United States v. Nebo Oil Co.

• Decision Date: 04 August 1951
• Docket Number: No. 13460.,13460.
• Citation: 190 F.2d 1003
• Parties: UNITED STATES v. NEBO OIL CO., Inc.
• Court: U.S. Court of Appeals — Fifth Circuit

190 F.2d 1003 (1951)

UNITED STATES v. NEBO OIL CO., Inc.

No. 13460.

United States Court of Appeals Fifth Circuit.

August 4, 1951.

COPYRIGHT MATERIAL OMITTED

John F. Cotter, Atty., Dept. of Justice, Washington, D. C., A. Devitt Vanech, Asst. Atty. Gen., Sol B. Pressburg, Spl. Atty., Alexandria, La., William J. Fleniken, Asst. U. S. Atty., Shreveport, La. and Edmund B. Clark, Washington, D. C., for appellant.

John W. O'Boyle, James D. Heldt, John C. Jacobs, all of Dallas, Tex., Malcolm L. Monroe, J. Blanc Monroe, New Orleans, La., for appellee.

Before HUTCHESON, Chief Judge, and BORAH and STRUM, Circuit Judges.

BORAH, Circuit Judge.

This suit was brought by the appellant, United States of America, against the appellee, Nebo Oil Company, Inc., for a judgment declaring that appellant is the owner of the minerals, including oil, gas and sulphur, underlying approximately eight hundred acres of land located in the Parish of Natchitoches, State of Louisiana. A trial was had by the court without a jury and judgment was entered dismissing the complaint. This appeal followed.

The undisputed facts are these: In the year 1932 five lumber companies decided to pool the mineral rights in their lands in order to secure more favorable exploration and development thereof, it being agreed by the parties that each would share in any production obtained from the pooled acreage in proportion to the acreage which each lumber company contributed to the pool. For that purpose, the Good Pine Oil Company was organized and the lumber companies individually conveyed to it all of the oil, gas and sulphur underlying their lands.

One of these conveyances to Good Pine Oil was by recorded deed from the Bodcaw Lumber Company, dated November 12, 1932, covering all of the oil, gas and sulphur underlying a tract of land containing 37,532.13 acres of which the 800 acres of land here involved was a part. This deed recited that the minerals were conveyed to Good Pine Oil, its successors and assigns, forever; and that it was intended to confer upon the vendee absolutely and without limit for time of their enjoyment any and every right, title and interest which the vendor had in the minerals conveyed.¹

Prior to the year 1936 the United States was interested in purchasing lands in Louisiana for national forest purposes and had found that owners of large tracts of land were unwilling to sell their lands because of court decisions holding that the sale or reservation of mineral rights in Louisiana created only a right in the nature of a servitude which was subject to prescription by ten years nonuser. However, the United States Department of Agriculture, Forest Service, was not in accord with this view and on May 29, 1935, submitted to Bodcaw Lumber Company an opinion of the Assistant Solicitor of the Department of Agriculture to the effect that the prescriptive provisions of the Louisiana Civil Code would not apply to lands sold to the United States for national forest purposes.

Thereafter, on February 11, 1936, Bodcaw sold to the United States a tract of timber land containing 24,943.93 acres, of which the 800 acre tract whose minerals had previously been conveyed to Good Pine Oil formed a part. These lands were purchased by appellant for inclusion in the Kisatchie National Forest and were specifically conveyed to it "subject to the sale of all the oil, gas and sulphur in, on, and under all of the lands conveyed herein, as shown by act of sale dated November 12, 1932, * * * wherein Bodcaw Lumber Company of Louisiana, Incorporated, was the vendor, and Good Pine Oil Company, Incorporated, was the vendee." This deed recites that "the mention of these mineral sales and of the rights granted therein is made solely for the purpose of limiting vendor's warranty to the United States of America in the present sale, and the recital of the said mineral sales shall in no wise extend or enlarge the same in point of time, or limit, control, or otherwise restrict the manner of exercising its rights by the Good Pine Oil Company, Incorporated, its successors and assigns."²

At the time the sale was made, the officers and directors of Bodcaw believed that the mineral rights in the lands sold were valuable and the price of $1.75 per acre paid by appellant for the timber lands acquired under the 1936 deed did not reflect the value of any mineral rights. Moreover, the uncontradicted testimony is that Bodcaw would not have sold the timber lands to the United States had its representatives then taken the position, as they do now, that the prescriptive provisions of the Louisiana Civil Code would be applicable to the lands sold.

