Hagood, Application of

• Decision Date: 18 October 1960
• Docket Number: S,No. 2940,Nos. 5262-C and 5263-,s. 5262-C and 5263-,2940
• Citation: 356 P.2d 135
• Parties: In the Matter of the Application by L. N. HAGOOD for Oil and Gas Leases, Application1/2 Sec. 16 and W 1/2 Sec. 36, T. 43 N., R. 74 W. L. N. HAGOOD, Appellant (Appellant below), v. TEXAS PACIFIC COAL AND OIL COMPANY, Appellee (Appellee below).
• Court: Wyoming Supreme Court

Page 135

356 P.2d 135

In the Matter of the Application by L. N. HAGOOD for Oil and Gas Leases, Application Nos. 5262-C and 5263-C, S 1/2 Sec. 16 and W 1/2 Sec. 36, T. 43 N., R. 74 W. L. N. HAGOOD, Appellant (Appellant below), v. TEXAS PACIFIC COAL AND OIL COMPANY, Appellee (Appellee below).

No. 2940.

Supreme Court of Wyoming.

Oct. 18, 1960.

L. N. Hagood, pro se, and W. A. Cole, Casper, for appellant.

Frank M. Gallivan, Cheyenne, and Gorsuch, Kirgis, Campbell, Walker & Grover, and Fred A. Deering, Jr., Denver, Colo., for appellee.

Before BLUME, C. J., and PARKER and HARNSBERGER, JJ.

Mr. Justice PARKER delivered the opinion of the court.

This is a dispute between applicants over the right to be awarded State oil and gas leases on undeveloped lands formerly held by one of them. On October 16, 1947, the Texas Pacific Coal and Oil Company, hereafter called the company, leased from the State of Wyoming the S 1/2 sec. 16 and W 1/2 sec. 36, T. 43 N., R. 74 W., sixth principal meridian, Campbell County. This transaction was effected by two separate instruments, Lease Nos. 0-4693 and 0-4694, each of which contained a provision that the term should be for ten years after the date. Both leases were amended in 1951 to provide that they should be in effect for a primary term of ten years and so long thereafter as oil and gas might be produced in paying quantities. Before October 16, 1957, the end of the ten-year period, the company applied for a new lease at the same rental of twenty-five cents per acre; and within the time provided by Rule 8(a) ¹ Hagood filed applications for leases of the same land, offering fifty cents per acre and a lease acquisition bonus of three dollars per acre. The commissioner of public lands considered the matter and rendered his decision, recommending the issuance of the leases to the company and the disallowance of the Hagood applications. In his decision the commissioner recited that both applicants were qualified to lease the lands in question, that the company had preferential rights as the old lessee, and that it had not been the policy of his office to require an applicant having preferential rights to meet higher bids when he had spent considerable sums of money in the area for exploration or development. Hagood appealed the commissioner's decision to the board of land commissioners, urging that the legislature had eliminated preferential rights and presenting testimony as to the activities of each of the applicants with the amounts each had offered. The company appeared by counsel and participated in the examination but presented no evidence. The order issued by the board was brief and general, stating merely that the commissioner's decision was upheld. Hagood then appealed to the District Court of Campbell County where the matter was heard in accordance with § 36-27, W.S.1957. The company appeared with witnesses who testified at some length, over the objection of Hagood, as to prospecting and drilling activities in the county. Witnesses for the company admitted that no drilling activities or prospecting had been done upon or near the land in question but said that it had performed such work in the same geologic province. Hagood appeared by attorney, examined the witnesses, and presented argument but submitted no evidence. The order (judgment) affirmed the decision of the board, upholding that of the commissioner, and recited generally that the company was the holder of a lease, had not violated same, had paid the rentals thereon, and was qualified to receive leases of State lands; that the commissioner and the board had not abused their discretion by refusing to order the company to meet the higher rental of Hagood; that the company had actual use for the lands; and that the rental offered was reasonable and not out of proportion.

Hagood has appealed to this court, listing some fourteen points on which he intends to rely, most of which indicate the aspects in which the decisions of the board and district court were allegedly illegal and improper. He raises two principal contentions, that the company had no preferential right as the old lessee and that the decision of the board and the district court constituted illegal exercise of discretion, grave abuse of authority, and fraud upon the State of Wyoming. We must then first determine whether or not the company as a lessee had a preferential right of renewal, and such determination can be made only in the light of pertinent legislation both past and present.

