K.R. Daughtrey v. William Wallace Allred
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2008-CA-00826-COA
K.R. DAUGHTREY AND PAUL UPTON
APPELLANTS
v.
WILLIAM WALLACE ALLRED
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEYS FOR APPELLANTS:
ATTORNEY FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
APPELLEE
04/15/2008
HON. FRANKLIN C. MCKENZIE, JR.
JONES COUNTY CHANCERY COURT
JOHN D. SMALLWOOD
LARRY O. NORRIS
JAMES L. QUINN
CIVIL - CONTRACT
CONTRACT DEEMED ENFORCEABLE
AFFIRMED – 12/08/2009
BEFORE KING, C.J., IRVING AND CARLTON, JJ.
IRVING, J., FOR THE COURT:
¶1.
This appeal arises out of contracts between Kenneth R. Daughtrey, Paul Upton,
Charles Thomas Carden, and William Allred. In 1992, Allred approached Daughtrey and
Upton with an opportunity to purchase mineral rights from Amoco Corporation. Thereafter,
Upton and Daughtrey each purchased mineral rights and promised to convey, as a
commission, fifteen percent of those rights to Carden, after their expenses for the purchase
of the mineral rights had been recouped. Carden subsequently passed away, and Allred was
assigned Carden’s rights to the fifteen-percent interests. In 2003, Allred filed suit in the
Jones County Chancery Court against Daughtrey and Upton, seeking conveyance of the
fifteen-percent interests as well as damages for lost profits. The chancery court found in
favor of Allred, and ordered Daughtrey and Upton to convey their interests and pay Allred
$26,807, each, as damages. Feeling aggrieved by the chancery court’s judgment, Daughtrey
and Upton appeal, asserting that Allred lacked standing to file his complaint, that the court
erred in finding the contract enforceable, and that the court erred in finding that a ten-year
statute of limitations applied to Allred’s claim, rather than a three-year statute of limitations.
¶2.
Finding no reversible error, we affirm.
FACTS
¶3.
In 1992, Carden learned of an opportunity to purchase from Amoco around fifty-three
thousand acres of mineral rights, spread over numerous Mississippi counties. Carden and
Allred had been close friends and business associates for a number of years, and Carden
brought Allred into the Amoco deal. Allred in turn brought in Daughtrey, Upton, and two
other investors, each of whom agreed to convey fifteen percent of their mineral rights to
Carden as a commission for the Amoco deal. In total, thirteen investors purchased various
percentages of the Amoco mineral rights. Allred purchased 5.68% of the mineral rights for
almost seventy-five thousand dollars, and Daughtrey and Upton each received a 1.89%
ownership interest in the mineral rights for about twenty-five thousand dollars each.
Testimony indicated that there were transactional costs and expenses of approximately fifty
thousand dollars, of which Daughtrey and Upton each paid around a thousand dollars as their
pro rata share. Shortly after the purchase of the mineral rights, Daughtrey, Upton, and the
two other investors recruited by Allred each signed an agreement to convey fifteen percent
2
of their mineral rights to Carden as promised prior to being allowed to purchase a percentage
of the Amoco mineral rights. The fifteen percent was to be paid “at such time as [the]
investment had paid out.” 1 The agreement also stated that each investor “agrees to notify
C.T. Carden at such time as payout occurs and within thirty (30) days of payout[,] assign in
writing by recordable Assignment 15% of the interest acquired by [the investor] . . . .”
Testimony at trial indicated that Daughtrey and Upton expressed qualms about the
commission before finally signing the contracts.
¶4.
Carden passed away on September 12, 1995. On May 15, 1998, Jay Cuccia, Carden’s
stepson, was appointed and confirmed as administrator of Carden’s estate. Carden’s rights
to the fifteen-percent interests were assigned to Allred by Cuccia on February 28, 2000. The
assignment stated that “although the agreements were executed in favor of Carden, same was
done for the purpose of convenience only and were held in the name of Carden on behalf of
William Wallace Allred.” In September 1999, Daughtrey and Upton received the payout of
their investment in the mineral rights. Despite having contracted to do so, neither made any
effort to inform anyone that their investment had paid out.
¶5.
On February 27, 2003, Allred filed a complaint in the chancery court against Upton
and Daughtrey, asserting that they had breached contracts requiring them to transfer fifteen
percent of their mineral rights to Carden, and, subsequently, to Allred due to the assignment
of that right to Allred. The complaint also sought reimbursement for the profits on the
1
Payout was “deemed to [have] occur[ed] on the first day of the month following
recoupment by Investor of all expenditures made in connection with the purchase,
development and operation of the Amoco mineral interest.”
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fifteen-percent interests that Upton and Allred had each been receiving.
¶6.
Upton’s answer to Allred’s complaint was filed on April 8, 2003, while Daughtrey
filed his answer on April 10, 2003. In their answers, Upton and Daughtrey asserted three
affirmative defenses: (1) that the statute of limitations had run, (2) that Allred and Upton had
an attorney-client relationship that should have prevented Allred from filing the action, and
(3) that Allred’s dealings with them, combined with the lack of a disclosure agreement,
prohibited Allred’s action because he was “in violation of the Standards of the Code of
Ethics of Attorneys practicing in the State of Mississippi.” Both answers also stated that
Upton and Daughtrey had assigned their fifteen-percent interests to Carden only after being
assured by Allred that he had also assigned a portion of his interest to Carden.
¶7.
