Cosmos Exploration Company v. Gray Eagle Oil Company

This is an appeal from the decree of the circuit court of appeals for the ninth circuit, for the southern district of California, sustaining the defendants' demurrer to the bill of complainant, and dismissing the same. The questions arise under the act of June 4, 1897, making appropriations for the sundry civil expenses of the government, etc. 30 Stat. at L. 11, 36, chap. 2, U.S.C.omp. Stat. 1901, p. 1541. The particular portion of the statute under which this litigation comes is set forth in the margin.

The material facts averred in the bill are as follows: The assignor of the complainant, one C. W. Clarke, was on November 16, 1899, the owner in fee simple absolute of certain land in a forest reservation, nonmineral, and covered by a patent from the United States. On December 8, 1899, there were lands in the particular township described in the bill which for more than a year continuously theretofore had been surveyed, unappropriated, and vacant public land of the United States, open to settlement, returned and characterized upon the official records of the United States as agricultural land, free and open to settlement and entry under the laws thereof. This land did not then contain any known minerals, salines, petroleum, or mineral oils, nor had any minerals or petroleum or other mineral oils or mineral substances of any kind ever been discovered within the limits of such land, which was situated in the county of Kern, within the southern district of California, and within

(Page 36.) That in cases in which a tract covered by an unperfected bona fide claim, or by a patent, is included within the limits of a public forest reservation, the settler or owner thereof may, if he desires to do so, relinquish the tract to the government, and may select in lieu thereof a tract of vacant land open to settlement not exceeding in area the tract covered by his claim or patent; and no charge shall be made in such cases for making the entry of record or issuing the patent to cover the tract selected: Provided further, That in cases of unperfected claims, the requirements of the laws respecting settlement, residence, improvements, and so forth, are complied with on the new claims, credit being allowed for the time spent on the relinquished claims. the district of lands subject to sale and disposition by the United States land office at Visalia, California. On November 16, 1899, Clarke relinquished the land in the forest reservation to the United States by deed recorded in the office of the county in which the land was situated, and on December 8, 1899, he duly delivered to the register and receiver of the United States land office at Visalia, California, and filed in that land office his deed to the United States indorsed as recorded in the office where the land was situated, together with his selection of the land in lieu of the land relinquished; and at the same time he filed with the register and receiver a non-mineral affidavit showing the selected tract contained no known minerals, and he also delivered to and filed with the register and receiver an abstract of his title to the relinquished tract, duly certified as such by the recorder of the county in which the tract was situated, which abstract showed him to be the owner of the land by title in fee simple absolute, free of any lien or encumbrance at the time of such relinquishment and at the time the deed to the United States was made, and showed that his conveyance to the United States vested in the government the full, complete, and perfect title thereto. On the same day (December 8, 1899) the register and receiver of the United States land office at Visalia, California, duly accepted, received, and filed the deed, abstract of title, non-mineral affidavit and the selection of the land made by Clarke, and duly entered the selection upon the official records of the land office, and the register of the land office then certified that the land so selected by Clarke was free from conflict, and that there was no adverse filing, entry, or claim thereto; and Clarke thereupon and thereby became vested, as complainant averred, with the complete equitable title to the land so selected, and was thereupon and thereby entitled to receive a patent for the land from the United States in pursuance of that selection, under the terms and in pursuance of the provisions of the act of Congress above referred to. Clarke thereafter assigned and transferred to the complainant an undivided three-quarters interest in the land taken in lieu of the relinquished land, and by virtue of the above selection the full, complete, and equitable title to the so selected land became immediately vested in the complainant's assignor without further act upon his part, and complainant, by virtue of those acts and the assignment to it, is now the complete and equitable owner of a three-quarters interest in the land, and entitled to a patent therefor.

Clarke did not file any affidavit of non-occupancy of the land selected, so far as the record shows.

It is then averred that this claim of the complainant is denied by the defendants, who assert that the land remained subject to entry, exploration, selection, and purchase as mineral land, until a patent shall be issued to the complainant's assignor, and the complainant avers that the defendants since the selection have entered upon the land, bored for and obtained petroleum oil, and are engaged in taking it therefrom.

It is also averred that the right and title of the defendants are based upon some one or more of four certain pretended placer mining locations which the bill describes, and which cover the land claimed by complainant, and that the defendants assert title to and the right to the possession of the land described in those placer locations from some or all of the locators thereof; but complainant alleges that these placer locations are illegal and void, because they were not based upon any discovery of mineral within the boundaries thereof, or of petroleum oil within such boundaries, until after the land had been selected by complainant's assignor Clarke.

That after the land had been selected by complainant's assignor, the defendants filed in the United States land office at Visalia, California, a written verified protest against such selection, in which protest it was alleged that the land selected by Clarke was not subject to selection by him under the act of June 4, 1897, above referred to, because the same was mineral land and was included within the boundaries of a valid placer mining location. The protest ask that the Commissioner of the General Land Office should order a hearing to determine the mineral character of the land, and that the selection by Clarke be rejected and disapproved; and the bill specifically avers that such protest is now pending before the Commissioner of the General Land Office.

