Ellis v. Brown

• Decision Date: 21 October 1949
• Docket Number: 10824.,No. 10823,10823
• Citation: 177 F.2d 677
• Parties: ELLIS et al. v. BROWN. BROWN v. ELLIS et al.
• Court: U.S. Court of Appeals — Sixth Circuit

177 F.2d 677 (1949)

ELLIS et al. v. BROWN.

BROWN v. ELLIS et al.

Nos. 10823, 10824.

United States Court of Appeals Sixth Circuit.

October 21, 1949.

George S. Wilson, Jr., Owensboro, Ky. (George S. Wilson, Jr., Wilson & Wilson, Owensboro, Ky., on the brief), for appellants and cross-appellees.

Hubert Meredith, Owensboro, Ky. (Hubert Meredith, Owensboro, Ky., on the brief), for appellee and cross-appellant.

Before ALLEN, McALLISTER and MILLER, Circuit Judges.

ALLEN, Circuit Judge.

This appeal and cross-appeal attack a judgment of the District Court holding appellee to be the owner of one-eighth of the seven-eighths working interest in certain oil and gas leases covering real property located in Daviess County, Kentucky. The court gave judgment for one-eighth of the seven-eighths of the value of all oil produced from the leaseholds in question, less one-eighth of the reasonable cost of production, ordered an accounting, and also gave judgment for payment to appellee of one-eighth of seven-eighths of the value of all oil produced from such leases in the future less one-eighth of the cost. The cross-appeal is instituted because of the District Court's refusal to enter judgment for appellee as to all leases acquired by appellant Ellis or by Ellis and associates covering land in Daviess County subsequent to January 23, 1946, and also as to certain land in Daviess County owned by Ellis in fee simple.

A contract was entered into between appellee and appellant Ellis on January 23, 1946, under which appellee agreed to and did assign to Ellis a seven-eighths interest in the working interest in 17 oil leases. The contract contemplated that other leases in Daviess County should also be secured and worked by the parties. On May 20, 1946, appellee obtained a valuable lease called the Shipp lease, which was placed in the name of Ellis. Under the agreement Ellis was obligated, entirely at his own expense, to sink the first well on the property covered by the Shipp lease. Work was begun on June 13, 1946, at a location selected by appellee, and was completed on August 4, 1946. The well was drilled to a depth of over 1,900 feet, costing appellants over $8,000, and proved non-productive, as it ran into sulphur water at the Mississippi line. Appellee contended that the well could have been plugged and shot and made a producing well; but when appellants offered to convey the well to him for that purpose, together with 40 acres additional, he refused the offer on the ground that he was not financially able to shoot the well. Appellee and Ellis disagreed about the location of the second well, and the site was picked by Ellis and Morrison, co-appellant herein and assignee of a one-eighth interest in the leases. Appellee thereupon stated that he "didn't want any part of it." Shortly afterward he left Daviess County and later left Kentucky to work in Michigan. He paid no share of the expense at any time. In February or March, 1947, appellee visited Ellis and asked for information about the project for the purpose of making out his income tax return. He was told by Ellis that he had no interest in the property, and this litigation ensued.

Appellants contend that appellee totally abandoned the enterprise and that under the doctrine announced in United Mining Co. v. Morton, 174 Ky. 366, 192 S.W. 79, appellee must be denied recovery.

Abandonment is the relinquishment of a right or of property with the intention of not reclaiming it or reassuming its ownership or enjoyment. In Kentucky, except in the case of a perfect legal title to a corporeal hereditament, every right or interest in, title to, or ownership of property may be lost by abandonment; and this rule applies to mining rights and privileges. United Mining Co. v. Morton, 174 Ky. 366, page 377, 192 S.W. 79.

We cannot agree, however, that the decision in the United Mining Co. case requires reversal of the judgment herein. The District Court found correctly that the contract of January 23, 1946, established a partnership. A mining partnership was also the subject of consideration in the cited case. There Morton and Langenbach formed a partnership which owned certain mining leases. Morton expressly contracted to spend his whole time on the work of the partnership. After two years he ceased completely to work in the partnership business, failed to contribute to partnership expenses, and left the state. For five years Morton failed to apprise his partner of his whereabouts, leaving Langenbach to bear the entire burden, financial and otherwise, of operating a zinc mine. The principal legal question was whether Langenbach was justified in surrendering the lease under which the mine had been operated by him at a substantial loss, and the court held that Morton had abandoned the partnership business, including his interest in the lease, and that the surrender by Langenbach was valid.

Here the principal consideration for the contract differed materially from that in United Mining Co. v. Morton, and sheds light on the question whether appellee intended, by his declaration that he wanted no part of it, to renounce his interest in the leases. If he did not so intend, there is no abandonment. Cf. Trammel Creek Oil & Gas Co. v. Sarver, 197 Ky. 594, 247 S.W. 753. Appellee made no agreement to spend his full time, or any part thereof, in working on the contemplated oil wells. The consideration for the contract was the assignment by appellee, immediately given, of the major part of his seven-eighths interest in 17 leases. Under the contract, the responsibility of both financing and directing the drilling of the first Shipp well was entirely upon Ellis. As to the other wells that were contemplated, since appellee had only a minor interest he could not direct the location nor the drilling. He disagreed emphatically with the location of the second well, and he went away from Daviess County not only because of his financial needs, but also because he felt that he was "just causing confusion" and the best thing for him was "to stay away as much as possible to not interfere with the operation." But he kept in touch with the project and asked for and received information about it from appellants. The record contains a letter signed by appellants' agent, Epperson, dated November 8, 1946, giving appellee information as to the drilling of an additional well under the Shipp lease, and as to the proposed location of another...