been under which Dr. caused Smith be- Bolin, lease to H. who'held it as trustee lieve that the drilling location others, himself and several who were tp likely- Howard be most to de- along cotenants thereunder during him velop’production gas of oil or would be-on 1947, 1948, 1949, and up in 1950 ex- its .the of the west portion northern piration on March 12. This land was leased lease. conveyed This information so by Bolin for 12, 1947, himself March on Smith, upon- encouraged Dr. which he subsequently, but .spring the late action, acquired was information himby 1947,he agreement entered into .an aat time when he a member aof persons (some appellants here- .partnership, mining purposes, at least for in),'whereby leases were owned on the which drilled wells in that vicinity on basis of interests. fractional The owner- portion northern the west Howard lease. ship .of persons, was in following "His, “partners” had been Kay and ,H. John stated interest:.. D. fractional. Kay Gene Clark. Neither Gene nor fie; ¾6; Smith, John Dr. Nail, P. K. Dr. B. J. -way Clark was interested C, G; ¾«; ,S. Via; Egdorf, O. Denny, Dr. taken leasehold estate in 1947. The venture . Via; Via; Denney, Via; Paulk, Earl Kindel Smith, Kay and Clark was one which Beck, Theo . ?Ae. ..... prior place several, years took Acquisition these depth interests the wells were drilled .fractional coupled express purpose was with oral 1,250 feet, approximately proving dry. please your me know desires and if knowledge conveyed the other co- let willing out, you drop the of want to I am about in 1947 Dr. Smith tenants your carry on. was that take interest and from such findings venture proved that drilling operations former per foot paying “Continental $2.00 northern vicinity there was oil get for this I am sure we can a well drilled that the but part lease of the west Howard price. $2.00, there will In addition to the prior occasion on such or wells drilled well approximately per foot surface $.25 proper location to simply to be at failed testing. pipe, cement and cementer quantities. sug- He paying it in discover dry hole, about all that is the event of for- near such drilling at location gested however it would cost. find oil Should we suggestion Dr. Smith’s mer wells. proportionate we will all share our honored, being well location pro- expense of the well putting proved south, it where distance some drilled duction. dry. the location Bolin selected venture, activity no Following this away get drilled. “I would like this cleared place taking the west Howard early of next week. *5 August interim, Bolin, of H. date you, “Thanking the I am to letter very truly, following wrote the “Yours him as cotenancy in with the members Bolin” “/s/ read The letter Howard leases. the there the Though was of sub- discussion as follows: ject of Bolin’s letter and between some the two leases attention called to “Your of the cotenants between each cotenant Texas, County, in Montague we own which developed immediately nothing Howard namely, (the Edith east the Paine proposal. from the (the Howard lease) Minnie west Gault February In month of the of there lease. These lease), with 320 acres each undertaken was Bolin and some of the expire will own terms the leases their exploratory drilling op- one further others Therefore, we should early part of 1950. eration, place which took on the south worth, any. if their give consideration line the east of Howard lease. At time my that we drill “It is recommendation operation drilling the estate of co- wells, depth on each lease to one two tenancy theretofore existing both the there are approximately 1250 feet because changed Howard land leases was as. sands, one at 850 producing known two lease, east Howard so that the fractional At this time both at 1250feet. feet and one in the lease thereon was as follows: Cor- Company Gulf Oil Oil Continental Bolin, tyie; Nail, ¾6; H.D. Dr. B. Dr. J. drilling wells area poration many are Yie; Vie; Egdorf, Denney, C.O. Earl Kin- years, many producing for which Paulk, ¼e; Beck, del Theo Vie. particularly 850 finding at and are wells passed feet, territory has been and in that pay Theo Beck did agree 'not depth. the well that we up drilling at that drilled the on the venture south line sand, lease, pipe at 850 tested the set feet and we east Howard and he never .pipe expenses. not make a "well. The was Denney it did Earl but did deeper pulled out we went agree one-eighth pay then cost of the time, However, However, drilling. proved the same results. at Mr. after the well Miller, Superintendent, my “dry hole” Denney said he believed be a did not offer to production pay obligation years, and West was South of our such for over two or general and in the area where until about' the Con- time this suit was well filed on developing. Frankly, question Gulf are 1952. The tinental well was June likely dry depth will quite 2,765 be it is well drilled to a feet and accord- was. averages, law but February at the same ing abandoned of 1950. There was unwilling knowledge am I surrender leases the drilling time no obtained from Therefore, well, drilling party wells. without the two alteration of relationships logical operations,' which occasioned could “over-all” information in the area. process case. well being to the issues of this was in material drilled merely period during February, constituted a first 1950,and operation correspondence in some perhaps agree- actual of law and with the Standard persons Company, Oil participating ment constituted mentioned the fact that “mining part- drilling of that well “crinoidal lime” formation which was under found in the drilling ners” rather than mere cotenants course of the 1947 well on west lease drilled. was a formation he wished to “define” in the parties All cotenants drilling course of the of such well. The leasehold estates both Howard land leas- formation in was not encountered expire es would were aware the leases during the drilling course of the of this their own terms on date of March well, however. expiration, least Prior to one of Nail, cotenants, requested Dr. D. 'H. At about the same time of corre- Bolin that for an ad- he re-lease spondence qu'estion, trying Bolin .was term, advising ditional Bolin at time promote Company the Standard Oil re- pay that he for at least fractional would gard exploratory drilling in the North n renewable interest as such related to the Texas área himby to be conducted at the first leases which were in effect time. doing basis of Bolin Stand- him, however, was reply Bolin’s that it Company making payment by ard Oil way impossible to secure a renewal assignment acreage around loca- appear Dr. Nail leases. It does not exploratory operations,' plus tion of such *6 making proposal any other his for one than Company making the Standard Oil some any duty himself. was not Bolin under operations. cost contribution to the of such participate acquiring in the of another lease. words, what promoting Bolin was type was a whereby of “farmout” contract None of the cotenants under acquire would he interests leases on oil 12, 12, 1947, from March to March upon for drilling lands return his re-leasing took action toward the same partly partly, lands his own at minerals, premises gas either for oil be- Company’sexpense, Standard Oil with both expired, fore the leases or afterward —until parties any production to share in realized. 20, 1950, date of when H. Bolin June This, case, applied to this is what will be through re-acquired the a lease broker same termed a “farmout”. premises new under leases from surface owners, to whom title had reverted on along At date of March about March 12, 1950. Company the Standard Oil Texas exploratory operations
