Sadler v. PUBLIC NAT. BANK & TRUST CO. OF NEW YORK

• Decision Date: 22 March 1949
• Docket Number: No. 3725,3726.,3725
• Parties: SADLER et al. v. PUBLIC NAT. BANK & TRUST CO. OF NEW YORK et al. (UNITED STATES, Intervener). PUBLIC NAT. BANK & TRUST CO. OF NEW YORK v. SADLER et al. (UNITED STATES, Intervener).
• Court: U.S. Court of Appeals — Tenth Circuit

172 F.2d 870 (1949)

SADLER et al. v. PUBLIC NAT. BANK & TRUST CO. OF NEW YORK et al. (UNITED STATES, Intervener). PUBLIC NAT. BANK & TRUST CO. OF NEW YORK v. SADLER et al. (UNITED STATES, Intervener).

Nos. 3725, 3726.

United States Court of Appeals Tenth Circuit.

February 7, 1949.

Rehearing Denied March 22, 1949.

COPYRIGHT MATERIAL OMITTED

H. A. Ledbetter, of Ardmore, Okl., for appellants, Mat A. Sadler, et al.

Geo. N. Otey, of Ardmore, Okl., for appellant, Public National Bank & Trust Co. of New York, trustee.

Earl Q. Gray, of Ardmore, Okl., for appellee, Edwin B. Cox.

Before PHILLIPS, Chief Judge, and BRATTON and HUXMAN, Circuit Judges.

HUXMAN, Circuit Judge.

This was an action for cancellation of an oil and gas lease and for partition of real estate. The trial court entered a judgment refusing to cancel the lease and a judgment partitioning the real estate in question. In Number 3725, the plaintiffs have appealed from the judgment refusing to cancel the lease, and in Number 3726, the Public National Bank and Trust Company of New York, trustee, herein called the bank, has appealed from the judgment partitioning the real estate. The two appeals were submitted on a single record and were argued together.

Number 3725.

On August 11, 1913, the allottee, Mary Daney, a restricted Indian, executed an oil and gas lease covering her allotment of real estate, which, by mesne coveyances was assigned to Edwin B. Cox. The land covered by this lease may be referred to generally as Tract one and Tract two. Tract one consists of fractional parts of land in Section 30, Township 3 South, Range 3 West, Carter County, Oklahoma, and Tract two consists of fractional parts of Section 28, 32 and 33, all in Township 3 South, Range 3 West, Carter County, Oklahoma.¹

All of the plaintiffs except Mat A. Sadler and all of the Indian defendants are direct or remote restricted Indian heirs of Mary Daney, deceased, and as such acquired an interest in the land subject to the oil and gas lease above referred to. The interest owned by Mat A. Sadler was acquired by mesne conveyances from the sale of interest owned by some of the restricted Indian heirs. The interest was owned first by the defendant, bank, which, prior to the institution of this action sold this interest to Sadler, retaining, however, an undivided one-half of the mineral interest thereunder.

Plaintiffs instituted this action against Edwin B. Cox, the bank, the restricted Indian heirs and their guardian, and the non Indian defendants.

The first cause of action was for the cancellation of the oil and gas lease covering Tract Number two, and the second cause of action was to quiet title and partition the land in said tract.²

For their causes of action, plaintiffs alleged that Edwin B. Cox asserted a claim to an oil and gas lease dated August 11, 1913, covering all the land in both tracts one and two; that oil was found in paying quantities on the North half of the SW¼ of the SE¼ and the SW¼ of the SW¼ of the SE¼ of Section 30, Township 3 South, Range 3 West, more than five years ago; that no additional wells had been drilled; and that in the fall of 1945, plaintiff, Mat A. Sadler, made written demand upon the defendant, Edwin B. Cox, to surrender up said lease as to all nonproductive 10 acre tracts and that said demand was refused. Plaintiffs further alleged that the right of Cox to the oil and gas lease had long since been abandoned and that the plaintiffs were entitled to have the lease cancelled as to all the acreage except the acreage on which there is now producing oil and that Cox had breached the terms and conditions of the lease in failing to fully develop said lease in accordance with the terms and conditions as written in said lease.

