South Penn Oil Co. v. Calf Creek Oil & Gas Co.

140 F. 507, 1905 U.S. App. LEXIS 4810

• Court: U.S. Circuit Court for the District of Northern West Virginia
• Decided: August 22, 1905
• Docket: No. 580
• Status: Published

Opinion

DAYTON, District Judge

(after stating the facts as above). The demurrer in this case, I think, was very properly overruled by my predecessor, and, although defendants in their answer and arguments have earnestly insisted that this suit ought not to be maintained, because plaintiff can make full defense to the actions at law, I do not agree with them. The defense of the actions at law involves all the elements of estoppel in pais by the acts, conduct, and writings of the parties; it also involves a consideration of fhe question of how far defendants may be barred by a judicial proceeding; and, further, it might involve a determination from the involved state of facts of the particular rights to recover, if any such they have, between the two principal defendants, the Calf Creek Company and Irwin’s administrator. The one, not being party to the other’s action, would not be bound by the jury’s verdict in the other’s case. Thus the plaintiff, who is defendant in those actions, might run great risk, if held liable at all, to have a double liability created, which would cause it extraordinary trouble and expense, more than probably by a final resort to equity, to avoid. The avoidance of a multiplicity of suits is involved, as well as the defense of estoppel, here, and equity, it seems to me, is required to intervene to do full and exact justice according to its principles and those of good conscience. While estoppel may be set up as a defense at law, especially to the action of ejectment, as held in Kirk v. Hamilton, 102 U. S. 68, 26 L. Ed. 79, and Dickerson v. Colgrove, 100 U. S. 578, 25 L. Ed. 618, yet it is to be borne in mind that the doctrine of estoppel by acts and conduct of parties is a creation of equity alone, and the very great weight of authority is to the effect that generally equity alone should administer it. This is peculiarly so where the circumstances out of which such estoppel is claimed to arise are complicated and involved in transactions between different parties.

An examination of the facts of the two cases cited show them to have been simple and the remedy easily applied. In those cases legal titles only could be relied on. Here executory contracts alone are involved. It is not the simple question of whether a, party having a full legal title by deeds has by an act of his estopped himself, but the very question of recovery in these actions at law here must necessarily be determined by the construction and effects of a number of contracts purely executory, standing alone, and m their relation to and effects upon each other. For instance, if it should be held that the oil lease contract of Irwin to Huggins conveyed all the oil and gas underlying Irwin’s 60 acres of land, then how possibly could Irwin’s administrator maintain his suit at law against the South Penn Company for any part of this oil? If it should be, on the other hand, held that the Calf Creek Company sold and conveyed all of its stock, franchises, and holdings to Suhr & Co. before its suit was brought, how could it maintain it? On the other hand,- if it be held that the Irwin-Huggins contract is void for uncertainty of description, and therefore granted nothing to Huggins and his assignees, how could the South Penn Company be held to account to any one but Irwin’s administrator, and how to him, in case his decedent, by his acts, declarations, conduct, and contract, acquiesced in their taking the oil and estopped himself from denying their right to do so? The simple fact that all these questions may arise, and had to be considered by the South Penn Company in preparing its defense to these actions, fully convinces me that they could well assuthe that such defense could not adequately be made at law.

Another consideration has had great weight in my mind in this holding. While Greenleaf (Ev. § 22) and Stephens (Dig. Ev. §§ 102-105) treat estoppel as a branch of the law of evidence, the later and better authorities hold that, inasmuch as they constitute good defenses or good grounds of title, as the case may be, and frequently operate to transfer or bar title with the same full effect that a conveyance or a statutory adverse possession would have, they should be held to be means of determining primary rights of property, and not the mode or means by which such rights arc proved. Stoddard v. Chambers, 2 How. 284, 11 L. Ed. 269; 2 Pom. Eq. Jur. § 801. This being true, and estoppel, therefore, constituting a part of the substantive law of property and contracts, it seems to me to be peculiarly the duty of federal courts to follow the decisions of the courts of their states in both their construction and method of application. If this be true, there can be no question about the matter. The Supreme Court of Appeals of West Virginia, in Hanly v. Watterson, 39 W. Va. 214, 19 S. E. 536, and in Norfolk & Western R. Co. v. Perdue, 40 W. Va. 442, 21 S. E. 755, has distinctly held that estoppel by conduct of party, commonly called “estoppel in pais,” is an equitable defense, to be enforced in equity. The same court has held, in Bias v. Vickers, 27 W. Va. 456, that, where a party has an equitable defense made by express statute available at law, he is not deprived of his right of setting up such defense in equity, but may have his choice of so doing or availing himself of it at law under the statute. There can be no doubt of this court’s jurisdiction to maintain this suit. The actions at law were properly instituted in this court by reason of diversity of citizenship. This suit is brought as ancillary thereto, and by reason thereof to aid the defendant therein to make its defense. It is immaterial under such circumstances that some of the parties connected with the transactions, who have been made parties, may be citizens of the same state as plaintiff.

