Mayer v. White

• Decision Date: 05 April 1926
• Docket Number: No. 6977.,6977.
• Parties: MAYER et al. v. WHITE.
• Court: U.S. Court of Appeals — Eighth Circuit

12 F.2d 710 (1926)

MAYER et al. v. WHITE.

No. 6977.

Circuit Court of Appeals, Eighth Circuit.

April 5, 1926.

Truman Post Young and John J. Yowell, both of St. Louis, Mo. (Koerner, Fahey & Young, of St. Louis, Mo., on the brief), for appellants.

I. J. Ringolsky, of Kansas City, Mo. (M. L. Friedman, William G. Boatright, and H. J. Shultz, all of Kansas City, Mo., on the brief), for appellee.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and YOUMANS, District Judge.

YOUMANS, District Judge.

On and prior to February 21, 1920, appellee, J. H. White, and S. R. McCorkle were partners under the name of McCorkle Drilling Company. The partnership owned oil and gas leases and drilling tools, tanks, and casings. On that date White contracted to sell to H. E. Mayer all his interest in the partnership property for $50,000, payable as follows: $1,000 on the execution of the contract; $4,000 on March 15, 1920; $20,000 on April 1, 1920, and $25,000 on May 1, 1920, Mayer agreeing to assume the partnership debts. After the execution of the contract, Mayer associated with him J. Lionberger Davis and William F. Fahey.

In March, 1920, the particular date does not appear, S. R. McCorkle, as party of the first part, and William F. Fahey, H. E. Mayer, and J. Lionberger Davis, as parties of the second part, referred to in the contract as the Syndicate, entered into a contract with reference to the property of the McCorkle Drilling Company. The contract recited:

(1) That McCorkle was the owner of certain oil and gas mining leases and certain tools, equipment, materials, and supplies subject to the interest of J. H. White.

(2) The sale by J. H. White of his interest in said property to H. E. Mayer for $50,000.

(3) The purpose of the Syndicate to form two corporations, one of which should be known as the McCorkle Drilling Company, which corporation should become the owner of the property, tools, materials, and supplies referred to, and should have a total capital stock of 750 shares of no par value, and the second corporation should be known as the Serena Petroleum Corporation, and should have a capital stock of 4,000 shares of no par value.

(4) That McCorkle and White operated a firm known as the McCorkle Drilling Company, which had obligations approximately of $20,000.

(5) That it was the desire of the Syndicate to furnish to each of the corporations the sum of $20,000.

The contract then provides:

(1) That McCorkle should sell to the two corporations all his interest in the leases, tools, etc.

(2) That Mayer should sell all his interest in the same property acquired from White to the corporations, except certain royalty units referred to in the White-Mayer contract.

(3) That the members of the Syndicate agreed to pay in cash to William F. Fahey the following sums: Davis $30,000, Mayer $10,000, Fahey $10,000, to be used by Fahey to pay off the obligations of the McCorkle Drilling Company, a partnership, approximating $20,000 assumed by the McCorkle Drilling Company, a corporation, and $25,000 to be paid on behalf of the Serena Petroleum Corporation as follows: $1,000 to Mayer, the amount paid by him to White, $4,000 to be paid on March 15, 1920, to White, and $20,000 to be paid White on April 1, 1920, the remainder to be paid by Fahey into the treasury of the McCorkle Drilling Company, a corporation.

(4) Mayer agreed to pay White on May 1, 1920, the balance due under the contract between them, with the proviso that, if Mayer did not pay that sum to White on May 1, 1920, the members of the Syndicate should pay the same, in which event the royalty units purchased by Mayer from White, together with other units held by McCorkle, should be divided among the members of the Syndicate and McCorkle in a certain named proportion.

(5) That Mayer and Fahey should execute to Davis their note for $30,000, and that the two corporations should execute their note to Fahey and Mayer for $50,000.

(6) That upon the organization of the two corporations all the corporate stock of the two corporations should be deposited to secure the note of $50,000, and upon the payment of said note the stock should be distributed one-fourth to McCorkle, one-fourth to Mayer, one-fourth to Fahey, and the remaining one-fourth to be divided among the three members of the Syndicate. The corporations were organized; the property was taken possession of by McCorkle and the three members of the Syndicate and turned over to the corporations as provided in the contract. The contract between White and Mayer contained the following provision:

"It is further understood and agreed by and between the parties hereto that, in the case of the failure to pay any of these payments when due, the same are to draw interest at the rate of 8 per cent. per annum from maturity, and that, in the case of failure of the party of the second part to carry out its terms of this agreement with respect to the payment of any and all sums when due, any and all sums theretofore paid shall be forfeited to the use of the party of the first part as liquidated damages, and this contract shall become null and void."

