South Penn Oil Co. v. Miller

• Decision Date: 04 November 1909
• Docket Number: 788.
• Citation: 175 F. 729
• Parties: SOUTH PENN OIL CO. v. MILLER et al.
• Court: U.S. Court of Appeals — Fourth Circuit

175 F. 729

SOUTH PENN OIL CO. v. MILLER et al.

No. 788.

United States Court of Appeals, Fourth Circuit.

November 4, 1909

Thomas P. Jacobs, and Charles Powell (A. B. Fleming and Kemble White, on the briefs), for appellant.

Henry M. Russell, for appellees.

Before GOFF and PRITCHARD, Circuit Judges, and BRAWLEY, District judge.

GOFF Circuit Judge.

The original bill alleges that the complainants, the appellees here, are citizens and residents of the state of West Virginia, and that the two defendants therein, the Eureka Pipe Line Company and the South Penn Oil Company, are corporations organized under the laws of the state of Pennsylvania, and citizens of that state, and that the amount in controversy is largely in excess of the sum of $2,000. It sets forth that the complainants were the owners, for development of oil and gas, of a tract of land in Wetzel county, W. Va., containing about 33 acres; that they held the same by virtue of two certain instruments of writing, known as 'oil leases,' in which the grantors reserved a royalty of one-eighth of the oil produced, and were to receive $300 per year for each gas well.

It is not necessary on this appeal that other provisions of the leases should be referred to.

It is further alleged that complainants drilled a productive oil well on said land, as required by the terms of the leases to them; that the defendant the Eureka Pipe Line Company, a corporation which carries on the business of receiving oil produced at the different wells in that locality and transporting it through pipe lines to places where it can be marketed, received the oil from said well and transported it to Pittsburg, to be there sold to such persons as complainants might direct; that from the 26th day of June 1902, to the 1st day of October, 1902, said company received about 22,100 barrels of oil from that well, and that since the last-mentioned date all the oil produced at the well has passed into the lines of that company for transportation that the drilling of an additional well on said lands was commenced by complainants, as required by the leases, but not completed, because of the mishaps incidental to such business, and also because of the acts of the defendants that the market price of oil at Pittsburg has been, since said oil was so delivered, $1.22 per barrel, and that complainants, owning seven-eighths thereof, were entitled to receive for the same about $23,592; that the South Penn Oil Company was engaged extensively in the business of leasing property for the development of oil and gas; that it has many wells in West Virginia, and that the Eureka Pipe Line Company transports the oil of the South Penn Oil Company through its lines; that either because the South Penn Oil Company, or persons interested in it, hold large quantities of the stock of the Eureka Pipe Line Company, or for other reasons, it has a great and unreasonable influence over the acts and conduct of the Eureka Pipe Line Company; that until complainants drilled in the first producing well on the property mentioned the South Penn Oil Company made no claim to any rights to the same, but that soon after the producing well was finished said company set up a claim that it was the owner of the land for oil and gas purposes; that it claims to have valid leases for said property, from grantors other than those complainants claim under, but that the leases under which it so claims do not entitle it, nor has it any title that does entitle it, to the land so claimed by complainants; that the said two companies entered into a conspiracy between themselves for the purpose of asserting a claim on behalf of the South Penn Oil Company to the land so leased to complainants, and for the purpose of compelling them to surrender said land and the oil produced from it to that company; that in pursuance of such conspiracy the South Penn Oil Company served a notice on the Eureka Pipe Line Company, in which it was stated that said oil company was the owner, for oil and gas purposes, of the land which had been so leased to the complainants, and the owner of the oil so produced and run into the pipe line mentioned, and that in pursuance of such conspiracy the Eureka Company refused to deliver the oil, either to complainants or to the persons to whom they gave orders for it; that the South Penn Oil Company holds oil and gas leases upon other properties in close proximity to the property so leased to complainants, and upon both sides of the same, and is drilling wells at places so close to complainants' leases that they will have the effect of draining the oil which belongs to complainants, and which is under the land so leased to them, unless they can proceed promptly and vigorously to drill other and successive wells on said property, so as to extract the oil therefrom; that the market price of oil remained at $1.22 per barrel from said 26th day of June, 1902, to October 1, 1902, and has since increased in price, and that complainants are entitled to have the Eureka Pipe Line Company account to them for all of said oil at the highest price at which oil may have been sold in the general market at any time between the 26th day of June, 1902, and the time when their oil may be delivered to them under the order of court; that complainants are entitled to a decree against said companies, so engaged in such conspiracy, for the amount which may represent the difference between the highest market price and the market price which may be in effect at the time when such delivery shall be made; that by reason of the circumstances mentioned complainants have been and are seriously injured, and have sustained loss because of the interference with their development of said property, and that if such situation continues they will suffer irreparable loss, and injury of such a character that the amount of it cannot be definitely measured or ascertained, and cannot be compensated for by any damages which complainants might recover in an action at law against said companies.

It is not necessary to recite other matters in the bill found, as they are not essential to the disposition of the questions now before this court. The prayer of the bill was that a preliminary injunction issue, restraining the South Penn Oil Company from interfering in any manner with the delivery to complainants, by the Eureka Pipe Line Company, of the oil so held by it; restraining the last-named company from retaining the possession of such oil, and from preventing complainants from taking and disposing of the same; directing such company to deliver to complainants without delay the oil in its possession received from the well mentioned; that said Eureka Pipe Line Company be required to render a specific account of the oil so received by it, and that a decree be entered in favor of complainants against said companies for the amount representing any difference between the highest market price during the period such oil was so retained and the market price prevailing when the oil should be so delivered to them; that, if it be found necessary, a receiver be appointed to take charge of and manage the property, develop the same, and receive and dispose of the oil and gas therefrom; that a decree be entered finally determining that the South Penn Oil Company has no rights or interest of any kind in or to said property; and also for such other and general relief as to equity may be proper.

This bill, with exhibits, was on the 13th day of October, 1902, presented in the court below, when on consideration thereof, Judge Jackson entered an order, in which it is stated that the facts presented established 'prima facie' the right of complainants to the possession of seven-eighths of the oil which had been produced from the well mentioned.

Such order authorized complainants to enter into bond in the penalty of $30,000, with security, conditioned that complainants would comply with any future order of the court relating to the oil referred to, and pay all damages which might be incurred by the defendants, should the order thereafter be set aside. It then required that the South Penn Oil Company cease to interfere in any way with the sale by complainants of the seven-eighths of the oil produced from said well, and directed the Eureka Pipe Line Company to deliver to complainants the seven-eighths of such oil. The court also then designated October 18, 1902, for the hearing of a motion made by complaints, for the appointment of a receiver, and on that day entered a decree appointing one, and directing him to take possession of the property, to proceed to complete the wells commenced by complainants, to drill other wells, and to do all other things necessary to be done for the proper development of the land for oil and gas. The receiver was directed to take possession of the oil produced from the wells on the land, and sell the same; and the Eureka Pipe Line Company was ordered to deliver to the receiver all of the oil that might come into its lines from said wells. The receiver was required to give bond in the penalty of $10,000, with the usual conditions.

The subpoena in chancery, summoning the defendants to answer the bill at December rules, 1902, was served on the Eureka Pipe Line Company on October 15, 1902, and on the South Penn Oil Company October 17, 1902. At said rules the defendants appearing under protest for the purpose only of pleading to the jurisdiction of the court, filed a plea, alleging that the Eureka Pipe Line Company was not a corporation under the laws of the state of Pennsylvania, nor an inhabitant of that state, but that it was a corporation organized under the laws of the state of West Virginia, and was an inhabitant of that state; that complainants and each of them were citizens...