The Act of Admission passed by Congress in 1890 provided in § 5:

'That all lands herein granted for educational purposes shall be disposed of only at public sale, the proceeds to constitute a permanent school fund, the interest of which only shall be expended in the support of said schools. But said lands may, under such regulations as the legislature shall prescribe, be leased for periods of not more than five years, in quantities not exceeding one section to any one person or company * * *.' 26 Stat. 222.

This section was amended by Act of Congress on February 15, 1934, accepted, ratified, and confirmed by the Wyoming legislature February 6, 1935, § 1, c. 34, S.L. of Wyoming, 1935, so that the second sentence above quoted then read:

'But said lands may, under such regulations as the legislature shall prescribe, be leased for mineral, grazing, agricultural, or other purposes, provided that the term of agricultural and grazing leases shall not exceed 10 years; mineral leases including leases for exploration for oil and gas and the extraction thereof for a term not longer than ten years * * *.'

The section was again amended by Congress on October 5, 1949, accepted, ratified, and confirmed by the Wyoming legislature February 18, 1951, § 1, c. 137, S.L. of Wyoming, 1951, and the second sentence now reads:

'But said lands may, under such regulations as the legislature shall prescribe, be leased for mineral, grazing, agricultural, or other purposes, provided that the term of agricultural and grazing leases shall not exceed 10 years * * *.'

The statute relating to the authority of the board of land commissioners to issue mineral leases in effect at the time of the company's original lease, November 25 1947, was § 24-701, W.C.S.1945, which read:

'The board of land commissioners is hereby authorized to lease for a term of ten (10) years, with the preferential right in the lessee to renew his lease for successive periods of ten (10) years, any state or school lands supposed to contain coal, oil or minerals, and to make and establish rules and regulations governing the issuance of such leases and covering the conduct of development and mining operations to be carried on thereunder.'

This section was amended by § 1, c. 157, S. L. of Wyoming, 1951, so that the pertinent part read: ²

'The Board of Land Commissioners is hereby authorized to lease any or all lands granted to the State for educational purposes, for oil and gas for a primary term up to ten (10) years, and as long thereafter as oil or gas may be produced in paying quantities, and to extend the term of existing oil and gas leases in good standing for as long as oil or gas may be produced in paying quantities * * *.'

Hagood contends that the preferential right mentioned in § 24-701 was abolished by c. 157, S. L. of Wyoming, 1951. He argues further that the company's leases by the June 28, 1951, agreements for the change in the term were entirely subject to the amended statute which abolished the preferential right. The company on the other hand urges that it had a preferential right to new leases for three reasons, i. e., the amended statute did not prohibit such right; the board was justified in granting a preference in its own discretion, especially in the light of its practice and regulations; and in any event, there could be no retroactive application of the 1951 statutory amendment so as to deprive the company of the rights which it had under the 1947 leases.

We cannot agree entirely with the contentions of either party. The legislature by failing to mention the preference right in the 1951 amendment of the statute did not abolish the right but did remove any authority therefor previously extended. It is true that the board in the exercise of its discretion has broad powers, but we find no precedent indicating that such an agency may by the pronouncement of a policy grant preferences for which there is no constitutional or statutory authority. The board at the time of its decision had a rule ³ which purported to grant a preferential right for renewal of leases to old lessees in accordance with §§ 21-122 and 24-701, W.C.S.1945, but it ignored the fact that these statutes had been amended and no longer authorized such preferential right for oil and gas leases. Therefore, the only basis for the board's extending a preferential right of renewal to the company was that growing out of the 1947 leases drawn at a time when the statute authorized preferential rights of renewal. It is well settled that laws which subsist at the time and place of making of a contract, and were it is to be performed, enter into and become a part of it as though expressly referred to and incorporated in its terms. Von Hoffman v. City of Quincy, 4 Wall. 535, 71 U.S. 535, 18 L.Ed. 403. And see Black & Yates, Inc. v. Negros-Philippine Lumber Co., 32 Wyo. 248, 231 P. 398, 37 A.L.R. 1487; 12 Am.Jur. Contracts § 240; 17 C.J.S. Contracts § 330. But see 3 Corbin, Contracts, 1951, § 551. It is likewise settled that a statute may not be applied retroactively so as to deprive contracting...