Near the date Howard land decide leases did expire were on date of March it would conduct the area thereafter way Bolin obtained certain information from the in would be of “farmouts” Company way wholly relating drilling Standard Oil Texas to rather than its geology relating expense. in the area and selected three locations own Company’s disposition upon Standard Oil re- it leases owned where it was believ- specting further exploratory drilling drilling operations its in ed would be advan- vicinity. had, tageous point He The first himself to it. advantage and the was, course, others who were cotenants him which naturally with would discovery leasehold estate in the east follow as result of paying Howard lease, production upon obtained one opér- contribution from or more of such Company ations, point Standard Oil of Texas to the and the second advantage cost of drilling geological the well on the knowledge south line of increase the was east company lease. This would be Howard oil the area which realized even prove contributed to this cost wells though of its all of the drilled should because desire prove up' lease, Primarily adjoining “dry geological an of which -"tobe -holes”. it owner, was also to information Bolin obtained related geo- add to-its to oil Compa- possibilities structively vicinity drilling bound Standard Oil in the of these ny to “farmout” make the aforedescribed sites. words, D. H. Bolin knew contract. In other Oil locations Standard selected that com- he could make contract with they where desired to Company as three pany. one to set about to seek some He operations con- exploratory drilling con- obligation share his under such Texas, County, Montague ducted were tract, He to enter into. which intended lease, First, Griffith as follows: ap- acquainted any never at time of the north and some distance which was located enterprise. pellants proposed He with the leases; second, from the Howard west some individuals State located adjacent lease, Gist made a to so whom he deal California with west How- immediately north to and parties share a of his risk. These lease, , lease; on the ard and third Cato Morner, Brooks, Stanley Richard Cornel and east north
which was located Wilde, Wilde, Morgan A. Patricia K. lease, east due north and almost Gist Maree, along with Jr., appellees are Company Oil The Standard lease. They upon appeal. entered into to be drilled at all these locations desired they whereby two- a deal with Bolin took preferred “pack- the same time and about right to two- thirds of his risk received might con- age” whomever deal upon profit expectation, an thirds of the They of- thereon. for “farmouts” tract This agreed to Bolin. cash consideration op- oil with several terms fered to discuss drilling the three in advance his result and as erators, including contract with “farmouts” under his time, did, period of over some of discussion placed in escrow with Standard, but '6,May about date of enter on or into Falls, Tex- Bank of First National Wichita H. Bolin with D. to drill ex- contract as, completion delivery to Bolin ploratory wells on the three locations. The Company Oil his contract Standard Bolin to called for drill first on the contract exploratory drilling relative to the lease, immediately Griffith con- wells. by discovery or abandon- cluding such well exploratory lease, Bolin conducted the secondly ment to Gist drill *7 operations upon the upon Griffith lease the immediately concluding iby such well to prescribed by depth contract and discovery finally abandoned or abandonment drill on “dry as the well so drilled a hole”. Im- lease. The to Bolin the consideration Cato mediately explorato- thereafter instituted prescribed (which doing drilling so for ry operations upon lease, drilling depths prescribed as Gist be to certain was to 1950, 19, depth approxi- and of production discovery absent of each well June 1,708 mately reached, feet was agreement and which depth) on was a lesser depth into was to or the “crinoidal lime” Oil con- Company Standard formation. This was formation the same vey him leasehold interests in 100 their crinoidal lime formation which had proven produc- to be around each well acres July in in the Company encountered course tive, from which Standard Oil proportion' prescribed the well near receive a the center of was to lease, Standard Oil Com- production depths realized. west Howard between the conveyance 1,890 1,930 pany agreed, additional to such feet. There feet and was dif- well from ference, however, estate as each of the iri that when the forma- leasehold realized, might pay production which drilled on the Gist it be- tion was .into per prescribed production amount foot paying drilled Bolin a came obvious was search, formation, exploratory as realizable from the its realized of contribution ' payment drilling. least on the Gist lease. Such was at the cost Company made Oil to be Standard Upon receipt of this information from'the production whether or was'realized. lease, Gist on or: well about June ,to , 1950, immediately 1950, subsequent 19, May .6,. D.- H. Bolin got but .Prior n March Gainesville, 1-950, 12; broker of had a touch with a lease Bolin commitment Texas, employed him Company agent and as Oil which con- from Standard him, individually, Falls, First National negotiate Bolin Bank of for Wichita Tex- as, acting leases for the Howard land trustee owners of estate Theo Beck, May 31, purchase did lo- of same. This broker died 1950. The suit was pur- against and did filed others, contact such owners Bolin cate and D. and H. thereof, impress upon from chase said leases the owners a constructive 'trust Howard purchase owners lands land who were the surface leases under the transfer of question. The date of the such D. H. Bolin on June comprising an profits both the Howard land for accounting leases from production The fact that him realized therefrom since leases was June discovery acquisition Bolin had Gist date of his well of such leases. The date, public but be- lease was not at such same relief sought character of was days acquired came so a few later. “farmouts” from the Standard Company Likewise, Oil Texas. discovery pub- became long Not after amended pleadings, sought ac- there was an licized, meeting arranged to be was held counting years Bolin for D. H. Falls, Texas, in the officeof in Wichita 1948 and far