Ball v. The Red Square Oil & Gas Company and The Osage Oil Corporation

• Decision Date: 18 June 1923
• Docket Number: 24,822
• Citation: 113 Kan. 763,216 P. 422
• Court: Kansas Supreme Court
• Parties: J. S. BALL, Appellant, v. THE RED SQUARE OIL & GAS COMPANY and THE OSAGE OIL CORPORATION, Appellants; THE INDEPENDENT TORPEDO COMPANY; THE FARMERS STATE BANK OF NEOSHO FALLS, and THE BRADFORD SUPPLY COMPANY, Appellees

216 P. 422

113 Kan. 763

J. S. BALL, Appellant, v. THE RED SQUARE OIL & GAS COMPANY and THE OSAGE OIL CORPORATION, Appellants;

THE INDEPENDENT TORPEDO COMPANY; THE FARMERS STATE BANK OF NEOSHO FALLS, and THE BRADFORD SUPPLY COMPANY, Appellees

No. 24,822

Supreme Court of Kansas

June 18, 1923

Decided January, 1923.

Appeal from Woodson district court; ROBERT E. CULLISON, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. OIL AND GAS LEASE--Action Against Owners--Receiver Appointed--Interpleas Filed--Notice of Interpleas. Where in an action against a foreign corporation owning an oil and gas lease, brought by a creditor claiming a lien on the production, upon whose application a receiver has been appointed to operate the lease, other persons having claims against the defendant and the property are allowed to interplead, the defendant is required to take notice of their interpleas without the service of new process.

2. SAME--Decree Ordering Sale--Order Interpreted. The language of a decree ordering the sale of property and the application of a part of the proceeds to the costs of the receivership and like matters is interpreted as meaning that only such items are to be so paid as have been allowed by the court.

3. SAME--Petition Good Against Demurrer. Under the very liberal construction to which a pleading is entitled where it has not been attacked by motion or demurrer, the petition is held to set out sufficiently the plaintiff's cause of action.

4. MECHANIC'S LIEN--Liens for Labor and Materials--Obvious Error in Statute--Statute Construed. The statute giving a lien for labor and material furnished for the development or operation of an oil and gas lease refers, for means of its enforcement, to other statutes, one of which it describes as certain sections of chapter 168 of the Laws of 1899. The chapter so designated relates only to assignments of mortgages, but chapter 168 of the Laws of 1889 relates to mechanic's liens. It is held that the obvious intention was to refer to the latter chapter, and the statute is given effect accordingly.

5. SAME--Lien Statement--When Sufficient. Although under the statute above referred to a lien is allowed only for material actually used on the premises against which the claim is made, there is no requirement that such fact shall be made to appear in the lien statement. Where the claimant is a corporation an affidavit to the lien statement made by an agent need not recite that he has personal knowledge of the facts.

6. SAME--Certain Pipe-line Used in Marketing Oil--Included Within Operation of Mechanic's Lien. A pipe-line constructed and used solely for the marketing of the product of a particular oil and gas lease, although extending beyond the boundaries thereof, is within the operation of the statute giving a labor or material lien "upon the whole of such leasehold . . . the building and appurtenances and upon said oil and gas well for which they were furnished, and upon all the other oil wells, fixtures and appliances used in the operating for oil and gas purposes upon the leasehold for which said material and supplies were furnished and labor performed."

7. SAME--Matters of Procedure. Objections upon various matters of procedure are held not to require a reversal.

8. OIL AND GAS LEASE--Contract Relating to Division of Production. Where the owner of one-eighth of an oil and gas lease has a contract with the owner of the other seven-eighths by which the latter is to pay all the expenses of operation and the former is to receive one-eighth of the product free of charges therefor, a lien under the statute above referred to extends to the entire lease, including the one-eighth interest the owner of which, as between himself and the owner of the other seven-eighths, is relieved from liability for operating expenses.

9. SAME. In the situation stated in the foregoing paragraph mere unsecured contract creditors of the owner of the seven-eighths interest, who is engaged in operating the lease, have no right to look to the one-eighth interest for payment.

10. SAME--Sale of Lease Under the Lien Statute--Period of Redemption. Assuming that even before the amendment of 1923 the statute intended sales of oil and gas leases under the lien statute to be made without a right of redemption, the fact that a receiver was ordered to sell such a lease with a reservation of that right is not a ground of complaint by a party having no lien by statute and none by contract except against the production, the court, so far as he was concerned, having had a large discretion with respect to the disposition of the property.

