Turnbow v. Lamb

• Citation: 95 F.2d 29
• Decision Date: 25 March 1938
• Docket Number: No. 8472.,8472.
• Parties: TURNBOW et al. v. LAMB et al. LAMB et al. v. TURNBOW et al.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

95 F.2d 29 (1938)

TURNBOW et al. v. LAMB et al.

LAMB et al. v. TURNBOW et al.

No. 8472.

Circuit Court of Appeals, Fifth Circuit.

March 2, 1938.

Rehearing Denied March 25, 1938.

W. T. Saye and J. N. Saye, both of Longview, Tex., for appellants W. C. Turnbow, and others.

L. L. James, of Tyler, Tex., and Robt. B. Keenan, of Los Angeles, Cal., for appellees Lamb and others.

Before FOSTER and SIBLEY, Circuit Judges, and STRUM, District Judge.

STRUM, District Judge.

Plaintiffs below, Lamb, Olsen, and Keenan, together with W. C. Turnbow Petroleum Corporation, constituted a mining partnership in the operation of an oil and gas lease in Texas, each partner owning a constituent interest in the lease. Turnbow Corporation was the operating partner. The others contributed their pro rata part of the operating expense, and were entitled to their pro rata share of the profits.

A proper accounting was rendered by Turnbow Corporation for oil lawfully produced. Unknown to its copartners, however, and without their consent, Turnbow Corporation produced oil in excess of the amounts allowed by Texas law and production regulations, for which it paid nothing to its copartners.

Lamb instituted this action against Turnbow Corporation, in which Olsen and Keenan later joined, seeking a partition of the leasehold, and an accounting for the complaining partners' pro rata part of the excess oil produced by Turnbow Corporation. Turnbow Corporation admitted it had produced 59,146 barrels of excess oil, for which it received 25 cents per barrel above the cost of production, of which sum it tendered plaintiffs' proportion into court, but the tender was refused.

The lease covered two parcels, designated as Elder "A" lease and Elder "B" lease. The master who heard the evidence found that 150,000 barrels of excess oil had been produced from "B" lease, and 50,000 barrels from "A" lease. All parties later admitted that no excess oil was produced from "A" lease. The District Judge found that 200,000 barrels were produced from "B" lease alone, and gave judgment to the complaining partners for their pro rata portion thereof at a value of 35 cents per gallon, the highest price paid for excess oil during the production period, Turnbow failing to divulge his actual receipts.

On appeal, Turnbow Corporation contends that the excess oil is contraband to which no right of possession attaches, so that plaintiffs can recover neither the oil nor its value, but are confined to a recovery based upon the depleted value of the leasehold due to the withdrawal of the oil; that recovery for the value of the oil is also precluded because the oil was produced by Turnbow Corporation as a copartner and agent for the plaintiffs; and finally that the finding of any excess production over the admitted 59,146 barrels from "B" lease is unsupported by the evidence and that the valuation of 35 cents per barrel is excessive. By cross-appeal, plaintiffs below contend that they should not have been confined to a recovery on the basis of the value of excess or unlawful oil, but should have been awarded a recovery based on the value of allowable or lawful oil, the latter having a greater market value than the former.

The District Court properly rejected Turnbow Corporation's contention that appellees' recovery is limited to depletion of the leasehold value. There is nothing inherently noxious in the oil produced. Inherently it is a useful and legitimate commodity. Excess oil is illegal only because it is prohibited. As between state and producer, excess oil is subject to forfeiture. This, however, affords no reason why a partner who has deceptively and fraudulently produced excess oil should not account to his innocent copartners for what he has received. Harris v. Gurley, 5 Cir., 80 F.2d 744. Otherwise, the wrongdoer would be left to enjoy the fruits of his own misdeeds, unless the innocent partners could establish a depletion in the value of the leasehold due to the withdrawal, an undertaking beset with many and varied problems. Cf. Marshall v. Lovell, 8 Cir., 19 F.2d 751; Futch v. Sanger, Tex.Civ. App., 163 S.W. 597; Stewart v. Wright, 8 Cir., 147 F. 321; New Century Co. v. Scheurer, Tex.Civ.App., 30 S.W.2d 388; 13 C.J. 498.

In Miller v. Ammon, 145 U.S. 421, 12 S.Ct. 884, 36 L.Ed. 759, and Waldo v. Gould, 165 Minn. 128, 206 N.W. 46, and like cases cited by Turnbow Corporation, the party seeking to recover was himself an offender. Such is not the case here. The illegal status of the oil was created by the acts of Turnbow Corporation, not by the complaining partners. The latter were without knowledge of Turnbow Corporation's unlawful activities, and neither acquiesced therein nor consented thereto. The Texas proration laws are designed to promote conservation, not to facilitate...