(Cite as: 755 S.W.2d 874)

Court of Appeals of Texas,

Houston (14th Dist.).

Clayton W. WILLIAMS, Jr. and Williams Company, Appellants,

v.

Dorothy M. JENNINGS, Appellee.

No. B14-86-00170-CV.

May 5, 1988.

Rehearing Denied Aug. 4, 1988.

This is an appeal from a judgment rendered in a slander of title lawsuit. In thirty-four points of error, appellants Clayton W. Williams, Jr., and Williams Company dispute whether appellee Dorothy Jennings proved all elements of her cause of action. In addition, they contest the award of attorney's fees. We find error in the award of attorney's fees and modify the judgment to delete them. We affirm the judgment as modified.

We begin with a somewhat lengthy recitation of the facts. In 1972 Mr. and Mrs. A.D. Jennings bought 92.3 acres owned by Mr. and Mrs. Charles Brightwell in Brazos County. The Brightwells owned fifty percent of the mineral rights in the property; however, during negotiations, the real estate agent mistakenly told the Jennings that the Brightwells owned one hundred percent. He later revised that figure to fifty-one percent, which was also incorrect, but that amount was written into the earnest money contract. The Brightwells originally planned to retain fifty percent of their mineral rights. However, at closing, they agreed to sell all of their rights, and the earnest money contract was revised to read that "Seller agrees to convey all mineral rights to property in his possession." A general warranty deed was recorded on August 29, 1972. This deed contained no mineral reservation.

Concerned that the deed did not specify that the Jennings now owned fifty percent of the minerals, Jennings wrote the title company on September 12, 1972, but mistakenly asked that the deed be reformed to reserve one-half of the minerals to the Brightwells with an additional clause specifically granting one-half of all minerals to the Jennings. The requested reformation was incorrect because, according to the parties' intent, the Brightwells owned no interest, the Jennings owned fifty percent, and a Mrs. Pugh owned the remaining fifty percent. Jennings stated that the reformation was necessary because the specific mineral reservation had been inadvertently omitted during changes made in the land description at closing. The title company corrected the deed (sending Jennings a copy with the correction taped to it), and it was recorded in the Brazos County Deed Records on September 29, 1972. The reformed deed was neither re-executed nor re-acknowledged. The original filing and recording dates were crossed out and the new dates entered thereon. The following paragraph was added to the second page:

There is hereby excepted and reserved by Grantors herein one-half ( 1/2 ) of all the oil, gas, and other minerals produced from the above-described parcell [sic] of land. It being our intention to reserve one-half ( 1/2 ) of the oil, gas and other minerals and one-half ( 1/2 ) of the oil, gas and other minerals to pass to the Grantee herein.

This Deed is being refiled to show the above reservation.

Mrs. Jennings testified that she knew nothing about the reformed deed until 1979.

Increased drilling activity in the area in the early 1980's stimulated leasing activity. Sometime in 1980, James Frierson, a leasing broker acting on behalf of appellants, contacted the Brightwells to lease their mineral rights in the 92.3 acres that had *879 been sold to the Jennings. When Mr. Brightwell expressed doubt concerning their ownership of any mineral rights, Frierson assured him they owned at least fifty percent. Brightwell then sought confirmation from the real estate agent involved in the sale. The agent told him they owned fifty percent of the mineral rights at the time of the sale, conveyed one-half of that to the Jennings and thus retained twenty-five percent. The Brightwells therefore signed an oil and gas lease in April 1981 and accepted a bonus check for $5000. The lease was recorded in the Brazos County Oil and Gas Lease Records on May 29, 1981.

In the meantime the Jennings divorced, and, during the divorce proceedings, one of the lawyers suggested the reformed deed might be unclear. Jennings once again wrote the title company, pointing out that the reformed deed had neither been re-executed nor re-acknowledged and that the Brightwells owned none of the minerals. He asked for clarification of the fact that he and his wife owned one-half of all oil, gas and other minerals. The title company took no action but assured the Jennings they indeed owned one-half. Jennings obtained a copy of the earnest money contract with the intent to file it in Brazos County but never did so. The Jennings divorced in 1981, and, as part of the property settlement, Jennings conveyed his one-half community interest in the 92.3 acres to his wife. That deed was executed on June 5, 1981, and recorded on June 19, 1981.

Mrs. Jennings received offers to enter into oil and gas leases on her property, including several that did not meet her price from agents of Clayton Williams. However, she discovered the Brightwell/Williams lease and suspended existing negotiations. She then sued to clear her title. The case was tried to a jury, which found appellants liable for $23,075 in actual damages, $65,000 in exemplary damages and $12,361.81 in attorney's fees and expenses.

