Wight v. Chandler

• Decision Date: 03 March 1959
• Docket Number: No. 6030.,6030.
• Parties: E. A. WIGHT, Appellant, v. R. J. CHANDLER, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

264 F.2d 249 (1959)

E. A. WIGHT, Appellant, v. R. J. CHANDLER, Appellee.

No. 6030.

United States Court of Appeals Tenth Circuit.

March 3, 1959.

Jack D. Emery and Raymond B. Whitaker, Casper, Wyo., for appellant.

E. L. McCrary, Casper, Wyo., for appellee.

Before BRATTON, Chief Judge, and PICKETT and LEWIS, Circuit Judges.

BRATTON, Chief Judge.

E. A. Wight, a citizen of Montana, instituted this action against Carl Drew, a citizen of Canada, Albert J. Jacobs, a citizen of Canada, Elmo C. Ginkel, a citizen of Minnesota, and Albert E. Ginkel, a citizen of Florida. The substance of the cause of action pleaded in the complaint was that on specified dates plaintiff owned in whole or in part three oil and gas leases issued by the United States under the terms of the Mineral Leasing Act of February 25, 1920, as amended, 30 U.S.C.A. § 181 et seq., covering certain described lands in Wyoming; that the leases were denominated Serial Number BLM-A 017074, Buffalo Serial Number 038576, and Wyoming Serial Number 032532, respectively; that plaintiff conveyed by assignment his title in the leasehold estates to parties not having any interest in the action; that in the assignments, he reserved unto himself certain specified overriding royalty interests; that he conveyed by assignment a portion of such overriding royalty interests to the defendant Drew; that the defendant Drew conveyed by assignment to the defendants Elmo C. Ginkel and Albert E. Ginkel, each, a portion of such overriding royalty interest; that the consideration which the defendant Drew paid to plaintiff for the assignments of overriding royalty to him was 86,000 shares of common stock issued by North American Pipeline Producers Co., a corporation organized under the laws of Canada; that the defendant Drew made false and fraudulent statements and representations concerning such stock, including the value thereof; that plaintiff relied and acted upon such statements; and that the stock was valueless. A default judgment was entered in the cause determining and decreeing that the defendants Drew and Jacobs were entitled to no interest in the three leases, and that the title of plaintiff therein be quieted and confirmed as against such defendants. No appeal was taken from such judgment and it became final.

Three days after the entry of the default judgment, an amended complaint was filed in the action in which R. J. Chandler was joined as a party defendant. The material allegations contained in the original complaint were repleaded in the amended complaint. In addition, it was alleged that the defendant Drew assigned to the defendant Chandler one-half of one percent overriding royalty in the Buffalo Serial Number 038576, lease, and also one-half of one percent overriding royalty in the Wyoming Serial Number 032532 lease. By answer, the defendant Chandler denied the allegations of fraud on the part of the defendant Drew contained in the amended complaint, and pleaded affirmatively that he acquired the overriding royalty interest which the defendant Drew conveyed to him without notice of any claim or right of plaintiff. The cause was tried as between plaintiff and the defendant Chandler. Judgment was entered determining and decreeing that the defendant Chandler was the owner of the overriding royalty interest which the defendant Drew conveyed to him by assignment; that the defendant Chandler was entitled to the benefits flowing from such ownership, as against any claim of plaintiff; and that plaintiff had no legal estate in and to such overriding royalty interest in the leasehold estates, respectively.

The validity of the assignment from the defendant Drew to the defendant Chandler is challenged upon the ground that the only consideration which passed to the defendant Drew therefor was the cancellation of a pre-existing debt which had become barred by limitation, and that the cancellation of the debt was not a sufficient consideration for the conveyance of the overriding royalty. The court found that as a consideration for the assignment, the defendant Chandler delivered and surrendered to the defendant Drew a promissory note in the face amount of $6,000 with accrued interest of approximately $3,000 which the defendant Drew had executed and delivered to the mother of the defendant Chandler in 1946; that the note was due and payable on demand; that the mother of the defendant Chandler delivered the note to her son — the defendant Chandler — with the intent that he should be the owner and holder thereof and should collect the same; and that the defendant Chandler surrendered and delivered the note to the defendant Drew as consideration for the assignment of the overriding royalty interest to the defendant Chandler. These findings are sustained by substantial evidence. They do not appear to be plainly erroneous. And therefore they must stand on review. It is the general rule that the intervention of limitation does not extinguish a debt or preclude its enforcement, unless the debtor invokes the defense by pleading it. The debt continues in existence, even though recovery thereon has become barred by limitation. And although there is some contrariety among the cases respecting the question, the rule with which we are in accord is that unless a controlling statute provides otherwise, the cancellation of a pre-existing debt constitutes sufficient consideration for the conveyance of property; and that one who cancels and extinguishes a pre-existing debt as consideration for the conveyance to him of property becomes a purchaser for value. State Bank of St. Louis v. Frame, 112 Mo. 502, 20 S.W. 620; Hallett v. Alexander, 50 Colo. 37, 114 P. 490, 34 L.R.A.,N.S., 328; Noe v. Smith, 67 Okl. 211, 169 P. 1108, L.R.A.1918C, 435; Lee Tire & Rubber Co. v. Gay, 164 Wash, 569, 4 P.2d 503; Sutton v. Ford, 144 Ga. 587, 87 S.E. 799, L.R.A.1918D, 561; Sansom v. Warren, 215 N.C. 432, 2 S.E.2d 459; Orphanoudakis v. Orphanoudakis, 199 Va. 142, 98 S.E.2d 676; Dietsch v. Long, 72 Ohio App. 349, 43 N.E.2d 906.

Fraud on the part of the defendant Drew in the procuring of the assignment of the overriding royalty interest was an issue of fact joined between plaintiff and the defendant Chandler. Plaintiff resided at Billings, Montana, and the defendant Drew resided at Calgary, Alberta, Canada. Some time prior to the transaction giving rise to this litigation, the defendant Drew employed plaintiff to acquire for him federal oil and gas leases. The two had transactions preceding this one, such prior transactions consisting of various leasing activities or oil interests. Plaintiff owned the overriding royalty referred to in the amended complaint, and the defendant Drew was vice-president of the North American Pipeline Producers Co. and owned stock issued by it. The parties agreed that plaintiff should assign the overriding royalty interests to the defendant Drew and as the consideration therefor the defendant Drew should deliver to plaintiff 86,000 shares of common stock issued by the corporation. The documents were to be exchanged through the medium of a bank in Calgary. Plaintiff caused the assignment of the overriding royalty interests to be placed in the bank and the defendant Drew received it from the bank. But plaintiff — apparently at his own choice — did not receive the stock from the bank. All of the testimony relating to the issue of fraud was given by plaintiff and the defendant Drew. Plaintiff testified in substance that the defendant Drew told him that the stock would go on the market in about thirty days at $1.50 per share; that the...