Western Royalty Corp. v. White

DUNKLIN, J. On July 23, 1926, James H. White and W. C. Duncan purchased an undivided two-thirds interest in an oil and gas lease covering 27 acres of land in Wichita county. At the same time the Petroleum Royalties Corporation acquired the other undivided one-third interest in the same lease. There was an agreement between those joint owners that White and Duncan should have the active superintendence and management of the lease and for their services to bo paid a reasonable compensation; that the lease should be developed and operated for production of oil and gas, and, after paying all operating expenses, including the cost of superintendence by White and Duncan, the profits should bo divided according to the respective interests to the parties in the lease, that is to say, White and Duncan were to receive two-thirds and the Petroleum Royalties Corporation one-third. On June 11, 1930, the Petroleum Royalties Corporation conveyed and assigned its one-third interest in the lease to Edward Wilkins, and on June 17, 1930, Wilkins conveyed the same interest to the Western Royalty Corporation. At that time there were oil 'wells' on the lease, and White and Duncan continued to operate the'same, and thereafter paid over to the Western Royalty Corporation ‘one-third of the proceeds of oil acquired from the lease up to and including the month of February, 1931. White and Duncan then instituted this suit against the AYestern Royalty Corporation to recover one-third of certain operating expenses which it was alleged the defendant was obligated to defray. And plaintiffs claim that defendant’s liability for the amount sued for arose by reason of the following allegations in their petition: “That at the time the defendant purchased the one-third interest herein described he knew that said lease was a producing oil and gas lease, that it would be necessary to maintain, operate and develop said lease and to pay the expenses thereof and that plaintiffs were actively managing' and superintending said lease and that its obligation was to contribute its pro rata part of the operating expense including a reasonable charge for superintendence and management of said lease and in acquiring the interest formerly owned by the Petroleum Royalties Corporation and in allowing its continued operation by plaintiffs it assumed the obligation of the Petroleum Royalties Corporation to pay its proportional part, being an undivided one-third, of the reasonable expenses of operating and developing said lease. “That the defendant regularly received its one-third of the revenue from the oil and gas from said lease after the payment of the usual one-eighth royalty. Defendant acquiesced in the operating and developing of said lease and the sending of the sums hereinafter set out by plaintiffs with knowledge that the operation of said lease was continuing. “Defendant on February 25, 1931, in writing acknowledged to plaintiff its obligation to pay its part of said expenses and therein duly acknowledged that plaintiffs were entitled to collect from it one-third of the drilling expenses of said lease in these words: “ ‘We fully recognize our responsibility and the fact that you'are entitled to collect from us one-third of the drilling expenses of this lease.’ “The plaintiffs promptly each month rendered to this defendant statements showing the operations on said lease and the cost thereof. “The said expenses all incurred after the defendant purchased said interest in said lease and in the usual course of developing the same totaled each month the following: June 1930 $417.19 July 1930 356.29 August 1930 273.90. September 1930 26S.67 October 1930 284.75 November 1930 192.90 December 1930 194.36 January 1931 288.24 February 1931 181.35 —a more detailed statement of which properly itemized is attached hereto, marked exhibit ‘A’ and made a part hereof.” Exhibit A attached to the petition shows that some of the items appearing in. the foregoing account for different months were made up of items of expense incurred prior to June 17, 1930, when the defendant acquired its interest in the lease; some of those items were incurred in April, some in May, and some in June prior to" the assignment [1099] by Wilkins to the defendant of its one-third interest. The case was tried before the court without a jury, and judgment was rendered for one-third of the items listed in the account shown above, which included one-third of the items of expense incurred prior to defendant’s purchase from Wilkins, as shown by the exhibit attached to the petition. From that judgment the defendant has prosecuted this appeal. It was not alleged in plaintiffs’ petition, nor did the evidence show, that the defendant expressly assumed the payment of any part of the operating expenses incurred prior to its purchase from Wilkins, but the evidence shows without controversy that the defendant recognized its liability to the plaintiffs for one-third of all the expenses incurred in operating the lease after it acquired its one-third interest therein from Wilkins. Complaint is made by appellant that the judgment was erroneous to the extent of its inclusion of one-third of the operating expenses incurred prior thereto, and we have reached the conclusion that the judgment is erroneous to that extent. By other assignments a further complaint is made that certain operating expenses charged by plaintiffs were unreasonable, but those assignments are overruled because the testimony introduced was sufficient to support the court’s findings to the contrary. Although testimony of one of the plaintiffs to the agreement of the Petroleum'Royalties Corporation to pay one-third of the operating expenses while it was the owner of one-third of the lease was inadmissible • against the defendant in the absence of proof that it expressly or impliedly assented to the same obligation on its part, yet the error in admitting it was harmless, since that obligation was admitted by the defendant in its letters to plaintiffs after it became interested in the lease; the trial being before the court without a jury. In their briefs, counsel for appellees have requested that, in the event of a finding by this court that the judgment is excessive, permission be given them to file a remittitur in a sufficient amount to cover such excess, and that the judgment be affirmed for the balance. A calculation has been made which it is claimed definitely shows the amount of such excess with the request that the same he accepted as such excess in the event of the finding that the judgment is excessive. However, by reason of the fact that some of the items of expense appear to cover periods both before and after the defendant acquired its interest in the lease, and we have no definite basis for a correct apportionment of those items, we cannot grant the request for the remittitur. If counsel for both parties can agree on the amount of the remittitur to be so entered, the judgment will then be reformed so as to eliminate the excess, andi as reformed, will be affirmed; such remit-titur to be filed within 15 days from the date of this judgment. If such remittitur is not filed within the period of time, stated, the judgment will be reversed, and the cause remanded.