In December 1941 the Good Pine Oil Company was dissolved and the mineral interests which it had acquired were transferred to its stockholders in indivision. Thereafter the appellee, Nebo Oil Company, was organized and by mesne conveyances acquired all of the mineral rights formerly held by Good Pine Oil.

It was stipulated by and between the parties that no drilling operations have been conducted on the 800 acres of land here involved or on lands contiguous thereto. However, it appears that the mineral rights acquired by Good Pine Oil by virtue of the 1932 deed from Bodcaw were exercised by the drilling of five separate wells between October 1941 and October 1948, three of which were located on lands conveyed to the United States under the 1936 deed from Bodcaw. It further appears that there has been considerable drilling activity on other portions of the pooled acreage and substantial production has been developed and oil and gas is now being obtained therefrom. Additionally, each of the five lumber companies, in accordance with the pooling agreement, has shared in this production obtained from the pooled acreage in proportion to the acreage which each contributed to the pool.

The gravamen of the complaint is that no drilling operations were conducted on the lands in suit during the ten year period beginning November 12, 1932; and that consequently any mineral rights owned by Good Pine Oil or its successor, Nebo Oil, had prescribed by ten years of nonuser of the servitude. For answer, Nebo Oil denied that the mineral rights had prescribed and set up the defenses, among others, that there had been an interruption of the ten year prescriptive period for the reason that the minerals underlying the 800 acre tract were pooled with other minerals which had been developed, and exercise of the servitude on any part of the pooled acreage interrupted prescription with respect to all of the minerals included in the pool; and that the mineral rights were imprescriptible by virtue of Act 315 of the Louisiana Legislature of 1940. The trial judge sustained these defenses and this appeal followed.

Insisting that the judgment should be reversed, appellant contends that the court erred: (1) in holding that the mineral rights in question were included in a pooling agreement which was binding on the appellant though unrecorded, and that production under that agreement interrupted prescription; and (2) in concluding that Louisiana Act 315 of 1940 is valid and constitutional as applied to lands conveyed to the United States prior to the effective date of its enactment.

In Louisiana there is no land tenure other than perfect ownership and imperfect ownership and there is no separate corporeal mineral estate in oil and gas as such. The Louisiana courts have adhered to the principle that a reservation or sale of oil and gas creates only a right to go upon the land to search for and capture minerals. This right to reduce the substance to possession, although not fitting perfectly into any civil code category, is in the nature of a servitude on land in favor of a person, to be governed by the laws of Louisiana pertaining to servitudes. Frost-Johnson Lumber Co. v. Salling's Heirs, 150 La. 756, 91 So. 207. The mineral servitude can only be created by the landowner through such acts as are used in the transfer of title to immovable property. Long-Bell Petroleum Co. v. Tritico, 216 La. 426, 43 So.2d 782, 791; Revised Civil Code, Articles 743, 766, 770. It is extinguished by the prescription resulting from nonuser of the servitude for ten years following the execution of the deed conveying the right. Frost-Johnson Lumber Co. v. Nabors Oil and Gas Co., 149 La. 100, 88 So. 723. Revised Civil Code, Articles 789, 3546. However, user of a mineral servitude will preserve it for another ten years. Lee v. Giauque, 154 La. 491, 97 So. 669; Louisiana Petroleum Co. v. Broussard, 172 La. 613, 135 So. 1. These principles are well established.

It is equally clear that the reservation or grant of mineral rights in several noncontiguous tracts of land creates separate servitudes and the drilling on one noncontiguous tract of land does not interrupt the running of prescription against the rights in another tract of land. Lee v. Giauque, 154 La. 491, 97 So. 669, 670. However, where several landowners agree to unitize or integrate their mineral interests in various tracts of land, in order to better secure development thereof, and provide for the payment of the proceeds in the proportion which their mineral interests bear to the whole, their agreement is governed by the law of contracts and not by the law of servitudes. In such instances the land is treated as a whole and it is immaterial whether the lands are contiguous or noncontiguous. Brown v. Sugar Creek Syndicate, 195 La. 865, 197 So. 583; Robinson v. Horton, 197 La. 919, 2 So.2d 647; Veeder Company Inc. v. Pan American Production Company, 205 La. 599, 17 So.2d 891; Dobbins v. Hodges, 208 La. 143, 23 So.2d 26; Farrell v. Simms, 209 La. 1072, 26 So.2d 143; Jackson v. Hunt Oil Co., 208 La. 156, 23 So.2d 31.

One of the principal issues in this case relates to the pooling agreement. It is conceded that this agreement was never recorded and despite this fact appellee contends that appellant was charged with notice thereof by...