On May 2, 2003, Upton and Daughtrey filed separate motions requesting that their
cases be consolidated. The record reflects that little was done in the case from mid-2003
until early 2005, when Allred filed a motion requesting a trial setting and consolidation of
Upton’s and Daughtrey’s cases. On June 6, 2005, the chancery court consolidated the two
cases and set trial for November 9, 2005. Trial was delayed for a variety of reasons,
including Hurricane Katrina.
In August 2006, the chancery court entered an order
bifurcating the trial “as to liability and damages.” Trial was ultimately held in September
2006.
¶8.
Cuccia was the first witness to testify at trial. He testified that he had worked with
Carden in the oil and gas industry for many years. He explained that Carden and Allred had
been close friends who also conducted business together; he indicated that his stepfather and
Allred “probably talked close to daily . . . .” Cuccia indicated that Carden and Allred trusted
4
each other enough that many of their business deals were conducted verbally: “We were not
worried about it if we sent a check to Wallace Allred for fifty thousand dollars, you know.
It wasn’t like I had to follow up and say, oh, where is this deed, you know. Like, you know,
you knew it was coming.”
¶9.
Allred testified next. Like Cuccia, Allred testified about his close friendship with
Carden. Allred explained that he had attempted to teach Daughtrey about the oil and gas
business after Daughtrey approached him wanting to enter the market. Allred testified that
he brought Upton into the Amoco deal because he and Upton had been very good friends for
many years. Allred explained that, in the oil and gas business, it was not unusual to “pay for
100 percent and get 75 percent,” to, in other words, forfeit twenty-five percent of the mineral
rights as a commission. Allred testified that, because he was friends with Upton, Daughtrey,
and the other investors, he and Carden decided to charge only fifteen percent as a
commission, and to make the commission payable only once the investors had recouped their
initial outlay. The court asked Allred what “payout” meant in the oil and gas industry, and
Allred explained: “In the industry, payout is that time and point at which the investor has
received in income or sufficient income to cover his cost of drilling . . . . [I]t’s that point in
time at which the participant has received sufficient income to cover the cost of buying it and
managing it . . . .” Allred admitted that he should have informed Upton, Daughtrey, and the
other investors after he and Carden decided that Allred would receive the fifteen-percent
interests rather than Carden. However, Allred indicated that Carden did not initially decide
that Allred would receive the interests. Allred testified that, when Daughtrey informed him
that he would not convey his fifteen-percent interest as he had promised, Daughtrey told him
5
that his reasons for refusal were that he was upset that he had lost so much money in the oil
industry and that he believed that Allred thought that he had no class.
¶10.
Allred admitted that only Daughtrey, Upton, and the two other investors who Allred
brought into the Amoco deal paid the fifteen percent as a commission. Allred testified that
this was because the other investors all had years of experience in the oil and gas business;
as such, they had provided deals and opportunities for each other many times and knew what
they were doing. Allred testified that the four investors that he brought into the deal, by
contrast, knew nothing about the oil and gas business and would, therefore, need a lot of help
to successfully utilize their mineral rights. Allred indicated that that was why only those four
investors were asked to pay fifteen percent of their interest as a commission.
¶11.
As Daughtrey and Upton’s attorney concluded his cross-examination of Allred, he
asked a series of questions intimating that Allred had acted as Daughtrey’s or Upton’s
attorney in the Amoco deal. After Allred’s cross-examination, the chancellor inquired of
Upton and Daughtrey’s attorney whether he had “any document that establishes [an]
attorney-client relationship.” The attorney responded that he did not. He further admitted
to the court that there are no checks showing payments for legal fees to Allred.
¶12.
Wallace Stewart Leggett, one of the four investors brought into the deal with Upton
and Daughtrey, then testified on behalf of Allred. Leggett was a business partner with Bobby
Joe Dykes, another of the four investors that Allred brought into the Amoco deal. Leggett
testified that he purchased fifty thousand dollars’ worth of mineral rights in the Amoco
spread, and that he understood that he would be required to convey fifteen percent of his
interest therein once he had recouped all of his expenses. Leggett indicated that all of the
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investors that Allred brought into the Amoco deal had been told about the fifteen-percent
commission before they purchased any of the mineral rights. Unlike Daughtrey or Upton,
Leggett gave notice once he received his payout. Leggett testified that he conveyed fifteen
percent of his interest to Allred in June 2000, after confirming that the fifteen-percent
interests had been transferred to Allred by Carden’s estate. Leggett also indicated that he
was never led to believe that everyone involved in the Amoco deal would convey a fifteenpercent interest. Finally, Leggett testified that he had never considered Allred to be working
as his attorney on the Amoco deal, and that, to his knowledge, Upton and Daughtrey had
never indicated that Allred was acting as their attorney in the matter.
¶13.
After the testimonies of a few more witnesses, Allred rested. Neither Upton nor
Daughtrey made a motion for a directed verdict at the close of Allred’s case. Upton testified
after Allred rested. Upton confirmed prior testimony to the effect that he and Allred had
been very close friends for a long time. Upton also described the initial meetings regarding
the Amoco deal. Upton testified that, regarding the first meeting, “I don’t ever recall him
mentioning anything about a backup 15 percent or any other thing.” Upton stated that the
first time he heard about the fifteen-percent commission to Carden was when Allred
presented him with the agreement for Upton to sign. Upton claimed that Allred had come
to his home one morning after Upton’s initial refusal to sign the agreement, and that the
following conversation ensued:
In my den, he told me that everybody had signed the agreement over to Mr.
