Rudy v. Ellis
| Decision Date | 30 January 1951 |
| Parties | Rudy et al. v. Ellis et al. |
| Court | United States State Supreme Court — District of Kentucky |
Action by James H. Rudy, and others, against James C. Ellis and others, to obtain confirmation of oil and gas lease, and to have a trustee appointed to protect the interests of various infants. The Daviess Circuit Court, Sidney B. Neal, J., rendered judgment that the lease was void, and determined the rights of the parties to the oil and gas produced, and plaintiffs appealed. The Court of Appeals, Helm, J., held that where defendant lessees had no knowledge of any defect in title to oil lease, until notified of that fact, they were innocent trespassers, and were entitled to their reasonable expenditures in producing oil and gas.
Judgment reversed in part and affirmed in part, with directions.
1. Trespass. — A willful trespasser is one who knows he is wrong, and an innocent trespasser is one who believes he is right.
2. Mines and Minerals. — Where adult lessors of oil and gas lease were only life tenants, and fee was in infants some in being and some possibly unborn, and provisions of statute required appointment of trustee for protection of interests of infants was not complied with before giving lease to lessees, but lessees had no knowledge of any defect in title until notified of defect, they were innocent trespassers and were only entitled to their reasonable expenditures in producing oil from wells on leased premises. KRS 353.300.
3. Mines and Minerals. — Those who invade property of another inadvertently or under a bona fide belief or claim of right and extract minerals are allowed credit for proper expenditures in obtaining or producing them, and while not allowed any profits they will not be penalized, and measure of damages in respect to oil leases where trespass or appropriation was in good faith is value of oil at mouth of well, less amount reasonably expended in producing it.
4. Infants. — Record established that trial court's refusal to approve oil and gas lease, fee of which was in infants some in being and some possibly unborn, when statute requiring appointment of trustee for protection of infants' interests was not compiled with before executing lease and requiring a private sale, was not error. KRS 353.300.
Thacker & Sweeney, Hubert Meredith and Thomas E. Sandidge for appellants.
E.B. Anderson and David C. Brodie for appellees.
Before Sidney B. Neal. Judge.
Reversing in part, affirming in part.
George H. Rudy, by the seventh clause of his will, devised a 335-acre farm in Daviess County as follows:
After his death on September 23, 1946, James H. Rudy and the other adults named executed an oil and gas lease covering this farm to Rita Damron. James H. Rudy, having been, at the suggestion of Mr. Anderson, appointed guardian for his infant children, he, individually and as guardian, and the other adults executed an oil and gas lease dated September 23, 1946, but actually executed and acknowldeged on December 5, 1946, for this tract to the D.G. & S. Oil Company and James C. Ellis. The first lease was marked and treated as void. The Oil Company is a partnership composed of Wallace Damron, husband of Rita Damron, W.E. Gary and L.N. Savage.
On August 16, 1947, the lessees began operations on the tract, drilling two gas wells and an oil well. About February 1, 1948 an attorney for the vendee of the gas from the wells discovered that the lessees, appellees here, apparently had an invalid lease because they had not complied with KRS 353.300 in obtaining the lease. The vendee so advised appellees and began impounding the monies they owed for the oil and gas as it came from the wells.
On February 28, 1948, appellees filed this action asking that a trustee be appointed in accordance with KRS 353.300, and that the lease of December 5, 1946 be confirmed. The court appointed Katherine Rudy trustee for the infant devisees under the will, declined to approve the lease of December 5, 1946 to appellees, but authorized and directed the trustee to make a private sale of the oil and gas lease.
On October 7, 1948, Katherine Rudy, as trustee, tendered to the court an oil and gas lease for the tract to the Ryan Oil Company, providing, in addition to the usual provisions, a consideration of $50 an acre, or $16,750, and asked for approval of the court. By order of October 18, 1948, Mrs. Rudy was directed to deliver the lease to the lessee, Ryan Oil Company.
Appellee James C. Ellis and the partners in the D.G. & S. Oil Company filed intervening petitions setting up their objections to the sale of the lease by Mrs Rudy, trustee, to the Ryan Oil Company, setting out their lease of December 5, 1946, pleading that under this lease they had entered upon the tract innocently and in good faith, saying that as bona fide occupants of the leasehold they began on August 16, 1947, exploration of the property for oil and gas purposes and drilled three wells on the property between August 16, 1947 and December 11, 1947, one a small oil well, and two commercial producers of natural gas; that they equipped the wells with casing and connected them with pipe lines in order that the oil and gas produced might be marketed. They alleged an expenditure of $23,434.02 in the exploration, drilling and production of oil and gas on the property.
They prayed that approval of the Ryan Oil Company lease be withheld; that Mrs. Rudy, as trustee, be directed to join in the execution of the lease of December 5, 1946 to appellees; that the court then approve the lease in accordance with KRS Chapter 353; that appellees be adjudged 7/8th of all the gross proceeds of the oil and gas produced; that the enhanced vendible value of the property be determined to be the sum of $23,434.02, and that appellees be adjudged a lien for that amount.
Appellees filed answer and cross-petition making C.R. Ozier, successor to the Ryan Oil Company, a party. Mrs. Rudy, as trustee, renewed her motion for approval of the Ryan Oil Company lease and filed amended answer, counterclaim and cross-petition,...
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