Harris v. Young

• Decision Date: 22 June 1921
• Docket Number: No. 13172.,13172.
• Citation: 298 Ill. 319,131 N.E. 670
• Parties: HARRIS et al. v. YOUNG et al.
• Court: Illinois Supreme Court

298 Ill. 319

131 N.E. 670

HARRIS et al.

v.YOUNG et al.

No. 13172.

Supreme Court of Illinois.

June 22, 1921.

Error to Appellate Court, Third District, on Appeal from Circuit Court, Clark County; Walter Brewer, Judge.

Suit by M. E. Harris and others against Doit Young and others. The decree was affirmed by the Appellate Court (215 Ill. App. 489), and plaintiffs bring certiorari.

Reversed and remanded, with directions.Everett Connelly, of Marshall, for plaintiffs in error.

Samuel M. Sholfield, of Marshall, for defendants in error.

DUNCAN, J.

An order of the United States District Court for the Eastern District of Illinois was entered October 27, 1909, for the sale of oil and gas leasehold estates held and owned by the J. B. Nay Oil & Gas Company, bankrupt. The leaseholds so sold are known and described in this record as the Payne leases; one being a 24-acre tract and the other a 40-acre tract situated in Licking township, Crawford county, Ill. W. W. Shuler became purchaser at said sale for the sum of $5,500. The report of the sale was confirmed by the court on December 23, 1909, and a deed was executed to Shuler on December 27, 1909. Shuler made the purchase by virtue of an agreement between himself, M. E. Harris, Charley Johnson, and Kore Queen, by which Harris was to have a one-eighth interest therein, Shuler three-eighths, Johnson two-eighths, and Queen two-eighths. Shuler on December 31, 1909, deeded to Doit Young, or assigned to him, an undivided one-half interest in the leaseholds; this undivided one-helf representing the shares that were to be deeded to Johnson and Queen, and the deed of assignment being recorded on January 11, 1916. Young was cashier of the Casey National Bank, of Casey, Ill., and had agreed with Queen that the bank would furnish the money with which to purchase his interest, and was to hold Queen's interest in said leaseholds as security for the purchase money and for other money owed the bank and previously borrowed by Queen, in accordance with a certain declaration of trust executed by Young on December 31, 1909, and recorded January 18, 1913. This declaration of trust recites that Young received from Shuler the assignment of an undivided one-fourth working interest in the oil and gas leaseholds, which assignment includes all wells, tankage machinery, and appurtenances on and belonging to the 24-acre lease and all other assets due the property. He then certifies that he holds the same in trust for the benefit of Queen, as security for the payment of any and all notes given by Queen to the Casey National Bank, or any overdraft or account of Queen in said bank, and upon payment of--

‘any and all such notes or overdrafts at any time, then I, Doit Young, agree to and do assign and set over to Kore Queen, his heirs or assigns, all of the above one-quarter interest in the lease, wells, appurtenances, as above described.’

Just after executing this declaration of trust Queen and the bank had a settlement, in which it was found that Queen owed the bank $2,755.30, including a $1,755.30 note dated January 7, 1909, which the bank continued to hold, and $1,000, the remaining balance due on settlement, for which Queen gave his note dated January 4, 1910. The bank also held a note of Queen for $1,660, payable to the First National Bank of Shelburn, Ind., which the Casey National Bank was holding for collection. Johnson failed to take his one-fourth interest in the gas and leasehold interests, and Young conveyed or assigned said one-fourth interest to J. G. and C. S. Ewing on March 16, 1910. Shuler did not retain his three-eighths interest in the Payne leaseholds, but conveyed the same to the Ewings on April 11, 1910. Shuler also conveyed the remaining one-eighth interest to Harris on March 11, 1910, in accordance with the original agreement between himself, Harris, Johnson, and Queen.

