Rector v. United States, No. 7172.

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: STONE, KENYON, and BOOTH, Circuit
• Citation: 20 F.2d 845
• Parties: RECTOR v. UNITED STATES et al.
• Docket Number: No. 7172.
• Decision Date: 28 May 1927

20 F.2d 845 (1927)

RECTOR
v.
UNITED STATES et al.

No. 7172.

Circuit Court of Appeals, Eighth Circuit.

May 28, 1927.

20 F.2d 846

R. W. Stoutz, of Tulsa, Okl. (W. E. Disney, of Muskogee, Okl., and John Wheeler, of Tulsa, Okl., on the brief, and Anthony P. Nugent, of Kansas City, Mo., of counsel), for appellant.

H. B. Martin, Sp. Counsel for the Creek Tribe or Nation of Indians, of Tulsa, Okl., and Eustace Smith, Sp. Asst. Atty. Gen., for the United States.

W. A. Ledbetter, of Oklahoma City, Okl. (Edward H. Chandler and William O. Beall, both of Tulsa, Okl., on the brief), for appellee Mohawk Petroleum Co.

W. P. McGinnis, of Tulsa, Okl. (Y. P. Broome and J. C. Wilhoit, both of Tulsa, Okl., on the brief), for appellee Tidal Oil Co.

Before STONE, KENYON, and BOOTH, Circuit Judges.

STONE, Circuit Judge.

This is the third of three appeals from the final decree (January 31, 1925) entered in one of the two socalled "river bed cases," this one, of which two cases, involved the title to the bed of the Cimarron river (a tributary of the Arkansas river) where it traversed that portion of the state of Oklahoma formerly belonging to the Creek Nation. The two other appeals and an appeal, involving the same question of title, as to the river bed lands of the Arkansas river have been disposed of in one opinion, this day filed, in No. 7119, United States v. Hayes et al., No. 7166, United States v. Cimarron River Oil Co. et al., and No. 7163, Riverside Oil & Refining Co. v. Cimarron River Oil Co. et al. (C. C. A.) 20 F.(2d) 873. The appeals in that opinion presented the single question of the title to such river bed lands. In that opinion, we affirmed the decree of the trial court adjudicating the title to be in the adjoining upland owners. This appellant is an upland owner and her appeal is not from that portion of the decree determining title to the bed lands (which is in her favor). She complains of those portions of the decree governing

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the extent or amount of her recovery from certain lessees who produced oil from the river bed lands adjoining her upland property. Only such facts as are material to an understanding of the present controversy will be stated here as other facts more germane to the question of title are stated in the other opinion

A part of the Cimarron river runs through lands formerly belonging to the Creek Nation. These lands were allotted or sold under the Creek Original Agreement and the Creek Supplemental Agreement. Thereafter, oil was discovered under the river bed lands. The state of Oklahoma promptly laid claim to these river bed lands on the ground that the Cimarron river was a navigable stream. It executed leases for oil development thereof to various parties. The Creek Nation claimed these lands on the grounds that they were included in the patents to the Nation from the United States that they were not included in the allotments or sales under the above agreements and that the Cimarron river was not a navigable stream. To protect and determine this title urged by the Creek Nation, the United States filed, as trustee and guardian of the Creek Nation, an action against these lessees. The state immediately filed an intervention therein, setting up its title and right to make the leases. Both contenders realized the imperative necessity of extracting the oil from this land to prevent drainage and loss thereof through development on the immediately adjoining uplands. The state and the United States agreed upon a plan to effectuate this preservation of the oil. This took the form of a stipulation. The above complaint, intervention and stipulation were filed on December 27, 1913.

The preamble of the stipulation is as follows:

"Whereas, the ownership and right to the possession of the lands described in complainant's bill of complaint herein, and the deposits of oil and gas underlying said lands, is the subject of controversy between complainant and said interveners, to be determined in this suit, complainant claiming title and right of possession to be in its ward, the Creek Nation of Indians, and said interveners claiming title and right of possession to be in themselves and their lessees (the defendants herein); and

"Whereas, it is believed by complainant and said interveners to be desirable that the production of oil and gas from said lands be gone forward with pending this suit and pending the ultimate determination of the ownership and right to the possession of the said lands; and

"Whereas, to that extent it is satisfactory to complainant and said interveners for such production to proceed under the leases heretofore executed by said interveners to the defendants herein, which said leases are sought by complainant's bill to be cancelled, and copies of which are attached to said bill as Exhibits B, C, D, E and F."

