Court Opinion

ID: 3964522
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:24:20.057823+00
Date Added: 2024-06-11T14:17:39.579605
License: Public Domain

Finding myself unable to concur with the majority of the court in the disposition of this cause, I file my individual views of what disposition should be made thereof and my reasons therefor — writing the opinion I think should have been written in this case.
Appellee brought this suit against appellants to cancel an oil and gas lease to 53,000 acres of land in Webb county, upon the alleged ground of fraud and fraudulent misrepresentations to appellee, upon which false representations he relied and which influenced the lessor to make the lease, and upon the further ground of the breach of the contract upon the nonperformance on the part of appellants, by failing to comply with the express terms of the agreement, which in law likewise amounted to an abandonment of the contract that justified the cancellation of the lease and gave appellee the right to recover the possession of the land, together with damages.
Appellants' pleading was sufficiently responsive and the trial proceeded with a jury, who, after being charged by the court, returned their verdict in favor of appellee, and the court entered judgment thereupon, in part, as follows:
"It is by the court further considered, ordered, and adjudged that the title of the plaintiff, Albert Urbahn, in and to the above-described land, be and the same is hereby declared freed from any claim or interest depending upon or arising out of either said lease above described, dated February 24, 1919, or the confirmation thereof above described, dated May 22, 1919, and the assignment from the defendant Rio Grande Oil  Gas Company to the defendant Clara E. Lane, dated February 24, 1920, assigning portions of the lease to said land then claimed by the defendant, Rio Grande Oil  Gas Company.
"It is by the court further considered, ordered, and adjudged that the plaintiff, Albert Urbahn, should have and he is hereby awarded his judgment, jointly and severally, against each of the defendants Rio Grande Oil  Gas Company and I. F. Crow and S.E. Baily and J. M. Gruver for the sum of twenty-one thousand five hundred seventy and no/100 ($21,570.00) dollars, together with interest thereon from this date until paid at the rate of 6 per cent. (6%) per annum, for which plaintiff may have his execution.
"It is by the court further considered, ordered, and adjudged that the plaintiff be and he is hereby denied any judgment for damages against the defendant Clara E. Lane.
"It is by the court further considered, ordered, and adjudged that plaintiff should be and he is hereby awarded judgment against defendants Rio Grande Oil  Gas Company and I. F. Crow and S.E. Baily and J. M. Gruver for all costs in this behalf incurred, for which let execution issue."
The court gate a general charge without submitting it, as it is now very generally done, upon special issues.
This is one of the largest records that has come before this court, having such few real questions of law in it. It is a fact case largely. The transcript contains 255 pages. The statement of facts contains 352 pages. Appellants' brief contains 242 pages, and includes therein 100 assignments of error, 82 points, and citation of 120 decisions. The appellee's brief contains 154 pages and he answers and argues every proposition of appellants and cites 15 authorities.
This is the third appeal of this case. The suit was first tried by the district court of Webb county, who found for appellee. That judgment was reversed by this court and the case was remanded to the district court for another trial. See Lane v. Urbahn, 246 S.W. 1071. It was again tried, but this time with a jury. See 265 S.W. 1063. And on appeal it was again reversed and remanded for another trial, and in its opinion this court said:
"This cause has been tried and disposed of in the court below largely in disregard of the opinion of this court on a former appeal; the questions now presented being practically the same as those raised and disposed of in the former appeal. 246 S.W. 1070. There is no occasion to restate the facts in detail, nor discuss those questions at length."
This case presents an example of where appellate courts should affirm judgments when possible to do so when substantial justice requires it. One trial judge, a very able and learned one, too, and 24 jurors, have severally passed on the facts, and they are not greatly different, except that on this trial they are much more favorable to appellee.
