Hayes v. Gulf Oil Corp.

• Decision Date: 13 July 1987
• Docket Number: No. 86-2700,86-2700
• Parties: Lloyd HAYES, Plaintiff-Appellee, v. GULF OIL CORPORATION, now known by change of name as Chevron USA, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 285

821 F.2d 285

Lloyd HAYES, Plaintiff-Appellee, v. GULF OIL CORPORATION, now known by change of name as Chevron USA, Inc., Defendant-Appellant.

No. 86-2700.

United States Court of Appeals Fifth Circuit.

July 13, 1987.

John Philip Howe, The Chevron Companies, Margaret M. McKay, Houston, Tex., for defendant-appellant.

Sibley & Lamb, Thomas J. Sibley, Robert B. Dunham, Beaumont, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of Texas.

Before CLARK, Chief Judge, BROWN, and JOHNSON, Circuit Judges.

CLARK, Chief Judge:

We are to decide in this case whether a United States District Court sitting in the Beaumont Division of the Eastern District of Texas has jurisdiction over the subject matter of a lawsuit disputing the title to real property located in the State of Colorado. The district court in Texas held that it had subject matter jurisdiction over this Colorado dispute. The defendant Gulf Oil Corporation (Gulf) contends that the plaintiff's lawsuit, which alleges that title to an oil and gas leasehold had reverted to the plaintiff by operation of law, is a "local action," which can only be brought in the state in which the real property at issue is located. Plaintiff Lloyd Hayes questions the current viability of the local action rule and contends that, at most, the assertion of the local action doctrine merits a change of venue which can be and was waived by Gulf. Because we agree with Gulf that the local action doctrine remains a vital part of the fabric of the law, we reverse the district court's decision that it had subject matter jurisdiction and remand the case with directions to that court to dismiss the action or to transfer it to the district court in Colorado pursuant to 28 U.S.C. Sec. 1631. ¹

I. The Underlying Dispute

The underlying dispute in this case concerns the title to an oil and gas lease which was issued by the Bureau of Land Management of the United States Department of the Interior to the plaintiff Hayes for a ten-year term, effective August 1, 1975. This lease covered lands located in Montezuma County, Colorado. Hayes agreed to assign Gulf his interest in the lease in October 1977 for a five-year primary term, with an automatic extension if "actual drilling operations have been commenced on lands of another lease with which this lease is committed to an approved co-operative or unit plan."

Hayes and Gulf disagree as to whether this has occurred. Hayes approved the inclusion of the lease in the Yellow Jacket Unit Agreement in 1977, but the Yellow Jacket Unit was terminated as of April 2, 1983. However, all the acreage in the Yellow Jacket Unit, including this lease, was combined with the acreage in six other units to form the McElmo Dome Unit. The McElmo Dome Unit was compulsorily unitized pursuant to a Colorado statute. Hayes never ratified the McElmo Dome Unit or consented to the inclusion of his lease therein. He thus claims that all interests in the federal lease reverted to him when the Yellow Jacket Unit was terminated. Gulf responds that Hayes' refusal to ratify the McElmo Dome Unit is irrelevant, since the unit was compulsorily unitized under state law.

Hayes filed suit against Gulf and Shell Oil Company (Shell) in the United States District Court for the Eastern District of Texas, claiming title and seeking a declaration that all interests under the lease belonged to him. After an amended complaint was filed, Gulf and Shell filed a joint motion to dismiss for lack of subject matter jurisdiction for two reasons: 1) Shell, with its principal place of business in Houston, Texas, was a non-diverse party; and 2) a federal district court sitting in Texas had no subject matter jurisdiction over a dispute about title to a Colorado leasehold. Hayes voluntarily dismissed Shell and again amended his complaint. Gulf then renewed its motion to transfer this action due to a want of jurisdiction pursuant to 28 U.S.C. Sec. 1631.

The district court held that it had subject matter jurisdiction to adjudicate the question of leasehold title in lands located wholly in Colorado and denied Gulf's motion. The district court certified this issue for interlocutory appeal, 28 U.S.C. Sec. 1292(b), and this court granted Gulf permission to appeal.

II. The Local Action Doctrine

The questions presented are: whether Hayes' action is indeed local, whether the local action doctrine remains good law, and whether the rule affects only the venue of the court and may be waived.

A local action involving real property can only be brought within the territorial boundaries of the state where the land is located. See Ellenwood v. Marietta Chair Co., 158 U.S. 105, 107, 15 S.Ct. 771, 771, 39 L.Ed. 913 (1895); see also 15 Wright, Miller, & Cooper, Federal Practice and Procedure: Jurisdiction and Related Matters 2d Sec. 3822, at 202-04 (1980). Chief Justice Marshall recognized the common law concept of the local action doctrine while sitting as a Circuit Justice in Livingston v. Jefferson, 15 F.Cas. 660 (C.C.D.Va.1811) (No. 8411). In that case, Edward Livingston sued former president Thomas Jefferson in a federal court in Virginia for an alleged trespass to land in Louisiana. The court dismissed the action, since an action for trespass to land in Louisiana was local and could not be heard in a Virginia court.

