Delta Drilling Co. v. Arnett

• Decision Date: 26 March 1951
• Docket Number: 11098,No. 11097,No. 11099.,11097,11099.
• Parties: DELTA DRILLING CO. et al. v. ARNETT. BRACKETT et al. v. ARNETT. ARNETT v. DELTA DRILLING CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

186 F.2d 481 (1950)

DELTA DRILLING CO. et al. v. ARNETT.

BRACKETT et al. v. ARNETT.

ARNETT v. DELTA DRILLING CO. et al.

Nos. 11097, 11098, No. 11099.

United States Court of Appeals Sixth Circuit.

December 27, 1950.

Writ of Certiorari Denied March 26, 1951.

Charles G. Middleton, Louisville, Ky., for appellant Delta Drilling Co.

William L. Sullivan, Henderson, Ky., for appellant W. W. Brackett et al.

Charles G. Middleton, Leo T. Wolford, and Eugene B. Cochran, Louisville, Ky., King, Flournoy & Craig, and N. Powell Taylor, and Pentecost & Dorsey, all of Henderson, Ky., Ralph W. Garrett, Robert

L. Imler, Tulsa, Okl., Clarence Lohman, Edward Kliewer, Jr., Houston, Tex. on the briefs, for appellants and cross-appellees.

Thomas E. Sandidge and W. P. Sandidge, Owensboro, Ky., Edwin M. Slote, New York City, for Thomas E. Arnett, appellee and cross-appellant.

Before HICKS, Chief Judge, and ALLEN and McALLISTER, Circuit Judges.

Writ of Certiorari Denied March 26, 1951. See 71 S.Ct. 574.

ALLEN, Circuit Judge.

These appeals and cross-appeal involve title to the oil and gas underlying a tract of about 47 acres of land, situated in Henderson County, Kentucky.¹ In 1915 Rubie Powell and her husband, owners of the land in question, conveyed it by general warranty deed, in fee simple, to plaintiff Thomas E. Arnett. This deed is the common source of title for all the parties. On January 8, 1915, plaintiff mortgaged the land, reserving to himself "the coal and mining rights under this land." The mortgage was foreclosed in 1916, and defendants W. W. Brackett and his wife became surface owners by mesne conveyances from T. J. Arnett, the purchaser at the foreclosure sale. They and the heirs of T. J. Arnett executed oil and gas leases to the defendant Sinclair Prairie Oil Company, reserving a one-eighth royalty. In 1947 Sinclair assigned fractional working interests to defendants Delta Drilling Company and W. F. Lacy. In turn, Lacy assigned fractional working interests to defendants A. W. Wesselman and A. V. Martens. The working interests in the oil and gas were distributed as follows:

                  To Sinclair Prairie Oil Company,  32/128
                     Delta Drilling Company,        40/128
                     W. F. Lacy,                    30/128
                     A. W. Wesselman,                5/128
                     A. V. Martens,                  5/128
                

Other defendants named in the complaint are owners of royalty interests. In 1947, five producing oil wells were drilled upon the tract, and plaintiff subsequently instituted this action to quiet title, and for injunction and accounting. After full hearing, the District Court entered a judgment in his favor.

Three principal questions are presented:

(1) Did Thomas E. Arnett, in the mortgage which he executed in 1915 to T. J. Arnett, reserve to himself the oil and gas?

(2) Did the defendants, through the foreclosure proceedings and subsequent conveyances, acquire title to the oil and gas underlying the mortgaged property?

(3) Is J. W. Ellis, who in December, 1948, subsequent to a judgment by the court in favor of the plaintiff, acquired a fractional royalty interest in the share of J. R. Stebbins in the oil and gas leases, an indispensable party whose presence would destroy jurisdiction?

A preliminary question is raised by plaintiff's motion to dismiss the appeals so far as they concern the judgment quieting his title. This is based upon the contention that a judgment of November 22, 1948, was a final and complete disposition of the question of plaintiff's title. In this judgment the District Court held that plaintiff was the owner of the legal title to the minerals and entitled to possession and quiet enjoyment thereof; that the oil and gas leases involved were invalid and cancelled and set aside; and that the defendants should render an accounting of all oil and gas extracted, produced, or sold by them from the wells which they had drilled upon the land. No appeal was taken from this judgment. A later judgment, entered September 22, 1949, reiterated the holding that plaintiff was owner of the legal title, cancelled the oil and gas leases, gave plaintiff title to the equipment, and rendered judgment against defendants on the accounting feature of the case. The appeals herein were taken on October 17, 1949, from this second judgment, and plaintiff contends that this court has no jurisdiction to consider the appeals so far as the judgment holding plaintiff to be the owner of the oil wells and the oil and gas, and quieting his title to the same, is concerned, for this was adjudicated in the first judgment, from which no appeal was taken.

