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

Citation20 F. Supp. 427
Decision Date25 August 1937
Docket NumberNo. E-5.,E-5.
CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
PartiesUNITED STATES v. STANDARD OIL COMPANY OF CALIFORNIA et al.
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John W. Preston, Sp. Counsel, and Annette Abbott Adams, Asst. Sp. Counsel, both of San Francisco, Cal., for the United States.

Oscar Lawler, of Los Angeles, Cal., Eugene M. Prince, of San Francisco, Cal., and Wm. H. Burges, of El Paso, Tex., for defendant Standard Oil Co. of California.

Ray W. Hays, of Fresno, Cal., for defendants Frank J. Carman, Elna Carman, Henry Fairbank, Charles Fairbank, and Clara Fairbank Ranney.

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

YANKWICH, District Judge.

The United States of America, as plaintiff, has instituted this suit in equity seeking to be decreed the absolute owner of certain public lands in the State of California known as section 36, township 30 south, range 23 east, M.D.B. & M. Pending for determination are the motion of some of the defendants to transfer the cause to the law side of the docket and motions of the plaintiff to strike and dismiss certain of the defenses set forth in the answers.

I. The Motion to Transfer to the Equity Side.

Consideration of this motion calls for a summary of the allegations of the bill of complaint. It asserts ownership of the section in the United States Government upon the following grounds:

(1) The land was excepted from the Government grant of school lands to the State of California by the Act of March 3, 1853 (Act March 3, 1853, c. 145, 10 Stat. 244), because it was known to be mineral in character, on January 26, 1903, at the time the official survey of the section was approved.

(2) On January 23, 1935, the Secretary of the Interior — acting in a proceeding commenced in the Department of the Interior, General Land Office, on May 8, 1925, in which the United States was plaintiff, and the State of California and Standard Oil Company and other defendants in the present suit were defendants, and in which it was charged that section 36 was mineral in character and known as such at and prior to the date of the approval of the survey by the General Land Office, on January 26, 1903 — made his decision determining, as a fact, that the whole of section 36 before, on, or after January 26, 1903, was and was known to be mineral in character and that no right, title, interest, or estate in the section ever vested in the State of California or its transferees, but that title remained in the United States.

(3) A rehearing of the proceeding was denied by the Secretary on May 20, 1936, and the decision is now final and binding on this court.

(4) Each of the defendants, as transferees of the State of California, claims some interest in the property, which claims are, however, without right.

(5) The lands are a part of the United States Naval Petroleum Reserve No. 1, set apart by Executive Order of September 2, 1912, with other lands, for the exclusive use of the Navy in case of national emergency.

The bill of complaint, which is rather lengthy, after setting forth these facts, and the manner of derivation of the title of the various defendants, alleges that each of them asserts certain rights to, title or interest in, or lien upon, the lands or to the petroleum or mineral oil or gas or gasoline deposited therein or extracted therefrom, but that such claims are without right.

The following additional facts are alleged:

The defendants entered upon the lands in violation of the lawful orders and proclamations of the President of the United States; they drilled thirty-two wells and caused to be extracted and taken from the premises, oil, gas, and gasoline, appropriating the same for their use and benefit, and wasted the Government's lands and minerals and destroyed and injured them as a naval petroleum reserve. The plaintiff is unable to state the exact amount of oil, gas, and gasoline so extracted, but alleges, upon information and belief, that it exceeded 4,976,369.16 barrels of oil of a high commercial grade, exceeding in value the sum of $8,318,875.16 and 60,140,814 M.C.F. of gas exceeding in value the sum of $3,052,795.54 and 12,983,649.84 gallons of gasoline of varying values exceeding in value the sum of $1,104,798.10, to the damage of the plaintiff, which damages can only be ascertained by requiring the defendants, Standard Oil Company of California, and Frank J. Carman, and others, to account therefor.

The complaint then alleges: "That plaintiff is informed and believes, and upon such information and belief alleges, that said defendants Standard Oil Company of California, Frank J. Carman, and the said trustees intend to continue to trespass upon said lands and to extract and appropriate oil and gas from the wells now existing on said West one-half (W½) and the West one-half of the East one-half (W½ of E½), and Lots 5, 6, 7, 8, 11, and 12 of said Section 36, and to sink and drill new wells thereon and to extract oil and gas therefrom, and will continue such drilling and such extraction and appropriation of the supply of gas and oil underlying said lands and lands adjacent thereto belonging to the United States, and to the entire exhaustion thereof, unless restrained by order of court; and the occupation and operation of said lands and the extraction of the oil and gas content thereof has been, is, and will continue to be, detrimental to and destructive of said lands and of the purposes and policy of the plaintiff with reference thereto, and an irreparable injury to said lands and to the plaintiff and the people of the United States, which cannot be compensated in damages."