That the protest does not show there was any known mine, or that there were any known salines, or any known or existing petroleum wells, or known petroleum deposits, on any of the land selected by Clarke at the time the land was selected, and it is averred that the protest, failing to show such facts, is insufficient to warrant or justify a hearing being ordered by the Land Department to re-establish or redetermine the character of the land, or to change the present classification thereof as fixed by the former report of the Surveyor General and the confirmation thereof by the Land Department, and that such protest is insufficient to impair or affect the validity of Clarke's selection of the land; that notice of such selection by Clarke had been given and published on the ___ day of January, 1900, and that by law only sixty days are allowed to any person or persons to file protests in the local land offices of the United States against any selections under the law of June 4, 1897, and that the only protest or adverse claim filed against the selection was the protest of defendants above referred to, and that such protest does not state any facts which impair or affect the right of said Clarke or of the complainant in said selected land, nor does it show any grounds why a United States patent therefor should not issue to Clarke, and that defendants are bound and estopped by their protest and the contents thereof and the facts therein stated, and that if such facts be admitted they do not show that defendants, or any of them, have any interest in the lands as against Clarke or complainant; and it is averred that, upon the facts as pleaded by the protest, the Land Department of the United States cannot lawfully refuse or deny the issuance of a patent to Clarke, and that upon such facts he is entitled to the approval of his selection by the Land Department of the United States and to the issuance of a patent therefor.

Notwithstanding complainant was the complete and equitable owner of the land and entitled to the quiet and uninterrupted possession of the same, so far as regarded the three-quarters interest therein, yet the defendants herein, except Clarke, did, on or about February 1, 1890, and frequently since then, by themselves and their employees, without right, title, or claim, wrongfully and unlawfully, and in disregard of the right of Clarke, enter upon the land, erect derricks and other machinery thereon, and proceed to excavate the soil thereof and bore wells and drive iron pipes therein, seeking for petroleum oil and other mineral products in the land, for the purpose of taking the same, if found, to their own use, and removing the same; that thereafter, and on or about the last day of February, 1900, the defendants discovered in the wells petroleum oil in profitable quantities, and that the defendants are now wrongfully and unlawfully in possession of the premises, and unlawfully and continuously from day to day pumping large quantities of petroleum oil from the wells, and are about to and will, unless restrained by the court, remove the same from the land and sell and dispose of and market the same, and appropriate the proceeds thereof to their own use, to complainant's great loss and damage, and will continue so to do to the great waste and irreparable injury and damage of said property and the complainant, unless restrained therefrom by the court.

It was also alleged that the defendant Clarke is the owner of an undivided one-quarter interest in the selected land described, and that complainant requested him to join with it in instituting and prosecuting this suit, but he refused to join herein, and therefore complainant made him a defendant in order that all the parties interested in the premises might be before this court and their rights finally adjudicated by a decree to be entered herein.

Upon these allegations complainant prayed for a writ of injunction restraining defendants from interfering with complainant's entry upon the land, and enjoining defendants, other than Clarke, from excavating or digging upon the land for the purpose of taking petroleum oil from the wells thereon or from marketing or disposing of the oil, until the further order and decree of the court in the premises, and that upon final hearing the injunction should be made perpetual by an order and decree of the court.

It was also prayed that complainant might have the judgment of the court that the full and complete equitable title to an undivided three-quarters interest in the property is vested in the complainant, and an undivided one-quarter interest in Clarke, and that the adverse claims of defendants thereto should be decreed to be wholly without right and unfounded, and that complainant have judgment for the possession of the land, and that a receiver should be appointed to take possession of the land and to preserve the same and the product thereof on the premises until the further order of the court, but not to operate the wells thereon except to the extent necessary, if at all, to preserve the same from deterioration in value, nor to market or remove any oil therefrom.

Upon the filing of this bill the court granted an order to show cause why the complainant should not have a preliminary injunction as asked for in the bill. The defendants appeared and interposed a demurrer to the bill, and upon the hearing of the order to show cause they presented a large number of affidavits, which in substance averred that the complainant was guilty of fraud and bad faith in locating the claim, and that such location was a fraud upon the statute under which it was assumed to be made. Affidavits in reply were filed by the complainant.

The demurrer was argued at the same time as the argument was had upon the return of the order to show cause, and thereafter on September 24, 1900, an order was made by the circuit court denying the application for a receiver and for an injunction, and a decree was also made sustaining the defendants' demurrer and dismissing the bill with costs, and on September 26, 1900, such decree was entered dismissing the bill. 104 Fed. 20.

An appeal was taken from the decree sustaining the demurrer and dismissing the bill, but none from the order denying the application for a receiver and for an injunction. As the appeal to the circuit court of appeals was only from the decree overruling the demurrer and dismissing the complainant's bill, that court confined its discussion to the facts alleged in the bill.

After a hearing it affirmed the decree of the circuit court (50 C. C. A. 79, 112 Fed. 4), and the complainant has by appeal brought the case here.

Messrs. T. C. Van Ness, Jefferson Chandler, John M. Thurston, Shirley C. Ward, M. A. Ballinger, Horace F. Clark, and William C. Prentiss for appellant.

Messrs. John S.C.hapman and Frank H. Short for appellee.

Mr. Justice Peckham, after making the foregoing statement of facts, delivered the opinion of the court: