Penn-O-Tex Oil & Leasehold Co. v. Big Four Oil & Gas Co.

Argued October 3, 1929. This is an appeal from a judgment entered in favor of the Big Four Oil Gas Co., defendant, a corporation of the State of Delaware, in an action of assumpsit by the Penn-O-Tex Oil Leasehold Co., a corporation of the State of Ohio, to recover damages because of an alleged breach of contract. Both corporations were engaged in the business of buying, selling and operating oil and gas leases. Plaintiff, which, by virtue of certain assignments, "commencing with the [original] owner and passing regularly and successively in line," was the owner of leaseholds on 21,000 acres of land in the State of Texas, the use whereof was limited to oil and gas development, agreed, in writing, with the Pittsburgh Western Oil Co., a corporation (not a party to this suit), to sell and assign to that company its leasehold rights in 18 of the 33 sections of land which comprised this property.

Plaintiff alleges that, coincident with the transaction just mentioned, the Pittsburgh Western Oil Co. agreed, in writing, with the Big Four Oil Gas Co., defendant, to sell and assign to the last named one-half of its holdings under the above mentioned assignment from the Penn-O-Tex Oil Leasehold Co., — the defendant to accept its proportionate share of the obligations set forth in the assignment to the Pittsburgh Western Oil Co. Plaintiff further alleges that, on the same date as and complying with the above two agreements, it executed a formal assignment of its leasehold rights to the Pittsburgh Western Oil Co., and that the last corporation "executed and delivered to the said Big Four Oil Gas Co. a formal assignment of a one-half interest of, in and to the said leasehold; __________ [and further] that the selection of the [land] to be conveyed from the [plaintiff] to the Pittsburgh Western Oil Co., and from the Pittsburgh Western Oil Co., a one-half interest therein to the Big Four Oil Gas Company, had all been agreed upon prior to the date of said assignments __________ and the formal assignments [were] made up, executed and delivered simultaneously."

Plaintiff then alleges that, because of failure to meet obligations "to complete a well," etc., which the Pittsburgh Western Oil Co. assumed in accepting the assignment to it, a suit for breach of contract was instituted against the company in the United States District Court, where judgment was rendered for plaintiff. The present suit was brought because of defendant's failure to meet the same obligations, which plaintiff alleges the Big Four Company was bound to perform as "half-owner [with the Pittsburgh Western Oil Co.] of the leasehold estate."

Plaintiff, conceding that there was no privity of contract between it and the Big Four Oil Gas Co., bases its claims against the latter on the theory of privity of estate, existing by virtue of a covenant running with the land, which it contends bound defendant by reason of the alleged assignment to it by the Pittsburgh Western Oil Co. of the one-half interest in the leaseholds here in controversy.

In support of the contention that privity of estate existed between plaintiff and defendant, the former points to the assignment, attached to its statement of claim, from the Penn-O-Tax Oil Leasehold Co. to the Pittsburgh Western Oil Co., also to a written agreement to assign an interest in the leasehold, by the Pittsburgh Western Oil Co. to the Big Four Co., which document appears to be neither signed nor executed by the present defendant. Plaintiff further points to the averment in its statement of claim that an assignment of one-half of the leasehold was executed by the Pittsburgh Western Oil Co. to the Big Four Oil Gas Co., which states also that the latter took possession thereunder; but no copy of such assignment was set forth as an exhibit or otherwise included as part of plaintiff's case.

It has long been the practice in this State, and our statutes (Act of May 25, 1887, section 3, P. L. 271, and Act of May 14, 1915, section 5, P. L. 483, 484) require that "every pleading shall have attached to it a copy of all [writings] upon which the party pleading relies for his claim"; though, if such writing is set forth in a local court record or is recorded in any official place within the territorial limits of the court's jurisdiction, a proper reference to it in the pleadings will suffice. As already said, in the present instance, plaintiff neither attached to its statement of claim a copy of the alleged assignment to the Big Four Co., nor referred to any official record thereof, nor attempted to account for its failure in these regards.

On the case as presented, since plaintiff depends on privity of estate to establish its position, it can, after demurrer filed, do this only by showing that it in some measure exhibits in its statement the written assignment on which that privity rests; and this plaintiff wholly failed to do.

A like conclusion as to failure of proof was reached by the federal court in Penn-O-Tex Oil Leasehold Co. v. The Big Four Oil Gas Co., 23 F.2d 154, 155, where, considering the same contentions here presented by the same plaintiff against the same defendant, the United States Circuit Court said: "But the doctrine of covenants running with the land is based on an essential legal fact that some estate to which the covenant may attach as its vehicle or conveyance has been transferred: 11 Cyc. 1081; Flaniken v. Neal, 67 Tex. 629, 4 S.W. 212. To apply this law to the instant case, it must appear that the leased land or some interest in it was assigned by Penn-O-Tex to the Big Four. We have found no evidence of such an assignment."

Defendant urges that the adjudication in the case to which we have just referred makes the suit now before us res judicata, and the court below so held; but we prefer not to base our decision on that ground, for to do so on the present record would compel us to treat defendant's pleading as though it were a responsive answer instead of a demurrer, which course the court below mistakenly pursued. That tribunal acted on the statements of fact contained in the demurrer, showing the present controversy to have been already adjudicated in another suit, instead of treating such specific references to facts as mere guiding indications of what, on inspection, the record of that other proceeding would show, — which is the course the court below should have pursued.

It is not improper to make "the defense of res judicata __________ by demurrer, where the fact and the tender of the prior adjudication [depended upon] appear on the face of the proceedings" demurred to (23 Cyc. 1524; see also MOSCHZISKER'S Legal Essays 81); and here, as we shall presently show, plaintiff itself in effect averred the alleged prior adjudication. Plaintiff's statement of claim (the pleading demurred to), — differing in this respect from the statement in Steel v. Levy, 282 Pa. 338, 340-1, the case so largely relied on by appellant, — discloses on its face the existence of the judgment depended on by defendant as res judicata. To put the matter more specifically: Plaintiff avers an action "brought in the United States District Court for the Western District of Pennsylvania, at No. 3600 Law, and a judgment had [therein] against the __________ Pittsburgh Western Oil Co. __________, on the 17th day of January, 1929, for _________ $160,800," adding that such judgment is "hereby referred to and made a part of this statement of claim." It seems, however, that the court record in the suit mentioned in plaintiff's statement of claim shows both the Pittsburgh Western Oil Co. and the Big Four Co. named as codefendants; further, that it shows a prior judgment for the latter, or, in other words, a judgment in favor of the present defendant, which was affirmed on appeal January 20, 1928, about a year before the judgment pleaded by plaintiff. The affidavit of defense, instead of simply raising the point of law that the record of the judgment mentioned in plaintiff's statement of claim showed the present suit to be res judicata, set forth in some detail what that record contained, among other things, the prior judgment in favor of the present defendant, affirmed on appeal. For this reason, plaintiff contends that defendant's affidavit must be looked upon as a speaking demurrer; but since the record in question was that of a United States court located in the same place as the Court of Common Pleas of Allegheny County, the court below, it is subject to the rule stated by us in Phila. v. Reading Co., 295 Pa. 183, 189, and could be incorporated in the pleadings by reference; further, when so incorporated, the record in full, showing the judgment in defendant's favor, would thereby be proffered by the pleader for inspection by the court, and hence the court would not have to depend for its facts on the alleged speaking averments in the affidavit of defense, or statutory demurrer. The trouble here, however, is that the record under discussion is not printed in either brief presented to this court, and all the indications are that it was not actually presented to or inspected by the court below, as it should have been (Pasquinelli v. Southern M. Mfg. Co.,272 Pa. 468, 480; see also Deere Plow Co. v. Hershey, 287 Pa. 92,101), that tribunal accepting and acting on the statements in the affidavit of defense as verity. Plaintiff nowhere denies that the record in the United States court would show exactly what the affidavit of defense avers, and we are in no doubt that the facts are as there stated, or that, had the court below inspected the record, on its tender in the pleadings by plaintiff, that tribunal would have been warranted in treating the present case as res judicata; but, as the record before us stands, we shall, as already indicated, affirm the judgment on its merits, rather than as a matter adjudicated in the before mentioned prior action.

The judgment is affirmed.