United States v. California Midway Oil Co.

• Citation: 259 F. 343
• Decision Date: 23 June 1919
• Docket Number: B-10.
• Court: U.S. District Court — Southern District of California
• Parties: UNITED STATES v. CALIFORNIA MIDWAY OIL CO. et al.

259 F. 343

UNITED STATES v. CALIFORNIA MIDWAY OIL CO. et al.

No. B-10.

United States District Court, S.D. California.

June 23, 1919

We are hereby concerned with a suit brought by the United States to enjoin the continued operation by the defendants of the northwest quarter of section 32, township 31 south, range 23 east, Mt. Diablo meridian, in Kern county, Cal., as an oil-bearing placer mining claim, to cancel and set aside certain mineral locations thereon, and for an accounting for oil taken therefrom. The result depends upon the bona fides of a paper location of the property in question under the placer mining laws, made in January 1909, in the names of H. E. Bashore, R. B. Welch, W. A Keenan, Eugene Metz, W. A. Mahr. H. M. Walker, F. H. Romaine and C. Rupert Walker, by L. B. McMurtry, as their attorney in fact.

McMurtry is, and for many years has been, extensively engaged in speculating in and disposing of alleged locations of prospective and undeveloped oil lands, part of the public domain in California. In 1903, while in Chicago attempting to sell stock in a company organized for the development of such locations, he became acquainted with L. A. Chadbourne and C A. Dunbar, and at his request Chadbourne and Dunbar obtained from their friends and acquaintances four powers of attorney, each executed by eight persons, known in the record as Chicago locators, authorizing him to locate in their names mineral claims in any part of the United States, and to improve, develop, and make proof thereof, and to grant, bargain, and sell the same. Mcmurtry caused these powers of attorney to be recorded in San Benito county, Cal., and acting under them posted notices of location in the names of his principals on numerous tracts of unoccupied possible oil properties in that county, which, however, were never developed or proved to be oil-bearing.

In 1906 or 1907 development in the Midway oil fields in Kern county became came active, and McMurtry caused certified copies of the Chicago powers of attorney to be recorded in that county, and about January 1, 1907, posted or caused to be posted location notices in the names of the Chicago parties on sundry quarter sections of land in that district, some 26 in number, including the property involved in this suit. The several tracts described in the location notices so posted were merely prospective or hoped-for oil lands, and none of them were developed, and no discovery of oil was made on any of them until after the abandonment of the locations in January, 1909. In the fall of 1908, however, McMurtry, acting as attorney in fact for the Chicago locators, made a contract with Mrs. J. M. McLeod for the development of the property in controversy, and also the northeast quarter of the same section, upon which a location notice had been posted in the name of certain of the Chicago parties, under the terms of which Mrs. McLeod was to drill for oil on each tract, and if it proved to be oil-bearing she was to have as consideration therefor one-half thereof, the remainder to belong to the locators. A short time thereafter the contract was modified by reducing the area to accrue to Mrs. McLeod to the south 60 acres of each quarter, and her interest became vested in the California Midway Oil Company, who, some time in November or December, 1908, moved lumber and other material onto the south 60 acres of the northwest quarter of the section, preparatory to beginning active operations. Before it had commenced drilling, however, McMurtry discovered or was advised by his attorney that the locations in the names of the Chicago parties were defective, because of a mistake in some of the names, and because the notices intended to cover the north half of section 32 had not, in fact, been posted on the land described therein, owing to an error as to the boundaries. He thereupon abandoned all the locations made by him in the names of the Chicago parties, and in January, 1909, posted and caused to be recorded new notices, covering practically the same tracts, in the names of certain residents of New York, under powers of attorney executed by them in December, 1907.