There is another well fixed and established rule that appellate courts will not, should not, and ought not to interfere with the findings of the jury if there are any material facts to support such findings. Heard v. Pratt (Tex.Civ.App.) 257 S.W. 662, and Texas Pipe Line Co. v. Huddleston (Tex.Civ.App.) 274 S.W. 168. In the first-cited case the opinion was written by the writer of this one, and in the *Page 183 
other by the associate justice who wrote the two opinions in the case of Lane et al. v. Urbahn, supra. Hence in the disposition of this case we will be governed by the rules stated. It is quite likely if this case were reversed and remanded it would again be returned here with the same result.
We have given this record a most thorough examination. Though lengthy, we have examined carefully the statement of facts and read and considered the brief of each party. That being the case, and on account of the former trials and opinions of this court just read, we are going to dispose of this case without quoting too much at length from the pleading and testimony, but sufficiently so and by referring the reader to the opinions of the court in the former appeals of this case for an understanding of the true issues involved.
Let us set out certain established rules fixed for guidance in respect to cancellation of oil leases. We have heretofore held in such cases, though forfeitures are not (generally) favored in law yet in oil leases forfeitures are favorably considered. The law does not favor holding up indefinitely from development oil leases of large tracts of land, but rather favors speedy cancellation for want of development. This rule is further enlarged so that in the construction of oil and gas leases that construction most favorable to the lessor should be given. Emery v. League, 31 Tex. Civ. App. 474, 72 S.W. 603; Aycock v. Reliance Oil Co. (Tex.Civ.App.) 210 S.W. 848; 18 Ruling Case Law (Mines) § 115, p. 1214.
The lease expressly grants the right to assign in whole or in part. The contention is that the lease was procured for development purposes; a clause was written into the lease imposing a drilling obligation. The contention of appellee is that it was affirmatively represented to him to execute the lease that the assignment clause was not to be used except to people who intended in good faith, to develop, and, for that reason and understanding to satisfy appellee, appellant made the agreement. The effect of this was to be construed as a representation that not only one but each of the assignees was bound by and would discharge all obligations imposed upon the lessee for the benefit of appellee, one of which was to develop.
There is another well-established rule pertinent here that fraud vitiates all contracts, and though fraud, like any other fact, must be proven, there are many things of apparent minor importance, which, if in any collateral way tend to throw any light on the transaction to establish the fraud, may be used as circumstances, when relevant, to aid the jury in passing upon the main question.
As material facts to cancel the lease for fraud it was alleged that the following misrepresentations were made by appellant:
"First. That the procurers of the lease were all experienced oil developers whose success was attested by the fact that they had sold out their oil holdings in Oklahoma for $34,000,000 and were abundantly able financially to hazard large sums of money in exploring for oil and gas on the land.
"Second. That they intended in good faith to apply their resources to good-faith development of the land for oil and gas.
"Third. That they were owners of a corporation through which they intended to provide the money and in good faith to develop for oil and gas.
"Fourth. That they did not intend to assign any leases under the clause which gave the right to assign in whole or in part to any person or corporation who did not intend in good faith to mine and operate for oil and gas on said lease nor who was not financially able so to do.
"Fifth. That they intended to observe the obligation imposed by the lease to use all reasonable efforts known to or practiced by competent oil producers to commence a well on the land within six months.
"Sixth. That they intended to observe the clause by which they, `guarantee on the part of its assigns the full and faithful performance of all the covenants and obligations imposed upon the original lessee,' and that the parties understood and agreed that such clause extended to all assignees and imposed the obligation upon each to develop in good faith as the lease imposed upon the lessee."
Thomson, an experienced oil man, testified in response to a hypothetical question based on testimony given by Gruver, that in all his life he had never known good-faith drilling to be done in the fashion outlined by Gruver. A well to a depth of 1,600 feet should have been drilled within three or four months, based on his knowledge and experience of good-faith drilling. Tools, which Gruver testified occasioned weeks of delay, could have been procured out of San Antonio within three days. That he had procured such tools for drilling at that time in Somerset from San Antonio. The reasonable cost for drilling such a well 1,600 feet and fitting it for pumping was from $7,500 to $8,500. There should have been more casing on the ground at that time, but the well should have been finished long before. That cable tools were not necessary, that practically all the oil fields in Texas were developed with rotary rigs.
