In Lebow v. Cameron, Ky.,
The circuit court proceeded to make the directed adjudication, allowing some of the claimed expense credits and disallowing others, and entered judgment accordingly. The Cameron interests have appealed, claiming that the court erred in allowing certain expense credits, in not adjudging the Lebow people to be jointly rather than severally liable for the profits in excess of the properly allowable expenses, in not awarding recovery for an overpayment of royalties to the lessor, and in not allowing recovery against the buyer of the oil for a sum paid out by it. The Lebow interests have cross-appealed, contending that the *661 court erred in disallowing some of its claimed expense credits.
The total amount claimed as credits by the Lebow interests was $70,410.29. Of this amount the trial court allowed approximately $57,000. This left approximately $13,000 for which the Cameron interests were awarded recovery. (Some $142,000 of the proceeds of the sale of the oil produced by the Lebow interests, representing the profit above their claimed expenses, was paid over to the Cameron interests at an earlier stage of this litigation.) The judgment was a several one, being apportioned against the members of the Lebow group according to the respective shares they had received in the proceeds of the sale of the oil.
The first contention of the Cameron interests on this appeal is that the expenses incurred by the Lebow interests after suit was instituted against them to invalidate their “top” lease, amounting to approximately $36,700, should not have been allowed by the circuit court, because the Lebow interests must be considered to have lost their status as
innocent
trespassers after suit was brought. Reliance is had on Loeb v. Conley,
The next claim of error relates to the allowance by the trial court of credit in the approximate amount of $8,800 for expenses incurred in waterflooding. The appellants maintain that the waterflooding was not of any benefit because it did not increase production; also that the flooding was done on an adjoining leasehold owned by the Lebow interests and the Cameron interests cannot be compelled to submit to unitization for waterflooding purposes. We do not conceive the law to be that the only expenses for which an innocent trespasser may be allowed credit are those which actually have been productive of the income against which credit is claimed. We think the test of allowability should be whether the expenses were reasonably calculated to be beneficial and productive. The obligation of the innocent trespasser, as stated in the Swiss Oil case, is to pay over the profits, and there appears to be no reason why normal standards of reasonableness of expenses should not be applied in determining what are the profits. As concerns the claim that the Cameron interests were in effect being subjected to compulsory unitization we point out that we are not dealing here with strict legal rights but with equitable principles, and the question is whether in fairness the waterflooding expenses should be allowed as a credit — not whether the Lebows could recover from the Camerons in a straight suit for the expenses. And with respect to the matter of fairness we observe that *662 there was evidence that the waterflooding did keep the production from decreasing. So it is our conclusion that the circuit court properly allowed the waterflooding expenses.
The third contention of the appellants relates to expenses for alleged supervisory services by one McMahan, who was owner of a one-half working interest in the Lebow “top” lease. McMahan claimed expenses amounting to $5,625 for loss of income from his regular business, and for living and traveling expenses, while he was in Daviess County for the purpose, as stated in the appellees’ brief, of seeing “that his investment was properly protected.” The circuit court held that the claim was “excessive” and allowed only $1350 of it. The appellants argue that none of the expenses should have been allowed and the appellees, on cross-appeal, maintain that the full amount should have been allowed. Applying the test herein-before set forth, we find no basis for a holding that any of McMahan’s expenses were reasonably calculated to be beneficial or productive in the operation of the lease. There was no showing that McMahan knew anything about the oil business, or had any experience as an operator, or exercised any control or supervision over the drilling or operating of the wells, or was acting in any capacity on behalf of the other owners of the working interests. It appears that he was merely observing the operations to see how his investment was making out. While it is true, as held in the Swiss Oil case, that overhead expenses may be allowed as a credit to an innocent trespasser, we do not believe that McMa-han’s expenses properly can be classed as allowable overhead. Accordingly, it is our opinion that none of McMahan’s expenses should have been allowed as a credit.
