Shoemake v. Davis

• Decision Date: 11 December 1937
• Docket Number: 33565.
• Citation: 146 Kan. 909,73 P.2d 1043
• Parties: SHOEMAKE v. DAVIS.
• Court: Kansas Supreme Court

73 P.2d 1043

146 Kan. 909

SHOEMAKE v. DAVIS.

No. 33565.

Supreme Court of Kansas

December 11, 1937

Syllabus by the Court.

An agreement, whereby plaintiff obtained oil lease with defendant's money under defendant's promise to "carry (plaintiff) for a quarter interest," created "joint adventure"; there being implied in agreement a sharing of losses, in that plaintiff would lose his work and defendant lose his money if project were a failure and a sharing of money profits, if any.

An oral agreement whereby plaintiff obtained oil lease with defendant's money under defendant's promise to "carry (plaintiff) for a quarter-interest" was not within statute of frauds, since agreement dealt with personal relations of joint adventurers, not with sale of real estate.

Evidence authorized finding that, under agreement whereby plaintiff obtained oil lease with defendant's money on defendant's promise to "carry (plaintiff) for a quarter-interest," plaintiff became owner of undivided one-fourth interest in lease and leasehold estate, as against contention that court was required to take judicial notice that phrase "carry (plaintiff) for a quarter-interest" meant that plaintiff would get 25 percent. of net profit realized on sale of lease.

In an action to enforce an oral contract concerning the acquisition of an oil and gas lease and for an accounting thereof, the record examined, and held that the lease was obtained and held as a joint adventure and that the statute of frauds did not vitiate the contract; and held, also, that the evidence was sufficient to support the finding of fact on which the judgment was predicated.

Appeal from District Court, Sedgwick County, Division No. 4; Isaac N. Williams, Judge.

Action by John A. Shoemake against James Davis. Judgment for plaintiff, and defendant appeals.

Austin M. Cowan, C. A. McCorkle, and Robert H. Nelson, all of Wichita, for appellant.

A. W Hershberger, J. B. Patterson, Enos E. Hook, and P. J Warnick, all of Wichita, for appellee.

DAWSON Chief Justice.

This was an action to enforce an oral contract concerning the acquisition of an oil and gas lease and for an accounting pertaining thereto.

Plaintiff a resident of Wichita, was engaged in securing oil and gas leases and disposing of them for a profit. He had several years' experience in that business, in the pursuit of which he had become conversant with the development and prospective development of the oil and gas industry in Central Kansas and kept tab on the expiration and cancellation of oil and gas leases thereabout.

Defendant also a resident of Wichita, was a man of some means. He owned a drilling rig and had many years of experience in drilling oil wells.

About March 1, 1934, plaintiff made an examination of certain county records and thereby learned that an oil and gas lease of 240 acres of land on the county lines of Rice and Ellsworth counties, which had theretofore been held by the Gypsy Oil Company, had been canceled. Plaintiff ascertained that the landowner, one Edwards, resided in Wichita and called on him. Edwards signified his willingness to give a new lease of the premises for ten years on the usual terms as to royalties, but that in addition thereto he would require a down payment of $1 per acre, and a further payment of $1 per acre annually for the privilege of delaying the commencement of drilling operations.

Plaintiff then called on defendant Davis and told him he could obtain such a lease in promising territory if Davis would put up the money. Davis agreed to do so. Plaintiff's version of the arrangement was as follows:

"A. I then went to see Mr. Davis and told him the situation and that we could probably get a good play on that lease in the next few months if we wished to sell it, or if we wished to carry it it would be a good lease to hold for three or four years.

"Q. All right? A. And I asked him if he would carry me for a quarter interest in it if I would buy it at that price and he said he would."

Defendant's version of the facts reads: "*** about the 4th of March, 1934, I had a conversation with Mr. Shoemake regarding the Edwards lease. That conversation took place in my office. He came in and submitted or showed me a lease in Rice and Ellsworth Counties that was available, that had been cancelled, and stated that he thought it would be a very good lease to buy for resale purposes and so I asked him what it would cost me. He said it would cost me a dollar an acre or $240.00.

