McKenna v. Wallis, Civ. A. No. 8904-B

• Court: U.S. District Court — Eastern District of Louisiana
• Writing for the Court: WRIGHT
• Citation: McKenna v. Wallis, 200 F.Supp. 468 (E.D. La. 1961)
• Decision Date: 26 December 1961
• Docket Number: 8937-B.,Civ. A. No. 8904-B
• Parties: Patrick A. McKENNA, Plaintiff, v. Floyd A. WALLIS and Pan-American Petroleum Corporation, a corporation, Defendants. PAN AMERICAN PETROLEUM CORPORATION, Plaintiff, v. Floyd A. WALLIS, Defendant.

200 F. Supp. 468

Patrick A. McKENNA, Plaintiff, v. Floyd A. WALLIS and Pan-American Petroleum Corporation, a corporation, Defendants.

PAN AMERICAN PETROLEUM CORPORATION, Plaintiff, v. Floyd A. WALLIS, Defendant.

Civ. A. Nos. 8904-B, 8937-B.

United States District Court E. D. Louisiana, New Orleans Division.

December 26, 1961.

MacCracken, Collins & Whitney, Philip R. Collins, Courtney Whitney, Jr., Washington, D. C., Edmond G. Miranne, New Orleans, La., for Patrick A. McKenna.

Cobb & Wright, Lloyd J. Cobb, Joseph V. Ferguson, II, William P. Hardeman, Percy Sandel, New Orleans, La., for Pan American Petroleum Corp.

Henican, James & Cleveland, C. Ellis Henican, New Orleans, La., Horace M. Holder, Shreveport, La., for Floyd A. Wallis.

WRIGHT, District Judge.

These cases involve rights in a mineral lease covering about 830 acres on the oil-rich banks of Southwest Pass, one of the mouths of the Mississippi River, around the community of Burrwood in southernmost Louisiana. The common defendant, Wallis, holds his lease from the United States. He did not come by it without a fight.¹ Nor is his title yet secure.² But even if his triumph be short-lived, Wallis wants to enjoy it alone. The claimants here would spoil that hope. They assert a right to share in his victory. McKenna is his alleged co-adventurer, who claims a one-third interest in the lease; Pan American Petroleum Corporation demands an assignment of the lease under an option contract. Wallis admits the agreements, but insists they relate to another venture which came to naught. The present lease, he maintains, is the fruit of a different venture in which the claimants have no part.

The chronology of this controversy begins in early 1954. Wallis uncovered the acreage in question, apparently land of the United States on which no application for a mineral lease had been filed. He promptly communicated his "find" to McKenna, who was handling other matters for him in Washington before the Department of the Interior. In the meantime, another applicant, Morgan, submitted a lease offer covering at least portions of the lands involved. But Wallis nevertheless prepared his applications, five in number, and they were filed on June 2. In their collaboration on this venture, Wallis and McKenna worked out an agreement,³ which was finally reduced to writing in a letter from Wallis dated December 27, 1954, approved by McKenna on January 3, 1955. Specifically referring to the applications already filed, the letter agreement recognizes in McKenna a one-third interest in those applications and in any lease to be issued thereunder.⁴

Three months later, after swift negotiations, Wallis, acting alone,⁵ granted Pan American an option to acquire any lease issued to him pursuant to the still pending applications.

At this point, and for some months yet, everyone concerned⁶ assumed the acreage in question was "acquired land" of the United States,⁷ being apparently accretion to a tract purchased by the Department of the Army from a Louisiana patentee.⁸ Wallis had sought a lease under the Mineral Leasing Act for Acquired Lands, 30 U.S.C.A. § 351 et seq., which applies only to such lands.⁹ He had filed applications which would be ineffective if, as happened, the acreage were ultimately determined to be public land.¹⁰ Neither McKenna nor Pan American demurred. On the contrary, both actively supported the acquired lands theory. It was only in late 1955 or early 1956¹¹ that Wallis began to doubt he had guessed right about the character of the land.¹² Then, on the advice of new counsel, he submitted another application for the same tract under the "public domain lands" Mineral Leasing Act, 30 U.S.C.A. § 181 et seq. No new written agreements were entered into, nor were the old instruments amended. The question presented is whether McKenna and Pan American nevertheless acquired rights in the lease ultimately issued to Wallis under this fresh public domain application.

