Humble Oil & Refining Co. v. Lewis 245 La. 499, 159 So. 2d 132

FOURNET, Chief Justice.

We granted a writ of certiorari on the petition of Pierson Lewis in order to review the judgment of the Court of Appeal, *502Third Circuit, reversing the judgment of the trial court rendered in his favor, in a concursus proceeding instituted by Humble Oil & Refining Company making Lewis and his estranged wife, Mrs. Janice Butler Lewis, parties defendant, to determine the ownership of $2,505.25 in its possession representing the purchase price of a one-half of interests in oil due pursuant to an assigned royalty interest to Lewis. See, La.App., 150 So.2d 796.

The facts reveal that sometime during June, 1959, E. W. Marks employed the services of Lewis, an oil and gas lease broker, to acquire a seventy-five per cent working interest in approximately 203 acres located in what is known as the Bosco Oil Field in Acadia Parish, and as consideration for such services, Lewis was to receive a three per cent overriding royalty. The leases were acquired and in August, 1959, were delivered to Marks, who on October 26, 1959, executed an instrument assigning the override to Lewis. The document was given to John Maxwell, Marks’ attorney, with instructions that it would be delivered to Lewis after it was determined that the leases acquired for Marks by him actually consisted of a seventy-five per cent working interest and titles thereto were merchantable.

On November 29, 1959, Maxwell, having received notice from Lucius F. Suthon, a member of the law firm of Jones, Walker, Waechter, Poitevent, Carrere and Denegre of New Orleans, who had been employed by the Merchants National Bank of Mobile, Alabama, to examine the titles to these properties, which together with other properties, were being pledged as security for a loan of $300,000 to Marks, certifying that Marks had acquired a seventy-five per cent working interest in the Bosco area and the titles thereto were merchantable, turned over the assignment to Lewis on that same day, which he recorded in Acadia Parish on December 1, 1959. In the meantime, on November 12, 1959, Lewis had secured a judgment decreeing a separation from bed and board from his wife.

Mrs. Lewis contends the document of October 26th was given in payment for services rendered during the existence of the community and therefore forms a part thereof under the express provisions of the Revised Civil Code.1

*504'On the other hand, it is Lewis’ contention, in which he was upheld by the district court, that title to these royalties did not pass until the document was delivered to him on November 29, 1959, at which time the community which formerly existed had been dissolved, therefore, the royalties became his separate property, citing Wampler v. Wampler, 239 La. 315, 118 So.2d 423.

'According to the facts of that case, M. R. Corley, who had secured the signatures of 8 of the 18 owners of property to an oil and gas lease affecting same, executed an assignment thereof in July of 1952 to Wampler' Brothers, a partnership composed of Floyd Wampler and the defendant, Charles Wampler, for the recited consideration of $1,000. This incomplete lease, its assignment, and the recited consideration of $1,000 were all deposited in escrow with á Mr. David, an attorney of Shreveport, with the stipulation that he would pay the $1,000 to Corley only after Corley had obtained the signatures of the remaining ten owners of the property to this lease, and the attorney had .found the title thereto to be a good and merchantable one, the assignment, at that time, to be delivered to Wampler Brothers and the cash consideration to be paid to Corley. On July 23, 1952, the last lessor had signed the oil and gas lease, but the title was not approved by Mr. David until September 23, 1952. In the meanwhile, on August 15, 1952, the defendant, Charles Wampler, was divorced from his wife.

In holding the assignment in the Wampler case did not form a part of the community of acquets and gains formerly existing between Charles Wampler and his wife, this court relied on Article 2043 of the Revised Civil Code, declaring its provisions “parallel the general law of escrow” and were consonant with Article 2471 of the code, which provides thát “A sale, made with a suspensive condition, does not trans-fer the property to the buyer, until the fulfillment of the condition,” and concluded that these conditions (the delivery of the assignment and the payment theréfor were not to be made until the remaining 10 signatures to the lease had been secured and the title thereto approved by the attorney) suspended the assignment, which was neither binding nor enforceable by or on either party until they had been fulfilled.

The Court of Appeal, in a well considered opinion, reversed the trial court, noting the obvious factual difference between the *506Wampler case and the one now under consideration. In its opinion it was pointed out that “In the Wampler case * * * a suspensive condition existed, because the obligation was not to take effect until the consideration had been paid and a valid title had been delivered, neither of which events occurred until after the divorce had been rendered. In the instant suit, however, we think the obligation took effect when the assignment was executed on October 26, 1959, because both parties had performed all obligations which they had assumed ; and that any conditions which may have existed after that date were resolutory in nature, that is, the assignment was liable to be defeated if it should be later determined that Lewis had not actually delivered a 75 per cent working interest in the leases. * * * ”

We think the foregoing pronouncement of the Court of Appeal is a proper evaluation of the status in law of the obligations involved in the two cases, and their effect. From a reading of the opinion in the Wampler case it is obvious that the decision rested primarily on the first portion of the first paragraph of Article 2043 of the Revised Civil Code, as reflected by the emphasis in the opinion as follows:

“The obligation contracted on a suspensive condition, is that which depends, either on a future and uncertain event, or on an event which has actually taken place, without its being yet known to the parties.

