Thompson v. Crystal Springs Bank

Citation21 F.2d 602
Decision Date26 August 1927
Docket NumberNo. 7761.,7761.
PartiesTHOMPSON et al. v. CRYSTAL SPRINGS BANK.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

J. E. Curran, of Blackwell, Okl. (S. H. King and Bellatti & Brown, all of Blackwell, Okl., on the brief), for plaintiffs in error.

Frank Settle, of Tulsa, Okl., and Lester A. Maris, of Ponca City, Okl. (Hulette F. Aby and William F. Tucker, both of Tulsa, Okl., on the brief), for defendant in error.

Before KENYON, Circuit Judge, and MOLYNEAUX and JOHN B. SANBORN, District Judges.

KENYON, Circuit Judge.

Parties will be designated as in the trial court. Plaintiff, Crystal Springs Bank, a Mississippi corporation, brought action against defendants on two promissory notes given August 2, and September 18, 1922, respectively, one for $5,000.00 and one for $1,000.00, signed, "Marshall Oil & Gas Company, by W. L. Marshall," claiming that defendants and Marshall constituted a partnership under said name, and that Marshall, with full authority from the defendants, borrowed money represented by the notes and used it in carrying on the business of the partnership, viz. dealing in oil leases. The parties involved as defendants are R. R. Thompson, C. F. Bays, L. D. Farmer, W. T. Rucker, H. B. Housch, and Robert Ballentine. The case was submitted to a jury and verdict returned for plaintiff as to both notes. Defendants' claim is that there was no intention on the part of the defendants to form a partnership of any kind, and that the evidence discloses that the original subscription made by the parties to Marshall was a mere "grubstake." Little was said during the trial as to the proposition now strongly urged, that the arrangement constituted what is known as a mining partnership.

The facts in brief substantially are: W. L. Marshall interested the defendants, who were residents of Oklahoma, in a certain proposition with reference to oil and gas leases in Mississippi, held by what was known as the Latson Trust. Marshall had a contract with this company for the acquisition of their interest in such leases in Hinds and Copiah counties, Miss. One provision of this agreement in which Marshall was the second party is as follows:

"Party of the second part agrees to take over proposition as it stands, and to get leases perfected, and Latson Trustee straightened through the courts, so as to make all records clear, and titles merchantable, and to promote the proposition to a drilling contract for a test well, or a sale outright. Parties of the first part agree to make assignment to party of the second part as called for on any sale that he may make, party of the second part to furnish his own abstract, or certification of title."

Defendants with others entered into certain articles of agreement and subscribed $100 each to the enterprise. These articles contain the following provision:

"We, the undersigned subscribers, herewith pay each, the sum of one hundred ($100.00) dollars, the same to be for expenses in sending a representative to Mississippi to perfect the leases that are now held by the Latsen Trust, and now under contract to W. L. Marshall; it being understood that each $100.00 represents one-tenth interest in the Latsen Trust-Marshall Contract.

"Item: That, just so soon as this subscription is completed, then the subscribers thereto will meet, elect officers, and perform all other acts that shall be thereupon agreed to."

The contract between Marshall and the Latson Trust required Marshall to perfect the leases and make title merchantable and to promote the proposition to a drilling contract for a test well, or a sale outright. On December 15, 1921 defendants had a meeting at Blackwell, Okl. The minutes of that meeting are in evidence, a portion of which is as follows:

"At a meeting of the subscribers to take on the leases owned by the Latson Trust in Mississippi, the following were present: R. R. Thompson, W. L. Marshall, Robert Ballentine, R. C. King, H. B. Housch, and W. F. Rucker, absent, Mr. Farmer, Bays and Smith. Mr. Thompson was made chairman of the meeting and W. T. Rucker secretary. A motion was made and carried that the five members present on a committee to work with Mr. Marshall in disposing of the acreage, Mr. Thompson to act as secretary, and Housch as treasurer of the committee. After discussing the matter pretty thoroughly, the meeting adjourned.

"W. T. Rucker, Secy."

Marshall went to Mississippi to look after the proposition. Thompson, who was secretary of the committee, elected at the meeting referred to, and others of the defendants were in constant correspondence with Marshall relative to the general plans which he was undertaking to carry out. Marshall entered upon the drilling of a test well. Some misunderstanding with various people arising, his work was apparently delayed. He named the company "Marshall Oil & Gas Company" for the purpose of selling, as he testifies, acreage to a better advantage, and a large sign was placed upon a part of the property, designating it as the "Marshall Oil & Gas Company." Defendants Thompson and Housch went to Mississippi, visited the properties, and met the president of plaintiff bank whom they advised that they were pleased with what Marshall was doing, and that they were all, referring to the defendants, standing back of Marshall in what he did, and asked him to render Marshall assistance. July 28, 1922, a meeting was held at Blackwell, Okl., by those interested. The minutes of this meeting are in evidence. Defendants Farmer and Bays were not present at the meeting, but the other defendants were. It was termed a stockholders' meeting of the Marshall Oil & Gas Company. Five trustees were elected; three thereof being defendants Ballentine, Farmer, and Housch. Marshall and R. C. King, who does not appear to have been served with notice, were the other two. After the so-called stockholders' meeting, the trustees had a meeting at which defendant Ballentine was made chairman, King, secretary, Marshall, manager, and Housch, treasurer. Shortly after this it became necessary to borrow money to carry on the drilling operations which Marshall had commenced. He made application to plaintiff for a loan of $5,000 to meet the pay roll, and wired defendant Thompson as follows:

