Case Name: FITZ-GERALD v. HULL et al.
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1951-02-14
Citations: 237 S.W.2d 256
Docket Number: No. A-2738
Parties: FITZ-GERALD v. HULL et al.
Judges: SMEDLEY, J., dissenting. WILSON, J., not participating.
Reporter: South Western Reporter Second Series
Volume: 237
Pages: 256–273

Head Matter:
FITZ-GERALD v. HULL et al.
No. A-2738.
Supreme Court of Texas.
Feb. 14, 1951.
Rehearing Denied April 4, 1951.
Turner, Rodgers, Winn, Scurlock & Terry and Carlton R. Winn, all of Dallas, 'Gerald Fitz-Gerald, Midland, and Lloyd Croslin, Lubbock, for petitioner.
Martin, Moore & Brewster and Arthur Lee Moore, all of Fort Worth, Dan Moody, Austin, for respondents.

Opinion:
GRIFFIN, Justice.
In this cause the respondents herein, H. Winston Hull and Charles C. Green, as plaintiffs, sued the petitioner, James Fitz-Gerald, as defendant, in a statutory action of trespass to try title to, and for an interest in, an oil and gas lease on certain described lands in Hockley County, Texas. For convenience, the lands will be called the Coble lands. Plaintiffs also alleged in detail -a statement of their claims for recovery.
Generally, the allegations and proof show a-joint venture entered into between respondents — plaintiffs below, and petitioner — defendant below — to ¿quire an oil, gas and other mineral lease on the Coble lands, in the event respondents' employer, Texas Gulf Producing Company,' did not take such lease, and to develop and operate such lease as joint venturers, respondents owning one-half thereof, and petitioner owning the other one-half; expenses and losses to be shared equally. The petitioner took the lease from Coble in his own name in violation of the original agreement between the parties that it was to be taken in the names of all three'. The evidence shows that respondents, as soon as they learned of the lease being taken in -petitioner's name; began asking for a deed to their one-half interest, and never'at any time acquiesced in, nor ratified, the act of petitioner in taking the lease in his own name: Petitioner kept putting off the request of respondents to convey their one-half of the lease, by telling respondents he was going ahead with his part of the joint venture, and'as soon as he had completed certain arrangements necessary to develop the lease he would convey to respondents their one-half interest. This continued until two or three wells had been brought in on the lease by the operators to whom an undivided one-half interest had been assigned by petitioner, and then for the first time petitioner repudiated the original agreement and denied that respondents had any interest in the lease, and refused to convey any part of same to respondents. At the close of respondents' evidence, the trial court sustained petitioner's motion for an instructed verdict and judgment was entered denying respondents any recovery. The Court of Civil Appeals, 232 S.W.2d 93, held that the evidence was sufficient to raise a fact issue as to the existence of a constructive trust in said lease for the benefit of respondents and remanded the cause tO' the trial court for trial 'before a jury on the issues as set out in its opinion. Writ was granted by this Court. The Court of Civil Appeals has made a very detailed statement of the pleadings and the evidence, and we will not burden this opinion with a repetition of the same.
We must keep in mind that when an appellate court comes to consider the propriety of the trial court's having given an instructed verdict such Court must view the evidence in the light most favorable to the party against whom the verdict was instructed. Stevens v. Karr, 119 Tex. 479, 33 S.W.2d 725; White v. White, 141 Tex. 328, 172 S.W.2d 295.
These principles have long been recognized as applicable to cases of instructed verdict.
Under the previous decisions of this Court, it was not necessary for the plaintiffs to have secured a permit under the Texas Securities Act, Art. 600a, Vernon's Ann.Civ.Sts., as amended. This was conclusively decided by this Court in the case of Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146. That case was a suit by Lewis against Davis to recover an undivided one-half interest in certain oil and gas leases and other oil and gas rights, and for a division of profits. The trial court sustained an exception to the plaintiff's petition on the ground that he had pled no permit under Art. 600a as required of a dealer. This action was affirmed by the Court of Civil Appeals. This court reversed and remanded the cause, holding that the exception had been wrongfully sustained. After citing from previous decisions of this Court holding that the Securities Act was for the protection of purchasers against sellers of securities, and does not undertake to regulate purchases or to protect sellers against purchasers this Court discusses the 1941 amendment to the Securities Act, and concludes that such amendment does not "work ohanges in the general purpose of the Act and so to amend it as to require the procuring of permits or licenses by those who buy securities and the registration of securities for the protection of sellers against buyers." Loe. cit., bot. 2nd col., 199 S.W.2d at page 149. Particularly applicable to the case at hand is this language: "(13) It follows that if petitioner by reason of an agreement with or a relation to respondent became the owner or the equitable owner of a one-half interest in the oil and gas leases and other mineral interest acquired by respondent and by petitioner, he can maintain suit to establish and enforce his interest against respondent, even though neither petitioner nor respondent registered under the Securities Act. "
This ground for an instructed verdict cannot apply so as to sustain the trial court's action.
