Atlantic Richfield Co. v. Tomlinson

• Decision Date: 20 July 1993
• Docket Number: No. 78350,78350
• Citation: 1993 OK 106,859 P.2d 1088
• Parties: ATLANTIC RICHFIELD COMPANY, a Delaware corporation; Nicor Exploration Company, a Delaware corporation, Plaintiffs, v. Prentis B. TOMLINSON, Jr., Trustee; Royalty Partners, a Texas limited partnership; John Brewster, Trustee; Genevieve Crane; Dorothy June Ashinhurst a/k/a Dorothy June Grayson, Defendants.
• Court: Oklahoma Supreme Court

Page 1088

859 P.2d 1088

1993 OK 106

ATLANTIC RICHFIELD COMPANY, a Delaware corporation; Nicor Exploration Company, a Delaware corporation, Plaintiffs, v. Prentis B. TOMLINSON, Jr., Trustee; Royalty Partners, a Texas limited partnership; John Brewster Trustee; Genevieve Crane; Dorothy June Ashinhurst a/k/a Dorothy June Grayson, Defendants.

No. 78350.

Supreme Court of Oklahoma.

July 20, 1993.

Rehearing Denied Sept. 22, 1993.

Certified Questions of law from the United States District Court for the Eastern District of Oklahoma.

The Honorable H. Dale Cook, District Judge for the United States District Court for the Eastern District of Oklahoma, has certified several questions of state law to this Court pursuant to the Oklahoma Uniform Certification of Questions of Law Act, 20 O.S.1991 § 1601, et seq. We answer the certified questions as follows: An oil and gas leasehold interest may not be adversely possessed either (1) by the drilling of and production of oil and gas from a well drilled on a separate tract of land within a drilling and spacing unit created by the Corporation Commission, or (2) by the possession

of that oil and gas leasehold under a claim of right for the statutory period. Because we answer Certified Questions 1(a), 1(b) and 1(c) in the negative, we need not address Certified Questions 1(d), 2 or 3. While the Commission has jurisdiction to resolve issues involving correlative rights of mineral interest owners within a drilling and spacing unit, jurisdiction to decide title to an oil and gas leasehold interest properly lies with the district court. The 1967 judgment quieting title to the disputed mineral interest has no effect upon defendants' mineral interest rights in that tract, because they were neither parties nor privies to the quiet title action. Finally, the champerty statute, 21 O.S.1991 § 548, is inapplicable to this case, because plaintiffs cannot establish a prescriptive leasehold under the facts presented.

CERTIFIED QUESTIONS ANSWERED.

Joseph W. Morris, Richard B. Noulles, Teresa B. Adwan and M. Benjamin Singletary, Gable & Gotwals, Tulsa, David D. Morgan and Michael L. Tinney, Ames, Ashabranner, Taylor, Lawrence, Laudick & Morgan, Oklahoma City, for plaintiffs.

Russell James Walker, Walker, Walker & Driskell, Oklahoma City, for defendants.

WATT, Justice:

The United States District Court for the Eastern District of Oklahoma has certified several questions of state law to this Court pursuant to the Oklahoma Uniform Certification of Questions of Law Act, 20 O.S.1991 § 1601, et seq.

FACTS AND PROCEDURAL HISTORY

Before the federal court is an action to determine title to an oil and gas leasehold interest. The mineral interest covered by the disputed lease is an undivided one-half interest in the oil, gas and other minerals in the Northwest Quarter of the Northeast Quarter of Section 24, Township 5 North, Range 18 East, Latimer County, Oklahoma (hereinafter referred to as the "NW/4 NE/4").

In 1941, Will J. Shaw conveyed the surface estate of the NW/4 NE/4 to J.W. Martin. The warranty deed reflected that Shaw reserved all the mineral interest underlying the NW/4 NE/4 to himself. However, in preparing the abstracted version of that warranty deed, the abstracting company failed to note the reservation of the mineral estate by Shaw. Consequently, the abstract showed Martin as the owner of both the surface and the mineral estates.

In 1942, Martin purported to convey the fee interest in the NW/4 NE/4 by warranty deed to Genevieve Crane, one of Will Shaw's two daughters.

In 1953, Crane executed an oil and gas lease to A.B. Soper as lessee. The Soper Lease covered the NW/4 NE/4 and a 20-acre tract owned by Crane to the south. This is the only oil and gas lease that has ever covered the NW/4 NE/4. Crane received all delay rentals under the lease.

In June of 1958, Will Shaw died. Although none of his probate documents listed the mineral interest in the NW/4 NE/4, Shaw owned record title to that mineral estate at the time of his death. Under the probate of Shaw's estate, the residuary portion of the estate went to Shaw's widow, Victoria Shaw, as a life tenant, with the remainder to his heirs. Will Shaw's heirs were Victoria Shaw and his two daughters, Crane and Dorothy June Ashinhurst.

