232 F. 619 | S.D. Cal. | 1916
(sitting 'by special assignment). These cases involve closely related questions, were heard together, and it will be convenient to likewise dispose of them, noticing in the course of the /opinion wherein they differ, if at all. They are suits in equity brought by the government for decrees that the several tracts of land particularly described in the bills, together with the mineral contents thereof, are the property of the United States, free from all claims of the defendants, or any of them, and for an injunction restraining the
The lands in controversy are mineral (petroleum) lauds of the United States situate kqthe Maricopa oil fields in California. They are included in presidential order of September 27, 1909, temporarily withdrawing all public lands, without particular designation, within an area of about 3,000,000 acres, the larger part of which was privately owned, “from all forms of location, settlement, selection,, filing, entry, or disposal,” under the mineral laws of the United States, “in aid of proposed legislation affecting the use and disposition of the petroleum deposits in the public domain.” This order, which was subsequently ratified and confirmed on July 2, 1910, subject to the provisions, limitations, exceptions, and conditions contained in the act of Congress approved June 25, 1910 (36 Stat. 847), was held in all respects valid by the Supreme Court in February, 1915, in U. S. v. Midwest Co., 236 U. S. 459, 35 Sup. Ct. 309, 59 L. Ed. 673. No discovery of oil had been made on any of the lands at the date of the first withdrawal order, nor was any one in possession thereof at that time actually engaged in work looking to a discovery. In suits 47, A-2, A-3j and A-30 sundry parties had, prior thereto, posted on the laud involved in each of the suits and caused to be recorded a notice claiming a location of the land as a petroleum placer mining claim under the mining laws of the United States, but no discovery of oil had been made or any work done thereon, except some so-called assessment work, which consisted in excavating sump holes, building small cabins, and the erection of a couple of derricks on one of the tracts, which derricks were never used or equipped for drilling, but were subsequently taken down and removed to other parts of the premises. After the first withdrawal order, parties claiming as lessees of the so-called locators in the four cases referred to, and in the other two without any previous notice of location, commenced drilling 'operations in each of the tracts involved in the fall of 1909 or early in 1910, and continued thereafter until the discovery of oil, which they were extracting and disposing of when these suits were commenced against the parties in possession, the so-called locators, the purchasers of the oil, and others.
The bills set out the title of the government, the character of the land, the withdrawal orders, the entry of the defendants in violation thereof, and allege that they are in possession of the property, and extracting the oil therefrom, and disposing of it, to the irreparable damage of the plaintiff. The bills pray for injunctions, decrees, and accounting, as stated. The defendants admit government’s title, but assert the right of the locators and the operating companies to the possession of the properties, and to extract and dispose of the oil, under the mining laws of the United States and the act of Congress of June 25, 1910.
“That the rights of any person who, at the date of any order of withdrawal heretofore or hereafter made, is a bona fide occupant or claimant of oil or gas bearing lands, and who, at such date, is in diligent prosecution of work leading to discovery of oil or gas, shall not be affected or impaired by such order, as long as such * * * claimant shall continue in diligent prosecution of said work.”
To come within this provision it is essential that the party claiming the benefit thereof was a bona fide occupant or claimant at the date of the withdrawal, and at that time in diligent prosecution of work leading to a discovery. Now, the evidence shows, and it is undisputed, that the defendants in none of the cases were engaged in the prosecution of work leading to discovery of oil or gas at the date of the first withdrawal order, or in fact doing any work at all. Indeed, no work had been done on any of the tracts for months prior to the order, and then only so-called assessment work, which was of no effect as against the government, since assessment work must follow, and not precede, discovery.
It is urged, however, that they had in good faith signified an intention, by filing and recording notices and doing so-called assessment work, to enter the lands under the mineral laws, and that they would have proceeded with work looking to discovery, but for their inability to obtain water for use in their boilers and for drilling purposes. The lauds in controversy are situate in an arid section of the state, and until late in 1909 or early in 1910 it was difficult, if not impracticable, to obtain water in sufficient quantities for successful drilling; but I do’ not think that fact brings the cases within the terms of the law.
