McNeeley v. South Penn Oil Co.
| Decision Date | 05 December 1905 |
| Citation | 52 S.E. 480,58 W.Va. 438 |
| Parties | McNEELY et al. v. SOUTH PENN OIL CO. |
| Court | West Virginia Supreme Court |
Submitted September 15, 1905.
Syllabus by the Court.
The basis of accounting, between tenants in common, joint tenants, and coparceners, for waste effected by the extraction of petroleum oil from the common property under circumstances which make it reasonably certain that the party so taking oil acted without fraud and under the belief of good title in himself to the whole of the property though not without notice of defect of title, is the value of all the oil produced from the land, less the whole cost of its production, including the cost of drilling producing wells.
If one co-tenant execute an oil lease purporting to cover the whole of the common property, under which the lessee produces oil delivering to the lessor part thereof as royalty, it is proper to require the lessor and lessee jointly to make reparation to the injured co-tenant, and to order satisfaction of the decree against them to be made out of proceeds of the oil in the hands of the special receiver in the cause.
In such case, rentals received by the cotenant in possession for delay in drilling, under a provision of the lease, constitute no part of the damages and should not be included in the decree; nor are they to be accounted for as rents and profits, unless the lease is ratified or acquiesced in by the other co-tenant.
A mere demand for discovery as to and accounting for such rentals in a bill expressly denying the title of the lessor and validity of the lease, does not amount to a ratification or adoption of the lease.
Appeal from Circuit Court, Wetzel County.
Bill by G. B. McNeely and others against the South Penn Oil Company and others. From the decree defendant oil company appeals and plaintiffs file cross-appeal. Modified and affirmed.
See 46 S.E. 499.
Thos. P. Jacobs, Edward A. Brannon, Frank V. Iams, and T. R. Horner, for plaintiffs.
A. B. & R. F. Fleming, Erskine & Allison, C. Powell, J. W. Newman, and R. W. McCoy, for defendants.
In this, the second appeal in McNeeley v. South Penn Oil Company, the disposition of the first appeal in which is reported in 52 W.Va. 616, 44 S.E. 508, 62 L.R.A. 562, where all the facts out of which the questions then presented arose, are fully stated, the principal question is the basis on which the accounting for the oil produced shall be made. After the case went back to the circuit court, the South Penn Oil Company filed its second amended and supplemental answer, claiming the right to account on the basis of the value of the oil in place, which, it was averred, was the value of one-eighth of all the oil produced. Upon exception to the answer, so much of it as set up this claim was stricken out by the court. Then the cause was recommitted to commissioner Basil T. Bowers to take further testimony and to ascertain and report the amount and value of all the oil obtained from the land occupied by said company with its oil operations, the amount and value of such part thereof as had been received by John W. Starkey, the lessor, and the amount of money expended by said oil company in operating for and producing the oil so obtained by it. The special receiver in the case and the Eureka Pipe Line Company were required to report the amounts of oil received by them, respectively, and the disposition made thereof, and the prices at which any of it had been sold. The commissioner reported that the South Penn Oil Company had taken, from the 74 acres of land occupied by it, oil amounting in value to $47,800.75, of which amount $3,592.11 had been paid by it to J. W. Starkey, the lessor, as royalty, and that the cost of producing the whole amount of oil thus obtained had been $35,698.24, making the sum of $12,102.51 the value of the production from said land, less the cost thereof. To this report both the plaintiffs and the South Penn Oil Company excepted, the former because the commissioner had allowed the cost of production to be taken out of the value of the oil, and the latter because the commissioner had refused to find and report, as the amount due the plaintiffs, the one-half of one-eighth of all the oil produced. The court overruled all the exceptions and decreed to the plaintiffs, on account of oil produced, the sum of $6,051.25, and, in addition thereto, $138.67, one-half of the cash rentals which had been paid to Starkey, making a total of $6,189.92. From this decree, the South Penn Oil Company appealed, assigning numerous errors in the decree, and McNeely and others, the plaintiffs, obtained a cross-appeal, on which they complain of the allowance out of the fund of the cost of production.
