Union Oil Company of California v. Smith/Opinion of the Court

This case presents, for the first time in this court, the question of the meaning and effect of an act of Congress approved February 12, 1903 (32 Stat. 825, c. 548 [Comp. St. § 4636]), which reads as follows:

'An act defining what shall constitute and providing for     assessments on oil mining claims.

'Be it enacted, etc., that where oil lands are located under     the provisions of title thirty-two, chapter six, Revised      Statutes of the United States, as placer mining claims, the      annual assessment labor upon such claims may be done upon any      one of a group of claims lying contiguous and owned by the      same person or corporation, not exceeding five claims in all:      Provided, that said labor will tend to the development or to      determine the oil bearing character of such contiguous      claims.'

Smith, now defendant in error, being in possession of a placer mining claim known as the 'Schley claim,' comprising a tract of 106 acres of land in the state of California, part of the public domain of the United States, under a location notice posted and recorded by himself and seven other qualified persons who afterwards conveyed their interests to him, and being engaged in the diligent prosecution of work for the purpose of finding oil upon the claim, brought an action in a California state court to determine adverse claims, making the Union Oil Company of California defendant.

Defendant asserted a superior right of possession under a mineral land location of the same ground under the name of the 'Rawley claim,' made by eight qualified associates in the year 1883, many years before plaintiff's location. No discovery of oil or other minerals had ever been made upon the ground by either of the claimants or by any other person. But at the time plaintiff and his associates located it defendant, although not then actually occupying this ground, was in actual occupation of a contiguous claim of 160 acres known as the 'Sampson claim,' upon which it then was drilling and afterwards continued to drill a well for the discovery of oil, the well being 1,000 feet distant from the boundary line of the disputed claim. Defendant claimed the right of possession of five contiguous claims, including the 'Rawley-Schley' and the 'Sampson,' under locations regularly made in all respects save discovery. Defendant pleaded and proved these facts, and also introduced evidence warranting a finding that its boring work on the 'Sampson claim' tended to determine the oil-bearing character of the 'Rawley-Schley claim.'

It was and is defendant's contention that by virtue of the act of 1903 one who has acquired the possessory rights of locators before discovery in five contiguous claims taken up as oil-bearing lands may preserve and maintain an inchoate right to all of them by means of a continuous actual occupation of one, coupled with diligent prosecution in good faith of a sufficient amount of discovery work thereon, provided such work tends also to determine the oil-bearing character of the other claims.

The superior court of the county, and, on appeal, the Supreme Court of the state, overruled this contention and gave judgment in favor of the plaintiff (Smith v. Union Oil Co., 166 Cal. 217, 135 Pac. 966), and the case was brought here by writ of error under section 237, Judicial Code (Act March 3, 1911, c. 231, 36 Stat. 1156), prior to the amendment of September 6, 1916 (39 Stat. 726, c. 448 [Comp. St. § 1214]).

It will be observed that both parties are in the position of prospectors or explorers upon the public domain-locators without discovery; and, in order to appreciate correctly what effect, if any, the act of 1903 has upon their rights, it is important to have in mind what is meant by 'annual assessment labor,' and the part it plays in the operations of miners under the mining laws of the United States.

By section 2319, Rev. Stat. U.S. (Comp. St. § 4614), all valuable mineral deposits in lands belonging to the United States are declared to be—

'free and open to exploration and purchase, and the lands in     which they are found to occupation and purchase, by citizens      of the United States and those who have declared their      intention to become such, under regulations prescribed by      law, and according to the local customs or rules of miners in      the several mining districts, so far as the same are      applicable and not inconsistent with the laws of the United      States.'

By section 2320 (section 4615) it is declared:

'No location of a mining claim shall be made until the     discovery of the vein or lode within the limits of the claim      located.'

By section 2322 (sec. 4618) locators of mining locations on the public domain—

'so long as they comply with the laws of the United States,     and with state, territorial, and local regulations not in      conflict with the laws of the United States governing their      possessory title, shall have the exclusive right of      possession and enjoyment of all the surface included within      the lines of their locations, and of all veins,' etc.