"Q. What else was said? A. I said to Mr. Shoemake 'What do you want out of this if I buy this lease?' He said, 'Well, I think I can sell it without any doubt and I would be perfectly satisfied to take twenty-five percent of the net profits.' ***

"Q. What did you say to that? A. I said, 'Well if you think you can resell that lease, I will be perfectly willing to put up $240.00 providing you can go out and sell that lease and make a net profit on it, and let you be the judge of the profit."

Following his conversation with defendant, plaintiff again called on Edwards, and the latter executed a lease naming defendant as lessee and placed it in an agreed bank to be delivered to plaintiff on payment of $240. A draft on Shoemake for that amount was attached to the lease, dated March 3, 1934, and payable at five days' sight. Davis gave Shoemake a check for the required sum, and Shoemake took up the lease and delivered it to Davis.

From this beginning of the contract relationship of the litigants the record proceeds at length to narrate inconsequential sayings and doings of the parties during the year 1934 and the earlier half of 1935; but in the autumn of that year plaintiff and defendant made an agreement whereby one C. E. Skiles should have assigned to him 80 acres of the leased premises in consideration of his drilling a well thereon. Skiles undertook to do so, and about January 15, 1936, he brought in a producing oil well.

Shortly afterwards plaintiff called on defendant and said that since the lease had become valuable he wanted something in writing to show his interest in it. Davis declined that request and this lawsuit followed.

The pleadings developed the issues or fact. The cause was tried without a jury. The court made findings of fact and conclusions of law favorable to plaintiff, and gave judgment as follows:

"II. The plaintiff is the owner of an undivided one-fourth (1/4) interest in the oil and gas lease and the leasehold estate covering the *** [160 acres described].

"III. An accounting should be taken between the parties in accordance with their respective interests in said lease."

Hence this appeal.

Defendant contends that the oral agreement between Shoemake and himself was unenforceable under the statute of frauds. He postulates the proposition that the relationship of the parties was not one of partnership nor a joint adventure, because, he argues, there was no agreement between them to share whatever losses might be sustained, nor concerning the sharing of any profits which might be made out of the lease. Such is, indeed, a common test for determining whether a business relationship of parties is of the nature of a partnership or joint adventure. In Moore v. Thompson, 105 Kan. 492, 493, 184 P. 980, 981, is was said: "One of the important tests in determining the existence of a partnership is the sharing of profits and losses of the enterprise. This test is not conclusive, as there may be a sharing of profits with an agent or servant as partial compensation for services, and such relationship will not constitute a partnership. Shepard v. Pratt, 16 Kan. 209; Beard v. Rowland, 71 Kan. 873, 81 P. 188; Wade v. Hornaday, 92 Kan. 293, 140 P. 870."

In Curtis v. Hanna, 143 Kan. 186, 188-189, 53 P.2d 795, 796, where the existence of a partnership or joint adventure was under consideration, it was said:

"We assume, however, that the trial court, if the matter was specifically called to its attention, took note of the similarity between a partnership and a joint adventure (see 15 R.C.L. 500, 33 C.J. 841, Annotations in 48 A.L.R. 1055, 63 A.L.R.

909, Livingston v. Lewis, 109 Kan. 298, 198 P. 952, and cases cited). ***

"We deem it unnecessary to attempt to define precisely the terms 'partnership' and 'joint adventure.' They have much in common; to a considerable extent a joint adventure is a partnership not general in its field of operation and length of duration, but limited to a particular enterprise or venture. 33 C.J. 842 and citations above."

But, as remarked in Moore v. Thompson, supra, the test of sharing profits and losses is not a conclusive determinant of the relationship of parties to a business undertaking. Just what technical designation should be ascribed to a business undertaking where one of two men agrees to contribute his money to the acquisition of an oil and gas lease, and the other contributes his knowledge and energy to the matter of obtaining such a lease, when their purpose is to make a profit by it? Sharing of losses? Yes, one will lose his money and the other his work if the project is a failure. Sharing of profits? Yes, if the venture is successful and there are profits to be shared. There is nothing in the decided cases nor in the textbooks which says that the sharing of profits and losses in a partnership or joint adventure must be the same in kind. Fairly considered, we think the agreement between plaintiff and defendant implied such a sharing of profits and losses, and was essentially a joint adventure.

In Shepard v. Pratt, 16 Kan. 209, 213, where the accuracy of an instruction on an issue of partnership was under scrutiny, Mr. Justice Brewer said: "It is not true that an equal division of the profits always and under all circumstances constitute...