Court Opinion

ID: 6926023
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:21:16.497926+00
Date Added: 2024-06-11T16:06:55.948822
License: Public Domain

PHILLIPS, Circuit Judge
(concurring) .
This is an appeal pursuant to 28 U.S.. C.A. § 1292(a) (2) from an order appointing a receiver for two producing oil and gas leases in Lincoln County, Oklahoma.1
Milton M. Green, Donald C. Bloink, Morgan Hockenberger, Margaretta C. Hockenberger and Ronald E. Mitchell, hereinafter sometimes called the plaintiffs, filed this action against Carroll W. Britton, W. R. Britton, Rachel Jane Ballou, Fred Ballou and W. A. Thompson, hereinafter sometimes called the defendants, alleging in their first claim for relief that they are the owners of the legal and equitable title to undivided interests in two oil and gas leases, known as the Rives Lease and the Hopkins Lease, respectively, and that the defendants hold the legal title to the remaining working interests in such leases; that they acquired their respective interests through separate written agreements with Carroll W. Britton, which in part provided that in consideration for the purchase price paid a test well would be drilled, completed into the tanks and equipped on a turnkey basis; that Carroll W. Britton was to have charge of the operations of the leases; that she was to conduct the operations on such leases for the mutual interest of all the parties; and that the plaintiffs were to have access to all books, records and information relating to such operations; *385that a gas well was drilled on one of the leases known as the Hopkins Lease and an oil well was drilled on the other lease known as the Rives Lease by the Brit-tons; that the Brittons breached the agreements with the plaintiffs and breached their fiduciary duty to the plaintiffs, in that they failed to complete the Hopkins well; mismanaged the Hopkins well so as to cause a waste of gas and the well to be shut in; neglected both wells; allowed offset wells to drain the Hopkins and Rives wells; failed to furnish basic data to the plaintiffs for a geological or engineering analysis of either the Hopkins or the Rives well, although requested to do so; failed to furnish the plaintiffs monthly statements of operating expenses or run statements; charged the plaintiffs incorrect and exhorbitant operating expenses; failed to meet title requirements of the gas purchaser, although such requirements were available; allowed tanks and equipment to be removed from the Rives Lease; and that as a result the plaintiffs have been irreparably damaged and have no adequate remedy at law.
The plaintiffs prayed for the appointment of a receiver, for a temporary restraining order enjoining the Brittons from continuing the operation of the leases, from removing or disposing of any of the property on either of the leases, and from parting with any of their interests in the leases, for an accounting, and for all other just and equitable relief.
In a second claim for relief, Ronald E. Mitchell alleged that Fred Ballou, for himself and as agent for the Brittons, and Rachel Jane Ballou executed and delivered to him a promissory note in the amount of $20,000, secured by a mortgage on an undivided one-fourth interest in both leases; default in the payment of the note and breach of conditions of the mortgage; that his security has been diminished; and that the mortgage provides for the appointment of a receiver in the event of a foreclosure. He prayed for judgment in the sum of $20,-000, plus other amounts provided for in the mortgage, foreclosure of the mortgage, a declaration of priority of his lien and for the appointment of a receiver.
Prior to the hearing on the application for appointment of a receiver, the Brit-tons and the Ballous filed answers to the complaint, admitting that the plaintiffs were the owners of undivided shares in the working interests, as alleged in their complaint, but alleged that there are additional working interest owners, namely Edward C. Lacy, Pearl Keller and Rose Firsht; that such persons are indispensable parties to the action; that such persons are citizens of Michigan and if they are made parties to the action diversity of citizenship will not exist.
At the hearing on the application for the appointment of a receiver the parties stipulated that the purchasers paid the Brittons $17,000 for their interests in the two leases.
The plaintiffs introduced into evidence a certified copy of the journal entry of a judgment of the District Court of Lincoln County, Oklahoma, in an action to quiet the title to such leases, brought in such state court, setting forth the working interests in the Hopkins Lease. Such journal entry of judgment reads in part as follows:
“Carroll W. Britton, Rachel Jane Ballou, W. A. Thompson, Edward C. Lacy, Pearl Keller, Morgan Hockenberger, Margaretta C. Hockenberger, Ronald E. Mitchell, Mrs. Rose Firsht, Milton M. Green, and Donald C. Bloink, Plaintiffs, vs. George Morhain and L. P. Orr, Sheriff of Lincoln County, Oklahoma, Defendants. No. 17,643.
