Greene v. Condor Petroleum Co. , 121 S.W.2d 381 ( 1938 )

Ernest H. Greene sued Condor Petroleum Company et al. to recover a commission or compensation for services alleged to have been rendered by plaintiff to defendants in procuring the building of an oil refinery near leases owned by plaintiff and defendants and the sale of oil by the defendants and plaintiff to the refinery. Plaintiff alleged that he and the defendants were the joint owners of an oil and mineral leasehold estate in 2475.86 acres of land in Jones County, Texas; that plaintiff owned an undivided one-twelfth interest therein and plaintiff and defendants were "the joint sole owners of said property." He alleged that in 1932 the Condor Petroleum Company, R. G. Piper and F. A. Sansome, trustee, and plaintiff entered into a contract for the purpose of exploring, drilling and developing said property with a view of producing oil therefrom; that under the terms of the contract between said named parties the Condor Petroleum Company was made the operating manager for the joint owners with full power to control and manage the property and to make contracts and to do all things necessary for the production and marketing of oil on and from said properties. He alleged that the interests of the defendants who were not parties to said contract, whereby the Condor Petroleum Company was made the operating manager of the properties, were acquired subject to the terms thereof and they were bound thereby. Plaintiff further alleged that there was no pipe line or refinery near said properties on which fifteen producing oil wells were located and that plaintiff was employed by Condor Petroleum Company, acting for itself and the other defendants, to "procure an outlet or market for the oil produced from said leases." That plaintiff procured the building of a refinery near said property and caused the sale of oil produced from the property belonging to plaintiff and defendants on which he claimed a commission on oil sold to said refinery to the date of filing plaintiff's petition in the sum of $28,321.12. He alleged that the amount or rate of commission was not agreed upon and he sued for what he alleged to be a reasonable commission, or, in the alternative, for such amount as the court found to be just.

Plaintiff attached to his petition and made a part thereof the contract between Condor Petroleum Company and R. G. Piper, F. A. Sansome, trustee, and plaintiff. Said contract recited that Condor Petroleum Company owned certain oil and gas leases and had a drilling contract with the lessors of said land; that for a recited consideration Condor Petroleum Company had agreed to and did sell, assign and convey to Piper, Greene and Sansome, trustee, an undivided one half interest in and to the oil and gas mining leases therein described; that Greene, Piper and Sansome, trustee, each thereby acquired a one-third interest in the one half interest assigned by Condor Petroleum Company. The contract contained stipulations to the effect that in the event oil was found in paying quantities the expenses incident to the drilling of wells and the production of oil, etc., should be borne jointly by the parties to the contract in proportions equal to their respective interests in said leases. That upon the completion of the first well the Condor Petroleum Company should have exclusive charge, possession, control and supervision of all operations of every kind to be conducted on the said property and the handling and marketing of oil, etc. That Condor Petroleum Company should thereafter charge to the joint account of the parties to said contract in proportion to the interest of each all costs and expenses incurred in the operation of the premises, and an agreed charge for bookkeeping, accounting and office expenses of a certain amount per well per month; further, that upon final abandonment of the premises the equipment thereon might be divided in kind and each party receive his proportionate share thereof. The contract provided that Condor Petroleum Company should keep accurate records of all joint accounts showing expenses incurred and charges made and all credits and returns made and received, which records should be available at all reasonable times for examination and inspection by the parties to the contract, and that any exception to any statement of such expenses, etc., must be made to the Condor Petroleum Company by the other parties to the contract within sixty days from the receipt of a statement, and if no exception was made within such time, then such statement should be conclusively presumed to be correct. Greene Piper and Sansome, trustee, agreed to pay to Condor Petroleum Company their proportionate part of all costs and expenses incurred and charges made to the joint account by the Condor Petroleum Company in the operation of said leases upon demand. It was stipulated that any purchaser of oil from said leases should be instructed to pay the proceeds to the Condor Petroleum Company, who should account to the other parties to the contract, or their assigns; that Condor Petroleum Company might apply any income to which Greene, Piper and Sansome, trustee, might be entitled to any indebtedness owing by either of them to the operating manager of said leases, to-wit, Condor Petroleum Company. It provided that in case of disagreement as to any matter relating to the operations of the lease under the contract which could not be amicably settled the matter was to be submitted to arbitration in a certain manner and at a certain time, and that the decisions of the arbitrators should be final. There was also attached to plaintiff's petition a contract between Condor Petroleum Company and a refining company for the sale of oil from said leases to the refining company.