***

[33][34] Appellants argue in point of error twenty-one that the trial court erred in admitting into evidence appellee's testimony of verbal lease offers that she received from Mr. Berry and a Mr. Wilhite. Appellants claim this evidence is hearsay. Many out-of-court statements do not constitute hearsay. The fact that the words were uttered is sometimes the fact to be established. Such testimony is received because the mere utterance of the words has legal significance. Irving Lumber Co. v. Alltex Mortgage Co., 446 S.W.2d 64, 71 (Tex.Civ.App.--Dallas 1969, aff'd on other grounds, 468 S.W.2d 341 (Tex.1971). Most obviously this is true where the words proven constitute a necessary part of the cause of action or defense, or as is sometimes said, are "operative" facts, or part of the "ultimate issue." IA R. Ray, Texas Law of Evidence Civil and Criminal § 795 (Texas Practice 3d ed. 1980).

A necessary element of appellee's case was the loss of a specific sale. Her statements concerning the lease offers were admitted not to prove the truth of their terms but to prove their utterance and thus that such a sale existed. See also Yellow Freight System, Inc. v. North American Cabinet Corp., 670 S.W.2d 387, 390 (Tex.App.--Texarkana 1984, no writ). The evidence was not hearsay, and point of error twenty-one is overruled.

***

We affirm the judgment of the trial court with the modification regarding attorney's fees.

SEARS, Justice, dissenting.

I respectfully dissent from the majority opinion.

***

*889 The majority opinion cites Yellow Freight System, Inc. [FN2] for the proposition that Appellee's testimony concerning the verbal offer to lease the land was not hearsay. However, the Yellow Freight System, Inc. case dealt solely with oral negotiations between the parties to the lawsuit and/or agents of parties to the lawsuit. Yellow Freight contended there was no valid oral agreement because the parties had failed to agree upon a value, and, that the testimony of North American's official regarding the agreement was hearsay. The case is significantly different from the facts of this appeal. In Yellow Freight System, Inc., the parties to the lawsuit agreed that they had entered into oral negotiations, but one side contended it was not a contract solely on the grounds that they had not agreed upon a price. That court held: "Since there was evidence of an oral agreement, and since a reasonable price could be presumed, the trial court's findings of a contract ... are supported by the evidence." Yellow Freight System, Inc. v. North American Cabinet Corp., 670 S.W.2d at 390. The Yellow Freight System, Inc. court even noted that because one party to the lawsuit testified about conversations with the other party's agent or representative, it would be admissible even if the hearsay testimony was admitted for its truth. The majority opinion overlooks the fact that the Yellow Freight System, Inc. reasoning is inapplicable because Appellee was not talking to an agent or representative of the Appellant. The majority opinion also overlooks the fact that the Appellee's hearsay testimony was offered not for the purpose of proving up a missing element of the contract, but for the purpose of proving the contract itself.

FN2. Yellow Freight System, Inc. v. North American Cabinet Corp., 670 S.W.2d 387, 390 (Tex.App.--Texarkana 1984, no writ).

The majority opinion also cites Irving Lumber Company. [FN3] The Irving Lumber Company case involved statutory liens on the construction of residential homes. Irving Lumber contended that they entered into oral contracts with Alltex Mortgage Company to furnish the materials necessary to complete residential homes to be built on vacant lots. Irving Lumber also contended that although construction of the homes was to be completed in three different stages, the oral contract obligated the parties only as to the first two of the three stages. That court concluded that the testimony of the agent of Irving Lumber was not hearsay as to Alltex Mortgage Company because the testimony "together with exhibits numbers 8, 9, and 12, showed the oral contracts ...." Irving Lumber Company v. Alltex Mortgage Company, 446 S.W.2d at 71. The exhibits alluded to by the court listed four lots, separate plans for each lot, the date the plans were ordered, the contract price for each lot and the date the labor and materials were furnished to each lot. Obviously, the court found that the testimony, together with the evidence in exhibits 8, 9, and 12, showed that the parties had entered into an oral contract. Also, that court expressly held "evidence of an out of court statement is not hearsay unless it is offered as proof of the fact asserted." Irving Lumber Company v. Alltex Mortgage Company, 446 S.W.2d at 71. (Emphasis added.) Clearly, the authority relied upon in the majority opinion does not support the conclusion that the testimony of Appellee regarding the oral contract of sale was not hearsay. In fact, the law as shown above is to the contrary.

FN3. Irving Lumber Company v. Alltex Mortgage Company, 446 S.W.2d 64 (Tex.Civ.App.--Dallas 1969), aff'd 468 S.W.2d 341 (Tex.1971).

At best, the evidence shows that Appellee may have had conversations concerning a mineral lease on her land. There is no competent evidence of any contract for a lease; therefore, there is no competent evidence of any loss of a specific sale. As mentioned earlier in this dissenting opinion, even if we took the hearsay testimony as admissible and as true, Appellee has still failed to establish the existence of a contract or the loss of a specific sale. Therefore, damages for slander of title cannot be assessed against Appellee. A.H. Belo Corporation v. Sanders, 632 S.W.2d 145, 146 (Tex.1982).

***

I would hold that Appellee has failed in her burden to establish the loss of a specific sale, that there is no evidence of malice on the part of Appellant, and I would reverse and render the judgment to the trial court with instructions that a judgment be entered that Appellee take nothing.