The next item in contention is an expense of $182.83 for services of an engineer in making an analysis of the oil reserve under the leased tract, for the purpose of determining the feasibility of the proposed waterflooding operation. The appellants argue that the circuit court erred in allowing credit for this expense. For the reasons hereinbefore stated with respect to the expenses of the waterflooding operation itself, we think the engineering expense properly was allowed.
As stated at the outset of the opinion, the judgment below was against the various members of the Lebow group
severally
in accordance with the respective shares they had received in the profits. The appellants contend that the judgment should have imposed joint and several liability, and they cite authority for the proposition that co-trespassers, as other joint tortfeasors, are jointly and severally liable. We think it is sufficient to point to a
statute
which has changed the common-law rule in Kentucky. See Alexander v. Humber,
The next question concerns the claim of the Cameron interests for recovery of an overpayment of
royalties,
in the amount of $5,018.55, to the lessors, Theodore and Bessie Mercer. In the prior judgment that was here on appeal in Lebow v. Cameron, Ky.,
We find no valid reason why recovery should not be awarded against the Mercers for the overpayment of royalty. Nothing in the opinion on the prior appeal suggests that such recovery would be improper. Nor do we see how Wilking was in any way an indispensable party on the question of whether the Mercers had been overpaid and should reimburse the Cameron interests for the overpayment. If recovery were sought against Wilking of course he would be an indispensable party, but in our opinion he was not indispensable to a recovery against the Mercers, nor do we think he would be indispensable even to a recovery against the other holders of the working interests who authorised the overpayment, if the circuit court should choose to award such a recovery.
The final claim of the appellants relates to a recovery sought against the Owensboro-Ashland Company, which had purchased the oil produced by the Lebow operations. In the prior judgment which was on appeal in Lebow v. Cameron, Ky.,
The appellants make a minor point of the fact that the total of the several awards against the various appellees is some $800 short of the amount of the expense disallowed by the circuit court. No one offers any clear explanation for this shortage. Perhaps some of it can be explained by the fact that no recovery was allowed for so much of the net profit as was received by Wilking, because he died and the action was not revived as to him. The only direction we need to make is that upon re-computation of the amounts of the recoveries pursuant to the mandate to be issued on this opinion, any mathematical errors that may have occurred should be corrected.
We come now to the cross-appeal. One of the items covered by the cross-appeal — the matter of McMahan’s expenses —has hereinbefore been disposed of. That leaves for determination the allowability of credit to the appellees for ad valorem taxes paid by them and for the expenses of drilling a dry hole. The appellees maintain that the circuit court erred in disallowing credit for these items.
During the period the Lebow interests were in possession of the leasehold they paid $1,445.40 of ad valorem taxes assessed against the leasehold. In strict theory those taxes were assessed against the Le-bow leasehold and their payment would not relieve the Cameron interests of taxes assessable against the Cameron leasehold. *664 However, in practical effect only one tax was undertaken to be assessed and that was intended to be against the leasehold value regardless of ownership, so the payment of the taxes by the Lebows did redound to the benefit of the Camerons. The cases relied upon by the appellants, holding generally that taxes voluntarily paid by a person under the mistaken belief that he is the owner of the property cannot be recovered by him from the true owner, are in our opinion not applicable, because we are not dealing here with a legal right of recovery but with the equitable allowance of credit. It is our conclusion that the tax payments should have been allowed as a credit.
As concerns the cost of drilling the dry hole it is our opinion that those costs, under the test hereinbefore adopted, were reasonably calculated, when incurred, to be beneficial and productive, and therefore credit should have been allowed for them. We do not interpret Lawrence Oil Corp. v. Metcalfe,
The judgment is affirmed except as to the four items hereinbefore found to have been erroneously adjudged, namely, the McMahan credit, the Mercer overpayment, the tax credit, and the dry-hole credit. As to the first two of those items the judgment is reversed on the direct appeal, and as to the last two of those items the judgment is reversed on the cross-appeal, with directions to the trial court to enter judgment in conformity with this opinion.
Notes
. We note the fact that the circuit court found that the appellees were not partners or joint adventurers.