The Deadwood-Osage Oil Company v. Walker

• Decision Date: 09 January 1934
• Docket Number: 1821
• Citation: 28 P.2d 482,46 Wyo. 428
• Parties: THE DEADWOOD-OSAGE OIL COMPANY v. J. W. WALKER
• Court: Wyoming Supreme Court

28 P.2d 482

46 Wyo. 428

THE DEADWOOD-OSAGE OIL COMPANY v. J. W. WALKER

No. 1821

Supreme Court of Wyoming

January 9, 1934

APPEAL from the District Court of Weston County; SAM M. THOMPSON Judge.

Action by The Deadwood-Osage Oil Company, a corporation, as plaintiff, against J. W. Walker and others as defendants, for the cancellation of an operating agreement made for the production of oil and gas from lands held by plaintiff under a government oil and gas lease. From a judgment for plaintiff, defendants appeal. The material facts are stated in the opinion.

Affirmed.

The cause was submitted for the defendants and appellants on the brief of John P. Rusk of Newcastle, Wyoming.

We do not believe there is any legal evidence in the record to support the findings and judgment of the court below that the lease should be forfeited for failure of lessee to perform its agreements. Abandonment of a lease is a question of intention determinable from the facts. Mere lapse of time is not sufficient. Summers Oil & Gas Sec. 164. Plaintiff in an action to cancel lease for abandonment has the burden of proof. 2 Thornton O. & G. 889. If title is vested in the lessee by drilling a well, it cannot be lost by abandonment. 1 Thornton O. & G. 459. Mere suspension of operations is not sufficient to establish abandonment. Bennie v. Oil Company (Okla.) 190 P. 391. The intention is the first and paramount object. 1 Thornton O. & G. 461; Blackwell v. Whited (Okla.) 196 P. 688. There was no sufficient notice given by lessor of termination of lease under 30-day clause. Mere failure to pay royalties is insufficient ground of forfeiture unless stipulated in lease. 1 Thornton O. & G 587; Wakefield v. Sandy Lake etc. Company (Mich.) 49 N.W. 135. Summers O. & G. 517; 1 Thornton O. & G. 611. Operations under the lease were under the control of the government and drilling permits are necessary before commencing poerations. The court will take judicial notice of these regulations. Buffalo Basin Co. v. Tanberg (Wyo.) 13 P.2d 243. These regulations have the force and effect of a statute. Cosmos Co. v. Gray Eagle Company, 190 U.S. 301, 47 L.Ed. 1064. Defendants as successors of Hole, after paying plaintiff $ 800.00 in cash and spending $ 8,000.00 on the land, without cost to plaintiff, proved this land to be oil land, thus enabling plaintiff to secure a government lease, which was issued under the rules of the Department of the Interior. Under Section 19 of the Leasing Act, defendants had an equitable lease. There is nothing in the opinion of this court in Buffalo Basin Co. v. Tanberg Company to the contrary. Defendants are within the rule of this court, as laid down and declared in Oil Company v. Cross, 31 Wyo. 18, holding that no forfeiture will be allowed unless it is made clearly to appear that it would be against equity to permit lessee to longer assert his interest. Defendant never showed the slightest intention of abandoning the premises. If plaintiff had no title in the forty (40) acre tract referred to in the second cause of action under an old Placer Location, it could not be awarded a judgment quieting title thereto. An oil and gas lease does not create the ordinary relationship of landlord and tenant; therefore defendants have a right to deny the title of plaintiff. New American Oil Co. v. Troyer (Ind.) 77 N.E. 739; Dickey v. Company (Kans.) 76 P. 398. Plaintiff had the burden of proving title to this forty (40) acre tract and failed to prove title. There is no proof that plaintiff had complied with the laws of the state as to recording its location, notice or proof of the annual assessment work. Beeker v. Pugh (Colo.) 13 P. 906; Cons. Co. v. Mining Co. 12 P. 212; Bryan v. McCaig (Colo.) 13 P. 413. Mining rights are created in part at least by compliance with state laws. Quicksilver Co. v. Mining Company (Calif.) 45 P. 1047; Saxton v. Perry (Colo.) 107 P. 281; Belk v. Meagher, 104 U.S. 279; Del Monte Mining Company v. Mining Company 171 U.S. 55. The location must be one which entitles the locator to possession against the United States as well as against all other persons. Gwilliam v. Donnelsman, 115 U.S. 45; Tonapah Co. v. Mining Company 125 F. 408; Kendall v. Mining Company (Colo.) 12 P. 198. It is submitted that the judgment on both causes of action should be reversed.

The cause was submitted for the plaintiff and respondent on the brief of E. E. Wakeman, of Newcastle, Wyoming.

