Richardson v. Western Oil, Coal & Investment Co.

• Decision Date: 30 December 1924
• Docket Number: No. 6733.,6733.
• Citation: 3 F.2d 403
• Parties: RICHARDSON et al. v. WESTERN OIL, COAL & INVESTMENT CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

3 F.2d 403 (1924)

RICHARDSON et al. v. WESTERN OIL, COAL & INVESTMENT CO. et al.^*

No. 6733.

Circuit Court of Appeals, Eighth Circuit.

December 30, 1924.

John W. Lacey, of Cheyenne, Wyo. (R. N. Matson, D. J. Howell, C. L. Rigdon, and Herbert V. Lacey, all of Cheyenne, Wyo., on the brief), for appellant.

Joseph C. Ewing, of Greeley, Colo. (Ray E. Lee, of Cheyenne, Wyo., Floyd E. Pendell, and Alfred R. Lowey, both of Denver, Colo., and R. M. Boeke, of Casper, Wyo., on the brief), for appellees.

Before LEWIS, Circuit Judge, and MUNGER and MILLER, District Judges.

LEWIS, Circuit Judge.

Appellees sued appellant for a share of the royalties which they claim he was receiving from lessees on oil produced from certain lands in the Salt Creek, Wyoming, oil fields. Their claim is based on a written contract between one of the appellees, the Western Oil, Coal & Investment Company, hereinafter called Western Co., and appellant Richardson, of date January 10, 1921. The other appellee obtained from the Western Co. half of its interest in the contract.

The decree from which Richardson brought this appeal allowed appellees one-eighteenth of stated royalties on oil from eight quarter-sections; and Richardson's contention here is that as to seven of them the royalties named in the decree and in which the court gave appellees one-eighteenth interest were too large and greater than the contract provides for, and that as to the eighth, S. W. ¼ of Section 12, appellees are not entitled to hold appellant under the contract for any shares of royalties on oil therefrom. Both contentions turn on a proper construction of the contract between the parties.

Title may be acquired from the United States to oil lands in the public domain by complying with the statute relating to placer mining claims (R. S. § 2329 et seq.; Comp. Stats. § 4628 et seq.), filing a location certificate and doing the required amount of annual assessment labor on the claim, as a condition to the later conveyance of title from the United States by patent.

The matters dealt with in the contract and the situation confronting the parties when it was made were these:

(1) Locations had been made on these eight quarter-sections of public lands many years ago, many years before this contract was made; in some instances they were superimposed, that is, the same quarter-section was located at different times by eight different persons, creating a conflict between locators under the respective locations, and none of them, except the S. W. ¼ of Section 12, had passed to patent; in some of these locations on the eight quarter-sections the name of Scott Morford appeared on the location certificates as one of the eight locators of each quarter-section; he died several years before the contract here sued on was entered into, and there is nothing in the record establishing that the locations in which his name appears as a locator had been maintained as valid locations, but to the contrary it appears from the record that persons claiming under other locations on the same quarter-sections were insisting that their locations were valid and existing; (2) in February, 1920, Congress passed the so-called Leasing Act, 41 Stat. 437 (Comp. St. Ann. Supp. 1923, §§ 4640¼-4640¼ss), which provides in Section 18 (Id. § 4640¼i) that upon the relinquishment to the United States of all right, title and interest claimed and possessed prior to July 3, 1910, and continuously since by the claimant or his predecessor in interest under the pre-existing placer mining law to any oil or gas-bearing land upon which there had been drilled one or more oil or gas wells to discovery, and upon payment of a named royalty to the United States, the claimant, or his successor, if in possession of such land, undisputed by any other claimant prior to July 1, 1919, should be entitled to a lease thereon from the United States; and upon the delivery and acceptance of the lease, all suits brought by the Government affecting such lands might be adjusted. The Act clearly contemplated and provides that the lease should be given only to those who might hold an existing valid location, and it expressly authorized the Secretary of the Interior to determine that fact; it says:

"In case of conflicting claimants for leases under this section, the Secretary of the Interior is authorized to grant leases to one or more of them, as shall be deemed just."

