Pure Oil Co. v. Byrnes

• Decision Date: 16 November 1944
• Docket Number: No. 27825.,27825.
• Citation: 388 Ill. 26,57 N.E.2d 356
• Parties: PURE OIL CO. et al. v. BYRNES et al. BYRNES v. PURE OIL CO.
• Court: Illinois Supreme Court

388 Ill. 26

57 N.E.2d 356

PURE OIL CO. et al.

v.BYRNES et al.

BYRNES

v.PURE OIL CO.

No. 27825.

Supreme Court of Illinois.

Sept. 19, 1944.

Rehearing Denied Nov. 16, 1944.

Proceeding by Pure Oil Company and others against James Lawrence Byrnes and others for permission to drill for oil, wherein named defendant subsequently petitioned for an accounting and named plaintiff cross-petitioned to set aside original decree. From the decree, the named plaintiff appeals and named defendant cross-appeals.

Decree affirmed.Appeal from Circuit Court, Jasper County; James G. Burnside, judge.

Smith, McCollum & Riggle, of Flora, Vinson, Elkins, Weems & Francis, of Houston, Tex., and Ben A. Harper, of Chicago, for appellant.

Thomas H. Fittz, of Indianapolis, Ind., and Albert E. Isley, of Newton, for appellee.

THOMPSON, Justice.

Appellant, Pure Oil Company, seeks, by this appeal, to reverse a decree of the circuit court of Jasper county, by which the court cancelled an oil lease executed by appellee, James Lawrence Byrnes, and Sam B. Raitman. The decree also required appellant to account to appellee for his one-fourth interest in the oil produced on the premises involved, after deducting the expenses of drilling, producing and marketing the oil, the cost of an equity proceeding by appellant as the holder of a majority of joint interests in the land, and the sum of $3700 paid by appellant to Raitman for the lease. Appellee is endeavoring to sustain the decree insofar as it cancels the lease, and by cross errors assails that portion of the decree which allows a deduction of the $3700.

The forty acres of land involved in the litigation was owned by John Riley Byrnes, who died February 9, 1894, leaving four children, one of whom was appellee, as his only heirs-at-law. His estate was never administered. Appellant, in 1940, obtained a lease from all the heirs except appellee, whose whereabouts was then unknown. On December 23, 1940, appellant, as owner of a majority of joint interests in said land, filed an equity proceeding in the circuit court of Jasper county under the provisions of the act of 1939 in relation to oil and gas interests in land, Ill.Rev.Stat.1943, chap. 104, pars. 25-33, incl.; Laws of 1939, p. 805, for permission to drill for and produce oil and gas to protect said joint interests from being drained by wells on adjoining premises.

On February 27, 1941, a decree was entered granting appellant such permission and ordering it to account for and pay into court for the use of appellee and his wife, if any, all sums of money received from the sale of one fourth of the oil produced, if any, in excess of one fourth the cost of the law suit and of drilling, completing, maintaining and operating said well or wells and of marketing the production. Immediately thereafter appellant drilled one producing and one nonproducing well. Four monthly reports were filed with the court but no action was taken, by the court, on said reports.

On December 10, 1942, appellee filed a petition in the aforesaid proceeding in which he alleged his ownership of a onefourth interest in the northwest quarter of the southwest quarter of section 8, township 5 north, range 10 east, in said county, being the same tract involved in the original proceeding; the entering of the decree granting permission to appellant to enter upon and produce oil from said premises; the producing and marketing of large quantities of oil; that there was due petitioner from the proceeds thereof, as of July 31, 1941, the sum of $2241.79, after allowing to appellant the statutory deductions set forth in the decree; that appellant had not reported the amount since July 31, and that there was then due from appellant to appellee in excess of $10,000. Appellee prayed for an accounting and that his rights in and to the wells, equipment and personal property attached to and used in connection therewith be fixed.