Journal Entry of Judgment
******
“It Is, Therefore, Considered, Ordered, Adjudged and Decreed that the title and possession of said plaintiffs in and to said Oil and Gas Lease, be, and the same is hereby, *386forever settled and quieted in the Plaintiffs against the Defendants and as to each other in the follow-lowing respective proportions:
Milton M. Green and Donald C. Bloink: Und. 7/64ths
Morgan Hockenberger and Margaretta C. Hockenberger: An Undivided l/32nd or 44 2/64ths
Ronald E. Mitchell: 44 l/64th
Carroll W. Britton: 44 83/256ths
Carroll W. Britton held in trust for Edward C. Lacy: it l/128th
Carroll W. Britton held in trust for Pearl Keller: 44 l/16th
Carroll W. Britton held in trust for Mrs. Rose Firsht: 44 19/256ths
Rachel Jane Ballou: 44 l/8th
W. A. Thompson: 44 l/4th”
In order for the plaintiffs in the quiet title action to be entitled to a judgment quieting the title to the leasehold estates in them, it was necessary for them to make affirmative proof of their titles thereto, and we must presume that was done, as their respective titles are set forth in the judgment.
The plaintiffs presented evidence from which the court could have found that the Brittons seriously mismanaged and misoperated the two leases, failed to furnish basic data to the plaintiffs for a geological or engineering analysis of the two wells, and failed to furnish them with books, records and information pertaining to the operation of the two leases, and that the Brittons and Ballous had defaulted on the note due to Mitchell and had otherwise breached the conditions of the mortgage securing such note.
W. R. Britton, testifying for the defendants, identified an agreement between Carroll W. Britton and Pearl Keller dated March 31, 1961, and filed with the County Clerk of Lincoln County, Oklahoma, August 30, 1962. Such agreement provides in part that Carroll W. Britton agrees to deliver to Pearl Keller an undivided Yie of % working interest in the Hopkins and Rives Leases; that Carroll W. Britton agrees to begin drilling of a well to a specified depth without delay; that Keller shall have an undivided "H.6 interest in the casing, equipment and material used in such well; that Keller has an option to participate in subsequent wells; that Keller shall have access for inspection purposes to the leasehold area, and access to any and all information, books and records relating to the operation of the lease; and that Carroll W. Britton shall have charge of the operation of the lease for the mutual interest of all parties. Such agreement was admitted in evidence over objections by the plaintiffs.
W. R. Britton further testified that the Keller agreement is similar to the agreements executed between Carroll W. Brit-ton and the plaintiffs.
At the close of the hearing the court granted the application for the appointment of a receiver. The order appoint*387ing such receiver provides in part as follows:
“* * -x- the Court, * * * finds that it has jurisdiction of the parties and of the subject matter; that the Defendants, Carroll W. Britton and W. R. Britton, violated the contract with the Plaintiffs and mis-managed and mis-operated the Oil and Gas Mining Leases involved herein * * * and the Defendants, Carroll W. Britton, W. R. Britton, Rachel Jane Ballou and Fred Ballou have defaulted in the Note and Mortgage due the Plaintiff, Ronald E. Mitchell, for more than one year, and in otherwise violating the terms of the Mortgage to Ronald E. Mitchell * * * and by reason of all of said facts, the Court finds that a Receiver should be appointed for the Oil and Gas Mining Leases involved in this litigation.”
The leaseholds are situated within the territorial jurisdiction of the United States District Court for the Western District of Oklahoma.
I do not construe the relief sought on the first claim to be limited to the appointment of a receiver. Under the allegations of the complaint, fairly construed, the relief which the plaintiffs in effect sought and the relief to which they were entitled was the immediate removal of Carroll W. Britton as operator of the leases, an accounting from her, and a temporary receiver to manage and operate the working interest in the leases until the owners could work out a new arrangement for operating such working interest. True, the prayer literally construed does not go that far, but the demand or prayer for relief is no part of the claim and a plaintiff may recover all the relief to which the allegations of his claim and his proof show him to be entitled.2
In Skelly Oil Co. v. Wickham, 10 Cir., 202 F.2d 442, 446, this court defined an indispensable party as follows:
“An indispensable party is one who has such an interest in the subject matter of the controversy that a final decree cannot be rendered as between other claimants, of interests in the subject matter, who are parties in the action, without radically and injuriously affecting his interest and without leaving the controversy in such a situation that its final determination may be inconsistent with equity and good conscience.”
