Burke v. Horth
| Decision Date | 25 February 1924 |
| Docket Number | 1162. |
| Parties | BURKE et al. v. HORTH (COLUMBINE OIL CO. et al., interveners). |
| Court | U.S. District Court — District of Wyoming |
John R Smith, of Denver, Colo., N. E. Corthell, of Laramie, Wyo., H H. Schwartz, of Casper, Wyo., and George E. Brimmer, of Rawlins, Wyo., for plaintiffs.
A. C Campbell, of Cheyenne, Wyo., Merle N. Poe, of Findlay, Ohio A. M. Gee, of Casper, Wyo., and Roderick N. Matson, of Cheyenne, Wyo., for defendants.
This is a suit in equity through which the plaintiffs seek to impress a trust in their favor upon a certain lease issued by the United States to one Robert Taylor, under the Leasing Act of February 25, 1920 (Comp. St. Ann. Supp. 1923, Sec. 4640 1/4 et seq.); the land covered by the lease being the east half of section 12, township 39 north, range 79 west, in Natrona county, state of Wyoming, and within the Salt Creek oil field. After the trial of the cause had started, and before its completion, the principal defendant, Robert Taylor, died, and his executor, the defendant Ralph R. Horth was substituted, and the suit revived in his name. The circumstances out of which the controversy arose appear to be substantially as follows:
Prior to the year 1911 the former defendant, Robert Taylor, became the owner of certain oil placer mining claims initiated under the Placer Mining Act, and on the 21st of November, 1911, Taylor entered into a lease with one J. Condit Smith, which lease had for its general purposes the exploitation of lands therein named, including the lands in controversy, for the purpose of developing and recovering the oil and gas therein contained. The particular provisions of this instrument, so far as they are material to the controversy here, will be noticed later. This lease by various assignments came into the hands of the plaintiffs, Burke and the Eclipse Oil Company. On September 23, 1916, a second lease upon the property here involved was executed by Taylor to one Mosher, through whom by transfers the defendants Ohio Oil Company and Columbine Oil Company acquired interests in the property. After the passage of the Leasing Act, Taylor, with the other two defendants, made application for a lease upon the premises to the Interior Department, to the granting of which the plaintiffs filed protest, and after a hearing the lease was awarded to Taylor alone, some time in December, 1920, and is the lease upon which the plaintiffs here seek to impress a trust in their favor by virtue of the Smith lease. A more particular discussion of the respective claims of the parties under the Smith and Mosher leases will follow elsewhere.
The cause has been ably argued and briefed by counsel, and presents interesting and intricate legal questions, upon which the courts have spoken through a mass of decisions not all in harmony, and particularly differing in facts and circumstances, making it difficult for this court, within its limitations, to select a consistent course in disposing of the matters presented. The principal legal question presented is as to the character of the instrument of the lease to Smith, in regard to which it is claimed by plaintiffs that the lease constitutes a grant of the lands covered, thereby creating a vested interest in the plaintiffs, which cannot be disturbed, except through recognized legal processes not heretofore invoked. The defendants maintain that the instrument carries nothing more than the provisions of an ordinary oil and gas lease, and must be treated along the same lines as the courts have treated such instruments.
An examination of the lease appears to 'grant, devise, lease, and let' the property in question to Smith, 'to have and to hold' the same for a period of 50 years; that the lessee shall perform all the requirements of law in regard to assessment work, and make proper filings of the necessary affidavits, and report upon the same to the lessor; that the lessee shall drill as many wells as he may see fit, and may sublet the whole or any parts of the premises, and that one-eighth of all oil or gas found in and saved from the lands shall be delivered to the lessor; that the lessor shall not dispose of or incumber the lands during the term of the lease, without giving the lessee the first privilege to purchase, and that the lessee will commence to drill a well upon the premises before the 15th day of June, 1912, and continue drilling the same with due diligence until completed, and commence a well within 60 days of the completion of each well until each 160 acres of the devised premises has been drilled. It is further provided that, when oil or gas has been discovered in paying quantities, the lessors shall immediately proceed to make application for patent for the quarter section upon which such discovery has been made. The final provision of the lease is that the lessor may in any year before the 1st of October reassign his lease to the lessor, in the event the lands do not justify further prospecting for oil or gas, and that he shall thereby be relieved from any further assessment work upon the lands.
The Circuit Court of Appeals of this circuit has quite recently spoken in regard to instruments somewhat similar to the one in controversy, these decisions being strongly urged upon this court by counsel for plaintiffs. The first case is that of Smith v. McCullough (C.C.A.) 285 F. 698, which was a suit in equity, in which it was held that the lease there gave the lessee a present vested interest in the land. In that case, however, one of the controlling features seemed to be that the lease provided, in the event the lessee did not drill or explore for oil within the time and in the manner fixed under the terms of the lease, that he could be relieved therefrom by paying a stipulated price per acre, designated as rental, during the life of the lease, and in the opinion in that case the court found that this rental had been paid. The other case, decided more recently by the same court, is Ewert v. Robinson (C.C.A.) 289 F. 740, which was a suit in ejectment, and therefore found its place upon the law, rather than upon the equity, side of the court, in which particular it is distinguishable from the case at bar; but it likewise appears in the case that there was also a provision exempting the lessee from the commencement of drilling operations by the payment of a prescribed amount per acre as rental, which was apparently a principal, if not a controlling, factor in the decision rendered in the case.
In the case at bar, the lease has no such provision. Outside of the $1 nominal consideration, the entire consideration for the granting of the lease seems to have been the performance of the assessment work by the lessee and the development of the land to productivity for oil and gas. Under such a lease as we have here under consideration, if reasonable diligence be not exercised by the lessee in the development of the land for the production of oil and gas, the lessor is left without any consideration for his leased premises, and for an unusually long period of years. In the cases cited, the lessor had entered into a stipulation that, in the event the land were not developed for oil and gas within the stipulated period, a rental might be paid in lieu thereof, which, however small, signifies the will of the parties at the time the contract was made, and that it would be either the development of the property within a specified time or the payment of rental, which would...
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