Carden. And I says, What do you mean, all the investors has signed [sic] it?
He said, That’s right. I said, Wallace, did you sign one over to him? Yes.
Told me yes. The [sic] he told me -- and I still told him I didn’t want to sign
it. And -- because I just didn’t believe I owed anymore money to nobody.
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And he told me, Well, Mr. Carden will sue you for it if you don’t sign it. He’ll
get his money one way or the other. That’s the words he told me. And he
says, [y]ou’re the last one, Paul. Everybody else has signed it. And he told me
he’d signed it.
Upton testified that he signed the agreement after this meeting in his home. However, he
further testified that he was still unconvinced that he should have signed the agreement. In
the days following his signing, sometime in 1992, he spoke with two Amoco investors,
neither of whom were brought in by Allred. He learned that neither of them was assigning
a fifteen-percent interest to Carden as a commission. Upton testified that he then had a
confrontation with Allred, wherein he accused Allred of swindling him.
¶14.
Upton also testified about a meeting with Allred several years later, after Carden’s
death, wherein Allred attempted to get Upton to convey the fifteen-percent interest in
accordance with the agreement that he had signed. Upton testified that he refused to convey
fifteen percent of his interest to Allred. When asked by his attorney whether he had signed
the agreement to convey the fifteen-percent interest to Carden, Upton replied that he had
done so “[u]nder duress.” Upton indicated that he received his payout from the Amoco
minerals on September 29, 1999. Upton testified that he would have conveyed the fifteenpercent interest to Carden if Carden had still been alive. Essentially, Upton testified that it
was Allred’s reception of the interest that Upton refused to acquiesce to.
¶15.
The chancellor questioned Upton’s actions after Upton came to believe that he had
been defrauded by Allred, as follows:
[THE COURT]:
Well, that’s why I asked you if you thought this was a
fraud from 1992 forward, why in the world didn’t you do
something about it -- report it to the law, call the Oil and
Gas Board, call the District Attorney, call the county
8
attorney, call the Attorney General’s office, file a lawsuit
to have it all set aside or at least your agreement set aside
because it was fraudulent?
[UPTON]:
I can’t answer that question for you, Judge, because I
don’t know why. I was just so upset with [Allred]. And
I knew, because he kept threatening me with a lawsuit.
Now, I guess I ought to have sued him.
(Emphasis added).
¶16.
Daughtrey testified after Upton.
Daughtrey testified that, like Upton, he had
misgivings about the agreement to convey a fifteen-percent interest to Carden but that he
signed the agreement after Allred told him that Carden would sue Daughtrey if he did not sign
the agreement. Daughtrey testified that his Amoco investment paid out on September 23,
1999. Daughtrey further testified that he refused to convey fifteen percent of his mineral
rights to Allred because Daughtrey had signed an agreement to convey the interest to Carden,
not Allred. Daughtrey testified that he did not think the assignment of the fifteen-percent
interest to Allred was valid, because:
I -- I don’t think it is. I don’t think it’s a legitimate assignment, because Mr.
Cuccia – Cuccia signed this over for the estate of Mr. Carden, C.T. Carden, as
the administrator and I don’t -- I know I’m not -- I don’t know anything about
the legal ends of that. But I wouldn’t think that it was on the up and up, sir.
Daughtrey also had the following exchange with his attorney during direct examination:
Q.
At the time you signed that agreement, if it had been signed over to Mr.
Allred, would you have signed it?
A.
No, sir. Because I wouldn’t have.
Q.
If Mr. Carden had presented the mineral deed to you after payout was
assigned, would you have done that?
A.
I certainly would have, because I had an agreement with him. I had an
9
agreement with him to do just that and I would have done that.
[THE COURT]:
A.
Yes, sir.
[THE COURT]:
A.
¶17.
Same one I asked Mr. Upton over there. If Wallace
Allred, tomorrow said, well, you know, I’m tired of
fooling with this. I’m just gonna reassign this back over
to the Estate of C.T. Carden and they’ll own it, whoever
his heirs are. Would you sign it then?
To the Estate of Mr. C.T. Carden?
[THE COURT]:
A.
Let me ask you this question.
Uh-huh.
I would have to, sir. Because I had signed that agreement to Mr. C.T.
Carden and he was deceased and then his succession was in the process
[sic].
After stating that he assumed that Allred was his attorney, Daughtrey was asked by the
court what fees he had paid Allred for legal representation. Daughtrey admitted that he had
not paid Allred for any legal fees and that Allred had never billed him for any legal services.
Daughtrey further admitted that Allred had never told him that he was acting as his attorney.
¶18.
After Daughtrey’s testimony concluded, Daughtrey and Upton rested their case. The
chancellor then related his findings, which stated, in pertinent part, as follows:
Based on the testimony that the Court has heard, the Court finds that, when
these two defendants along with the other two investors from Covington
County met with Mr. Allred, that they were in fact informed about a
commission involving Mr. C.T. Carden. They knew it going in, knew it on the
front end. I’ve had one of the original investors to so testify that he was at a
meeting where all of them were in attendance when this was discussed, and I
find his testimony to be credible. In fact, he has honored his agreement that he
signed.
Mr. Daughtrey and Mr. Upton readily admit they signed the agreement for the
15[-]percent back-end commission. They both readily admit that, if C.T.
