Willetts v. Reid — 5 N.Y. St. Rep. 175

Majority

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Isaac Willetts et al., Appl’ts, v. Samuel N. Reid et al., Resp’ts.

(Supreme Court, General Term, Fifth Department,

Filed September, 1886.)

Headnote

1. COMPLAINT, SUFFICIENCY OF — DISMISSAL BEFORE OFFERS OF PROOF — ON APPEAL FROM, ALL FACTS ALLEGED MUST BE TAKEN AS PROVEN.

In reviewing on appeal tlie determination of a referee dismissing plaintiff’s complaint before any proofs offered or statement made by the plaintiff of the facts which he intended to prove, it must be presumed that the plaintiff could sustain by competent evidence the facts set forth in the complaint, and the propriety of the dismissal must be determined from the allegations therein.

2. Contract — Construction of — Lien.

The complaint stated that plaintiffs, I. W. and W. G-., were the owners of and had the right to mine for oil upon premises described, and as to another parcel they were entitled to one-eighth of the oil which might be produced thereon by other parties. They were in possession of the first parcel and had drilled thereon oil wells which had produced a considerable quantity of oil. Connected therewith and used in the development of the property, was a plant of machinery and storage tanks. The plaintiffs, by an instrument under seal set forth in the complaint, sold and transferred all their interest in said property with the machinery, etc., and in the royalty mentioned to the defendant IC., who agreed to pay therefor $32,000, of which, at the commencement of the action, $7000 remained unpaid. K. entered into possession, operated the wells and produced a large amount of oil. The plaintiff, I. W., prior to the commencement of this action, acquired an interest by purchase in the contract of bargain and sale. Plaintiffs claim by virtue of the contract to have a lien upon all the property which ivas the subject of the sale, and the oil which has been produced or maybe produced, as security for the unpaid purchase money, and seek to enforce such lien and for a personal judgment against K. for any deficiency existing after the sale. The contract provides that all rigs, tanks, etc., now' on the land or hereafter put on the same, shall remain part and parcel of the premises until all payments are completed; and that in case of K.’s failure to make the payments as they fell due for ten days, then after such failure all oil produced upon the premises should be run into lines to the credit of I. W. as security for such payments. There was at the time of the sale some oil in store in the tanks on the premises. The contract provided further that all oil produced on the premises should be the property of K., or, if any were sold, the avails should belong to him. Held, That the contract operated as a sale in presentí, and vested title of all the property in the vendee, including the oil in store.

3. Oil wells, etc. — Personal property.

Held, That as between the parties to this action the interest of the vendors in the wells and all the machinery used in operating the same, must, by force of Laws 1883, Chapter 372, be regarded as personal property.

4. Lien created by agreement — Valid against promisor and all CLAIMING UNDER HIM, EXCEPT INNOCENT PURCHASERS.

Held, That the contract being that the vendee should give to the vendor security on the oil produced, although the manner and form was not provided in which the same was to be perfected so as to give the vendor written evidence of their lien, notwithstanding the omission and regarding the contract as a mere executory promise to give a lien, Courts of Equity would regard such a promise as creating an equitable lien enforceable as against the party promising and those claiming under him who are not innocent purchasers.

5. Same — Foreclosure of — Parties.

Held, That persons having or claiming to have interests in the property

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subsequent and subordinate to the plaintiff’s lien, were properly made parties to the action.

6. Same — What not a bab to an action.

Held, That the fact that K. had abandoned the premises and plaintiffs regained possession and were engaged in operating the wells and receiving the product of the oil and the avails thereof, was no bar to maintaining an action to foreclose the lien.

AN Appeal from a judgment dismissing the plaintiffs’ complaint as to the defendants, Rufus M. Brown, Robert M. Wall, Charles H. Levins, and Samuel N. Reid, who are the respondents. These defendants and Thomas Kervin appeared and answered, denying many of the material facts upon which the plaintiff’s cause of action is based and setting up matters in defence, which, if true, would defeat a recovery as to all the defendants. The issues were all referred to a referee to hear and take proofs of the allegations in the complaint, and to compute the amount due and owing on the contract described in the plaintiffs’ complaint, and to report the same to the court. No case was made setting forth the proceedings on the hearing before the referee, but he states in his report that on motion of the counsel for all the defendants who answered except Thomas Kervin, the plaintiffs’ complaint was dismissed as to such defendants, and each of them on the ground that the same did not state facts sufficient to constitute a cause of action against such defendants or either of them, with costs which were taxed and entered in the judgment at $143.77. No trial was had on issues between the plaintiff and the defendant Kervin, and they remained untried. The case was submitted on printed briefs.