'The miners of each mining district may make regulations not     in conflict with the laws of the United States, or with the      laws of the state or territory in which the district is      situated, governing the location, manner of recording, amount      of work necessary to hold possession of a mining claim,      subject to the following requirements: The location must be      distinctly marked on the ground so that its boundaries can be      readily traced. * *  * On each claim located after the tenth      day of May, eighteen hundred and seventy-two, and until a      patent has been issued therefor, not less than one hundred      dollars' worth of labor shall be performed or improvements      made during each year. On all claims located prior to the     tenth day of May, eighteen hundred and seventy-two, ten      dollars' worth of labor shall be performed or improvements      made by the tenth day of June, eighteen hundred and      seventy-four, and each year thereafter, for each one hundred feet in length along the      vein until a patent has been issued therefor; but where such      claims are held in common, such expenditure may be made upon      any one claim; and upon a failure to comply with these      conditions, the claim or mine upon which such failure      occurred shall be open to relocation in the same manner as if      no location of the same had ever been made, provided that the      original locators, their heirs, assigns, or legal      representatives, have not resumed work upon the claim after      failure and before such location.'

Section 2325 (section 4622) and section following permit a patent to be obtained for a mineral claim, and regulate the procedure. By section 2325 the applicant for patent is required (among other things) to file 'a certificate of the United States surveyor general that five hundred dollars' worth of labor has been expended or improvements made upon the claim by himself or grantors,' and, upon his compliance with this and other requirements, if after publication of notice for 60 days no adverse claim is filed, or (section 2326 [section 4623]) such claim, having been filed, has proceeded to adjudication in a court of competent jurisdiction with result favorable to the applicant, upon a payment of $5 per acre and proper fees a patent is issued for the claim or such portion thereof as has been decided to be in the rightful possession of the applicant. By section 2329 (section 4628) placer claims are made subject to entry and patent under like circumstances and conditions and upon similar proceedings as are provided for vein or lode claims; the purchase price of placer claims being fixed by section 2333 (section 4632) at $2.50 per acre.

Under this legislation petroleum for many years was regarded as a mineral, although not specially mentioned as such, and claims to oil lands were disposed of by the Land Department under the provisions of law relating to placer claims, with a single exception afterwards overruled. Union Oil Co., 23 L. D. 222, decided August 27, 1896; Union Oil Co. (on review) 25 L. D. 351, decided November 6, 1897. It was in order to obviate the effect of the former of these two decisions that Congress passed the act of February 11, 1897 (29 Stat. 526, c. 216 [Comp. St. § 4635]), which declared:

'That any person authorized to enter lands under the mining     laws of the United States may enter and obtain patent to      lands containing petroleum or other mineral oils, and chiefly      valuable therefor, under the provisions of the laws relating      to placer mineral claims'

-with a proviso saving petroleum land theretofore filed upon, claimed or improved as mineral but not yet patented. See House Rep. No. 2655, 54th Cong. 2d Sess.; 29 Cong. Rec. pt. 2, p. 1409; Burke v. Southern Pacific R. R. Co., 234 U.S. 669, 678, 34 Sup. Ct. 907, 58 L. Ed. 1527.

Aside from the suggested effect of the act of 1903, it is clear that in order to create valid rights or initiate a title as against the United States a discovery of mineral is essential. Section 2320, Rev. Stat.; Waskey v. Hammer, 223 L. S. 85, 90, 32 Sup. Ct. 187, 56 L. Ed. 359. Nevertheless, section 2319 extends an express invitation to all qualified persons to explore the lands of the United States for valuable mineral deposits, and this and the following sections hold out to one who succeeds in making discovery the promise of a full reward. Those who, being qualified, proceed in good faith to make such explorations and enter peaceably upon vacant lands of the United States for that purpose are not treated as mere trespassers, but as licensees or tenants at will. For since, as a practical matter, exploration must precede the discovery of minerals, and some occupation of the land ordinarily is necessary for adequate and systematic exploration, legal recognition of the pedis possessio of a bona fide and qualified prospector is universally regarded as a necessity. It is held that upon the public domain a miner may hold the place in which he may be working against all others having no better right, and while he remains in possession, diligently working towards discoy ery, is entitled-at least for a reasonable time-to be protected against forcible, fraudulent, and clandestine intrusions upon his possession. Zollars v. Evans (C. C.) 5 Fed. 172, 173; Crossman v. Pendery (C. C.) 8 Fed. 693, 694; Johanson v. White, 160 Fed. 901, 88 C. C. A. 83; Hanson v. Craig, 161 Fed. 861, 863, 89 C. C. A. 55; s. c., 170 Fed. 62, 65, 95 C. C. A. 338; Gemmell v. Swain, 28 Mont. 331, 335, 72 Pac. 662, 98 Am. St. Rep. 570; New England, etc., Oil Co. v. Congdon, 152 Cal. 211, 92 Pac. 180; Whiting v. Straup, 17 Wyo. 1, 19, 23, 95 Pac. 849, 129 Am. St. Rep. 1093; Phillips v. Brill, 17 Wyo. 26, 38, 95 Pac. 856.

