Chanslor-Canfield Midway Oil Co. v. United States

• Decision Date: 03 May 1920
• Docket Number: 3364.
• Citation: Chanslor-Canfield Midway Oil Co. v. United States, 266 F. 145 (9th Cir. 1920)
• Parties: CHANSLOR-CANFIELD MIDWAY OIL CO. et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

266 F. 145

CHANSLOR-CANFIELD MIDWAY OIL CO. et al. v. UNITED STATES.

No. 3364.

United States Court of Appeals, Ninth Circuit.

May 3, 1920

Rehearing Denied July 6, 1920.

Ross Circuit Judge, dissenting.

This suit is to restrain waste and depletion of the oil contents of a certain described quarter section of public lands, to obtain an injunction against defendants from asserting title or interest in the lands, from trespassing thereon, for an accounting, for the appointment of a receiver, and other equitable relief. The land is included within the area prescribed by the withdrawal order of the President of the United States dated September 27, 1909.

On January 1, 1903, the land had been claimed as an oil placer mining claim by an association of eight persons in whose names the defendant Hall had posted notices of location. The notices of location were filed for record January 28, 1903, at the request of Jane Stokes, one of the named locators. The next day, January 29, 1903, all of these persons, other than Jane Stokes, transferred such interests as they may have had to Jane Stokes, who thereafter, in July, 1908, transferred to the defendant Hall. On January 12, 1909, Hall made a development contract with the Chanslor-Canfield Midway Oil Company, defendant below and an appellant here, under which the oil company claims herein. By the contract Hall retained to himself one-half of the quarter section, which half he subsequently conveyed to the defendant appellant Recovery Oil Company; the deed being dated December 31, 1910.

The defendants joined issue and set up: (1) That the action is one in ejectment by the United States out of possession against defendants in possession, and for damages for trespasses, and that a court of equity has no jurisdiction (2) that the act of Congress of June 25, 1910, the so-called Pickett Act (Comp. St. Secs. 4523-4525), gave to the Chanslor-Canfield Company and to Hall a right to continue in occupation of the lands and to prosecute their work to a discovery, and thereupon to have patent, and to that extent abrogated whatever effect the September 27, 1909, withdrawal order had on the lands; (3) that the entry of the lands and the development thereof was pursuant to invitation of the United States, under a policy established long before September 27, 1909, and was on said date a rule of property and thereafter, by act of Congress approved June 25, 1910, recognized by Congress by the making of the President's order of temporary withdrawal, dated September 27, 1909, wholly inoperative as to the lands described in the complaint; (4) that the company was a bona fide purchaser of the north half of the lands involved, and without notice or claim of fraud made by the United States.

The District Court denied motions to transfer the case to the law side of the court and to dismiss, retained jurisdiction, heard evidence, appointed a receiver, and decreed that the lands belonged to the United States, free of all claims of any of the appellants, gave the United States judgment in damages for $76,751, and decreed that all fixed improvements upon the lands belonged to the United States and should be turned over.

The United States is a cross-appellant, alleging error in the action of the District Court in allowing interest upon the value of oil extracted only from the date of the appointment of the receiver, and in refusing to allow costs to the United States.

U. T. Clotfelter, of Los Angeles, Cal., and Morrison, Dunne & Brobeck and Peter F. Dunne, all of San Francisco, Cal., for appellants.

Henry F. May, Sp. Asst. Atty. Gen., and Charles D. Hamel, Sp. Asst. U.S. Atty., of San Francisco, Cal., for the United States.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

HUNT Circuit Judge (after stating the facts as above).

We first consider the question of jurisdiction. As stated, the suit was brought in equity to restrain continuing waste and depletion and for other relief, including accounting and adjudication that the property belongs to the United States free and clear of all claims of appellants.

Rule 22 of the Equity Rules (198 F. xxiv, 115 C.C.A. xxiv) provides:

'If at any time it appear that a suit commenced in equity should have been brought as an action on the law side of the court, it shall be forthwith transferred to the law side and there be proceeded with, with only such alterations in the pleadings as shall be essential.'