The first three payments stipulated in the contract for $25,000 in the aggregate were made. The last payment due May 1, 1920, was not made. On May 21, 1920, White served notice on Mayer that the contract would be canceled and that the amount paid him would be forfeited pursuant to the terms of the contract.

On September 13, 1920, White brought suit against McCorkle, Mayer, Davis, Fahey, and Serena Petroleum Corporation, and McCorkle Drilling Company, a corporation, et al., in the District Court of the United States for the District of Kansas for two purposes: First, the dissolution and winding up of the partnership composed of White and McCorkle under the name of McCorkle Drilling Company; and, second, the cancellation and rescission of the contract of February 21, 1920, between White and Mayer. Upon the filing of the bill, a receiver was appointed to take charge of the partnership property. The case came on for trial, and on October 27, 1920, the court below rendered a decree in which the following matters were decided:

(1) The rescission and cancellation of the contract between White and Mayer of February 21, 1920.

(2) A charge of $25,000 in favor of Mayer, Davis, Fahey, Serena Petroleum Corporation, and McCorkle Drilling Company, a corporation, upon the interest of White in the partnership property being the amount paid White on his contract with Mayer. The decree on that point reads as follows:

"That the defendants H. E. Mayer, J. Lionberger Davis, William F. Fahey, Serena Petroleum Corporation, and McCorkle Drilling Company, a corporation, are hereby given a lien on the interest of the complainant, J. H. White, in and to all the oil and gas leases, royalty, and production, and the assets owned by the copartners composed of the complainant and S. R. McCorkle; and said interest of the complainant J. H. White is hereby charged with a lien in the sum of $25,000 and interest from this date at the rate of 6 per cent. per annum until said sum is paid, and unless paid within 60 days from the date of this decree herein the receiver as special master of this court appointed in this cause is hereby authorized and directed to sell the interest of said complainant, J. H. White, in said assets to satisfy and liquidate said lien in such manner as the court may hereafter direct."

(3) That the net amount of debts of McCorkle Drilling Company, a partnership, paid by Mayer, Davis, and Fahey, be ascertained by the master and declared a lien on the assets owned by White and McCorkle, and, if the sum so ascertained was not paid within 60 days after the date of the decree, then the receiver as special master was authorized to sell said assets to satisfy such lien in such manner as the court might thereafter direct.

(4) S. R. McCorkle was decreed to be the owner of a certificate of 194 units of a certain royalty, subject to a lien in favor of White.

(5) That an accounting be had between White and Mayer as partners, and, unless the sum found due by either of them upon such an accounting was paid within 60 days after the date of the decree, the interest of the debtor partner was to be sold as the court might thereafter direct, and that the creditor partner have a judgment against the debtor partner for any amount due after the sale of the debtor property.

(6) A master was appointed to take testimony and make findings of fact and conclusions of law and report a proposed decree with regard to the following undetermined matters:

"(a) To ascertain the net amount paid by the defendants H. E. Mayer, William F. Fahey, J. Lionberger Davis and Serena Petroleum Corporation, and the McCorkle Drilling Company, in liquidation of partnership debts of the firm known as McCorkle Drilling Company, a copartnership, composed of complainant and S. R. McCorkle, and all sums expended by defendant S. R. McCorkle under contract made with the said defendants.

"(b) To take an accounting between the complainant, J. H. White, and the defendant S. R. McCorkle, partners as the McCorkle Drilling Company, to determine the amounts invested by each in said firm, and the amount, if any, due from one of said parties to the other, as well as to determine the exact assets of said firm and the interest of each partner in the same.

"(c) To ascertain, audit, and determine the exact amount due the defendant the Red Star Oil Company on account of drilling wells on leased land described herein, under contracts made for drilling on the same."

The court made the following reservation:

"The court reserves jurisdiction of this cause for the making of such orders as the continuing preservation of the property and the protection of the parties may require."

The master filed his report on November 15, 1923. On November 26, 1923, appellees filed exceptions to that report. The first exception reads as follows:

"That the said...