Amoco Production Co. v. U.S., 78-1147
| Decision Date | 21 April 1980 |
| Docket Number | No. 78-1147,78-1147 |
| Citation | 619 F.2d 1383 |
| Parties | AMOCO PRODUCTION COMPANY, a Delaware Corporation; Champlin Petroleum, Inc., a California Corporation; and Sun Oil Company (Delaware), a Delaware Corporation, Plaintiffs-Appellees, v. The UNITED STATES of America et al., Flying Diamond Oil Corporation, John R. Anderson, Beverly Lasrich et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Tenth Circuit |
John W. Horsley of Moyle & Draper, Salt Lake City, Utah, for defendants-appellants Flying Diamond Oil Corp., John R. Anderson and Beverly Lasrich.
MaryAnn Walsh, Washington, D. C. (Jacques B. Gelin, Atty., and Sanford Sagalkin, Acting Asst. Atty. Gen., Dept. of Justice, Washington, D. C., with her on brief), for defendant-appellant United States of America.
Alan L. Sullivan, Salt Lake City, Utah (Gerald R. Miller, Salt Lake City, Utah, with him on brief), Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, for plaintiffs-appellees.
Before McWILLIAMS, DOYLE and McKAY, Circuit Judges.
In 1942, the Federal Farm Mortgage Corporation (FFMC) conveyed by special warranty deed a fee simply interest in certain land in Summit County, Utah, to Hyrum and Florence Newton. The original deed and all copies other than a recorded version kept in the Summit County Recorder's Office are apparently no longer in existence. The parties dispute the exact contents of the original 1942 deed. Appellants claim that the deed reserved to the FFMC a one-half mineral interest in the property. As recorded, however, the deed contains no such reservation.
In 1957, the FFMC conveyed by quitclaim deed to the United States all of its mineral interest in various tracts of property, including the Newtons' property. The United States subsequently leased its claimed one-half mineral interest to the other appellants in this case.
In 1960, the Newtons conveyed their entire interest in the property to a family corporation, the Hyrum J. Newton & Sons Sheep Company (Newton Company). Beginning in 1971, this family corporation leased the entire mineral interest in the property to the appellees.
Appellees brought suit on January 21, 1976, under 28 U.S.C. § 2409a to quiet title to the disputed mineral rights. Contending that the Utah recording statutes provided the appellees with constructive notice of the 1957 deed to the United States, appellants moved for summary judgment on the ground that the action was barred by the limitations period of § 2409a(f). That section bars a quiet title action against the United States twelve years after the claimant "knew or should have known of the claim of the United States." The district court denied the motion. It declined to apply Utah law, concluding that the phrase "knew or should have known" should be given a uniform federal interpretation rather than decided according to state law. The federal interpretation adopted by the court was that a "stray" deed 1 imparts no constructive notice to subsequent takers.
The appellees also moved for summary judgment. After excluding all of appellants' proffered evidence bearing on the contents of the 1942 deed, the court granted appellees' motion, quieting title in the appellees and requiring the appellants to account to the appellees for all profits realized under the claimed one-half mineral interest.
Section 2409a authorizes quiet title actions against the United States, but provides:
Any civil action under this section shall be barred unless it is commenced within twelve years of the date upon which it accrued. Such action shall be deemed to have accrued on the date the plaintiff or his predecessor in interest knew or should have known of the claim of the United States.
28 U.S.C. § 2409a(f).
This suit was commenced on January 21, 1976. Thus, if the Newtons or the Newton Company knew or should have known of the mineral claim of the United States prior to January 21, 1964, the suit must be dismissed. Appellants do not allege actual knowledge prior to this date. They insist, however, that the Newton Company "should have known" of the government's claim because under Utah law the recorded 1957 quitclaim deed to the United States provided constructive notice. Appellees contend that the district court properly rejected the application of state law in favor of a uniform federal law.