Hamilton Ward, for the appl’ts ; A. L. Elliott, for the resp’ts-

As the complaint was dismissed on the defendants’ motion before any proofs were offered.or any statement made of the facts which the plaintiff intended to prove in support of his cause of action, it must be determined by the allegations contained in the complaint whether the same was properly "dismissed, for it is to be presumed that the plaintiff could sustain by competent evidence the facts therein set forth. A perfect cause of action was stated against the defendant Kervin, entitling the plaintiff to the recovery of a personal judgment against him for a large sum of money, and for the other relief which was demanded in the complaint. The complaint states in substance that the plaintiff Isaac Willetts and William Cran-ston were the owners of and had the right to operate and mine for oil on certain premises which are specifically described, and as to another parcel they were entitled to one-eighth of the oil which might be produced thereon by other parties as a royalty to be paid to them. They were in possession of the first named parcel, and had drilled five oil wells thereon, which were productive, and which had produced a considerable quantity of oil.

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There was connected therewith and used in developing the property engines, derricks, pumps, drills and tanks for storing oil, such as are commonly used in that business. By an instrument under seal which is set forth in the complaint, the plaintiffs sold and transferred all their interest in the said property, together with the said machinery and apparatus, and in the royalty before mentioned, to the defendant Thomas Kervin, who agreed to pay therefor $32,000, and the complaint alleges that at the time of the commencement of the action, there was due and unpaid on said contract, $7,000. It is also alleged that Kervin entered into the possession of the premises, operated the wells and produced a large quantity of oil. It is also averred that the other plaintiff, Leonard Willetts, acquired an interest by purchase in the contract of bargain and sale, prior to the commencement of this action. The plaintiffs also claim that by virtue of the contract they have a lien upon all the property which was the subject of the sale, and the oil which has been produced, or which may be produced, as a security for the unpaid purchase money, and seek in this aqtion to enforce such a lien, and for a personal judgment against Kervin for any deficiency that may exist after a sale. In the contract immediately following Ker-vin promised to pay the purchase price, there is a provision that “all rigs, tanks, boilers, engines, tubing and casing, now upon said land, or hereafter put upon the same, shall remain upon the same as part and parcel of the said premises until all payments be made and completed herein,” and the concluding paragraph of the agreement is as follows: “ it is further agreed by and between the parties hereto, that in case of failure on the part of said Kervin, to make the payments herein at the time they shall respectively fall due for the period of ten days, then after such failure, to meet such payment, all oil produced upon the said premises, shall thereafter be run into the lines to the credit of Isaac Willetts, as a security for such payments.” At the time of the sale there was some oil in store in the tanks on the premises, and the contract also contains this clause, “ all the oil produced upon the above premises shall be the property of the said Ker-vin, or if any be sold, the avails thereof shall belong to him.” It is manifest, when taken in connection with the averments of the complaint, that the last mentioned term of the contract just quoted, was intended to be a sale of the oil in store at the time of the making of the agreement. We are inclined to the opinion, and in disposing of this appeal, we shall view the contract ■ as a sale in presentí, and vesting the title of all the property in the vendee.

The respondents’ position is, that as against Kervin, the plaintiffs had no lien upon the property, and could only recover a personal judgment against him, and for that reason they were unnecessary parties, and there could be no advantage secured to

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the plaintiffs by retaining them as parties defendant to the action pending the trial of the issues between them and Kervin. In our consideration of this question, we have reached the contrary conclusion, and think that the plaintiffs have an equitable lien upon the property and the oil produced, until the entire purchase price is paid. As the vendors were the owners of the fee, the land, their interest therein in the wells, and all the machinery used in operating the same, must be regarded as personal property as between the parties to this action, by force of chapter 372, of the Laws of 1883, which provides, “all off wells and oil fixtures connected therewith, situate on lands, leased “for oil purposes, and.all interests and rights held under and by virtue of any lease, oil contract, or other right or license to .operate for or produce petroleum oil, shall be deemed personal property for all purposes except taxation.” As to a lien arising on the express contract of the parties, the general rule as stated by one of the elementary writers is : “ that every express executory agreement in writing, whereby the contracting parties sufficiently indicate an intention to make some particular property, real, or personal, or fund therein described or identified, a security for a debt or other obligation, or whereby the party promises to convey or assign, or transfer the property as .security, creates an equitable lien upon the property so indicated, which is enforceable against the property in the hands, not only of the original contractor but of his heirs, administrators, executors, voluntary assignees, and purchasers or incum-brancers with notice.” Pomeroy’s Equity Jurisprudence, vol. III, § 1235.

