Lawrence v. Kennedy

111 S.E. 142, 90 W. Va. 209, 1922 W. Va. LEXIS 214

Opinion

Ritz, Judge:

The plaintiff Lawrence filed his bill for the purpose of settling the interests of the various parties in the oil derived from a tract of about one acre of land known as the Ramsey lease.

It appears that in the month of July, 1918, Samuel H. Meyers and TI. F. Martin were the owners of a lease upon a tract of land, the oil from which is in controversy in this suit, by the terms of which they were authorized to develop the same for oil and gas. At' that time considerable development had been begun in the neighborhood, and it was contemplated that this would prove to be a valuable oil-bearing lease. The defendants Kennedy and Van Fleet purchased the half interest of Martin in this lease, and at the same time entered into a contract with Meyers by which they were to secure bis ball interest upon certain terms and tinder certain conditions, one of such terms being that be was to have a certain interest in a corporation to be formed by them for the purpose of developing the property, and another that they should contribute a sufficient amount of money to drill one well upon the property. They organized a volutary association for the purpose of carrying on operations on the lease and offered Meyers the'proportion of stock therein which he was to get under his contract, which they claimed was a compliance with the terms of the contract upon their part. Meyers then, according to their contention, agreed to sell them his interest in the concern thus formed for the sum of $2250.00, but when this amount was offered to him in satisfaction of his accepted offer he declined it, and conveyed his interest to the defendant, Stage, who in turn conveyed it to the defendant Burns. Kennedy, and Van Fleet in the meantime had entered into a contract with the plaintiff Lawrence by which Lawrence agreed to drill a well upon the premises at his own expense for the consideration that he be given an eleven-thirty-seconds interest therein, the cost of such well to be subsequently refunded to him by the whole enterprise should it turn out to be a producing one. Lawrence went upon the premises in accordance with his contract and drilled a well which turned out to be a substantial producer.

Upon the refusal of Meyers to convey his half interest in the lease to Kennedy and Van Fleet and their associates, in accordance with what they claim to be the terms of his contracts, they brought a suit against the defendants Meyers, Stage and Burns for the purpose of compelling specific execution of those contracts. The plaintiff Lawrence was also made a party defendant to this bill, and it was alleged therein that while he was jointly interested with Kennedy and Van Fleet in the enterprise, he was acting adversely to them, and that the purchase by Stage from Meyers, and by Burns from Stage of the Meyers one-half interest was really a purchase by Lawrence, and that Burns and Stage were holding this interest for his benefit. The bill alleged that Stage and Burns had full notice of the contracts and arrangements be tween Kennedy and Yan Fleet on the one part, and Meyers on the other. The prayer of the hill was.that the contracts between Kennedy and Van Fleet on the one part, and Meyers on the other, be specifically executed, and the defendants Stage and Burns be compelled to convey the title to this one-half Meyers interest to the plaintiffs, or that the same be conveyed to them by special commissioner should they refuse to do so. Lawrence answered this bill and denied that he had any interest in the Meyers half interest, or any connection with the purchase by Stage from Meyers, and by Burns from Stage. Stage and Burns both answered asserting that they purchased for themselves alone, admitting that they knew at the time of the contracts between Meyers and Kennedy and Van Fleet, but denied that they were valid contracts, or that the plaintiffs were entitled to have them enforced. Evidence was taken and upon a hearing had in the Court of Common Pleas a decree was entered adjudicating the right of Kennedy and Yan Fleet to have specific execution of the contract, and compelling Meyers, Stage and Burns to convey this half interest to Kennedy and Yan Fleet and their associates upon the payment of the sum of $2250.00 pi’ovided for in the contract. From this decree an appeal was prosecuted to the Circuit Court of Kanawha county, and that court, upon a hearing,' reversed the Court of Common Pleas, and held that upon the showing made Kennedy and Yan Fleet were not entitled to have specific execution of their contracts in regard to the Meyers half interest, and dismissed their bill. This decree was affirmed by this Court. Kennedy v. Burns, 84 W. Va. 701.

