United States v. Adamant Co.

• Decision Date: 25 June 1952
• Docket Number: No. 12961.,12961.
• Citation: 197 F.2d 1
• Parties: UNITED STATES v. ADAMANT CO. et al. and four other cases.
• Court: U.S. Court of Appeals — Ninth Circuit

197 F.2d 1 (1952)

UNITED STATES v. ADAMANT CO. et al. and four other cases.

No. 12961.

United States Court of Appeals, Ninth Circuit.

May 23, 1952.

Rehearings Denied June 25, 1952.

Wm. Amory Underhill, Asst. Atty. Gen., Department of Justice, Walter S. Binns, U. S. Atty., Los Angeles, August Weymann, Special Attorney, Department of Justice, Los Angeles, Cal., Roger P. Marquis, Fred W. Smith, Attorneys, Department of Justice, Washington, D. C., for appellant, United States.

Leland J. Allen, Los Angeles, Cal., for appellees, Adamant Co., Walter B. Scoville, Joe Seeple and Harry Wynn.

Williamson, Hoge & Curry, Fulton W. Hoge, and Edward M. Patterson, Los Angeles, Cal., for appellees, Herschel Bullen, Mary H. Bullen, J. C. Hayward and Mary S. Hayward.

John H. Rice and Julius A. Leetham, Los Angeles, Cal., for appellee, Reconstruction Finance Corporation, Assignee of Treasure Co.

Before MATHEWS and ORR, Circuit Judges, and YANKWICH, District Judge.

YANKWICH, District Judge.

On September 28, 1942, the Government of the United States instituted a condemnation proceeding for the use of the Reconstruction Finance Corporation, acting in behalf of its subsidiary Defense Plant Corporation, to condemn certain real property in the City of Los Angeles, California. The Defense Plant Corporation by the Joint Resolution of June 30, 1945, 59 Stat. 310, 15 U.S.C.A. § 611 note, was merged with the Reconstruction Finance Corporation. The property consisting of a largely depleted oil field, known as the Playa Del Rey field, was taken for use as a natural gas reservoir. Many different parcels were within the area condemned. But this appeal involves only two contiguous tracts on which Treasure Company, to be referred to as "Treasure", owned oil and gas leases. The lease known as the Fletcher lease was on Lots 9, 10 and 11, Block 33, Tract 9809. The lease known as the Burns No. 1 lease, covered Lots 7, 8, 35 and 36, Block 33, Tract 9809.

In its Answer, Treasure claimed ownership of both leases. The defendant, Adamant Company, to be referred to as "Adamant", alleged ownership, through agreement with Treasure, of a 25 per cent participating interest in the Fletcher and the Burns No. 1 leases and in Treasure Well No. 8, which they alleged was located on both leaseholds.

Defendant Walter B. Scoville alleged an interest of 17 per cent in the Fletcher and Burns No. 1 leaseholds under the same agreement with Treasure. Defendant Harry Wynn claimed an ownership of 6 per cent in the Fletcher and Burns No. 1 leases and Treasure Well No. 8. Defendants Herschel Bullen and Mary H. Bullen alleged ownership of a 1 per cent interest in oil production from the lease as did the defendants J. C. Hayward and Mary S. Hayward, and they asked the court to determine the value of such interest. The owner of the land and the lessors, who were also parties to the action, settled with the Government during the course of the trial.

The trial, as to the named defendants, was held before Judge Campbell E. Beaumont and a Jury. On May 13, 1949, the jury rendered a verdict which recited:

"H-1-

W.I — Being the total working interterests in Treasure Company Well Treasure No. 8........... 194,500.00"

Judgment on the verdict was entered by Judge Beaumont on the 11th day of July, 1949. The judgment recited that the verdict

"is hereby adopted by the Court as the fair market value of each of the aforesaid interests in the property taken and condemned by the plaintiff as of September 28, 1942."

It also recited that the Government was entitled to acquire the property for uses and purposes which are authorized by law, and that upon the filing of the plaintiff's Declaration of Taking, on December 26, 1942, and the deposit in the Registry of the court of the estimated just compensation, all the right, title and interest of any character whatsoever belonging to any and every person in and to the property were vested in and out of said persons and vested in the United States. The court retained jurisdiction for the purpose of adjudicating

"all adverse claims in or to any part of the award or awards of compensation herein made and the apportionment and distribution of said awards to the parties entitled thereto, and the right, if any, to interest on the awards."

Pursuant to this reservation of authority, Adamant, Walter B. Scoville, Harry Wynn, Joe Seeple, Herschel Bullen and Mary Bullen, his wife, and J. C. Hayward and Mary S. Hayward, instituted proceedings before the same court for the allocation of the funds. 40 U.S.C.A. § 258a.