in so as the interests of meeting arranged H. Bolin. appellants, the named plaintiffs, might meeting K. Smith. The was held Dr. P. appear years, claim those under the meeting 1950. At this the fol- June proper that a accounting correct had present: Bolin, lowing persons were not been Doctors H. rendered. Ar- John Smith, Nail, Earl Den- Dr. P. K. Dr. B. J. rington Reagan, connec- R. whose J. Paulk, ney, Kindel a son R. L. appears, tion joined hereafter of D. H. Bolin. suit, they adopted pleadings meeting that at It is conceded this Dr. plaintiffs other appeared their interests acting and was Smith was authorized to act thereby. appellants. for all interested summary Motion judgment was filed appellants These were then and there in- codefendants, by D. H. Bolin and his they acquire sistent that were entitled to upon hearing this motion granted interests fractional Bolin from new judgment accordingly. entered From this estate on the leasehold judgment persons position all the based the cost to new lands, old plaintiffs brought leases on the the fractional appeal. inter- they claimed ests to which entitlement being respect to the trusts sought to be im- identical to the fractional pressed, a circumstance obviously owned, has previously. old under the leases on material appel- effect' the attitude of July, the same lands well when Smith, -Nail, Egdolf, lants Denney, Earl Likewise, they *8 was were drilled. insistent Gayle Denny and Kindel Paulk is the fact they participate that were with entitled December, that in partner- a written drilling in- of additional Bolin the wells on ship agreement was entered into between part leases, the north the Howard land H.D. Bolin and person's all of the aforesaid in, lease, offsetting Gist a search the for except There Theo'Beck. were two other gas. oil and parties persons who were to that written' refused the in Bolin individuals pártnership agreement They of 1946. were privilege so'sharing the in leasehold and Arrington H. Reagan. R. John J. re-acquired in estate the Howard lands and partnership was formed under such contract participa- likewise refused consider the purposes prescribed as:,, “buying, sell- persons drilling opera- in tion of said ing, trading, developing, equip- exchanging, contemplated upon he tions said lands under- oil, ping, gas, leases, .mining and producing the new 'leases. minerals, estate, royalties, and all real other by Smith, was filed on property Suit other and and interests therein”. June Nail, Egdorf, Denny, Denney, Paulk, Every activity by and partner- undertaken joined plaintiffs ship by were met with utter failure. At about purchase it. specific agreement to partnership was capital Original progress in activity drilling the date was H. Bolin $24,000, D. prescribed with to be leases, how- Scruggs oth- the Oldham and the $8,000 each of agreeing pay known as ever, acquired a lease Bolin either $16,000. In each, $2,000 aggregating ers lease, already else, own- if he the O’Neil capital, Bolin words, original of the in drill- lease, interested he became two-thirds. ed such put up and the others one-third either exploratory well thereon. however, ing to ad- an that as prescribed, with event, agreement after he entered into an partnership payments into the ditional had entered eight persons he thereof with whom capitalization, one-half original the- agreement partnership Bolin, into the aforesaid -andone-half paid would be one-eighth conveyed partnership whereby to’each he persons entering into eight owned, he had on gas lease Properties the oil with him.- agreement consideration for a en- O’Neil lease shared, expenses and losses profits a total equally amounting di- person, to be from each provided $300 countered consideration, fifty per $2,400. As of .the vided, Bolin and per cent to fifty exploratory individuals, well agr.eed each as an Bolin eight cent to the other to.drill costs, the others H. fifty-per cent. on such lease at his own of such pne-eighth properties one.-eighth- -as' have to all interest each as to take title Bolin was to others, production drilling realized. The the interests of the the trustee part- well, proved on the O’Neil business and to transact all fruitless keeping partner, “dry and it was abandoned as a hole”. nership managing as the purchase Whether or not the informed. interests all the others lease, drilling operations and the O’Neil time such contract was entered in At the thereon, should or should not be consider- already to, title some Bolin held leases being provisions ed within the of the Oklahoma, County, and the in Comanche partnership signed parties articles of “blocks”, whereby pro being leases questions is of no -aid the of the case. paying quantities gas oil duction 12, 1947, By May date of each member hold leases com each block would partnership expended with had any payment block without prising purchase lease, for the O’Neil $300 specific delay rentals on the annual thereon; drilling and the- of the well though block, appears comprising the and it that expired. Also, part- the lease had not upon him as to each obligation an nership expended had a material of the within a a. well thereon block drill capital paid members thereof in writ period. By memorandum certain acquiring that time in tin the - member appears each ing, it Scruggs and Oldham Some of the leases. Bolin, agreed than partnership, other $2,000 capital subscribing members purchase by the from. Bolin to-a paid association had amount individual, under as an ¡acreage subscribed, so and some of' them not. contemplated originally three two Arrington Those who had not were'Dr. acre, per of leases blocks agree $3 Reagan, only Dr. had each that Bolin was to drill an ex ment further According kept $1,000. being the records upon each block as ploratory an indi well Bolin,.each owed, of them as.to actual partnership, acting for the contractor vidual *9 expenditures, part- by thertofore made plus per foot drilled. cost at actual others, nership, the amount of The $307.06.- fully paid subscrip- had in their all of whom “blocks” in Comanche two'of the These tions, capital in each had to his credit Oklahoma, County, were termed the Old- July Arring- In Dr. Scruggs lease. the fund $692.94. lease ham and Reagan explora- in and Dr. did like- ton did drill $307.06 Bolin early .paid They any blocks, never thereafter in opera- wise. each tory on these two wells ' partnership capital, money into the nor up “dry The third proving holes”. tion participated any in discussion purchased any fu- apparently 'never ‘was “block” ’ enterprise. was never ture partnership, there by the 'and