Pending that litigation arrangements were entered into by the parties under which the property could be developed and the oil saved. It appears that operations were conducted on either side of this Ramsey lease, and in very close proximity thereto, which would have extracted all of the oil thereunder unless it was drilled simultaneously with the operation on these other tracts. In order to secure such operation Kennedy and his associates, being the undisputed owners of the Martin half interest, and claiming the Meyers half interest, entered into a contract with the Ring Oil Com pany, which had been formed by Lawrence for the purpose of carrying on drilling operations, by which they agreed that the Ring Oil Company should further develop the property, and that the oil produced by such development should be sold by one John C. Malone, and the proceeds thereof used to pay the expenses of drilling, so far as was necessary for that purpose, upon bills approved by a certain committee representing the different claimants to the property. Stage and Burns entered into a like contract with the Ring Oil Company. Kennedy and Yan Fleet and their associates also at the same time entered into a contract with Malone under which he agreed to market the oil, to pay the expenses of operations, upon bills approved as above indicated, and retain the residue for later distribution. Stage and Burns entered into a like contract with Malone. Under this arrangement the Ring Oil Company drilled two additional wells upon the property, making three in all, and from the oil produced from these wells there had been realized the sum of about $100,000.00 at the time Malone filed his answer herein, at which time the said wells were still being pumped and were substantial producers. Of this sum of $100,000.00 Malone had paid out about $70,000.00 for the expenses of operation in accordance with the contracts above referred to. The representative of Kennedy and Yan Fleet refused to approve the bills for the operation of the property according to the allegation of the bill in this case, and the Ring Oil Company notified the parties that unless it was paid its bills for pumping and operating the property it would shut down the operations. Lawrence thereupon filed this bill alleging substantially the facts above cited, and further averring that if operations upon said lease were suspended he would be seriously injured and- damaged by reason of the fact that the oil which might be produced from this lease, by proper operation of the wells, would be discharged through the wells on adjoining leases which were then being operated, and asked that a receiver be appointed to carry on the operations pending the litigation, that the rights of the parties be established, and the money already on hand be divided among them in proportion to their respective interests. All of the parties assented to the appointment of a receiver under the circuim-stances, and operations have since been conducted by a receiver appointed by the court.

Various pleadings have been filed in the case, but for the' purpose of the question we have here it is necessary to notice only some of them. To Lawrence’s bill setting up his interest, Kennedy and Van Fleet and their associates filed an answer and cross bill. In this answer and cross bill the interest of the parties in the Martin one-half of the land is denied to be as contended for by Lawrence, and certain contracts and deeds in relation thereto are asked to be set aside, and others to be construed differently from the interpretation given to them by Lawrence in the bill. With this Martin one-half interest, however, we are not now concerned. As to the Meyers half interest, the defendants allege in their cross bill that they are entitled to practically the whole thereof. They aver that the purchase thereof by Stage and Burns was-in the interest of Lawrence; that Lawrence was the real purchaser; and that the- purchase of this interest, which conflicted with the interest asserted by them in the former suit, under their contract with Meyers, inured to the benefit of all of the joint adventurers. That they are entitled to have the interest so acquired by Stage and Burns in behalf of Lawrence adjudged to be for the joint benefit of all of those jointly interested in the Martin interest inasmuch as the purchase was made by Lawrence through Stage and Burns during the time the controversy was pending over this Meyers interest, and, further that Lawrence as a purchaser from them is estopped to claim an interest adverse to that which they sold him, while he is still relying upon and holding under his contract with them. They filed an amended cross bill in which the allegations in regard to the Meyers half interest were somewhat elaborated. Subsequently, it appeared from answers filed by Stage and Burns that Lawrence had acquired all of the interests held by Meyers, Stage and Burns in the Meyers half interest, and was the owner of all thereof, and Kennedy and Van Fleet contended that the conveyance to Lawrence of these interests by Stage and Burns and Meyers was simply turning over to him what he bad actually purchased during the time the litigation in regard thereto was pending. Lawrence filed a special plea termed a plea of res judicata. In this plea he set up the fdrmer' litigation and its termination, as above indicated. He averred in this plea that he was in nowise interested in the transactions between Meyers and Stage and Burns in re-gárd to the Meyers half interest at the time the same were Made, or until long after the termination of the litigation settling the claims of Kennedy and Yan Fleet and their as-sódiátes thereto; that recently he had purchased from Meyers, Stage and Burns their interests in the Meyers half interest, and that he now held .the same, but insisted4that the determination of the former litigation was a bar to Kennedy and Van Fleet and their associates asserting any interest therein against him, because of the fact that he was a party defendant to the former suit, in which allegations were made against him that he was the real purchaser of the interests conveyed to Stage and Burns. Objection was made to the filing of this plea which, being overruled, Kennedy and Yan Fleet tendered what they called a special replication and amended cross bill, but the court upon objection refused to allow the same to be filed, and entered a decree holding that Kennedy, Van Fleet and their associates were barred by the decree in the former suit from asserting any claim to the Meyers half interest against Lawrence, and it is from this decree that this appeal is prosecuted.

