Court Opinion

ID: 9668810
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:27:39.107648+00
Date Added: 2024-06-11T18:15:48.698381
License: Public Domain

ON REHEARING
HAMITER, Justice.
A rehearing was granted in this case :so that we might reconsider our holding (on an exception of no cause of action) that the plaintiffs had stated a cause of action in their demand for the recovery ■of profits derived from the purchase and .sale of a certain oil and gas lease.
The facts, as set forth in the opinion of the Court of Appeal (146 So.2d 176, 195) when certifying the legal questions involved, are as follows: “Under the allegations of the petition of plaintiffs Hayes and Knox, they and the defendant Muller entered into an oral agreement of joint adventure, pursuant to which each co-adventurer advanced twenty thousand dollars to he used for the purchase of royalties and leases in a certain area in Acadia Parish. Pursuant to this agreement, the defendant Muller obtained the Sweeney mineral lease affecting certain property in Acadia Parish, which lease was obtained by Muller in his own name only.
“Six years later Muller sold this Sweeney lease for nine hundred thousand dollars to ■ the Louisiana Gas Corporation.
“By this suit, the plaintiffs pray for judgment and their share of the profits realized from the sale of the Sweeney lease, or in the alternative that the defendant be ordered to make an accounting to them of all profits derived from the joint adventure, including those derived from the sale of the Sweeney lease.” (Italics ours)
The basic legal question, as certified to us by the Court of Appeal, is this: “Where Co-adventurers Muller, Hayes, and Knox enter into an oral agreement of joint adventure for each to contribute an equal sum to purchase oil leases and royalties, and pursuant thereto an oil and gas lease is obtained in Co-adventurer Muller’s name only and Muller subsequently sells this lease to a third person at a profit, are Hayes and Knox permitted to use parol evidence to prove their original agreement so as to establish their right to recover their share of profits in a suit for money judgment against Muller, wherein no claim is made-against the title held by the third person?”
It is our opinion now that we were in error in holding originally that plaintiffs had stated a cause of action for an accounting of the profits realized from the alleged joint adventure.
At the outset it is clear that in-demanding shares of the profits the plaintiffs must *376prove the existence of a contract between them and the defendant to purchase the mineral lease for the benefit of all three. Too, admittedly, the only available evidence here (in proof of such agreement) is verbal.
LRS 9:1105 states: “Oil, gas, and other mineral leases, and contracts applying to and affecting these leases or the right to reduce oil, gas, or other minerals to possession, together with the rights, privileges, and obligations resulting therefrom, are classified as real rights and incorporeal immovable property. They may be asserted, protected, and defended in the same manner as may be the ownership or possession of other immovable property by the holder of these rights, without the concurrence, joinder, or consent of the landowner, and without impairment of rights of warranty, in any action or by any procedure available to the owner of immovable property or land. This Section shall be considered as substantive as well as procedural so that the owners of oil, gas and other mineral leases and contracts within the purpose of this Section shall have the benefit of all laws relating to the owners of real rights in immovable property or real estate * * * ” (Italics ours)
And in Ingolia v. Lobrano, 244 La. 241, 152 So.2d 7, we held recently, with, reference to such statute, that “ * * * applicable to the mineral leases and contracts is the same requirement of written testimonial proof that governs the transfer of immovable property.” In other words the parol evidence rule applies to transactions involving mineral leases, just as it does to those affecting real estate.
It is the contention of these plaintiffs that the parol evidence rule is not applicable, since title to the lease will not be affected (it having been transferred to Louisiana Gas Corporation); that they are merely seeking to recover profits derived from Muller’s sale. Their claim to such profits, by the explicit allegation .of their petition, rests on a verbal agreement that the property would be bought and sold for their benefit; and that the defendant, in a breach of this agreement, handled the lease in his name and is retaining the profits derived therefrom.
The important question then is: Can the plaintiffs show such an agreement by parol? We think not. The parol evidence rule has been applied by this court not only in cases involving contracts which directly affect title to realty but also in others where the litigants merely sought to derive benefits growing out of verbal agreements relating to the sales of immovable property.