Jeffries testified at this trial that since this lawsuit began a well in the same creek has been drilled about eight or nine miles further up, in the same character of soil, which at first caved in considerably the first 300 or 400 feet, which was actually drilled over 2,500 feet from the 1st day of June until the 1st day of September, having been shut down 14 days.
Appellee offered no evidence at any former trial with reference to the unusual formation, on the question of the slow progress of the well, in answer to appellants' contention. *Page 184 
Baily testified for the first time on this trial in denial of Crow's testimony that the company paid $1,500 for labor in drilling. Crow and Gruver testified at former trials as to the various items spent in drilling this well, among which was $1,500 allowed Lane for payments to drillers. Baily denied this and affirmed he had a contract to drill this well and that he paid every cent of the labor bills himself.
At former trials it was claimed the company was drilling the well in 1921, when the second 800 feet was put down. Baily testified at this trial that he had a contract to drill the well, and Gruver agreed to do the drilling for Baily, and that to his knowledge the company never paid 5 cents for drilling expenses on the second 800 feet; that the company provided no money for drilling after January 1, 1921.
At former trials complaint was made that the company was embarrassed financially because Baily checked out some $24,000 or $25,000 in the latter part of 1920. At this trial Baily testified he had authority to check this out; that the amount of the check was $20,500; that he and his brother were drilling the well by contract and they drew this check because they had never drawn any money on their contract. On this trial Crow modified his testimony and admitted that Baily had the right, but did not think Baily should have arbitrarily fixed the amount due him.
At former trials it was contended that Baily refused to come down and testify. This Baily denied, and said he told them always that he was ready to come. Baily testified on this trial, never testified to before, and produced a telegram to bear it out, which Crow testified he wrote in May, 1921, that the assignment of the unsold portion of the lease to Lane's wife was a forgery.
The testimony shows that the acknowledgment of Baily was taken before Dene Taylor and that she is now in Tulsa, but neither Crow nor Baily ever asked her about having made what Baily testified and what Crow wired to be a forged acknowledgment.
It was proven at this trial for the first time that the appellant corporation had its charter forfeited in 1923; that the statutes of Oklahoma, under which the corporation was organized, require the keeper of books to show its business transactions. The evidence here shows that the only book or record which can or will be produced is a loose-leaf minute book; that at the time the guaranty clause was written the ones acting for the corporation had already drafted their form of lease assignment which imposed no obligation upon their lessees or assignees and had contracted with salesmen to conduct lease assignments. After that had been done the guaranty clause was written into the contract, showing, as appellee contends, that at the time the guaranty clause was written there was no intention on the part of the corporation to respect the contract, and we find ourselves reaching the same conclusion. The minute book shows that the $10,000 note signed by the corporation and indorsed by the stockholders is not an obligation of the company at all, but was for money loaned for the payment of their stock; whereas, on all former trials Gruver testified that it was an obligation of the company on which suit was brought before appellee filed this suit. On this trial Gruver testified he had always thought that it was a loan of the company, but, having been shown the minute book, stated that he did not believe it to be an obligation of the corporation.
On this trial a subpœna duces tecum was issued for the original report of the Geologist, in response to which Crow testined he was unable to find. This testimony is largely taken from the statement of the evidence made in appellants' brief, pages 13-72, where the pages of the statement of facts refer to the testimony.
