D'ANGELO v. Petroleos Mexicanos
| Decision Date | 16 July 1975 |
| Docket Number | Civ. A. No. 74-17. |
| Citation | 398 F. Supp. 72 |
| Parties | James P. D'ANGELO, Receiver for Papantla Royalties Corporation, a dissolved Delaware Corporation, Plaintiff, v. PETROLEOS MEXICANOS, a decentralized Institution pertaining to the Republic of Mexico, Defendant. |
| Court | U.S. District Court — District of Delaware |
William H. Bennethum, III, Wilmington, Del., for plaintiff.
Arthur G. Connolly, Jr., of Connolly, Bove & Lodge, Wilmington, Del., for defendant; Timothy P. Walsh of Hardin, Hess & Walsh, New York City, of counsel.
Plaintiff, James P. D'Angelo, is the receiver of Papantla Royalties Corporation ("Papantla"), a dissolved Delaware corporation, appointed by order dated December 21, 1956, of the Court of Chancery of Delaware. He has brought an action against the defendant, Petroleos Mexicanos, a decentralized governmental agency of the Republic of Mexico, a non-resident of the United States, for an order requiring the defendant to account to the plaintiff for oil produced from wells in Mexico in which he claims that Papantla and plaintiff have royalty or participation interests. The complaint alleges that the defendant was created by the Mexican government to manage and handle privately owned oil properties existing in Mexico which had been seized on or about March 18, 1938, for the purpose of nationalizing the oil industry. The complaint alleges that at the time, Papantla was the owner of certain oil royalties and participation rights in certain of the properties so expropriated by the Mexican government, and that those rights were never expropriated by the defendant or the Republic of Mexico. The amount in controversy is alleged to exceed the sum of $10,000, exclusive of interest and costs. The action is between a citizen of a state of the United States and a citizen of a foreign state, and is within the jurisdiction conferred by 28 U.S.C. § 1332(a)(2).
Following a determination by the Court that the defendant was subject to its quasi in rem jurisdiction by virtue of a sequestration of its property, D'Angelo v. Petroleos Mexicanos, 378 F.Supp. 1034 (D.Del.1974), the defendant appeared generally and answered the complaint. The case is now before the Court upon cross motions for summary judgment based upon the pleadings, depositions, answers to interrogatories, admissions on file and affidavits.
Defendant's motions are based upon the grounds that (a) the act of state doctrine precludes the Court from considering the merits of plaintiff's claim, (b) the statute of limitations and/or laches bars the claim, and (c) the doctrine of forum non conveniens requires a dismissal of the action. Plaintiff seeks a summary judgment on the basis of the record.
A large part of the evidence which plaintiff relies upon in resisting defendant's motion for summary judgment rests upon the testimony of one Roscoe B. Gaither, Esquire, which at this juncture must be accepted as true.1 Under Mexican law prior to the adoption of the Constitution of 1917, the owner of the surface of land owned the oil in the subsoil.2 This was changed by Article 27 of the Mexican Constitution of 1917. This Article provided that the Mexican nation owned the oil in the subsoil and permitted exploitation only in accordance with ". . . concessions granted by the Mexican Federal Government, to private individuals or civil or comercial (sic) corporations that are constituted according to Mexican laws. . . ."3 Nationals of foreign countries who had been in Mexico and developed the oil prior to the adoption of the 1917 Constitution protested against the non-recognition of the rights which they had acquired before the enactment of the Constitution. Because of the protests of foreign governments, including Great Britain, Holland and the United States, to the deprivation of rights in oil acquired by their nationals prior to 1917, meetings were held between them and representatives of the Mexican government in Mexico City beginning on May 15, 1923. These were known as the Bucareli Conferences. As a result a number of agreements were entered into between the Mexican government and certain of the foreign nations, including the United States, represented by Messrs. Payne and Warren. The United States' agreement, known as the Payne-Warren Agreement, gave recognition to the pre-constitutional rights of the landowners, through many of whom rights of foreign nationals were derived. This agreement was confirmed by the Petroleum Law of December 26, 1925. Thus, Mexican law was changed so that landowners who were able to prove to the satisfaction of the Mexican government that they had intended to utilize the oil in the subsoil prior to May 1, 1917, could acquire a confirmatory concession which permitted exploitation for up to 50 years. A decree dated January 3, 1928, modified this law and made the concessions good for an unlimited period of time.
The title of Papantla to the "royalties and participation rights" upon which plaintiff, as Papantla's receiver, based his claim derived from confirmatory concessions. Acting under powers of attorney from numerous landowners, Gaither had filed with the head of the legal department of the Department of Economy of Mexico, (1) proof of title of certain landowners claiming the subsoil rights, and (2) proof positive of their intention prior to 1917 to use the oil in the subsoil. As a result of this action 576 confirmatory concessions were acquired by Papantla, as appears from the records in the defendant's own files.
After the confirmatory concessions were obtained, Gaither made arrangements with the landowners so as to permit the development by the big oil companies of the concessions which he had obtained for the landowners. About two-thirds of the 576 confirmatory concessions were leased or sold to the oil companies.4
Two of the major deals which Gaither made were with Sinclair Oil Company and Aguila, a Dutch Shell subsidiary. Under the contracts which Gaither made with them, Shell was given an 89% interest in the oil produced and Sinclair an interest of 87½%. A 5% interest was reserved to the landowners, 3% was reserved to intermediaries who had assisted Gaither as interpreters or guides in making contact with the Indian landowners, and the remaining interest was reserved for Gaither and by him assigned to Papantla.
By a presidential decree of March 18, 1938, certain properties of specified oil companies were expropriated. The decree reads:
Among the 17 companies specified in the decree were those which had acquired or leased from Gaither on behalf of Papantla interests in the confirmatory concessions, which Gaither had acquired for the landowners.
Following the expropriation the defendant was formed, and through it Mexico went into the oil business, carrying on production, transportation, refining, manufacturing and the sale and export of petroleum products in and from Mexico.
By paragraph 5 of its answer to the complaint the defendant has "admitted that prior to the Mexican expropriation in 1938 Papantla owned certain oil royalties or participation rights". However, the same paragraph denies that "after the Mexican expropriation in 1938 Papantla had any right to oil royalties or participation rights and therefore denies that any money is owed to Papantla or to plaintiff."5 In short, defendant contends that the rights of the holders of the confirmatory concessions and of persons having any interest therein, including Papantla, were extinguished by the Mexican expropriation in 1938.
On the other hand, plaintiff maintains that the expropriation decree related solely to the physical properties owned by the 17 oil companies specified in the decree and to their interests in any confirmatory concessions6 but had nothing to do with the interests which Papantla and others had retained in those concessions.
Plaintiff asserts that the confirmatory concessions were a "breed apart" and were dealt with by a "treaty agreement" between the United States and Mexico, and since the expropriation decree was silent as to the interest held by Papantla and others it was never intended to extinguish those rights. By "treaty agreement" plaintiff apparently means the Payne-Warren Agreement stemming from the Bucareli Conferences.
Defendant contends that under the act of state doctrine the Court should refrain from adjudicating the issue thus posed by plaintiff. That doctrine found early expression in Underhill v. Hernandez, 168 U.S. 250, 18 S.Ct. 83, 42 L.Ed. 456 (1897), where Chief Justice Fuller said for a unanimous Court:
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