Ohio Oil Co. v. United States, Civ. No. 2914.

• Decision Date: 01 April 1946
• Docket Number: Civ. No. 2914.
• Citation: 65 F. Supp. 991
• Parties: OHIO OIL CO. v. UNITED STATES.
• Court: U.S. District Court — District of Wyoming

65 F. Supp. 991

OHIO OIL CO. v. UNITED STATES.

Civ. No. 2914.

District Court, D. Wyoming.

April 1, 1946.

Dines, Dines & Holme, Harold D. Roberts, and Robert E. More, all of Denver, Colo., and W. H. Everett, of Casper, Wyo., for plaintiff.

Carl L. Sackett, U. S. Atty., of Cheyenne, Wyo., Francis B. Critchlow, Sp. Asst. to Atty. Gen., and Marvin J. Sonosky, Atty., Department of Justice, of Washington, D. C., for defendant.

KENNEDY, District Judge.

This is a suit brought under the Tucker Act, 28 U.S.C.A. 41(20), seeking to recover the sum of $9,186.96. In due time, after the filing of the complaint, answer was interposed by the defendant and a trial was had to the Court, at the conclusion of which it was agreed that the case would be submitted upon written trial briefs. After a number of extensions of the time fixed, which were mutually agreeable to counsel, such briefs were submitted and the matter is now before the Court for consideration.

In passing it may be said that counsel have been diligent, effective and most helpful to the Court in presenting their divergent contentions. In view of the fact that defendant offered no testimony in the case but relied upon the documentary evidence presented by the plaintiff, the matters developed by cross-examination of plaintiff's witnesses and that the questions presented are seemingly those of law which points relied upon are clearly contested in the briefs, it would seem to eliminate any necessity of a specific reference to the pleadings.

A running sketch of the transactions which lead up to the controversy are as follows: Under the Act of February 25, 1920, 41 Stat. 437, 30 U.S.C.A. §§ 22, 48, 181 et seq., commonly known as the "Mineral Lands Leasing Act", the defendant on August 25, 1920, acting as lessor through the Secretary of the Interior, leased a parcel of land in the Lance Creek Oil Fields, Niobrara County, Wyoming, described as N½ S½ of Section 4, Township 35 North, Range 65 West of the 6th P.M., containing 160 acres, more or less, which gave to said lessees the exclusive right and privilege to drill and mine, extract, remove and dispose of all oil and gas deposits in or under said land, which lease was made under Section 19 of the Leasing Act. Said lease was thereafter and on the 23d day of June, 1922, assigned to the plaintiff, which assignment was duly ratified by the Secretary of the Interior. Thereafter the plaintiff, with other owners of leases in the Lance Creek Field, entered into a Unit Agreement as provided by an amendment to the original Act, which was filed with and approved by the Secretary of the Interior, becoming effective on January 1, 1938, after which all production from the land here concerned was allocated in accordance with the terms of the Unit Agreement, royalties being paid the defendant upon the gross proceeds derived by plaintiff from the production as so allocated.

In the first instance, the oil produced from said field was not great, but somewhere around 1939 the production was measurably increased by drilling to the lower sands. Under the leasing statute and the terms of the lease, it was provided that the Government should be paid, so far as the purposes of this case are concerned, a royalty on the basis of 12½% of the oil or gas produced and should have the right to have said royalty paid in kind unless it should elect under certain circumstances to receive the value thereof. It was also provided that the lessee under the lease should at all times keep the defendant advised of all contracts for sales of oil from the premises and such action on the part of the plaintiff was carried out.

In 1937 the defendant served notice on the plaintiff that it elected to take its royalty in kind, which arrangement lasted for practically a year when the Government again reverted to the policy of receiving its royalty in value and these royalties were paid to the defendant on the basis of the sales made by the lesseee during the period, all of which prices were determined by sales contracts on file with the Secretary of the Interior.

The principal contract, which provided for the disposition of the product of the field, was entered into in August 1936, which ran until July 1941, calling for a price of 25¢ per barrel under the so-called "Mid-Continent" price which was $1.02 per barrel, and it seems that it was considered that this was the current posted field price for the oil in the Lance Creek Field upon which the Government royalties were computed. Other contracts were entered into for the sale of such oil from the field upon the same basis, which extended through, or well into, the period concerning which royalties are here in dispute — from July 1, 1939 to April 1, 1941.

