Pace v. State ex rel. Rice

• Decision Date: 13 October 1941
• Docket Number: 34620.
• Citation: Pace v. State ex rel. Rice, 4 So.2d 270, 191 Miss. 780 (Miss. 1941)
• Court: Mississippi Supreme Court
• Parties: PACE et al. v. STATE ex rel. RICE, Atty. Gen., et al.

4 So.2d 270

191 Miss. 780

PACE et al. v. STATE ex rel.

RICE, Atty. Gen., et al.

No. 34620.

Supreme Court of Mississippi

October 13, 1941

H B. Greaves, Powell & Powell, G. B. Herring, and Hermon Dean, all of Canton, for appellants.

Alexander & Satterfield, Green & Green, and W. E. Morse, all of Jackson, and Greek L. Rice, Atty. Gen., and Geo. H. Ethridge Asst. Atty. Gen., for appellee.

R H. & J. H. Thompson, both of Jackson, Amicus Curiae.

McGEHEE Justice.

The questions presented for determination in this case are of very vital importance to the educable school children of every township in Mississippi wherein there is located a sixteenth section of land susceptible of development for the production of oil and gas in commercial quantities, since these minerals are now owned by the state in its sovereign and governmental capacity as trustee for the inhabitants of the townships under an obligation to utilize them for the support of the schools. The decision now reached by the Court on the issues here involved is also one which undertakes to adjudicate the rights of all holders of ninety-nine year leases on such lands, herein denominated as agricultural or surface leases, as opposed to the rights claimed by the oil and gas companies under leases executed by various boards of supervisors, with the approval of the governor and attorney general, under the authority of Sections 6762 and 6763, Code of 1930, Chapter 318, Laws of 1926, by which such oil and gas lessees of the state are fully empowered to go upon these lands for the purpose of exploring for, drilling and removing any oil and gas to be found beneath the surface thereof, and in which leases a one-eighth royalty therein is reserved for the support of the schools of the respective townships.

It will therefore be readily seen that if numerous oil and gas fields should be discovered throughout the state equal to or greater in production than the "Tinsley Field" near which the particular sixteenth section now in controversy is alleged to be located, the far reaching effect of this decision cannot be estimated or foreseen.

Herein there is challenged the right of the state as trustee, suing by its attorney general on behalf of the school children of the township as beneficiaries of the trust under which the state holds the title of these lands, and particularly Section 16, Township 11 North, Range 5 East, in Madison County, and also the right of the Stanolind Oil & Gas Company, appellees, (1) to have the title of the state and the rights of said lessee confirmed and quieted to the minerals under the surface thereof; (2) to determine and adjudicate the right of the oil and gas company to enter upon the land for the purpose of exploring for, drilling and removing the oil and gas therefrom in accordance with the terms of the lease now held by it, (3) to cancel as clouds upon the title of said minerals certain easement contracts and the oil and gas leases executed in favor of third persons by the agricultural or surface lessees; and (4) to enjoin the defendants named in the bill of complaint from interfering with the rights of the complainants in the premises, so as to enable the state, as such trustee to obtain realization of the value of its one-eighth royalty and the oil and gas lessee to enjoy the rights vouchsafed to it, by the lease in question, and to thereby prevent this great store of wealth from being wasted or dissipated to the detriment of the school children of the township by means of wells on adjacent lands, upon the offer of the complainants to do equity by paying all such damages as may be inflicted upon the surface rights of the defendants by reason of the proposed operation, to be conducted in the usual and customary manner, the complainants disavowing any purpose to cause any irreparable injury by reason thereof.

