Union Pac. Land Resources Corp. v. Moench Inv. Co., Ltd.

Decision Date14 December 1982
Docket NumberNo. 80-1966,80-1966
Citation696 F.2d 88
PartiesUNION PACIFIC LAND RESOURCES CORPORATION, a corporation, Champlin Petroleum Company, a corporation, and Amoco Production Company, a corporation, Plaintiffs-Appellees, v. MOENCH INVESTMENT COMPANY, LTD., a limited partnership; and Thousand Peaks Ranches, Inc., d/b/a Howells Livestock, Inc., a corporation, Defendants-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

Floyd Abrams, of Cahill Gordon & Reindel, New York City (Robert Martin, Gary W. Davis, and Lee Thompson of Martin, Pringle, Fair, Davis & Oliver, Wichita, Kan., Edward W. Clyde of Clyde, Pratt, Gibbs & Cahoon, Salt Lake City, Utah and Richard Rideout of Vines, Rideout & Gusea, Cheyenne, Wyo., on brief), for defendants-appellants.

Daniel M. Gribbon of Covington & Burling, Washington, D.C. (D. Thomas Kidd, Casper, Wyo., Gorsuch, Kirgis, Campbell, Walker & Grover, Denver, Colo., Houston G. Williams of Williams, Porter, Day & Neville, P.C., Casper, Wyo., and Russell H. Carpenter, Jr., David F. Williams, and Stephen H. Galebach, of Covington & Burling, Washington, D.C., with him on brief), for plaintiffs-appellees.

Before SETH, Chief Judge, SEYMOUR, Circuit Judge, and COOK, * District Judge.

SEYMOUR, Circuit Judge.

This diversity action involves title to oil and gas interests in lands situated in western Wyoming. Union Pacific Land Resources Corporation (Union), Champlin Petroleum Company (Champlin), and Amoco Production Company (Amoco) brought this quiet title suit in the Wyoming District Court against Moench Investment Company (Moench) and Thousand Peaks Ranches, Inc. (Thousand Peaks), the holders of the surface estate to the lands in question. The district court granted summary judgment in favor of plaintiffs, and Moench and Thousand Peaks (hereinafter referred to collectively as Moench) appeal. Moench contends that summary judgment was inappropriate because facts crucial to the interpretation of documents determinative of the oil and gas ownership issue remain controverted. We disagree.

I. HISTORICAL BACKGROUND

The lands involved in this case, five sections or part-sections of land located in Uinta County, Wyoming, were originally granted to a corporate predecessor of the Union Pacific Railroad Company pursuant to the Union Pacific Act of 1862, ch. 120, 12 Stat. 489, amended by Act of July 2, 1864, ch. 216, 13 Stat. 356. Section 3 of the Act granted odd-numbered sections of public land to the Railroad for every mile of track The lands here at issue were originally granted to "The Union Pacific Railroad Company" (The Union Pacific) by the Union Pacific Act. In the years immediately following the Act's passage and amendment, The Union Pacific was unable to raise adequate financing for construction of the railway. Therefore, in 1867 the company mortgaged its entire land grant including the lands in controversy. A second mortgage of the entire grant was executed in 1873. In 1880, The Union Pacific was consolidated with two other land-grant railroad corporations to form "The Union Pacific Railway Company" (the Railway), which succeeded to The Union Pacific's interests. See United States v. Union Pacific Railway, 148 U.S. 562, 566-67, 13 S.Ct. 724, 725-26, 37 L.Ed. 560 (1893). In 1893, the Railway went into receivership. The mortgage was foreclosed in 1898, Final Decree of Foreclosure, Union Trust Co. v. The Union Pacific Railway (No. 252, D.Utah 1898) (cited in Rec., vol. I, at 324), and the land-grant lands and interests therein still owned by the Railway were sold to the "Union Pacific Railroad Company (the Railroad) in 1899, Rec., vol. VII, Ex. 1-C (Special Master's deed). The Railroad obtained patents to these lands in 1901. The Railroad later sold the real estate to the Rigby Ranch Company retaining "all coal and other minerals" for itself, its successors, and its assigns. Moench acquired the Rigby Ranch Company interests between 1936 and 1939, and Union obtained the Railroad interests in 1971. In 1977, Union conveyed its petroleum rights in the lands to Champlin, which subsequently leased the same to Amoco.

                laid "for the purpose of aiding in the construction" of a transcontinental railway. 1   The Union Pacific Act of 1862, ch. 120, Sec. 3, 12 Stat. 489, 492, amended by Act of July 2, 1864, ch. 216, Sec. 4, 13 Stat. 356, 358.  The grant excluded "all mineral lands" from the conveyance.  Union Pacific Act Sec. 3.  Section 4 of the Act provided that patents to the lands conveyed by section 3 would be issued to the Railroad upon completion of forty consecutive miles of railway.  Id. Sec. 4
                
II. PROCEDURAL HISTORY

Union, Champlin, and Amoco (hereinafter referred to collectively as Union) brought an action to quiet title to the petroleum rights in these Wyoming lands in June 1979. The lawsuit was apparently a reaction to litigation previously commenced by Moench and others contesting Union's title to oil and gas under identical mineral reservations in deeds to other land grant property in Utah and Wyoming.

