Rowland v. Cox

121 Ky. 341 | Ky. Ct. App. | 1905

Opinion by

Chief Justice Hobson

Affirming.

On the 9th of May, 1902, A. J. Stein and B. A. Bonniville made a contract with S. S. McCain, E. R. Carr and B. C- Wilson, by which, in consideration that the latter would sink one test well to the depth of the first sand for the purpose of finding oil, Stein and Bonniville leased to them for the period of 20 years one-half interest in all the oil in a certain boundary of land, less a royalty of one-eighth. The lease concludes with these words: “Further, it is understood and agreed, that unless said test well proves fruitful — that is, produces oil — then this lease and contract shall be considered null and mid and of no effect whatever. ’ ’

On June 29, 1902, when the test well had been sunk to a depth of 489 feet, it was reported that oil was struck. Examination showed oil in the well. McCain, Carr and Wilson, who were boring the wells, said that the drill had struck a crevice, and when it went down again became fastened, and after this they found oil had run in. There was considerable excitement on the subject, and on July 10th Carr and wife, in consideration of $500, conveyed to George T. William and E. C. Rowland, Carr’s one-sixtli interest. On July 15th William and Rowland sold to John Cox and R. D. Wilson for $800 three-fourths of the one-sixtli interest which Carr had conveyed to them. After all this had been done, it was learned that no oil had been in fact struck in the well, but that Carr and his associates had bought several barrels of crude petroleum and poured them into the well. Cox and Wilson thereupon tendered to Rowland and William the deed for the interest conveyed to them, and demanded the $800 which they had paid, on the ground that it had been obtained from them by fraud and mistake. Their demand being refused, they filed this suit to recover the money. The allegations of the petition were denied, and on final hearing the circuit court held that there was no fraud, but mutual mistake, and entered judgment in favor of the plaintiffs. Of this the defendants complain.

It will be observed that by the lease made to Carr and his associates it was stipulated that, unless the test well produced oil, the lease should be void and of no effect. The test well did not produce oil, and therefore by its terms the lease was void. It .is insisted for appellants that this conclusion does not follow, for the reason that the well had been put down only 489 feet, and was some 40. or 50 feet from the sand. It is said that, if the well was bored down to the sand, it might prove oil-producing. This may be true, but it does not lie in the mouth of Carr and his associates to say so. They abandoned the well after pouring the oil in it and giving out that they had struck oil. They then proceeded to move off. The well, when they abandoned it, was not oil-producing. The contract contemplated the continuous boring of the well after they had begun. They can not be permitted to salt the well and abandon it, and, after they have abandoned it, to say that, if they had not abandoned it, perhaps they might have struck oil, and that therefore their lease is not void. Carr, therefore, had nothing to sell. His conveyance to William and Rowland passed nothing. As William and Rowland got nothing from Carr, they had nothing to convey to Wilson and Cox. Wilson and Cox paid $800 for nothing.

It is earnestly insisted that all of this was speculation, and that, where a man buys property of a speculative value, he can not recover his money because it turns out to be without value.

The rule laid down in 2 Pomeroy’s Equity, sec. 855, is relied on: “When parties have entered into a contract or arrangement based upon uncertain or contingent events, purposely as a compromise of doubtful claims arising from them, and where parties have knowingly entered into a speculative contract or transaction, one in which they intentionally speculated as to the result, and there is in either case an absence of bad faith, violation of confidence, misrepresentation, concealment and other inequitable conduct mentioned in a former paragraph, if the facts upon which such agreement or transaction was founded, or the event of the agreement itself, turn out very different from what was expected or anticipated, this error, miscalculation or disappointment, although relating to matters of fact, and not of law, is not such a mistake, within the meaning of the equitable doctrine, as entitles the disappointed party to any relief, either by way of cancelling the contract and rescinding the transaction or of defense to a suit brought for its enforcement.” This rule has no application. Cox and Wilson, it is true, were speculating in oil property. They took the risk of how much oil the well would produce; but they bought on the idea that it was an oil-producing well. They were not speculating on the chance that there was no oil in the well. They assumed that oil had in fact been struck. The rule also does not apply for the reason that, the well, having been salted, Carr had nothing to convey, and his vendees, William and Rowland, simply stood as to title in his shoes. If this were an action by Rowland and William against Carr to recover the $500 they paid him, clearly it could not be maintained that the principle relied on would apply. But Rowland and William simply bought Carr’s interest, and they can no more retain the money of Cox and Wilson than Carr could retain their money if they had sued him. It is true Carr perpetrated the fraud, and Rowland and William were Ms victims. When they sold to Cox and Wilson, they did not know of the fraud. The trade made by them with Cox and Wilson was made under a mutual mistake, and the chancellor properly rescinded it.

Judgment affirmed.