"Crystal Springs, Miss. August 1st, 1922, Mr. R. R. Thompson, Blackwell, Oklahoma. Drill down one thousand feet first payment due and they want the money get boys together and wire this bank to loan me five thousand for a few days feel sure will have it then found good showing of oil at nine ten great deal of interest shown have paid the three thousand draft."

Thompson, after consulting defendant Housch, wired in response thereto:

"Blackwell, Okla. 1:59 P. M August 2, 1922.

"L. M. Dampeer, Banker Crystal Springs, Miss. We OK five thousand loan to Marshall.

"R. R. Thompson and Associates."

After the bank received this telegram, it loaned the money represented by the $5,000 note in suit. The $1,000 represented by the other note in suit was borrowed subsequently. All the money received from the bank was paid to the drilling contractor who was drilling the well under a contract. In addition to the $100 subscribed by each of the defendants to defray Marshall's expenses in going to Mississippi with relation to the Latson Trust leases, other sums not large in amount were thereafter advanced. The record is replete with correspondence between Marshall and defendants Thompson, Housch, Farmer, and Bays, concerning the undertaking.

The court submitted to the jury to determine as a question of fact whether a general partnership existed between the defendants and Marshall, or a mere grubstake agreement, and, if a general partnership, whether the drilling of the well was within the scope of the partnership. The alleged error in submitting the case to the jury on the theory of a general partnership was raised by exceptions to the instructions and objections to the admission of certain evidence, and is presented here under numerous assignments of error. No instructions were requested on the question of a mining partnership.

Of course, if the arrangement under consideration was what is commonly known as a "grubstake" agreement, there would be no liability on the part of these defendants on these notes, unless special authorization to Marshall to sign them was shown. 27 Cyc. p. 757; Prince et al. v. Lamb et al., 128 Cal. 120, 60 P. 689; Hartney v. Gosling et al., 10 Wyo. 346, 68 P. 1118, 98 Am. St. Rep. 1005; Gillespie v. Shufflin et al., 91 Okl. 72, 216 P. 132. The jury found against this theory advanced by defendants.

Plaintiff's amended petition uses the term "mining partnership" as applied to the arrangement, but it also alleges that a general partnership existed.

For reasons born of the supposed necessity of mining development, some exceptions to the general law of partnerships seem to have grown up with relation to liabilities under and proof of mining partnerships. These partnerships generally result from the co-operation of tenants in common in developing leases. That a mining partnership is a peculiar one and differs in some respects from an ordinary commercial or trading partnership is well established by the authorities; the principal difference being that in a mining partnership the delectus personæ does not exist.

In the leading case of Skillman v. Lachman, 23 Cal. 204, 83 Am. Dec. 96, it is said:

"In the case of an ordinary mining partnership, something more will be required to raise the presumption of liability arising from persons holding themselves out to the world as partners than would be necessary in the case of an ordinary partnership. Such persons, in the absence of other circumstances, cannot fairly be presumed to have intended to render themselves liable to all the consequences of a commercial partnership."

In Kahn v. Central Smelting Co., 102 U. S. 641, 26 L. Ed. 266, the Supreme Court of the United States said:

"Mining partnerships as distinct...

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3 cases
  • Humphrey v. Bullock
    • United States
    • Court of Appeals of Texas
    • 25 d3 Janeiro d3 1984
    ...in Texas, 12 Texas L.Rev. 410 (1934). However, a general partnership may engage in a mining enterprise. Thompson v. Crystal Springs Bank, 21 F.2d 602 (8th Cir.1927); Rowley, Rowley on Partnership § 56.5 (2d ed. 1960); Summers, The Law of Oil and Gas (1962). The method by which a mining and ......
  • In re International Fuel & Iron Corporation
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • 10 d6 Setembro d6 1927
    ......(D. C.) 248 F. 356; Merchant's National Bank et al. v. Sexton, 228 U. S. 634, 33 S. Ct. 725, 57 L. Ed. 998. ......
  • Yeager v. Graham
    • United States
    • United States State Supreme Court of Kansas
    • 7 d6 Outubro d6 1939
    ...... would be necessary in the case of an ordinary partnership. Thompson et al. v. Crystal Springs Bank, 8 Cir., 21. F.2d 602, and cases cited. ......

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