The promise of the vendee was to give a security upon the oil produced, and the form and manner in which the same was to be perfected so as to give the vendor some written evidence of their lien, was not provided for in the agreement. But notwithstanding this omission, and regarding the contract as a mere •executory promise to give a lien, courts of equity regard such .a promise as creating an equitable lien which will be enforced .as against the party promising to give the hen and those who claim under him who áte not innocent purchasers. Pomeroy’s Eq. Jurisprudence, 373, § 1237.

In this State the general rule as stated has been applied in particular cases, sons to carry out and consummate in an effective manner the real intention of the parties as stipulated in their agreement. In Husted v. Ingraham, 75 N. Y., 251 , the plaintiff sold and delivered a quantity of carpeting to their vendees which was put down in their hotel with the understanding that the purchasers should secure the purchase price to the vendors by a chattel mortgage. The purchaser’s notes were received without exacting a chattel mortgage upon the carpets, and thereafter a receiver .was appointed of the property of the purchasers,

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and he claimed a title to the carpets. In commenting upon the rights of the parties the court said, “ the carpets having been delivered upon an agreement that the price should be secured by a mortgage thereon, that agreement could have been specifically enforced in equity and constituted an equitable lien against the property as against the purchaser, and all parties claiming through or under them except bona fide purchasers having no notice of the lien.

In Hale v. Omaha National Bank, 49 N. Y., 626 , the lessees of a hotel property agreed in writing, in one of the clauses of the lease, to give their vendors a lien to secure the payment of rent upon all the furniture which they should place in the hotel. The defendant seized the property and converted the same to his own use without any claim or color of title. The court in holding that the plaintiff had an equitable lien upon the property said that the parties evidently contemplated some further and other act or deed, to complete and perfect the security, but notwithstanding the failure to do so, the lessors had a right as soon as the lessees placed the furniture in the hotel, and they could have required of them security in proper form upon the property, and had they refused, upon request, to give the lien agreed upon, a specific performance would have been decreed and the court would have seized hold of the executory promise and regarded that as done which the parties had promised to do, and thus secure to the lessor a perfect and effective lien as stipulated in the agreement. See also Flagg v. Mann, 2 Sumner, 487; Chase v. Peck, 21 N. Y., 581 ; Gilson v. Gilson, 2 Allen, 115 ; Peckham v. Haddock, 36 Ill., 38 ; Chadwick v. Clapp, 79 id., 119 .

As to the other items of property, we think, on reading all the provisions of the agreement, that it was the intent and purpose of the parties to give the vendors a lien ihereon for the purpose of securing the unpaid purchase money, and the clause which provides that the same should remain upon the premises, and as a part and parcel of the same, until all the payments should be made and completed, was inserted for the purpose of securing that end. The form or particular nature of the agreement which will be sufficient to create a lien is not very material, for equity looks rather to the final intent and purpose of the parties rather than at the form ; and if the intent appeared to give, or to charge, or to pledge property, real or personal, as a security for an obligation, and the property is so described that the principal things intended to be given or charged can be sufficiently identified, the lien follows. Pomeroy's Eq. Jur., § 1237, and the cases cited in the foot notes.

The fact as alleged in the complaint that Kervin had abandoned the premises and the plaintiffs had regained possession of the same, and were engaged in operating the wells and receiv-.

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ing tbe product of oil and tbe avails thereof, is no bar to maintaining an action to foreclose this lien, and is an additional reason why they should institute foreclosure proceedings and render an account of the avails of the property, so that the true amount of the unpaid purchase money may be ascertained. The defendant Reid is the general assignee of Kervin, and for that reason he is a proper party defendant. As to the other defendants, the complaint avers that they have or claim some interest in the property subsequent and subordinate to the lien of the plaintiff, and in their answers they set up a lien upon the property and claim that the plaintiff’s debt has been fully paid and satisfied. The plaintiffs having a lien on the property as against their vendee, in an action to foreclose the same, there can be no doubt whatever, but that the defendants named were proper parties in this action. Fowler v. Mutual Life Ins. Co., 28 Hun, 198 ; Brown v. Volkenning, 64 N. Y., 76 .

Judgment reversed, new trial granted, with costs to abide the event.

All concur.