Petitioner contends that the pleadings and evidence of the respondents show, as a matter of law, that they are seeking to enforce an express trust created by parol, which is specifically prohibited by Sec. 7, Art. 7425b. If such were the case, the action of the trial court in instructing the verdict must be affirmed. A reading of the respondents' pleadings and of the Statement of Facts shows beyond any question that respondents seek to recover upon a constructive trust. All the allegations are to the effect that the agreement between the parties was that the purchase of the lease was to be made by the petitioner, but that the title was to be taken in the names of the respondents and the petitioner, and that respondents were to pay one-half the consideration and to be liable for one-half of all obligations of the lease and own one-half thereof; that the petitioner, in violation of the agreement, had taken title to the lease in his name alone (which fact was unknown to respondents until after the first well came in) ; and that for a time after respondents discovered that the title of the lease stood 'in the name of the petitioner alone, he recognized the original agreement and promised to make proper conveyances to respondents of their one-half interest, but that respondents did not agree to petitioner's holding title in his name, and continued to insist that their one-half interest be deeded to them. Under such state of facts when the petitioner took title to the property in his own name in violation of his promise, and of the original agreement made 'between the parties, he held the title to an undivided one-half interest for the benefit of, and in trust for, the respondents. This trust arose not be-" cause there was any agreement for the title to be taken in the name of petitioner, and the property to be held by him in trust for the .respondents — as would be necessary to constitute an express trust — but, because under the facts, equity would raise the trust to protect the rights of the respondents, and to prevent the unjust enrichment of petitioner by his violation of his promise and duty to the respondents to take title in the name of the three of them, and for their mutual profit and advantage.
As the Trust Act was originally passed by Acts, 48th Leg., R.S., Ch. 148, p. 232, Sec. 2 read: "Sec. 2. Definition of trust. 'Trust', for the purposes of this Act, means an express trust only, and does not include so-called 'business trusts' ".
At the very next session of the Legislature the Texas Trust Act was amended in certain particulars. Sec. 2 then was made to read, as it did at the time of the transactions set forth in respondents' pleadings, and as it now reads:
"Art. 7425b-2. Definition of trust
" 'Trust' for the purpose of this Act means an express trust only, and does not include (1) resulting or constructive trusts, (2) so-called 'Massachusetts Trusts' or similar business trusts, (3) security instruments such as deeds of trust, mortgages and conditional sales contracts, (4) instruments wherein one or more persons are mere'nominees for one or more persons without any disclosed beneficiaries and without any active trust duties. Acts 1943, 48th Leg., p: 232, ch. 148, § 2, as amended Acts 1945, 49th Leg., p. 109, ch. 77, § 1."
The only purpose the Legislature could" possibly have had in thus amending Sec. 2, was to make mo're definite just what trusts were covered by the Act, and to state in so many words that the Act was not meant to apply to resulting or constructive trusts, to certain other business transactions generally known and denominated as "trusts", or whose legal effect was to create a "trust" in law or equity. To come within the limits and prohibitions of the Act, a certain state of facts must give rise to an express trust. We must, therefore, determine just what is an express trust under the terms of this. Act. It was well-settled by our decisions rendered prior to 'the adoption of the Trust Act that the Statute of Frauds did not prevent the establishment of a parol trust in land. These decisions applied to express, resulting and constructive trusts equally. There was no appreciable difference in the end reached as to the form, name or character of the trust involved. We think the early case of James v. Ful-crod, 5 Tex. 512, very clearly sets out that under our Statute of Frauds then existing the establishment of a trust in lands could be proven by parol evidence. Chief Justice Hemphill, in declaring that trusts might be established by parol testimony, says:
"The 7th section of the English Statute of Frauds provides that all declarations or creations of trusts or confidences of any lands, tenements, or hereditaments shall be manifested or proved by some writing signed by the party who is enabled by law to declare such trust, etc.
