Toklan Royalty Corp. v. Panhandle Eastern Pipe Line Co.

• Decision Date: 10 December 1949
• Docket Number: No. 37691,37691
• Citation: 168 Kan. 259,212 P.2d 348
• Parties: TOKLAN ROYALTY CORPORATION et al. v. PANHANDLE EASTERN PIPE LINE CO.
• Court: Kansas Supreme Court

Page 348

212 P.2d 348

168 Kan. 259

TOKLAN ROYALTY CORPORATION et al. v. PANHANDLE EASTERN PIPE LINE CO.

No. 37691.

Supreme Court of Kansas.

Dec. 10, 1949.

Syllabus by the Court.

1. Motions to separately state and number causes of action rest in the sound discretion of the trial court and unless it appears that rulings thereon affect a substantial right and in effect determine the action are not appealable.

2. Even when rulings on such motions are regarded as appealable they will not be reversed unless it appears they result in prejudice to the substantial rights of the parties.

3. Except where a party appeals after final judgment, rulings on motions to strike, even though regarded as tantamount to rulings on a demurrer, must be perfected within two months in order to give this court jurisdiction to consider them.

4. In this jurisdiction objections to a petition founded on grounds that the plaintiff is not the real party in interest or that he had no legal capacity to maintain the action must be made by demurrer to the petition or by answer, otherwise they will be deemed to have been waived.

5. In an action for cancellation of a written instrument all persons whose rights, interests or relations with or through the subject matter of the suit will be affected by the cancellation are proper and necessary parties in order that they may have an opportunity to be heard and have their rights determined.

6. Persons who are united in interest under the terms of a written instrument are indispensable parties to an action for its cancellation.

7. When in an action of the character described in paragraphs 5 and 6 of this syllabus failure to join indispensable parties appears from the face of the petition the plaintiff not only lacks legal capacity to sue but has failed to state a cause of action and his pleading is demurrable upon either or both of such grounds.

8. The record in an action for cancellation of a gas purchase contract examined and held, that it appears from the face of the petition persons having a unity of interest in the subject of the action, and therefore indispensable parties, are not joined as parties plaintiff or defendant. Held further, that under such conditions and circumstances the petition is demurrable in that (1) it affirmatively discloses the plaintiff lacks legal capacity to maintain the action and (2) it fails to state a cause of action.

Mark H. Adams, of Wichita, and Arthur G. Logan, of Wilmington, Delaware, both argued the cause, and Charles E. Jones, Wm. I. Robinson, J. Ashford Manka, Addison I. West, all of Wichita, and Edward H. Lange and C. R. Kirkbride, both of Kansas City, Missouri, were with them on the briefs, for appellant.

A. D. Weiskirch, and Manford Holly, both of Wichita, argued the cause, and George B. Collins, C. L. Williams and Oliver H. Hughes, all of Wischita, were with them on the briefs, for appellees.

PARKER, Justice.

This is an action for cancellation of contract and for the recovery of money. The defendant appeals from an order overruling its demurrer to a first cause of action for cancellation of the contract as set forth in an amended petition. The plaintiffs appeal from an order sustaining a demurrer to the second case of action for recovery of money and an earlier ruling requiring them to separately state and number their causes of action.

The overall picture to be gleaned from a lengthy and involved amended petition, giving that pleading the benefit of all inferences to which it is entitled when attacked by demurrer, can be stated thus:

On July 7, 1937, the defendant, Panhandle Eastern Pipe Line Company, entered into a gas purchase contract with R. K. Wilson. This contract provided that such individual should sell all the natural gas he was able to produce through drilling wells upon certain oil and gas leases owned by him, covering and upon approximately sixty-four hundred acres of land, in Grant county, and that the defendant should at its own cost and expense construct a gathering line a distance of approximately 14 miles and thereafter take and pay for all gas so produced from such leases at a price of 4 cents per one thousand cubic feet. By its terms the contract ran with the land and the oil and gas leasehold estate and provided that it was to be binding upon the parties, their respective heirs, successors and assigns. The contract attached to and made a part of the petition, contains numerous other provisions of no particular importance to a decision of the issues involved.