Plaintiff's title was established by its lease from the government. Buffalo Basin Company v. Tanberg Company, 44 Wyo. 424. More than two years had elapsed and appellants had done nothing towards developing the land or complying with the contract. Appellants produced no oil from the lands after November, 1930. Notice that plaintiff was taking over and in possession of the lands was posted in accordance with the rules. Plaintiff paid government royalties on account of defendants' operation of the well, for the months of October and November 1930. An oil and gas lease expires at the end of the term unless production is had within the term. 40 C. J. 1054; Baldwin v. Blue Stem Oil Company (Kan.) 189 P. 920. The lease terminates when production ceases Kahm v. Gas Co. (Kans.) 253 P. 563; U. S. v. Brown, 15 F.2d 565; Elliott v. Oil Company (Kans.) 187 P. 692; Anthis v. Sullivan Company (Okla.) 203 P. 187; Jewett v. Company (Kans.) 251 P. 1110. Abandonment will be more readily found and applied in oil and gas leases than in most other cases. Hall v. Augur (Calif.) 256 P. 252; Harris v. Riggs (Ind.) 112 N.E. 36; Boatman et al v. Andre, 44 Wyo 352. It is a question of fact, depending on intention and conduct. Rawlings v. Armel (Kans.) 79 P. 683; Aye v. Co. 193 P. 451, 74 A. S. R. 696. The ordinary rule that the law does not favor forfeiture of leases, does not apply with full force, if at all, in case of oil and gas leases under which the lessee wrongfully fails to develop the property. 40 C. J. 1077; McNamer v. Co. (Mont.) 247 P. 166; Solberg v. Gas Co. (Mont.) 246 P. 168; Indiana Oil Co. v. McCrory (Okla.) 140 P. 610. A court of Equity will decree a forfeiture of an oil and gas lease in the interest of justice. Indiana Oil Co. v. McCrory, supra. The question of intention is one for the jury. 1 Thornton O. & G. 460-461. Section 19 of the Leasing Act has been interpreted by the Secretary of the Interior. Burke v. Taylor et al. 47 L. D. 585; Son v. Co. 48 L. D. 210; Heirs of Baker v. Company, 49 L. D. 634. Appellants admit the title of plaintiff when they set up their claims to the land by reason of their lease from the respondent; therefore, respondent is not required to prove title to the land, other than a better title thereto than the appellants have. Sears v. Murdock (Ore.) 117 P. 305; Tannahill v. Breening (Calif.) 259 P. 1017; Strange v. Strange (Calif.) 137 P. 1104. Under such circumstances, it was unnecessary for plaintiff to prove title. Tannahill v. Breening, supra. 51 C. J. 174. Eltzroth v. Ryan (Cal.) 26 P. 647. Annual assessment work is not a condition required to obtain patent. It relates to possession. McEvoy v. Megginson, 29 L. D. 164; Hughes v. Ochsner, 27 L. D. 396, 398. The claim was open to re-location, if annual assessment work is not done. Chapter 70, Sec. 125. Possession in plaintiff is good as against a defendant having no title. Cramer v. McCann (Kans.) 112 P. 832. The trial court found generally for plaintiff. No specific findings were requested. The letter of the trial court quoted in appellants' brief is not a part of the appeal record. It is submitted that the judgment below should be affirmed.

RINER, Justice. KIMBALL, C. J., and BLUME, J., concur.

OPINION

RINER, Justice:

This case is brought here by direct appeal to review a judgment of the District Court of Weston County. The parties will for convenience be referred to as they were designated in the court below.

The facts involved in this litigation and material to be considered here are substantially as follows:

On March 23, 1922, the Department of the Interior of the United States, through its proper officers, granted to seven persons an oil and gas prospecting permit for a period of two years from the date thereof, under section 19 of an act of Congress, approved February 25, 1920, and generally known as the "Leasing Act," relative to public lands of the nation containing oil, gas, sodium, phosphate, etc. This permit authorized the grantees, under the law aforesaid, the terms of the grant, and the regulations of the Secretary of the Interior, to prospect for oil and gas upon certain lands in Weston County, Wyoming, described as the South Half of the Northwest Quarter and the North Half of the Southwest Quarter of Section 7, Township 46 North, Range 63 West, of the 6th P. M. By appropriate instruments of transfer, the plaintiff became the owner of this permit which, through sundry subsequent applications made for the purpose, was from time to time, extended.

Under date of June 25, 1929, plaintiff entered into an agreement with one B. V. Hole, relative to the North Half of the Southwest Quarter of Section 7, aforesaid, whereby it delivered to him possession of this land and the exclusive right to mine and operate thereon for oil and gas, he agreeing to do so in accordance with the requirements of the above mentioned permit, and to comply fully with all the requirements of the United States, under it. He also agreed to pay specified royalties on production, both to the United States and to the plaintiff. Failure on the part of Hole to keep the several covenants incumbent upon him, at plaintiff's option and on 30 days notice, as provided by the agreement, should "terminate this contract and render the same inoperative, and not further binding upon" the plaintiff, "unless such defect shall be cured within...