Badger Dome Oil Co. v. Hallam

• Decision Date: 31 October 1938
• Docket Number: No. 11181.,11181.
• Parties: BADGER DOME OIL CO. v. HALLAM.
• Court: U.S. Court of Appeals — Eighth Circuit

99 F.2d 293 (1938)

BADGER DOME OIL CO. v. HALLAM.^*

No. 11181.

Circuit Court of Appeals, Eighth Circuit.

October 31, 1938.

P. A. Wells and Louis B. Schwartz, both of Minneapolis, Minn. (John P. Devaney, of Minneapolis, Minn., on the brief), for appellant.

Oscar Hallam, of St. Paul, Minn. (Richard A. Golling, of St. Paul, Minn., on the brief), for appellee.

Before THOMAS and BOOTH, Circuit Judges, and SULLIVAN, District Judge.

THOMAS, Circuit Judge.

This is a suit in equity brought by the plaintiff, Badger Dome Oil Company, a corporation, against Oscar Hallam, Trustee, to obtain a decree adjudging that the plaintiff is the owner of the mineral rights of a tract of land situated in Park County, Wyoming; to require the defendant to account for the profits derived from leasing such mineral rights; and to enjoin defendant from further interfering with plaintiff's alleged rights. The defendant claims ownership of the entire fee under a tax deed and that a judgment of the state court in a suit to quiet title is res judicata of the rights of the parties. The decree of the district court was for the defendant and the plaintiff appeals.

The controversy involves ownership of the title to the mineral rights in a tract of land of about 2,100 acres described by government subdivisions in the complaint. The case was submitted on an agreed statement of facts. Both parties derive title through Grant Van Sant. On January 24, 1920, he was the owner in fee of the entire tract. On that day he gave a contract for deed to the Brockway Real Estate Company, reserving the mineral rights. The contract was recorded February 14, 1920. By its terms the seller agreed, upon compliance of the buyer, to convey the surface of the land by special warranty deed, or to make conveyance at the buyer's option when 50% of the purchase price was paid, the buyer to give a mortgage for the balance, and to pay taxes commencing with the 1920 assessment.

By successive assignments Clark Fork Alfalfa and Stock Company acquired the vendee's interest under the contract on March 16, 1920, and the assignment was recorded on the following day.

On September 15, 1920, Grant Van Sant gave a quit claim deed conveying the mineral rights which he had reserved in the land under his contract of January 24th to the plaintiff, Badger Dome Oil Company, which deed was recorded October 28, 1920.

On October 16, 1920, Grant Van Sant, in performance of his contract for deed, gave a special warranty deed to Clark Fork Alfalfa and Stock Company, reserving the mineral rights therein as they had been reserved in the contract. This deed was recorded March 17, 1937.

On October 23, 1920, the Clark Fork Alfalfa and Stock Company gave a trust deed conveying the title to the land to the Van Sant Trust Company and C. R. Bedall to secure an indebtedness of $50,000, which was recorded January 27, 1921. The description of the land in the trust deed did not mention the mineral rights, but the Van Sant Trust Company, mortgagee and trustee for the bondholders, had constructive knowledge of the reservation of the mineral rights through the recording of the various instruments containing the reservations and actual knowledge because Grant Van Sant was president of the trust company. The mortgagors agreed to pay the taxes on the land and the interest on the bonds secured by the trust deed and the principal of the bonds as they became due. The trustee was given the right to pay taxes and to add the amount so paid to the indebtedness secured by the trust deed. It was further provided that in case of default the trustee should be entitled to possession with the right to manage the property and apply the rents to the payment of taxes and interest.

There were no taxes assessed exclusively against the mineral rights, because by the laws of Wyoming (Chapter 179, Sec. 2906, Wyoming Compiled Statutes 1920) mineral rights are not assessed separately from the surface before development, and these mineral rights had not been worked.

On March 12, 1921, the secretary of the Clark Fork Alfalfa and Stock Company, the owner of the title (except the mineral rights), in accordance with the laws of Wyoming, returned the land for assessment, but he did not mention the mineral reservation in the return. The land was assessed for 1921 without mention of the mineral rights. The taxes were not paid for 1921, and on September 5, 1922, the land was sold for the delinquent taxes. On June 8, 1925, the certificate of purchase, which had been issued to Joseph C. Ewing, the purchaser, was assigned to Walter W. Hulce, trustee, who had succeeded the Van Sant Trust Company as trustee under the trust deed. The time for redemption from the tax sale expired on November 12, 1925, notice having been duly given thereof by Hulce. A tax deed was issued to Hulce, trustee, and recorded on November 13, 1925, in which no mention was made of any mineral reservations.