These powers of attorney were obtained under the following circumstances: During the summer and fall of 1907, McMurtry had transferred his activities to New York and was engaged in selling stock in an oil company in that city. The financial panic of that year made it impossible for him to continue his operations, and in December he concluded to return to California. Before doing so, he asked associates of his by the names of Thorn, Thickens, and Powell to obtain four powers of attorney, each executed by eight qualified persons, authorizing him to locate, develop, and dispose of oil lands in their names, if he should be able to locate any such lands open to entry, on his return to California. Thickens, Thorn, and Powell thereupon approached their employes and friends, explained the matter to them, and requested the execution of such powers of attorney, assuring them that they would thereby incur no financial responsibility and there might be something in it for them. Four powers of attorney (one of which was used in making the location in suit) were thereupon executed and acknowledged, each by eight separate persons, authorizing and empowering McMurtry to locate in the names of the signers mineral claims, to develop and improve the same, and to bargain, sell, and dispose thereof. These powers of attorney were delivered to McMurtry and duly recorded in Kern county, and were used by him in posting and causing to be recorded location notices on the several tracts mentioned in this suit and other property; eight names being used for each tract. In some instances he authorized third persons to use the names of the signers to the powers of attorney in making locations for themselves.

A few days after the location in controversy in this suit, McMurtry, in the names of Bashore and others, under one of the powers of attorney referred to, agreed with the California Midway Oil Company, through its representative, J. M. mcLeod, that it should proceed with the development of the property covered thereby and the northeast quarter of the section, located by him in the names of another group of the New York parties, on substantially the the same terms as the previous contract with Mrs. McLeod, as modified, but under the New York locations.

Some time thereafter, and in January, 1909, the California Midway Oil Company commenced drilling for oil on the south 60 acres of the northwest quarter and continued such work to a discovery in the summer of that year. On May 17, 1909, the New York locators, acting by McMurtry, their attorney in fact, conveyed their interest in the entire north half of the section to J. M. McLeod, subject to the outstanding contract under which the California Midway Oil Company was in possession and at work, and simultaneously therewith and as a part of the same transaction McLeod agreed in writing that, if oil should be discovered on either of the quarters, he would immediately make application for patent therefor and upon issuance of the receiver's final receipt would, by good and sufficient deed, grant, bargain, sell, and convey to the locators the north one hundred acres of each quarter. On December 3, 1909, the New York locators, by McMurtry as their attorney in fact, assigned their interest in the contract of May 17, 1909, with McLeod, to Judge Claflin, his attorney, and on the following day Claflin transferred the same to McMurtry.

Early in 1910, McMurtry, as attorney in fact for the New York locators, sold or contracted to sell the west 40 acres of the north 100 acres of the northwest quarter to the Columbus Midway Oil Company for $100,000, and received as payment thereon the sum of $10,000, and on March 22, 1911, as such attorney in fact, deeded the property to the company, taking back a mortgage to secure the payment of the balance due thereon. The Columbus Midway Oil Company subsequently made default in the payment of the balance of the purchase price, and on November 22, 1912, conveyed the property to McMurtry individually in satisfaction thereof, and the record now so stands.

In June, 1910, overtures were made by a representative of McMurtry to the Associated Oil Company to sell to it the locators' interest in the remaining 60 acres in the northwest quarter and the north 100 acres in the northeast quarter of section 32, and 1,280 acres in various other tracts covered by paper locations made by him in the name of the New York parties. Considerable negotiation and correspondence were had concerning the matter; it being agreed at one time that if the sale was consummated holders of the title would each execute declarations of trust to the effect that the title was held in trust for the original locators as evidence that they were in fact the owners of the property. This plan, however, was abandoned, and on August 4 1910, a written contract was entered into between the New York locators, acting by McMurtry as their attorney in fact, and W. F. herrin and others, known as the Herrin grantees, acting for the Associated Oil Company, which agreement, after stating that 16 named persons (each of whom had executed a power of attorney to McMurtry) represented that on January 1, 1909, they had legally located the northwest quarter and the northeast quarter of section 32, township 31 south, range 23 east, Mt. Diablo meridian, under the mining laws of the United States, that they were still the owners thereof, subject to the deed to and agreement with McLeod, of May 17, 1909, that a discovery of oil had been made on the northwest quarter in May, 1909, and that ever since that time they, either by themselves or their agent or representative,...