Moench responded to the quiet title action by: (1) denying that Union owned any minerals in the Wyoming real estate; (2) contending that the Union Pacific Act required the original grantee and its successors to sell or forfeit all interests in the land grant acreage; and (3) claiming that the Railroad's retention of "all coal and other minerals" was ambiguous and should be interpreted to exclude oil and gas.

The district court entered summary judgment for Union in August 1980. Union Moench now contests on two independent bases the propriety of entering summary judgment. It primarily asserts that facts prerequisite to a correct construction of Pacific Railroad Act land grant conditions remain in dispute. Moench suggests this alleged factual controversy precludes any summary determination as to the extent of Union's oil and gas ownership in the Wyoming properties. Moench additionally charges that the Railroad's deed reservation of "all coal and other minerals" is ambiguous and argues that parol evidence establishes that the clause excludes petroleum products.

Pacific Land Resources Corp. v. Moench Investment Co., 495 F.Supp. 876 (D.Wyo.1980). The court recited the previously outlined chains of title, determined that the mineral reservation included oil and gas rights as a matter of state law, and rejected Moench's Union Pacific Act claims. Id. at 877-78.

III.

ANALYSIS

A. Pacific Railroad Act Issue

Moench's first argument focuses on the Act's "settlement and preemption" proviso. Congress granted the section 3 lands to The Union Pacific to enable it to finance its construction costs by land sales. However, Congress did not wish the lands to be entirely foreclosed to settlers in the country's nineteenth century westward expansion. Thus, Congress provided that

"[A]ll such lands, so granted by this section, which shall not be sold or disposed of by said company within three years after the entire [transcontinental railway] shall have been completed, shall be subject to settlement and preemption, like other lands ...."

Union Pacific Act Sec. 3.

Moench maintains that factual disputes exist concerning the meaning of this condition and the compliance or noncompliance with its requirements, which render summary judgment improper. Moench claims that the facts surrounding the insertion of the proviso into the Union Pacific Act suggest a governmental intention to prevent The Union Pacific (and thus its successors in interest) from obtaining any surface or mineral interest in the granted lands beyond that immediately necessary for the construction of the railway. Moench additionally argues that the Wyoming property was never "sold or disposed of" as required by the settlement and preemption proviso, and that public policy therefore demands that the Railroad's successor, Union, now divest itself of all interest in the real estate.

Moench's theory essentially must be that the terms of section 3 precluded the Railroad from retaining an interest in the mineral estate while selling the surface estate to Moench's predecessor in interest. The section does state that "all mineral lands" are excepted from the Act's land grants. See United States v. Union Pacific Railroad, 353 U.S. 112, 114-17, 77 S.Ct. 685, 686-87, 1 L.Ed.2d 693 (1957). However, the Supreme Court has held repeatedly that this exception refers to the determination at time of patenting of the lands' mineral or non-mineral character. See, e.g., id. at 116, 77 S.Ct. at 687; Burke v. Southern Pacific Railroad, 234 U.S. 669, 683-85, 698-705, 34 S.Ct. 907, 912-13, 918-921, 58 L.Ed. 1527 (1914); Shaw v. Kellogg, 170 U.S. 312, 339, 18 S.Ct. 632, 643, 42 L.Ed. 1050 (1898); Davis v. Wiebbold, 139 U.S. 507, 519, 11 S.Ct. 628, 632, 35 L.Ed. 238 (1891). The issuance of a patent after an administrative determination that the lands were not mineral in character was held to constitute a final administrative decision that is conclusive on the issue against collateral attack. Burke, 234 U.S. at 691-92, 710, 34 S.Ct. at 916, 923; see also Davis v. Wiebbold, 139 U.S. at 526-27, 529-30, 11 S.Ct. at 635-636 (Land Department patents conclusive when assailed collaterally); Deffeback v. Hawkes, 115 U.S. 392, 404-05, 6 S.Ct. 95, 100-01, 29 L.Ed. 423 (1885) (lands for which a patent has been issued under a grant excepting mineral lands are proof against a later discovery of minerals). 2 The lands at issue were patented to the Railroad in 1901. The mineral lands exclusion therefore does not restrain grantees' ability to reserve mineral interests in sales of section three lands.

Neither do we find Moench's "settlement and preemption" clause argument persuasive. The language of the clause in no way suggests that the grantee received only a limited fee barren of rights to whatever minerals might later be discovered. Nor does the language suggest that the grantee was required to convey its entire fee to a purchaser. Moench points to no legislative history that...

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