36i agreed proposition posed Paulk and un- contracted for purposes Though the letter, Arrington broad, but Dr. Dr. and quite contract der the written Reagan they did not and either failed or re- Bolin thereunder and given the discretion join suggested fused to in the adventure in actually broad, had been no there likewise Montague County, spe- which was that encom- partnership purchase not made passing purchase of the Howard land amount acre- cifically agreed as part- drilling thereon. Dr. P. Ki age county each of its location enterprise agreed join in the ner, upon prem- Smith on operation drilling nor no taking two-eighths the basis of interest in agreed up- purchased specifically ises so estate, the leasehold a Mr. Theo Beck partner. on There had been no each (not with the connected others theretofore “selling, trading, exchanging, developing, ” * * * any wise) agreed enterprise, etc., prescribed join in per other one-eighth taking basis interest. purposes instrument. Once of the written charge actually basis agreement acreage made was made b.e per acre, charge was made on of $6 leased it is clear that Bolin assumed as his acres, group purchase the basis of of 580 in right, and the members acted such other respect leasehold -estate. waived'any contention the con- trary, control of all details connected with agreement into, As to this new entered the sites to activities. He be drill- selected parties (named heretofore as the ed, agreement once was reached to- share enterprise joining in jointly ones costs, operations solely and conducted drilling exploratory the first well on the respect. every own in discretion lease, center, west near its arid parties will be termed hereinafter 12, 1947, May On said date of H. Bolin group” the “second convenience) con- wrote a letter to each of the other members templated ques- in "additionto the in partnership pointed such which he out acquisition tion the leasehold interests that he had secured “about 580 acres in the real estate which the drilling Montague County which is in the close person Each would contem- conducted.. proximity to the North Nocona shallow plated purchase of such interest from production”. He stated as of that writ- Bolin, already owned the lease- Smith, ing Nail, Denney Gayle Earl estate in entirety hold its did so make Denny agreed purchase had purchase. writing no There was evi- question and drill wells He two thereon. n dencing agreement by parties stated “cost” of further that the a one- respect, themselves in bind eighth acreage interest of the lease exception following sole letter writ- approxi- or leases he mentioned would be ten D. H. on date June mately per acre interest that fraction. $7 joining the other individuals ad- words, person In other each addressed was tq venture, orally agreed, after informed purchase, that for the from wit: of one-eighth the leasehold es- owned, tate he it cost approximately would Smith, K. “Dr. P. suggested $513. Bolin’s letter purchase Nail, “Dr. B. J. (cid:127)be him, made from to be joint followed by Egdorf, “Dr. O. C. expenditures in exploration develop- Denney, “Mr. Earl ment, inferentially obviously proj- but as a Gayle Denny, “Mr. ect under the written then still Paulk, Kindel “Mr. existing. “Mr. Theo Beck: parties Since the you mentioned in the letter “Gentlmen: This is to advise that the *10 already agreed had the suggested pur- above those named constitute interested in subject chase drilling, and of block acreage Montague the letter a certain of primarily Egdorf, Paulk, Texas, concerned Dr. County, particularly Mr. more described Arrington Dr. Reagan. and Dr. Egdorf as the Howard land in the Robertson Sur- entirety of leases in their as “leases consisting approximately 580 vey, and of which we own”. There was never acres. by agreement as to such action his cotenants you the own- agreement are “Under our appear group, in the second it does not and interest this leasehold of a one-half ers they' paying knew rentals were' estate, drilling now located is and a well acres, they paid on more than 580 when contemplated property. It is further this delay their in 1948 and shares of rentals may on this be drilled second well that a reached heretofore agreement Our land. effect, you formed, I assume group full and At the force time the second is However, if there is it. group, familiar with it is to be noted that the those are first know, please let me you anything partnership wish to comprising entered into to observe you. are You invited writing jointly hear from still in December of well, should have drilling of this owned interests in certain leases leasehold quite today, will and it casing set subsequently surface These Oklahoma. Wednesday week. interesting expired, ex- opinion with them in our pired partnership relation to one anoth- you seven there are will note “You er the members of the group. first A having taken this, Dr. Smith interested in great deal substance of the briefs of Beck portions having Mr. Theo two appellants appellees up is taken one. remaining taken question with a discussion of truly, very “Yours composed partnership character of the . H.D. Bolin” :g “DHB group, the members of the first to wheth- as. part- er its character was of a “mining in the conduct nership”, as the character the second leas.e, ex- the west Howard operations on group (at was conceded to be least well location judgment as to ercised his own period actually in which it was conducts initiation operations, including their ing exploratory drilling operations on the abandonment, formerly just as he had lease), west Howard whether and as to part- operations under done under “mining partnership”' there was under a re- best, con- he deemed nership. did as He lationship transfer or devolution of commitment to and without sulting no one interest in- certain any one. counsel of group as to the first into terests Dr. P. K. ' Beck, partner- so Smith Theo that the acres, speak of 580 letters While both ship group articles entered into first leases com was a certain there' applied by provisions their to the second acres, H. Bolin title which D. prising group elaborately and its activities. Also who had ob given lease-broker discussed of when the fidu- payment for the serv for him as tained it relationship ciary partners, part- —as orig Bolin The leases obtaining1 it. ices nership with one relationships another—or acquired totalled 640 inally acres. This trust, identical to that existing between pay delay party his annual rental failed to partners as between the members 12, 1948, —ended forfeiting thereon due March thus group. second Bolin it to Bolin. included it and treated it having reverted members of the questions It is our conclusion that the so group, delay second and billed them for the briefs, though posed highly interest- payment rental to the surface owners on ing, analysis would not call for exhaustive 60 acres on the additional basis they have little to do with the decision original contemplation therein like unto the questions controlling of the ultimate the 580 acres. leasehold estate disposition case. owned cotenants the second oper thereafter treated It is as consti our conclusion that the tuting 640 In the letter he the written wrote ation of contract occasioning acres.. August 19, spoke partnership 1949he of the members his cotenants relations