See also, Choctaw and Chickasaw Nations v. Seitz, 10 Cir., 193 F.2d 456, 458, 459; Carter Oil Co. v. Crude Oil Co., 10 Cir., 201 F.2d 547, 549.
In the latter case this court quoted from Oxley v. Sweetland, 4 Cir., 94 F.2d 33, 37, as follows:
“The thing that makes one an indispensable party to a suit is that some interest of his will be affected by it, not that questions of law or fact will be passed upon in which he is interested but by the decision of which he will not be bound.”
Owners of undivided interests in the working interest in oil, gas and other minerals in land situated in Oklahoma are tenants in common.3
Under the law of Oklahoma, where one or more of the owners of undivided interests in an oil and gas lease enter into an agreement with another owner of an undivided interest in such lease, under which the latter is to drill a test well on the lease and thereafter operate and manage the lease, the relationship between the parties is that of joint adventurers, and an undivided owner who is to manage and operate the lease stands in a fiduciary relationship to his coad*388venturers and is bound to exercise the “utmost good faith” in managing and operating such lease and reporting and accounting to his co-owners with respect to such management and operation. Bosworth v. Eason Oil Co., Okl., 213 P.2d 548; Blackstock Oil Co. v. Caston, 184 Okl. 489, 87 P.2d 1087, 1089. In the latter case the court said:
“ ‘The relation between the parties to a joint adventure is fiduciary in its character, and requires the utmost good faith in all the dealings of the parties with each other.’ Cassidy v. Gould, 86 Okl. 217, 208 P. 780.”
It follows that the relationship between the plaintiffs and Carroll W. Britton was that of coadventurers; that Carroll W. Britton occupied a fiduciary relationship to the plaintiffs and was under the duty of exercising the utmost good faith in the operation and management of the lease and in accounting for the moneys and properties received from such operation.
It seems to me that the question of whether there was an absence of an indispensable party, without whose presence the court would not have jurisdiction to proceed, is substantive, rather than procedural. The rule is for the protection of substantive rights of the absent parties. Hence, under Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, Oklahoma law governs.
In Cameron v. White, 128 Okl. 251, 262 P. 664, the facts were these: The First National Bank of Henryetta, Oklahoma, failed on July 20, 1923, and a receiver was appointed by the comptroller of currency to take charge of the bank. Four trustees were elected by the depositors of the failed bank to represent the depositors in effecting a plan of reorganization. Seven hundred seventy-one depositors assigned their receiver’s certificates to such trustees and executed powers of attorney authorizing the trustees to represent them in the incorporation of a new bank. Pursuant to a reorganization plan, a new bank was incorporated and White, the plaintiff in the action and a depositor of the old bank who participated in the reorganization, subscribed for the purchase of stock in the new bank. After the organization of the new bank, it purchased from the receiver of the old bank its bank building and fixtures and the trustees purchased from the receiver of the old bank the remaining assets of such bank with a receiver’s dividend and a loan from the new bank. Before delivering his check for stock, White obtained from the trustees a writing signed by them which provided:
“ ‘After the payment of all collection charges and expenses incidental in connection with the reducing of the assets to money, to pay the balance of the proceeds received from the sale or collection of said assets to the stockholders of the’ ” new bank “ ‘in proportion to the amount of stock owned by each person holding stock.’ ”
White brought the action against the trustees, praying for the establishment of a %>th interest in the trust estate on behalf of himself and for the appointment of a receiver, alleging mismanagement and breach of trust on the part of the trustees with respect to the assets of the old bank acquired by them. A receiver was appointed for the trust estate.
