In re Mt. Forest Fur Farms of America

• Decision Date: 16 August 1941
• Docket Number: 8614,8894.,No. 8802-8808,8802-8808
• Parties: In re MT. FOREST FUR FARMS OF AMERICA, Inc. GULF REFINING CO. OF LOUISIANA et al. v. FITZGERALD. COCKRELL et al. v. FITZGERALD (two cases).
• Court: U.S. Court of Appeals — Sixth Circuit

122 F.2d 232 (1941)

In re MT. FOREST FUR FARMS OF AMERICA, Inc.

GULF REFINING CO. OF LOUISIANA et al. v. FITZGERALD.

COCKRELL et al. v. FITZGERALD (two cases).

Nos. 8802-8808, 8614, 8894.

Circuit Court of Appeals, Sixth Circuit.

August 16, 1941.

COPYRIGHT MATERIAL OMITTED

Butzel, Eaman, Long, Gust & Bills, of Detroit, Mich. (Frank D. Eaman and Victor W. Klein, both of Detroit, Mich., J. S. Atkinson, of Shreveport, La., Tinsley Gilmer, of Lake Charles, La., and George C. Schoenberger, Jr., of Houston, Tex., of counsel), for Gulf Refining Co. of Louisiana and others.

Monroe & Lemann, of New Orleans, La., Butzel, Levin & Winston, of Detroit, Mich., and Battle, Levy, Fowler & Neaman, of New York City (Monte M. Lemann, of New Orleans, La., A. J. Levin, of Detroit, Mich., George Gordon Battle, of New York City, J. Blanc Monroe, of New Orleans, La., Henry H. Sills, of Detroit, Mich., Walter J. Suthon, Jr., of New Orleans, La., and Pearson E. Neaman, of New York City, of counsel), for Freeport Sulphur Co.

Oxtoby, Robison & Hull, of Detroit, Mich., and Herold, Cousin & Herold, of Shreveport, La. (Oscar C. Hull and Leo I. Franklin, both of Detroit, Mich., and Samuel L. Herold, Jr., and Sidney L. Herold, both of Shreveport, La., of counsel), for Ernest Cockrell.

Robert S. Marx, Carl Runge, Lawrence I. Levi, and Julian G. McIntosh, all of Detroit, Mich., Lazarus, Weil & Lazarus and Cobb & Saunders, all of New Orleans, La., Fraser, Effler, Shumaker & Winn, of Toledo, Ohio (Eldon S. Lazarus and Eugene D. Saunders, both of New Orleans, La., Ross W. Shumaker and Robert C. Dunn, both of Toledo, Ohio, Charles S. Abbott, of Ann Arbor, Mich., and Nichols, Wood, Marx & Ginter, of Cincinnati, Ohio, of counsel), for trustee, Frank Fitzgerald.

Before HICKS, HAMILTON, and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

This complicated litigation, involving millions of dollars, has been heard on the consolidated argument of nine cases and reaches us on appeal, in summary proceedings in a corporate reorganization in bankruptcy, in causes 8802-8808 from a judgment of the District Court for the Eastern District of Michigan against six appellants, Gulf Refining Company of Louisiana, Gulf Refining Company, Humble Oil and Refining Company, Shell Oil Company, Inc., Freeport Sulphur Company, all corporations, and Ernest Cockrell; on appeal from an interlocutory injunction in 8614, restraining appellants Ernest Cockrell, his curator ad hoc, and their attorneys, from further proceedings in a suit pending in the 25th Judicial District Court for the Parish of Plaquemines, State of Louisiana; and on appeal from an interlocutory injunction in 8894, restraining appellants Ernest Cockrell and two Louisiana law firms, Herold, Cousin & Herold, and Plauche & Plauche, and also the Moran Corporation of the South and Isaac E. Heller, who are not appellants, from taking any further steps in another suit pending in the same Louisiana Judicial District Court.

The appellee, Frank Fitzgerald, trustee for Mt. Forest Fur Farms of America, Inc., the corporate debtor, appealed in the main case (8802-8808 consolidated) from that portion of the judgment which denied the full relief sought; but, for brevity and clarity, will be designated only as appellee.

On July 16, 1926, a corporation, Mt. Forest Fur Farm, was created under the laws of Michigan for the purpose of owning and operating fur and game farms in Michigan and elsewhere in the United States and in Canada and of manufacturing and dealing in furs and fur garments, including the right to deal in real estate in furtherance of its charter purposes. On March 29, 1928, this Michigan corporation sold its properties and assets to the debtor, Mt. Forest Fur Farms of America, Inc., incorporated under the laws of Delaware with like charter powers. The consideration received for this conveyance was stock of the new corporation and the assumption by it of all contracts and liabilities of the vendor. See Morlock v. Mount Forest Fur Farms of America, Inc., 269 Mich. 549, 257 N.W. 880. On September 28, 1928, Mt. Forest Fur Farm executed a deed to Mt. Forest Fur Farms of America, Inc., conveying the Louisiana land which is the subject matter of the present controversy.