The action was commenced in the State Court. Notice of pendency thereof was served on the Superintendent of the Five Civilized Tribes pursuant to Section 3 of the Act of Congress of April 12, 1926, 44 Stat. 239, and the action was removed by the United States. The United States filed a complaint in intervention in which it alleged the ownership of the land in Mary Daney, the allottee. The Government's complaint alleged that the "sole purpose of this intervention by the United States is to have established the true ownership of restricted Indian property." The complaint of intervention described the land, the death of Mary Daney, its descent to the restricted Indian heirs, and their respective fractional interests therein. It alleged the death of various Indian heirs, the descent of their interest and asked the court to allow the quantum of ownership in the respective Indians. The Government's complaint stated that the Government did not join in the request for partition but that if partition be granted that it be permitted to participate in all proceedings thereto the same as any other party in the action. Ultimately all the parties plaintiff and all the parties defendant except Cox and Hamon and the United States joined in the prayer for cancellation of the lease. The bank in its answer, however, resisted plaintiffs' prayer for partition.

The court predicated its judgment refusing cancellation of the lease on the grounds that abandonment of the leasehold had not been established, that all co-tenants necessary to maintain the action of cancellation had not joined therein, and that the necessary conditions precedent to the right to maintain an action for the cancellation of a lease for failure to comply with the implied covenant of reasonable development did not exist.

Plaintiff sought cancellation of the lease on the ground of abandonment as well as forfeiture by failure to develop. There is no evidence nor is it contended that Cox has surrendered the physical possession of the leased premises. The trial court found that Cox was not willing to develop Tract Number two until he secured surrounding leases and made other arrangements. This, however, under the Oklahoma decisions does not constitute abandonment. Neither is the fact that no development has been undertaken on this tract for thirty years sufficient to constitute abandonment of the premises.

In Doss Oil Royalty Company v. Texas Company, 192 Okl. 359, 137 P.2d 934, the Oklahoma Supreme Court reviewed many of its cases relating to abandonment and concluded that many of its former decisions which had been predicated upon abandonment resulting from long inactivity, although correctly decided, were based on erroneous grounds, and that the reason assigned therefor should have been a violation of the implied covenant to develop rather than abandonment. By the Doss Oil Royalty Company case, supra, the Oklahoma court specifically restricted the doctrine of abandonment to cases in which physical possession of the premises was relinquished. At page 938 of 137 P.2d of the opinion, the court said:

"We leave the doctrine of abandonment to be applied in cases where intention to abandon is accompanied by physical relinquishment."

It is conceded that Hamon did not join in the action for cancellation although the court found that by virtue of his partnership relation with Cox, the lessee, his joinder was not necessary. The court, however, found that it was necessary for the Government, as guardian of the Indians, to affirmatively join in the prayer for cancellation, and that this it had failed to do.

It is well settled law of Oklahoma that the heirs and successors in interest of a deceased lessor of lands for oil and gas must unite in bringing an action to cancel because of a breach of an implied covenant to use due diligence in the development of a leasehold estate. No one of the cotenants is authorized to act for the other in enforcing the forfeiture.³

As stated, neither Hamon nor the United States joined in the prayer for a cancellation of the lease. The court concluded that Hamon's consent was not necessary owing to his partnership relationship with Cox, but that the United States' consent was necessary. We think the court erred in both respects. If Hamon acquired his interest in the leased premises in good faith and not for the purpose of preventing a proper cancellation of the lease by refusing to consent thereto, we see no reason in law or equity why he should be treated differently from any other owner. Plaintiffs attempted to prove that his interest was acquired for the sole purpose of preventing the remaining owners of the real estate from maintaining an action to cancel the lease. The issue should have been determined.

A restricted Indian is not without capacity to sue or to be sued with respect to his affairs, including his restricted property. The only difference as to such an Indian is that when he files such a suit or is a defendant therein under the Act of April 12, 1926, 44 Stat. 239, it is necessary to serve notice upon the Superintendent of the Five Civilized Tribes if one would effectively bind the United States, the Indian's general guardian, by such action. The Government, however, is not compelled to come into the litigation and assume the burden of prosecuting or defending the action. If the Government does not come in, the action proceeds to final judgment between the Indian plaintiff or defendant and the opposing party with the same effect as in any other litigation.

Both the Act of April 12, 1926 and the decision by the Supreme Court in Heckman v. United States, 224 U. S. 413, 32 S.Ct. 424, 56 L.Ed. 820, recognize capacity in a restricted Indian to sue or defend actions in his own behalf subject only to the right of the Government to intervene. Thus, Section 3 of the Act of April 12, 1926, speaks of suits to which restricted Indians are "parties, as plaintiff, defendant, or intervener," and the Supreme Court in the Heckman case, 224 U.S. at page 446, 32 S. Ct. at page 435, 56 L.Ed 820 of the opinion states: "The allottee may be permitted to bring his own action, or, if so brought, the United States may aid him in its conduct * * *." It would thus...