Thus, in the early case of Patterson v. Bloss et al., 4 La. 374, the plaintiff alleged a verbal agreement under which he was to sell to the defendants certain property, with *378respect to which they refused to- take title. He did not seek specific performance. Rather, he sought damages for the failure to comply with the contract. The court, in rejecting parol evidence to show the agreement, said: “He who claims damages for the inexecution of a contract, must prove that it was actually entered into, in the same manner as if it required the specific performance of it.” From which holding it would logically follow that he who seeks an accounting of profits growing out of a joint adventure agreement respecting the purchase and sale of a mineral lease must prove by written evidence that the contract was actually entered into “in the same manner as if it required specific performance of it.” In this connection it is conceded that, in the instant case, the parol evidence rule would have prevented plaintiffs from enforcing the agreement to assign to them their proportionate interests' in the lease if it were still in the defendant’s name.
Whether it is permissible to prove a verbal contract such as is sought to be enforced here rests on the same principles enunciated in the early cases of the jurisprudence which have been consistently adhered to. In those cases we held that a' plaintiff cannot show an oral agreement to purchase property for him, and enforce the contract when it has been fraudulently violated (by acquisition in defendant’s name), despite the argument made therein that the evidence did not constitute an attack on the title of the defendant but was merely an attempt to profit from and through such title. See Hackenburg v. Gartskamp, 30 La.Ann. 898, Perrault v. Perrault et al., 32 La.Ann. 635, Hanby v. Texas Company, 140 La. 189, 72 So. 933, Scurto v. LaBlanc, 191 La. 136, 184 So. 567. Moreover, so zealous has the court been to guard against any deviation from this rule that it has held that even forced heirs (whose rights are usually safeguarded at the expense of other established rules) are denied the right to prove such an agreement by parol even though it interferes with their legitime. See Eberle et al. v. Eberle, 161 La. 313, 108 So.2d 549.
In Prescott et al. v. Prescott et al., 170 La. 233, 127 So. 611, the court had before it for consideration the almost identical issue presented here, and we think that the case is controlling of this controversy. Therein, the plaintiffs attempted to show by parol that one of the defendants (a brother) had acquired certain property in his own name, but that in doing so he was acting as the agent of the mother and used money which had been entrusted to him to invest for her. Prior to his mother’s death such defendant had sold the property and retained all of the funds derived from the sale. By their action plaintiffs (as heirs of their mother) sought to obtain an accounting of the revenues of such property received by that defendant while it was still *380in his name and to obtain their share of the sale price which had been paid to him. The court (in sustaining an exception of no cause of action) held that since plaintiffs were debarred by the parol evidence rule from showing title in their mother (rather than in the defendant) they could not be heard to demand an accounting of either the revenues of the property or any part of the proceeds derived from the sale thereof.
The plaintiffs herein contend that a rehearing was granted in the Prescott case, and that in the opinion on rehearing the court changed its original decree so as to reserve to the plaintiffs their right to demand an accounting. To begin with, a rehearing was not granted. The so-called opinion on rehearing was in fact a per curiam on application for rehearing, the court noting therein that “with this explanation and declaration, the application is refused”. In the per curiam, also, the court observed that, in their application for a rehearing, the plaintiffs had urged that the ■decision would be res judicata as to other claims against the defendant growing out ■of the succession proceedings. (The brief on the application is explicit that these ■claims concerned agreements between the mother and son not relating to real estate, ■as well as to monies received by him from property standing in the name of the mother.) The court then .explained that such ■claims were not affected by its decree; father, affected was only the claim of the plaintiffs with reference to the property purchased with the mother’s funds by the defendant in his own name.
In examining the briefs in the record of the Prescott matter, supra, we find it interesting to note that the plaintiffs there made virtually the same argument as is presented here by these plaintiffs. Thus, they urged that the defendant had “manipulated the whole affair in a manner violative of his fiduciary tie so as to derive a personal profit from his mother’s business other than legitimate compensation”; that the cause of action “is in effect a demand upon defendant to account * * * for profits which he derived from.the tract carried in his own name”; that although the defendant contended that the demand was an attempt to vest title in the decedent by parol evidence, “to the contrary petitioners affirm the title in the present vendees, and merely seek to require the agent to account for undue profits”; and that “even though the title to real estate were in part incidentally involved, the agent cannot hide behind any such technical smoke screen to avoid the major duty of rendering an account, and surrendering to the estate any personal profits derived from the manipulation of his mother’s business.” This view of the plaintiffs’ cause of action was totally rejected by the court, on the basis that the proffered parol evidence was inadmissible, when denying them the relief sought. (Italics ours)
*382Again in Carter et al. v. Loeber et al., 177 La. 444, 148 So. 673, the court refused to allow parol evidence to show that property-purchased at a foreclosure sale in the name of one person inured to the benefit of another, such purchase allegedly having been made in violation of a fiduciary agreement, even though as an alternative demand the plaintiffs sought a money judgment only for the value of the property.