The Government, through the Secretary of the Interior, served notice on the plaintiff by which it purported to fix a minimum price for its royalties upon the basis of value upon the oil allocated to plaintiff's lease, and finally fixed a minimum price of $1.02 per barrel for the period beginning July 1, 1939 and covering the period to April 1, 1941, which computed upon the royalties for oil produced in excess of the amount paid by plaintiff, amounted to the sum here sued for of $9,186.96.

This action on the part of the Secretary of the Interior was fought bitterly by the plaintiff and perhaps other producers in the field but without success in securing a reduction in the minimum price of oil fixed by the Secretary of $1.02 per barrel.

The Secretary on April 2, 1942, notified the plaintiff by letter that payments of the royalties on the minimum price fixed by the Secretary would have to be paid and that unless they were paid within fifteen days, appropriate legal action would be taken to cancel the leases and to collect all royalties due. Thereafter, and within the fifteen day period, the plaintiff, under protest, paid the amount demanded and here in controversy to the Secretary coupled with the express understanding and agreement that the amount should be deposited in the Treasury of the United States in a trust fund established by appropriate Acts of Congress, to be held pending determination of the order of the Secretary requiring such payment and that so much thereof as plaintiff should be entitled to receive out of said payment should be paid to it in the event it was judicially declared that the plaintiff should be entitled to its return. This money has since been held in the fund and for its recovery this suit has been instituted.

No attempt has been made in the foregoing statement to give detailed facts but a brief outline of the history of the various transactions which become the background of the legal controversy here presented. Other facts which may be pertinent may be referred to in a discussion of the points upon which counsel seem to agree the decision of the Court must be predicated, and these will now be discussed.

I. Jurisdiction of the Court

The first attack by counsel for the Government upon the claim of plaintiff is in the form of a challenge to the jurisdiction of the Court. It is, of course, the first duty of the Court to determine its jurisdiction and it becomes especially important where the absence of such jurisdiction is suggested by one of the litigants. The jurisdiction of the Court is invoked under the Tucker Act, 28 U.S.C.A. § 41(20), which confers such jurisdiction on the District Court of all claims founded upon the Constitution of the United States or any law of Congress or upon any regulation of the Executive Department or upon any contract, express or implied, with the Government of the United States, or for damages, liquidated or unliquidated in cases not sounding in tort. In this respect, counsel argue that although the suit is brought for the recovery of a sum paid under protest into a certain trust fund, which recovery is sought under a construction of the Federal Leasing Act, the regulations adopted thereunder, a lease upon the lands from which the oil was derived concerning which the value of the oil was attempted to be fixed by the Secretary, and the agreement between the plaintiff and the Secretary that the money so paid would be deposited in the trust fund to be repaid to the plaintiff in the event it should be judicially declared that the plaintiff was entitled to receive the same, that nevertheless the suit does not fall within the scope of the Tucker Act. I think it is clear that a determination of the right of the plaintiff in the premises rests upon the construction of the Federal Leasing Act and the regulations adopted thereunder, together with a construction of the lease issued to plaintiff by the Secretary, the recovery sought being in an amount less than the statutory limitation. This theory seems to be sustained by a number of cases, among which may be mentioned Christie-Street Commission Co. v. United States, 8 Cir., 136 F. 326, which was followed by the District Court in Ross Packing Co. v. United States, D.C., 42 F.Supp. 932.

No satisfactory legal distinction between contracts founded upon or arising under constitutional or statutory provisions has been found, as pointed out by Judge Sanborn in the Christie-Street Commission case, supra. In order to invoke the jurisdiction of the Court under the Statute it is not necessary that the right of the plaintiff to recover must be pre-determined in order to sustain the jurisdiction but only that the claim falls within the category enumerated in the Statute. Furthermore, it appears to me that when the money was paid under protest by the plaintiff and the Secretary agreed in writing that it would be placed in the trust fund of the Government and repaid in whole or in part should it be judicially declared that the plaintiff was entitled to recover, that this constituted a contract between the plaintiff and the Secretary on behalf of the Government which the Government is bound to respect. Neither do I believe it beyond the power of the Secretary to make...