The issue is very narrow under the Louisiana rule that all "contracts applying to and affecting" "oil, gas, and other mineral leases" must be reduced to writing. LSA-C.C. Arts. 2275, 2440, 2462, via LSA-R.S. 9:1105.¹³ Having failed to obtain new written agreements,¹⁴ each of the plaintiffs is compelled to rely on a single instrument. McKenna's claim is imprisoned in the letter agreement of December 27, 1954 — January 3, 1955; Pan American's claim is confined to the language of the March 3, 1955 option. Except as it throws light on their original intent, the conduct of the parties after those dates is irrelevant. Any new understandings reached in 1956, 1957, 1958 or 1959 are unenforceable in the absence of a writing. Nor does it matter whether Wallis obtained his lease by breaching his trust, as alleged. If the claimants acquired an interest in the lease, it is under the written instruments, not by virtue of any subsequent estoppel.¹⁵ Accordingly, we turn to those instruments.

The letter which incorporates the agreement between Wallis and McKenna, after particularly listing and identifying certain numbered lease applications, being those filed by Wallis under the Mineral Leasing Act for Acquired Lands, confirms in McKenna "a 1/3 undivided interest in the above captioned oil and gas lease applications * * * and such lease or leases as may be issued * * * under these captioned applications * *" (emphasis added). Similarly, the agreement with Pan American recites the same five pending applications and grants the company "the right and option * * * to acquire any and all oil and gas leases which may be issued * * * under and by virtue of the above referred to applications." (Emphasis added.) Much is made of a second paragraph of the option agreement where Wallis promises, in general terms, to "make diligent efforts" to obtain a lease over the lands covered by the applications. But that provision does not purport to enlarge the scope of the grant.¹⁶ Thus, both instruments speak exclusively of an acquired lands lease. Was this an oversight?

With scant excuse,¹⁷ the court permitted parol evidence to show the true intent of the contracting parties on the date the agreements were executed. But, not surprisingly, the documents and testimony produced only confirmed the indication of the written instruments that on January 3 and March 3, 1955, no one contemplated issuance of a lease to Wallis except in pursuance of the then pending acquired lands applications. That was all they talked about. And, quite naturally, that is all they put into their agreements.¹⁸ Doubtless, McKenna and Pan American were both anxious to share in any lease Wallis might obtain over these lands. At the time, however, they saw only one means of achieving that end. Had they anticipated the ultimate issuance of a public domain lease, perhaps they would have purchased an interest in that contingency too. But that is a futile speculation. Obviously they cannot be said to have intended to buy a share in a future they did not even advert to. The conclusion must be that the written agreements faithfully record what was in the minds of the parties. Accordingly, there is no pretext for a strained construction or for reformation of the instruments. These instruments, taken alone or illumined by parol evidence, limit the claims of McKenna¹⁹ and Pan American to the acquired lands applications.

It may be true, as plaintiffs suggest, that the lease ultimately granted, pursuant to the public domain application, is, from the lessee's point of view,²⁰ no different than one issued under an acquired lands offer. But that decides nothing. For so might a lease acquired by Wallis from the state or by assignment from Morgan, had the latter prevailed, be in all respects identical to the one in suit. Yet, clearly, neither McKenna nor Pan American could properly assert any interest in a lease obtained in that way. The important fact here is that the lease in dispute resulted from a new filing, based on a new theory, which was governed by a different statute and processed under different regulations.²¹ The public domain application cannot be viewed as a mere amendment of, or substitute for, the old offers. It stands on its own feet, holding its own priority. And the new filing in no way cancelled or superseded the earlier applications. In effect, Wallis had two irons in the same fire, in only one of which McKenna and Pan American held an interest.

In short, in the administrative view, at least, the lease in question is wholly unconnected with the original acquired lands applications. Tempted as it might be to disregard technicalities, even a court of equity must recognize as a reality administrative rules and regulations which so vitally affect valuable rights.²² Thus, here, the distinction made between acquired lands leases and public domain leases cannot be ignored, and the lease issued must be viewed as the fruit of a fresh undertaking, separate and apart from the venture in which the claimants had a part. It follows that, whatever remedies they may have in separate proceedings, if Wallis dealt unfairly with them,²³ neither McKenna nor Pan American acquired any interest in the lease in suit.²⁴

Decree accordingly.

1 The history of his contest with Morgan, a prior applicant before the Department of the Interior, is a long one. There was an initial skirmish over the "acquired lands" filings, which Wallis lost. Then the terrain shifted to the "public domain" applications and Wallis succeeded in obtaining a preliminary ruling voiding Morgan's prior filing for technical defects. But Morgan did not acquiesce in defeat. An elaborate rehearing before the Director of the Bureau of Land Management delayed his final decision another year. Failing in that, Morgan appealed to the Secretary of the Interior. By this time Wallis had an additional opponent, Strom, a later applicant who claimed a superior description of the lands. From the Secretary's rejection of their claims, Morgan...