By virtue of the provisions of LRS 9:-1105, particularly since thereunder this defendant is entitled to the same advantages of the parol evidence rule as if the alleged joint adventure contract had dealt with real estate, the holdings and doctrine of the above discussed cases are equally applicable to the instant litigation.
To reach any result other than that heretofore announced would open the door to parol evidence in every case wherein a litigant seeks to recover only benefits flowing from the realty affected. As an illustration, suppose that this defendant still retained the title to the lease which had greatly increased in value. Could the plaintiffs, by a parol showing of the joint adventure, successfully make a demand for their shares of the increase — a demand that would not affect the title any more than one for their shares of the profits realized by a sale? Under plaintiffs’ theory they could. But under our jurisprudence and statutory law they could not.
The following observations, to which we subscribe, were offered by Judge Frugé in his dissenting opinion in this cause (146 So.2d 186, 193) when it was on the original hearing in the Court of Appeal: “Stripped of all its frills, plaintiffs’ contention that they are simply attempting to enforce a personal agreement for money is simply this r They would have this Court hold that SO' long as one retains title to a mineral lease he is protected by the parol evidence rule, but when he sells it, he loses that protection and is then subject to an accounting suit where the same parol evidence would be admitted because then only a claim for money would be involved. This would not only be bad law, but the absurdities of such a holding from a practical standpoint are obvious ; particularly would this be true with respect to mineral leases having highly fluctuating values. If that were the law, claimants under the ‘verbal agreement’ (particularly if they outnumber the record owner of the lease) would thereby be permitted to sit idly by while the true owner assumes all financial risks of maintaining the lease and then descend on him with a ‘preponderance’ of verbal testimony when he is fortunate enough to realize a profit from the sale of that contract. This is the very type of situation that the framers of the Louisiana. Civil Code wisely decided to forbid in the-interest of public policy.”
The cases principally relied on by us in our original opinion (Emerson v. Shirley *384et al., 188 La. 196, 175 So. 909, Warnock v. Roy, 217 La. 224, 46 So.2d 251, and Wampler v. Wampler, 239 La. 315, 118 So.2d 423), and on which the plaintiffs place much emphasis, are clearly distinguishable from the instant cause. In the Warnock case the agreement between the parties did not concern the buying and selling of a lease, or royalties payable under a lease, but rather a joint adventure to drill a well, under the terms of which the parties were to receive a proportion of the financial returns of the well. As the court pointed out an interest in the title to the well could not have been involved because neither of the parties owned the leasehold and neither was to actually drill the well. Moreover, the agreement was not proved by parol but by written correspondence.
In Wampler v. Wampler, supra, the plaintiff (the divorced wife of the defendant) was seeking to be recognized as a co-owner of a certain lease which, she claimed, had been been purchased by her husband prior to the dissolution of the marriage. The husband introduced parol evidence to show that the lease had not been confected until after the divorce. Clearly this was not an attempt by him to establish title by parol in someone who had never had title, nor was her objection thereto based on that theory. She objected to the evidence as tending to vary the terms of the written assignment of the lease. Our holding was that, since the suit was not on the assignment between the contracting parties but was a controversy between one of the parties (in whose favor the assignment operated) and a third party who was his privy, the parol evidence rule was inapplicable.
Emerson v. Shirley et al., supra, did not involve an attempt by a litigant to show title by parol in one who had never had it, or to afford him benefits flowing from an oral agreement to acquire a title for him, as is attempted in the instant case. Therein, the plaintiff had owned a record title to a fractional royalty interest. He sold that interest to a defendant co-owner. His cause of action was one to annul such sale on the ground of fraud and his being so intoxicated at the time he transferred his interest that he had a temporary derangement of the intellect which prevented his understanding of the nature of the transaction. Either one of these grounds for annulling a contract of sale has long been recognized as what might be considered an exception to the parol evidence rule relative to authentic acts. The cases involving such rule of law are thoroughly discussed in Scurto v. LeBlanc, supra.
As a basis for his allegations of fraud the plaintiff in the Emerson case argued that there existed between him and his vendee a fiduciary relationship to such an extent that the latter owed to him a duty (beyond that existing in the ordinary co-ownership ■relationship) to disclose pertinent facts about the property before purchasing his *386interest.. The sole purpose of the introduction- of the parol evidence was to show such fiduciary relationship and the resulting duty, and not that of enforcing an agreement so as to give him any benefits flowing therefrom.