The first question naturally is, is the plea good as a plea in equity? Ordinarily the rule is that a plea in equity, to be good, must bar the right to recover in the suit, but it seems that where separate and distinct matters upon which the right of recovery is based are set up, a plea which is effective to bar one of these separate and distinct rights and claims will be held to be a good plea. ' Story’s Equity Pleadings, § 647.

It only remains, therefore, for us to determine whether the matter. set up in the plea furnishés a complete bar to the .claims asserted by Kennedy and Yan Fleet to the Meyers half interest. It will be borne in mind that this plea relies upon tbe adjudication in the former suit to defeat Kennedy and Van Fleet from recovering any interest in the Meyers part of the lease from Lawrence, but in addition to setting up the proceeding in that suit it further avers that Lawrence never acquired any interest in the Meyers claim until long after the determination of the suit of Kennedy against Burns. One of the theories upon which Kennedy and Van Fleet claim to be interested in the Meyers half of the lease is that Lawrence, while he was jointly interested with them in the venture, purchased this outstanding claim. They insist in their pleading that while they were in good faith claiming for themselves and Lawrence this Meyers interest, Lawrence, through his agents, Stage and Burns, went out and purchased the same, and now attempts to hold it adversely to them. Their contention is that because this purchase was made while they were asserting their claim to the whole lease in behalf of themselves and Lawrence, it was for their common benefit, and that they are entitled to have Lawrence decreed to be a trustee holding it for the benefit of all engaged in the pommon enterprise. They further contend that because of the relationship of vendor and purchaser existing between them and Lawrence, he is estopped to claim an interest in the property purchased by him from them adverse to such interest while he is still holding the same under his contract of purchase. The court below held that these contentions were barred by the former adjudication. With this conclusion we do not agree. An examination of the record in the suit of Kennedy against Burns discloses that the only relief Sought was the enforcement of the contracts set up between Kennedy and Van Fleet on the one hand, and Meyers on the other, and the only adjudication in that case was that these contracts were not enforceable, and that Kennedy and Van Fleet' were not entitled to have this half interest conveyed to them by Meyers or his grantees. While it is true that bill makes Lawrence a party defendant thereto, no relief is asked against him. It may be that the plaintiffs in that suit could have asserted that Lawrence was the real purchaser, and that his purchase inured to their benefit, and that the same was held by him simply as a trustee for the benefit of all the joint adventurers, and relied upon this as a ground for relief. This they did not do. The rule of res judicata, when applied to the plaintiff in a suit, is somewhat different in its effect than when applied to a defendant. Ordinarily a defendant, when he is sued, must set up every matter which exists that would defeat the claim asserted against him, and the adjudication in the suit ordinarily determines, not only every matter of defense which is actually set up, but also such matters as might pertinently be used as a defense. This is not the rule, however, in regard to a plaintiff. The adjudication in that case only settles the claims and grounds for relief actually set up and relied upon by the plaintiff. He, may have another ground upon which to base a claim for relief in that particular case not set up, and not relied upon, in which event the adjudication will not bar him from subsequently relying thereon in another suit. State v. McEldowney, 54 W. Va. 695; Perdue v. Ward, 88 W. Va. 371. We are, therefore clearly of the opinion that the adjudication in the former suit did not bar Kennedy and Van Fleet from setting up as a ground for relief against Lawrence, so far as the Meyers half interest is concerned, the facts now relied upon.