The procurers of the lease were found by the jury not to be experienced oil men, and did not have the resources which they represented they had to develop the 53,000 acres of land in good faith, and that they did not have the financial backing, but were securing the lease fraudulently, against appellee's insistence, to develop only one well as a basis to sell leases, or to "do a lease peddling business" to secure money by the sale of leases, rather than to bring wells in on the land that it might be developed as an oil-producing field. They asserted that they represented a strong financial corporation which they did not, but undertook to organize one so that they could exploit and sell stock or oil leases for their sole benefit. The corporation as organized was wholly insolvent; it owned no substantial assets by which the obligation to appellee could be carried out. After selling leases which became unprofitable they abandoned further drilling, and the officers took all the money on hand. It therefore became defunct and unable to proceed further. The corporation operated under an Oklahoma charter and it was forfeited by that state, leaving no assets or successor to carry out its obligations.
There cannot be any dispute that appellee was unwilling to lease the land unless the appellants would do so in good faith and were financially able to do so. A limitation was attempted to be placed on the sale of leases indiscriminately. Mr. Coyly testified that Mr. Lane said he was backed by parties who had sold their Oklahoma interest for $34,000,000 and would develop the land and would not peddle leases to secure capital, for they did not have to do it, as they had sufficient capital for that purpose.
Appellee testified:
"Mr. Lane said that they were not under the necessity of selling or peddling leases and *Page 185 
would not do so. My objection to the peddling of leases was that I had seen the effect of the peddling of leases. I told him that I would not lease to anybody that intended to peddle, and he said that they did not intend to do that. He impressed me favorably and I believed what he said.
"I did not care what the names of these successful oil developers were that were trying to get a lease on my land, because I wanted to be assured, and he (Lane) did assure me, that there was sufficient capital to develop the land without selling leases; that is, peddling leases. Mr. Gruver, nor Mr. Baily, nor Mr. Crow, ever discussed with me on any of their visits here before this suit was filed what their intentions were when they took the lease with reference to how they were going to get money to drill with if they drilled. They never had any discussion with me of that kind.
"I would not have leased to any one except with sufficient capital to develop the land. Before signing any lease whatever I had stated to him (Lane) that I would not sign any lease to anybody except those financially able to develop the property with their own resources and who would not sell leases or peddle leases to those who did not intend to develop and were not financially able to develop. I emphatically would not have signed any papers to Mr. Lane to place in his hands and go off and solicit promoters for a corporation to acquire my land out there."
The testimony is full and satisfactory to show that appellee leased the property to appellants in pursuance with the belief and upon the fraudulent representations made to him upon which he relied that the parties had sufficient capital to develop the land for oil and would do it and not peddle leases. Authority was given to assign leases, but the lease contract so assigned obligated "its assigns (to) the full and faithful compliance of all the covenants and obligations imposed on the original lessee herein." This assignment, therefore, by direct terms bound and obligated the appellants to specifically perform all the agreements of the assignees, whatever they were, either express or implied. They took the lease contract cum onere.
This is a fraud case and violates the rule established by the Legislature that protects parties against fraud. That law says:
"Actionable fraud in this state with regard to transactions in real estate * * * shall consist of either a false representation of a past or existing material fact, or false promise to do some act in the future which is made as a material inducement to another party to enter into a contract and but for which promise said party would not have entered into said contract, provided however that whenever a promise thus made has not been complied with by the party making it within reasonable time, it shall be presumed that it was falsely and fraudulently made, and the burden shall be on the party making it to show that it was made in good faith but was prevented from complying therewith by the act of God, the public enemy or by some equitable reason." Article 3973a, Vernon's 1922 Statutes, Act 1919.
Appellants have not disproved the allegations of fraud nor satisfied "the presumption that it was falsely and fraudulently made." The verdict of the jury established their fraud.
Promises made without intention of fulfillment in order to induce a contract are as culpable and as harmful and as willful as misstatements of existing facts. The lessor had the right to contract that subleases of his land should not be peddled about and sold indiscriminately, and patched over with leases like a shingle roofed house. Subleasing is not favored by law. It cannot be done without the consent of the lessor. Article 5237, R.S. of 1925. Such proof does not vary the terms of a written contract, but is a consideration for the leasing, and such testimony is material to establish that a written contract, otherwise fair on its face, was procured by fraud, and voidable. Thompson v. Sawyers, 111 Tex. 374, 234 S.W. 874, 875; Collum v. Sanger, 98 Tex. 162,82 S.W. 459, 83 S.W. 184.