Following Livingston, the Supreme Court has consistently recognized that a local action must be brought within the state where the land is located. See, e.g., Louisville & N.R.R. v. Western Union Telegraph Co., 234 U.S. 369, 34 S.Ct. 810, 58 L.Ed. 1356 (1914); Ellenwood, 155 U.S. at 107, 15 S.Ct. at 771; Casey v. Adams, 102 U.S. (12 Otto) 66, 67-68, 26 L.Ed. 52 (1880). This court has held that a local action must be brought in the state where the real property is located. See, e.g., Iselin v. Meng, 269 F.2d 345, 347 (5th Cir.), cert. denied, 361 U.S. 913, 80 S.Ct. 257, 4 L.Ed. 183 (1959); Shell Petroleum Corp. v. Moore, 46 F.2d 959, 961 (5th Cir.1931). Other federal courts have recognized and applied the rule. See, e.g., Humble Oil & Refining Co. v. Copeland, 398 F.2d 364, 367 & n. 5 (4th Cir.1968); Still v. Rossville Crushed Stone Co., 370 F.2d 324, 325 (6th Cir.1966), cert. denied, 387 U.S. 918, 87 S.Ct. 2030, 18 L.Ed.2d 970 (1967); Minichiello Realty Associates, Inc. v. Britt, 460 F.Supp. 896, 897-99 (D.N.J.1978), aff'd without opinion, 605 F.2d 1196 (3d Cir.1979); Central Transport, Inc. v. Theurer, Inc., 430 F.Supp. 1076, 1078-79 (E.D.Mich.1977). State courts, including those of Texas and Colorado, refuse to entertain actions involving land located outside state boundaries. See, e.g., Miller v. Miller, 715 S.W.2d 786, 788 (Tex.Ct.App.1986) (citing Holt v. Guerguin, 106 Tex. 185, 163 S.W. 10 (1914)); Flader v. Campbell, 120 Colo. 66, 207 P.2d 1188 (1949). The local action rule is so fundamental that state courts are not obligated to give full faith and credit to judgments from either federal or state courts sitting outside the local state's territorial boundaries. See Iselin, 269 F.2d at 347 (Louisiana federal court's judgment involving land situated in Mississippi is void and not res judicata in courts in Mississippi); Humble Oil, 398 F.2d at 367 (Texas courts have exclusive jurisdiction to determine title to realty in Texas; a South Carolina court decision would receive no full faith and credit in Texas courts). See also Clarke v. Clarke, 178 U.S. 186, 190, 20 S.Ct. 873, 876, 44 L.Ed. 1028 (1900) (Connecticut courts are not required to give full faith and credit to a judgment of the South Carolina Supreme Court concerning the construction of a will which affected the passing of title to land situated in Connecticut). What is explicit or implicit in all of these decisions is that federal and state courts lack jurisdiction over the subject matter of claims to land located outside the state in which the court sits.

A. Local or Transitory?

The local action doctrine is so ingrained in our jurisprudence that a claimant does not normally challenge the rule's existence, but is more likely to argue that a particular cause of action is transitory in nature and not local. Chief Justice Marshall discussed this distinction between local and transitory actions in Livingston and concluded that the common law restrained the court to hold that an action for trespass to land, although an in personam action seeking monetary relief, was nevertheless local in nature because it could only take place in Louisiana. 15 F.Cas. at 664.

Chief Justice Marshall stated that the question whether an action was local or transitory should be controlled by federal law. Id. at 665. See also Wright, Miller & Cooper Sec. 3822, at 207-08. However, the Supreme Court near the end of the century stated in dictum that the question whether an action is local depends on the law of the forum state, see Huntington v. Attrill, 146 U.S. 657, 669-70, 13 S.Ct. 224, 228, 36 L.Ed. 1123 (1892), and lower federal courts, including this court, have applied state law to determine whether an action is local or transitory. See Chateau Lafayette Apartments, Inc. v. Meadow Brook National Bank, 416 F.2d 301, 304 n. 7 (5th Cir.1969). See generally Wright, Miller & Cooper Sec. 3822, at 208-09 ("Fortunately the difference is not of great practical importance for in most instances state law has developed in accordance with the federal decisions.") (citing federal court decisions).

Plaintiff Hayes does not make a serious effort to contest the characterization of this lawsuit as local. Counsel at oral argument did suggest that what is really involved here is a contract dispute between Hayes and Gulf which just happens to involve the title to real property. We need not belabor this issue. Under Texas law it is clear that an interest in land under an oil and gas lease constitutes real estate, and that Hayes' action to terminate Gulf's interest is an action to try title to real property located in...