"The 8th section declares that all trusts or confidences of land or tenements which arise or result by the implication or construction of law or are transferred by an act or operation of law shall be of the like force- and effect as if the statute had not been made.
"The 9th requires that all grants and assignments of any trust or confidences shall likewise he in writing, or he utterly void and of none effect.
"These provisions, which have been adopted in most of the States of the United States, prohibit the creation of trusts of lands unless manifested or proved by writing, or unless they result by implication or construction of law; but under owr laws, express and implied or constructive trusts, as to their creation, or rather proof, stand upon the same footing. The special contract under which the former are raised, and the facts from which the latter result, may alike be proven and sustained by parol evidence." (Emphasis added)
Until our Trust Act Statute of 1943 was passed, it continued to be true that no distinction between the kinds of trusts- existed in regard to the proof of the existence of the trust by parol. The Trust Act of 1943, for the first time in Texas jurisprudence required that one of the kinds of trusts; to-wit, express trusts in real property must be created by some written instrument. Sevine v. Heissner, Tex.Sup., 224 S.W.2d 184 (1, 2) at page 186.
In many early decisions of the Texas courts where the question raised had to do with the admissibility of evidence, we find some expressions as to the name given to' the state of facts involved that an "express trust" was present. However, as said in James v. Fulcrod, supra, and Sevine v. Heissner, supra, prior to the adoption of the Trust Act the proof of express and implied or constructive trusts was subject to the same rules. Therefore, it was not necessary for the court to make any distinction between the various kinds of trusts in deciding the cases. This accounts for the language in some of the earlier cases with regard to "express trusts." A careful reading of all those cases will show (1) that a decision as to the kind and character of trust involved was hot necessary to the decision of the case and (2) that in nearly all of such cases, the facts showed either that the title was taken in the name of one party for the benefit ,of the other party as a result of a. previous' agreement between the parties, or that there had been a ratification and acquiescence on the part of the complaining party of the act of the defendant in taking title in his own name. • Where it has been necessary to distinguish the various kinds of trusts, we believe that the Texas cases hold that an express trust "can come into existence only by the execution of an intention to create it by the one having legal and equitable dominion over the property made subject to it." Mills v. Gray, 147 Tex. 33, 210 S.W.2d 985, loe. cit. (1-4), at page 987.
42 Tex.Jur., p. 611, "Trusts", § 10: "Also, as distinguished from a trust arising from implications, an express trust arises 'either by express agreement or by direct and positive acts of the parties or by some writing or deed.' "
To the same effect are the following: Restatement, "Trusts," Vol. 1, p. 6, 1st par., § 23-24, pp. 72-73; 54 Am.Jur., p. 22, "Trusts", § 5; Wacasey v. Wacasey, Tex.Civ.App., 256 S.W. 1020, loc. cit. (2-4), at page 1022, no writ history; McAlister v. Eclipse Oil Co., 128 Tex. 449, 98 S.W.2d 171, loc. cit., 175 (3, 4); First State Bank v. National Bank of Commerce, Tex.Civ.App., 99 S.W.2d 406, loc. cit. (2), at page 409, writ refused; Lobban v. Wierhauser, Tex.Civ.App., 141 S.W.2d 384, writ refused; Pomeroy Equity Jurisprudence, 5th Ed., Symons, Vol. 1, p. 206, § 152; Idem, Vol. 3, p. 916, § 987; Simmons v. Wilson, Tex.Civ.App., no writ history, 216 S.W.2d 847, loc. cit. (4, 5), at page 852. Regardless of the language of some of the early cases, the Trust Act specifically -defines "express trusts" within the meaning of that Act. It provides:
"Art. 7425b-7. Requisites of a trust
"An express trust may be created by one of the following means or methods:
"A. A declaration in writing by the owner of the property that he holds it as trustee for another person, or persons, or for himself and another person or persons ; or
"B. A written transfer inter vivos by the owner of property .to another person as trustee for the transferor or for a third person or persons; or
"Cl A transfer by will by the owner of property to another person or persons as trustee for a third person or persons; provided that a natural person as trustee may be a beneficiary of any such trust.