The defendants insist that the bill is multifarious, because the two actions at law, involving the one the claim of the Calf Creek Company and the other that of Einley’s administrator, are sought to be enjoined in one and the same suit, insisting that their rights are wholly separate and distinct. I do not believe this contention to be well founded. While the actions at law are distinct, they both relate to one and the same subject-matter, to wit, the oil taken by the South Penn Oil Company from the land of Wm. Irwin. It clearly appears, too, that it is not a divisible subject-matter. If Huggins’ lease, made long before any oil was produced by any one from the land, granted to him all the oil under this 60 acres, as claimed (and it appears by the record that his assignees exercised the right without objection from anybody to bore wells and take the oil from all parts of the farm, except from the right of way strip), then, as I have intimated, Irwin’s administrator can have no claim whatever against the plaintiff. If those holding under Huggins allowed another to take away a part of their oil, it was no concern of Irwin. He could under his contract recover his royalty alone from them. If, on the other hand, his lease is void, then the Calf Creek Company, holding under it, has no cause of action; for in the law declarations there are no allegations of <xn assignment or apportionment agreed and made between them of the claim for damages against plaintiff for the oil taken. It is always to be remembered that the determination of the question of whether a bill is multifarious is one largely within the sound discretion of the court, and dependent to a very considerable degree upon the particular facts of each case. United States v. American Bell Telephone Co., 128 U. S. 315, 9 Sup. Ct. 90, 32 L. Ed. 450; Walker v. Powers, 104 U. S. 245, 26 L. Ed. 729; Brown v. Guarantee Trust Co., 128 U. S. 403, 9 Sup. Ct. 127, 32 L. Ed. 468; Oliver v. Piatt, 3 How. 333, 11 L. Ed. 622; Arnold v. Arnold, 11 W. Va. 455; Shafer v. O’Brien, 31 W. Va. 601, 8 S. E. 298; Segar v. Parrish, 20 Grat. 672.

This brings .us to the merits of the controversy. There can be no longer question that the contract from Irwin to the Ohio River Railroad Company did not confer a fee simple, but only an easement in and to the 50-foot strip of right of way, and in consequence that the railroad company’s lease to Bicldey conferred upon him or his assignees no legal right to operate for and take away oil and gas therefrom. I think it is just as clear, though not so well settled judicially, that, standing alone upon its own terms, the lease from Irwin to Huggins is void for uncertainty in its description, and therefore conferred upon him and his assignees no legal right to the oil and gas in and under the 60 acres, or any part thereof. The test of an instrument’s sufficiency in description is whether specific performance can be made according to the very terms of the deed or contract. Ret us examine this contract a moment. Properly construed, it undertakes to convey all the oil and gas underlying 30 acres of the 60-acre tract, to be bounded on the north by lands of the Ohio river, east by lands of Mrs. T. P. Pollock, south by lands of W. M. Irwin, and west by lands of Mrs. J. C. Sharp. These words of description might well describe the whole tract, and, if the oil under the whole tract was being granted, might well be held sufficient; but we are to remember that 30 acres'out of the 60 are to bé carved out and identified by these words of description. In how many different forms could this 30 acres be surveyed out that would reasonably conform to these words of description, and which one would a court have the right to choose as the one meant by the contract? I am aware that the courts deal leniently with this matter of descriptive boundaries; but in a case of this kind, where the inclusion in the boundary of one acre covering the right of way strip, for example, may be worth much more than another acre included by a different survey, there must be some intimation of where the division, lines are to fall. The clause in the contract giving the “refusal” of the oil under the other 30 .acres does not help things, for only that under 30 acres was in fact granted. The books are full of cases where courts of equity have refused to specifically enforce contracts of sale of lands, because the terms of description are too indefinite. I need only cite such cases from our state reports as Crim v. England, 46 W. Va. 485, 33 S. E. 310, 76 Am. St. Rep. 826; Westfall v. Cottrills, 24 W. Va. 763; Mathews v. Jarrett, 20 W. Va. 415; Gallagher v. Gallagher, 31 W. Va. 9, 5 S. E. 297.

If this position be rightly taken, then the Calf Creek Company, like the South Penn Company, must be driven to rely upon an equitable estoppel as against Irwin’s administrator, should he determine to sue for the oil taken from the 60 acres by it; and it certainly has no right of action against the plaintiff for damages as alleged in its declaration in the law cause under such circumstances. But, whether this position be tenable or not, I have no trouble in reaching the conclusion that the Calf Creek Company cannot maintain its action at law for several other reasons:

First. Because the pleadings and decrees in the case of Bickley against it fully recognized the South Penn Company’s right to operate upon and take the oil from the right of way. Unlike Lockwood in his case against Logan, no injunction was asked, no denial was made by the Calf Creek Company, but the decree recognizing this' right was wholly acceded to. In Corrothers v. Sargent, 20 W. Va. 351, at page 356, Snyder, J., says:

“It is well settled that a point once adjudicated by a court of competent jurisdiction, however erroneous that adjudication, may be relied on as an estoppel in any subsequent collateral suit in the same or any other court, at law or in chancery, when either party or the privies of either party allege anything inconsistent, with it; and this, too, when the subsequent suit is upon the same or a different cause of action. Nor is it necessary that precisely the same parties were plaintiffs or defendants in the two suits.”