The jury found there was fraud, and hence appellants' defense of estoppel was not sustained by the facts. All the stock of the Rio Grande Oil  Gas Company was issued to Baily, Gruver, Crow, and Lane, and they have each by their pleadings expressly disclaimed all "title to or interest in the land or lease or other matters in controversy in this suit, other than as a stockholder." They were the only stockholders and directors. Appellants themselves show that the corporation has had no money since January 1, 1921, and has not paid 5 cents for the drilling which was done subsequent to that date.
As aptly stated by appellee, which we approve:
"The evidence shows that the drilling was done by Gruver and he swears to have had no agreement with the corporation, nor with Crow or Baily. Crow and Baily swore that the drilling was done for the corporation because of an agreement between Baily and Gruver, to which Crow was not a party. It would be legally impossible for any such agreement to have been made in behalf of the corporation. Gruver was disqualified in acting as a director where he was contracting for himself, and that left only one director, Baily, to bind the corporation. That he could not do. No higher evidence could exist that this drilling was a personal matter of Gruver's, as he swore it was, than the fact that he has never been repaid one cent for this drilling, and they all swore that he has never presented any claim therefor. Upon Gruver's express pleadings he is claiming no rights except as a stockholder and he pleads no estoppel for his benefit individually.
"The testimony showed that the only asset the Rio Grande Oil  Gas Company has is this lawsuit; that it has no drilling tools or equipment, no money, and owes the appellant Gruver either $22,000 or $32,000 principal; and that the charter of the corporation was forfeited by the state of its creation on October 15, 1923.
"The only interest in the lease that the stockholders could have, if any, of a defunct *Page 186 
corporation, was that of individual stockholders, but they disclaimed any interest. It would be an anomalous judgment which should award against appellee and to the Rio Grande Oil  Gas Company, which does not exist, and which left at its demise no asset with which to perform its obligations, a lease upon 53,000 acres of land, which, under its terms, could only be held by the continued drilling of an oil well."
The pleading was sufficient to let in proof under the guaranty clause in the lease that the obligation of performance on the part of the subsequent lessees to good-faith development was so intended and understood. That was such a covenant that ran with the land and sufficient to bind the subsequent lessees. If it was ambiguous it was subject to proof. Hitson v. Gilman (Tex.Civ.App.) 220 S.W. 144; Pierce v. Allen (Tex.Civ.App.) 278 S.W. 455; Aycock v. Reliance Oil Co. (Tex.Civ.App.) 210 S.W. 848; First Nat. Bank v. Shaw (Tex.Civ.App.)260 S.W. 309; Newcomb v. Kloeblen, 39 L.R.A. (N. S.) 732; United States v. Bethlehem Steel Co., 205 U.S. 105, 27 S.Ct. 450, 51 L.Ed. p. 731.
It would be absurd to say where the contract requires a well to be begun within a certain time, and, not being pushed on with diligence, that a mere beginning of one well would satisfy the fulfillment of a contract for the development of oil wells in and upon a tract of 53,000 acres of land. Bear in mind, as stated, the construction of oil leases are in favor of the owner of the soil.
The jury was instructed to allow as offset for any damages which they might find $5,314, the amount of lease money which had been paid, and the value of the hole which had been drilled. Appellants paid 10 cents an acre for this lease. The evidence shows that they received some $35,000 or $40,000 off about 6,000 acres of this land for lease rentals. Bruni testified to familiarity with oil lease rentals paid during that time and that he had "never known of any lands going for less than 10 cents an acre." Appellee proved by Thomson that "wells are drilled in various sections of Texas, ranging from 1,300 to 2,000 feet deep, turnkey job, from $7,500 to $8,500, which includes derrick, pipe, and the complete well, equipped for pumping."