The trustees moved to discharge the receiver and sought dismissal on the ground of the absence of indispensable parties, namely, the other beneficiaries. The court quoted from Compiled Oklahoma Statutes 1921, § 518, in part as follows:
“A receiver may be appointed by the Supreme Court, the district or superior court, or any judge of either * * *:
“First. In an action * * * between partners or others jointly owning or interested in any property or fund, on the application of the plaintiff, or of any party whose right to or interest in the property or fund, or the proceeds thereof, is probable, and where it is shown that *389the property or fund is in danger of being lost, removed or materially injured. * * *”4
The court held that the other beneficiaries were not indispensable parties and affirmed the judgment of the trial court, refusing to vacate the order appointing a receiver. The court quoted with approval from Pickering v. De Rochemont, 45 N.H. 67, as follows:
“When the share of one of several cestui que trusts in a trust fund is ascertained and known, as where it is a moiety, or other aliquot part of the fund, a suit for a breach of trust may be maintained against the trustee, by the person entitled to that share, without joining the other cestui que trusts as parties.”
In Moody v. Branson, Okl., 136 P.2d 925, the facts were these:
William H. Ryan died testate in Garfield County, Oklahoma, in 1931. His will provided for the creation of a trust, named his sister, Martha Ryan Moody, to be trustee thereunder, named his daughter, Leone Maurine Ryan, as direct beneficiary of the trust, and provided that if Leone died before becoming 30 years of age, the undistributed balance of the trust estate should be divided between Martha and another sister, Parmelia Raymond. The will' was admitted to probate and the trust duly set up. In 1937, Leone brought an action against Martha, as such trustee, in a state court in Kansas, the place of residence of Martha, to require an accounting by her as trustee and for removal if she was found to have mismanaged the trust estate. Parmelia, who was a resident of Illinois, was not made a party. The Kansas court found Martha guilty of mismanagement of the trust, removed her as trustee, and ordered her to deliver the assets of the trust, which included land situated in Oklahoma, to a newly appointed successor trustee, John Branson. The Kansas judgment was not appealed from. An action was then brought in an Oklahoma state court to determine whether the plaintiff therein should pay a mortgage indebtedness owed to the estate of Ryan to Martha, as trustee, or to Branson, as trustee. To that action Branson, Leone and Parmelia were made parties. Martha and Parmelia asserted in the Oklahoma state court action that in an action to remove a trustee and appoint a successor trustee, all the beneficiaries are indispensable parties; that Parmelia was a beneficiary under the trust, and that since she was not made a party, the Kansas judgment was invalid. The Oklahoma court rendered judgment denying the removal of Branson as successor trustee and ordered the mortgage indebtedness paid over to him. Referring to the Kansas court action, the Oklahoma court said:
“This was an action in personam against Martha Ryan Moody. She resided in Greenwood County, Kansas. The personal property of the Trust was located there. The district court of that county being one of general jurisdiction possessing general equity powers, had jurisdiction of the action. Manley v. Garter, 7 Kan.App. 86, 52 P. 915; 65 C.J. 597, 629; Bogert, Trusts & Trustees, vol. 3, § 523, p. 1656.
“There were three issues involved in the proceedings in Kansas, an accounting, removal of the then trustee, and appointment of a succes*390sor trustee. It is well established that the rule that all beneficiaries are proper parties to an accounting is for the protection of the trustee alone, to guard him from a multiplicity of suits, and that the requirement may be waived by him. Wyman v. Herard, 9 Okl. 35, 59 P. 1009; 26 R.C.L. 1389. It is likewise well established that in an action to appoint a successor trustee the beneficiaries are proper, but not indispensable, parties and that a judgment appointing a successor trustee may not be collaterally attacked because of the absence of part of the beneficiaries, 65 C.J. 599, 601; 3 Bogert, Trusts and Trustees, § 533, pp. 1700, 1701; Sanders et al. v. Hall, 10 Cir., 74 F.2d 399. We think the rule that aü the beneficiaries are proper parties to an action to remove a trustee is likewise for the protection of the trustee, to avoid a multiplicity of removal suits. He may also waive this requirement. A contingent beneficiary, whose rights have not vested, has no right to have any particular person remain as trustee. As long as there is a proper trustee he has no right to complain. Furthermore the interests of the class to which Mrs. Raymond belonged were fully protected at the Kansas hearing. Her interests in the accounting and removal of the trustee were identical with those of Mrs. Mclver. Her interests, if any, in the retention of the trustee were identical with those of Mrs. Moody. She may have been a proper party, but she was not an indispensable party to either the accounting, the removal of the then trustee, or the appointment of a successor trustee and the judgment of the Kansas court may not be collaterally attacked on such grounds. See Freeman v. Prendergast, 94 Ga. 369, 21 S.E. 837. * * * ”
