What Is Mississippi Law on Mineral and Oil Leases?
Full Question:
Answer:
Generally, the case states that, in Mississippi, minerals are capable of severed ownership and may be owned separate and apart from the surface. The court had held that an oil and gas lease is a conveyance of an interest in land.
STOKELY v. STATE EX REL. KNOX, 149 Miss. 435 (1928)
115 So. 563
STOKELY v. STATE ex rel. KNOX, ATTY.-GEN., et al.[fn*]
No. 26721.
Supreme Court of Mississippi,
In Banc.
February 13, 1928.
[fn*] Corpus Juris-Cyc. References: Asylums, 5CJ, p. 1419, n. 48
New; Mines and Minerals, 40CJ, p. 1059, n. 12; Use, 39Cyc, p.
845, n. 72, 78.
MINES AND MINERALS. Board of trustees for state insane hospital
had no power to execute oil and gas lease on lands owned by
hospital (Hemingway's Code 1927, sections 5768-5797).
Board of trustees for the state insane hospital held to have
had no power, under Hemingway's Code 1927, sections
5768-5797 (Code 1906, sections 3187-3210), to execute an oil
and gas lease on lands owned by hospital, conveying the oil
and gas under land and granting exclusive right to conduct
operations to produce and dispose of the same, since the
effect thereof was a conveyance of an interest in land.
APPEAL from chancery court of Hinds county, First district; HON.
V.J. STRICKER, Chancellor.
Butler & Snow, for appellant.
What powers have the trustees of the institution under the
statutes? Going back to chapter 87, Code of 1892, it will be seen
that the institution is continued with all the privileges
conferred and duties enjoined upon it by law. We are then
required to look to prior acts to determine what privileges and
duties are enjoined by law, and we find that under the Code of
1871 and 1880, it is given "all the rights, powers and privileges
incident to such
Page 436
a body and necessary and proper to accomplish the end of its
organization." Under the Code of 1892, Code of 1906, and present
statutes, the corporation and trustees have all the powers which
they had under the Code of 1880 and the Code of 1871, in
connection with the management and control of the property of the
institution. Under all of these statutes, the trustees have
charge of the interests of the hospital. We do not mean by this
to say that under the Code of 1892, the trustees would have power
to "dispose of" the real property of the institution, meaning
thereby the right to convey the fee-simple title to the real
property of the institution.
What we do mean is that the institution may hold and use all
property belonging to it or which may be given to it, and that
the trustees have general charge of the interests of the hospital
and have general authority to manage and direct its affairs. We
desire to call the court's attention to the fact that the
contract in question is not a sale of real estate; second, that
it is not a lease of real estate. On the other hand, the
resolution recites that it is the privilege and duty of the
trustees to make the best use of the property; that it would be
to the best interest of the institution that a test be made for
oil and gas in this territory; that Mrs. Reader offers to make a
test of the hospital lands for oil and gas for seven-eighths of
the oil found; and it is adjudged to be to the best interest of
the institution to have the test made. Wells are to be located at
points not inimical to the interests of the institution. Mrs.
Reader is to bear all the expense incident to the enterprise; all
gas found (with immaterial exceptions) is to belong to the
institution and Mrs. Reader is to deliver to the institution,
without cost, one-eighth of the oil found. In other words, the
contract, as we see it, is one whereby the trustees, on behalf of
the institution employs Mrs. Reader (now Mrs. Stokely) without
cost or expense to the institution, to test out certain parts of
the large tract of land for oil and gas, and
Page 437
that too under a contract where the interests of the institution
are carefully guarded in such a way as not to interfere with the
ordinary operation of the institution.
It is true that the exclusive privilege is conferred upon Mrs.
Reader and her assigns to make the test, but this is a reasonable
requirement when it is understood that she was to make a large
outlay of money in making the test. The trustees of the
institution have the authority under the statute to determine the
use to which the lands shall be put.
We must remember that here we are dealing with the bare
question of power. No question of bad faith is involved. Here was
some thirteen hundred acres of land, only a small part of it
occupied by buildings and improvements. Comparatively a small
part occupied by vegetable gardens, farms, etc.; most of it not
actually needed for use by the institution. Under these
circumstances, would not the board have the power to lease out a
part of the land for pasturage and other purposes? Would it not
have the power to clear it up and bring it into a state of
improvement and cultivation; if by chance a mineral well or
spring was discovered or developed upon the property, would it
not have the right to dispose of water; would it not have the
right to do such other things and make such other uses of the
property as a reasonable prudent owner of the fee would make,
taking into consideration the character, extent and location of
the property? Is the board helpless? Can it do nothing but
produce chickens, eggs and pigs and vegetables and grain? We
submit that under the statute the board is given much broader
power than that contended for by the state.