“Diligent prosecution of tile work of discovery does not mean tire doing of assessment work. It does not' mean the pursuit of capital to prosecute •the work. It does not mean any attempted holding, by cabin, lumber pile, or unused derrick. It means the diligent, Continuous prosecution of the work, with the expenditure of whatever money may be necessary to the end in view.” McLemore v. Express Oil Co., supra.
The Supreme Court of Nevada, in Ophir Silver Mining Company v. Carpenter, 4 Nev. 538, 97 Am. Dec. 550, after saying, “Diligence is defined to be the ‘steady application to business of any kind, constant effort to accomplish any undertaking,’ ” adds:
It “is that constancy or steadiness of purpose or labor which is usual with men engaged in like enterprises, and who desire a speedy accomplishment of their designs; such assiduity in the prosecution of the enterprise as will manifest to the world a bona fide intention to complete it within a reasonable time. It is the doing of an act, or series of acts, with all practical expedition, with no delay, except such' as may be incident to the work itself.”
Now, the mere effort, however diligent, to obtain water for drilling purposes, or the inability to do so, which is all the evidence for the defendants tends to show, cannot be held to constitute diligent prosecution of work looking to discovery any more than the pursuit of capital to prosecute such work, or a lümber pile or unused derrick, can be held to constitute such diligence. The question is not whether the defendants were able to prosecute the work of discovery at the date of the withdrawal order, but whether they were actually engaged in such work at that tirne.
There is some force in this argument, but I think it is answered by the language of the act and the decision in the Midwest Case. It was held in the Midwest Case that the President had authority by long
It is also insisted that the withdrawal order of September, 1909, did not affect the right to explore for oil in the withdrawn lands, and, after discovery, to extract and dispose of the same, but only the right to enter, locate, or purchase such lands. The language of the order, as well as its history and purpose, clearly negatives such contention. Its manifest object, as its language plainly shows, was to preserve the petroleum in the lands, in order to subserve the public interest as the President then saw it. The lands were valuable only for their mineral contents, and the express purpose of the withdrawal order was to preserve such contents until Congress should provide for their disposition. When the lands were withdrawn, they ceased to be public lands of the United States within the meaning of the mining laws, and hence not open to exploration or discovery under such laws. I conclude, therefore, that in view of the withdrawal order of September 27, 1909, and the Midwest Case, the defendants have no right, title, or interest in or to the property in controversy, or possession thereof, or its mineral contents, which they can successfully assert as against the government, and this brings me to the question of jurisdiction and the relief to which the plaintiff is entitled in these suits.
There is much apparent confusion in the adjudged cases as to when and under what circumstances a court of equity will assume jurisdiction at the suit,of a party out of possession to determine title and right to possession of mining property. These questions were considered by Mr. Justice Wolverton in Bishop v. Baisley, 28 Or. 119, 41 Pac. 936, and the doctrine deduced by him from an examination of the authorities may be summarized as follows: Where the title is legal, and not equitable, and is seriously in dispute, a court of equity will not assume jurisdiction by one out of possession, except for a temporary purpose, to abide the adjudication of title by an action at law, and a perpetual injunction will not be granted in such a case, as that would be to try title in a court of equity, when the remedy is purely legal. But where the legal title and right to possession is clear, a perpetual injunction will issue to restrain trespass and waste, and a court of' equity will grant such other relief as may be consistent with equity and right. He says:
“The injunctive jurisdiction of courts of equity will be freely exercised to prevent trespass upon mines, as the digging and removing ores therefrom and extracting and disposing of their products reaches to the very substance and value of the estate, and goes to the destruction of the very essence thereof. A continued trespass of such a character would almost inevitably lead to a multiplicity of actions for damages. 2 Beach on Injunction, § 1155. The general rule requiring the plaintiff to come with an uncontroverted legal title extends also to trespass against mines, but is relaxed somewhat in the case of irreparable injury going to the substance of the estate.”
