Shell Petroleum Corporation v. Caudle
| Decision Date | 08 March 1933 |
| Docket Number | No. 6675.,6675. |
| Citation | 63 F.2d 296 |
| Parties | SHELL PETROLEUM CORPORATION v. CAUDLE et al. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Pinckney G. McElwee, of St. Louis, Mo., for appellant.
Dallas Scarborough, of Abilene, Tex., for appellees.
Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.
The appellees, Caudle and Childs, sued McClanahan and Shell Petroleum Company for labor, for rental of oil well casing returned, and for the value of casing retained in connection with the drilling by Caudle and Childs of an oil well on property of Shell, but under a contract made with McClanahan, who was alleged to be in a mining partnership with Shell. We follow the witnesses in thus referring to the Shell Petroleum Company. A mechanic's lien for the improvement was claimed, but for want of compliance with the statutes it concededly failed. It was shown that McClanahan contracted with Caudle and Childs to drill a well upon a footage basis, and that they were to rent him the piping to be used for casing at stated rates; the casing to be pulled out and returned if the well was abandoned. There was no agreement proven as to what should be done if the well was a producer. The well was put down, and produced but slightly. The largest size of casing at the top was pulled out and returned, for which rental only was claimed. Shell refused to let Caudle and Childs take out the remaining casing, and its value is claimed. The contract of association between McClanahan and Shell is discussed below. There was only substituted service on McClanahan, so that when the lien failed he went out of the case for lack of jurisdiction over his person. Caudle and Childs and Shell moved for an instruction as to Shell's liability. The court held Shell to be liable. The jury under further instructions fixed amounts of $2,557 as due for the drilling, $240 for rental of the pulled casing, and $3,630 for the casing retained. Judgment thereupon was entered against Shell for all these items, and Shell appeals.
The only basis alleged for holding Shell liable for the labor and rentals due under McClanahan's contract was the mining partnership. Shell's answer denying the partnership should have been under oath. Texas Rev. St. 1925, art. 2010. The jurat thereon appears not to have been signed by an officer. Had exception been taken, it should have been sustained; but no objection to the pleading or the evidence offered under it was made. It is too late after judgment to claim that the partnership was not in issue. Berry v. Thomason (Tex. Civ. App.) 261 S. W. 154, 155; Farris v. U. S. Fidelity & Guaranty Co. (Tex. Civ. App.) 251 S. W. 612.
On that issue there is no proof of any holding out by Shell of McClanahan as its partner, or any statement or representation misleading to Caudle and Childs. They had the burden of proving a partnership in fact in order to bind Shell. Oil production from the earth is to be classed as mining. "A mining partnership arises by operation of law where co-owners work a mine." Munsey v. Mills & Garitty, 115 Tex. at page 483, 283 S. W. 754, 759; Wagner Supply Co. v. Bateman, 118 Tex. at page 505, 18 S.W.(2d) 1052. But co-operation in prospecting is not working a mine. Where property to be prospected is not jointly owned, the actual agreement controls. Hartney v. Gosling, 10 Wyo. 346, 68 P. 1118, 98 Am. St. Rep. 1005. A proposal to share by royalty or otherwise in the results of a well-drilling venture on the property of one coadventurer does not make a partnership, where the intention is otherwise. Gardner v. Wesner (Tex. Civ. App.) 55 S.W.(2d) 1104; Lowry Oil Corp. v. Bennett (Tex. Civ. App.) 16 S.W.(2d) 947; Wammack v. Jones, 103 Okl. 1, 229 P. 159. See also Transcontinental Oil Co. v. MidKansas Oil & Gas Co. (C. C. A.) 29 F.(2d) 323. And where an agreement is made for a future partnership, but the partnership is to go into effect only after stipulated things are done, no partnership exists until the conditions are fulfilled. Buzard v. McAnulty, 77 Tex. at page 443, 444, 14 S. W. 138; Ash v. Mickleson, 118 Okl. 163, 247 P. 680, 681. In the present case McClanahan owned no interest in the 80-acre oil and gas lease to be explored. It belonged wholly to Shell. On September 28, 1928, they made an elaborate written agreement, briefly stated as follows: "Whereas the parties hereto are desirous of exploring and developing the 80 acre tract * * * for their mutual benefit under the terms and conditions hereinafter set forth," — McClanahan agreed at his sole cost and expense to drill a test well to the depth of 1,950 feet unless a satisfactory production was sooner reached, and to carry $10,000 of insurance to save Shell harmless against liability for injury or death in connection with McClanahan's operations. On proof that all bills had been paid by McClanahan, and irrespective of the well's proving a producer or dry, Shell agreed to execute to McClanahan an assignment of a one-half interest in the 80-acre lease. If McClanahan failed to complete the well, he was to release all his right, title, and interest to Shell, and forfeit to Shell any equipment on the premises. On completion of the well and on assignment of the one-half interest, Shell was to have management of the whole lease, of the drilling of other wells, and of the sale of oil; keeping the records and making divisions. If either desired to sell out the other was to have the preference as purchaser. We think this agreement contemplated a mining partnership with Shell as the managing partner; but it was to arise only after McClanahan had delivered the test well, with all bills therefor paid, as the price of his share in the partnership. There was to be no joint ownership or sharing either of profits or liabilities before that time. The reference to liability insurance is not to be considered an admission that Shell would be liable for negligence in McClanahan's operations, either as a partner or as a principal for an agent, but rather as an effort to guard against contention by others that such liability existed. The stipulation as to McClanahan's releasing his right, interest, and...
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