Hyde v. Blaxter

• Decision Date: 28 April 1924
• Docket Number: 6435,6436.
• Parties: HYDE et al. v. BLAXTER et al. BLAXTER et al. v. HYDE et al.
• Court: U.S. Court of Appeals — Eighth Circuit

299 F. 167

HYDE et al. v. BLAXTER et al.

BLAXTER et al. v. HYDE et al.

Nos. 6435, 6436.

United States Court of Appeals, Eighth Circuit.

April 28, 1924

Warwick M. Downing, of Denver, Colo., and A. F. Sims, of Howard Kan., for plaintiffs.

Vincent F. Hiebsch, of Wichita, Kan. (Fred B. Stanley, of Wichita Kan., and J. B. Patterson, of Okemah, Okl., on the brief) for defendants.

Before LEWIS, Circuit Judge, and BOOTH and SYMES, District Judges.

LEWIS Circuit Judge.

This suit was begun July 26, 1922, by Blaxter and Mitchell, appellees in No. 6435 and appellants in No. 6436, to quiet their title as lessees in three 40-acre tracts in Elk County, Kansas. The lease covered 400 acres. It was given by Hyde and wife, appellants in No. 6435 and appellees in No. 6436, in 1918, for a term of five years and as long thereafter as oil or gas is produced from the land by the lessee. The lease contains this clause:

'On January 1st, 1922, each and every forty-acre tract that has not been developed to the extent of one finished well shall revert to the lessor and the lease on these undeveloped forty-acre tracts shall become null and void.'

Seven wells on seven different 40 acres had been put down, and the eighth well on what is called the eighth 40-acre tract was very close to completion on January 1, 1922. It had been started in time to complete it before that date, and it would have been completed within the time limited, but for unusual conditions not to be anticipated or guarded against. A very few days' work after January 1st completed it. It had cost about $15,000 to drill it. The ninth and tenth 40 acres had not been drilled, as the lease required, prior to January 1, 1922. The lessees insist that they should be protected against forfeiture on all three of the 40-acre tracts and the lessors insist that forfeiture should be enforced as to all of them. The trial court sustained the lessees' right to the 40 acres on which the eighth well was put down but denied any right in the lessees to tracts 9 and 10, holding that they had been forfeited. Both conclusions seem to us to be right. As to the eighth 40-acre tract on which the well had been substantially completed on January 1st, there can be no just reason assigned in a court of equity on which a forfeiture would be enforced or permitted. There was reasonable compliance as to that 40 acres, and the chancellor could not permit the dry letter to override the substance and purpose of the contract. But the clause of the lease quoted above should be construed, we think, after reading all other relevant provisions, as having the effect of treating each 40 acres separately for purposes of development; and it requires that each 40 should be drilled upon, and if a well was not completed on any of the 40's by January 1, 1922, the lease as to the particular 40 so undrilled should be null and void. Prior to January 1, 1922, the lessees had spent more than $150,000 under their lease in developing the property, and their claim is that this should hold the entire 400 acres from forfeiture. But no expenditure in drilling on the ninth and tenth 40-acre tracts had been made. There is also claim that the lessors acquiesced in the lessees' right to drill on the 9th tract after January 1st, but we can hardly attribute that meaning to what it is claimed one of the lessors said. We discover no facts that would give the lessees equitable right of protection against forfeiture on tracts 9 and 10, in view of the quoted clause.

Prior to bringing this suit the lessors brought an action in the State district court of Elk County under the Declaratory Judgment Act of that State (Laws 1921, c. 168) for an interpretation of the lease contract and the establishment of its meaning. The proceeding there is plead in bar here by the lessors as res adjudicata. That court in its decree entered June 10, 1921, set out the clause of the lease quoted above and then declared:

'This provision is exceedingly plain and clearly means that there must be one well finished on each unit referred to in said lease of forty acres, or said unit of forty acres not so developed and improved would be forfeited and would revert to the lessor, said lease pertaining to each forty acres remaining so undeveloped would become null and void as to that unit.'

After January 1, 1922, the lessors filed in that court their petition for its writ of assistance to put the lessees out and the lessors into possession of the eighth, ninth and tenth 40-acre tracts. The writ was denied for these reasons, as shown by the record:

'That the question as to whether or not the lessees were complying with the terms of said lease was not presented to the (that) court. That the only question presented was as to the construction of certain portions of the lease as to what they meant. That is as far as the declaratory judgment affected the lease.'

As we view it, all that was done by the State district court was to make a declaration of record that the meaning of the lease was clear and it meant what it said as to development on each 40-acre tract. We see nothing in those proceedings, however, that operates as a bar to adjudication on the issue of forfeiture presented in this suit. We construe the lease as the State court did. To that extent there may be res adjudicata. Copy of the petition in the State district court is brought here, and from it it appears that the lessees there contended, and only contended, that there was conflict and disagreement between the clause of the lease that has been quoted above and other parts of the lease, and the only purpose of that proceeding was to obtain from the court an interpretation of the lease, whether the quoted clause prevailed or whether it was annulled or modified by other parts of the lease. There were other alleged ambiguities and inconsistencies in the lease submitted to that court for its solution and interpretation. No question or issue of forfeiture as to any of the 40-acre tracts was there under consideration. And obviously, the issue here presented could not have been considered or adjudicated, because that procedure and the findings of the court there made were several months prior to January 1, 1922. This suit, then, while between the same parties, is upon a different cause of action and presents a controversy on facts lying outside the lease and resting in parol that could not have been litigated or decided there. The action of the State court is in no sense res adjudicata of the controversy here. Hottelet Co. v. Garden City Milling Co. (C.C.A.) 285 F. 693, 696.

Hyde and wife filed in addition to answer a crossbill against the lessees, Blaxter and Mitchell, wherein they alleged that neither of the three 40-acre tracts had been developed to the extent of one finished well prior to January 1, 1922. They prayed that the lessees be enjoined from drilling or doing any development work on either of those tracts and from taking any oil from the well on tract 8, that the lease be cancelled as to the three 40-acre tracts, that the lessors have possession thereof and their title thereto quieted against the lessees. They further alleged that under certain named sections of the statutes of...