While there are no express allegations to that effect, it may be assumed, since the plaintiffs' interests depend upon title acquired from him, that some time after the execution of the contract, Wilson in some manner legally transferred his interest in the leases to Theodore F. Parish and Frank P. Parish who thereby succeeded to all his rights under the gas purchase contract.

On or about May 31, 1941, the Parishes entered into an agreement with plaintiffs, by which the latter advanced the parishes $90,000 and they agreed to assign to plaintiffs as security an undivided 1062/1350ths of the 7/8ths working interest of the first oil and gas produced from the leasehold until the loan with interest at 4 per cent was fully paid. Thereafter division orders were delivered to the defendant notifying it of such action.

On the same day the identical parties entered into a second contract whereby in consideration of a waiver of the interest payments required by the terms of the loan agreement, covenants pertaining to sharing in expense to be shortly incurred in the acidization and reconditioning of the gas wells on the premises in question and payment of the sum of $100 the Parishes gave plaintiffs an option to purchase an undivided 81/135ths of the 7/8ths working interest in their oil and gas leases.

The assignments referred to in the contract of May 31, 1941, were duly executed, and later on June 16, 1941, deposited with The Fourth National Bank of Tulsa, Oklahoma, together with an escrow agreement providing they were to be delivered by that institution to plaintiffs in the event of their exercise of the option heretofore mentioned.

December 13, 1944, defendant filed an action for recovery of a substantial sum of money against the Parishes in Grant county, Kansas. Two days later an attachment was issued out of the district court of that county and levied on their interest in the oil and gas leasehold. Thereafter a receiver was appointed to take charge of and handle the property.

On December 16, 1944, one day after the attachment levy, plaintiffs exercised the option granted under the contract of May 31, 1941, procured the assignments from the escrow agent and on December 18, 1944, caused them to be placed of record in the office of the Register of Deeds of Grant county.

February 6, 1945, the action in the Grant county district court was removed to the United States District Court of Kansas, Second Division. There, the plaintiffs intervened, asserted title to sixty per cent of the oil and gas leases based upon the transactions heretofore related and asked for a judgment discharging the attachment.

The attachment was discharged by order of the federal court on October 1, 1947. Following that action the receiver paid plaintiffs all money collected by him for gas produced from and attributable to their interest in the leases.

The amended petition further states that defendant at all times material to the action has taken all gas produced and saved from the oil and gas leases described in the purchase contract into its pipe line but asserts that all moneys due them since January 1945, inuring by virtue of such contract, have been paid plaintiffs solely pursuant to court orders resisted by defendant and that the latter still questions plaintiffs' title to the interest acquired by them in the leases under the option agreement and have informed them it does not recognize their interest therein and will not pay them any of the proceeds accruing from gas runs arising therefrom.

In addition to what has been heretofore related such amended pleading states that the gas purchase contract has become an improvident bargain and is, therefore, a contract against public poliy which should be cancelled. It also contains charges, supported by appropriate allegations, in substance to the effect defendant has breached such contract because (1) it contested dissolution of the attachment; (2) it attempted to acquire title to plaintiffs' properties by asserting the transfer to plaintiffs was obtained by a usurious contract; (3) it attempted a conspiracy by an offer to the Parishes to dismiss the action against them if they would join with it in a suit to set aside and annul the transfer to plaintiffs on grounds of usury; (4) it failed to pay for gas runs while the attachment proceedings against the Parishes were pending and has refused to recognize plaintiffs' leasehold estate and their title therein and pay for gas runs accruing thereafter, and (5) its action with respect to all such matters has prevented plaintiffs from effecting a profitable merger with Aberdeen Petroleum Corporation, a Delaware corporation.

Up to this point our relation of factual allegations has been limited to the first cause of action. The second cause of action includes all pertinent averments of the first by reference and one further allegation which reads: 'That by virtue of the defendant having breached the hereinbefore referred to gas purchase contract, Exhibit 'B', in a wilfull, deceitful and malicious manner, as hereinbefore alleged in their first cause of action, that the Court should award, in addition to the cancellation of said gas purchase contract, Exhibit 'B', a punitive amount that to the Court seems meet in equity to punish the defendant for said wrongs and conduct'.

In conclusion plaintiffs pray (1) that under their first cause of action they have judgment for rescission, cancellation and...