In the meantime, on August 16, 1923, a lis pendens was filed in the district court of Park County, Wyoming, which recited that an action had been commenced in that court to foreclose the trust deed. The indebtedness secured by the trust deed has not been paid and the trust deed has not been foreclosed. In February, 1925, Hulce as trustee demanded and was given possession of the land because of default in payments of interest.

On November 30, 1925, Hulce, trustee, commenced an action in the state court of Wyoming to quiet title to the land in which action the appellant was made a party defendant as claiming an interest in the land, but the description in the complaint made no reference to the mineral rights. In that suit notice was not served personally upon the appellant Badger Dome Oil Company; but jurisdiction was sought to be obtained by two forms of substituted service under the Wyoming statutes, Laws 1921, c. 19; Rev.St.1931, § 89-817 et seq.: (1) By service upon the Secretary of State and (2) by publication. The appellant did not appear. On February 4, 1926, a default decree, reciting that appellant "though having been duly and regularly served with summons" failed to appear, was entered. It was decreed that Hulce was the owner of the real property described in the petition and entitled to possession and that any claims of appellant were inferior in right and subsequent in time to the claims of Hulce, trustee, and title was quieted in him to the land as described "together with the improvements thereon, the appurtenances and water rights and right of way for irrigation ditches" etc., but not referring to any mineral rights.

Prior to the commencement of the present suit Hulce resigned as trustee under the trust deed and conveyed the land to his successor in trust, the appellee herein.

The appellant claims (1) that the taxes represented by the tax certificate which Hulce bought were not assessed against the mineral rights, and therefore did not bind them; (2) that the purchase of the tax certificate by Hulce constituted payment of the taxes, even as to the land; (3) that jurisdiction of appellant was not obtained by the state court in the action brought by Hulce to quiet title; and (4) that in the suit to quiet title jurisdiction was not obtained by the state court over the subject matter of this suit, i. e. the mineral rights.

The appellee claims (1) that the tax title was a good title and covered the mineral rights; (2) that the present action is a collateral attack upon the decree to quiet title; (3) that the description of the land in that action was sufficient to give the court jurisdiction over the mineral rights; and (4) that the service of summons upon appellant was sufficient under the laws of Wyoming to give the court jurisdiction over the person of appellant. Incidental to these major claims of appellee he also urges that appellant is barred by the statute of limitations and by laches. These minor claims are dependent upon the validity of the tax deed and must stand or fall with it.

It is apparent that decision in this court turns upon the question of the effect to be given to the decree of the state court of Wyoming in the suit by Hulce to quiet title. Two questions raise the matters to be considered: (1) What contentions in this court, if any, were adjudicated in that decree? and (2) Did the state court in that case have jurisdiction of the person of the appellant?

With reference to the first question, it is the rule in the federal courts that an adjudication by a federal court is conclusive of all questions of both law and fact upon which the rights of the parties depend, of those which might have been determined as well as those which were. Dickinson v. Orr, 8 Cir., 94 F.2d 536, 539. But a federal court will give to the judgment of a state court the same effect that is given to it by the courts of the state in which it is rendered, Dickinson v. Orr, supra. The scope of the federal rule and of the Wyoming rule is practically identical. In the case of Hennessy v. Chicago, B. & Q. R. Co., 24 Wyo. 305, 157 P. 698, 701, the Supreme Court of Wyoming said that "the judgment in the former action adjudicated, not only the matters, grounds, and reasons for a recovery then pleaded, but also all matters which could properly have been set forth and determined in that suit."

Applying this rule to the issues and contentions presented in the present suit it is apparent that had the Badger Dome Oil Company appeared in the suit to quiet title in the district court of Wyoming and contested the plaintiff's claims in that action all questions of rights dependent upon local law might have been adjudicated. Had that court erred in any particular the remedy was by appeal. Clearly the question of whether or not the taxes for 1921 were assessed against the mineral rights was an issue which might properly have been adjudicated in that action. So also was the question of whether the purchase of the tax certificate by Hulce as trustee under the trust deed constituted...