United States v. Grass Creek Oil & Gas Co.

TRIEBER, District Judge (after stating the facts as above). Under the issues and proofs two questions arise. First. Was there a discovery of mineral oil by the defendants or those under whom they claim, on the lands in controversy, on or before the 6th day of May, 1914, when the withdrawal order of the lands was made by,the President? Second. Were the defendants at the date of said order of withdrawal bona fide occupants or claimants of these lands, engaged in diligent prosecution of work leading to the discovery of oil, and continuing thereafter in diligent prosecution of said work, until oil was discovered? [1] In view of the conclusions reached, we deem it unnecessary to determine the first issue, as a finding in favor of the defendants on either issue must result in the affirmance of the decree. It is a well-settled rule governing appellate courts that the findings of fact by a chancellor, although not conclusive upon appeal in equity, are presumptively correct and persuasive. Unless an error has occurred in the application of the law, or a serious mistake has been made in the application of the evidence, or the finding is clearly against the weight of the evidence, such findings will not-be disturbed. And this rule is especially applicable when the evidence was heard orally by the chancellor, and he thus had the opportunity to see the witnesses, observe their demeanor while testifying, judge of their candor and intelligence, and thus be able to determine their credibility and the weight to be given to their testimony. Harrison v. Fite, 148 Fed. 781, 78 C. C. A. 447; Coder v. McPherson, 152 Fed. 951, 82 C. C. A. 99; Mastin v. Noble, 157 Fed. 506, 85 C. C. A. 98; Harper v. Taylor, 193 Fed. 944, 113 C. C. A. 572; United States v. Marshall, 210 Fed. 595, 127 C. C. A. 231; Tobey v. Kilbourne, 222 Fed. 760, 138 C. C. A. 308. The new equity rules have made no change in these respects. American Rotary Valve Co. v. Moorehead, 226 Fed. 202, 141 C. C. A. 129. [2, 3] The act of Congress under which the withdrawal of these lands was made by the President on- May 6, 1914, is known as the “Pickett Act,” passed June 25, 1910 (36 Stat. 847, c. 421). That act, so far as it applies to the issues in this case, contains the following proviso: [485] “Provided, that the rights of any person who, at the date of any order of withdrawal heretofore or hereafter made, is the 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, so long as such occupant or claimant shall continue in diligent prosecution of said work.” As it is claimed on behalf of the appellant that the finding of the trial judge was not warranted by the evidence, and that he committed obvious errors in the application of the law, it becomes necessary to review the evidence. As we deem it unnecessary to determine the correctness of the finding on the first issue, that of the discovery of oil in 1913, we shall confine ourselves to the statement and consideration of the evidence relating to the other issue. Most of the facts on this issue are undisputed and not questioned by either party. As early as April, 1913, Mr. Harrison, a geologist and mining engineer, visited this section, now known as the “Grass Creek oil field”; that in July, 1913, he employed a civil engineer to locate the lands according to the government surveys; that thereupon he located a number of mineral claims as attorney in fact for certain parties, ail of whom were qualified to make the locations, among them the lands in controversy. He placed proper location notices on the land, had the location notices properly .recorded in conformity with the, laws of the United States, of the state of Wyoming, and .the rules of miners in that section. He established camps, and drilled for oil on these lands, continuing until September, 1913, when it is claimed oil was discovered. He thereupon sought to obtain the necessary capital to develop these locations. In April, 1914, he showed these lands to representatives of the defendant the Ohio Oil Company, with a view of leasing them to it, indicating to them what he called the “discovery holes,” which he had caused to be drilled in 1913, On April 19, 1914, he entered into an oral contract for the lease of these lands to the Ohio Oil Company, the agreement being made with Mr. McFadyen, who was field superintendent of the Ohio Oil Company. This agreement was made subject to the approval of the officers of the company. A few days thereafter, in April, 1914, this approval was obtained by telegraphic communication, whereupon Mr. McFadyen at once entered upon the lands and placed in charge thereof, as caretaker, one Virgil Jackson, who remained on the land as the employé of the Ohio Oil Company as caretaker from that time until after May 6, 1914. On May 4, 1914, Mr. McFadyen ordered the lumber and material, which was owned by the Ohio Oil Company and suitable for developing the land for oil, which was then in the town of Casper, to be sent immediately to Kirby, which is the nearest railroad station to these lands'. On May 5, 1914, Mr. Harrison returned to these lands, bringing with him tent equipments for the accommodation of the workmen, and which were immediately put up. On the same day, May 5, 1914, Mr. McFadyen, for the Ohio Oil Company, entered into a verbal contract with Mr. Good, at Ther-mopolis, to drill wells on these lands, and to proceed at once. Mr. Good shipped the drilling tools to the land on May 9, 1914, for the purpose of doing the work, and continued uninterruptedly until Oc [486] tober 1, 1914. He began actual drilling operations on the northwest quarter on July 1, 1914, as soon as the drilling apparatus had been erected and was in working order, finishing the well on July 24, 1914, when, having drilled to a depth of 1,047 feet, oil in commercial quantities was discovered. Actual drilling on the east half of the southwest quarter was begun by him on July 31, 1914, and continued until August 20, 1914, when oil was discovered in commercial quantities at the depth of 965 feet. On May 6, 1914, Mr. Harrison found some persons on these lands, who claimed to be locators under what is known as the Worland locations; but he treated them as' trespassers and compelled them to leave, which they did. In this connection it is proper to state that these Worland locators, although made parties