And this I take to be the true rule.. Where there is a serious controversy as to the title, and the party in possession is holding adversely, the plaintiff’s remedy is at law, and not in equity. Johnston v. Corson Gold Mining Co., 157 Fed. 145, 84 C. C. A. 593, 15 L. R. A. (N. S.) 1078. For “suits in equity shall not be sustained in the courts of the United States in any case where a plain, adequate and complete remedy may be had at law.” R. S. § 723. But where the title and right to possession is clear, and th-e defendant is wrongfully in possession, extracting and removing the mineral contents, thus destroying the very substance of the estate, a court of equity will assume jurisdiction to prevent such waste, and, having done so, will determine the rights of the parties before it. It is true the plaintiff in such case has a remedy at law to recover possession ahd damages for the trespass, but “it is not enough that there is a remedy at law. It must be plain and adequate, or, in other words, as practical and efficient to the ends of justice, and its prompt administration, as a remedy at equity.” Payne v. Hook, 7 Wall. 430, 19 L. Ed. 260; Toledo Traction, Light & Power Co. v. Smith (D. C.) 205 Fed. 643; Magruder v. Belle Fourche Valley Water Users’ Ass’n, 219 Fed. 72, 133 C. C. A. 524.
“Threatened and continuous injuries to mines, quarries, timber growing upon lands, buildings located thereon, or other improvements of a permanent character, are enjoined, because, as has been said, such acts ‘alter the character of the property, and also tend to destroy it, and occasion irreparable loss and damage.’ * * * In such cases the threatened injuries are to the res, and diminish the value of the property itself, and an injunction will be granted to prevent the continuing waste or continuing trespass, although the plaintiff is not in possession, and although the legal title has not been settled or questioned by an action at law. * * * And having obtained jurisdiction for that purpose, the court may, for the purpose of preventing a multiplicity of suits, retain it for further relief, and may remove a cloud upon the title, quiet the title, and determine the right of possession.”
A court of equity, therefore, has jurisdiction to restrain the defendants from destroying the value of the properties in controversy, by extracting and removing the oil therefrom, and will retain the suits for an accounting and satisfaction for the injuries already done. El Dora Oil Co. v. U. S., 229 Fed. 946, - C. C. A. -; Graves v. Ashburn, 215 U. S. 331, 30 Sup. Ct. 108, 54 L. Ed. 217; Coosaw Min. Co. v. South Carolina, 144 U. S. 550, 12 Sup. Ct. 689, 36 L. Ed. 537; U. S. v. Flint, 4 Sawy. 78, Fed. Cas. No. 15,121; U. S. v. Guglard et al. (C. C.) 79 Fed. 21; Light v. U. S., 220 U. S. 523, 31 Sup. Ct 485, 55 L. Ed. 570; Big Six Dev. Co. v. Mitchell, 138 Fed. 279, 70 C. C. A. 569, 1 L. R. A. (N. S.) 332, and authorities there cited; U. S. v. Bernard, 202 Fed. 728, 121 C. C. A. 190; U. S. v. Mackey (D. C.) 214 Fed. 137; Wood v. Braxton et al. (C. C.) 54 Fed. 1005; Peck v. Ayers & Lord Tie Co. et al., 116 Fed. 273, 53 C. C. A. 551; U. S. v. Brighton Ranche Co. (C. C.) 26 Fed. 218.