Harris, Queen, and the two Ewings operated the oil wells on the 24-acre leasehold, and it is claimed in this suit by Harris and the Ewings that they operated the oil wells as partners, under the firm name of Monarch Oil Company; each partner to pay the expenses of operation and to have the proceeds of the wells in accordance with the interest deeded or assigned to them in the Payne leaseholds. The 40-acre Payne leasehold was an undeveloped tract, on which during their alleged partnership they did some boring for oil, but sold it to A. M. Myers for about $400. Harris and the Ewings claim that, while they and Queen were operating the oil wells on the 24-acre leasehold as partners, they paid out $6,041.21 for operating those wells and prospecting on the two leaseholds for oil, by boring wells, etc., no portion of which was contributed by Queen, and that of the sum expended Harris paid $1,666.50, which was $911.35 more than his share of the expenses; C. S. Ewing paid of said expenses $2,966.02, of $1,078.14 more than his share; and J. G. Ewing paid $1,408.69 of said expenses, or $479.19 less than his share; and that Queen's unpaid share of said expenses was $1,510.30. Harris sold and transferred his one-eighth interest to B. F. Miller on November 10, 1910, and the Ewings sold and transferred to C. L. Palmer on January 18, 1912, all their right, title, and interest in said lease, being an undivided five-eighths. Young retained the undivided one-fourth interest in the 24-acre lease in trust for Queen up to the death of the latter, in July, 1913, and thereafter retained, and still retains, said interest in trust for A. B. Queen, the widow, and Margaret Queen and Edith Thompson, daughters and only heirs of the deceased. It also appears that Young holds what is known as the Randolph leasehold in the same capacity and for a similar use, in which latter leasehold Harris had no interest, and so far as the record shows neither of the Ewings had any interest therein. Queen died intestate in Indiana, of which state he was a resident, and his widow and heirs have continued to live in Indiana since his death, Margaret Queen being a minor. Queen was at all times above mentioned insolvent.

In October, 1916, Harris and the Ewings filed a bill in the circuit court of Clark county, and later an amended bill, for an accounting and to establish a lien on the 24-acre leasehold held by Young in trust for Queen for alleged expenditures by them and for other matters growing out of their partnership with Queen, and in which they alleged there were large sums due them as partners by Queen on a proper accounting, and that their rights as against Young and the banks, as against each other, may be ascertained and decreed. To the amended bill Young, the two banks, the widow, and the two children and heirs of Queen were made parties defendant. The two banks answered the bill, denying that there was no declaration of trust in writing by Young as to the indebtedness of Queen to the First National Bank of Shelburn. They averred that Young was holding the 24-acre leasehold in trust for the indebtedness due the two banks from Queen; that Queen was indebted to the Casey National Bank in the sum of $2,500 and to the First National Bank of Shelburn in the sum of $1,200 and interest; that said indebtedness was evidenced by promissory notes secured by the leasehold; and that the indebtedness to the banks had not been paid and that they have a valid lien on the leasehold for the same. The other allegations in the bill they neither admitted nor denied, but called for strict proof of the same, and denied that complainants were entitled to any relief whatever. Young made a separate answer to the bill, in which he averred that the Monarch Oil Company was a copartnership, consisting of the complainants, Harris, the Ewings, and Queen, and was operating for oil and gas on the premises aforesaid. He also made the same averments as the two banks in their answers with reference to the indebtedness due them and as to the liens held by them for the same under his declaration of trust, and that complainants had knowledge of said indebtedness and trust, and denied practically all other allegations of the bill and that the complainants were entitled to any relief.

The widow and two children of Queen were served by publication as nonresidents. The adult daughter and the widow made default. H. M. Janney was appointed guardian ad litem for the minor daughter and answered the bill, admitting that she is the daughter of Queen and a resident of Indiana, and that her father died intestate, leaving A. B. Queen his widow and Edith Thompson and Margaret Queen as his only heirs at law. He admits that Young holds a one-fourth interest in the leasehold estate as trustee for Margaret's father, and that there was no declaration in writing by the trustee that he holds the lease in trust or as security in any manner for the Shelburn National Bank, but admits that he made the declaration of trust as to the Casey National Bank aforesaid. He asks that Young, Harris, and the Ewings be required to make full answer as to all matters charged by them, and that his answer should be treated as a cross-bill to that end, and said parties he makes defendants thereto, waiving the answer under oath, and asks for full relief as equity may require.

The cause was referred to the master in chancery to take and report the evidence with his conclusions, which he did. Objections were made to the master's findings, and conclusions and exceptions were preserved, and on a final hearing the court found and decreed that complainants and Kore Queen were partners as aforesaid, and operated the oil wells on the 24-acre lease, and that complainants expended the sum of $6,041.21 for machinery and for other outlays upon the premises for the firm or...