Appellant answered averring that by reason of an oil and gas lease executed and delivered by appellee and S. B. Raitman, on September 22, 1941, to M. T. Peyton, and duly recorded, appellant was relieved of any obligation to operate the leasehold estate according to the terms of the aforesaid decree and was relieved from paying appellee any amount except his proportionate part of the one-eighth royalty provided in said lease. It was also alleged in the answer that appellee, on September 20, 1941, executed and delivered to S. B. Raitman a mineral deed by which appellee conveyed to him a one-eighth interest in and to all the oil, gas and other minerals under said land; that said deed was recorded in Jasper county; that on September 20, 1941, appellee also executed and delivered to said Raitman an oil and gas lease on said premises, which was never recorded, but was lost or destroyed; and that by reason of said instruments M. T. Peyton took legal title to the leasehold estate conveyed to Raitman and to the leasehold estate conveyed by appellee and Raitman to him on September 22, 1941. It is then averred that M. T. Peyton was the nominee of appellant and took the lease as a dry or passive trust for the use of appellant so that the legal title thereto passed to appellant; that appellant paid to appellee and Raitman the sum of $3750 for said lease; that Peyton and his wife assigned said lease to appellant; that said lease contained a retroactive provision by which it was made effective, as to minerals produced and moneys accruing to the lessors therefrom, as of February 15, 1941, as if the lease had been entered into prior to any production of oil from said land; and that by virtue thereof appellee relinquished any right that he might have had theretofore to have any money paid to him by virtue of the court decree of February 27, 1941, and was not entitled to recover anything except what had accrued under the royalty provisions of said lease, which amounted to $2293.67 as of November 30, 1942, which appellant offered to pay, and to account for all future payments of royalty under the lease.

With the answer appellant filed a cross petition realleging the facts set forth in the answer and adding thereto that by reason of said mineral deed and leases appellee is estopped to claim under the decree of February 27, 1941; that said decree was superseded thereby and that said decree and the claims of appellee thereunder constitute a cloud on the title of appellant to the oil and gas leasehold. Appellant prayed to be relieved from any obligation to appellee under said decree; that the decree be set aside or modified; and that appellant's title under the said lease be established and confirmed.

Appellee replied to the answer and answered the cross petition, alleging, in substance, that S. B. Raitman obtained the mineral lease by fraud and deceit and procured appellee's signature thereto while appellee was drunk; that on September 27, 1941, he filed suit in the circuit court to set aside the mineral deed and lease to Raitman and that they were cancelled on August 19, 1942; that if any oil lease was obtained by Raitman it was through fraud, deceit, concealment and misrepresentations, and while appellee was drunk; that if such a lease was ever executed it was cancelled and destroyed by both parties so as to revoke it; and appellee denied executing and delivering the lease to Peyton. In his answer to appellant's cross petition appellee also averred, in substance, that appellant, as trustee of funds belonging to appellee, conspired with S. B. Raitman to obtain appellee's signature to the lease of September 22, 1941, and by concealment of material facts, of which appellee was ignorant, and by false representations, secured for itself and for its benefit the said trust property. Specific acts of fraud and concealment are alleged by which the lease, with the retroactive effective clause included, was obtained. His answer to the cross petition concluded with a prayer for a cancellation of the lease to Peyton; a setting aside of the assignment thereof to appellant; and an accounting according to the prayer of his original petition.

Appellant then replied to the answer to the cross petition and pleaded estoppel on the ground that appellee's counsel had assured appellant's representatives that the lease was not to be attacked and that relying on such assurance appellant had paid Raitman $3700 for the lease; and for the further reason that appellee had never asserted his intention to avoid the lease within a reasonable time after learning the facts on which he relies for rescission, but delayed bringing suit until December 10, 1942, and during the delay Raitman had become a bankrupt so that it was impossible to recover the amount paid him, which could have been done had appellee proceeded with diligence to assert and adhere to his decision to avoid the lease.

On the issues thus raised evidence was heard, and the only issues now before this court are: (1) Was appellant, by reason of its relation to appellee as tenant in common of the oil in the common inheritance, a constructive trustee of appellee's interest and thereby obligated to make a full disclosure of the existence of a producing well and of the amount of money on hand to appellee's credit before accepting the lease in question; (2) did appellant's representatives participate in the fraud and deceit practiced by Raitman; (3) was appellee estopped by laches and the conduct of his attorneys from rescinding the lease; and (4) is it equitable to allow appellant to deduct the $3700, paid to Raitman, from the amount distributable to appellee?

The proof discloses that Raitman offered a reward and thereby located appellee, who was taken to Chicago, on September 20, 1941, by one Lester Schomas, to meet Raitman, who paid their fare and paid Schomas, $50 for his efforts. The three went to Raitman's room in the Palmer House, where whiskey was served and Raitman informed appellee that he was a lawyer who would help appellee recover his...