363 when tionships in late group “tenancy first 1947 incident ceased in common” ex- 'jointly 12, group 1950, owned of such ended leases March. when be- pired, expired. relation as existed that such in- constituted tween members thereof sup The authorities we found which part- rights obligations such dividual conclusion, port the above are follows: nership That funds as existed thereafter. Tex.Jur., p. 490, 494, 32 169,p. 173, sec. sec. though of the association the formation p. 505, 182, p. 525, 197; sec. Lubbock s.ec. group members of occurred the second Coal Grain & Ferguson, Co. Tex. Civ. dissolution, v. first antecedent to the App., Amarillo, 1921, 539; 227 S.W. Fuller overlap in- group, such a constituted mere Laws, 1925, 342, v. Mo.App. 219 271 S.W. time, up- periods with no effect cident ; Tex.Jur., 173, 220, p. 495, p. 836 32 sec. relationships. two diversity.of 3, 251, 23; p. Munsey sec. sec. Mills v. & though the written contract existent That 1926, 754; Garitty, 469, 115 283 S.W. Tex. part- group first constituted them Co., 641, Smelting Kahn v. Central 102U.S. ners, them operation lawof constituted 266; Tomberlin, 26 Root L.Ed. v. Tex. period “mining partners,” during they Civ.App., Paso, 1931, El 596, 36 S.W.2d engaged explora- actually were jointly refused; 20; 246, Tex.Jur., p. writ 32 sec. tory drilling operations jointly Bateman, Wagner Supply 1929, Co. v. 118 Oklahoma, and not at owned leases in 498, 1052; 18 S.W.2d 12 Texas Tex. Law operations times other such were than when 414; Review, Thuss, p. Gas, Texas Oil and ap- progress, might in actual in so far as be Edition, 160; p. 215, Summers, Second sec. plicable-the “min- rules law in cases Gas, Edition, 4, p. Oil & Permanent Vol. prevent partnerships” ing dissolu- sec. cited under cases note by any tion relations aliena- 20; Wesner, Tex.Civ.App., Gardner v. Aus “mining partner”. tion of interest That of a tin, 1932, refused; S.W.2d writ general relating rules to dissolution Supply Branson, Iron Mountain & Co. v. applied partnerships be where the would 407; 134 Kan. 8 P.2d Huston v. partner of a alienation of interest occurred Cox, 1918, 992; 103 Kan. 172 P. requisites did time when of law C.J. S., Minerals, 245, page Mines § exist, constituting not at that same time partners” in “mining activities those “mining partnership”. pur- for such fiduciary That There are relationships partners poses binding cannot contract growing persons out of the fact that are
authority a transfer or antecedent to devolu- leas.e, tenants in common under a by held interest, partner’s tion of a absence of one of such cotenants for the benefit of all. joinder by provided those such fiduciary receive relationships There are growing interest, operation of law persons if other- fact would out of the are “mining preserve partnership. partners” wise fail to That in a “mining partnership”, pri- the members of the second were activities of which are conducted one marily “mining partners” tenants in common under How- for the benefit leases, except period ard land for a in 1947 of fiduciary the others. There are relation their jointly ships when reason of engaging growing persons out of the fact that exploratory drilling operations partners, ordinary near are in an partnership, center of west Howard the activities of which are conducted one matter “mining partners constituted as a partner. law of such as"the managing “mining partners” partnership”. relationship That There is trust in each in when activity relationship, abandonment of trust stance. Such proved dry, relationship itself, the well their re- trust has á can readily life. verted to of tenants That common. noted that as to trusts occasioned re relationships, trust “mining their incident to lationships tenancy in common partnership” relationship ended when the well drilled in of “mining partners”, the re abandoned, and their rela- lationships in themselves are not indicative *12 364 any Hull, “reposing by each confidence” v. 150 Tex. 237 256. S.W.2d party in the others with whom are view applied In thereof a rule of law be relationship. in Operation might' case, of law to this respects as the activities actu- persons partners” ally constitute such “mining performed, bewill the same rule isas as, as well applied in general cotenants instances where ordinary cases of or mistrust,' personal enmity
because partnerships, or as laid down in the case of persons any Peckham, would never enter supra. into kind v. The activities Johnson partnership agreement performed, with another one so constituting is in law what voluntarily, yet be joint enterprise, any would forced to construc- a fiduciary partnership tively partners” so because relationship become “mining parties existent between the necessary any joint its incidence to own- ceased as to such a status discontinu- joint ership operation mining prop- status, ance occasioning activities as, joint erties. The would be true having same there agreement been no between operations pursuant drilling in to the a parties which would such de- occasion jointly search for gree oil under owned. of-fiduciary any relationship future at C.J.S., Minerals, time. 58 Mines and § 251, page general ap rule the rule is plicable general ordinary partnerships, or case, In that Peckham, v. supra Johnson voluntarily by prosecuted entered into and Sup Tex. 788], S.W.2d [132 persons another, each one wherein Court points out as a reason for reme partner agent is held to be confidential rule, by such analogy, that if it were other right the other each a wherein has arid wise, person one might stage” “set the to. know all the others know and is each sharp bargain. The reasoning appears required to make a full disclosure of to indicate that such rule applied must be- relating his knowledge material facts within analogous principle cases with the partnership to* affairs to the others in law in mind that where any there is evi him. re relation to Good faith might dence which intimate or to show tend lationship requires duty dis this. This after, a fiduciary, even cessation of the Peckham, closure is absolute. v. Johnson primary fiduciary relationship, acts. in. bad 132 Tex. 120 S.W.2d upon information, property the as faith sociation, A.L.R. 720. or acts in bad information withheld case, those who are In the instant .entitled though the relation- faith from have such them, revealed to may then he between the members of second ship be held liable persons for such act to such “mining partners” was that during. occupied relationship activities, him as pursuant period mining to’ cestuis. operations, actually prog- operation yet ress—and of law— indisputably words,
the facts
disclose that their
there
neces
sarily
premise
together
voluntary and
association
in-
acquired
information
as,
member,
complete
property
purposes,
or
to each
tentional
as to either of
reposed
so,
party
good
in H. Bolin which the
acquiring
faith
the informa
far
fiduciary
other members
was in
relationship
part
so
concern-
tion
aas
actually performed ner with
acquisi
ed
another
time
mining activities
of its
period tion,
“property”
so far
was concerned the
information is
belong
and in
such
performance.