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Carden had called upon them during his lifetime to execute the conveyance,
that they would have done so. They would have been legally obligated and
bound to do so; even suggest that, if the C.T. Carden Estate[,] which now
exists[,] called upon them to do so, that they would be bound to do so.
Mr. Allred’s interest comes to him through C.T. Carden[,] assigned by the C.T.
Carden Estate to him. He is the rightful owner of whatever rights that C.T.
Carden had against Daughtrey and Upton. And, of course, this is subject to the
executor sending the Court, certified under the Acts of Congress, whatever
court order is necessary to formerly [sic] approve the conveyance or assignment
to Mr. Allred.
What it seems to me like is, is that the defendants don’t have a problem paying
anybody other than Allred. And why? I don’t know. Seems to me that folks
that have had and maintained the kind of friendships these people have had over
the years, it looks to me like one friend ought to feel good about another friend
making money; and that, if somebody is gonna make a commission, I would
rather have a friend of mine make a commission than I had somebody I had
never seen and laid eyes on. But sometimes human nature prevails and folks
get all bent out of shape when they think somebody’s gonna make some money
that they’re not gonna make. And that seems to be the basis for what happened
here.
Additionally, Mr. Upton testified that in 1992, he knew about all this [sic]
shenanigans as he inferred that they were. I’m sure he discussed it with Mr.
Daughtrey. From 1992 until this lawsuit was filed, they did absolutely nothing
to attempt to challenge this agreement that they both agreed that they had
signed in favor of C.T. Carden. Mr. Upton complains that, because of all [sic]
the investors didn’t sign it, then that’s -- he shouldn’t have to sign it. But,
nevertheless, he did sign it and did nothing whatsoever to challenge it, even
though he believed that Mr. Allred had lied to him about all the other investors
signing it and about Mr. Allred having signed it.
Frankly, I find Mr. Allred’s testimony to be credible in that regard. I don’t
believe that he misrepresented anything to Mr. Upton in that regard. He may
have said all other investors have signed it. And I think by that, who he was
talking about were the four guys in Covington County, Mississippi, that he was
meeting with on a regular basis as being all of the investors that he was
referring to, if in fact it was even questioned.
So, this agreement -- these agreements signed by these gentlemen are
enforceable.
11
The chancellor then went on to discuss the statute of limitations. He asked the parties to
provide briefs supporting their arguments regarding the statute of limitations and whether it
had run. Thereafter, on March 13, 2007, the chancery court entered a judgment as to liability.
In pertinent part, the court found the following:
By separate written agreements executed by Paul Upton and K.R. Daughtrey[,]
each is obligated to convey to William Wallace Allred, assignee of the
succession of C.T. Carden, deceased, 15% of the interest each originally
acquired in certain mineral interests formerly owned by Amoco Production
Company . . . consisting of approximately 53,000 mineral acres over various
counties in Mississippi.
“Payout” as defined in the Agreement of Paul Upton . . . occurred on September
29, 1999 . . . . “Payout” as defined in the Agreement executed by K.R.
Daughtrey . . . occurred on September 23, 1999 . . . . Within thirty days of
payout, each Defendant was obligated to assign in writing by recordable
instrument 15% of the interest he originally acquired in the Amoco Minerals.
Neither defendant at any time gave notification of payout nor executed a written
Assignment in favor of C.T. Carden, his successors or assigns, of 15% of the
interest originally acquired in the Amoco minerals.
C.T. Carden died in September, 1995. . . . By instrument dated February 28,
2000[,] . . . the [administrator] assigned to [Allred] all right, title, and interest
in and to the Agreements signed by Paul Upton and K.R. Daughtrey. . . . The
Agreements executed by the Defendants . . . are supported by consideration, are
valid and enforceable, and were not procured by fraud or misrepresentation as
alleged by the Defendants.
No attorney-client relationship between the Plaintiff and either Defendant ever
existed concerning or relating to the Amoco Minerals. The Assignment by the
succession representative of C.T. Carden . . . in favor of the Plaintiff, is
supported by consideration, is otherwise valid and enforceable, and has been
approved and ratified by the District Court of the 22nd Judicial District of St.
Tammany Parish, Louisiana, in the Matter of the Succession of Charles Thomas
Carden, No. 95-30506.
[Allred] filed each of the above captioned actions on February 27, 2003. The
three[-]year “catch-all” statute of limitations in Miss[issippi] Code Ann[otated
section] 15-1-49 applies to the Plaintiff’s claim for recovery of a percentage of
income and proceeds from production paid to the Defendants. A ten[-]year
12
statute of limitations provided in Miss[issippi] Code Ann[otated section] 15-1-7
and [section] 15-1-9 applies to the Plaintiff’s claims for recovery of a
percentage of the Defendants’ interests originally acquired in the Amoco
Minerals. The Defendants should each provide an accounting for all income
and production proceeds attributable to their respective interests in the Amoco
Minerals from and after September 30, 1999[,] to date.
Judgment should be granted in favor of [Allred] on his complaints against [Upton and
Daughtrey] in the above captioned actions, but only insofar as set forth herein.
[Allred’s] claims for defamation and for tortuous interference should be dismissed.
The affirmative defenses and all relief requested by [Upton and Daughtrey] against
[Allred] should be denied and their counterclaims dismissed.
