Continental Oil Co. v. Osage Oil & Refining Co., 727.

• Decision Date: 03 February 1934
• Docket Number: No. 727.,727.
• Citation: 69 F.2d 19
• Parties: CONTINENTAL OIL CO. et al. v. OSAGE OIL & REFINING CO. et al.
• Court: U.S. Court of Appeals — Tenth Circuit

69 F.2d 19 (1934)

CONTINENTAL OIL CO. et al. v. OSAGE OIL & REFINING CO. et al.^*

No. 727.

Circuit Court of Appeals, Tenth Circuit.

February 3, 1934.

Chester I. Long, of Wichita, Kan., and D. A. Richardson, of Oklahoma City, Okl. (Robert F. Armstrong and Wm. H. Zwick, both of Ponca City, Okl., and Ray S. Fellows, of Tulsa, Okl., on the brief), for appellants.

W. F. Wilson, of Oklahoma City, Okl. (J. E. Whitehead, of Dallas, Tex., and Wilson, Wilson & Owens, of Oklahoma City, Okl., on the brief), for appellees.

Before PHILLIPS and McDERMOTT, Circuit Judges, and KENNEDY, District Judge.

PHILLIPS, Circuit Judge.

On August 27, 1918, the Secretary of Interior approved a departmental oil lease from the Osage Tribe of Indians to the Osage Oil & Refining Company. This lease was for a term of five years from the date of approval, and "so long thereafter as oil is found in paying quantities." It has been the subject of much litigation. For a history of such litigation up to November 8, 1928, see Axelrod v. Osage O. & R. Co. (C. C. A. 8) 29 F.(2d) 712.

The original decree in the instant case was entered on April 29, 1927. It was affirmed by the Eighth Circuit in Axelrod v. Osage O. & R. Co., supra. The mandate was filed January 16, 1929. On February 2, 1929, the Continental Company filed a motion to modify the decree. On June 24, 1929, the trial court entered an order modifying the decree. This order was set aside by this court in Osage O. & R. Co. v. Continental Oil Co., 34 F.(2d) 585, 589. In our opinion in that case we said in part:

"It is our opinion that the only power possessed by the United States District Court for the Northern District of Oklahoma over the decree of April 29, 1927, affirmed by the Circuit Court of Appeals for the Eighth Circuit, is the power to enforce its execution and it should exercise such power unless the Continental Company, within a reasonable time thereafter, obtains leave from such United States District Court to file a supplemental bill setting up facts which, in the judgment of such court, entitles the Continental Company to be relieved from the duty enjoined on it by the decree of April 29, 1927, to purchase a one-half interest in the lease. In which event, issues should be made up and that cause regularly heard and disposed of."

This is an appeal from an order denying a second application for leave to file a supplemental bill. The facts disclosed by the verified bill and exhibits thereto attached, tendered with such application and in decisions upon prior appeals in this cause, are these:

The obligation imposed by the original decree on the Continental Oil Company of Maine to purchase and pay for a one-half interest in the lease, was conditional. The decree in part provided:

"It is further ordered, adjudged and decreed that the plaintiff (Osage Company) shall discharge all liens appearing of record in the office of the County Clerk of Osage County, Oklahoma, and in the office of the Osage Indian Agency that affect or may be a charge against the above leasehold estate and shall tender and deliver to the Continental Oil Company full, complete and valid title to an undivided one-half interest in said lease in good standing with the Osage Indian Agency, and the Secretary of the Interior and free and clear of any and all liens and encumbrances whatsoever, and if such title cannot be given by plaintiff to The Continental Oil Company within thirty days from the time this decree becomes a finality, then the Continental Oil Company shall thereupon and forthwith be entitled to the return to it of the $50,000.00 herein ordered deposited with the clerk of this court * * * and The Continental Oil Company shall then surrender to plaintiff any claim to said lease and shall be relieved of any further liability whatsoever to said plaintiff." (Italics ours.)

Pursuant to the direction of the Commissioner of Indian Affairs in his letters of May 8 and 20, 1929, the superintendent of the Osage Indian Agency, after notice to the interested parties, held a hearing with respect to such lease on June 26, 1929.

On June 27, 1929, the Continental Oil Company, a Maine corporation, assigned, conveyed, and transferred all of its property to the Continental Oil Company, a Delaware corporation.

