Court Opinion

ID: 9674971
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:38:12.642562+00
Date Added: 2024-06-11T12:14:43.593329
License: Public Domain

HECHT, Justice,
dissenting.
In 1934 a district court in Travis County declared that Fred Turner, Jr.’s oil and gas lease on behalf of the State of Texas was “valid and subsisting”. The gist of the State’s complaint in this case is that Turner violated his duty under the Relinquishment Act of 1919, ante at 64 n. 1, by arranging to acquire the benefit of part of the working interest in addition to his own royalty. If Turner did violate his duty, then the lease is not valid. Since the lease has been adjudicated valid, the State’s claim is barred by res judicata. I therefore dissent.
*69The material facts, all undisputed, are these. In 1930 Turner was deeded a 3.97-acre tract of land in the Yates Oil Field in Pecos County. Since the property was permanent school fund land, the State reserved ownership of the minerals. Leasing of the minerals appears to have been delayed by conflicting claims to the tract. In 1933 the State, concerned that the tract was being drained by wells on adjacent property, filed suit against Turner and others to quiet title to the tract and for appointment of a receiver to develop the minerals. The district court appointed a receiver and gave him exclusive possession and control of the tract with “complete power and authority to manage, control and develop the same.” The receiver solicited bids to develop the minerals and filed a report with the court. In their pleadings Turner and Fasken asked the court to approve a lease of the minerals between them. In 1934 the district court rendered judgment vesting title to the tract in Turner subject to the State’s reservation of minerals, amending and validating the Turner-Fasken lease, and discharging the receiver. The lease reserved a one-eighth royalty and called for payment of a $20,000 bonus, both of which were shared equally by the State and Turner. The lease expressly allowed the parties to assign their interests, and shortly after judgment was rendered, Turner assigned his royalty interest, and Fasken assigned a large part of the working interest, to Midland Producing Company in exchange for stock. Over the past 59 years Midland Producing Company and its successors have received more than $100 million from wells drilled on the Turner tract.
The Turner-Fasken lease is indisputably valid. The 1934 judgment establishes this, and any claim to the contrary would be barred by res judicata. The State not only acknowledges the authority of the 1934 judgment, it asserts that the Turner-Fasken lease is valid independent of the judgment and disavows any challenge to it. The State concedes not only that the lease was fair on its face and the royalty it received was all it was entitled to, but that the bonus per acre paid for the lease was the largest the State had ever obtained. The State did not seek part of the working interest and would not have accepted it because it did not want the risk of drilling a well. The State’s complaint is not that it received less than it was entitled to from the transaction, but that Turner and Fasken received more. The State’s claim is not for something it should have had, but for something it argues Turner and Fasken should not have had. The basis for this claim is that Turner breached his statutory duty to the State by obtaining for himself and his associates, through Midland Producing Company, the benefit of a portion of the working interest under the lease.
The State is correct in its contention that if Turner executed the lease to Fasken in order to obtain a portion of the working interest which was not to be shared with the State, then Turner exceeded his authority as the State’s agent under the Relinquishment Act. We faced a similar contention in State v. Standard, 414 S.W.2d 148 (Tex.1967), which involved a lease reserving to the surface owner an option to acquire a portion of the working interest. We held that the surface owner exceeded his authority because “the leasing power of the surface owner [under the Relinquishment Act] is limited to the execution of an oil and gas lease for bonus, rental and royalty considerations not less than the statutory minimum and consistent with prevailing values.” Id. at 153. We also held, however, that because the surface owner had exceeded his authority, the lease was invalid. In other words, when a surface owner arranges a lease to acquire a portion of the working interest not shared with the State, the lease is invalid. It therefore follows that a claim that a surface owner exceeded his authority is inconsistent with an adjudication that the lease is valid. If the surface owner exceeded his authority, the lease is invalid; if the lease is valid, the surface owner did not exceed his authority.
The rule in Standard bars the State’s action in this case. Although the State repeatedly affirms the validity of the Turner-Fasken lease, as a principal it is nevertheless permitted to complain of its agent’s conduct. The 1934 judgment, however, is res judicata of its complaints. If Turner had arranged to acquire some benefit from the working interest before the 1934 judgment was signed, *70then the lease would have been invalid. The judgment that the lease was “valid and subsisting” necessarily precludes the State’s subsequent claim that Turner exceeded his authority. After judgment was rendered and the lease validated, Standard indicates that Turner’s duty to the State ended, so that if he then arranged to acquire a benefit from the working interest he violated no duty to the State. The State’s somewhat implausible argument that Turner was under a perpetual duty never to obtain any benefit from the working interest conflicts with Standard.
The validity of the Turner-Fasken lease, adjudicated in 1934 and reaffirmed by the State in this case, completely precludes the State’s assertion that Turner exceeded his authority or breached his duty under the Relinquishment Act. Even if the State argued that Turner acted fraudulently, which it has not chosen to do in this Court, any action against Turner for his pre-judgment conduct is barred by res judicata, and after judgment was rendered Turner was no longer the State’s agent. This flaw in the State’s case is both irrefutable and fatal. It involves no genuine issues of material fact. The trial court was right in granting summary judgment against the State, and the court of appeals was right in affirming it. The Court’s sole response is that the State has raised sufficient fact issues regarding Turner’s actions to entitle it to a trial. Besides being unnecessary, a trial in this case is an especially heavy burden for all parties because of the passage of time, the death of most of the witnesses, and the impossibility of reconstructing events more than half a century old. This burden is occasioned simply by the Court’s refusal to meet the arguments raised.
The parties have raised many other issues. Defendants claim, among other things, that the duty Turner owed the State was not that of a fiduciary, that the appointment of a receiver in 1934 deprived him of any authority except to propose a lease for the trial court’s consideration, that there is no evidence that Turner breached whatever duty he had, and that there is no evidence that Turner’s successors acted in concert with him. Defendants also claim that the State ratified the Turner-Fasken lease transaction when the Attorney General’s office investigated it in the late 1960’s and found no actionable wrongdoing involved. In my view, it is not necessary to determine whether any of these arguments have merit.
Since I would affirm the judgment of the court of appeals, I dissent.
PHILLIPS, C.J., and. ENOCH, J., join in this dissenting opinion.