“In the former case, the obligation can not be executed till after the event; in the latter, the obligation has its effect from the day on which it was contracted, but it can not be enforced until the event be known.”

Clearly the factual situation in the instant case brings it squarely within the provisions of the latter portion of the first paragraph of Article 2043, which declares that “The obligation contracted * * * depends * * * on an event which has actually taken place, without its being yet known to the parties,” for Lewis had acquired the leases and transferred them to Marks, as agreed, and Marks had, in payment thereof, on October 26, 1959, executed the assignment of an overriding royalty interest therein, leaving for determination whether the leases delivered by Lewis actually consisted of a 75% working interest. Once it was determined that Lewis had acquired this 75% working interest, the assignment made by Marks, under the plain provisions of the article, had “its effect from the day on which it was” executed, i. e., October 26, 1959, prior to November 12, 1959, on which day Lewis had secured a legal separation from his wife.

It necessarily follows, therefore, that the Court of Appeal properly adjudged the amount deposited in the registry of the court by the Humble Oil & Refining Company ($2,505.25) was the property of the defendant, Mrs. Lewis, Mr. Lewis having *508been previously .paid his half interest, which is not in contest here.

For the reasons assigned, the judgment of the Court of Appeal for the Third Circuit is affirmed.

HAMITER, J., concurs in the result.

McCALEB, J., dissents with written reasons.

SUMMERS, J., dissents.

McCALEB, Judge

(dissenting).

This case is on all fours with Wampler v. Wampler, 239 La. 315, 118 So.2d 423 and the district judge and the dissenting judge of the Court of Appeal were correct in concluding that the Wampler matter should control the decision herein.

The majority view of this Court adopts, in essence, the reasoning of the prevailing opinion of the Court of Appeal, which attempts to distinguish this case on its facts from Wampler v. Wampler. But, in my judgment, the asserted differentiation is tenuous, being founded on an erroneous conclusion of fact and a misapplication of the law. Let me demonstrate.

The substance of the Court of Appeal’s deduction that the Wampler case is distinguishable from the instant matter is that, there, Wampler had not paid Corley for the assignment because Corley had not yet delivered a merchantable title at the time the divorce was granted whereas, here, “ * * * Lewis had obtained and delivered to Marks all of the leases which he had agreed to obtain, and Marks in turn had executed the assignment of an overriding interest in favor of Lewis, which constituted the consideration he had agreed to pay Lewis for these leases. Neither party was obligated to do anything further, * * * (Italics mine.) See 150 So.2d p. 799.

I submit that the above quoted statement shows that the Court has misconceived the facts of the case.1 For it is not true that Lewis had done everything required of him by the agreement at the time he delivered to Marks all the leases which he had agreed to secure. On the contrary, while he had delivered a title purporting to assign the seventy-five percent working interest, it was not known at that time that said title was legally or factually merchantable. Implicit in the agreement between Marks and Lewis was the understanding that the mentioned working interest in the mineral leases Lewis was to secure for Marks would be evidenced by a merchantable title and payment of the recompense which Lewis was to receive from Marks for his services (the as*510signment of an overriding royalty interest in the leases) was conditioned on the happening of an event, i. e., — approval by Marks’ attorney of the legality and merchantability of the titles obtained by Lewis. So, when Lewis delivered the promised working interest in the leases, he had not yet fulfilled his obligation; the contract was still executory and Marks was not liable thereon until he was afforded a reasonable time to have the title to the property examined. This was the very reason for placing in escrow the instrument conveying the three percent overriding royalty to Lewis.

To conclude, then, that title to this royalty passed to Lewis (and this is necessary for the result reached herein), when Marks executed the royalty instrument and delivered it to his attorney with instructions to turn it over to Lewis when and if the lease title secured by Lewis was merchantable, is not only opposed to the intent clearly manifested by the parties to the contract but is, in my opinion, at odds with our codal law on conditional obligations (see Articles 2021 through 2047 of the Civil Code) and the prior jurisprudence. If title passes to the creditor without delivery when an instrument is placed in the hands of a third person then, indeed, escrows are of little or no efficacy in Louisiana. But, legally and factually, title did not pass in the instant case for it is manifest that Lewis could not have lawfully alienated the royalty interest, an incorporeal immovable, while the instrument evidencing it remained in the possession of Mr. Maxwell. This is because delivery of title to immovables is essential to a transfer or assignment (see Article 2479 of the Civil Code) and until Mr. Maxwell turned over the royalty interest to Lewis in compliance with the escrow agreement the latter did not become the owner thereof. Suppose the consideration for Lewis’ services had been currency — would Lewis have become the owner of the currency before Mr. Maxwell delivered it to him ? I think not.