"D. An appointment by a person having a power of appointment to another person as trustee for the donee of the power or for a third person; or
"E. A promise by a person to another person whose rights thereunder are to be held in trust for a third person; or
"F. A beneficiary may be a co-trustee and the legal and equitable title to the trust estate shall not merge by reason thereof. As amended Acts 1945, 49th Leg., p. 109, ch. 77, § 3.
"Provided, however, that a trust in relation to or consisting of real property shall be invalid, unless created, established, or declared:
"1. By a written instrument subscribed by the trustor or by his agent thereunto duly authorized by writing; § 7." (Emphasis added.)
"2. By any other instrument, under which the trustee claims the estate affected. Acts 1943, 48th Leg., p. 232, ch. 148,
We see that the state of facts we have in the instant case does not come within any of the above "means or methods" whereby an express trust may be created under the terms of the Trust Act. Therefore, such Trust Act cannot apply to our case, and we do not have an express trust present.
By the express terms of Sec. 2, Texas Trust Act, Art. 7425b a constructive trust is not included within the terms of the Act.
Petitioner contends that there must be some fiduciary relationship between the parties to support a constructive trust, and that the facts of this, case show that no such relationship existed.
"While a confidential or fiduciary relationship does not in itself give . rise to a constructive trust, an abuse of confidence rendering the acquisition or retention of property by one person unconscionable against another suffices generally to ground equitable relief in the form of the declaration and enforcement of a constructive trust, and the courts are careful not to limit the rule or the scope of its application by a narrow definition of fiduciary or confidential relationships protected by it. An abuse of confidence within the rule may be an abuse of either a technical fiduciary relationship or of an informal relationship where one person trusts in and relies upon another, whether the relation is a moral, social, domestic, or merely personal one.'' Sec. 225, 54 Am.Jur., "Trusts", p. 173. (Emphasis added) . .
"The abuse of a confidential relationship by acquiring property through the employment of knowledge or interest obtained in such relationship constitutes a sufficient basis for equitable relief in the form of the declaration and enforcement of a constructive trust in respect of such property and in favor of the person wronged. The relationships of trustee and cestui que trust, principal and agent, client and attorney, and employer and employee, are striking, but far from exclusive, examples of confidential relationships within the meaning of this rule. " Sec. 226, Idem, pp. 173-174. (Emphasis added)
"An unfair transaction between a confider and a confidant or fiduciary, at least where the confidence is induced by a fiduciary relationship between the parties, gives rise to a constructive trust in respect óf any unjust enrichment of the confidant or fiduciary. Where such a transaction is attacked, the burden of proof is on the confidant or fiduciary to establish the fairness of the transaction, and to this end he must fully disclose the facts and circumstances, and affirmatively show his good faith and the absence of pressure or influence on his part in the matter. However, it is not every relationship to which the term 'fiduciary' or 'confidential' can be applied with reason or plausibility, so as to raise a presumption of unfair dealings between the parties to the relationship. It. is a question of the actual relationship between the parties that must be inquired into, and not whether the terms 'fiduciary', 'confidential,' or 'trust' can, with some degree of reason, be applied to the relationship." Sec. 227, Idem, pp. 174 — 175.
"The general rule is that a purchase, upon his own account or for his own benefit, by a fiditciary or confidant, of the property constituting the subject matter of the confidence or fiduciary relationship, in violation of the trust or confidence reposed in him, raises a constructive trust in favor of his principal or confider. The rule is not confined to a particular class of persons, such as guardians, trustee, or solicitors, but is a rule of universal application to all persons coming within its principle. The principle of the rule is that no party can be permitted to purchase an interest where he has a duty to perform which is inconsistent with the character of a purchaser. " Sec. 228, Idem, p. 175. (Emphasis added)
See also Restatement, "Restitution", p. 64, Sec. 160, et seq., where in discussing Constructive Trusts it is stated:
"Sec. 160. Constructive Trust.
"Where a person holding title to property is subject to an equitable duty to convey it to another on the ground that he would be unjustly enriched if he-were permitted to retain it, a constructive trust arises.
