Harrington v. Union Oil Co.

144 F. 235, 1906 U.S. App. LEXIS 4696

Opinion

DAYTON, District Judge

(after stating the facts as above). In my judgment, with the utmost respect for the judgment and learning of my predecessor, all- proceedings in this 'case had after the 20th of July, 1901, filing the answer of the defendant the Union Oil Company and the petitions and answers of the Equitable Trust Company and the Penn Oil, Gas & Mining Company, were wholly unwarranted. These answers, in apt, explicit, comprehensive, and complete terms, denied each and every material allegation of plaintiff’s bill and his right to any interest in and to the leasehold property in controversy. The limit of judicial power, under the circumstances, would have been to have entered an order giving plaintiff a time ■within which to reply generally to said answers, and, in case he did so, 'to allow time to the parties to take evidence touching the very marrow of the controversy, to wit, whether plaintiff had any such interest as claimed by him in such leasehold property. In case he did not reply within the time fixed, or in case he, having replied, failed to establish by proof his interest in the property, this court had but one thing to ■ do, and that was to dismiss his bill, with costs in favor of the defendants.

To ’suffer answers to be filed which wholly, deny plaintiff’s right, and in the same decree filing them, with no exceptions and no replications thereto, no evidence by affidavits or otherwise to show necessity, to appoint a receiver' and direct him to withdraw the property from the hands of those who have possession and deny the plaintiffs right, is in my judgment a grave and serious abuse of judicial discretion and power, calculated, as this case demonstrates it did, to cause great confusion, injustice, and injury very difficult for the courts subsequently to either correct or compensate for. On the contrary, the court’s duty upon the filing of such answers is clearly set forth in equity rule 66 as follows:

“Whenever the answer of the defendant sliall not be excepted to, or shad be adjudged or deemed sufficient, the plaintiff shall file the general replication thereto on or before the next succeeding rule day thereafter; and in all cases where the general replication is filed, the cause shall be deemed, to all intents and purposes, at issue, without any rejoinder or other pleading on either side. If the plaintiff shall omit or refuse to file such replication within the prescribed period, the defendant shall be entitled to an order as of course, for a dismissal of the suit; and the suit shall thereupon stand dismissed, unless the court, or judge thereof, shall, upon motion, for cause shown, allow a replication to be filed nunc pro tunc, the plaintiff submitting to speed the cause and to such other terms as may be directed.”

In this case, the answers were filed, no exceptions taken, no replications were filed within the prescribed period nor since, and no application has evef been made to file the same nunc pro tunc. Nevertheless, by the same decree that filed "the answers, a receiver was appointed on motion of the plaintiff, and subsequently money was borrowed by the receiver, wells drilled, large expenses incurred, injunctions awarded, still on motion of plaintiff, against a judicial sale by a state court and by a sheriff for taxes, the sale of the property was made, large sums decreed from the proceeds for receiver’s expenses and charges, liens created upon the property, all after the bill should have been and by the rule technically stood dismissed, with about the usual result in such cases, that the property was wholly inadequate to pay for these extravagant outlays incurred under judicial authority and control, and now it is largely, if not solely, the question who- shall sustain the loss and deficit. I have had great difficulty Jo determine what should be done, under these perplexing conditions. I have reached the conclusion that it is my duty to backtrack as far as possible and place all parties in the position as near as possible that they would have been in August, 1901, when this bill should have been dismissed; but in attempting to do this I am met with the condition that the court improperly authorized the receiver to borrow $2,000 from the Wood County Bank and created it an express lien upon the property, before Leonard by his proceeding in the state court obtained on December 10, 1901, the adjudication and determination of his mechanic’s lien thereon, and that, with all parties before the court except Leonard, against whom injunction had been awarded, but not served, a decree of sale was ordered of the property expressly to pay this and other debts made by the receiver..

It would be very difficult to solve this problem equitably, were it not for the further facts that Leonard on June 17, 1904, by petition made himself a party to the cause, and on August 3, 1904, upon the coming in of the report of sale, consented to the confirmation of the sale of the property to satisfy said bank debt and other debts incurred by the receiver. The language of this decree is broad and unequivocal. After setting forth the sale of said property to Dellicker for $2,450, and the payment of that sum to the receiver by the pur chaser, and his payment thereof to the registrar of this court, it says:

“And there being no exception to said report, by consent of all parties by counsel it is adjudged, ordered, and decreed” that the sále be confirmed and the allowances be paid out of the proceeds for deed, advertising, auctioneer’s fee, attorney’s fees, receiver’s expenses and partial compensation, and unpaid costs.”