It is also to be noted that the Court of Appeal’s conclusion — that the escrow agreement in this case, unlike that in the Wampler case, depended for its execution on a resolutory and not a suspensive condition — is stated by the majority opinion herein to be “ * * * a proper evaluation of the status in law of the obligations involved in the two cases, and their effect.” I, however, submit that the Court of Appeal again faultily reasons that the condition of the escrow was resolutory “ * * * because both parties had performed all obligations which they had assumed * * * Aside from the fact, as I have above pointed out, that Lewis had not yet tendered a title which was then known to be merchantable, it is clear that Marks’ execution of the overriding royalty assignment did *512•not vest ownership in Lewis at that time because the assignment was not delivered to Lewis but, instead, put in escrow to be held until the leases obtained by Lewis could be examined and determined to be merchantable. This was a condition, mutually agreeable to both parties, which depended for its fulfillment on a future event, i. e., determination by the purchaser’s agent, Marks’ attorney, that the leases were merchantable. This is patently a suspensive condition, which is defined by Article 2043 of the Civil Code, inter alia, as one depending on a future and uncertain event.

An escrow agreement is the antithesis of a resolutory or dissolving condition which, as defined by Article 2045 of the Civil Code, operates a revocation of the obligation when accomplished. The Article further states “It does not suspend the execution of the obligation (as in the case of an escrow) ; it only obliges the creditor to restore what he has received, in case the event provided for in the condition takes place.” (Clause in parenthesis mine.)

By Article 2046 of the Code “A resolutory condition is implied in all commutative contracts, to take effect, in case either of the parties do not comply with his engagements; in this case the contract is not dissolved of right; the party complaining of a breach of the contract may either sue for its dissolution with damages, or, if the circumstances of the case permit, demand a specific performance.”

Thus, in the case at bar if Marks, instead of placing the royalty assignment in escrow, had delivered it to Lewis and it had been subsequently ascertained that the mineral lease titles secured by Lewis were not merchantable, a resolutory condition would have been present and Marks could sue for a cancellation of the royalty assignment. But, to repeat, Marks did not deliver the royalty assignment to Lewis prior to the date of the judgment of separation but placed it in escrow and it was not delivered until after the judgment was rendered.

Finally, it appears that, albeit this Court quotes with approval the finding of the Court of Appeal that the condition under which the overriding royalty deed was placed in escrow on October 26, 1959 was resolutory and not suspensive, the majority nevertheless concludes that the escrow agreement was dependent for its fulfillment on a suspensive condition of a different sort from the one presented in the Wampler case.

For my part, I fail to perceive the factual difference between the cases for in each case the deed was placed in the hands of the attorney for Wampler and Marks to be held in escrow until the attorney could examine the title to the leases which had been *514tendered and determine that said title was legally merchantable.2

In addition, I believe the majority opinion is clearly erroneous in its holding that Marks’ obligation herein was contracted on an event which had actually taken place without its yet being known to the parties and, therefore, such obligation, i. e., the overriding royalty deed, had effect from the day on which it was executed (October 26, 1959) in accordance with the last clause of Article 2043 of the Civil Code. The theory of this resolution is and must be that the condition for the giving of the overriding royalty deed went into effect immediately on its execution because it was later ascertained by Marks’ attorney that the titles to the oil leases delivered by Lewis were legally merchantable.

The flaw in this deduction, so it seems to me, is that it assimilates the fact that Lewis had obtained a merchantable' title to “an event” which had actually taken place without it being yet known to the parties, as provided by the Civil Code. But the fact that the title that Lewis secured was merchantable was not the event on which the escrow agreement was founded. On .the contrary, the future event on which the placing in escrow of the royalty deed was conditioned was the ascertainment by Marks’ attorney that the titles to the oil leases were merchantable for the parties agreed that said attorney was not to deliver the royalty deed to Lewis until the happening of that future event.

Article 2043 of the Civil Code, insofar as it treats of agreements dependent on an event which has actually taken place, is merely declaring that such an agreement is not dependent on a suspensive condition.3 The suspensive condition in this *516case, however, while primarily contingent upon Lewis’ procurement of a good title to the leases, was ultimately dependent for its fulfillment upon a future event, i. e., approval by Marks’ attorney that the titles delivered were merchantable.

I respectfully dissent.