We think that the above discussion suffices to distinguish Emerson v. Shirley, supra, and to show that it does not support the position of these plaintiffs. However, if we are in any way mistaken about that, we also point out that it was decided in 1937 — or long prior to the legislative enactment placing mineral leases on the same basis as realty insofar as the benefits of the parol evidence rule are concerned.
Consequently, we are of the opinion that plaintiffs cannot prove the alleged parol joint adventure agreement of the parties. And since they cannot show such contract, there is no basis for their demand for an accounting of profits received by the defendant.
For the reasons assigned the judgment of the district court, maintaining the exception of no cause of action and dismissing the suit, is reinstated and made the judgment of this court. All costs are to be paid by plaintiffs. The right to file an application for a rehearing is reserved to the latter.
SUMMERS, Justice (dissenting from judment and decree on rehearing).
The -real basis ,for- the opinion on- rehearing is that plaintiffs’ claim for an accounting for profits “rests on a verbal agreement that the property would be bought and sold for their benefit; and that the defendant, in a breach of this agreement, handled the lease in his name and is retaining the profits derived therefrom.” Hence, the opinion continues, “Can the plaintiffs 'show such an agreement by parol ? ” And the opinion concludes that such an agreement cannot be shown by parol.
What this opinion on rehearing fails to recognize is what plaintiffs have sought so carefully to stress in all of their arguments and briefs before this court. It is the fact that the plaintiffs have alleged, among other things, that the basis of the joint adventure contract was profits to be derived from the pooling of knowledge, know-how and capital in oil and gas royalty and leasing transactions. The acquisition of title in Muller’s name, or, as a matter of fact, in any other person’s name, was only incidental, collateral to and a means of accomplishing the main object of the joint adventure agreement which was the dividing of profits to be derived ultimately as a result of the pooling of their knowledge, know-how and capital. At the time when the parties entered into the agreement there was no meeting of minds on the acquisition of any particular lease or royalty rights. What the parties did clearly understand, however, is that *388the profits resulting from their endeavors would be equally divided.
In Byrd v. J. F. Meeks Lumber Co., Inc., 158 So. 701 (La.App.1935), parol evidence was admitted to prove a joint adventure (called a trust) when plaintiff was seeking an accounting from a transaction involving real estate and the court properly observed:
“The opinion rendered by us in this case shows that title to real estate came into play only incidentally to the demand against defendant for an accounting as her agent for money received which should have gone to her benefit in the transaction.
“If the principal could not establish by parol the obligation of the agent or fiduciary to account for money received for his benefit, because title to real estate happened to be involved, the agent would, as remarked by counsel for plaintiff in his brief, ‘have civil immunity to do whatever he pleased with his principal’s property and money in deals involving real estate.’ ”
It should be kept in mind that the plaintiffs’ petition does allege that there was an agreement to buy leases and transfer ownership therein to the parties to the joint adventure. And it must be conceded that these allegations are subject to the objections which defendant has advanced, insofar as any claim to an interest in those leases is concerned. Plaintiffs do not and cannot rely upon those allegations to sustain their cause of action. Rather, plaintiffs do rely and can rely upon the other allegations of their petition to the effect that they entered into a joint adventure agreement to seek profit from the combination of their knowledge, know-how and capital and they are entitled to an accounting from their co-adventurer on that basis insofar as it does not affect title to real estate. (See Ingersoll Corp. v. Rogers, 217 La. 79, 46 So.2d 45 (1950) from which it can be seen that if the petition does not state a cause of action in some respects it will not be subject to an exception of no cause of action, if it does, in fact, set forth a cause of action in other respects.)
It was my opinion originally — and nothing has been advanced in the first application for rehearing or in the opinion on rehearing to lessen that view — that this is a classic case to invoke the joint adventure doctrine if it exists in this State at all. If the joint adventure doctrine is a part of our law, it is so because it supplies a device to do equity when equity is clearly due. And that, in essence, is what is sought here — an accounting for breach of a fiduciary relationship which will have no effect on any title whatsoever. This is a question which the legislature has not governed by any enactment which has been brought to my attention. The field then is one in which equity should properly be invoked. LSA-Civil Code, art. 21.
*390Furthermore, it will not do to say that the joint adventure agreement is controlled by all of the rules and restraints applicable to partnerships, for if this is so there was no cause to bring the doctrine of joint adventure into our law in the first place.
On the basis of the allegations which are contained in plaintiffs’ petition, including fraud on defendant’s part, it is difficult to accept the conclusion that plaintiffs have no remedy under our law.
I adhere to the views expressed in the original opinion.