Yeager v. National Co-op. Refinery Ass'n

• Decision Date: 13 June 1970
• Docket Number: No. 45696,45696
• Citation: 470 P.2d 797,205 Kan. 504
• Parties: M. P. YEAGER, Appellee, v. NATIONAL COOPERATIVE REFINERY ASSOCIATION, a corporation, Appellant, v. W. R. YEAGER, Appellee.
• Court: Kansas Supreme Court

Page 797

470 P.2d 797

205 Kan. 504

M. P. YEAGER, Appellee, v. NATIONAL COOPERATIVE REFINERY ASSOCIATION, a corporation, Appellant, v. W. R. YEAGER, Appellee.

No. 45696.

Supreme Court of Kansas.

June 13, 1970.

Syllabus by the Court

1. An oil and gas lease which, in legal proceedings, has been determined to be invalid will not form the basis for the recovery of payments of royalty due under or by virtue of its terms.

2. Where a contractual basis exists between two or more persons and at the same time a duty is imposed by or arises out of the circumstances surrounding or attending the transaction, the breach of such a duty may be said to constitute a tort.

3. In a purely equitable action for an accounting, where there is no corresponding legal right or remedy, the statute of limitations will not be applicable, but only laches will bar or defeat the action.

4. When a statute fixes the period of limitations under which a claim, if filed in a court of law, would be barred, a court of equity by analogy will follow the limitations set by the law. (Following Rex v. Warner, 183 Kan. 763, 332 P.2d 572.)

5. Where, in an action for an accounting, the items of asserted indebtedness are all on one side, the account does not have the character of an open, mutual running account so far as the statute of limitations is concerned.

6. Where part of a final judgment entered in the trial court is severable from the rest of the judgment, an appeal may be taken from that part only.

7. In general, a cause of action accrues, so as to start the running of the statute of limitations, as soon as the right to maintain a legal action arises, the true test being at what point in time the plaintiff could first have filed and prosecuted his action to a successful conclusion.

8. The record is examined in an action brought for an accounting and for reasons stated in the opinion it is held that recovery is barred by the statute of limitations.

Richard A. Loyd, of Jochems, Sargent & Blaes, wichita, argued the cause, and Emmet A. Blaes and Bruce W. Zuercher, Wichita, were with him on the brief for appellant.

William L. Oliver, Jr., of Martin, Porter, Pringle, Schell & Fair, Wichita, argued the cause, and George B. Collins, of Collins & Collins, Wichita, also argued and was with him on the brief for appellees.

FONTRON, Justice.

In this lawsuit, the plaintiff, M. P. Yeager, who owns an interest in an overriding oil and gas royalty, seeks an accounting from the defendant, National Cooperative Refinery Association, for a share of the oil produced from the Northeast Quarter of Section 5, Township 28 North, Range 1 East, Kay County, Oklahoma. These parties will be referred to hereafter either as plaintiff, or Mrs. Yeager, on the one hand and defendant, or N.C.R.A., on the other. N.C.R.A. has filed a third party petition against W. R. Yeager, the husband of M. P. Yeager, who, as third party defendant, will be referred to throughout the opinion as Yeager or Mr. Yeager.

The case was tried to the court which, after making findings of fact and conclusions of law, entered judgment in favor of Mrs. Yeager against N.C.R.A. ordering an accounting. Judgment was also entered in favor of Mr. Yeager and against N.C.R.A. on the latter's third party petition. This appeal was thereupon undertaken by N.C.R.A.

The facts of the case are somewhat involved. In 1953, Mr. Yeager, an independent Wichita lease broker, discovered an unleased quarter section of land in Kay County, Oklahoma, which he thought was blessed with good oil prospects, since it lay adjacent to production. In checking into the ownership, Yeager found that parties by the name of Dilworth, sometimes referred to herein as the 'Dilworth Group', claimed an interest in the mineral rights through a common ancestor who had farmsteaded the quarter section, while other parties, known in this opinion as the Trenarys or the 'Trenary Group', also claimed title to the minerals, tracing their ownership through tax sale conveyances made to purchasers at tax foreclosure sales.

Mr. Yeager interested N.C.R.A. in obtaining an oil and gas lease on the property and a verbal understanding was reached that when Yeager had secured a valid lease, N.C.R.A. would take an assignment of the lease from Yeager paying $500 therefor. The assessment was to be subject to the reservation by Yeager of an overriding royalty of 1/16 of 7/8 of all oil and gas produced thereunder. N.C.R.A. also agreed to pay all abstracting expenses.

In an endeavor to obtain good title to the lease, Mr. Yeager contacted both the Dilworth and the Trenary groups and was continuing to negotiate with members of both groups when the defendant advised him that the Dilworths were not necessary parties to the lease and to cease his efforts to lease from them.