"A constructive trust, unlike an express trust, is not a fiduciary relation, although the circumstances which give rise to a constructive trust may or may not involve a fiduciary relation." Idem, p. 644.
"Constructive Trusts.
"Sec. 1044. Generally. Constructive trusts include all those instances in which a trust is raised by the doctrines of equity for the purpose of working out justice in the most efficient manner, where there is no intention of the parties to create such a relation, and in most cases contrary to the intention of the one holding the legal title, and where there is no express or implied, written or verbal, declaration of the trust. They arise when the legal title to property is obtained by a person in violation, express or implied, of some duty owed to the one who is equitably entitled, and when the property thus obtained is held in hostility to his beneficial rights of ownership. As the trusts of this class are imposed by equity, contrary to the trustee's intention and will, upon property in his hands, they are often termed trusts in in-vitum; and this phrase furnishes a criterion generally accurate and sufficient for determining what trusts are truly 'constructive.' An exhaustive analysis would show, I think, that all instances of constructive trusts properly so called may be referred to what equity denominates fraud, either actual or constructive, as an essential element, and as their final source. Even in that single class where equity proceeds upon the maxim that an intention to fulfill an obligation should be imputed, and assumes that the purchaser intended to act in pursuance of his fiduciary duty, the notion of fraud is not invoked simply because it is not absolutely necessary under the circumstances; the existence of the trust in all cases of this class might be referred to constructive fraud. This notion of fraud enters into the conception in all its possible degrees. Certain species of the constructive trusts arise from actual fraud; many others spring from the violation of some positive fiduciary obligation; in all the remaining instances there is, latent perhaps, but none the less real, the necessary element of that uncon-scientious conduct which equity calls constructive fraud. (The constructive trust is imposed to prevent unjust enrichment.)
"Courts of equity, by thus extending the fundamental principle of trusts — that is, the principle of a division between the legal estate in one and the equitable estate in another — to all cases of actual or constructive fraud and 'breaches of good faith, are enabled to wield a remedial power of tremendous efficacy in protecting the rights of property; they can follow the real owner's specific property, and preserve his real ownership, although he has lost or even never had the legal title, and can thus give remedies far more complete than the compensatory damages obtainable in courts of law. " Pomeroy, Equity Jurisprudence, "Constructive Trusts", Vol. 4, p. 93, § 1044.
Also: "Sec. 1053. 8. Trusts ex Male-ficio. — In general, whenever the legal title to property, real or personal, has been obtained through actual fraud, misrepre sentations, concealments, or through undue influence, duress, taking advantage of one's weakness or necessities, or through any other similar means or under any other similar circumstances which render it un-conscientious for the holder of the legal title to retain and enjoy the beneficial interest, equity impresses a constructive trust on the property thus acquired in -favor of the one who is truly and equitably entitled to the same, although he may never perhaps have had any legal estate therein; and a court of equity has jurisdiction to reach the property either in the hands of the original wrong-doer, or in the hands of any -subsequent holder, until a purchaser of it in good faith and without notice acquires a higher right, and takes the property relieved from the trust. The forms and varieties of these trusts, which are termed ex maleficio or ex delicto, are practically without limit. The principle is applied wherever it is necessary for the obtaining of complete justice, although the law may also give the remedy of damages against the wrong-doer. " Idem, p. 119, Sec. 1053.
Also, Idem, p. 140, et seq., Sec. 1056b.
Our courts have discussed constructive trusts, and have defined them as being raised by law. Lipsitz v. First National Bank, Tex.Com.App., 293 S.W. 563, loc. cit. 1st col., and top 2nd col., at page 567: "Being void, his acceptance of the money from the sheriff a-s the proceeds of the sale of the interest of these heirs in these lands, with the intention of denying to defendants in error the full satisfaction of their respective demands as measured by the judgment rendered in cause No. 4659, made him a trustee in invitum. The reception of this money created in favor of the defendants in error and Mrs. M. A. Anderson a constructive trust in Lipsitz. Constructive trusts are those which arise purely by construction of equity, and are entirely independent of any actual or presumed intention of the parties. Olcott v. Gabert, 86 Tex. 121, 23 S.W. 985; Bouvier's Law Dictionary; Currence v. Ward, 43 W.Va. 367, 27 S.E. 329." See also Texas Creosoting Co. v. Hartburg Lumber Co., Tex.Com.App., 12 S.W.2d 169, loc. cit. 2nd col., at page 173; Simmons v. Wilson, Tex.Civ.App., 216 S.W.2d 847, no writ history; Restatement, "Trusts", Vol. 1, § 1(c), p. 506; Scott on Trusts, Vol. 3, p. 3, par. 2315, § 462.1, et seq.
