South Penn Oil Co. v. Calf Creek Oil & Gas Co.

• Decision Date: 22 August 1905
• Docket Number: 580.
• Citation: 140 F. 507
• Parties: SOUTH PENN OIL CO. v. CALF CREEK OIL & GAS CO. et al.
• Court: U.S. Court of Appeals — Fourth Circuit

140 F. 507

SOUTH PENN OIL CO. v. CALF CREEK OIL & GAS CO. et al.

No. 580.

United States Circuit Court, N.D. West Virginia.

August 22, 1905

[Copyrighted Material Omitted]

On November 23, 1900, the Calf Creek Oil & Gas Company, a West Virginia corporation, instituted on the law side of this court its action of case against the South Penn Oil Company a Pennsylvania corporation, to recover $20,000 damages alleged to have accrued by reason of the plaintiff having been the owner of all oil and gas in and under a tract of 60 acres of land situate in Pleasants county, W. Va., and of the defendant entering thereon unlawfully and operating and boring wells and removing oil and gas therefrom. On the following day John B. Finley, as administrator of William Irwin, deceased, instituted a like suit on the law side of this court against said South Penn Oil Company for $5,000 damages, alleging his decedent to have been the owner of said same 60 acres of land, and that the defendant company had entered upon, operated and bored wells, and removed oil and gas therefrom. On the 28th day of October, 1901, the said South Penn Oil Company instituted this suit in equity against said Calf Creek Oil & Gas Company, John B. Finley administrator, and numerous others, seeking to enjoin and restrain the said Calf Creek Oil & Gas Company, John B Finley, administrator, from maintaining and prosecuting said actions at law and to establish its right to operate for and remove from a certain portion of said 60 acres of land oil and gas. An amended and supplemental bill and a bill of revivor were subsequently filed in the cause. From the pleadings and proofs the facts seem to be as follows:

On March 14, 1882, William Irwin entered into a contract with the Wheeling, Parkersburg & Charleston Railway Company, subsequently succeeded by and merged with the Ohio River Railroad Company, whereby he granted and conveyed 'the full and free right of way of the width of 50 feet' through the 60 acres of land in controversy, and bound himself, when required by the company, to convey the same by deed in fee simple. This contract was acknowledged by Irwin April 6, 1883, and admitted to record April 25, 1883. On January 21, 1899, the Ohio River Railroad Company by contract granted to F. D. T. Bickley all the oil and gas in and under said 50-foot strip of right of way through the Irwin and other lands upon certain terms and conditions not material. This contract was acknowledged January 26, 1899, and recorded February 1, 1899. Bickley associated with himself in the matter M. J. Peters, George Morlang, H. M. Spence, and E. K. Davis, and these parties at once commenced to bore wells upon the right of way strip through the Irwin lands, and on May 18, 1899, had substantially completed two producing wells thereon, when by contract of that date, in consideration of $14,250, they sold all their leasehold rights acquired from said Ohio River Railroad Company, together with substantially all of their property used in said oil operations, to the plaintiff. This contract was acknowledged the day of its date, and was recorded May 24, 1899. The plaintiff company immediately thereafter took possession of said two completed wells, bored three others on said Irwin right of way, and removed therefrom large quantities of oil, paying royalty to the said railroad company. Meanwhile, on September 2, 1895, William Irwin by contract had demised and granted to Richard Huggins all the oil and gas under a tract of land described in said contract as follows: 'Situated in the district of Grant, county of Pleasants, state of West Virginia, and is bounded and described as follows, to wit: North by lands of Ohio river, east by lands of Mrs. T. P. Pollock, south by lands of W. M. Irwin, west by lands of Mrs. J. C. Sharp, containing 30 acres. ' This contract further provided: 'The lessee to have the refusal of the lessor's 30 acres that he has reserved on the same terms and conditions of this lease. ' But, so far as appears, no contract of any kind was ever made showing that this refusal was accepted, or that said Huggins or his assignees had any interest in any other than the 30 acres. Huggins seems to have associated with himself, in this and other leases, J. P. Marshal and Clinton Pope; for, on November 26, 1895, these parties executed a power of attorney to said J. B. (alias Richard) Huggins, authorizing him to sell the leases on certain terms and conditions. This paper was acknowledged April 4, 1896, but not admitted to record until August 12, 1899. On April 14, 1896, Huggins, in his own right and as attorney in fact, conveyed this 30-acre lease and others to George W. Grimes. On April 21, 1896, Grimes sold the same leases to the Calf Creek Oil Company, then a partnership, but now a corporation, reserving, however, an undivided sixteenth interest, which, by contract of date May 8, 1897, he sold to H. W. Hunter, trustee for David Levi, J. C. Roberts, T. L. Rogerson, M. F. Cox, George L. Darst, F. D. T. Bickley, J. C. Bardall, and H. W. Hunter. On June 10, 1899, the stockholders authorized and directed a sale of its holdings to be made to Henry Suhr & Co., and on August 22, 1899, this sale was consummated by its board of directors, and by it all the capital stock and all the interest of said company in the Irwin and other leases passed to and became vested in said firm, composed of Henry Suhr, C. M. Loomis, and F. D. T. Bickley.