The judgment of November 22, 1948, was denominated "Interlocutory Order and Judgment," but its finality is to be determined not by its name, but by the question whether it disposes of the case upon its merits. Jacobsen v. Jacobsen, 75 U.S.App. D.C. 223, 126 F.2d 13; Biggins v. Oltmer Iron Works, 7 Cir., 154 F.2d 214. Cf. City of Louisa v. Levi, 6 Cir., 140 F.2d 512. Defendants contend that the District Court and the parties considered the first judgment as purely interlocutory and non-appealable; but this circumstance plainly is not controlling. Raytheon Mfg. Co. v. Radio Corp. of America, 1 Cir., 76 F.2d 943, affirmed 296 U.S. 459, 56 S.Ct. 297, 80 L.Ed. 327.

We think the judgment of November 22, 1948, is clearly final. It is true that the judgment grants four defendants leave to file answers, but these were to relate to the question whether the defendants had acted innocently in drilling for the oil. The question of title to the equipment was left open; but this also is incidental to the accounting.

With reference to the main question of title to the minerals, the judgment of November 22, 1948, declared that the plaintiff "is now and has been since January 7, 1915, the owner and is entitled to possession of the oil and gas" in and under the land described, and ordered that his title to such minerals "be and the same is hereby quieted against all claims, demands, and pretensions of the defendants, and each of them with respect thereto." It was also adjudged that the plaintiff "is entitled to all of the oil or gas wells now located on the above described tract of land," and that the defendants "make and render to the plaintiff a full and complete accounting within 20 days of the date hereof of all oil, gas and other petroleum products" extracted from such land by them, and sold, "so that the court can determine therefrom the issues as to the amount of damages, if any, that should be awarded to the plaintiff herein." The judgment further ordered that the case be "continued on the undisposed of issues herein." This was a judgment which was "complete and required nothing from the later one to give it finality." Kycoga Land Co. v. Kentucky River Coal Corp., 6 Cir., 110 F.2d 894. Failure to appeal therefrom was therefore fatal, Gulf Refining Co. v. United States, 269 U.S. 125, 46 S.Ct. 52, 70 L.Ed. 195, to the case of the defendants of record on November 22, 1948, so far as it related to the issue of quieting title.

This conclusion disposes of this feature of the case as to the principal defendants. In the posture which this case assumed toward its close, the conclusion does not, however, allow us to omit decision as to whether the court rightly decided the question of title. Following the judgment of November 22, 1948, certain motions to dismiss for lack of indispensable parties were filed. On the hearing of these motions, plaintiff filed an amended complaint, making T. M. Pryor, J. W. Liles, and J. Ray Stebbins parties defendant. Answers were subsequently filed by Liles and Pryor, raising the same issues of fact and questions of law which had been raised by the principal defendants. Stebbins made an itemized response to plaintiff's request for admissions. Since none of these defendants had an opportunity to be heard upon the questions involved in the case prior to the adjudication of November 22, 1948, that judgment is not final as to them, and we are compelled to consider whether, as contended, the judgment should be reversed.

The mortgage reservation does not in terms mention oil and gas.² It neither conveys these minerals to the mortgagee nor reserves them expressly in haec verba to the mortgagor. If the reservation covers oil and gas it is due to the addition of the phrase "mining rights" after the term "coal." As pointed out by the defendants, the privilege of access, of digging, etc., which follows in the reservation, clearly relates only to coal, and the term "or minerals" which are authorized to be carried through the premises refers to minerals underlying adjacent properties.

However, it is now clearly settled in Kentucky that the term "mining rights" means minerals, and includes oil and gas. Rowe v. Chesapeake Mineral Co., 6 Cir., 156 F.2d 752; Maynard v. McHenry, 271 Ky. 642, 113 S.W.2d 13; Kentucky-West Virginia Gas Co. v. Preece, 260 Ky. 601, 86 S.W.2d 163; Federal Gas, Oil & Coal Co. v. Moore, 290 Ky. 284, 161 S.W.2d 46; Hurley v. West Kentucky Coal Co., 294 Ky. 96, 171 S.W.2d 15; Hudson & Collins v. McGuire, 188 Ky. 712, 223 S.W. 1101, 17 A.L.R. 148; Slone v. Kentucky-West Virginia Gas Co., 289 Ky. 623, 159 S.W.2d 993. Hence the mortgagor reserved title to the oil and gas.

About a year after the mortgage was executed, foreclosure proceedings were instituted, and, as significantly commented by the District Court, if the intention of the mortgagor was not plain in the reservation, the time to clarify this point was in the foreclosure proceedings. The judgment of the Henderson County Court foreclosing the mortgage contained this provision: "The coal and other mining rights in and under said 47 acres have heretofore been conveyed and are not to be sold under this decree."

The sale was consummated and the purchaser was T. J. Arnett, the mortgagee and predecessor in title to the various defendants. The commissioner's deed, drawn in conformity with the direction of the...