In most of the cases there are substantially three classes of defendants: (1) The parties who drilled wells in the properties in controversy, and extracted and marketed the oil therefrom, and were threatening to continue.to do so, known as the operating companies; (2) the alleged locators, under whom the operating companies claim; and
The cases against the operating defendants must go to a master to ascertain and report the amounts, if any, the plaintiff is entitled to recover against them. It is proper, therefore, that the court should indicate the rule by which, in its judgment, the master should be governed in his consideration of the matter. For the government it is contended that the operating companies must be treated as willful trespassers, and required to account to it for all oil extracted at its market value, with no deductions whatever for money expended for sinking wells, or otherwise developing and improving the properties, or for the cost and expenses of extracting and marketing the oil, and that in addition it is entitled to take and appropriate all wells, casings, derricks, machinery, tools, and appliances and other property put on the lands by the defendants. This view does not favorably address itself to a court of equity. Equity seeks compensation for the wrong done, and not to punish the wrongdoer. Turner v. Seep (C. C.) 167 Fed. 652. As said by Judge Gilbert in United States v. Bernard, 202 Fed. 732, 121 C. C. A. 190, which was a suit to enjoin trespass on government land and for damages:
“In actions of trespass, where the injury is wanton or malicious, or gross and outrageous, or is done against the protest of the plaintiff, or in known violation of the law, the court may permit the jury to add to the measured compensation of the plaintiff further damages by way of punishment or example, the amount thereof to be left to the jury’s discretion, in view of the special, peculiar circumstances of the ease. But the function of a court of equity goes no farther than to award, as incidental to other relief, or in lieu thereof, compensatory damages. It has no authority to assess exemplary damages. By applying to a court of equity for relief, the complainant waives all claims to vindictive damages.”
Wlien it (the sovereign) “sues in equity as a private suitor on a cause of action relating to its proprietary interests, it is held to he affected by those •equities which are recognized as fundamental in controversies between private parties. And why should this not be so? It derogates from the dignity and character of the government to suppose that, formed as it is to secure impartial justice between individuals, it may nevertheless, in the conduct of its own affairs, without regard to the principles it represents, perpetrate upon its citizens wrongs which it would promptly condemn if practiced by one of them upon another.”
It is therefore unnecessary to examine the numerous cases cited discussing when a trespass upon land will be regarded as innocent or willful, or the measure of damages in an action at law therefor, or to attempt to reconcile the apparent conflict in the opinions, or to deduce any general rule therefrom, because these suits are to be decided upon principles of justice, right, and fair dealing, under all the facts, and not according to the strict rules applicable to actions at law.
. Acting on this advice, honestly and in good faith, without any intention of wronging the government, they developed the properties, expending large sums of money in so doing, the aggregate in tire six cases in question amounting to more than $1,000,000. By their labor and expenditures they have demonstrated the mineral character of the lands, and increased their market value from $2 or $3 an acre to $2,-000 or $2,500 an acre. What was before a barren, arid waste is now demonstrated valuable mining properties, with numerous oil-producing wells thereon, and that through the efforts and expenditures of the defendants. The government agents and officers charged with the disposition of the public lands knew of tire possession and development of the properties, and made no objection thereto, and while this does not estop the government from now asserting title or right to the possession (Pine River Logging Co. v. U. S., 186 U. S. 279, 22 Sup. Ct. 920, 46 L. Ed. 1164), it should not be overlooked by a court of equity in considering the character of the defendants’ possession, or the damages which they should be required to pay. .
It is true the defendants, as laymen, are presumed to have known the law, and that the withdrawal order was valid, although many of the leading members of the California bar, and five of the ten federal judges called upon to consider the question judicially, apparently did not, and even the Executive himself was in doubt as to his authority to make the order. The maxim that every man knows the law applies to defendants, but there is a marked difference between those who recklessly, or with actual intent to rob others, trespass upon their property, and those who, acting on the advice of counsel, trespass by mistake, with no evil purpose, but with an honest belief that they have a right to do so. “One who acts in good faith, upon the erroneous advice of reputable counsel upon questions of legal right concerning which a layman could hardly have actual knowledge, is not chargeable with bad faith, or with a willful intent to commit a wrongful act because his counsel was mistaken in his view of the law.” U. S. v. Homestake Min. Co., 117 Fed. 481, 54 C. C. A. 303; U. S. v. St. Anthony R. R. Co., 192 U. S. 524, 24 Sup. Ct. 333, 48 L. Ed. 548; U. S. v. Mullan Fuel Co. (D. C.) 118 Fed. 663. The defendants were not willful looters of the public domain, nor reckless trespassers thereon. They acted on the advice of reputable counsel, expended their money and labor in good faith, relying upon a law of the United
. The value of the oil taken is to be ascertained by its market value at the time it was used or disposed of by the defendants, less the cost of extracting and marketing the same', excluding from such costs the work of sinking wells, development or improvement, or in discovering or reaching the oil. Hall v. Abraham, 44 Or. 481, 75 Pac. 882. In Turner v. Seep (C. C.) 167 Fed. 650, and other cases (see Dartmouth College v. Paper Co. [C. C.] 132 Fed. 92), the courts have held that the damages to be recovered from an innocent trespasser on mineral land is the value of the mineral in the ground at the time it was taken, determined by the usual and customary royalty its production would have afforded the owner. This result depends to some extent on the form of the action, and so far as I have been able to ascertain in most of the cases in which this rule has been applied the defendants were either in possession claiming under the owner or through inadvertence or mistake. Here the possession was intentional and without the consent and against the will of the government, and therefore the defendants should not be permitted to reap a profit from their transaction. U. S. v. Hammond (D. C.) 226 Fed. 849. They should be allowed, however, to set off against the damages properly chargeable to them the value of any permanent and useful improvements to the property made by them, such as producing wells, permanent buildings, and the like, and should be permitted to remove from the premises all tools, boilers, engines, and other movable machinery or equipment which they placed thereon during their occupation thereof.