The judgment finally ordered Daughtrey and Upton to each convey fifteen percent of their
mineral rights to Allred and to pay Allred “an amount equal to income attributable to 15% of
[the] 1.89% undivided interest in the Amoco Minerals paid or received from and after
February 27, 2000[,] with interest at the rate of 8% per year.” The order further stated that
a hearing would be held on the issue of damages once Daughtrey and Upton filed accountings
with the chancery court.
¶19.
On January 30, 2007, the Twenty-Second Judicial District Court of Saint Tammany
Parish, Louisiana, entered a judgment granting Cuccia the authority to assign Carden’s rights
to the fifteen-percent interests to Allred. The judgment stated, in pertinent part, as follows:
Considering the Petition for Authority to Execute Assignment and Conveyance
of Mineral Leases of William Wallace Allred filed herein on January 8, 2007,
by L. Jay Cuccia . . . and that this Court deems it to be in the best interest of this
Succession to authorize the Administrator to enter into the Assignment and
Conveyance of certain interests in oil, gas and mineral leases located in the
State of Mississippi . . . and evidence having been submitted that Notice of the
filing of the Petition was given according to law by publication in the TimesPicayune, that more than seven (7) days have expired since the date of
publication of said Notice, and that no Opposition thereto has been filed;
IT IS ORDERED, ADJUDGED AND DECREED that Covington County,
Mississippi residents Paul Upton, Bobby Jo Dykes, K.R. Daughtrey, and W.
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Stuart Leggett executed agreements in favor of the decedent C.T. Carden in
September and October 1992 to convey after “payout” 15% of the interest each
investor originally acquired in certain mineral properties in Mississippi . . . .
For good and valuable consideration including the work of William Wallace
Allred in the evaluation, acquisition and management of the Amoco Minerals,
C.T. Carden during his lifetime agreed to assign to William Wallace Allred
Carden’s interest in those agreements described above. After the death of C.T.
Carden, and on February 28, 2000, L.J. Cuccia, Administrator of the Succession
of C.T. Carden, deceased, assigned to William Wallace Allred all right and title
and interest of C.T. Carden, or his Succession, in and to the agreements . . . .
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that . . . Cuccia
. . . is hereby authorized, directed and empowered to enter into the Assignment
and Conveyance of Mineral Leases to William Wallace Allred dated February
28, 2000, a true copy of which is attached to the Petition filed in this matter .
...
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the
Assignment is supported by consideration and is otherwise valid and the act of
. . . Cuccia . . . in executing said Assignment is hereby ratified, approved, and
allowed by the Court;
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that L. Jay
Cuccia, Administrator, is hereby authorized, directed and empowered to
execute, on behalf of this Succession, whatever other documents and take
whatever other actions are necessary in order to effect the Assignment to
William Wallace Allred of all right, title and interests under and through the
Agreements described in the Assignment attached to the Petition . . . .
¶20.
On April 11, 2007, before submitting any accountings, Daughtrey and Upton filed a
notice of appeal to the Mississippi Supreme Court from the March 13, 2007, judgment. On
June 7, 2007, the Mississippi Supreme Court dismissed Upton’s and Daughtrey’s appeal,
finding that “the judgment from which the notice of appeal was filed is not a final, appealable
judgment . . . .” On August 6, 2007, Daughtrey and Upton filed an accounting with the
chancery court. In it, Daughtrey and Upton stated that: “based upon the language of the
Court’s ruling[,] the Defendants have done their best to calculate income and interest,
14
however, the directive as to [a]ccounting had a beginning date of September 30, 1999[,] while
the directive as to the money judgment had a beginning date of February 27, 2000.” The
parties further stated that: “[B]oth . . . [a]ccountings include calculations for said management
costs and reduction of [Allred’s] judgment based upon said management costs. Though the
Defendants did not in fact pay management costs, they nonetheless performed the very work
which such a management entity would have performed.” The accountings also raised the
issue of the validity of the assignment of the fifteen-percent interests to Allred:
Defendants assert that nothing in the record, not the Judgment on Petition for
Authority to Execute Assignment . . . nor any other document presented at trial
nor the sworn testimony of any witness, breathed life into the original
assignment dated February 28, 2000. The Assignment signed on that date was
void as a matter of law. The Administrator of the Succession of C[.]T[.] Carden
was without authority to sign said document. Further, the Judgment . . . entered
on February 1, 2007, by the 22nd Judicial District Court, Parish of S[t].
Tammany, Louisiana, did not authorize the Assignment to be back dated to
February 28, 2000. . . . Likewise, said Judgment is devoid of any mention of
it being a nunc pro tunc order. As such, the S[t]. Tammany Court merely gave
the Administrator the authority to sign the Assignment as it read on February
28, 2000, but effective as of the date of said Judgment, that being February 1,
2007. As the Assignment cannot become effective until February 1, 2007, the
Defendants have included calculations in their [a]ccountings to reflect the same.
Essentially, the accountings provided multiple calculation for what was owed to Allred,
depending on what amounts were discounted as expenses and what time period was used.
With no deductions, the accountings provided a total of over twenty thousand dollars. Other
calculations by Upton and Daughtrey figured that Allred was entitled to less than a thousand
dollars for the profits that Upton and Daughtrey had improperly received.
¶21.