Before the debtor corporation was created, Mt. Forest Fur Farm, after considerable negotiation, entered into a written agreement with appellant Ernest Cockrell, an oil operator, to purchase, for a consideration of two dollars per acre, approximately 53,000 acres of land situated on the west side of the Mississippi River in Plaquemines Parish, Louisiana. This contract of sale contained a perpetual reservation in Cockrell of "one-eighth of all minerals, including oil, gas and sulphur, which may be found in, under and upon said land."

Earnest money was paid and, after much wrangling between the parties, during which Cockrell threatened to call the deal off unless a required first payment of purchase money was made by a specified date, a deed to 127/150ths' interest in the land, described by townships and sections in Plaquemines Parish, Louisiana, as containing 52,500 acres, more or less, was executed by Cockrell to Mt. Forest Fur Farm on April 11, 1927, and recorded the following day. This deed contained an ambiguous mineral reservation. The consideration, paid partly in cash and partly by the delivery of one promissory note and the assumption of another, totaled $88,900 for Cockrell's 127/150ths' undivided interest in the land.

The other 23/150ths' undivided interest, owned by the Moran Corporation of the South, was acquired by Mt. Forest Fur Farm on June 30, 1928, by a deed of conveyance unquestionably reserving in the vendor all mineral rights.

Obvious ambiguity in the mineral reservation clause of the deed from appellant Cockrell to Mt. Forest Fur Farm is the fundamental casus belli in the instant case.

We quote the much-mooted language: "This Vendor is vested with and specially retains for himself, his heirs and assigns, and reserves from this sale, a perpetual royalty equal to one-eighth of all minerals, including oil, gas and sulphur, which may be found in, under, upon or beneath the lands herein above described, together with perpetual and exclusive rights to make and execute mineral leases on all or any portion of said lands for the exploration, development, production and marketing of any and all of said minerals, and also including perpetual rights of ingress and egress solely for said purpose of exploration, development, production and marketing of said minerals, at all times, and likewise the use of so much of the surface of said premises as may be found necessary and convenient for the exploration, development, production and marketing of said minerals which may be found and produced from said premises."

This reservation has been construed by the Supreme Court of Louisiana, which, adversely to the contention made by Mt. Forest Fur Farms, Inc., plaintiff in a suit brought in Louisiana to recover bonus money amounting to $50,000 which Cockrell received from the Gulf Refining Company for granting and extending a mineral lease, held that by virtue of the above quoted clause in his deed to Mount Forest Fur Farm, Cockrell had retained the perpetual and exclusive right to make and execute mineral leases on all or any portion of the land; that he had retained not merely the right to select the lessee and to fix the terms of the lease, and to lease as agent, but also the right to lease for his own benefit and that of his heirs and assigns "save as otherwise expressed" in the reservation; and that he was entitled to "all that the lease might bring, save as therein specified." Accordingly, denying the claim of Mt. Forest Fur Farms, the court affirmed a judgment awarding Cockrell the bonus money. But the court announced that it was not concerned with the right to the royalties from the lease. Mt. Forest Fur Farms of America, Inc. v. Cockrell, 179 La. 795, 155 So. 228, 229.

If we have jurisdiction, this undecided issue, inter alia, must be decided here; if we have not, a court of competent jurisdiction should be the forum.

The lease from Cockrell of all mineral rights in the land to Gulf Refining Company of Louisiana was dated March 15, 1928; and, subsequently, on May 7, 1928, Roxana Petroleum Corporation (now appellant Shell Oil Company, Inc.) acquired from the Moran Corporation of the South a mineral lease on the remaining 23/150ths' interest in the 52,500 approximate acreage. On July 18, 1928, Roxana Petroleum Corporation and appellant Humble Oil and Refining Company obtained from the State of Louisiana, through its Governor, Huey P. Long, a lease of the mineral rights on the bed of Lake Grand Ecaille. By contract of October 8, 1929, appellants Humble Oil and Refining Company, Gulf Refining Company of Louisiana and Shell Oil Company, Inc. (which had succeeded Roxana), agreed to develop and operate jointly all mineral leases owned by them or subsequently acquired in an area which embraced the 52,500 acre tract. On February 10, 1932, appellant Freeport Sulphur Company subleased from the three oil companies all their rights and privileges under their respective leases to explore for, mine, produce and market sulphur.

After the discovery of oil on the property, the Board of Commissioners for Buras Levee District filed suit claiming title to 1,136 acres of the land. Mt. Forest Fur Farms of America, Inc., the Moran Corporation of the South, the three oil companies, and Ernest Cockrell were named as defendants; and, after a vigorous defense, succeeded in winning a four to three decision in the Supreme Court of Louisiana, rejecting the claims of the Levee Board. Board of Commissioners for Buras Levee District v. Mt. Forest Fur Farms of America, Inc., 178 La. 696, 152 So. 497.

But the Levee Board persisted in making claim to other portions of the realty. Cockrell countered by filing a declaratory judgment suit in the Federal Court which...