The trustees are not to be likened to executors,
administrators, guardians or other statutory trustees, nor are
they to be likened to trustees created by will or other writing
to hold and manage the property for a limited time. They are more
nearly like in their powers, duties
Page 438
and responsibilities to the directors of a corporation. The
directors cannot alienate substantially all of the corporate
property, but when it comes to the control and management of the
corporate affairs so long as the stockholders do not limit their
authority, the directors have a very large power and discretion.
The rule is laid down as follows: "The board of directors or
trustees is the body usually intrusted with the authority to
conduct the business of the corporation, and it may be said that
the directors have plenary authority to transact all the ordinary
business of the corporation within the scope of its charter
powers. Unless their authority is restricted, and what they do
within the scope and purposes of the corporation the corporation
does — . . . The power so vested in the directors includes the
general power, unless restricted to transfer or convey the
property of the corporation both personal and real." 7 R.C.L.,
437; to the same effect see 14 C.J. 81, 83.
Little, if any, help is to be had from adjudicated cases. We
are dealing with fundamental general propositions. The board of
trustees is given general powers of management and direction of
the corporate affairs and property of the institution. The
institution has all the powers necessary and proper to accomplish
the end of its organization, and under the statutes the trustees
are given charge of the property and of the interests of the
institution and enjoined with the management and direction of its
affairs and authorized to do all things not contrary to law. A
broader discretion and power could hardly be conferred.
J.L. Byrd, Assistant Attorney-General, for appellees.
The invalidity of the contract or lease is based upon the
proposition that the trustees have only such power as is vested
in them by the act creating the board of trustees, or such power
as is necessarily implied, and that they cannot use the property
of the institution except for the benefit of the institution, and
the language
Page 439
of the statute creating the hospital and providing for the
trustees limits them to the use of all real estate for the
benefit or use of said institution. There are several acts with
reference to the state insane hospital beginning with the
original act establishing it, which is chapter 66, Laws of 1848;
and including chapter 12, Code of 1857; chapter 41, Code of 1871;
chapter 13, Code of 1880; section 2807, Code of 1892, and chapter
92, Code of 1906.
The appellant can only justify the actions of the board of
trustees in making the contract in question here on the theory
that it is for the best interest of the institution. We submit
that the chancellor was correct in holding that it was not for
the best interest of the institution and not within the scope of
the authority of the board of trustees. We can conceive of no
possible good whatever that could be gotten for the benefit of
the patients of the insane hospital by exploring for oil all over
the land on which the institution is situated. On the other hand,
it would be more like to disturb the patients and be a detriment
to them than a benefit. If oil were discovered on the lands the
money would not go to the insane hospital but would go to the
state treasury, and the Legislature might appropriate a part of
the money to the insane hospital, or it might not, all being a
matter of conjecture.
The trustees of his institution realized that they did not have
a right to lease the land for oil purposes, so they attempt to do
indirectly that which they could not do directly, and instead of
leasing the land they entered into what they call a contract for
exploration of the property for oil and gas, but which amounts to
exactly the same thing, and it puts a burden upon the property
which the court will readily see casts a cloud on the title to
the property. It is dressed up like a contract, but in truth and
in fact it is nothing but a lease for the exploration of the
land. In 40 C.J. 584, 991, the general
Page 440
rule is stated that where it is apparent that the intention in
making the contract was to lease the mining property it will be
so construed and not construed as a mere contract of employment.
The board of trustees had no authority whatever, either express
or implied, to make such a lease of contract, and that their
action was void.
Argued orally by Geo. Butler, for appellant, and J.A.
Lauderdale, for appellee.
COOK, J.
The state, on the relation of the Attorney-General and the
state insane hospital improvement, removal, and land sale
commission, instituted this suit in the chancery court of the
First district of Hinds county seeking to cancel a certain
contract or lease theretofore made by the trustees of the state
insane hospital with the appellant, Mrs. Ella Rawls Reader
Stokely, which said contract or lease had been assigned to the
Standard Shale Products Corporation. The bill sought to cancel
this contract or lease on two grounds: First, that the trustees
of the insane hospital had no authority to make such a contract
or lease. And second, that the lessee had not performed her part
of the said contract or lease.
The appellants filed an answer to the bill of complaint, and in
their answer demurred to that portion of the bill which charged
that the trustees were without authority to make the contract or
lease, assigning as grounds of demurrer, first, that the bill of
complaint states no fact showing or tending to show that the
board of trustees of the state insane hospital is without
authority to make the contract in question; and second, no
reasons are given, either of law or fact, for the invalidity of
said contract. The answer also averred that, on the date in
question:
"The state insane hospital then and there owned the lands
described in the bill of complaint, and then and there the
trustees of said hospital had the authority to use said property
for said institution, and were authorized
Page 441
to make such use thereof as a reasonable and prudent person would
make of similar property, taking into consideration the extent,
location, and nature of said property, and the needs and
requirements of said institution, and that acting in pursuance of
their authority the board of trustees of said hospital did on or
about the 5th day of December, 1924, enter into a contract with
the defendant, Ella Rawls Reader Stokely, then Ella Rawls Reader,
whereby and wherein the said Ella Rawls Reader agreed to test and
explore, at her own expense, for oil and gas on said property,
and to drill, at her own expense, on or before March 5, 1925, for
the purpose aforesaid, a well on said property, and in
consideration thereof the said hospital, acting by and through
its board of trustees, agreed to give the said Ella Rawls Reader
seven-eighths of all the oil found or produced or taken from said
land, and the said Ella Rawls Reader on her part further agreed
to deliver to the credit of said hospital, free of cost, in the
pipe line or tank in which she might connect her wells, the equal
of one-eighth of all oil produced and saved from said land, and
agreed to purchase from said hospital, with certain exceptions
not necessary here to set out, all gas found or produced or taken
from said property at and for the sum of eight cents per thousand
cubic feet, measured at the wells, payments to be made for said
gas every three months, all of which will more fully appear by
reference to the contract made Exhibit B to the bill of
complaint."
