Oldland v. Gray, 3907.

• Decision Date: 03 February 1950
• Docket Number: No. 3907.,3907.
• Citation: 179 F.2d 408
• Parties: OLDLAND et al. v. GRAY et al.
• Court: U.S. Court of Appeals — Tenth Circuit

179 F.2d 408 (1950)

OLDLAND et al. v. GRAY et al.

No. 3907.

United States Court of Appeals, Tenth Circuit.

January 5, 1950.

Rehearing Denied February 3, 1950.

COPYRIGHT MATERIAL OMITTED

Frank Delaney, Glenwood Springs, Colo., and C. J. Moynihan, Montrose, Colo. (L. H. Larwill, Denver, Colo., was with them on the brief), for appellants.

Jean S. Breitenstein, Denver, Colo. (Mitchell Benedict, Denver, Colo., was with him on brief), for appellees Nellie Ione Gray, Evelyn Levison and A. C. McLaughlin.

Frederic L. Kirgis, Denver, Colo. (Don Emery, Rayburn L. Foster, R. B. F. Hummer, George L. Sneed, Jr., Bartlesville, Okl. and Roscoe Walker, Jr., Denver, Colo., were with him on brief), for appellee Phillips Petroleum Company.

Before BRATTON, MURRAH and PICKETT, Circuit Judges.

MURRAH, Circuit Judge.

The appellants, referred to in the record and briefs as the Oldland Group, brought this suit in a Colorado State Court against the appellees, to establish their overriding royalty interest in an oil and gas lease owned and operated by the appellee Phillips Petroleum Company, by assignment from appellees Gray and Levison, who obtained it by quitclaim deed from appellee McLaughlin; and to impress a trust upon such royalty interest in the hands of Phillips.

In brief, the appellants claim that in 1926, they assigned their original prospecting permit on 1760 acres of public lands in Rio Blanco County, Colorado, to McLaughlin, on condition that he would fulfill the terms and conditions of the permit, and in the event leases were issued to the assignee as contemplated by the permit under the 1920 Leasing Act, 41 Stat. 437, 30 U.S.C.A. § 181 et seq., and production was obtained thereon, McLaughlin, as assignee, would pay to the Oldland Group, in addition to the royalties due the Government, a stipulated percentage of the market value of the oil and gas produced and saved from said leases; that in 1938, McLaughlin applied for a lease in exchange for the prospecting permit as contemplated by the 1935 Amendment to the Leasing Act, 49 Stat. 674, which was issued to him in 1939; that the appellees Gray and Levison took the leases by quitclaim deed from McLaughlin with knowledge of and subject to the conditions in the permit, and in 1943 applied for and received a renewal of the lease, which was thereafter assigned to the Phillips Company; that Phillips took the same with knowledge of and subject to the interest of the Oldland Group, and they are therefore entitled to a decree adjudging them to be the owners of the royalty interest provided in the 1926 assignment, and impressing a trust upon the production or the proceeds therefrom to the extent of their interest.

Service of process was made upon Phillips as a domesticated foreign corporation, and upon other non-resident defendants by personal service in the state of their domicile. More than thirty days after such service, but within the time allowed the defendants to plead by an order of the state court based upon a stipulation of the parties, the defendants filed their petition for removal, alleging that the federal court had original jurisdiction of the suit as one arising under the Constitution or laws of the United States, involving amounts in excess of $3,000, and as one between citizens of different states.

Appellants moved to remand, first, on the grounds that the suit had not been removed before the defendants were required by the laws of the state or the rule of the court to answer or plead to the complaint as provided by Section 72, Title 28 U.S.C. A.¹; and on the further grounds that the action did not arise under the Constitution or laws of the United States, or was wholly between citizens of different states. The trial court overruled the motion to remand, and after an extensive trial, rendered judgment for the defendants, from which this appeal is taken.

The first question is of course whether the court acquired jurisdiction on removal. While there is a contrariety of views on the subject, the majority and we think the best reasoned view, is to the effect that an extension of time to plead by an order of court beyond a date when the pleadings would be due under a statute of the state or general rules of practice of the state courts, does not extend the time for applying for removal under Section 72, Title 28 U.S.C.A. See cases collected Annotation 108 A.L.R. 966.