But this does not necessarily conclude the question. Lawrence’s plea goes further than simply setting up the former adjudication and relying thereon. It traverses the allegation in the cross bill that the purchase by Stage and Burns was for his benefit, and that they acted in his interest, anci asserts that he never acquired any interest whatever in this Meyers half interest until after it was determined that Kennedy and Van Fléet and their associates had no claim of any kind thereto. Does this make any difference ? It may be true that if Lawrence did not stand inj the relation of purchaser to Kennedy and Van Fleet he would be in a position to acquire for his own benefit the Meyers half interest from Stage and Burns at the time he says he did. We must not, however, lose sight of the fact that not only is Lawrence by reason of his purchase, jointly interested with Kennedy and Van Fleet, but be is a purchaser from them of an undivided interest in the whole property. He claims in the bill filed in this case this interest under that contract of purchase, and insists that he is entitled to it. It clearly appears that he was put in possession of the property and began and continued operations thereon under that contract of purchase, and that the Ring Oil Company organized by him for the purpose of carrying on these operations, retained possession and control of the property until, upon his motion, it was taken possession of by a receiver of the court, and the possession of this receiver is, of course, but the possession of the owners. It is very well established that a purchaser of real estate, or an interest in real estate, who is put in possession thereof by his vendor cannot acquire an adverse interest so long as he holds the same, and if he does acquire such interest it will inure to the benefit of his vendor, if he desires to have the advantage thereof, upon payment of the-purchase price thereof. 27 R. C. L. title “Vendor and Purchaser” § 283; Warvelle on Vendors, § 703; Buffalo Coal & Coke Co. v. Vance, 71 W. Va. 148; Smith v. Boyer, 72 W.Va. 632; Roller v. Effinger, 88 Va. 641; Galloway v. Finley, 12 Peters 264; Bush v. Marshall, 6 Howard 284; Misamore v.Berglin, 197 Ala. 111. 72 So. 347, L. R. A. 1916 F 1024; Page v. Bradford-Kennedy Co., 19 Idaho 685, 115 Pac. 694, 24 Am. & Eng. Anno. Cases 402; Frink v. Thomas, 20 Ore, 265, 12 L. R. A. 239; Patroski v. Minzgohr, 144 Mich. 356, 108 N. W. 77, 115 Am. St. Rep. 450; Lake v. Hancock, 38 Fla. 53, 56 Am. St. 159; Greeno v. Munson, 9 Vt. 37, 31 Am. Dec. 605; Harle v. McCoy, 7 J. J. Marshall, 318, 23 Am. Dec. 407; Meadows v. Hopkins, Meigs 181, 33 Am. Dec. 140. The fact that Lawrence’s purchase from Kennedy and Van Fleet was not of the whole property cannot change his relationship to them. He purchased an undivided interest in the whole. He was put in possession under that purchase, and he is in this suit setting up the same and insisting thereon. He is in the position of claiming an undivided interest in the whole property under Kennedy and Van Fleet, and another undivided interest in the whole property adverse to Kennedy and Van Fleet. This he cannot do. His acquisition of the Meyers half interest while he was holding under Kennedy and Van Fleet inures to their benefit. He is estopped to set it'up adversely to them. Of course, however, in order to have the advantage of it they will-have to pay him the cost of securing the same instead of only a part of the cost, as is argued by counsel. Their obligation to Lawrence was to sell him an undivided' eleven-thirty-seconds of the whole property. They purported to own the whole property, and he dealt with them on the basis of their ownership of the whole, and it is their duty to make good the title to the whole property. Lawrence is under no obligation to make good such title by the acquisition of an outstanding interest. He has fully paid for his eleven-thirty-seconds, and if he would have to pay eleven-thirty-seconds of the cost of purchasing the outstanding interest he would be paying twice for part of the interest acquired by him.

We are of opinion that the plea filed by Lawrence sets up no defense to the cross bill, and that the court should have sustained the objection to the filing of the same. We will, therefore, reverse the decree, sustain the objection to the plea, and remand the cause for further proceedings.

Reversed and remanded.