The case of MacDonald v. Follett, 142 Tex. 616, 180 S.W.2d 334, 337, we believe to' be particularly applicable to the present •suit. In 1934 MacDonald wanted to lease land belonging to the Muellers who were non-residents of Texas, and who were also Follett's clients. An oil and gas lease, expiring in 1937, on the Mueller lands was made to a nominee for MacDonald & Fol-lett, who with knowledge and consent of the Muellers, assigned to Follett an override of ½2 royalty under the lease and then assigned the working interest under the lease to some oil companies, subject to the override. Follett immediately conveyed one-half of the override to MacDonald in accordance with their prior oral agreement. Thereafter, without the knowledge or consent of Follett, MacDonald secured renewal leases in April, 1937, and in assigning these leases to the oil operators, MacDonald reserved a ⅝2 override in his name, as had been done previously, but MacDonald would not convey any part to Follett. The 1937 leases expired in April, 1940, and in October, 1938, MacDonald, by direct negotiations with the Muellers, procured top leases on the same land to become effective upon the expiration of the 1937 leases in April, 1940. MacDonald assigned these top leases to the -same operators and he retained a ½2 override royalty. Production was had under the top leases obtained in 1938. Follett claimed that MacDonald held one-half of such ⅜2 override for the benefit of Follett; and that a constructive trust arose in favor of Follett the minute MacDonald secured the ⅛2 override. The trial court gave judgment for the defendant on an instructed verdict as to the claimed interest in the ½2 override, and the Court of Civil Appeals held the question as to whether or not MacDonald and Follett had entered into a joint venture in 1934, and if such joint venture was still in existence at the time the 1938 top leases were procured should be submitted to a jury, arid on favorable findings, Follett might recover. There .were other holdings, but oh points not germane to the question here involved. The Supreme Court, in determining the cause, said: "This is a suit in equity and in that realm the conduct of parties is judged by refined standards. No rules can be prescribed and no attempt should be made to formulate rules for the measurement of conduct by courts of equity, but that such conduct must be measured by standards exacting the utmost fidelity between the parties is universally recognized. We experience no difficulty in arriving at the conclusion that the facts above narrated, if found to be the true •facts, establish that a relation of trust and confidence existed between Follett and MacDonald prior to the execution of the 1938 top leases. "
It was claimed in MacDonald v. Follett that Follett had paid no part of the consideration for the 1937 leases, but the Court says: "While MacDonald paid the consideration therefor, he. was not out any money on the transaction but, on the contrary, made money by the transaction."
Surely if a constructive trust is to be held to exist in top leases, about which there was no contention of an express agreement to hold such override for benefit of Follett, then we have no difficulty in holding that a constructive trust — under the evidence given in the trial of this case — could arise in favor of the respondents herein when the petitioner took the lease from Coble in his own name;
It is contended by petitioner that no fiduciary relation can exist during the negotiations leading up to the talcing of the lease, and cites the case of Kaiser v. Newsom, Tex.Civ.App., 108 S.W.2d 755, writ dismissed — correct judgment as authority for such statement. In discussing the relationship necessary to support the raising of a trust relationship the Court says: "In its broadest sense such a rule should always prompt the acts of parties in dealing with others; yet the 'fiduciary' relation created and recognized by law implies more than that. This close relation has its inception in the obligation of one to another when they are partners in a joint enterprise, between trustee and cestui que trust, guardian and ward, and in other .instances not necessary to enumerate. Peckham v. Johnson (Tex.Civ.App.), 98 S.W.2d 408, and authorities there cited."
Thus the Court recognized that had the agreement been as pleaded by the plaintiff there would have been a sufficient "fiduciary relationship" to sustain a constructive trust, but held .that since no issue was given, or requested by plaintiffs, and since the burden rested upon them to establish the facts relied upon there was not such a relationship established in the case; and therefore, this point showed no reversible error. Also in Kaiser v. Newsom, the jury answered all the issues submitted favorably to the defendant. In our case, the respondents testified to the facts necessary to establish the joint venture between the parties, petitioner and respondents.