Rule 12(a) of the Colorado Rules of Civil Procedure provides that a defendant shall file his answer within twenty days after the service of summons upon him, or if a copy of the complaint be not served with the summons, or if the summons be served without the state, then within thirty days after service thereof upon him. Rule 6(b) of the Colorado Rules of Civil Procedure provides, however, that when by the rules an act is required or allowed to be done at or within a specified time, the court may order the period enlarged if application therefor is made before the expiration of the period originally prescribed or as extended by a previous order. The order of the court extending the time within which the defendants might answer or plead in this case was undoubtedly entered pursuant to authority expressly granted to the court by Rule 6(b), and it does not derogate from the requirements of Rule 12(a). It was not entered upon the inherent power or authority of the court separate and apart from the Rule. It follows, we think, that the petition for removal was filed within the time in which the appellees would be required to plead under the general rules of practice of the Colorado court, and was therefore timely under the federal statute as construed by the majority view.

The question remains whether by timely removal the court acquired jurisdiction over the subject matter as one arising out of the Constitution or laws of the United States, or between citizens of different states, involving the requisite amount in controversy.

The rights of the parties have their origin in the 1920 Leasing Act authorizing the original permit, and that Act, as subsequently amended in 1935 and 1942, 56 Stat. 726, undoubtedly has distinct relevancy in the adjudication of the stated claim. But, as we have often said, "A suit having for its purpose the enforcement of a right which finds its origin in the laws of the United States is not necessarily and for that reason alone one arising under such laws. * * * A right or immunity created by the laws of the United States must be an essential element of the plaintiff's cause of action, and the right or immunity must be such that it will be supported if one construction or effect is given to the laws of the United States and will be defeated if another construction or effect is given." Andersen v. Bingham & G. Ry. Co., 10 Cir., 169 F.2d 328, 329. See also Regents of N. M. College v. Albuquerque Broadcasting Co., 10 Cir., 158 F.2d 900; Skelly Oil Co. v. Phillips Petroleum Co., 10 Cir., 174 F.2d 89. Federal law did not create this asserted cause of action, nor is it an essential element thereof in the sense that the cause of action will be sustained if federal law is given one construction or effect, and defeated if given another. The asserted rights of the parties arise out of a private contract, and they must stand or fall upon its construction or effect. Cf. United States v. Ohio Oil Co., 10 Cir., 163 F.2d 633. We conclude that the court did not acquire jurisdiction over the case as one arising under the laws of the United States.

We are convinced, however, that jurisdiction of the court over the subject matter must be sustained on the independent ground of diversity of citizenship and requisite amount in controversy. Several of the plaintiffs and three of the defendants are citizens of the State of California, but there is complete diversity of citizenship between all of the plaintiffs and the defendant Phillips Petroleum Company, and it is argued that there is a separable controversy between the plaintiffs and that defendant. A removable separable controversy is one which can be fully adjudicated between parties of diverse citizenship, and as to which no other party is necessary or indispensable. Preston v. Kaw Pipe Line Co., 10 Cir., 128 F.2d 162; State of Oklahoma ex rel. Williams v. Neustadt, 10 Cir., 149 F.2d 143.

All of the defendants joined in a single petition for removal, and it was silent in respect to the existence of a separable controversy between plaintiffs and defendant Phillips Petroleum Company. A petition for removal based upon a separable controversy should give that as the ground. Goetz v. Interlake Steamship Co., D.C., 47 F.2d 753. But failure of the petition to do so is not fatal to the right of removal on that ground. In the absence of a charge that plaintiff acted in bad faith in prosecuting his suit upon a joint cause of action, i. e. see Updike v. West, 10 Cir., 172 F.2d 663, certiorari denied 337 U.S. 908, 69 S.Ct. 1050, the question whether a separable controversy exists within the purview of the removal statute is to be determined by reference to the complaint at the time of the filing of the petition for removal. Wecker v. National Enameling & Stamping Co., 204 U.S. 176, 27 S.Ct. 184, 51 L.Ed. 430, 9 Ann.Cas. 757; Preston v. Kaw Pipe Line Co., supra; State of Oklahoma ex rel. Williams v. Neustadt, supra.

Here, according to the complaint, appellant sought to establish their royalty interest as against all of the appellees who claimed adversely. As respects the ownership of the production from the lease, appellants sought a joint judgment against all of the appellees deriving their title from a common source. But in addition to the joint relief sought against all of the appellees, the appellants by separate prayer, sought to impress a trust upon the production or its proceeds in the exclusive possession and control of Phillips, and to have Phillips declared to be the trustee of same. All of the appellees or their successors in title are...