Northern Pacific Railway Company v. United States, 6178.

• Citation: 277 F.2d 615
• Decision Date: 12 March 1960
• Docket Number: No. 6178.,6178.
• Parties: NORTHERN PACIFIC RAILWAY COMPANY and Continental Oil Company, Appellants, v. UNITED STATES of America, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

277 F.2d 615 (1960)

NORTHERN PACIFIC RAILWAY COMPANY and Continental Oil Company, Appellants, v. UNITED STATES of America, Appellee.

No. 6178.

United States Court of Appeals Tenth Circuit.

March 12, 1960.

COPYRIGHT MATERIAL OMITTED

W. J. Wehrli, Casper, Wyo. (A. T. Smith and W. M. Griffith, Denver, Colo., were with him on the brief), for appellants.

Claron C. Spencer, Dept. of Justice, Washington, D. C. (Perry W. Morton, Asst. Atty. Gen., John F. Raper, Jr., U. S. Atty., Cheyenne, Wyo., and Roger P. Marquis, Dept. of Justice, Washington, D. C., were with him on the brief), for appellee.

Before BRATTON, PICKETT and BREITENSTEIN, Circuit Judges.

BRATTON, Circuit Judge.

The United States began this action against Northern Pacific Railway Company and Continental Oil Company to clear its asserted title to the mineral estate under a strip of land containing 30.12 acres in Park County, Wyoming. Recourse at the outset to the background against which the litigation was instituted may contribute to a clear perception of the questions presented and the manner in which they arose.

By the Act approved July 2, 1864, 13 Stat. 365, 367, Congress made a grant of public lands to Northern Pacific Railroad Company for the construction of railroad and telegraph facilities; and by the Act approved August 30, 1890, 26 Stat. 371, 391, 43 U.S.C.A. § 945, it was provided among other things that in all patents for lands thereafter taken up under any of the land laws of the United States or on entries or claims validated by such act, a right of way should be reserved from the land described in the patent for ditches or canals constructed by the authority of the United States. In 1896, Northern Pacific Railway Company became the successor in interest of Northern Pacific Railroad Company; and in 1906, it made certain lieu selections of land under the grant. Among other lands selected was Section 35, in Township 58 North, Range 98 West, now in Park County, Wyoming; and in 1908, a patent was issued conveying such section and other lands, but it failed to contain a reservation of a right of way for ditches or canals constructed by the authority of the United States. In 1916, the United States was about to undertake the construction of the Frannie Canal, a unit of the Shoshone Project, across section 35 for reclamation purposes. It then discovered that the patent conveying the section to Northern Pacific failed to contain any reservation of a right of way for such purpose. The Bureau of Reclamation thereupon initiated correspondence with Northern Pacific relating to the situation. After interdepartmental correspondence and memoranda within Northern Pacific's organization and after extended correspondence between the Bureau of Reclamation and Northern Pacific, the latter executed and delivered to the United States a deed for the land constituting the right of way across the section, containing a total of 30.12 acres. The deed did not purport by express language to vest in the United States anything less than the full fee title. The United States constructed upon such right of way the ditch or canal and it was thereafter operated as the Frannie Canal. In 1946, the Northern Pacific entered into a contract with Continental Oil Company. The substance of the contract was to lease to Continental all of section 35 for the development of oil and gas. By express terms, the lease was subject to the rights granted to the United States under deeds dated October 23, 1916, and June 9, 1920, for a right of way for the Frannie Canal. In 1947, Continental obtained production of oil from section 35. It drilled eight wells. Seven produced. One was dry. None of the wells was on the right of way but some of them were adjacent thereto and probably were draining oil from it. In 1953, the United States issued to Allen F. Klindt an oil and gas lease covering a portion of the land embraced within the right of way on section 35.

