United States v. Stanolind Crude Oil Purchasing Co., 1975-1977.
Decision Date | 29 June 1940 |
Docket Number | No. 1975-1977.,1975-1977. |
Citation | 113 F.2d 194 |
Parties | UNITED STATES v. STANOLIND CRUDE OIL PURCHASING CO. SAME v. GULF OIL CORPORATION. SAME v. SINCLAIR PRAIRIE OIL CO. |
Court | U.S. Court of Appeals — Tenth Circuit |
A. F. Moss, of Tulsa, Okl., and F. W. Files, of Pawhuska, Okl. (Norman M. Littell, Asst. Atty. Gen., Harry W. Blair and Aubrey Lawrence, Sp. Assts. to the Atty. Gen., Lawrence S. Apsey and Frederick W. Whiteside, Attys., Department of Justice, both of Washington, D. C., C. S. Macdonald, of Pawhuska, Okl., and H. R. Young, of Tulsa, Okl., on the brief), for the United States.
Ray S. Fellows, of Tulsa, Okl. (Donald Campbell, Clay Tallman, Guy H. Woodward, and Charles R. Fellows, all of Tulsa, Okl., on the brief), for Stanolind Crude Oil Purchasing Co.
James B. Diggs, of Tulsa, Okl. (William C. Liedtke, Russell G. Lowe, Redmond S. Cole, C. L. Billings, and James B. Diggs, Jr., all of Tulsa, Okl., on the brief), for Gulf Oil Corporation.
Summers Hardy, of Tulsa, Okl. (Edward H. Chandler, Paul B. Mason, and N. A. Gibson, all of Tulsa, Okl., on the brief), for Sinclair Prairie Oil Co. J. C. Denton, R. H. Wills, J. H. Crocker, I. L. Lockewitz, and J. P. Greve, all of Tulsa, Okl., amici curiae.
Before PHILLIPS, BRATTON, and HUXMAN, Circuit Judges.
Stanolind Crude Oil Purchasing Company1 is a corporation organized under the laws of Delaware. Sinclair Prairie Oil Company2 is a corporation organized under the laws of Maine. Gulf Oil Corporation3 is a corporation organized under the laws of Pennsylvania. Each is, and for many years has been, engaged in the purchasing of crude oil in the state of Oklahoma.
On November 28, 1936, the United States commenced suits in equity against each of them to recover for three per cent of the oil run to such corporations and their predecessors from leases on the Osage Indian Reservation, under division orders executed by the lessees of the leases from which the oil was run and approved by the Superintendent of the Osage Indian Agency.4 The causes were transferred to the law docket and an amended complaint was filed in each case.
Section 1 of the Osage Allotment Act, approved June 28, 1906, 34 Stat. 539, provides for an approved roll of the Osage Tribe of Indians. Section 2 provides for the allotting of the lands in the Osage Reservation in severalty to the members of the Tribe listed on the roll. Section 3 provides that all minerals under the Osage Reservation are reserved from allotment and retained for the Tribe as a whole for a period of twenty-five years from April 8, 1906,5 and that leases for all oil, gas, and other minerals may be made by the Osage Tribe of Indians through its Tribal Council, with the approval of the Secretary of the Interior and under such rules and regulations as he may prescribe, provided "that the royalties to be paid to the Osage tribe under any mineral lease so made shall be determined by the President of the United States." Section 4 provides that all royalty received from oil, gas, and other mineral leases shall be placed in the Treasury of the United States to the credit of the members of the Osage Tribe of Indians, as other moneys of said Tribe are to be deposited, and shall be distributed to the individual members of the Tribe according to the roll. Section 4 further provides that there shall be set aside from the royalties received from oil and gas not to exceed $50,000 per year for ten years for the support of schools on the Osage Indian Reservation. Section 5 provides that at the expiration of the trust period the minerals shall be the absolute property of the individual members of the Tribe according to the roll, or their heirs. Section 12 provides that all things necessary to carry the provisions of this act into effect, not otherwise therein specifically provided for, shall be done under the authority and direction of the Secretary of the Interior.