defendant to this action, made no defense whatever, nor any claim to the lands by cross-complaint against appellees, thus abandoning any claim which they may have had. to the land in controversy, and by implication, at least, recognizing the superior rights of the Harrison locators, under whom ap-pellees claim. On the same day Mr. Harrison made contracts for supplies to be used in connection with the work of drilling for oil. An engineer of the Ohio Oil Company arrived on that day with a carpenter, who started the work of building the camps on that day and continued until they were completed. Tents were also put up on that day. In the meantime Mr. McPadyen was looking after the prompt loading and forwarding of the Ohio Company’s rigs, which had been ordered to be forwarded to the land. Prior to May 6, 1914, the Ohio Oil Company had expended in money and assumed liabilities under its contracts for work on the land, amounting to $2,000. The material and lumber for the camps arrived on May 7, 1914, and work was begun at once. On May 10, 1914, the cook house had been completed, and the car containing the equipment reached the railroad station nearest to these lands, and was placed on the siding for unloading. Knowledge of the withdrawal order did not reach the parties until May 14, or 15, 1914. Since then the Ohio Oil Company has expended for the development of these two tracts of land large sums of money; on the northwest quarter $11,-157.92, and on the other tract $10,152.97. Thereafter and before the institution of this suit there was spent by the Ohio Oil Company $629.36 in operating the wells and $15,000 for the construction of a 37,500-barrel steel storage tank. These sums do not include the expenditures made by Mr. Harrison prior to his contract with the Ohio Company. There was evidence introduced on the part of the government that on May 5, 1914, a Mr. Walker went on the land with a party of prospectors, and he did not see any work under way, that at a few points he found some three-inch pieces of pipe and a drill hole on each of, the quarters. A Mr. Orchard, another witness for the government, testified that he went on these lands March 25, 1914, and saw no improvements, except a few pieces of pipe sticking out of the ground. Mr.- Valentine, another witness for the government, testified that he was on these lands on May 5, 1914, and saw no one there, but saw a [487] piece of pipe sticking out of the ground on the southeast quarter, but nothing on the northwest quarter. In our opinion the evidence clearly justified the finding by the chancellor that, from the time Jackson was employed and placed on the land as caretaker for the defendant, the Ohio Oil Company was an occupant of the land. But it is claimed that, even if that is true, the defendant the Ohio Oil Company was not a bona fide occupant or claimant of these lands, in the diligent prosecution of work leading to the discovery of oil or gas on May 6, 1914, when the order of withdrawal was made. It is claimed that actual drilling operations were not commenced until July 1, 1914, on the northwest quarter, and on July 31, 1914, on the east half of the southwest quarter, and that until the actual drilling was begun there was no prosecution of work within the meaning of the act of Congress. We are of the opinion that this is too narrow a view to take of this statute. The enactment of this proviso by Congress could have had but one object in view, and that was to protect the rights of all persons who, at the date of an order of withdrawal, are occupying or claiming oil-bearing lands in good faith, for the purpose of acquiring them under the laws of the United States, and are diligently prosecuting the work leading to the discovery of oil. Before the enactment of this statute discovery of the mineral was essential to make a location. As frequently, in fact in most instances, prospecting was necessary in order to determine whether oil or gas are on the public lands, and large sums of money were necessarily expended to ascertain this fact, Congress by this proviso in the act of 1910 extended its protecting arm to those acting in good faith in an effort to ascertain whether there was oil or gas under them. In our opinion, when a citizen of the United States, in good faith enters upon public land for the purpose of discovering oil or gas, takes possession of the land by placing a caretaker thereon while he is taking proper steps to obtain the material necessary for the work of constructing the camps, enters into contracts for drilling, acting as expeditiously as possible in erecting camps and preparing for the drilling, spends money and enters into contracts whereby he becomes liable for sums of money to prosecute the work leading to the discovery of oil or gas, and as soon as it is possible, by the exercise of proper diligence, begins the work of drilling, and continues it diligently and expeditiously until oil is discovered in commercial quantities, he is within the protection of this proviso. As was stated in Borgwardt v. McKittrick Oil Co., 164 Cal. 650, 130 Pac. 417; although that case did not involve this act of Congress, but was a contest between claimants: “We do not mean to hold that such diligent prosecution of the work may not include such actual preparation for the same as the bringing to the claim of the materials necessary therefor.” The learned counsel for the government in fact concedes the correctness of this proposition. In his brief he says: “It is not contended by the government that the construction of a, camp might not be a part of such work, but that, unless such camp is for the purpose [488] of furnishing a base for drilling operations upon the claims in controversy, its construction is not diligent prosecution of work, so far as the claims in controversy are concerned.” The evidence dearly shows that the defendants brought themselves within this rule. Everything they did was “for the purpose of furnishing a base for drilling operations on the lands in controversy.” For what other purpose did they make these expenditures, and enter into contracts for erecting the camps, and the drilling by Mr. Good? The learned trial judge committed no error in the application of the law to the facts, as shown by the evidence, and the evidence sustains his findings beyond question. The decree of the District Court is affirmed..