A. R. Enfield, Charles H. Apt, Frederick G. Apt, Oscar Foust, John W. Brown, Kenneth H. Foust, all of Iola, G. H. Lamb, W. E. Hogueland, both of Yates Center, James M. Johnson, Frank W. Yale, and Ernest S. Ellis, all of Kansas City, Mo., for the appellants.

W. N. Banks, O. L. O'Brien, Walter L. McVey, Jay W. Scovel, all of Independence, Travis Morse, E. W. Myler, Oscar Foust, John W. Brown, Kenneth Foust, all of Iola, and E. E. Lamb of Yates Center, for the appellees.

OPINION

MASON, J.:

J. S. Ball brought against the Red Square Oil & Gas Company an action upon a claim for services, in which a receiver of an oil and gas leasehold was appointed. A number of interpleaders asserted claims against the property involved. Final judgment was rendered in favor of the plaintiff and the interpleaders, providing among other things for a sale of the property. The Red Square Company, which will be referred to as the defendant, appeals from practically the entire judgment and the plaintiff appeals from so much of it as directs the sale to be made subject to a right of redemption as in the case of real estate. An appeal is also taken by the Osage Oil Company, an interpleader.

As a part of this appeal the defendant presents the objections to the receivership which have already been considered and passed upon in the appeal from the overruling of the motion to discharge the receiver (Ball v. Oil & Gas Co., ante, p. 760) the two appeals having been heard together.

1. All but one of the interpleas asserted specific claims against the property. The defendant was not served with summons or other formal notice of their filing. Its attorneys, however, appeared at the trial of the issues so presented, although they introduced no evidence. The rule in this state is that a defendant once served is bound to take notice of the subsequent proceedings--including pleadings filed by new parties. (Shellabarger v. Sexsmith, 80 Kan. 530, 103 P. 992.) There are some reservations in the application of the rule (Beekman v. Trower, 82 Kan. 327, 108 P. 110), but they do not apply here. The defendant was present by his attorney at the trial of these interpleas, and having made no application to plead or introduce evidence, is not in a position to complain of the enforcement of the rule.

2. The order for the disposition of the proceeds of the sale of the property included a direction for the payment therefrom of the costs of the administration of the receiver and similar items--for instance the compensation of the receiver. This portion of the judgment is attacked as an attempt to delegate to the receiver the judicial power of determining the amount and validity of such claims against the fund. We interpret the language as meaning that the various items referred to shall be paid only as they are fixed and allowed by the court, and as so interpreted the objection does not apply.

3. The plaintiff's judgment is attacked on the ground that his petition was fatally defective in that it did not distinctly allege that he had a contract with the defendant, or the terms of the contract if he had one. Even against a demurrer a petition is liberally construed and held sufficient if the facts stated, whether well pleaded or not, with all the reasonable inferences to be drawn therefrom, constitute a cause of action. (Bowersox v. Hall, 73 Kan. 99, 84 P. 557; Gano v. Cunningham, 88 Kan. 300, 128 P. 372; Roberts v. Pendleton, 92 Kan. 847, 142 P. 289; Hempstead v. Hospital Association, 112 Kan. 241, 245, 210 P. 492.) And where the petition is not attacked by motion or demurrer a still more liberal rule of construction is adopted. "After answer filed, an objection to a petition that it does not state facts sufficient to constitute a cause of action is good only when there is a total failure to allege some matter which is essential to the relief sought, and is not good when the allegations are simply incomplete, indefinite, or statements of conclusions of law." (Laithe v. McDonald, 7 Kan. 254, 261.) The petition alleges that the plaintiff began drilling and developing the lease at the request of "the then owner," and continued it after the purchase by the defendant shortly thereafter; that the defendant had been indebted to him on account thereof in the sum of $ 9,410.75, for a part of which it had given in two notes for $ 2,000 each, the debt at the time the action was begun being $ 8,300.65, for which a recovery was asked. The answer admitted a contract to pay the plaintiff $ 1.50 and $ 1.75 a foot for drilling wells. The omission of the petition to state specifically that the work sued for was done under contract with the defendant, and its failure to specify the number of feet drilled, are not now a just cause of complaint.

The plaintiff's judgment was for $ 9,041.90, which obviously included the amount for which the notes were given. The defendant asserts that the recovery was too large by the amount of the notes, because they were not sued upon; that if the plaintiff had desired to recover upon them he would have been obliged to plead them as separate causes of action and attach copies; and that the notes...