On April 4, 2008, Upton and Daughtrey filed a motion to dismiss based on the premise
15
that the federal Securities Acts 2 prohibited Daughtrey’s and Upton’s ability to sell the fifteenpercent interests in their mineral rights. Allred filed an answer to the motion on April 8, 2008,
denying that he had sold any interest to Daughtrey or Upton, denying that the transactions
involved interstate commerce, denying that the Securities Acts would apply to the
transactions, and arguing that Upton and Daughtrey waived any argument regarding the
Securities Acts when they failed to raise the Acts as an affirmative defense in any pleadings
or otherwise raise the issue of the Acts during litigation.
¶22.
On April 15, 2008, the chancery court issued two judgments, one against Upton and
one against Daughtrey, in which it found, in pertinent part, as follows: “that the Plaintiff
WILLIAM WALLACE ALLRED shall have and recover from the Defendant . . . the sum
of $26,807 together with interest at the rate of 8% per annum until paid.” The judgments also
ordered Upton and Daughtrey to pay for the “costs of this action,” with each responsible for
one-half of the costs.
¶23.
On April 18, 2008, Daughtrey and Upton filed a motion for a new trial, alleging that
the judgment is against the overwhelming weight of the evidence, that Allred fraudulently
obtained the fifteen-percent interests in the mineral rights, that the statute of limitations barred
Allred’s recovery, that the chancellor erred in finding that Allred was assigned the right to the
fifteen-percent interests on February 28, 2000, rather than February 1, 2007, and that the
transfer was prohibited by federal securities laws. The court summarily overruled the motion
on May 5, 2008.
2
We use “Securities Acts” to refer to the Securities Act of 1933 and the Securities
Exchange Act of 1934.
16
¶24.
Daughtrey and Upton filed a notice of appeal on May 7, 2008, leading to their appeal
before this Court. Additional facts, as necessary, will be related during our analysis and
discussion of the issues.
ANALYSIS AND DISCUSSION OF THE ISSUES
1. Standing to File Complaint
¶25.
Upton and Daughtrey first claim that Allred had no standing to file a complaint because
the transfer from Carden’s estate to Allred was invalid, and because the federal Securities
Acts voided the mineral rights contracts. As we will discuss in the next issue, we find that the
Securities Acts do not void the contracts.
¶26.
The issue of the validity of the assignment of the fifteen percent to Allred was raised
at trial during Cuccia’s cross-examination. However, the issue was never raised in any of the
pleadings filed by Upton or Daughtrey. Furthermore, even though this issue was raised during
trial, it was immediately objected to by Allred’s attorney on the ground that the issue had not
been raised in any pleading. “[A] defendant’s failure to timely and reasonably raise and
pursue the enforcement of any affirmative defense or other affirmative matter or right which
would serve to terminate or stay the litigation, coupled with active participation in the
litigation process, will ordinarily serve as a waiver.” Fletcher v. Limeco Corp., 996 So. 2d
773, 780 (¶20) (Miss. 2008). See also M.R.C.P. 8(c); M.R.C.P. 12(b). Therefore, we find that
this issue is procedurally barred due to Daughtrey’s and Upton’s failure to raise the issue as
an affirmative defense.
¶27.
Even were this issue not procedurally barred, we would find that it lacks merit. The
judgment of the Louisiana district court validated Cuccia’s decision, as administrator, to
17
transfer the fifteen-percent interests to Allred.
The district court did so with the full
knowledge that Cuccia had executed the transfer several years before, and nothing in the
district court’s judgment indicated an intent to limit the conveyance to the date of the district
court’s judgment. Per Article IV, Section 1, of the United States Constitution, we must give
the Louisiana district court’s judgment full faith and credit.
¶28.
This contention of error is without merit.
2. The Securities Acts
¶29.
Daughtrey and Upton also contend that the transfer of mineral rights from Allred to
them is void because Allred was not a registered broker under the federal Securities Acts.
This argument misses the mark, as Allred did not convey any mineral rights to Daughtrey and
Upton. Rather, Daughtrey and Upton purchased the mineral rights from Amoco. Allred
contends that this issue is also procedurally barred due to Daughtrey’s and Upton’s failure to
timely raise the issue. We find that we must first examine whether the Securities Acts would
void the conveyance of the fifteen-percent interests to Allred from Daughtrey and Upton.
¶30.
While Section 77e of Title 15 of the United States Code (2006), which is part of the
Securities Act of 1933, prohibits the sale of an unregistered security through interstate
commerce, no provision of the Securities Acts indicates that a transaction so consummated
is thereafter void, as Daughtrey and Upton urge us to find. See 15 U.S.C. §§ 77a-77z (2006);
15 U.S.C. §§ 78a-78ff (2006). Furthermore, a careful scrutiny of the relevant case law has
failed to reveal any situation where such a transaction has been deemed void as a matter of
law.
Therefore, the federal Securities Acts do not require a finding that any of the
transactions here are void.
18
¶31.
Neither Daughtrey nor Upton raised the issue of the Securities Acts until after the court
had ruled against them as to liability. Rule 8(c) of the Mississippi Rules of Civil Procedure
explicitly states that illegality and fraud are affirmative defenses that must be timely raised
in pleadings. When Daughtrey and Upton’s attorney requested that the record be reopened
so that the Securities Acts claim could be litigated, the chancellor refused but allowed the
attorney to make a proffer regarding the claim. We find that the chancellor was correct in
finding that Daughtrey and Upton had waived any claim of illegality as a result of the federal
Securities Acts. As already discussed, nothing in the Securities Acts operates to void the
transactions as a matter of law.
¶32.
This issue is without merit.
3. Statute of Limitations
¶33.