It is fairly to be assumed from the pleadings and evidence that this sale of the Calf Creek Company to this firm was a result of a compromise of certain litigation growing out of these circumstances: The Calf Creek Oil & Gas Company was incorporated in May, 1896. Its capital stock consisted of 300 shares, of the par value of $200 each, of which 83 3/5 shares were held by F. D. T. Bickley. Bickley was not only apparently the largest stockholder, but also a director, vice president, secretary, and the active manager of the concern. Eight wells had been drilled on the Irwin land, and others on other land. It seems, however, that prior to February 4, 1899, Bickley and the directors of the company had disagreed, and he had been removed as superintendent, but not as secretary, nor, so far as shown, as vice president. A man by name of Nixon had succeeded him as superintendent. Bickley regarded him as incompetent and negligent. The production of oil was decreasing, and the land owners were bitterly complaining, Irwin especially, because the conditions of his lease were not being carried out, because the wells drilling on the right of way strip (the royalty for which was going to the railroad company) would drain the oil from his land, and the Calf Creek Company was sinking no offset wells, and he and others were threatening to cancel their leases. Bickley on February 22, 1899, served notice on the directors of the condition of affairs, and asked them to remedy the evils in management. On February 4, 1899, the directors met, but were manifestly antagonistic to Bickley, refusing to carry out his suggestions, and removing him as secretary. Thereupon, on February 27, 1899, Bickley filed his suit in equity in this court, making said Calf Creek Company, its directors, Irwin, and other land owners parties, setting up these facts and others of a personal nature not material here, in which he prayed for the appointment of a receiver, with instruction to remedy the conduct of affairs of the company, to drill offset wells, and other things in accordance with his views. Irwin on March 2, 1899, filed a verified answer to this bill, substantially admitting its allegations, and joining in its prayer for relief. In it he says the Calf Creek Company had drilled on his 60 acres 8 wells, when by the terms of the lease he was entitled to 12; that production was rapidly falling off and gross mismanagement of the property was indulged. Such receiver was appointed by decree of this court, and on May 22, 1899, made a full report in answer to the instructions of the court. This report fully confirmed the charges and grievances set forth by Bickley in his bill, and in detail discusses remedies. After closing the body of his report, he adds this:

'Special Report.

'Your receiver specially reports that, since the foregoing portion of his report was put into typewriting, the railroad right of way through the Irwin farm has been sold by M. J. Peters and others to the South Penn Oil Company, and your receiver is informed that the agents of said South Penn Oil Company have stated that they propose to locate three additional wells on said right of way through the Irwin; that already there are two producing wells on said right of way through the Irwin; as shown on the map (Exhibit No. 2), designated Nos. 1 and 2, and that it will be necessary, in order to protect said property, to put down counter wells on both sides of the railroad right of way, should said South Penn Oil Company make the development threatened. Your receiver further states that said Irwin, as shown on said map, is crossed by the said right of way from one side to the other; that this right of way is 50 feet in width, and passes through a very rich portion of the oil-producing part of the said Irwin farm; that the wells on said right of way are said to be producing an average of 130 barrels each per day. Your receiver further reports that well No. 1 on said right of way commenced producing about the 24th of March, and produced, as your receiver is informed, large quantities of oil for several days, and then seemed to fall away, but that the well is now, as your receiver is informed, producing large quantities of oil; that the second well, being No. 2, as your receiver is informed, shows to be as good as No. 1; that, in order to counteract the effect

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