By an act approved March 3, 1915 (section 274a, Judicial Code (Comp. Stat. Sec. 1251a)) it is provided: 'In case any of said courts shall find that a suit at law should have been brought in equity, or a suit in equity should have been brought at law, the court shall order any amendments to the pleadings which may be necessary to conform them to the proper practice. Any party to the suit shall have the right, at any stage of the cause, to amend his pleadings so as to obviate the objection that his suit was not brought on the right side of the court. The cause shall proceed and be determined upon such amended pleadings. All testimony taken before such amendment, if preserved, shall stand as testimony in the cause with like effect as if the pleadings had been originally in the amended form.'

Rule 23 of the Equity Rules (198 F. xxiv, 115 C.C.A. xxiv) is as follows:

'If in a suit in equity a matter ordinarily determinable at law arises, such matter shall be determined in that suit according to the principles applicable without sending the case or question to the law side of the court.'

Construing these rules together with the statute, we understand that a suit in equity shall not be tried by piecemeal, but is to be proceeded with on the side in which the suit was properly brought; that is to say, if it should have been brought as an action at law, under rule 22 the court should make an order of transfer to the law side, to the end that the action may be proceeded with upon the law side. If the suit is one properly to be brought before a court of equity, it should remain upon the equitable side and there tried. On the other hand, if, in the course of the suit begun in equity, matters should arise which would ordinarily have to be determined at law, such matters shall be determined without sending the case to the law side of the court. El Dora Oil Co. et al. v. U.S., 229 F. 946, 144 C.C.A. 228. Applying the rule to a case where there is a serious controversy as to the title and the party in possession is holding adversely, plaintiff's remedy is at law and not in equity. But where the title and right to possession is clear, and the defendant is wrongfully in possession, extracting mineral from the land, and thus is practically consuming the substance of the estate, jurisdiction is in a court of equity to stop such waste, and, after having interfered to stop the waste, the court will determine the rights of the parties before it. Remedy at law for possession and to recover damages for the trespass is in plaintiff, but such remedy is not adequate, by no means as practical and as efficient as a remedy in equity. Magruder v. Belle Fourche, etc., Association, 219 F. 72, 135 C.C.A. 524. In Johnston v. Corson G.M. Co., 157 F. 145, 84 C.C.A. 593, 15 L.R.A. (N.S.) 1078, there was a serious controversy as to title; hence the case is distinguished from the instant one.

There is no controversy as to where the legal title to the property here involved rests; and if the defendants have no right to the oil in the lands or to the possession thereof as against the United States, then certainly remedy at law is inadequate to prevent injury of an irreparable character being done to the land, even to the destruction of the value thereof.

Again, the trespasses complained of appear to have been continuous, and if defendants should remain in possession they will continue to destroy the substance of the estate by the extraction of the oil, and will render plaintiff's ownership valueless. In such a case a court of equity will restrain, and will also retain the suits for an accounting and satisfaction for injuries already done. Graves v. Ashburn, 215 U.S. 331, 30 Sup.Ct. 108, 54 L.Ed. 217; Goldschmidt Thermit Co. v. Primos Chemical Co. (D.C.) 225 F. 769; Gatewood v. New River Con. Co., 239 F. 65, 152 C.C.A. 115.

Passing to the merits, these facts appear: On January 1, 1903, the notice of location relied upon was posted, and the location certificate recorded January 28, 1903. On January 29, 1903, seven of the eight locators, for a consideration of $10 each, conveyed their rights, title, and interests to Jane Stokes, who was the eighth locator, and who was the mother-in-law of appellant Fred H. Hall. In July, 1908, Mrs. Stokes for a nominal consideration conveyed all her right, title, and interest to her son-in-law, Hall, and he in turn on January 12, 1909, made a contract with the Chanslor-Canfield Midway Oil Company. Upon the trial all of the locators, except one who died before the suit was tried and Mrs. Stokes, an aged lady, testified. Each said in effect that he had no definite recollection of the location of the claims or of the subsequent transfer, although, when shown the deed bearing his name, each admitted that he conveyed to Mrs. Stokes as appeared by the deeds introduced in evidence.

The locators testified they had no recollection of any of the particulars connected with the matter. One said that he had a faint recollection of going to the office of a notary and signing 'something'; that evidently this was done at the request of Hall; that he never paid out any money for fees or other expenses, never received anything of value in connection with the transaction, and never had any intention of acquiring any interest in oil lands in Kern county; that he had a faint...