both,
ing
profitable
entailed in the
And
use
of' time
of or dominion
un-
which
one
having
over
enure
the trust of
others
shall
doubtedly reposed in
not benefit of both when wrongfully
would
exercised
one,
case
abuse of their confidence
or
where the
non
permitted
does,
operate
equal
free him of the user
right
oppor
would
not have an
impose
tunity
construc-
right
private
it
others
make-use of
for his own
acquired
event,
property or
benefit. In
profits
acquisition
tive trust on
either
property
dim in breach of
trust. Fitz-Gerald
as the result thereof would be an
*13
12, 1948,
Misappro or before March
and on
before
acquisition
or
made in bad faith.
12,
requisite
.preserve
of March
1949. This
to
priation
partner
own use
by one
to his
no
its life existed
had been
property
is constructive if
because there
the
of the firm
production
the
gas
oil
from either of
32 Tex.
of
or
not actual
a trust fund.
fraud
leases,
per
have
conditions
298,
party can be
which
satisfied
Jur., p.
50. No
would
sec.
them,
necessity
pay
prop
eliminating
of
purchase
(as
a
the
mitted to
an interest
life
perform
delay
preserve
(as these
rentals to so
the
erty)
duty
he
a
where
has
noted,
of the
D. H.
with
leases. As has
fiduciary)
to his
is inconsistent
pay
delay
Fitz-Gerald Bolin did
purchaser.
his character as a
rentals
leases,
p.
Hull, supra,
Amer.Juris.,
basis of 640 acres existent in the two
citing
v.
54
175,
proportionally
and billed his cotenants
as
sec. 228.
payments
such
their own-
basis of
interest,
him,
ership,
acreage
of 640
Indeed,
knowledge
whenever such
rather than on the
of 580 acres. As
operate
basis
is used in such manner as to
fiduciary relationship
related to
existent be-
prevent
fiduciary
accomplishing the
from
of the
tween Bolin
the other members
purposes,
or ex
occasioning the creation
group,
solely
second
considered
as existent
itself,
fiduciary
then
istence
relation
relation
in com-
because of their
as tenants
prohibited
knowl
using
from
such
he is
so
mon,
them
he was not in trust relation with
any
edge
in the absence of
bad faith
even
n onhis
once the life
ceased coincidental
Comstock, Cir.,
trust
part. Trice v.
8
expiration
with the
of the leases
their
646,
620,
L.R.A.
121
57
61
F.
C.C.A.
procure
He
for-
own terms.
did
not
176;
1930, 143
Hughes,
Probst v.
Okl.
feiture
the leases and life of the trust.
929;
Ruling
A.L.R.
26
Case
P.
not, during
He’ did
its
the'-
life
Law,
p.
on Trusts. But
sec.
implied right
group
existence
case,
expired
having
the 1947 leases
as cotenants to a renewal of the lease
purposes
joint in-'
occasioning
.and
any
There-
negotiate
renewal for himself.
group
second
taken therein
terests
fore,
performed
legal
as to his
expiration,
duties
having been defeated
cotenants,
trustee,
refraining
as their
way the term thereof could
being
there
no
pen-,
own
from
use of
trust to his
by any unilateral action
have been extended
n ofthe
opportunity
by.
gain
sonal interest
trust,organization,
member
equivalent
in his
use adverse to
pre
relationship,
an act to
of the trust
as
(cid:127).
cestuis, during
life
the trust. 42.
purposes,
its
the element
serve the
Tex.Jur., p. 710,
Knowledge,
sec. 95.
com-
necessary element
of bad faith would be a
by appel-
plaint
made
re-acquisition
as to use of which is
existent as to the
to be shown
lants,
acquired
knowledge
could not be
by Bolin of such leases.
relationship incident to co-
account of trust
trust,
After the life of the
related
as.
acquired on
tenancy.
must have been
It
parties
part-
“mining
when
activity
relation
incident
account
ners”, there continued to exist a fiduciary
parties
partners’’.
as
There
“mining
relationship between them
by reason
respect
cotenancy
does exist in
to the
rela-
cotenancy
their
leases.
life
propriety,
as
tionship
trust,
cotenancy
related
as.
accounting
Bolin made to the other
group
the second
in the Howard
members of
group,
of the second
members
but this does
leases,
was limited
the term of the
validity
affect the
what we have s.aid.
expired by
lease.
its own terms on
matter
accounting
This
will be discussed
March
1950. D. H. Bolin had the ob-
,
later.
ligation
preserve
the life of such leases
they,
corpus
By
if
should
considered
reference to
pleadings,
it is ob-
appellant
activé
(cid:127)of an
trust. D. H. Bolin
so con- served that the
members
did
of. the
trust,
preserved
alleged
sider it as an active
Bolin ac-
second
that.
