Continental Oil Co. v. Natrona Service, Inc.

• Decision Date: 13 December 1978
• Docket Number: 77-1315,Nos. 77-1314,s. 77-1314
• Citation: 588 F.2d 792
• Parties: CONTINENTAL OIL COMPANY, a corporation, Plaintiff-Appellant and Cross-Appellee, v. NATRONA SERVICE, INC., a corporation, and John W. MacGuire, Defendants-Appellees and Cross-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 792

588 F.2d 792

CONTINENTAL OIL COMPANY, a corporation, Plaintiff-Appellant and Cross-Appellee, v. NATRONA SERVICE, INC., a corporation, and John W. MacGuire,

Defendants-Appellees and Cross-Appellants.

Nos. 77-1314, 77-1315.

United States Court of Appeals, Tenth Circuit.

Argued Sept. 27, 1978.

Decided Dec. 13, 1978.

Houston G. Williams of Wehrli & Williams, Casper, Wyo. (Barry G. Williams of Wehrli & Williams, Casper, Wyo., and Bruce R. Merrill, Senior Atty., Continental Oil Co., Houston, Tex. on brief), for plaintiff-appellant and cross-appellee.

Dennis M. Hand of Hand, Hand & Hand, P.C., Casper, Wyo. and H. Byron Mock of Mock, Shearer & Carling, Salt Lake City, Utah (Robert Jerry Hand of Hand, Hand & Hand, P.C., Casper, Wyo., on brief), for defendants-appellees and cross-appellants.

Before SETH, Chief Judge, and DOYLE, Circuit Judge, and STANLEY, ^* Senior District Judge.

WILLIAM E. DOYLE, Circuit Judge.

This is a declaratory judgment action which was filed by Continental Oil Company (Conoco) against Natrona Service, Inc., a Wyoming corporation, as a diversity action. Also named as a defendant in the case is John W. MacGuire. The purpose of the action was to establish Conoco's right to exclusive possession of certain lode mining claims which it alleged were located by it on public lands. The further allegations were: That Conoco had employed contractors to perfect mining claims in Sweetwater County, Wyoming, to do the necessary work in connection therewith required by the laws of the United States and of Wyoming; the contractors were to locate certain lode mining claims; were required to act in good faith, to file proper mining claims under the laws of the State of Wyoming and to do the requisite work of location, validation and recordation. The contractors through their agents and employees (it is further alleged) entered into possession of the lands covered by said claims and proceeded to perform the work required by the contracts.

In addition, Conoco allegedly conducted a systematic pattern of deep exploratory drilling in the area covered by the claims and on a portion of the claims and allegedly drilled approximately 40,000 total feet in 48 deep holes. The area on which the claims were established, it was said, was reasonable in size and the program was systematic and diligent. Conoco thus sought to establish its rights to all of the claims, admitting that it had not actually been present and currently working on a large number of them, but that it had been in possession of these claims insofar as it was practical to do so and had consistently asserted its rights to them.

Beginning on May 29, 1975, according to further allegations, defendants-appellees Natrona Service, Inc. and John W. MacGuire overstaked some of Conoco's claims, and almost immediately defendant, through its attorney, advised plaintiff that the claimed valid mineral locations in Sweetwater County, Wyoming were invalid and that the area was open for discovery at the time of the locations by defendants. Further, defendants notified plaintiff not to interfere with the rights of the defendants to perform discovery work and to validate the claims. It is alleged that the defendants had full knowledge of the location of the plaintiff's claims and, in fact, entered upon a portion of the lands covered by the said claims and notified defendants that it had verified certain defective claims.

It is alleged, in addition, that defendants continued to carry on activities on a portion of the plaintiff's claims in an effort to overstake and locate mining claims on portions of the area. Conoco, according to its allegations, spent approximately $500,000 in its service contracts with the contractors that it employed for the purpose of airborne reconnaissance, surface geophysical work, surface sampling and deep exploratory drilling.

The complaint stresses that large amounts of money were spent and that plaintiff acted at all times in good faith in its efforts to stake the claims in accordance with the laws of the United States and of Wyoming. The prayer is that plaintiff's rights to exclusive possession of the mining claims described in the complaint be recognized and that the defendants be enjoined from interfering in any way with the plaintiff's work and from claiming or assuming any right, title or interest to portions of the land covered thereby, and from attempting to enter upon or take possession of any portion of the land. Also, damages and further relief are prayed for.