The complaint as amended alleged the issuance of the patent; the notice to Northern Pacific that the United States intended to avail itself of the right of way across the section, reserved under the Act of 1890; the discovery of Northern Pacific upon receipt of the notice that the patent did not contain a reservation of right of way as provided by the Act of 1890; the offer of Northern Pacific to give the United States a deed for such right of way as it required through the section for a nominal consideration; the acceptance of the offer; the execution and delivery of the deed which granted the fee-simple title; the ownership of the United States of the title in fee; the construction and operation of the canal; the discovery of oil; the issuance of the lease to Continental; the drilling of wells on the section but upon land other than the canal tracts; and the existence of a controversy between the United States and Northern Pacific concerning title to the canal tracts and oil royalties. The complaint as amended further alleged that Northern Pacific and Continental were barred by the statute of limitations and laches from asserting any claim to the land constituting the right of way or the oil and gas underlying such land. By answer, it was pleaded that prior to the execution and delivery of the deed, it was mutually agreed between the United States and Northern Pacific that the latter should convey to the former the right of way which the United States might have reserved; that in fulfillment of such agreement, the deed was executed and delivered; that it was the mutual intent and purpose of Northern Pacific and the United States that the deed should comprise only a conveyance of an easement or right of way for the Frannie Canal; that it was not the intent and purpose of either party that Northern Pacific should convey to the United States title to the land or title to the oil, gas and other minerals under such land; and that through mutual mistake, the deed was prepared and executed in the form in which it appeared of record. By counterclaim, reformation of the deed was sought and the right and interest of the United States in the land constituting the right of way limited to that of an easement or surface right of way. On motion of the United States, the counterclaim was stricken.

Finding that no mutual mistake occurred in the execution, delivery, and acceptance of the deed; concluding that by such deed the title in fee of the land constituting the canal was effectively conveyed to the United States; and further concluding that the asserted claim of title of Northern Pacific to the mineral estate in such land was barred by limitations and laches, the court entered judgment for the United States. D.C., 169 F.Supp. 735.

The provision contained in the Act approved August 30, 1890, to which reference has been made, concerns itself solely and exclusively with easements or surface rights of way for ditches and canals constructed by the United States. It reserves to the United States easements or surface rights for that purpose from lands patented under the land laws of the United States. That was its congressional purpose and it goes no further. United States v. Ide, 9 Cir., 277 F. 373, affirmed 263 U.S. 497, 44 S.Ct. 182, 68 L.Ed. 407; Green v. Wilhite, 14 Idaho 238, 93 P. 971. And an easement or surface right of that kind does not include title to the oil and gas underlying the land constituting the right of way. United States v. Union Pacific Railroad Co., 353 U.S. 112, 77 S.Ct. 685, 1 L.Ed. 2d 693. It may well be that such easement or surface right of way across section 35 was reserved to the United States by virtue of the statutory provision even though the patent failed to contain any language of reservation. But that question is not presented and we do not explore it. Even though the patent had contained an appropriate provision of reservation in complete harmony with the statute, the estate reserved would have been only a surface right for the construction of ditches or canals. United States v. Ide, supra; Green v. Wilhite, supra. It would not have included title to the oil and gas lying underneath the land constituting the right of way. United States v. Union Pacific Railroad Co., supra. Upon the issuance of the patent, title in fee to the entire section passed to Northern Pacific. Such title may have been subject to an easement or surface right of way for ditch and canal purposes. But title to the oil and gas underlying the land was not reserved.

The deed from Northern Pacific to the United States is not challenged for defect or deficiency in form to convey title to the land constituting the right of way, including the oil and gas underlying the land. The deed described the land by metes and bounds, and the description may have readily suggested or indicated to the mind of a reasonable person that the land in the form of a strip of uniform width was to be used for right of way purposes. But the deed did not undertake by express language to limit its effect to a surface right of that kind. There are cases in which it is held that where a warranty deed regular in form conveys to a railroad company a strip of land without containing language stating or indicating that the land is conveyed for purposes of a right of way only, the grantor or those claiming under him is not permitted to go outside of the deed and contend that it conveyed less than title in fee. Gilbert v. Missouri, Kansas & Texas Railway Co., 8 Cir., 185 F. 102; Kynerd v. Hulen, 5 Cir., 5 F.2d 160, certiorari denied, 269 U.S. 560, 46 S.Ct. 20, 70 L.Ed. 411; and other cases cited in the notes appended to Sherman v. Petroleum Exploration, 132 A.L.R. 137. But here, the United States alleged in its complaint that it notified Northern Pacific that it intended to avail itself of the right of way across section 35, reserved under the Act of 1890. The United States further alleged in its complaint that upon receipt of such notice, Northern Pacific discovered that the...