payment
knowledge
operations
quired
life of the leases’
from the
on-
delay
required
leases,
(cid:127)of the
rentals
to be
on the Howard land
during the
and/or
period when he
fiduciary
support
was in
relation-
finding
all the elements of such a
them,
ship
re-acquire
which he
against
used to
judgment
and a
property
nearby prop- against
that same
thereupon,
him based
then as to such
charged
phase
He is not
then with a “use
judgment
of this suit the summary
erties..
withheld”,
wrongfully
of information
but was properly entered. Texas Rules of Civil
charged
Procedure,
in-
166-A;
with a “use in ‘bad faith’ of
rule
Gulbenkian v.
property
Penn,
formation which was the
Tex.Sup.1952,
tion had
edge
gained
fiduciary
a
had
as
with John
thereof,
interpretation
which he did not
.the
Kay
when
drilled the
Gene Clark
reason,
lapse.
at time of the
For this
have
prior
wells on
west Howard
lease
believe,
where
we
that
in cases
is
there
question
posed
years.
then
is
imposed
(cid:127)sought
a constructive trust
might
sought
Kay and Clark
have
whether
man,
by one
a lease taken
claimed
upon part
impress
a trust'
of Dr. Smith’s
fact that the same lease
part because
¾6 n ,
proven
well drilled
1947
had the
formerly
by him in trust
held
for oth-
wa9
productive.
affirmatively
ers,
shown
it must be
that such
re-acquisition
acted in the
a man
to, but taken
considera-
Additional
into
solely
knowledge that
lease
was the
question
with the
tion
whether
trust,
knowledge
property of his
knowledge
which Bolin
acted was
time
unto itself at the
of the ex-
sufficient
group,
the second
the element
property of
piration of the
occasioned
re-acquisi-
his act of
of “bad faith” as. to
act.
tion.
Many years ago, when
arriving
applica
mining
be the rule
ventures
at this to
primarily
grubbing
wé are not unmindful of consisted
earth
ble to the
ores,
very
metallic
there were oc-
reason cited
the court in the in search of
properties
Smelting Co.,
mining
dis-
Kahn
when
were
case of
v.
casions
Central
Munsey
“grub-
individuals who
26 L.Ed.
cited
covered
were
U.S.
v.
persons.
were
Garitty,
115 Tex.
Those who
Mills &
283 staked”
many
underlying
“grubstaked”
agreed
instances
the reason for
S.W.
specified
mining partnerships
any profits
propor-
in some
holding that
are not
share
“grubstaked” in
ventures
or withdrawal
tion of the
dissolved
the death
of a
they proved successful. There
being
appli
that
event
partner
without
thereto —
properties
when valuable
were ac-
instances
the act
1 Bouvier’s
unconscientious.
Law
found,
tually
Revision,
filed Dictionary,
locations made and claims
p.
Rawle’s Third
record, enuring
antithesis,
find- But
re-acquirer
to the benefit
in the
er
“grubstaked”
and those
him. In
contemplates
who had
acted in “bad faith”, which
instances,
some of these
and as
instances
affirmatively operated
his state of mind
similarity,
(perhaps
unbe-
design
the finder
with a furtive
or
some motive
fiduciary)
will,
knownst
allowed the claims of
his
self-interest
ill
or
or
for an ulterior
lapse
non-development
through
purpose
or other-
profit
gaining
of a
resulting
wise
occasioned a
under some iaw which
from a corresponding loss to such others.
orig-
premises
forfeiture of the
back to the
particular
And
regards
circumstances
(usually
cases,
inal
Federal Govern-
owner
of such
act would be
different
no
then,
ment),
rela-
fiduciary
after the
from
part,
fraud on his
as proceeding or
tionship
ended,
go
finder would
back acting dishonestly, intentionally, and delib
premises
same
loca- erately,
and make new
motive,
with a wicked
to cheat or
place,
tion, or
at the same
re-lo'cation,
deceive
constituting his
those
cestuis in re
of a
filing
recording
followed
spect
acquisition
or
loca
new claim to his own benefit alone. Of
loss,
tion to their damage or
his own
course,
litigation
ensued over advantage
sometimes
gain.
Warfield Natural Gas
constructive
claims
former cestuis that
Allen, 1933,
Co. v.