The defendants Condor Petroleum Company, R. G. Piper and Tal Vez Oil Company answered by general demurrer and special exceptions. One of the special exceptions was "that plaintiff and defendants were engaged in a joint enterprise, a mining partnership, and there is no allegation that a final accounting has been had which would in any manner authorize a suit by plaintiff against those associated with him in the joint adventure, and he is in effect suing himself." The general demurrer and special exceptions were sustained, and plaintiff having declined to amend, the case was dismissed. From the judgment of dismissal plaintiff has appealed.

We are of the opinion that plaintiff's petition and the contract attached thereto between plaintiff Greene, defendants Piper and Condor Petroleum Company and Sansome, trustee, evidence a mining partnership. Munsey v. Mills Garitty, 115 Tex. 469, 480, 283 S.W. 754; Wagner Supply Co. v. Bateman, 118 Tex. 498, 505, 18 S.W.2d 1052; Clayton v. Bridgeport Mach. Co., Tex. Civ. App. 33 S.W.2d 787, 790, writ refused; 12 Tex.Law Review, 410.

The general rule precluding suits between partners upon partnership claims or transactions prior to an accounting between the partners, and reasons for the rule, are stated in Corpus Juris, as follows: "An accounting and settlement between copartners is a condition precedent to an action by one against another upon partnership claims and transactions for the following principal reasons: (1) A dispute of this nature ordinarily involves the taking of a partnership account; for, until that is taken, it cannot be known but that plaintiff may be liable to refund even more than he claims in the particular suit. (2) In partnership transactions a partner does not as a rule become the creditor or the debtor of a copartner, but of the firm. (3) Such a suit would necessitate that the party complained of be both plaintiff and defendant. (4) One partner does not own or have a right to any specific portion of the partnership property." 47 C.J. p. 804, sec. 251.

Generally the rules with reference to ordinary partnerships are applicable to mining partnerships. 32 Tex.Jur. 217. The reasons for the existence of the quoted rule with reference to ordinary partnerships apply with like force in the instant case. We recognize the existence of exceptions to the rule, such as actions upon contracts separate and distinct from partnership dealings. We think such exception has no application to the instant suit, the petition disclosing that it is a suit upon "unliquidated matters resting in partnership dealings." Clamp v. Nolan, Tex. Civ. App. 300 S.W. 105, 106.

Summarizing, we think the petition discloses a partnership relation existing between plaintiff and defendants; that the partnership has not terminated; that there has been no accounting or settlement of partnership affairs; that the contract sued upon is not one separate and distinct from partnership affairs, bringing it within an exception to the general rule, but, to the contrary, is a suit by one partner against the other members of the partnership upon an unliquidated claim involving partnership affairs. The contract sued on effectuated the ultimate purpose of the partnership, to-wit, the sale of oil from the partnership leases. If the plaintiff should recover, under the terms of the written contract made a part of the petition, it would become the duty of Condor Petroleum Company, as the operating manager of the partnership, to first pay the amount of the judgment to plaintiff and then call upon the other members of the partnership, including plaintiff, to contribute their proportionate share, or to pay and discharge plaintiff's judgment out of partnership assets then in its possession. In either event, the plaintiff would be required to pay to himself a portion of the judgment; Greene is in effect both plaintiff and defendant. Such suit, we think, in the absence of an accounting, may not be maintained and the court did not err in sustaining the general demurrer and exceptions, and upon plaintiff's refusal to amend dismissing the case. In support of the foregoing conclusions we call attention to the following authorities: Masterson v. Allen, Tex. Civ. App.69 S.W.2d 539, 542, error refused; 47 C.J. 802, sec. 250; Worley v. Smith, 26 Tex. Civ. App. 270, 63 S.W. 903, 904; Lockhart v. Lytle,47 Tex. 452; Merriwether v. Hardeman, 51 Tex. 436; Hardee v. Adams Oil Ass'n, Tex. Civ. App. 254 S.W. 602, 605; Snyder v. Slaughter, Tex. Civ. App. 208 S.W. 974.

The judgment is affirmed.