And it has come to be generally recognized that while discovery is the indispensable fact and the marking and recording of the claim dependent upon it, yet the order of time in which these acts occur is not essential to the acquisition from the United States of the exclusive right of possession of the discovered minerals or the obtaining of a patent therefor, but that discovery may follow after location and give validity to the claim as of the time of discovery, provided no rights of third parties have intervened. Mining Co. v. Tunnel Co., 196 U.S. 337, 345, 348-352, 25 Sup. Ct. 266, 49 L. Ed. 501; Weed v. Snook, 144 Cal. 439, 443, 77 Pac. 1023.

In the California courts the right of a locator before discovery while in possion of his claim and prosecuting exploration work is recognized as a substantial interest, extending not only as far as the pedis possessio but to the limits of the claim as located; so that it a duly qualified person peaceably and in good faith enters upon vacant lands of the United States prior to discovery but for the purpose of discovering oil or other valuable mineral deposits, there being no valid mineral location upon it, such person has the right to maintain possession as against violent, fraudulent, and surreptitious intrusions so long as he continues to occupy the land to the exclusion of others and diligently and in good faith prosecutes the work of endeavoring to discover mineral thereon. Miller v. Chrisman, 140 Cal. 440, 447, 73 Pac. 1083, 74 Pac. 444, 98 Am. St. Rep. 63 (case affirmed 197 U.S. 313, 25 Sup. Ct. 468, 49 L. Ed. 770; Weed v. Snook, ubi supra; Merced Oil Mining Co. v. Patterson, 153 Cal. 624, 625, 96 Pac. 90; s. c., 162 Cal. 358, 361, 122 Pac. 950; McLemore v. Express Oil Co., 158 Cal. 559, 562, 112 Pac. 59, 139 Am. St. Rep. 147.

To what extent the possessory right of an explorer before discovery is to be deduced from the invitation extended in section 2319, to what extent it is to be regarded as a local regulation of the kind recognized by that section and the following ones, and to what extent it derives force from the authority of the mining states to regulate the possession of the public lands in the interest of peace and good order, are questions with which we are not now concerned. Nor need we stop to inquire whether the right is limited to the ground actually occupied in the process of exploration, or extends to the limits of the claim. These questions and others that suggest themselves are not raised by the present record, which concerns itself solely with the rights asserted by the defendant under the act of 1903. Whatever the nature and extent of a possessory right before discovery, all authorities agree that such possession may be maintained only by continued actual occupancy by a qualified locator or his representatives engaged in persistent and diligent prosecution of work looking to the discovery of mineral.

But, by the provisions of the Revised Statutes above cited, a discovery of mineral by a qualified locator upon unappropriated public land initiates rights much more substantial as against the United States and all the world. If he locates, marks, and records his claim in accordance with section 2324 and the pertinent local laws and regulations, he has, by the terms of section 2322, an exclusive right of pos session to the extent of his claim as located, with the right to extract the minerals, even to exhaustion, without paying any royalty to the United States as owner, and without ever applying for a patent or seeking to obtain title to the fee; subject, however, to the performance of the annual labor specified in section 2324, for upon his failure to do this the claim is open to relocation by others at any time before resumption of work upon it by the original locator.