The pleadings and proof show that the three parties agreed to enter into a joint adventure regarding this oil and gas lease and that each had a duty to perform to further the common interest. In carrying out this common interest each joint adventurer owed the highest duty to the other so to act as to further their joint interest, and each as to the .subject matter of such joint adventure, was an agent of the other. The petitioner violated this duty in taking the title in his own name, and seeking to appropriate all the profits to his own use and benefit. Equity will force him to disgorge and' to divide his gains with the other joint adventurers in accordance with their original agreement.
"The relationship between joint adventurers, like that existing between partners, is fiduciary in character, and imposes upon all the participants t'he obligation of loyalty to the joint concern and of the utmost good faith, fairness, and honesty in their dealings with each other with respect to matters pertaining to the enterprise. This is especially true of those to whom the conduct of the transaction, or the property involved therein, is intrusted. Such a party will be regarded as a trustee and will not be permitted to enjoy any unfair ad vantage because of his possession or control of the joint property. The mere fact that he is intrusted with the rights of his coadventurers imposes on him the duty of guarding their rights equally with his own, and he is required to account strictly to his coadventurers; and if he is recreant to 'his trust, any rights they may be denied are recoverable." 30 Am.Jur. "Joint Adventures," p. 695, Sec. 34.
"Persons engaged in a joint adventure, or about to assume such relationship, owe to each other the utmost good faith and the most scrupulous honesty. Lind v. Webber, 36 Nev. 623, 134 P. 461, 135 P. 139, 141 P. 458, 50 L.R.A.,N.S., 1046, Ann.Cas. 1916A, 1202." (Emphasis added)
See also same authority, Sec. 38, p. 697, and authorities cited in Note 9 of the text.
Restatement "Restitution", Sec. 194, p. 795, et seq., Sec. (2) declares the law to be: "(2) A person who agrees with another to purchase property on behalf of the other and purchases the property for himself individually holds it upon a constructive trust for the other, even though he is not under a duty to purchase the property for the other."
The comment under this Section 194 recognizes that conduct, such as is shown by the respondents' testimony in this case, may give rise to a constructive trust.
We think this case is covered by the case of Thompson v. Corbin, Tex.Civ.App., 137 S.W.2d 157, 159, (no writ history,) wherein it is said: "Defendants' 3rd, 4th and 5th propositions are grounded upon a special exception that 'there are no allegations sufficient to impress a trust in favor of plaintiffs' in and to any of the mineral interests acquired by Thompson. It is to be observed from the pleadings that the consideration for the agreement consisted of the mutual promises above discussed. It is further alleged that the interests here involved were acquired under said agreement or arrangement and subject thereto. If so, the mutual promises and their execution entered into the consideration at the time the properties were acquired. Their joint undertakings were to be confined to operations in mineral interests and restricted to an area known as the East Texas oil field. We need not determine if the petition alleges an express or an implied trust or a combination of both. Litigation arising out of similar joint adventure or partnership undertakings as we have here, have heretofore been recognized and sustained by our courts adversely to defendants' contention." Citing authorities.
While all the cases cited by the Court were cases of express trusts, and prior to the Texas Trust Act, the same reason! ing will apply to a constructive trust which is expressly excluded from the terms of the Act.
See also Lanier v. Looney, Tex.Civ.App., 2 S.W.2d 347, writ refused.
We also approve the holding of the Court of Civil Appeals that' the facts alleged and proven by plaintiffs did not constitute laches as a ¡matter of law.
Since the defendant had conveyed an undivided one-half interest in these properties to Thompson, et ah, and was jointly operating this lease with Thompson, et al., we believe that plaintiff Green's conversation with Thompson relative to the filing of the suit, and the damage that might foe done thereby, was admissible on the question of tihe laches of plaintiffs.
Of course, our opinion, of necessity, is based upon the facts presented on this particular trial, and in the face of the trial court's instructed verdict, and is no attempt to determine facts on a final trial where all parties have introduced their testimony.
The judgment of the Court of Civil Appeals is in all things affirmed.
SMEDLEY, J., dissenting. WILSON, J., not participating.