Blackner v. McDermott
| Decision Date | 11 August 1949 |
| Docket Number | No. 3868.,3868. |
| Citation | 176 F.2d 498 |
| Parties | BLACKNER et al. v. McDERMOTT. |
| Court | U.S. Court of Appeals — Tenth Circuit |
John S. Boyden, Salt Lake City, Utah (Knox Patterson, Salt Lake City, Utah, and Robert G. Clark, Cheyenne, Wyo., on the brief), for appellants.
Albert D. Walton, Cheyenne, Wyo., for appellee.
Before PHILLIPS, Chief Judge, and BRATTON and HUXMAN, Circuit Judges.
This was a suit brought by John R. McDermott against A. E. Blackner, Essie M. Blackner, wife of A. E. Blackner, and Richfield Oil Company, a corporation. Plaintiff sought a declaratory judgment determining that an operating agreement entered into by and between plaintiff and defendants A. E. Blackner and Essie M. Blackner for the development for oil and gas purposes of certain lands in Wyoming was in full force and effect; determining that an operating agreement subsequently entered into by and between the defendants A. E. Blackner and Richfield Oil Company for the development of such lands was without force and effect; awarding plaintiff the possession of the lands for the purpose of development; and enjoining the defendants and those holding under them from claiming any right in such premises by, through, or under the later operating agreement. The pleadings contained many allegations, admissions, and denials. Exhibits were attached to the pleadings and certain material facts were stipulated. Judgment was entered for plaintiff and defendants appealed.
An extended statement of the facts is necessary to an understanding of the questions involved and the circumstances under which they arose. McDermott obtained information indicating that certain lands in Sweetwater County, Wyoming, constituting part of the public domain of the United States soon would be open to application for mineral lease under the provisions of the Act of February 25, 1920, 41 Stat. 437, and he inquired whether Blackner was interested in submitting an application in his name for a lease covering such lands. Negotiations between them resulted in a verbal agreement that an application should be submitted in the name of Blackner and that in the event the lease was granted the parties should enter into a formal operating agreement under which McDermott should have full operating control of the premises under the lease and Blackner should have an overriding royalty of one and one-half per cent of the oil and gas produced from the premises. McDermott caused the application to be prepared; Blackner signed it; McDermott furnished the filing fee of ten dollars; and the two of them together mailed the application and the filing fee to the land office in Wyoming. Soon thereafter, McDermott, and Blackner and his wife, executed the written operating agreement. It provided among other things that upon the granting of the lease, McDermott should have the right to take possession of the leasehold estate and develop and operate it for the production of oil and gas; that he should comply with all the conditions and requirements of the lease or leases and the applicable laws and regulations; that he should execute and file such applications for extension of the lease or leases and do all other things which might be necessary in the premises to protect the rights and interests of the parties; and that he should be the attorney in fact for Blackner with full authority to take any action before the Department of the Interior in the name of Blackner which might be necessary for the use and benefit of the parties. And it further provided that McDermott should pay all costs and expenses of the development and operation of the premises, including rentals and taxes; and that he should pay to Blackner an overriding royalty of one and one-half per cent of the oil and gas produced, saved, and marketed, and not used for development purposes.
The application for the lease was approved. McDermott caused $400 to be mailed to the register of the land office with which to pay the rental for the first year. The lease was issued, and the parties made plans for the development of the premises. The plans included the forming of a corporation and the raising of capital. Friends of McDermott agreed to advance $2500 in cash to be used as capital with which to start the development. Disagreement arose between McDermott and Blackner. Blackner opposed approval of the operating agreement by the Department of the Interior, and he repeatedly advised the parties who had agreed to advance the $2500 that he intended to have the agreement annulled. As the result of his attitude, the parties declined to advance the money for development; and due in part to his interference, McDermott was unable to carry forward any affirmative effort to develop the property but he did make a contract with Sinclair-Wyoming Oil Company looking to that end. The operating agreement between Blackner and McDermott was approved, and shortly thereafter Blackner instituted in the United States Court for Wyoming an action against McDermott. Sinclair-Wyoming Oil Company later became a party defendant. Blackner sought cancellation of the original operating agreement and the agreement between McDermott and the Sinclair Company. Judgment was entered against Blackner and it became final. Shortly before the lease was to expire according to its terms, McDermott and Blackner acting separately each filed an application for a renewal in his own name. McDermott later amended his application to show the operating agreement and to show that his application was made under the authority of it for the benefit of both parties thereto. On the day following the expiration of the lease, the attorney now representing McDermott filed an application for a lease in his name. A new lease was granted Blackner on the basis of his preferential right by virtue of being the lessee under the original lease.
At about the time of the granting of the new lease, Blackner entered into an operating or option agreement with Richfield Oil Company. McDermott filed in the General Land Office a protest against its approval. As the result of the proceedings, the Department...
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