Effort was made to require appellants to produce their record, which they refused to do. If they refuse to produce records, and the jury allowed them a sum as an offset with much more than the naked hole drilled 1,600 feet, and has charged them the minimum price per acre for lease rentals, they certainly have nothing to complain of. Figuring this lease from February, 1919, to July, 1925, it will appear that the jury has allowed roughly $5,314 and $8,000 as credits and charged them at the rate of 10 cents an acre.
This court has never held that it is necessary to reform a contract in order to cancel it on the ground of fraud as claimed by appellants. Surety Co. v. Adams (Tex.Civ.App.) 278 S.W. 946. Reformation is only required in the enforcement of instruments; never for their destruction.
The appellants are in no position to complain at the court's charge on good faith, since they did not request one favorable to their view. Thompson v. Van Natta (Tex.Civ.App.) 277 S.W. 711. The charge given by the court on good faith is in consonance with the one approved in Street v. Masterson (Tex.Civ.App.) 277 S.W. 407.
I cannot agree that the court should have held the parties to the sole issue of good faith by drilling one well as a full compliance therewith, or given a charge to the jury to the same effect as to good faith in drilling one well.
Under the circumstances and under the facts developed it would be doing a useless thing to reverse and remand this case for another trial. Obviously there would be no lessee to finish the well started, much less to develop the 53,000 acres of supposed oil land. Where would this leave appellee? Consequently there is no lessee, the corporation is dead, and there is no survivor to carry out its obligations. To remand this case, therefore, would be to do an irreparable wrong to appellee. This feature was not in the other cases; it is a new disclosure rendering a reversal futile. It must follow, therefore, "as night follows the day," that to reverse and render is likewise an error; a fundamental error besides. The corporation has no legal existence. Corsicana Transit Co. v. Walton (Tex.Civ.App.) 189 S.W. 307; Id. (Tex.Com.App.) 222 S.W. 979.
My associate has written fully and said much by way of amplification, and given his conclusions and deductions from the testimony, in conflict with the jury's findings, but that duty already had been performed by the jury, whose function, only, was to pass upon, make the findings, and reconcile the testimony. Having performed that function, no mere conclusion of the court from the same testimony should be permitted to set aside the jury's findings and verdict. That is no function of an appellate court. This rule is too well settled to need the citation of authorities, since there is ample testimony shown to support the jury's findings. It is the duty of appellate courts to affirm judgments when possible to do so; not to render.
The Supreme Court has again approved a very recent opinion written by the distinguished Justice Speer for the Commission of Appeals, in the case of W. T. Waggoner Estate v. Sigler Oil Co., 284 S.W. 921. That opinion is so decisive of the similar questions of fact and law involved in this case as to really render further discussion of the subject unnecessary. It is on "all fours with it."
The prominent error, or at least one of them, shown in the opinion of the majority of this court, is in treating the facts and contending there was no actionable fraud, *Page 187 
but leaving fraud out of the case entirely. There are sufficient facts showing bad faith, misrepresentations, and fraud; therefore the finding of the jury on that question must not be set aside. The case of Waggoner Estate v. Sigler Oil Co., supra, is a splendid illustration of the right to forfeit an oil lease contract under reasons similar to the facts here developed, which primarily contemplated procuring the lease on the basis of fraud and bad faith, never intending to develop the lands for oil, but to sell it out to others and secure money in that way. A more easy and less expensive money making scheme than boring for oil. I quote from the syllabus of that opinion:
"In lease of land solely for mining and operation for oil, and chiefly in consideration of royalties, lessee has a determinable fee, ending, and authorizing cancellation, on breach of implied covenant for reasonable diligence in development, though there be no complete abandonment."
It is apparent, therefore, that there is no ground or good reason shown that will require this case to be reversed and rendered, but, on the contrary, it should be affirmed. I therefore file this as my dissent.