United States v. Standard Oil Co. of California, E-5.

• Decision Date: 04 December 1937
• Docket Number: No. E-5.,E-5.
• Citation: 21 F. Supp. 645
• Court: U.S. District Court — Southern District of California
• Parties: UNITED STATES v. STANDARD OIL CO. OF CALIFORNIA et al.

21 F. Supp. 645

UNITED STATES v. STANDARD OIL CO. OF CALIFORNIA et al.

No. E-5.

District Court, S. D. California, N. D.

December 4, 1937.

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John W. Preston, Sp. Counsel, of San Francisco, Cal., and Annette Abbott Adams, Asst. Sp. Counsel, of Los Angeles, Cal., for the United States.

Oscar Lawler, of Los Angeles, Cal., Donald R. Richberg, of Washington, D. C., Eugene M. Prince, of San Francisco, Cal., and Wm. H. Burges, of El Paso, Tex., for Standard Oil Co.

Ray W. Hays, of Fresno, Cal., for defendants Carman, Fairbank, and Ranney.

Neil G. Locke, of Los Angeles, Cal., for defendant Southern California Gas Co.

W. G. Griffith, of Santa Barbara, Cal., for defendant Mary Rock.

YANKWICH, District Judge.

After the defendants' motion to transfer to the equity side of the court, and the government's motion to dismiss and strike certain defenses, had been disposed of by the opinion filed on August 25, 1937 (D.C., 20 F.Supp. 427), amended answers were filed under the leave granted by the court. Some of the new defenses, such as lack of jurisdiction in the Secretary of the Interior, discovery as a rule of property, estoppel and the like, embodied, in changed form, those stricken by the prior ruling. They were ordered stricken by memorandum dated October 16, 1927.

The cause went to trial on November 8, 1937, upon the issues remaining.

We refer to the prior opinion for a more detailed statement of the factual bases of the controversy.

In effect, the opinion meant that title to the lands was in the United States under the decision of the Secretary of the Interior that the lands were of known mineral character on January 26, 1903, unless its finality was challenged successfully. The decision, made on January 24, 1936, a rehearing of which was denied on May 20, 1936, was received in evidence as a part of the government's chain of title. It and the other documentary evidence establish the government's title beyond dispute, unless (1) the defendants' new attack on the Secretary's decision and (2) their claim of title as transferees of the state of California are sustained. The two matters are so interrelated as to require joint treatment.

I. The Title of the United States as Determined by the Secretary of the Interior.

The defendants' claim of title is now grounded upon the proposition that there was no evidence before the Secretary of Interior to sustain his finding of title in the United States.

Having denied the contention of the defendants that they were entitled to a trial de novo before this court upon the issue of the known mineral character of the land, which carried title with it, the determination of the validity of the Secretary's decision calls for a review of the evidence presented during the contest. The full record was tendered as an exhibit to the new answers and offered and received in evidence. It is voluminous. The transcribed portions of it, excluding many exhibits, amount to nearly 10,000 typewritten pages. It was read by the court before the trial so that the divergent contentions as to its effect might be understood more adequately.

Ultimately, we are not called to justify the reasoning by which the Secretary arrived at his conclusions, or the facts to which he gave weight. The problem, under the principles laid down in the prior opinion, is to determine whether there is any evidence to sustain his finding that the land was known mineral on January 26, 1903.

In settling this question, we are not called to review the reasoning by which the conclusion was arrived at. Nor are we bound by it. We are not called to review the specific facts which the Secretary sets forth in his opinion as leading him to the conclusion. Nor do we have to agree with him as to the probative value to be given to them.

We are called to determine whether there is any evidence to sustain the ultimate conclusion, be that evidence singled out by the Secretary or other evidence in the record, to which his opinion does not refer.

The different factual steps which led him to the ultimate conclusion are of no importance. We are not required to accept them as findings of fact. The decision of the Secretary contained only one ultimate finding of fact, that is, that the land was known to be mineral on January 26, 1903.

In reviewing the record in the light of the principles declared in the previous opinion, we are called to answer the question: Is there any evidence to sustain this ultimate conclusion ?