The concluding two paragraphs of the stipulation are as follows:

"This stipulation is not to be taken as a recognition or concession by complainant of any title or interest of interveners in and to the said lands and the oil and gas thereunder, or as a recognition of the validity of said leases, or as a recognition or concession by said interveners of any title or interest of complainant in and to the said lands and the oil and gas thereunder, and is entered into for the sole purpose of hastening the development and conservation of the oil and gas underlying the said lands, and for the protection of whomsoever may ultimately be decreed by the court to be the owner of and entitled thereto, said development and conservation being necessary by reason of the oil and gas development and operation on the adjacent uplands; and nothing herein contained shall operate to relieve any lessee from fulfilling any agreement he may have with the Commissioners of the Land Office of the state of Oklahoma relative to the payment of the costs of litigation.

"Any person not now a party to this suit who claims an interest in any of the several tracts or parcels of land described in the bill of complaint herein may be made a party to this cause and receive the benefits of this stipulation upon subjecting himself to the jurisdiction of this court and agreeing to be bound by the provisions hereof."

From the above quotations from the stipulation, it is clear that the purpose and the sole purpose of this stipulation was to conserve the oil without prejudice to the rights of whoever might be adjudged the owner of the river bed lands and that it was thought this might be best done through the instrumentality of the leases given by the state and by impounding the royalties therefrom as representing the land owners' share from the production. The remainder of the stipulation provided a method of assuring prompt and proper production by the lessees and of insuring prompt and proper payment and impounding of the royalties from such production. This method contemplated two coordinated

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and cooperating agencies to secure the above results. One of these was a "supervisory committee" of two members, one chosen by the United States and the other by the state. The other was a receiver to be appointed by the court. The duties of the "committee" were to supervise the proper production by the lessees; to supervise the sale of the oil constituting the royalties; to promptly report to the receiver the amounts of royalties accruing from each lease; to supervise and direct the payment of the proceeds from sale of the oil to the receiver; to demand full performance of such lessees and promptly report failure or refusal to so perform and to report fully to the court, at least as often as every 30 days. The duties of the receiver were to promptly and diligently collect and keep accurate account of all royalties, rentals and bonuses, under the leases; to safely preserve the same "subject to be disbursed only under an order of court to whomsoever may ultimately be adjudged to be the owner of said lands and entitled thereto"; to take charge of and operate any property upon default of the lessee and to report fully to the court

The stipulation provided, also, "that all oil and gas produced from said lands under the said leases over and above the royalty, rental and bonus portion thereof shall become and be the property of said lessees and their assigns free from any claim of complainant or the said interveners." Three days later (December 30, 1913), this stipulation was presented to the court as and treated as an application "for the appointment of a receiver and for the appointment of a committee of two persons to supervise the production of oil and gas under the leases mentioned in the bill of complaint." Thereupon, the court found sufficient grounds for appointment of a receiver and made such appointment. It was made the duty of the receiver "to collect and receive promptly and diligently all rentals, royalties and bonuses due or to become due from any person, firm or corporation under the leases described in the bill of complaint herein, and safely to keep and preserve the same subject to be disbursed only under an order of this court to whomsoever may ultimately be adjudged to be the owner of the lands described in the bill of complaint herein, and entitled thereto"; to keep accurate accounts and to make monthly reports. He "is hereby ordered to take full custody and control of the several tracts or parcels of land described in said bill of complaint, subject only to the possession of the lessees or their assigns for the production of oil and gas therefrom under the said leases, and he is hereby empowered and authorized to go upon said several tracts or parcels of land at any time and make such inspections and investigations as will in his judgment enable him to perform properly his duties, power and authority under this order of appointment." The court appointed, also, a "supervisory committee" with the powers as outlined above from the stipulation. The order provided also as...