Harris v. Gurley, 7873.

• Decision Date: 03 January 1936
• Docket Number: No. 7873.,7873.
• Citation: 80 F.2d 744
• Parties: HARRIS et al. v. GURLEY.
• Court: U.S. Court of Appeals — Fifth Circuit

80 F.2d 744 (1936)

HARRIS et al. v. GURLEY.

No. 7873.

Circuit Court of Appeals, Fifth Circuit.

January 3, 1936.

William J. Park, of Tyler, Tex., and Jos. W. Bailey, Jr., of Dallas, Tex., for appellants.

Gordon Simpson, of Tyler, Tex., James A. Hall, of Clovis, N. M., and Thos. G. Woolsey, of Clayton, Mo., for appellee.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

SIBLEY, Circuit Judge.

This appeal is from a decree in favor of A. L. Gurley against J. T. Harris, J. C. Harris, and L. M. Harris, establishing and then dissolving a partnership among them, fixing the sum due to Gurley on an accounting, appointing a receiver for the partnership assets, and providing for their sale and distribution. The assignments of error complain of each result. The bill alleged the formation in the fall of 1931 among the four named persons of "a co-partnership agreement for the purpose of buying and developing oil land and leases by drilling wells, producing and selling oil, and the drilling and equipping of wells for others engaged in the oil business"; that at first only Gurley and J. T. Harris, the father of J. C. and L. M. Harris, were included, and what is called the Phillips lease was alone concerned, which they undertook to develop by drilling a well on it for an oil payment, if successful, of $120,000 to be equally divided between the two; that pending the drilling J. T. Harris acquired an oil lease on what is called Block 17, J. C. Harris and L. M. Harris also claiming to be interested, and L. M. Harris was acquiring one known as the De Moss lease; and by mutual agreement all the four persons and the three properties were taken into the partnership, each partner to be interested one-fourth; that the Phillips well was successfully completed October 4, 1931, and wells on the two other leases about December 17, 1931; that the enterprise, except as to the Phillips well to which Gurley and J. T. Harris contributed cash, was financed by selling or borrowing on the anticipated oil; that the Harrises actively managed the business of drilling and producing, since Gurley lived in New Mexico and fell ill; that vast quantities of oil had been taken out, both that allowed by state regulations and much more in excess of them, which was converted and sold by the Harrises in cooperation with others; that, while the legal title to two of the oil properties stood in the name of J. T. Harris and the third in that of L. M. Harris, they were held in trust for the partnership, and Gurley was entitled to an account for his share of the oil after paying partnership debts and expenses; that he had been excluded from the business, been sent but little money from it, and a settlement had been refused, so that he was entitled to a dissolution and an accounting and a receiver to wind up the partnership.

The answer denied the bill generally, and specially denied that Gurley had any interest in the De Moss lease; and denied that as to the others the debts and expenses had been discharged by the receipts; that the Harrises had operated the wells themselves; or that anything was due to Gurley. A partial account of oil taken from the Phillips and Block 17 wells was exhibited. All issues of fact were referred to a master. On exceptions to his report, the judge heard further evidence and made some slight further findings, approved the master's report, and entered a decree establishing "the partnership as is claimed and alleged in the complainant's bill filed herein; that the partnership acquired and owned the interest, rights and titles as alleged in the bill, one-fourth of which is adjudged and decreed to A. L. Gurley in the foregoing provisions of this decree"; that dissolution should be awarded and, the partnership property not being susceptible of fair division, a receiver should be appointed to sell "the right, title and interest held and owned by the partnership." A recovery was awarded Gurley against the Harrises jointly of $70,587.56 on an accounting to date.

Some questions are raised upon the face of the proceedings. On the coming in of the master's report the Harrises claimed that the suit was one at law for the recovery of land and for damages for conversion of oil, and that it should be transferred to the law docket for trial, or at least the issues of title and damages should be submitted to a jury. The motion to this effect was denied and the ruling repeated in the decree. We think it too plain for argument that the proceeding was equitable. The title asserted was an equitable one, to wit, a holding of the legal title to realty by J. T. and L. M. Harris in trust for the benefit of a partnership. The main relief sought is dissolution of the partnership and an account among the partners which is an ancient head of equity jurisdiction. The receivership also sought is relief peculiar to equity. It is true that the decree in one place undertakes to award to Gurley "title and possession" of a one-fourth interest in the oil properties and in another place a writ of possession, but this is foreign to the true purpose of the bill and contradictory to the parts of the decree which appoint the receiver and instruct him to take possession and sell. These expressions should be expunged. Again it appears that the bill prayed to recover in the accounting the highest value of oil between the time of its conversion and the trial, and the master and the court allowed that value on excess oil. This measure of value of converted property is sometimes resorted to at law on the idea that the true owner might have sold his property at that highest value if it had not been taken from him, and the wrongdoer is therefore held to pay it. But it can have no just application in this equitable accounting between partners. The error in claiming and applying it does not convert the case into one at law, but is to be corrected otherwise. There was no error in refusing a jury trial.

The bill discloses and the decree recognizes that two of the oil properties were in state receiverships alleged to be friendly, if not collusive, to which proceedings Gurley was not a party. It is argued that on well-recognized principles of comity an existing state receivership cannot be attacked in a federal court, nor could a rival receiver be there appointed. The decree rendered recognizes the state receiverships and the subordination of the federal receivership to those in the state courts, and requires the federal receiver to make due and proper application to the state courts for possession of the properties. This is no breach of comity. A receiver was found necessary to take charge of the partnership assets and to administer them. Some of them are not involved in the state receiverships. Those that are may at any time be relinquished to the federal receiver, or the partnership interest, which is less than the fee, may be by the state receivers paid over to him. His appointment is entirely proper.

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