The present value of the land is alleged to be in excess of $10,000,000.

Upon the basis of these and other allegations, which, for the purpose of this opinion, need not be summarized, the complaint prays:

(1) That plaintiff be decreed to be the absolute owner of the lands and the products thereof and the proceeds therefrom, and that the defendants be decreed to have no right, title, or interest in or to the same or any part thereof.

(2) That the leases, agreements, deeds, conveyances and transfers, assignments or other instruments and writings under which the defendants or any of them claims any estate, right, title, or interest in the land be declared null and void.

(3) That the defendants be required to render a full account of all their operations on the lands, of all the oil, gas, and gasoline extracted therefrom. That the plaintiff recover such amount as may be found due in kind and in money with interest and such damages as it may have sustained.

(4) That pending a determination of the suit the defendants and their officers, agents, servants, and attorneys be enjoined from trespassing on the lands and from drilling any additional wells thereon and from extracting any oil, gas, or gasoline from them, and that, upon final hearing, such injunction be made perpetual.

(5) That a receiver be appointed forthwith to take charge of all the lands and the products thereof and proceeds therefrom, with authority to conserve them under the supervision of the court pending the final determination of this suit.

(6) That the plaintiff have general relief.

Under Equity Rule 22 (28 U.S.C.A. following section 723), the defendants Standard Oil Company, Standard Gasoline Company, and Southern California Gas Company have moved to transfer the cause to the law side of the court, upon the ground that the complaint does not state facts sufficient to support equity jurisdiction and that plaintiff has an adequate legal remedy.

In applying the legislative mandate contained in section 267 of the Judicial Code (28 U.S.C.A. § 384) against entertaining suits in equity in courts of the United States in cases where a plain, adequate, and complete remedy may be had at law — which first appeared in section 16 of the Judiciary Act of 1789 (1 Stat. 82) — to suits for title or possession of real property, federal courts have held that a complainant out of possession could not maintain an equitable action in the nature of a bill quia timet to remove a cloud from his title against a defendant in possession.

This upon the theory, going back to the common law, that the legal remedy of ejectment is adequate in such cases. A motivating force for the adoption of these common-law principles was the guaranty of jury trial in actions at law by the Seventh Amendment of the Constitution. A defendant would be deprived of this valuable right if a suit in equity were sustained where the legal remedy suffices. See Scott v. Neely (1891) 140 U.S. 106, 11 S.Ct. 712, 35 L.Ed. 358. And our courts are determined to safeguard that right. These principles have been applied with great consistency. See Hipp v. Babin (1856) 19 How. 271, 277, 15 L.Ed. 633; Killian v. Ebbinghaus (1884) 110 U.S. 568, 573, 4 S.Ct. 232, 28 L.Ed. 246; Whitehead v. Shattuck (1891) 138 U.S. 146, 11 S.Ct. 276, 34 L.Ed. 873; Lacassagne v. Chapuis (1892) 144 U.S. 119, 12 S.Ct. 659, 36 L.Ed. 368; Johnston v. Corson Gold Mining Co. (C.C.A. 9, 1907) 157 F. 145, 146, 15 L.R.A. (N.S.) 1078; People of Porto Rico v. Livingston (C.C.A. 1, 1931) 47 F.(2d) 712, 713; Barnes v. Boyd (C.C.A. 4, 1934) 73 F.(2d) 910. But the rule has its exceptions. They are recognized by the Supreme Court in Twist v. Prairie Oil & Gas Co. (1927) 274 U.S. 684, at page 691, 47 S.Ct. 755, 758, 71 L.Ed. 1297: "It is true that ordinarily one out of possession may not bring in a federal court a bill to quiet title, against one in possession, because there is a full, adequate, and complete remedy at law and the defendant is entitled to a jury trial. See Whitehead v. Shattuck 138 U.S. 146, 11 S.Ct. 276, 34 L.Ed. 873; Black v. Jackson, 177 U.S. 349, 363, 364, 20 S.Ct. 648, 44 L.Ed. 801; Lancaster v. Kathleen Oil Co., 241 U.S. 551, 555, 36 S.Ct. 711, 60 L. Ed....

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