Freels v. Northrup

• Decision Date: 09 October 1984
• Parties: John Russell FREELS and Wife, Esther Freels, Plaintiffs-Appellants, v. Ira W. NORTHRUP and Wife, Daisy Northrup, Defendants-Appellees. 678 S.W.2d 55
• Court: Tennessee Supreme Court

Page 55

678 S.W.2d 55

John Russell FREELS and Wife, Esther Freels Plaintiffs-Appellants, v. Ira W. NORTHRUP and Wife, Daisy Northrup Defendants-Appellees.

678 S.W.2d 55

Supreme Court of Tennessee at Knoxville.

Oct. 9, 1984.

M.F. McDavid, Harriman, Buxton, Layton, Webster & Wilkinson by George H. Buxton, Jr., Oak Ridge, for plaintiffs-appellants.

John S. McLellan, Kingsport, for defendants-appellees.

OPINION

DROWOTA, Justice.

This action was initiated by Plaintiffs-Appellants to establish the ownership of certain mineral rights in a tract of land located in Morgan County, Tennessee. The Chancellor awarded the mineral rights to the Plaintiffs and accordingly decreed that a certain percentage of the oil royalties received by Defendants belonged to Plaintiffs. Defendants were further ordered to pay to Plaintiffs their proportionate share of sales proceeds from the oil well in question.

In the Court of Appeals the Defendants argued that the evidence preponderated against the findings of the Chancellor and that the Chancellor infringed upon the exclusive jurisdiction of the Tennessee Oil and Gas Board. The Court of Appeals concurred in the findings of fact by the Chancellor but reversed the trial court on the jurisdictional issue. Following that decision, we granted Plaintiffs' Rule 11 application. Two issues are presented for our consideration. First, whether the Chancellor properly determined the boundaries of the land in question. The second issue is whether the Oil and Gas Board has exclusive jurisdiction to determine participation in an oil well drilling unit.

The Defendants acquired the tract of land in question from Jim Marley in 1973. This same property had been conveyed to the Plaintiffs' grandfather in 1902 by H.D. Hambright who expressly reserved all mineral, coal and oil rights. In 1951, the heirs of Mr. Hambright conveyed these rights to the Plaintiffs. The Defendants entered into a lease with Ace Petroleum Company (hereinafter Ace) in 1979 which authorized Ace to explore for oil but reserved a royalty interest for the Defendants. Ace had a survey conducted and a map was drawn of the proposed drilling unit, which included the disputed tract of land. The Tennessee Oil and Gas Board subsequently issued a drilling permit to Ace.

During this time Plaintiffs entered into a similar lease with Maynard Hamby, which purportedly covered the mineral rights in the disputed tract. Ace then applied to the Gas and Oil Board to amend the drilling permit to accommodate the Plaintiffs' interest. The actual drilling was to take place on land undisputably owned by the Defendants, but the area of the well included property that the Plaintiffs allegedly owned. The Defendants did not recognize the Plaintiffs' property interest and did not authorize payment of any share to the Plaintiffs. Plaintiffs brought suit in the Chancery Court of Morgan County asking that they be declared the owners of the property. They alleged that they owned the mineral rights in the disputed tract, that the mineral interest in the property had been assessed to them for tax purposes for more than 20 years, that their interest was in such close proximity to the Defendants' well that unitization was required under T.C.A. Sec. 60-1-101 et seq. and the Rules of the Oil and Gas Board, that the Board had approved an amended application which proposed such unitization (at 16.5 per cent), and that oil had been collected from the well without any accounting to the Plaintiffs.

The trial court found that the disputed tract consisted of 25.3 acres rather than 12 acres and that Plaintiffs were the owners of the mineral rights in the tract. The Chancellor also found that 4.045 acres of Plaintiffs' interest was within the Defendants' 20 acre drilling unit. Accordingly, the court awarded Plaintiffs a 20.2 per cent interest in the Defendants' well.

The trial court's findings of fact were reviewed by the Court of Appeals and no error was found. The Court of Appeals did not accept Defendants' contention that the trial court should have accepted Defendants' survey as being more accurate. The Court of Appeals felt that the Chancellor relied on other testimony that was unchallenged and that, under the facts of this case, his ruling was correct.

In their appeal to this Court Defendants again challenge the trial court's findings of fact. As mentioned above, those findings were concurred in by the Court of Appeals. Our review of concurrent findings of fact by the Chancellor and the Court of Appeals is very limited. T.C.A. Sec. 27-1-113. Such findings are binding on this Court if there is any evidence to support them. Shuptrine v. Quinn, 597 S.W.2d 728, 730 (Tenn.1979); Davis v. Bank of Illinois, 561 S.W.2d 144 (Tenn.1978). Because we find that there is material evidence to support the questioned findings, we affirm the judgment of the trial court in determining the ownership of the disputed property.

The more troublesome issue on appeal is whether the trial court improperly infringed upon the jurisdiction of the Tennessee Oil and Gas Board in determining the percentage of participation that the Plaintiffs would enjoy in the oil well drilling unit. Defendants argue that only the Oil and Gas Board has the authority, pursuant to T.C.A. Sec. 60-1-202, to determine unit participation. The Court of Appeals agreed and held that the determination of unit participation percentages is within the particular expertise of the Oil and Gas Board.

The powers of the Oil and Gas Board are enumerated in T.C.A. Sec. 60-1-202, which provides in part that

(a) The Board shall have jurisdiction and authority ...

(4) To make rules, regulations, and orders for the following purposes:

* * *

(I) To identify ownership of oil and gas wells, producing leases, refineries, tanks, structures, and all storage and transportation equipment and facilities; ...

(M) To provide for the forced integration of separately owned tracts and other property ownership into drilling and production units....

From the statutory language it seems clear that the Board has the authority and jurisdiction to determine the unit participation in the Defendants' oil well. However, the issue is whether the Board has exclusive jurisdiction to make that determination. The Court of Appeals was of the opinion that the Chancery Court of Morgan County had no jurisdiction to determine the extent of the Plaintiffs' participation. We disagree and find that the Chancellor was acting within his authority and jurisdiction in making the unit participation determination.

Defendants base their argument on the doctrine of primary jurisdiction. The doctrine, which has been recognized by the federal courts in Tennessee, Terrell Oil Corp. v. Atlantic Richfield Co., 468 F.Supp. 860 (E.D.Tenn.1977), generally requires that parties resort first to an administrative agency before they seek judicial action involving a question within the competence of that...