If not content to rest upon the right conferred by section 2322, the qualified locator may obtain a patent for his claim by complying with the conditions prescribed by sections 2325 and 2326.

But, even without patent, the possessory right of a qualified locator after discovery of minerals upon the claim is a property right in the full sense, unaffected by the fact that the paramount title to the land is in the United States (Rev. Stat. § 910 [Comp. St. § 1533]), and it is capable of transfer by conveyance, inheritance, or devise (Forbes v. Gracey, 94 U.S. 762, 763, 767, 24 L. Ed. 313; Belk v. Meagher, 104 U.S. 279, 283, 285, 26 L. Ed. 735; Del Monte Mining Co. v. Last Chance Mining Co., 171 U.S. 55, 78, 18 Sup. Ct. 895, 43 L. Ed. 72; Elder v. Wood, 208 U.S. 226, 232, 28 Sup. Ct. 263, 52 L. Ed. 464).

Actual and continuous occupation of a valid mining location based upon discovery is not essential to the preservation of the possessory right. The right is lost only by abandonment, as by nonperformance of the annual labor required by section 2324. Belk v. Meagher, 104 U.S. 279, 283, 284, 26 L. Ed. 735; Black v. Elkhorn Mining Co., 163 U.S. 445, 450, 16 Sup. Ct. 1101, 41 L. Ed. 221; Farrell v. Lockhart, 210 U.S. 142, 147, 28 Sup. Ct. 681, 52 L. Ed. 994, 16 L. R. A. (N. S.) 162; Bradford v. Morrison, 212 U.S. 389, 394, 29 Sup. Ct. 349, 53 L. Ed. 564.

After this brief review of the mining laws there is little danger of mistaking the true intent and meaning of the act of Congress of February 12, 1903. Title 32, chapter 6, Revised Statutes, therein referred to, embraces the sections we have cited. And it is not to be doubted that the terms 'assessments' and 'annual assessment labor' refer to the annual labor required by section 2324, that being commonly called by miners the 'annual assessment' or the 'assessment work,' and so described in many judicial opinions and in at least two acts of Congress, passed respectively November 3, 1893 (28 Stat. 6, c. 12), and July 2, 1898 (30 Stat. 651, c. 563). See El Paso Brick Co. v. McKnight, 233 U.S. 250, 255, 256, 258, 34 Sup. Ct. 498, 58 L. Ed. 943, L. R. A. 1915A, 1113.

And it is important to observe that in these acts of Congress, as in the practice of miners, 'assessment work' had nothing to do with locating or holding a claim before discovery. On the contrary it was the condition subsequent prescribed by Congress to be performed in order to preserve the exclusive right to the possession of a valid mineral and location upon which discovery had been made. McLemore v. Express Oil Co., 158 Cal. 559, 563, 112 Pac. 59, 139 Am. St. Rep. 147. Hence the declaration in the act of 1903 that where oil lands are located as placer mining claims 'the annual assessment labor upon such claims may be done upon any one of a group of claims lying contiguous and owned by the same person,' indicates simply the legislative purpose that the necessary assessment work if done upon one of the group should have the same effect as if properly distributed among the several claims; that is to say, the effect of preserving the exclusive right of possession and enjoyment conferred by section 2322 with respect to unpatented claims based upon a previous discovery of oil.

'Group assessment work' did not originate with the act of 1903. From an early period the economy of operating contiguous mines or claims by a single system was recognized. In section 5 of the act of May 10, 1872, (17 Stat. 92, c. 152), now section 2324, Rev. Stat., it was provided with respect to the annual labor that 'where such claims are held in common, such expenditure may be made upon any one claim.' Questions as to the precise meaning of this naturally arese, and it was determined that it applied only to contiguous claims, and that the work must be done for the common benefit or for the purpose of developing all the claims. Smelting Co. v. Kemp, 104 U.S. 636, 655, 26 L. Ed. 875; Jackson v. Roby, 109 U.S. 440, 444, 3 Sup. Ct. 301, 27 L. Ed. 990; Chambers v. Harrington, 111 U.S. 350, 353, 4 Sup. Ct. 428, 28 L. Ed. 452; Anvil Hydraulic Co. v. Code, 182 Fed. 205, 206, 105 C. C. A. 45.

