Opinion ID: 2457485
Heading Depth: 1
Heading Rank: 2

Heading: Strangers to the Lease?

Text: Gulf States asserts in the alternative that the parol evidence rule does not apply to strangers to a transaction and could not be invoked in this case because Gulf States was a stranger to the Martin-Elliott lease. As such, it argues that any payment by it of the late rental could not bind either the lessor or the lessee or inure to the benefit of Petitioners. We shall not discuss the authorities on this point, because it is our opinion that Gulf States was not a stranger to the Martin-Elliott lease when it sent the rental letter and check to Mrs. Martin on January 17, 1975. [3] On the contrary, Gulf States, through its President and sole owner, Royal Russell, had arranged the purchase of the Martin and Evans leases from Mrs. Elliott. Prior to their assignment from Mrs. Elliott, Gulf States entered the written agreement of February 18, 1974, with Master Drillers whereby the latter would pay the cash consideration of $25,000 to her, receiving the assignments in its name and acting in a capacity of `Warehousing' said lease for and in behalf of GSE [Gulf States] .... By the agreement Gulf States agreed to allow Master to purchase the lease (referring to both the Martin and Evans tracts as one lease), with Gulf States having the option to purchase no less than one-half of the usable oil and gas locations thereon for one-half of the purchase price paid to Mrs. Elliott by Master. Russell testified that he made certain selections and had paid Master Drillers the $12,500, which entitled Gulf States to one-half of the lease, before the end of 1974. Gulf States claimed this interest in the Martin-Elliott lease before the IRS sale and as late as December, 1974, when Russell showed the IRS the February 18, 1974, agreement with Master Drillers. Gulf States still claimed an interest in the lease when it bid at the IRS sale of Master Drillers' interest on May 27, 1975. In answer to a question on oral argument in this Court, Gulf States' counsel stated that the company would still claim to own an interest in the Martin-Elliott lease if this Court decided that the lease is in effect. Under the warehousing agreement of February 18, 1974, between Gulf States and Master Drillers, the latter was holding in its name one-half of the unassigned Martin and Evans leases for Gulf States when Gulf States paid lease rentals to Mrs. Martin on January 17, 1975. If not an express trust, the written agreement of February 18, 1974, at least created a constructive trust under which Gulf States could have enforced its right to assignments due under the contract. Courseview, Inc. v. Phillips Petroleum Co., 158 Tex. 397, 312 S.W.2d 197 (1957). The rights of Gulf States, held in trust for it by Master Drillers, were not extinguished or transferred when the IRS sold Master Drillers' interest in the lease to Thompson by quitclaim deed on May 27, 1975. The quitclaim purported to cover only the right, title and interest of the said Master Drillers, Inc., in and to the leases, and its legal effect was to convey only such interest as the delinquent taxpayer [Master] owned at the time of the lien and quitclaim. 26 U.S.C. § 6339(b)(2); Mansfield v. Excelsior Refining Co., 135 U.S. 326, 10 S.Ct. 825, 34 L.Ed. 162 (1889); Crow v. Wyoming Timber Products Co., 424 F.2d 93 (10th Cir. 1970). See also Winningham v. Dyo, 48 S.W.2d 600 (Tex.Comm.App. 1932, judgmt adopted); Gulf Production Co. v. State, 231 S.W. 124 (Tex.Civ.App.1921, writ ref'd); 23 Am.Jur.2d § 292. Under the circumstances, Thompson and his assignee by quitclaim Brannon, were not innocent purchasers for value. They received only the title of Master Drillers, which was subject to the interest of Gulf States under its written but unrecorded agreement with Master Drillers. Thus, Gulf States was not a stranger to the Martin-Elliott lease when it sent the lease rental to Mrs. Martin. Unless it has since lost its interest by waiver, election, renouncement or some other action (a question which we do not now decide), Gulf States is still entitled to the one-half interest it had acquired in the Martin-Elliott lease under its agreement with Master Drillers dated February 18, 1974.