In October, 1954, a representative of N.C.R.A., accompanied by the company's attorney, who had rendered a title opinion that title to the minerals was in the Trenary group, journeyed to Newkirk, Oklahoma, where they met with the Trenarys' lawyers and accepted a lease executed by members of the Trenary group, alone. This action was taken unknown to Yeager. The lease which was secured, dated October 13, 1954, was taken in Mr. Yeager's name and was brought back to Wichita where Mr. Yeager, on October 14, 1954, assigned the same to N.C.R.A., reserving a 1/16 of 7/8 of all oil and gas produced thereunder. On the same date Mr. Yeager assigned a 3/4 interest in the overriding royalty interest to his wife, who is the plaintiff herein. The other 1/4 interest in the overriding royalty was assigned to Roy John Evans who is not a party to this lawsuit. Yeager took the lease and accompanying assignments to Newkirk, Oklahoma, where they were recorded on October 19, 1954. We shall hereafter refer to this lease as the Yeager lease.

Subsequently, N.C.R.A. assigned a onehalf interest in the lease, subject to the overriding royalty, to Leo H. Fortier and Wayne W. Wright, who were designated as operators of the lease. Six producing oil wells have been drilled on the quarter section involved.

On June 2, 1955, the Dilworths, who were left standing in the cold when the Yeager lease was accepted, and were apparently aggrieved by such neglect, commenced proceedings in the state of Oklahoma challenging the validity of said lease and seeking for themselves a share of the action. In the Oklahoma proceedings, fortier and Wright, N.C.R.A., Mr. and Mrs. Yeager and Mr. Evans were all joined as parties defendant.

The tortuous route of those legal proceedings over a ten-year span of time need not be traced in too minute detail. It is sufficient for the present to state that the District Court of Kay County, Oklahoma, in which the case was tried, held the Yeager lease to be valid, but on January 12, 1960, the Supreme Court of Oklahoma reversed that decision. In the opinion, reported as Dilworth v. Fortier, 354 P.2d 1091 (Okl.), the supreme court determined that the Trenarys derived no title whatever to the minerals through the chain of title based on the tax deeds and that the trial court had erred in upholding the Yeager lease so far as it was based on title derived through such deeds.

We need not probe into the basis for this decision other than to say it was predicated on the proposition that the tax sale proceedings, and the tax deeds issued thereunder, conveyed no title to the minerals, for the reason that, under a 1913 lease, the mineral interests in the land had become severed from the fee for tax purposes, and that gross severance taxes were being paid on gas produced therefrom at the time the land was sold for unpaid ad valorem taxes. Neither are we called upon to appraise the rationale of the decision. We need only observe that we are bound thereby so far as the validity of the Yeager lease is concerned.

The Oklahoma decision of January 12, 1960, did not entirely terminate the litigation, however, for the case was remanded for a new trial 'not inconsistent with the views expressed herein.' On remand, additional hearings were conducted by the Kay County District Court on April 17, 1961, and on June 27, 1961. In those hearings questions of title to the minerals were determined by the trial court, along with other matters. A second appeal was thereupon perfected to the Oklahoma Supreme Court which, on May 12, 1964, handed down a second opinion, Dilworth v. Fortier, 405 P.2d 38 (Okl.).

Finally, on November 3, 1965, this protracted litigation was laid at rest by an order entered by the long suffering trial court dividing, by way of dollars and cents, the oil runs which had accumulated and had been impounded over the years. The division was made between the Dilworth and Trenary groups, a Rose group, a Frates group, (both of which entered the picture during the lawsuit), and the owners of the Yeager lease (N.C.R.A. and Fortier and Wright).

The present action for an accounting was commenced against N.C.R.A. July 20, 1966. As we have already noted, judgment was entered in favor both of Mrs. Yeager and her husband. In its decision, the trial court reserved questions relating to the accounting itself pending determination of the legal issues which are involved in this appeal.

On the present appeal, the defendant, N.C.R.A., advances these arguments: (1) That plaintiff's claim is barred by the statute of limitations; (2) that plaintiff's claim is barred under the doctrine of res judicata; (3) that the defendant was not estopped to deny the validity of the Trenary lease; (4) that defendant was entitled to rely on the warranty of title contained in Yeager's assignment of the lease; and (5) that defendant's motion for a continuance should have been granted.

We shall first take up the defendant's contention that the plaintiff's claim is barred by the statute of limitations. The argument in this regard is two-fold: First, that the two-year statute of limitations defined in K.S.A.1969 Supp. 60-513, (formerly G.S.1949,...