By this consent decree 1 am convinced that Leonard must be held to-have waived his right to hold this property primarily liable to his mechanic’s lien in favor of these debts incurred by the receiver, and contented himself with asserting his demand for a personal decree against the parties interested in this lease under his view that they composed a mining partnership. I am therefore constrained to hold, for this reason and the further one that no exception or appeal has ever been taken to either the decree of sale or of confirmation, that I cannot now disturb their provisions, but in all respects ‘they must stand.. I am, however, authorized to hold the plaintiff responsible for his acts in this case. There can be no question whatever under the pleadings in the case that he has not, nor ever had, any legal interest in the leasehold. He admits it in his answer to Leonard’s petition, yet by his false clamor he has been directly the cause of a very large outlay in costs and expenses. He should be made to pay these sums, or their equivalent, to the relief of the injured parties involved. To be specific, he should pay the costs of this suit, including the amounts paid out of the funds, or else account for a sum equivalent thereto, and should be subject to a decree for costs incurred by the defendants the Union Oil Company, the Equitable Trust Company, and the Penn Oil, Gas & Mining Company in defense of his action. He should be required, in addition to these costs, to account for,a sum equivalent to the expenses of the receivership, wrongly created and continued on his application, consisting of the items of $5, $49.59, and $20, costs of sale of property, $250 paid as counsel fee to C. T. Caldwell’s assignee, the Wood County Bank, $250 paid as counsel fee to V. -B. Archer, $466.81' allowed receiver for his personal expenses, $360 allowed receiver as compensation, $200 allowed for future counsel fees, together with the costs of Special Master Morris and the allowance that may be made him for making his report filed, and the supplemental one hereinafter directed to be made by him, and any additional compensation that may be due the receiver, if any, for his services. He should also pay the unpaid debt due the Citizens’ Trust & Guaranty Company for furnishing bond for said receiver, ascertained by Master Morris to be $32.50. On all these sums he should be charged with interest from the date of the allowance of the items by the court or the date when the items of debt were incurred. A rough calculation would indicate that these sums, ■when so paid into court by the plaintiff, will be sufficient, with the sums now in the registry of the court and in the hands of the receiver, to pay off all debts unpaid by this unfortunate and deplorable receivership. However, this should be accurately ascertained, and for this purpose I will, for the present, direct Special Master Morris to make and file as speedily as possible a supplemental report and account showing (a) the exact amount of the court costs incurred by plaintiff in this cause, and what part thereof, if any, has been paid, either by the receiver or the registrar of this court, out of funds, in their hands; (b) the exact amount of costs incurred by the defendants the Union Oil Company, the Equitable Trust Company, and the Penn Oil, Gas & Mining Company in their defense of this cause, allowing but one attorney’s docket fee; (c) the aggregate costs incurred in said receivership, other than sums expended in the development of the property, being the items of $5, $49.50, and $20 costs of sale, $100 attorney’s fees, $826.81 receiver’s expenses and compensation, and $32.50 costs of receiver’s bond, with proper interest upon said sums; (d) the amount of outstanding debts due from said receivership to date; (e) the amounts in the hands of the receiver and the registrar of this court to the credit of this cause; (f) what additional expense account or compensation, if any, said receiver is justly entitled to; and (g) the costs of his said reports, with a statement of what he deems a just compensation to himself for making the same.

Said supplemental report may be made by said special master after 10 days’ notice given by him to counsel representing the parties. Upon the coming in of said supplemental report I will decree the plaintiff to pay the sums indicated either to the registrar or the parties entitled, and will, when the same are paid, then dismiss the cause, including the petition of Leonard, the latter, however, without cost and without prejudice to any right he may have by proper proceeding to enforce payment of his debt against the parties claiming to have had interest in said leasehold, other than plaintiff, Harrington, whom I adjudge never to have had any interest therein; it being a self-evident proposition that, if plaintiff’s bill was not maintainable, the said Leonard’s petition in the nature of a cross-bill thereto cannot be maintained.