The Act applied to the eight quarter-sections in controversy here, except the S. W. ¼ of Section 12, which, as said, had long been patented. Pursuant to the Act appellee, Western Co., applied for leases. Appellant Richardson also applied for leases. The Midwest Oil Co. and its three subsidiary companies applied for leases on six of the unpatented quarter-sections; and the National Petroleum Co. applied for a lease on the other unpatented quarter, N. E. ¼ of Section 10; (3) the only right, title or interest in the lands that the Western Co. claimed, rested on deeds from Morford's heirs, which purported to convey a five-sixths interest of his undivided one-eighth interest in the locations which he and his seven associates had made on the seven unpatented quarter-sections. There is no basis whatsoever on which it may claim an interest in the patented S. W. ¼ of Section 12. United States patent for that quarter was issued October 2, 1893, on a placer location made in February, 1886, by W. S. Kennedy and seven associates. Morford was not one of them. Morford and seven associates did file a location certificate on the S. W. ¼ of Section 12 in May, 1887, but whatever rights Morford may have had under it were entirely cut off prior to his death by the patent. There is no claim that the patentee, Central Association of Wyoming, took title in trust for Morford. The Midwest Oil Co. also claimed Morford's interest in six of the quarter-sections through one Bowen, who obtained deed from the Morford heirs prior in date to the conveyance to the Western Co. It also claimed to own the interests of other locators, and it applied for leases on those six quarter-sections, pursuant to the Act. Appellant Richardson also claimed to own Morford's interest, or a part of it, through one Johnson, and he also claimed that he had acquired the interests of Morford's co-locators and the interests of conflicting locators. The Western Co.'s claim to five-forty-eighths interest in the Morford locations on the seven quarter-sections was subject to double attack, that Morford's locations had not been maintained as valid locations, and he had no interest, — if valid, that his interest belonged to the Midwest or to Richardson. These three parties, the Western Co., Richardson, and the Midwest Oil Co. and its subsidiaries, had put in applications for leases; the first claiming only five-sixths of Morford's undivided one-eighth interest in the seven quarter-sections, Richardson claiming that he owned the Morford interest and the interests of other locators, and the Midwest Oil Co., also claiming that it owned Morford's interest and the interests of other locators in the six quarter-sections on which it applied for leases; (4) on December 11, 1920, Richardson made a contract with the Midwest Oil Co. and its three subsidiary companies, wherein it is recited that Richardson claimed to be the grantee of the Morford interest in the six quarter-sections, that the Western Co., one Mayfield, one Curry and one Lee also claimed to be owners of Morford's interest, or a part thereof, in the six quarter-sections, and it was agreed that when Richardson should obtain the withdrawal of the applications for leases of the Western Co., Mayfield, Curry and Lee, the Midwest Oil Co., in event it or its subsidiaries obtained leases, would create and assign to Richardson specified royalties on the gas and oil to be produced from the six quarter-sections during the terms of those leases, subject to deduction first of the royalties to be paid to the United States, as follows:

S. E. ¼ 11 — 40 — 79 1% N. E. ¼ 14 — 40 — 79 1% N. W. ¼ 24 — 40 — 79 ¾ of 1% N. E. ¼ 23 — 40 — 79 ½ of 1% S. W. ¼ 25 — 40 — 79 ½ of 1% N. E. ¼ 27 — 40 — 79 ½ of 1%.

This was the situation on January 10, 1921, when Richardson's brother and his counsel, Western Co. and its counsel, and counsel for Mayfield, Curry and Lee met for the purpose of formulating agreements between them and Richardson in reference to their claimed interests and applications for leases. A general understanding had been reached theretofore as to the terms of the contracts concerning the six quarter-sections listed above, the Western Co. claiming five-sixths of Morford's one-eighth interest as locator in them, Mayfield, Curry and Lee claiming the remaining one-sixth of Morford's interest. It was the intention of all of them to deal only with those six quarter-sections. All knew that Richardson had made some agreement with the Midwest Oil Co. and its associate companies looking to an adjustment and settlement of the claims of the Western Co., and of Mayfield, Curry and Lee. Counsel for Richardson thereupon drew up a contract between Richardson and the Western Co. dealing only with the six quarter-sections and submitted it. No objections were made to it. It appeared to have been satisfactory and in accord with prior negotiations. But when the prepared form was submitted it occurred to counsel for the Western Co. that he wanted unpatented N. E. ¼ of Section 10 and patented S. W. ¼ of Section 12 brought into the contract; and the manner in which that was done, the phraseology used, some by counsel for Richardson and some by counsel for the Western Co., in tacking on to the prepared form additional provisions covering those two quarter-sections, is the basis from which this whole controversy springs.

Bearing in mind what has been said, we now take up that contract, herein sued upon. It bears date January 10, 1921. It designates the Western Co. as party of the first part and Richardson as par...