On June 29, 1912, the Secretary of the Interior by a written communication to the President, recommended that the Osage Indian lands in Oklahoma be leased for oil and gas mining purposes, and that the royalties be fixed as follows: "On oil — 16 2/3% of the gross proceeds of all oil produced."
On July 1, 1912, President Taft approved the recommendation, thereby fixing the royalty at one-sixth of the gross proceeds of all oil produced.
Regulations were adopted and promulgated by the Secretary of the Interior on July 3, 1912. They set forth in full the form of oil mining lease then required. Both that form of lease and § 24 of those regulations provided for the sale of oil through approved division orders.
On July 27, 1915, President Wilson by executive order fixed the rate of royalty as follows:
"The rate of royalty on oil to be one-sixth, except where the average daily production of producing wells on any quarter-section unit shall equal or exceed 100 barrels for calendar-month periods, the royalty on such wells to be one-fifth."
On August 26, 1915, new regulations were promulgated by the Secretary of the Interior. These incorporated a form of Osage oil mining lease. The pertinent parts thereof read as follows:
Section 20 of the 1915 regulations in part reads as follows:
Section 64 of the 1915 regulations in part reads as follows:
"The Superintendent may make arrangements with the purchasers of oil for the payment of the royalty, but such arrangements, if made, shall not relieve the lessee from responsibility for the payment of the royalty, should such purchaser fail, neglect, or refuse to pay the royalty when it becomes due: Provided, That no oil shall be run to any purchaser or delivered to the pipe line or other carrier for shipment, or otherwise conveyed or removed from the leased premises, until a division order is executed, filed, and approved by the superintendent, showing the lessee has a regularly approved lease in effect, and the conditions under which the oil may be run. * * *"
With respect to the questions here presented the allegations of the three amended complaints are substantially the same. It will be sufficient to consider the allegations made in Stanolind's amended complaint.
In the amended complaint in the Stanolind case it is alleged that the Osage Tribe of Indians is and was at all times mentioned in the complaint the owner of the petroleum beneath the surface of all the lands situate in Osage County, Oklahoma; that leasing of such lands was authorized and directed by Congress by the Act of June 28, 1906, and amendments thereto; that rules and regulations were promulgated by the Secretary of the Interior effective August 1, 1915, respecting the leasing of such land; that leases upon such lands and petroleum were executed by divers persons in the form prescribed by such rules and regulations; that Stanolind and its predecessors took, received, and acquired oil from lands owned by the Osage Tribe of Indians under division orders prepared by Stanolind, signed by the lessee of the land from which the oil was taken, and approved by the Superintendent; that such division orders contained the following provision:
"Third: The Stanolind Crude Oil Purchasing Company shall deduct three percent from all oil received from wells into the pipe lines for its account on account of dirt and sediment, and, in addition, shall deduct one-twentieth of one percent, for each degree of heat above normal temperature, and oil shall be steamed when necessary to render it merchantable."
It further alleged that Stanolind prepared such division orders and presented them to the Superintendent for approval and thereby represented to him "that there was three percent dirt and sediment in said oil"; that such representations contained in such division orders were false and were known to Stanolind to be false when it prepared such division orders and when it obtained approval thereof by the superintendent; that Stanolind knew all the oil was in fact merchantable, and the United States did not know such oil was merchantable or that such representations were false until about August 1, 1933; that such misrepresentations were made by Stanolind with the fraudulent intent and purpose of having the United States rely thereon, and with the knowledge that the United States would not know at the times of approval of such division orders that such oil did not contain three per cent of dirt and sediment, and that all of it was merchantable.
It is further alleged that on or about August 1, 1933, the Secretary of the Interior ascertained that the oil then being purchased by Stanolind from...
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