In their final issue, Upton and Daughtrey contend that the chancery court erred in
finding that a ten-year statute of limitations applies to the conveyance of the fifteen-percent
interests to Allred. Neither Upton nor Daughtrey protest the chancery court’s application of
a three-year statute of limitations to the profits from the fifteen-percent interests.
¶34.
Upton and Daughtrey do not disagree that a ten-year statute of limitations applies to
suits involving recovery of land, including mineral rights; rather, Upton and Daughtrey
contend that the present case involves only a claim for breach of contract, which they submit
would be subject to a three-year statute of limitations. Specifically, Upton and Daughtrey
contend:
The trial court commits error in its application of the law . . . where the trial
court loses focus of the allegations and actual claims by Mr. Allred. In his
[c]omplaint[,] Mr. Allred makes claims for (1) [b]reach of [c]ontract, (2)
19
[c]onstructive [t]rust, (3) [u]njust [e]nrichment, (4) [d]efamation[,] and (5)
[i]ntentional [i]nterference with [b]usiness. In the [j]udgment on liability[,] the
trial court specifically dismisses (4) and (5). As to “unjust enrichment” and
“constructive trust,” neither term is found in said [j]udgment. Likewise, there
is no discussion of “unjust enrichment” nor [sic] “constructive trust” during the
trial court’s bench ruling . . . . As such, the trial court clearly finds for Mr.
Allred based solely upon his claim of breach of contract.
¶35.
We find our supreme court’s discussion in Allred v. Fairchild, 785 So. 2d 1064, 1070-
71 (¶¶16-18) (Miss. 2001), a case also involving Allred, helpful:
In order to properly analyze a statute of limitations question, an understanding
of the chronology of events and the limitations in question is necessary. Allred
and [Wiley] Fairchild enter into the agreement in December 1973; the sale of
the Windham properties is closed on February 1, 1974; and Allred files suit on
December 19, 1990. In other words, a total of 17 years passed between the oral
contract and the filing of suit. The applicable statutes of limitations which
might control are Miss[issippi] Code Ann[otated] [sections] 15-1-7, 15-1-9,
15-1-29, 15-1-39, [and] 15-1-49 (1995). Section 15-1-7 requires suits involving
recovery of land to be brought within 10 years of “right to make entry.”
Section 15-1-9 is also a 10[-]year statute of limitations for actions “claiming
land in equity.” Section 15-1-29 establishes a 3[-]year statute of limitations
upon actions on unwritten accounts or contracts. Section 15-1-39 imposes a
10-year limit on actions seeking or concerning trusts, and [section] 15-1-49 is
a catchall provision establishing a three-year deadline on all matters without
specified limitations. Miss. Code Ann. §§ 15-1-7, 15-1-9, 15-1-29, 15-1-39,
15-1-49 (1995).
Although 17 years is obviously not within any of these limits, Allred argues that
the statute of limitations did not begin to run until he could enforce his rights.
See Burwell v. Planters Lumber Co., 220 Miss. 79, 70 So. 2d 71 (1954). Since
there is undisputed testimony that payout occurred sometime in July 1981,
Allred contends this date is the true time of accrual for statute of limitations
concerns. See S[.] Wholesalers, Inc. v. Stennis Drug Co., 214 Miss. 461, 59 So.
2d 78, 79 (1952). Therefore, the action would not be barred by [sections]
15-1-7, 15-1-9, and 15-1-39. Furthermore, Fairchild made numerous false
representations and swore under oath to them, including: denying the existence
of an oral contract, until presented with evidence of one; denying the existence
of any documented proof of a contract when P-67 (a February 1974 memo)
evidenced the existence of a contract; sworn testimony that payout records were
never kept when, in fact, his long-time secretary testified that they were; and
failure to turn over many highly relevant documents, even after compelled to
20
do so. This litany of violations clearly justifies any delay in filing. As this
Court has repeatedly held, fraudulent concealment of the truth tolls all statutes
of limitations. Van Zandt v. Van Zandt, 227 Miss. 528, 539, 86 So. 2d 466, 470
(1956). There is also statutory authority for this position: “If a person liable to
any personal action shall fraudulently conceal the cause of action from the
knowledge of the person entitled thereto, the cause of action shall be deemed
to have first accrued at, and not before, the time at which such fraud shall be,
or with reasonable diligence might have been, first known or discovered.”
Miss. Code Ann. § 15-1-67 (1995). Under this rule, accrual did not begin until
the late 1980s when Allred discovered that payout had already occurred. Thus,
the suit was filed well within all of the applicable statutes of limitation[s].
Allred testified that he asked about the payout status of the properties several
times and was consistently lied to. Since accrual of his rights did not occur until
1981 and Fairchild fraudulently concealed the truth, the statutes of limitations
do not bar Allred’s various claims.
This Court is now faced with the same statutes of limitations.
¶36.
We find that the chancery court correctly ruled that a ten-year statute of limitations
applies in this case. The ten-year statute of limitations found in Mississippi Code Annotated
section 15-1-7 (Rev. 2003) applies to suits to recover mineral rights. See Fairchild, 785 So.
