Coastal Club v. Shell Oil Co., 632.

• Citation: 45 F. Supp. 859
• Decision Date: 11 July 1942
• Docket Number: No. 632.,632.
• Parties: COASTAL CLUB, Inc., v. SHELL OIL CO., Inc.
• Court: U.S. District Court — Western District of Louisiana

45 F. Supp. 859

COASTAL CLUB, Inc., v. SHELL OIL CO., Inc.

No. 632.

District Court, W. D. Louisiana, Lake Charles Division.

July 11, 1942.

LeDoux R. Provosty, of Alexandria, La., for plaintiff.

George C. Schoenberger, Jr., and Oliver L. Stone, both of Houston, Tex., for defendant.

PORTERIE, District Judge.

The plaintiff is a Louisiana corporation and the defendant a Virginia corporation, and the matter in controversy exceeds the sum of $3,000.00.

The petition in this suit, after setting out facts — not necessary to itemize or digest for our present purpose — concludes, in Article 9, as follows:

"It was further implied in said lease and defendant was further legally obligated after the production of oil or gas in paying quantities on said lands to proceed to drill said lands and develop the lease with reasonable diligence. This the defendant has failed and refused to do despite repeated demand, although said leased lands contain oil which is capable of production and the drilling of an addition Well or Wells would be prudent and profitable to plaintiff and defendant." (Italics supplied.)

Then more facts are given — not necessary to itemize or digest — and we reach the conclusions of Article 12, as follows: "Under the provisions of said lease contract, paragraph 8, in case of cancellation of the lease defendant has the right to retain five acres of land around each well producing, such tract to be designated by Lessee in as near a square form as practicable."

Then, omitting another article of facts, we reach the following conclusive contention: "In the event defendant is not bound by the provisions of the lease and is allowed to retain more than five (5) acres around each well, plaintiff says that Coastal Club, Inc. No. 1 will efficiently drain forty (40) acres around said well. The other two hundred acres of land which defendant refuses to develop and which it is attempting to retain without production, plaintiff believes and alleges contain, and if drilled will produce, oil in paying quantities. The lease should, therefore, be cancelled except for forty (40) acres of land around `Coastal Club, Inc. No. 1' well."

And the full prayer is, as follows:

"Wherefore, plaintiff prays and demands judgment against defendant: First Claim — Fully cancelling the oil, gas and mineral lease dated April 11, 1935, subject to defendant's right to retain five (5) acres of land in as square a form as possible around `Coastal Club, Inc. No. 1' well drilled in the North-West corner of Section 27, Township 12 South, Range 6 West. For attorney's fees in the sum of Two Thousand ($2,000.00) Dollars, interest and costs.

"Second Claim — Fully cancelling said lease subject to defendant's right to retain forty (40) acres of land in as square a form as possible around `Coastal Club, Inc. No. 1' well. For attorney's fees in the sum of Two Thousand ($2,000.00) Dollars, interest and costs."

A motion to dismiss has been filed by the defendant on the ground that the action "is in the wrong district because the claim is one for forfeiture of an oil, gas and mineral lease granted in 1935, a personal right, and defendant's domicile in the State of Louisiana is in the Eastern District of Louisiana, where its agents for the service of process reside and are domiciled." And this is the motion for us to decide.

We should think this action is cognizable before any district court of the United States: Judicial Code, § 24 (1), 28 U.S.C.A. § 41 (1). Ex parte Schollenberger, 96 U.S. 369, 378, 24 L.Ed. 853. The subject matter of this action is, therefore, properly before this court. This fact pervades in this opinion. However, "The clause section vesting jurisdiction should not be confounded with the clause section determining the particular courts in which the jurisdiction must be exercised." Sweeney v. Carter Oil Co., 199 U.S. 252, 26 S.Ct. 55, 58, 50 L.Ed. 178.

Now, we go back to the petition and we note what we think is the really most important allegation, to-wit: that the defendant corporation "as a condition precedent to being admitted to do business" in the State of Louisiana has filed a written declaration under Act No. 184 of 1924, as amended, and in accordance therewith has named two agents in Louisiana (it is conceded that they are residents individually of East Baton Rouge Parish, Eastern District of Louisiana) to receive service of process.