The court adopted the rule and principle declared and applied in Williamson v. Jones, 43 W.Va. 562, 27 So. 411, 38 L.R.A. 694, 64 Am.St.Rep. 891. On both sides, the equity and legality of that rule is denied, and, for McNeely and others, it is asserted that the Court never intended to prescribe in that case a general rule for the government of ordinary cases of this kind. In this connection, they point to the language used by the court in the syllabus, which is: "Under the circumstances, a party taking petroleum oil unlawfully is allowed all costs of production, including costs of boring productive wells, as a set-off against rents and profits." The phrase "under the circumstances" is made the basis of the argument, and the character of the sale, magnitude of the production, and the cost thereof, are relied upon as the circumstances which, in the opinion of the court, justified the formulation of the proposition above stated as a rule for the special case. As, in this case, the lessor and his tenant were not purchasers at a judicial sale, as in the case of Jones, and the production is not large, and the defect in the title of the lessor was disclosed by the records, it is insisted that this case cannot be assimilated to that of Williamson v. Jones, and that therefore the law of that case, on the subject of the basis of accounting, has no application here. Counsel for the South Penn Oil Company declare that the basis of settlement adopted is contrary to the great weight of authority, which is to the effect that when one co-tenant, acting in good faith, not fraudulently, but under a mistake, either of law or fact, commits waste in extracting oil or removing coal or other minerals, or timber, he is held responsible, not for the value of the finished product less the cost of production, but only for the value of the property in its natural state.
Aside from the difference in the volume of production and magnitude of cost, but one circumstance is pointed out in this case as distinguishing it from the one in which the rule complained of was declared. That is the charge of fraud against Starkey. The court expressly held, in Williamson v. Jones, that Jones was not a purchaser without notice. He was declared to be a purchaser with notice, whom ignorance of law did not excuse. But it is said that Starkey not only had notice, but participated in a fraud perpetrated upon Mary Higgins by her husband. The only evidence of this is that he took possession of the tract of land, one-half of which was owned by her and the residue by her husband, under a deed executed by the husband alone. As it is not perceived how the quantity and value of the oil produced can have any material bearing upon the equity of the case, the charge of fraud is the only matter urged, as ground for distinction between the two cases, that need be considered. Mary Higgins was an invalid at the time the agreement for the exchange of land was executed by her husband and Starkey, in 1873, and died of consumption on the 12th day of February, 1875. Some testimony was taken for the purpose of showing her attitude toward the exchange, and an effort was made to prove that she was satisfied with it. One witness testified that she had said she was glad it had been effected. She did not sign the executory contract providing for the exchange, and the deed was not made until after her death. From these facts it is argued that she was unwilling to convey the land, that her husband clandestinely entered into the agreement with Starkey and had evil designs in postponing the execution of the deed. At that time, the land was probably regarded as not very valuable. No one then dreamed of its mineral wealth. The transaction took place probably 20 years before that section of the country developed into oil-producing territory. At variance with the charge of secrecy, circumvention, and fraud, is the fact that Starkey took possession of the land immediately after the signing of the agreement, and while Mary Higgins was yet alive. Another circumstance which indicates that negligence, and not fraud, was the origin of these troubles, is that the land was not the homestead, for Higgins and his wife had obtained it in that same year from Edgell, by deed dated April 4, 1873. In view of these facts and circumstances we do not think the charge of actual fraud is sustained, and therefore no substantial ground of distinction between this case and that of Williamson v. Jones is perceived.
Counsel for the South Penn Oil Company, in insisting upon the application of the common-law principles governing the relation of co-tenants, seem to overlook the important fact that our statute has altered that law in this respect. By section 2 of chapter 92 of the Code of 1891, tenants in common, joint tenants, and coparceners are made liable to one another for waste. At common law there is no such liability. Reference is made to the statute which gives an action of account against a co-tenant for receiving more than his share of rent s and profits--section 14...
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