Ky. 646,
59 S.W.2d
*16
impressed upon
be
should
the new 534,
trusts
which resulted legations whatever in connection with the duty no as- owed them “look out accountings, and it seems to have been they might make there sertable charged .pleadings an ás issue in amended to”, appellants met the and such as result of certain facts which came *18 necessary relating requirements thereto light taking deposition the the n Collins, Tex.Civ.App. v. such cases. Collins of D. H. Bolin. Worth, 154 writ S.W.2d re Fort fused, m., and cited therein. . The that o. cases evidence shows- original w. the acquired’by leasehold interest the members is now directed consideration Our of the group second from D. H. Bolin was accounting which is prayer an to the for acres. 580 D. H. Bolin had originally by parcel brought the the part and action acres, transferring leased 640 60 acres on this appellants.- We view evidence the thereof to negotiated lease broker the who by summary required as the nature issue purchase, the lease and which resulted in- applied identical tests judgments, with arid having only acres Bolin at the time 580 concerning part of the con case group second was the formed. The fact trusts. structive total acreage that acres was the in- group volved when the was formed is evi- re-acquisition As of the Howard the to by 23, 1947, the denced letter writ- leases, as to “farmout” land leases and the June by Bolin of the ten to each other members. appellants that conclusion the can our delay When the rentals due therein, March coupled no interest maintain with due, fell lease the broker failed to having fact of their never made the acres, pay as his 60 same to and forfeited thereto, relating investment there financial acreage Bolin, right paid to this his for considerado» no occasion of these is due thereon as well delay the rental as the By pleadings reference the it matters. purchase of the the other 580 acres. interest in the 580 delay rentals due already entirety, made acres he then, any agreement owned in its without Bolin originally of the sec- what it him members cost would not any of other by subject propor- inquiry. be a for the This would have charged them ond group, paid dealing. in 1948 on been a delay “arms-length” .matter for rentals tion of the as An accounting by same basis was Bolin made acres this 60 orig- they expense venture, others on the the 580 acres charged them _ proportionate nothing in the court to take a evidence before the inally contracted raised in 1949. an issue having same there He did the in. misrepresentation Bolin testified therein. specific acres that the Bolin testified accounting that it correct and noth- was a lease, question east Howard was in the ing contrary appears. indicate the his held in correct, was and written instrument will be taken as i which, and the fur- fact supported this files partnership failed As broker to the under accounting ther fact that December, 1946, thereon articles of rentals pay his particular applied proper- Bolin’s and in Bolin. to the rights back forfeited his Scruggs bottom ties known as and Old- at the Block pencil notation own pay Block, not by agreement did ham it “Anderson is noted instrument reads: B.” partnership acquired now. H. Lease them from D. rental, we have be Bolin Bolin’s, credibility would as an individual on the However, $3 basis question per partnership, acres and that the acre the 60 ;where issue as to forfeited, and even acreage acquired Scruggs so under was, it was be whether 1,240 acres, benefit was in aggregate so, it for he took whether aggregate under the members Oldham was for all the himself alone or of 960 additionally if acres. The evidence before he did so group, second court hearing summary as to wheth- there would be some judgment unsettled, left thereafter as it but of it raised there- the treatment er by, just-what particular issues as. to by prop- in fact ratified other treated' acquired erties were undisputed Bolin part- It is did for members. nership, many how delay acres were the second embraced charge properties, acres, they and that nev- whether on the 60 less than rentals aggregate above any agreements with acres affirmatively made each block er agreed paid for partners, thereto. A fact issue therefore reference respect of them part- who were in the case con- exists nership actually acquired. trier of decision fact. sideration and words, apply. Appellants doubt, least, left in will dis- is Limitation question as to whether they got circumstances dur- ever what facts and covered the paid for, they depositions they paid and whether after ing taking more the course per than material, for what got. $3 acre filed. issue the suit was *19 though amount to be resolved even n peculiar Under the relationship of the sup- negligible and would its settlement is partnership, other reposed members of a port maintenance suit. respect confidence in Bolin ap- in plication developed upon of testimony funds ac- toward No quisition properties, they hearing agreed which raised once judgment summary acquire properties validity descrip- denoted on the as to issue triable primarily by they to the second on accounting made tion the fact-that were lo- acquisition County, cated in Comanche expense of the Howard Oklahoma. strictly up expense They left to Bolin in and on the leases 1947 actual leased, premises in 1947. mem- and drilling of well The trusted in him premises Bolin, that see group, the second than embraced bers upon. price group acreage agreed on the to the with him agreed jury Bolin violat- might A conclude that raising the development of the facts account acquiring ed a trust in for 'his own respect during the occurred in this issues gist and Crownover farmouts deposition of talcing of the course might conclude ap- new Howard leases. Bolin, became known H. in them he was motivated acquiring that partnership with in pellants who had been in him while information came to agreement articles of Bolin under relationship appellants, and confidential deposition was December, when the limitation, partnership property. would' The statutes taken. apply. not farm- Dr. When Smith to obtain asked leases, on the outs Gist and Crownover affirmed is trial court Judgment of the interested, his he and in Bolin said was not delay except accounting done; argues brief that it could not then be How- payments on the rental due and 6, 1950, May on interested but he was and as ard land leases January February, did when it. In part- the dissolution accounting as to’ by Dr. Nail new leases oh asked to secure December, Judgment of nership land, replied Bolin that “We the Howard re- and the cause trial court is reversed get get could no more that than we could upon thése issues manded for trial of the fly wings and’ this afternoon.” to Heaven accountings. Bolin taken Neither Dr. Nail’nor Mr.- has Heaven, wings and flown to but on Juhe BOYD, J., concurring and dis- 20, 1950, got Howard leases. Bolin new senting part. possible It is that after Bolin drilled two wells on the Howard leases knew more BOYD, Justice. about the subsurface than he did structure Smith, theretofore. who 1938 had Dr. opinion I concur the Court in in some ventures interested judgment far as it in reverses the so land, on the Howard and who was familiar cause; remands but I am forced to Kay’s geological data on the John the conclusion issues were -raised area, told Bolin all he knew about the appellants as to the evidence whether are picture, gave geological him the benefit impress a entitled constructive Kay’s Oliver, data. division Standard’s properties appellee and there- exploration superintendent, testified that respectfully from dissent the affirm- fore 10, 1950, March 9 or he discussed with Bo- summary judgment in ance of the favor of Gist, proposed lin farmout phase Bolin on that of the case. Crownover, vicinity and other land; may Although there not be material of the Howard and that on the s.ame dis-.. pute and, transaction, Bolin geolo- in that occasion he showed Standard’s inference, sense, area, any. fact, when an gy is to- that in the be same con- fact; agreed give drawn it itself a therefrom and ference Standard 100 acres agree, may per if reasonable witnesses minds well instead originally acres as issue, proposed. to what ultimate Although may only differ as the facts be the Inferences., . person establish. .to drawn from knows what information mo- circumstances are wit- acquiring not'testified tivated him Gist and cannot, nesses, and therefore- be said to Crownover farmouts and the new Howard the., hy evidence, is, leases, have been 'testimony point established *20 uncontradicted, though unless the conclusive, facts will only but tenders an issue- of . but, admit of one fact. conclusion...