It is important that we should quote fully the two main sections of this act so that the obligating force and effect upon the qualifying corporation may be well and fully appreciated:

"Every corporation organized under the laws of any other state, territory or country, * * * before being authorized to do business in this State, shall, as a condition precedent thereto, file in the office of the Secretary of State, a written declaration of its domicile, the place or places in the State where it is doing business, the place of its principal business establishment and the name of its agent or agents or other officers in this State upon whom process may be served, which said agent shall be a resident of the parish where the said corporation has an established business. The officer or designated employee of a corporation domiciled in Louisiana and authorized by its Charter to act as the agent of a foreign corporation may be the agent upon whom service of process may be made." Act 184 of 1924, § 1, as amended by Act 335 of 1938, § 1 (Dart's La.Gen.Stats., § 1250).

"The appointment of the agent or agents or officer upon whom service of process may be made shall be contained in a written power of attorney accompanied by a duly certified copy of the resolution of the Board of Directors of said corporation consenting and agreeing on the part of the said corporation that any lawful process against the same which is served upon the said agent or officer shall be a valid service upon said corporation and that the authority shall continue in force and be maintained as long as any liability remains outstanding against said corporation growing out of or connected with the business done by said corporation." (Italics supplied.) Act 184 of 1924, § 2 (Dart's La.Gen.Stats., § 1251).

Accordingly, we hold that Section 51 of the Judicial Code, 28 U.S.C.A. § 112, is clearly and directly applicable and this court is vested with the venue of this case and the jurisdiction of the person of the defendant. Neirbo Co. et al. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167, 128 A.L.R. 1437; Ex parte Schollenberger, 96 U.S. 369, 377, 24 L.Ed. 853; Oklahoma Packing Co. et al. v. Oklahoma Gas & Electric Co. et al., 308 U.S. 530, 309 U.S. 4, 60 S.Ct. 215, 84 L.Ed. 537; Dehne v. Hillman Investment Co., 3 Cir., 110 F.2d 456. Cf. London v. Norfolk & W. Ry. Co., 4 Cir., 111 F.2d 127. For supporting learned and witty sally, see Ward v. Studebaker Sales Corp. of America, 3 Cir., 113 F.2d 567, 568. "As all agree, it goes far toward removing the discriminatory advantage heretofore enjoyed by foreign corporations. For `the effect of the pre-Neirbo rule was usually to provide a dodge for the corporation rather than to insure an appropriate place for trial'."

For an obedient ruling by this court under the Neirbo case, with the additional point that service of process through either the marshal for the Eastern or the Western District would be good in this case, see Williams v. James, D.C., 34 F.Supp. 61.

Though all the principles of the Neirbo case 308 U.S. 165, 60 S.Ct. 158, 84 L.Ed. 167, 128 A.L.R. 1437 apply, we desire to quote particularly the following:

"In conformity with what is now § 210 of the General Corporation Law of New York (Consol.Laws, c. 23), Bethlehem designated `William J. Brown as the person upon whom a summons may be served within the State of New York.' The scope and meaning of such a designation as part of the bargain by which Bethlehem enjoys the business freedom of the State of New York, have been authoritatively determined by the Court of Appeals, speaking through Judge Cardozo: `The stipulation is therefore a true contract. The person designated is a true agent. The consent that he shall represent the corporation is a real consent. He is made the person "upon whom process against the corporation may be served" * * * The contract deals with jurisdiction of the person. It does not enlarge or diminish jurisdiction of the subject-matter. It means that, whenever jurisdiction of the subject-matter is present, service on the agent shall give jurisdiction of the person.' Bagdon v. Philadelphia & Reading C. & I. Co., 217 N.Y. 432, 436, 437, 111 N.E. 1075, 1076, L.R.A.1916F, 407, Ann.Cas.1918A, 389. A statute calling for such a designation is constitutional, and the designation of the agent `a voluntary act.' Pennsylvania Fire Ins. Co. v. Gold Issue Mining Co., 243 U.S. 93, 37 S.Ct. 344, 61 L.Ed. 610.

"In finding an actual consent by Bethlehem to be sued in the courts of New York, federal as well as state, we are not subjecting federal procedure to the requirements of New York law. We are recognizing that `state legislation and consent of parties may bring about a state of facts which will authorize the courts of the United States to take cognizance of a case.' Ex parte Schollenberger, supra, 96 U.S. at page 377, 24 L.Ed. 853."

It is clear, therefore, that the motion to dismiss must be overruled.

What we have before us, may we say, is purely a matter of federal procedure. Whether this case be tried in the federal court for this district, the Western District, or in the federal court for the Eastern District, which district the defendant is contending has venue, is immaterial as a matter of substantive law because in either event it will be the provisions as are found in the Civil Code of Louisiana controlling the contract and the cases of our courts thereunder which will decide whether or not there has been "reasonable diligence" in the exploration for oil and gas such as to...