In Beckwith v. Thompson, 18 W. Va. 103, it is held:

“A fact necessarily involved in an issue on which there has been a judgment is thereby exclusively settled in any suit thereafter between the same parties and their privies.”

In Tracey v. Shumate, 22 W. Va. 474, it is held:

“A final decree in a chancery cause is as conclusive as a judgment at law; and it is conclusive on the parties and their privies of every fact which the final decree necessarily 'affirmed the existence of, whenever the existence of such facts are again put in issue.”

Perhaps no court in the United States has gone farther towards maintaining this doctrine of legal estoppel than has the Supreme Court of Appeals of this state, as shown by such cases as. Western M. & M. Co. v. Va. C. C. Co., 10 W. Va. 250; Corrothers v. Sargent, 20 W. Va. 351; Mason v. Bridge Co., 20 W. Va. 223; Wandling v. Straw, 25 W. Va. 692; McCoy v. McCoy, 29 W. Va. 794, 2 S. E. 809; Seabright v. Seabright, 33 W. Va. 152, 10 S. E. 265; Parsons v. Riley, 33 W. Va. 464, 10 S. E. 806; Sayre’s Adm’r v. Harpold, 33 W. Va. 553, 11 S. E. 16; Lawson v. Conaway, 37 W. Va. 159, 16 S. E. 564, 18 L. R. A. 627, 38 Am. St. Rep. 17.

What is clearer than that in this Bickley suit it was determined that the South Penn Company had bought the lease from Peters and Spence, was going to drill additional wells, and had right to do so, and, in order to carry out the obligations of the Calf Creek Company, counter wells must be sunk? The Calf Creek Company was a party, conceded all this, and certainly is now estopped from denying it. Nor can this conclusion be avoided on the ground that the South Penn Oil Company was not a party to the suit, not bound by its decrees, and the facts recognized and adjudicated .were not, therefore, adjudicated between the same parties or their privies in interest, for the plain and indisputable reason that Bickley, the Calf Creek Company, and Irwin, were parties. Bickley had taken the lease from the railroad company, had taken Peters and Spence in partnership with him, and had instituted the suit, and during its pendency the South Penn Company had become a purchaser of the interests of this partnership, with Bickley as a member of it. It is not necessary to cite authority to show that a pendente lite purchaser is not required to be made, by amendment, a party, in order to be bound by the findings of facts or the judgments or decrees in a cause; for that point has been too long and too well settled to admit of contradiction.

Second. Because I regard it as grossly inequitable to say that this Calf Creek Company could allow its vice president, secretary, and manager, Bickley, to go to the railroad company and take this contract, assign it to Peters and Spence, retaining an interest, however, allow them to expend large sums in boring for oil, obtain it, allow them to assign to plaintiff, permit it to expend other large sums in drilling other wells, take away the oil, pay royalty to the railroad without a word of dissent, and then come in and recover the value of the oil taken.

Third. I am fully convinced that a fair construction of the resolutions of its directors confirming its sale to Henry Suhr & Co passed to that firm all of its rights and interests in these matters— in fact its stock and franchises — before its suit at law was brought, and that, therefore, its institution was unwarranted.

And touching the action brought by Irwin’s administrator I also have no trouble in reaching the conclusion that it cannot be maintained for these reasons:

First. He did not, like Uhl, deny that his contract gave the railroad the fee simple to the right of way. On the contrary, he declared it did so. If he was ignorant of what he had done and the extent of his own contractual act, lie certainly could not, nor can his administrator, be allowed to plead such ignorance in his own behalf to the prejudice of innocent parties who acted upon his own declarations as to what he had done. He not only allowed Spence and Peters, and their assignee, the plaintiff, to enter, but also by •contracts for valuable considerations suffered them to haul and lay pipe lines over his other land in order to enter upon the right of way. He aided them in commencing operations. He permitted them, for a money consideration, to build a tank on his land to store the oil. He suffered the oil to be taken away.

Second. He, too, was a party to the Bickley suit, filed his own sworn answer therein, and asked relief therein of counter wells against the plaintiff’s wells on the right of way. He was bound by the decrees therein.

Counsel for both parties with commendable zeal and industry have discussed in elaborate detail all the elements of equitable estoppel, and have cited a very great number of cases in illustration and support of their respective views. I have examined carefully these authorities, but deem it unnecessary to discuss them here. As I have hereinbefore said, estoppels are a part of the substantive law of property and of contracts, and therefore the obligation of this court to follow the decisions of the courts of this state touching their construction and operation is plain; and I think the principles laid down in Hanly v. Watterson, 39 W. Va. 214, 19 S. E. 536, and Norfolk & W. R. Co. v. Perdue, 40 W. Va. 442, 21 S. E. 755, not only justify but require, me to hold that Irwin by his acts estopped himself from denying plaintiff’s right to operate for and appropriate the oil from the railroad right of way through his land.

Let decree be entered granting to. the plaintiff the relief prayed for.