In answering, we bear in mind the criterion laid down by the Supreme Court for determining the mineral character of oil lands, in Diamond Coal & Coke Co. v. United States, 1914, 233 U.S. 236, 34 S. Ct. 507, 58 L.Ed. 936, and United States v. Southern Pacific Company, 1919, 251 U.S. 1, 40 S.Ct. 47, 64 L.Ed. 97, (the latter involving the Elk Hills district in which the land in dispute here is situated). In the case last cited, the court, in ruling that the evidence before the trial court justified a finding that the lands were known as mineral, states: "By this we mean that the known conditions at that time were such as reasonably to engender the belief that the lands contained oil of such quality and in such quantity as would render its extraction profitable and justify expenditures to that end." United States v. Southern Pacific Company, 1919, 251 U.S. 1, 13, 40 S.Ct. 47, 49, 64 L. Ed. 97. (Italics added.)

In testing the evidence by this touchstone, the court referred to the fact that, in the particular case, witnesses called for the government "gave it as their opinion, having regard to the known conditions in 1903 and 1904, as just outlined, that the lands were valuable for oil, in that an ordinarily prudent man, understanding the hazards and rewards of oil mining and desiring to engage therein for profit, would be justified in purchasing the lands for such mining and making the expenditures incident to their development, and in that a competent geologist or expert in oil mining, if employed to advise in the matter, would have ample warrant for advising the purchase and expenditure." United States v. Southern Pacific Co., supra, 251 U.S. 1, at page 13, 40 S.Ct. 47, 49, 64 L.Ed. 97 (Italics added.)

The defendants insist that, under this ruling, it is necessary to show, first, that the observable conditions were such as to indicate to a trained geologist the mineral character of the land. The defendants are willing to admit that a trained geologist, on the basis of present observable conditions, could retroject his opinion in point of time and give it as his opinion that a geologist consulted prior to January 26, 1903, would have given his opinion that the lands were of known mineral character. They insist, however, that, if that element may be proved by expert testimony, there is a second element, i. e., that the observable conditions were such as to warrant a prudent man in purchasing the lands and making the expenditures for mineral development, which cannot be proved by the opinion evidence of an expert, who, testifying today, would say that such investment by a prudent man would have been justified and, if employed prior to January 26, 1903, he would have so advised. To my mind, this requirement goes in the very face of the statement just quoted, indicating that such opinion was actually given in that case and considered in determining the character of the land.

But ultimately, we think the discussion is more or less academic. For, while the court, in discussing the evidence there, held that the facts were such as (1) to carry the conviction that the lands were mineral and (2) to induce a practical man to venture his substance in exploitation, we do not think it intended to lay down this twofold test as an absolute criterion by which the mineral character of land should always be determined. The criterion it laid down was the one appearing in the first quotation from the opinion, which is quoted above, and which, in the opinion, follows the analysis of testimony, and which it had also approved in Diamond Coal & Coke Co. v. United States, supra. The court there laid down the rule that the mineral character of land may be shown by deductions and inferences from the known conditions at the time.

If the facts are such as to engender the belief that the lands contain mineral in sufficient quantity to justify a prudent investment, it is immaterial whether the facts actually show that a prudent investor is actually found who states, in retrospect, that he would have made such investment. In other words, he whom the defendants call "the hypothetical practical man" need not actually be shown to exist. If the observable facts are such as to warrant the belief in the mineral character of lands, whether they were such as would sanction investment is an inference which may be drawn by the trier of facts from the facts on which the conclusion as to the existence of the belief is grounded.

If it were otherwise, the fact of absence of investment would be determinative. And if absence of investment be determinative then we are back to the test — that discovery is the only test for determining the oil-bearing character of lands. The decisions referred to and my own prior opinion reject this test. As stated in Diamond Coal & Coke Co. v. United States, supra, 233 U.S. 236, at page 249, 34 S.Ct. 507, 512, 58 L.Ed. 936: "There is no fixed rule that lands become valuable for coal only through its actual discovery within their boundaries. On the contrary, they may, and often do, become so through adjacent disclosures and other surrounding or external conditions; and when that question arises in cases such as this, any evidence logically relevant to the issue is admissible, due regard being had to the time to which it must relate." (Italics added.) We need not review in detail the record before the Secretary or point to all the facts in it which satisfy the test thus laid down. The...