2d at 1070-71 (¶¶16-18); Covington v. Butler, 242 So. 2d 444, 448 (Miss. 1970); Robinson
v. Rhodes, 236 So. 2d 746, 749 (Miss. 1970). Despite Daughtrey’s and Upton’s protests to
the contrary, Allred’s suit was essentially a suit that set out to accomplish two objectives: (1)
conveyance of the fifteen-percent interests in the mineral rights and (2) recovery of the profits
that Daughtrey and Upton had been fraudulently receiving from the interests. The first of
these is covered by section 15-1-7, the aforementioned ten-year statute of limitations; as to
the second, the court applied a three-year statute of limitations, a decision that neither
Daughtrey nor Upton has challenged. The Robinson court even noted that the ten-year statute
of limitations would apply in a mineral rights contract case “[i]f the purpose of the . . . suit
21
were to determine the validity of the instruments [contracts] . . . .” Robinson, 236 So. 2d at
749. Therefore, we find that the court properly determined that a ten-year statute of
limitations applies to Allred’s claim for conveyance of the fifteen-percent interests.
¶37.
Furthermore, Allred’s contention that an implied constructive trust exists in this case
has merit, especially in the light of our supreme court’s holding in Fairchild. The Fairchild
court stated, in pertinent part, that:
Before we can determine whether the chancellor erred, we must first determine
what is necessary to justify the imposition of a constructive trust.
A constructive trust is one that arises by operation of law against one who, by
fraud, actual or constructive, by duress or abuse of confidence, by commission
of wrong, or by any form of unconscionable conduct, artifice, concealment, or
questionable means, or who in any way against equity and good conscience,
either has obtained or holds the legal right to property which he ought not, in
equity and good conscience, to hold and enjoy.
Sojourner v. Sojourner, 247 Miss. 342, 153 So. 2d 803, 807 (1963) (citing 54
Am. Jur., Trusts, § 218). Essentially, a constructive trust is an operation of
equity. When one party holds title and benefits from land that he/she should
not rightfully possess, a constructive trust is imposed for the benefit of another
party who is rightfully entitled to a part or the whole. [Id.] at 808-[0]9 (citing
Russell v. Douglas, 243 Miss. 497, 138 So. 2d 730 (1962)). The determination
of the existence of a constructive trust is a matter of law and thus, subject to de
novo review. McNeil v. Hester, 753 So. 2d 1057, 106[4 (¶26)] (Miss. 2000).
There is no question that Fairchild possesses the Windham properties. We need
only determine whether Allred is due an interest in those properties.
In his original motion as well as in appeal briefs, Allred cites to an extensive list
of alleged discovery violations in support of his assertion that Fairchild
committed fraud. Allred’s contention is that Fairchild purposefully lied,
withheld evidence, and did everything possible to cover up the fact that he
owed Allred a percentage of the Windham properties. This fraud has allowed
Fairchild to benefit from the 10% interest due Allred per their oral agreement.
As such, Fairchild should not be allowed to benefit from his wrongdoing as a
matter of law.
In addition, the evidence indicates that Allred and Fairchild shared a special
22
relationship based upon trust and mutual respect. “While a confidential or
fiduciary relationship does not in itself give rise to a constructive trust, an abuse
of confidence rendering the acquisition or retention of property by one person
unconscionable against another suffices . . . .” Sojourner, 153 So. 2d at 807.
In harmony with the equitable purpose of constructive trusts, we are careful not
to apply too narrow a definition of confidential relationship. “An abuse of
confidence within the rule may be an abuse of either a technical fiduciary
relationship or of an informal relationship where one person trusts in and relies
upon another, whether the relation is a moral, social, domestic, or merely
personal one.” Id. at 808. Allred’s and Fairchild’s long and informal business
relationship is a clear indication that a confidential relationship existed. After
all, the two did business for over 20 years based on little more than a
handshake. It was this confidential relationship that allowed Fairchild to
conceal the truth concerning payout for so long.
****
The present situation is tailor-made for the imposition of a constructive trust.
Fairchild owns and profits off the Windham properties because he fraudulently
hid the date of payout from Allred[,] with whom he shared a confidential
relationship. A constructive trust is a fitting remedy to right such unjust
enrichment. Id. at 807. The chancellor erred in not imposing a constructive
trust for Allred’s benefit. Therefore, we reverse the chancellor’s order and
remand the case for determination of the value of the trust.
Fairchild, 785 So. 2d at 1067-68 (¶¶7-11). The Fairchild court found that a constructive trust
applied, even though the chancellor at trial had declined to impose a constructive trust.
Therefore, we may impose a constructive trust, even in the absence of a finding by the
chancellor to that effect.
¶38.
Like the Fairchild court, we find that an implied constructive trust exists in this case.
Daughtrey and Upton withheld the fifteen-percent interests in their mineral rights, even
though they had signed contracts promising to do otherwise. Furthermore, they did not report
their payout dates, even though they were required to do so by their contracts. Although
Leggett and Dykes had reported their payouts, Allred could not conclusively assume from this
23
that Daughtrey and Upton had received their payouts. As Allred testified, payout was
achieved only after the investors received their initial outlay plus expenses from the mineral
rights. Since Allred had no way to know what expenses Daughtrey and Upton had incurred,
he could not affirmatively state when each received their payout. Since we find that a
constructive trust should have been imposed, we find that a ten-year statute of limitations
would also apply on that basis.
¶39.
This issue is wholly without merit.
¶40. THE JUDGMENT OF THE CHANCERY COURT OF JONES COUNTY IS
AFFIRMED.
ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE
APPELLANTS.
KING, C.J., LEE AND MYERS, P.JJ., GRIFFIS, BARNES, ISHEE, ROBERTS,
CARLTON AND MAXWELL, JJ., CONCUR.
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