Defendants admitted overstaking some of Conoco's claims. The basis for this was examination of the recorded certificates in the County Clerk's office of Sweetwater County, Wyoming, and a determination by them that the said certificates were falsely made. A further alleged offense was that the purported location work of the plaintiff had been examined by the defendants, and it was determined that they did not meet the requirements of the law for location and discovery, marking of surface boundaries and required drilling.

The defendants sought recognition of superior rights to some 1,200 claims. Defendants' counterclaims sought declaratory relief seeking to establish that they had exclusive rights to the contested claims and seeking to establish that Conoco's remaining claims which they had not overstaked were invalid and, therefore, open to entry and location. There were 840 in this latter group, and the trial court, following presentation of all of the evidence, granted a verdict in favor of Conoco as to those which had not been overstaked. The effect of this was to give Conoco exclusive right and control over this group of claims for so long as it continued to perform exploratory and development work at these sites.

The remaining contested claims were submitted to a jury. The verdict was generally in favor of Natrona. In addition, the jury gave answers to interrogatories submitted to it. These were tantamount to specific findings that Conoco had not completed or substantially completed discovery; that there was no overall work program which had been operated by Conoco in the area claimed; that there was no such work program which was being diligently pursued; and, finally, that there was no evidence that a significant number of exploration holes had been systematically drilled.

Following the rendition of the verdict, the trial judge granted plaintiff-appellant's motion for judgment notwithstanding the verdict on some 19 of these disputed claims. It found that the deep drilling done on these by Conoco was sufficient to establish its right to possession under the law.

The contentions of Conoco and Natrona in support of their respective appeals are:

First, that the trial court erred in its formulation of the legal doctrine commonly referred to as Pedis possessio in that the court failed to apply it to the particular facts here presented, namely, the employment of contractors to carry out the location and validation activity. In essence, Conoco's position was that this doctrine which traditionally had been applied to individual miners should also apply to the use of contractors.

Second, that its evidence established that its compliance with the relevant federal and Wyoming laws was substantial, even though perhaps not in accordance with the strict letter of these laws. Natrona and MacGuire, on the other hand, challenge good faith compliance with the law by Conoco.

Third, in their defense in connection with the cross-appeal, Natrona and MacGuire maintain that the evidence did not support the trial court's granting of directed verdicts for the appellant as to the 840 claims which had not been overstaked by Natrona.

The defendants-appellees cross-appeal on the further ground that the trial court erred in granting judgments notwithstanding the verdicts as to certain claims upon which Conoco had engaged in deep drilling operations.

I.

The first contention of Conoco that the trial court misapplied or failed to apply the doctrine of Pedis possessio is the central issue.

The trial court instructed the jury at length and in detail as to the meaning of the doctrine of Pedis possessio. The judge told the jury that the doctrine is one applied by the courts to protect good faith possession by one actually working toward discovery. The law favors the first locator, the court continued, and protects him against a mere intruder or against one who attempts to enter the area by force, fraud, or by clandestine means; that a junior locator may acquire no rights based on such acts.

The court explained that the rights of the one in possession are enforced by the courts against persons who attempt to enter in bad faith, for (such entry) is contrary to the mining laws' purpose which is to promote good faith and orderly and diligent discovery and development of the mineral reserves.

The jury was told that Conoco relied on the Pedis possessio doctrine and that it is often necessary for a mineral prospector to go into a large area and to work in that area spending substantial sums in its endeavor to make a discovery of a valuable mineral such as uranium. The court listed the following essential requirements necessary to Conoco's being entitled to exclusive possession of the claims on a group or area basis.

First, that the area that the plaintiff is claiming is similar and the size is reasonable.

Second, that the validation work includes drilling a hole or holes not less than one-half inches in diameter to an aggregate depth of fifty feet with no holes less than ten feet and with one hole designated as a discovery hole if more than one hole has been drilled and showing it by means of a post or permanent marker containing the name of the claim, the name of the discoverer and locator, and the date of the discovery, marking the surface boundaries of the claim with six substantial monuments or stakes set at the four corners of the claim and on each side of the claim. This work must...