On October 23, 1950, another of the judges of the United States District Court, Southern District of California, Central Division, Judge Harry C. Westover, who heard the matter apportioned the funds in this manner

                  "Reconstruction Finance Corporation
                    is entitled to .................... 51%
                    of the sum of $191,700.00 ............. or $97,767.00
                   Adamant Company .................... 25% or  47,925.00
                   Walter B. Scoville ................. 16% or  30,672.00
                   Harry Wynn .........................  6% or  11,502.00
                   H. Bullen and Mary H. Bullen .......  1% or   1,917.00
                   J. C. Hayward and Mary S
                    Hayward ...........................  1% or   1,917.00
                

The amount apportioned was less than the award because the award had been depleted by a fee of $2800 allowed to David Head, who had been appointed receiver in a suit by Adamant and others against Treasure.

Additional facts will appear in the discussion to follow.

Four appeals are before this court:

The sole question presented by the Government's appeal is that the trial court should have found that the jury's verdict established the value of the lessee's interest in both the Fletcher lease and the Burns No. 1 lease.

The appeal of Reconstruction Finance Corporation raises the same question and, also, that, as there is pending an action in the State Court involving the rights of the lessees, the court should not have preempted its jurisdiction by determining their rights to portions of the award. They also question the method of apportioning the award.

The joint appeal of Adamant, Scoville, Seeple and Harry Wynn, to whom we shall refer as "the Adamant group", complains of a mathematical error in the trial court's apportioning of the award, in that the jury's award was based upon 80.6-1 per cent working interests. The award, they claim, should have been divided into 80.6 sums of money and allocated to the owners of the 1 per cents in accordance with the number of 1 per cents owned by each claimant. The trial court divided the jury's award into one hundred parts and made the division accordingly. The Adamant group also claim an equitable lien, which the trial court denied, on the money allocated to Reconstruction Finance Corporation for alleged royalties unpaid by Treasure. The amount so claimed is 47 per cent of $205,411.68, or $96,543.35, less the operating charge of $6,979.50, or a net equitable lien of $89,563.99.

Appellees, Bullen and Hayward, complain of the ruling that an agreement, referred to in the record as the "two-to-one agreement", was a personal agreement between the Haywards and Bullens and Scoville, and does not confer on them any rights to an additional award on that account. They also complain of the denial of an equitable lien upon the portion awarded to the lessee's successor, Reconstruction Finance Corporation.

I. Preliminary Considerations

A proper perspective requires a statement of certain general principles applicable to condemnation proceedings.

The action was instituted under Section 258 et seq. of Title 40, U.S.C.A. now superseded by the new condemnation Rule 71A, Federal Rules of Civil Procedure, 28 U.S. C.A.

It is an elementary principle in the law of condemnation, whether exercised by the government of the United States or by state or public bodies, that all persons having any interest in the property be made parties defendant. Nichols On Eminent Domain, 3rd ed., 1950, Vol. 2, Secs. 5.1-5.3; 29 C.J.S., Eminent Domain, Sec. 236; United States v. Dunnington, 1892, 146 U.S. 338, 13 S.Ct. 79, 36 L.Ed. 996; Minnesota v. United States, 1939, 305 U.S. 382, 59 S.Ct. 292, 83 L.Ed. 235; United States v. Sunset Cemetery Co., 1942, 7 Cir., 132 F.2d 163, 164; State of Nebraska v. United States, 1947, 8 Cir., 164 F.2d 866, 868; California Code of Civil Procedure, Secs. 387, 389, 1246.

No matter how large the number of persons who claim interests, where their rights are derivative and the award is for the whole estate, proceedings may be had to apportion the award. In such proceedings, the condemnor has no interest. Having secured a decree which vests title in him subject to the payment of the compensation, he is not interested in the manner in which the money he has paid for the entire title is apportioned between various claimants. Nichols, Op.Cit., Loc.Cit., Sec. 5.3(4), p. 51.

These considerations call for quick disposition of the appeal of the United States government. The judgment which vested title in the government was the one made by Judge Beaumont on July 11, 1949. The judgment apportioning the funds made by Judge Westover had nothing in it affecting the title of the United States. It is true that in the findings there is a statement that the award was only for the Fletcher lease on which the well was located, but that is not carried over into the judgment. And an appeal lies from a judgment, not from findings. 28 U.S.C. §§ 2106-2107. In order that a judgment be appealable at the behest of a party, the party must be aggrieved by it. 4 C.J.S., Appeal and Error, § 183; 2 Am.Jur., Appeal and Error, § 152; Farmers' Loan and Trust Co. v. Waterman, 1882, 106 U.S. 265, 1 S.Ct. 131, 27 L.Ed. 115; MacKinnon v. American Agar Co., 1934, 9 Cir., 73 F.2d 835, 837; In Re Schwartz, 1937, 2 Cir., 89 F.2d 172, 173.

Even assuming that the finding is erroneous and that the award covered both the Fletcher and the Burns No. 1 leases there is nothing in the...