The properties have been for some time and are now being operated by a receiver, and the oil extracted by him should be awarded to the complainant; but if he has used or is now using any tools, appliances, or equipment belonging to the defendants, he should he required to account to the owner for the fair value of such use, and for the value of such parts thereof, if any, which have been consumed, destroyed, or worn out by him, and the defendants should not be charged with any part of the compensation or expenses of the receiver, or the costs of these suits. Midland Oil Co. et al. v. Turner, 179 Fed. 74, 102 C. C. A. 368.
“There can be no color of title in an occupant who does not hold under any instrument, proceeding, or law purporting to transfer to him the title or to give to him the right of possession. And there can be no such a thing as good faith in an adverse holding, where the party knows that he has no title,' and that, under the law, which he is presumed to know, he can acquire none-by his occupation.”
The defendants drilled the wells in question, and made the other' improvements with full knowledge of the withdrawal order and of all the facts in the case, and while they acted under an honest belief they had the right to extract the oil, they were nevertheless trespassers, and are not entitled to be recompensed by the government for the money expended in developing the properties in excess of the amount of its claim against them. The lands were included in the withdrawn area to preserve them intact and undeveloped, pursuant to a governmental policy to conserve their mineral contents for such future use and disposition as to it might seem proper. This purpose has been interfered with by the opening up of the oil reservoirs by the defendants, so that in many, if not all, instances it is now necessary to continue-to operate the wells and extract the oil, or lose it entirely. The government should not be required to pay for improvements so made without its consent and against its expressed will. The proposition that the defendants cannot be required to surrender possession until they have been reimbursed for permanent improvements is not within the-reason of the rule that one who seeks equity must do equity. U. S. v. Trinidad Coal & Coking Co., 137 U. S. 160, 11 Sup. Ct. 57, 34 L.Ed. 640.
In order, however, that all questions of accounting may, if possible, be settled in one hearing, the master will be directed to ascertain and report, in addition to the matters necessary for an accounting in. accordance with the views heretofore expressed, the reasonable cost and expense of drilling the several wells producing, or capable of producing, at tire time the receiver took charge, and of all wells, if any, partly drilled at that time and subsequently completed by the receiver, and any other permanent and valuable improvements put upon-the property, and the usual and customary royalty value of oil in place, if any such value existed at the time of the trespass.
It is insisted that suit No. A-31 is barred by section 2332, Revised Statutes (Comp. St. 1913, § 4631), which provides that where a person or association of persons, or “their grantors, have held and worked their claim [mining] for a period equal to the time prescribed by the-statute of limitations for mining claims of the state or territory where-the same may be situated, evidence of such possession and working of the claims for such period shall be sufficient to establish a right to a patent thereto under this chapter, in the absence of any adverse claim.” This is not a statute of limitations. It is a part of the chapter on Mineral and Mining Resources, and prescribes the evidence sufficient to-
Decree may be prepared accordingly.