It is alleged in the bill of complaint that each of the defendants are claiming the right to prevent the complainants from going upon that portion of the land, for the purposes aforesaid, on which each of those in possession own an agricultural or surface lease, executed under the Act of February 27, 1833, running for ninety-nine years from September 1847, and that they are claiming the right to prior compensation for any damages that may be sustained to their surface rights as a condition precedent to the right of the state to have said minerals developed as a source of revenue for the support of the cause of education in keeping with the trust under which the state now holds title to the same; that the defendants have no title or interest by virtue of their ninety-nine year leases or otherwise, either in the minerals or the royalties to be derived from the development thereof, and that if they are permitted to successfully assert such title or interest by means of the contracts whereby they have attempted to grant the exclusive right of ingress and egress to third persons and to lease the oil and gas rights for a one-eighth royalty reserved to themselves, their action in that behalf will serve to cast a doubt, cloud and suspicion upon the true title; that unless said easement contracts and leases are cancelled and the defendants enjoined from interfering with the right of the state and its oil and gas lessee to enter upon the land and develop the same as prayed for, the reservoirs of oil and gas which have been stored up under the surface through the ages by the forces of nature will, because of the fugacious nature of such products, be drained by wells on adjacent lands and forever lost to the schools, so as to constitute waste as effectually as if removed by the defendants themselves, and in violation of the obligation of the surface lessees to return the land at the end of the term unimpaired by any permanent injury to the freehold; and that the defendants cannot, in view of their financial condition, be made to respond in damages adequate to compensate for the loss to be sustained by reason of the complainants being prevented from drilling for and removing these minerals pending the adjudication of such claims and demands that may be made by the defendants while wells are being drilled on adjacent lands.

It should be conceded at the outset of the discussion of the relative rights of the parties to this litigation that the holders of these agricultural or surface leases are entitled to be adequately compensated for any damages that may be sustained to their surface rights in the course of the exploration or development of the land for oil and gas; that for obvious reasons the extent of such damages cannot be properly ascertained and determined in advance of, and as a condition precedent to, the right of entry upon the premises, assuming, as we should, that the state is entitled to remove the minerals in question; that such damages are wholly uncertain and indefinite in amount, and will remain so until the extent of the exploration and development shall have been determined, and until which time their ascertainment, with such reasonable degree of certainty as would be fair and equitable to all parties concerned, is impossible, for the reason that in some instances the exploration for oil and gas would be limited from the very nature of the case to mere prospecting by geophysical and other methods short of drilling more than a few "dry-holes" in the woods, entailing only slight damage to the possession and occupancy of the surface lessee, whereas, in other instances, if production of these minerals in commercial quantities is to be had, the number of wells, derricks, pipe-lines, storage tanks, rights of way, etc., may represent a development conducted on a scale so extensive as to greatly handicap, if not preclude, the use of any appreciable area of the land for agricultural purposes; and that the same rule of law announced in the case at bar is, of course, to govern the rights of the state and its oil and gas lessees as related to those of the surface lessees on every sixteenth section in the state, comprising approximately one thirty-sixth of its entire area. It should also be conceded in this connection that in either instance the surface lessee may be remitted to his action at law for damages at such time as the amount thereof can be ascertained with such reasonable certainty as to fairly compensate him; that this Court has already declared in the case of Moss v. Jourdan, 129 Miss. 598, 92 So. 689, that: "Where one person owns the surface of land and another the mineral therein and to remove the mineral will injure the surface, the owner of the mineral will not be enjoined from removing it at the instance of the owner of the surface, but the owner of the surface will be remitted to his action at law for damages unless the injury to the surface is irreparable"; that in the case before us no injury would be caused to the surface rights of a mere lessee of the land that cannot be compensated for, and that the state as absolute owner of the fee, in its capacity as trustee, is not objecting to the proposed operation, but seeks the right to have the same conducted on its own property, presently leased.

It should also be observed that this cause was heard by the court below only on the bill of complaint and the demurrers and that this appeal is as granted upon the overruling of the demurrers, and to settle the controlling principles of the case; that no damages are claimed to have yet been sustained to the surface rights of the defendants, and they cannot be required to propound their claim by means of a cross-bill for any damage that may be hereafter sustained unless they elect to do so before final decree; that they may be remitted to their action at law on that issue, after all of the equities existing in favor of the complainants are...