On July 15, 1929, the superintendent made a report to the Commissioner of Indian Affairs on such hearing, in which he found that no oil had been produced on the lease from April, 1922, to August 27, 1923, called attention to his report of February 9, 1929, listing terminated leases and showing such lease to have expired on October 31, 1928, and recommended that the lease be held to have terminated on the latter date.

On September 30, 1929, the trial court entered an order setting aside its order of June 24, 1929. On the same date the Continental Company of Delaware filed in this cause, in the trial court, an application for leave to file a supplemental bill.

On October 11, 1929, the trial court made an order in which it directed the Continental Company of Delaware to accept assignments of an undivided one-half interest in such lease from the Osage Company to the Continental Company of Maine, and within 15 days after the delivery of such assignments by the Osage Company to present them to the Secretary of Interior for approval, all to be without prejudice to the rights of the Continental Company of Delaware to present its application to file a supplemental bill and assert all matters pertaining to the alleged invalidity of such lease.

On December 6, 1929, the superintendent of the Osage Indian Agency made a further report to the Commissioner of Indian Affairs, and accompanied it with a report to him made by William Ash Waid, a U. S. Oil and Gas Inspector, under date of November 26, 1929. The report of the inspector stated that no oil or gas was being produced from said lease at the end of the five-year period.

On February 12 and 13, 1930, a hearing was had before the Commissioner of Indian Affairs in the matter of the approval of the assignments from the Osage Company to the Continental Company, of which the Osage Company had notice, and in which it participated.

On February 25, 1930, the Commissioner of Indian Affairs reported to the Secretary of Interior that there had been no production on the lease during the five-year period after April, 1922, and that the lease had expired by its own terms, and recommended that the assignments be disapproved. This recommendation was approved on February 26, 1930, by the first assistant Secretary of Interior.

On March 8, 1930, the Osage Company brought a proceeding in the Supreme Court of the District of Columbia to secure a writ of mandamus directing the Secretary of Interior to approve such assignments.

The amended answer of the Secretary of Interior to the petition in mandamus in part states:

"He admits the bringing in by plaintiff (Osage Company) on or about May 4, 1921, of an oil well from which plaintiff ran only 421.88 barrels of oil up to and including the month of April, 1922, when production ceased and plaintiff apparently abandoned said premises. Thereafter no further interest was manifested by plaintiff in said leased premises. Requests of the Superintendent of the Osage Agency, in the meantime, that overdue accrued rentals be paid by plaintiff on this and other leases, and that this well be `plugged in' were without response from plaintiff and then in a reasonable period following May 17, 1924, after notices of termination because of non-production had been sent to all record owners of said lease, including plaintiff, under dates of August 30, 1923, January 5, and May 17, 1924, the lease was noted on the records of the Superintendent of the Osage Agency as having expired because of non-production. Abandonment by plaintiff was further evidenced by reports from the chief oil and gas inspector concerning that period that no work was being performed on the lease and that pipes had rusted out and that grass had grown up through the derrick floor. * * *

"The decision of the Secretary of the Interior herein was the decision of a question of fact, to wit, that the lessee plaintiff, had ceased producing either oil or gas in paying quantities under its said lease; that `after April 22 the lease was wilfully neglected if not completely and intentionally abandoned' by plaintiff; that the lease had expired by limitation. * * *

"The defendant says that subsequent to August 26, 1923, and long before the filing of the petition in this case, it was a fact that the oil well upon the land in question had not been operated with regularity, and that at such times as it was operated it yielded only about one barrel of oil a day. * * *

"The defendant says that subsequent to August 26, 1923, and long prior to the filing of the petition in this case, it was a fact that such royalty as was paid upon the oil produced from the land in question did not afford a fair and reasonable compensation to the Osage Indian Tribe for the use of its land. And it was a fact that oil no longer was found upon the land in `paying quantities' to either the lessor or the lessee. * * *

"Therefore said lease did not exist at the time the petition in this case was filed and does not exist at this time and the plaintiff has no right to be awarded a writ of mandamus to require the defendant to reinstate the same."

The Supreme Court of the District of Columbia sustained a demurrer to such amended answer, and on April 18, 1931, ordered that a writ of mandamus be issued directing the Secretary of Interior to approve such assignments.

On November 9, 1931, the Court of Appeals of the District of Columbia reversed the judgment of the Supreme Court in the mandamus proceedings. See Wilbur v. United States, 60 App. D. C. 326, 54 F.(2d) 437, 438. We set out the pertinent portions of the opinion therein in note.¹

The supplemental bill tendered with the application filed by the Continental Company of...