Because § 2409a limits the sovereign immunity of the United States, it must be interpreted according to federal law. See United States v. Standard Oil Co., 332 U.S. 301, 309-10, 67 S.Ct. 1604, 1609, 91 L.Ed. 2067 (1947); Newport Air Park, Inc. v. United States, 419 F.2d 342, 347 (1st Cir. 1969). Cf. Wheeldin v. Wheeler, 373 U.S. 647, 652, 83 S.Ct. 1441, 1445, 10 L.Ed.2d 605 (1963); Garner v. Rathburn, 346 F.2d 55, 56 (10th Cir. 1965). However, federal courts may properly look to state law as an aid in determining the application of statutory language to specific facts. See, e. g., Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57, 77 S.Ct. 912, 917-18, 1 L.Ed.2d 972 (1957); United States v. Crain, 589 F.2d 996, 998-99 (9th Cir. 1979). Local practices and local rules are particularly indicative of whether a party should have known a relevant fact. Moreover, questions involving ownership, transfer and title to real estate have traditionally been resolved according to the laws of the state where the realty is located. See Oregon ex rel. State Land Board v. Corvallis Sand & Gravel Co., 429 U.S. 363, 378-79, 97 S.Ct. 582, 590-91, 50 L.Ed.2d 550 (1977); United States v. Doyle, 468 F.2d 633, 636 (10th Cir. 1972).
Applying these principles, we conclude that one of the conditions that will satisfy the "should have known" language of § 2409a(f) and trigger the limitations period is constructive notice under applicable state recording statutes. Accordingly as a matter of federal law, we believe that a party "should have known" of a claim of the United States at the time he was clearly and properly imputed with constructive notice of that claim under local recording statutes.
Courts of other states that maintain official tract indexes apparently disagree over the question whether a stray deed imparts constructive notice. Compare McCoy v. Davis, 38 N.D. 328, 164 N.W. 951, 954 (1917), and Perkins v. Cissell, 32 Okl. 827, 124 P. 7, 9 (1912), with Fullerton Lumber Co. v. Tinker, 22 S.D. 427, 118 N.W. 700 (1908), and Balch v. Arnold, 9 Wyo. 17, 59 P. 434, 439 (1899). The Utah Supreme Court has never squarely resolved the issue. However, early Utah cases tend to support the position that a stray deed recorded on a tract index does not give constructive notice. See Boyer v. Pahvant Mercantile & Investment Co., 76 Utah 1, 287 P. 188, 191 (1930); Drake v. Reggel, 10 Utah 376, 37 P. 583, 584 (1894). Cf. Flemetis v. McArthur, 119 Utah 268, 226 P.2d 124, 126 (1951). Furthermore, at all times relevant to this suit in 1957 when the quitclaim deed to the United States was recorded, in 1960 when the warranty deed was given to the Newton Company, and in 1964, 12 years prior to the initiation of this suit the officially adopted position of the Utah State Bar was that a stray deed appearing on the tract index could be ignored. Record, vol. 1, at 99, 152. That position has since been amended. 2
It is thus evident that Utah law on constructive notice from stray deeds is inconclusive and ambiguous, and was so at all times relevant to this case. A federal court applying state law may properly determine how the state courts will resolve ambiguities in state law. However, we need not do so in this case. 3 We need determine only that state law on the issue is ambiguous.
The operative words of the statute "should have known" import a test of reasonableness. Only if it was unreasonable for the Newton Company to have failed to discover the claim of the United States should the limitations provision of § 2409a(f) become operative. When, as here, the relevant state law is inconclusive and ambiguous on the effect of a stray deed, we are not convinced that, as a matter of federal law, a party should be considered so unreasonable in failing to have discovered the existence of a claim that he will be charged with constructive knowledge of that claim. The doctrine of constructive notice, which creates a fiction and deals with hypothetical facts, is a harsh doctrine which should be resorted to reluctantly and construed strictly. See United States v. Suring State Bank, 150 F.Supp. 60, 62 (E.D.Wis.1957); Cody Finance Co. v. Leggett, 116 F.Supp. 700, 706 (D.Wyo.1953), aff'd sub nom. Reconstruction Finance Corp. v. Cody Finance Co., 214 F.2d 695 (10th Cir. 1954).
We emphasize that we are not deciding how Utah law would be applied in a similar situation. We hold only that under the circumstances of this case where the limitations period was triggered, if at all, only through constructive notice under state law, and the state law on constructive notice is ambiguous we are unwilling to say for purposes of this federal statute that the Newton Company "should have known" of the claim of the United States.
Having determined that the action was not barred by the limitations period of § 2409a(f), the district court was faced with two alternative approaches to resolve the merits of the dispute. The court could have determined whether the Newton Company or any of its successors in interest was a bona fide purchaser sufficient to cut off any interest in the appellants. 4 The court selected, however, to decide first whether FFMC conveyed the disputed mineral interest to the Newtons in the 1942 deed, or whether it reserved the interest to itself. 5 If the original 1942 deed contained no mineral reservation clause, the appellants obviously have no mineral interest in the property.
Because appellees brought this quiet title action, they have the burden of establishing their title to the disputed interest. S...
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