It is plain that the draftsman of the act of 1903 had this settled rule in mind, for the bill as introduced, with enacting clause in the same form as finally passed, had this proviso:

'Provided, that said labor will benefit or tend to the     development of such contiguous claims.'

By committee amendment in the House the words 'benefit or' were struck out, and after the word 'development' the following were inserted, 'or to determine the oil bearing character,' presumably regarded as peculiarly appropriate to oil lands. House Rep. No. 2657, 57th Cong. 1st Sess.; Senate Rep. No. 2756, 57th Cong. 2d Sess.; 36 Cong. Record, pt. 1, p. 83; pt. 2, pp. 1561, 1682. The committee report contains this explaination of the object of the bill:

'The law now requires that upon each mining claim there shall     be performed each and every year at least $100 worth of work. The courts have held with reference to lode-mining claims     that this annual labor may be done upon any one of a group of      mining claims, provided the said work tends to benefit the      entire group, but the Land Department of the government seems      to be of opinion that the annual labor upon placer-mining      claims must be done upon each of said claims. There is good     reason for this holding when applied to the ordinary placer      claim containing deposits of gold, because in such case the      gold lies upon the surface or near the surface, and general      development work being upon and near the surface does not      tend to benefit other claims than the one upon which the work      is actually done, but in the case of oil-mining claims the      situation is different. It is neces sary to bore wells for great depths in order to determine whether     or not oil exists in paying quantities. These wells are     expensive, and it is the opinion of the committee that the      industry itself will be more benefited by permitting the      owner to spend his means in sinking a single well in order to      demonstrate the possibilities of the property than it would      to require him to distribute his means among several claims. In other words, it is better that $500 should be spent in one     place until the character of the oil deposit has been      demonstrated than it is to require the same amount of money      to be spent in five different places.'

The argument for plaintiff in error, while conceding the general rule to have been established that assessment work could avail nothing except when performed upon or for the benefit of a claim in which a discovery of mineral already had been made, insists that the difficulty and great expense attendant upon the sinking of wells to make discovery of oil made it evident that the application of the doctrine was a great burden upon the oil miner; and that this, having been brought to the attention of Congress was the moving cause of the enactment of the act of February 12, 1903. This contention finds no support in the enacting clause, and but little in the proviso. It gives to the somewhat indefinite language of the proviso an effect that would greatly enlarge instead of confining the meaning of what precedes, and would render the statute a radical departure from the previous policy of the mining laws. The legislative history of the act, as well as its phraseology, fails to support the contention.

Nor is there great force in the suggestion that with respect to oil claims upon which discovery already had been made there was no need to encourage the doing or work tending to determine their oil-bearing character, because this would already have been established by the antecedent discovery. It hardly is necessary to say that the discovery of oil upon several contiguous claims does not render it wholly unimportant that assessment work thereafter done by the common owner upon one of the claims, in order to be credited to him as if it had been distributed among the several claims, shall be of general benefit to the group. This is the object of the act, and except as the proviso specifically declares 'determination of oil-bearing character' to be of benefit to the contiguous claims, little is added to the effect of section 2324, Rev. Stat., respecting group assessment work. But we cannot declare a determination of the 'oil-bearing character' of a claim upon which oil already has been discovered to be a matter so idle as to require us to seek a strained construction of the statute.

In our opinion the act shows no purpose to dispense with discovery as an essential of a valid oil location or to break down in any wise the recognized distinction between the pedis possessio of a prospector doing work for the purpose of discovering oil and the more substantial right of possession of one who has made a discovery and performs annual development work to maintain his right to the mineral until patent is obtained. Hence the Supreme Court of California did not err in overruling the contention that by force the act discovery work upon the 'Sampson claim' having a tendency to determine the oil-bearing character of the contiguous 'Rawley-Schley claim' conferred upon plaintiff in error inchoate right in the latter claim, of which it was not in possession and upon which it had made no discovery.

Judgment affirmed.