Wesson v. Crain, 8 Cir., 165 F.2d 6, 9, was an action brought by Wesson against Crain, trustee of Lee Wilson & Co., a business trust, for the removal of the trustee. The action was challenged on the ground that the other beneficiaries were indispensable parties. After a review of the authorities, the court said:
“We agree with the Supreme Court of Massachusetts that one of several beneficiaries may have a trustee removed if he has so misconducted himself that he ought to be removed. We have no doubt that a trustee owes to each and to all of the beneficiaries of his trust the duty which the law imposes upon anyone who occupies such a position. See and compare Boyd v. Gill, C.C.S.D. N.Y., 19 F. 145, 146; Wall v. Thomas, C.C.S.D.N.Y., 41 F. 620, 621. If the plaintiffs, upon a trial, can prove that the defendant’s conduct as trustee requires his removal, we think that the absence of the other beneficiaries as parties will' be no insuperable obstacle to the entry of a decree removing him. No beneficiary has a right to have the affairs of a trust conducted unlawfully, and no beneficiary can complain of the removal of a trustee if it is demonstrated that he has, because of misconduct, become an unfit person to occupy that position.”
Wesson v. Crain, Cameron v. White, and Moody v. Branson, supra, involved express trusts. But I think there is a close analogy between those cases and cases brought by one of several' partners or one of several coadventurers against a managing and operating partner or co-adventurer to remove him as operator and manager for breach of his fiduciary relationship, resulting from his mismanagement and misoperation. Moreover, as to the absent parties, Carroll W. Britton, by reason of her retention of the legal title to their undivided interests and the authority, unlimited as to time, to develop, manage and operate the working interests in the leases, although no formal words of trust were used, was the trustee of an express trust; and if such absent parties desired *391her retention as operator and manager, so that their position and interests in the proceeding are thus identical and mutual, they are and will be represented by her in the proceeding.
Since the mortgage only covered one-fourth of the undivided interests in the working interest in the leases, a receiver appointed in the proceeding on the foreclosure claim over the whole of the working interest would have to be on the grounds alleged in the first claim.
It is my conclusion that the facts alleged in the first claim and the second claim of the complaint and the evidence introduced in support thereof justified the removal of Carroll W. Britton as managing operator of the leases and the appointment of a receiver to succeed her in such management and operation and that the other co-owners not made parties to the action were not indispensable parties.
Accordingly, I concur in the affirmance of the order of the lower court appointing a receiver for the entire working interest in the leases.

. Defendants below endeavored to appeal from an order overruling their motion to vacate the order appointing the receiver and from an order overruling their motion to dismiss portions of plaintiffs’ complaint, but these are not appealable orders under 28 U.S.O.A. § 1292(a) and there has been no compliance with 28 U.S.C.A. § 1292(b) and will therefore not be noticed further.

. Hamill v. Maryland Cas. Co., 10 Cir., 209 F.2d 338, 340;
United States v. Borin, 5 Cir., 209 F.2d 145, 147;
United States v. Lesniewski, 2 Cir., 205 F.2d 802, 805;
Fanchon & Marco, Inc. v. Paramount Pictures, 2 Cir., 202 F.2d 731, 734, 36 A.L.R.2d 1336;
Fed.Rules of Civ.Proc., Rule 54(c), 28 U.S.C.A.

. See Skelly Oil Co. v. Wickham, 10 Cir., 202 F.2d 442, 446.

. Section 1551 of 12 Okl.St.Anno., Perm. Ed., applicable in the instant case, in part bere pertinent provides:
“A receiver may be appointed by the Supreme Court, the district or superior court, or any judge of either, * * *:
“First. In an action * * * between partners or others jointly owning or interested in any property or fund, on the application of the plaintiff, or of any party whose right to or interest in the property or fund, or the proceeds thereof, is probable, and where it is shown that the property or fund is in danger of being lost, removed or materially injured.
“Second. In an action by a mortgagee for the foreclosure or his mortgage and sale of the mortgaged property, where it appears that the mortgaged property is in danger of being lost, removed or materially injured, * * *.”