On January 6, 1961, the Oklahoma Corporation Commission issued an order establishing all of Section 24, Township 5 North, Range 18 East, Latimer County, as a 640-acre drilling and spacing unit for certain oil and gas formations. The Soper Lease was within that drilling and spacing unit. Later, the predecessor in interest of plaintiff Atlantic Richfield Company (ARCO) drilled and completed the James Unit No. 1-A well in the NW/4 of Section 24. The diagram below depicts the approximate locations of the unit well, Soper Lease and disputed tract.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

----------

ARCO or its predecessor bore all costs of drilling the unit well, which was drilled within the primary term of the Soper Lease and has continued to produce to the present time. Title opinions rendered before and after the drilling of the James Unit No. 1-A well were based upon the erroneous abstract. The title opinions showed Crane as the owner of the mineral interest in the NW/4 NE/4 and plaintiffs or their predecessors as owners of the lease covering that mineral estate. From 1962 until 1988, Crane received royalty proceeds as if she was the sole owner of the mineral interest in the NW/4 NE/4. ARCO or its predecessors have operated the unit well since its inception.

The James Unit No. 1-A well also covered separate acreage owned by Victoria Shaw, Crane and Ashinhurst, as heirs of Will Shaw. In September of 1964, the three women executed separate royalty division orders that reflected their mineral interests in that separate acreage. The royalty division orders set forth the ownership of the other mineral estates in the unit and showed Crane as the owner of the "full In 1966, Crane and plaintiffs' predecessors in interest filed an action to quiet title to several tracts of land in Section 24, including the tracts covered by the Soper Lease. The quiet title suit was brought against several defendants, including Will J. Shaw, if living, and his "unknown heirs," if deceased. Victoria Shaw and Ashinhurst were not named as defendants in that lawsuit. Crane and plaintiffs' predecessors stated in their verified petition that they had diligently tried to ascertain the identity of the named defendants' heirs, but that they were not ascertainable. Service by publication was made upon the unknown heirs of the named parties in the quiet title action and the quiet title judgment approved that publication service. The final judgment entered on July 17, 1967, quieted title in Crane and plaintiffs' predecessors to the NW/4 NE/4 and the acreage south of that tract.

interest" in the NW/4 NE/4. There is no indication that Victoria Shaw or Ashinhurst disputed the division order's statement of Crane's "full interest" in the NW/4 NE/4.

Victoria Shaw died on January 19, 1970. In the probate of her estate, Shaw's heirs, Crane and Ashinhurst, entered into a "family settlement" agreeing to share equally all assets and property. No probate documents showed that Victoria Shaw owned any mineral interest in the NW/4 NE/4. According to the record title, however, after January 19, 1970, Crane and Ashinhurst each owned a one-half mineral interest in the NW/4 NE/4 as heirs of their parents' estates.

In 1988, defendants Prentis B. Tomlinson, Jr., Royalty Partners and John Brewster discovered that Crane and Ashinhurst each held record title to one-half of the minerals underlying the NW/4 NE/4. After purchasing Ashinhurst's one-half interest, Tomlinson, Royalty Partners and Brewster claimed a right to share in the revenues of the James Unit No. 1-A well from the time of the well's first production. Royalty Partners then filed with the Oklahoma Corporation Commission an application to pool interests and adjudicate rights and equities of oil and gas owners in certain formations in Section 24, including the mineral interests in the NW/4 NE/4. Thereafter, plaintiffs filed the present action in federal court seeking to quiet title to the mineral leasehold interest in the NW/4 NE/4. The Commission proceedings were stayed pending resolution of the federal court suit.

Plaintiffs claim that they and their lessor, Crane, acquired prescriptive title to the full mineral interest in the NW/4 NE/4. Defendants contend that a "forced pooling" by the Corporation Commission is the only means for adjudicating the rights and equities of ownership in the spacing unit. Defendants also assert that the conservation laws of Oklahoma cannot be used to create a power to adversely possess the mineral interest in one tract by possessing the minerals in another tract within a spacing unit.

Although Genevieve Crane was originally named as a defendant in this action, she was dismissed as a party on plaintiffs' motion.

CERTIFIED QUESTIONS OF STATE LAW

The federal court has posed the following questions of state law:

1(a) Can the drilling of and production from a unit well in a 640-acre drilling and spacing unit created by the Oklahoma Corporation Commission give rise to and constitute adverse possession of a severed mineral interest in the oil and gas underlying a 40-acre tract within the unit, or of the leasehold interest therein, under the following conditions:

(i) the unit well is 970 feet from, but is not located on the 40-acre tract;

(ii) in drilling the unit well and producing the oil and gas therefrom, the adverse claimants (the lessor of the minerals and her lessee) acted under color of title and claim of right to the oil and gas underlying the 40-acre tract;

(iii) the record owner of the oil and gas underlying the 40-acre tract was not aware that she owned any interest in the oil and gas underlying that tract and, as (iv) for over...