The appellees filed a motion to test the legal sufficiency of
that part of the answer above quoted, and, upon the hearing of
the demurrer and this motion, the demurrer was overruled and the
motion was sustained, the answer being adjudged insufficient in
point of law and not amendable, and from this decree this appeal
was granted to settle the principles of the case.
For an understanding of the question to be decided, the facts
necessary to be stated are substantially as follows:
Page 442
During the year, 1924, and for some time prior there to, the
state insane hospital owned a large tract of land consisting of
more than one thousand three hundred acres, lying immediately
north of the corporate limits of the city of Jackson, on which
was located the numerous buildings and the equipment of the
institution, and on which the various activities of the
institution, including stock, truck, and produce farms and
poultry yards, are located and carried on. On or about the 5th
day of December, 1924, the board of trustees of said hospital
passed the following resolution:
"Wherefore it appears that the `state insane hospital' has an
opportunity to secure a test for oil and gas in the territory
surrounding the hospital, and whereas, proceeding under the
privilege and duty to make the best use of said property enjoined
upon said trustees, it appears to the board of trustees that it
would be to the best interest of the state insane hospital that
such a test be made in this territory, and wherefore Ella Rawls
Reader offers to make a contract with said board to test the
state insane hospital lands for oil and gas for seven-eighths of
all the oil found on said lands and the privilege of purchasing
all the gas found on said lands, and wherefore it appears to the
best interest of the institution to have such a test made:
"Therefore, be it resolved that, in consideration of one dollar
and the promise and agreement on behalf of Ella Rawls Reader to
test for oil and gas the lands belonging to the `state insane
hospital,' the president and secretary of this board be and they
are hereby authorized and directed to execute a contract with
Ella Rawls Reader, whereunder and whereby she is to test the
territory at her own expense and to receive as her compensation
seven-eighths of all oil found on said state insane hospital
lands.
"It is understood and agreed, however, that in the initial
drilling for testing the lands of the institution such
Page 443
locations shall be at points not specially inimical to the
interest of the institution as may be decided by the
superintendent.
"Said contract to be identical with the one attached hereto.
"By signing of said contract by the president and secretary of
this board, the board of trustees approves said contract.
"This contract is expressly made assignable in whole and in
part."
The instrument executed in pursuance of the foregoing
resolution provided that, in consideration of Ella Rawls Reader
agreeing to test for oil and gas at her own expense, and the
consideration of her agreeing to drill for oil on some part of
the state insane hospital lands at her own expense, the trustees
of said hospital agreed to give to her seven-eighths of all the
oil found or produced or taken from the lands of said hospital,
the lands being therein specifically described.
In consideration of her employment to develop the said lands
for oil and gas, the said Ella Rawls Reader agreed to deliver to
the credit of the trustees, in the pipe lines or tanks to which
she might connect her oil wells, the equal of one-eighth part of
all oil produced and saved from said lands. It was further
provided that all gas found or taken from the property was to
belong to the trustees, but Mrs. Reader was given the right to
purchase all or any part of it (with certain immaterial
exceptions) at eight cents per thousand cubic feet, measured at
the well. It was further provided that no well should be located
within certain limited territory or nearer than two hundred feet
to any dwelling house or barn on said premises without the
written consent of the trustees, and the said Ella Rawls Reader
and her assigns were granted the exclusive privilege of entering
all of said lands for the purpose of drilling for oil or gas and
conducting and operating all business in connection therewith.
Page 444
The action of the court below upon the pleadings presents for
decision the question of whether or not the board of trustees of
the said hospital, who are charged with the control and
management of the institution and its property, was authorized to
execute the instrument which it is now sought to cancel.
The state insane hospital was established by chapter 66, Laws
of 1848, which appears in Hutchinson's Code, at page 306, section
6, and it was there provided that:
"As soon as the buildings of said asylum shall be ready to
receive patients, the Governor shall appoint five directors of
said asylum, who shall have full power to make and ordain all
such by-laws, rules, and regulations not inconsistent with the
Constitution of the state or this act, which they may deem
necessary and proper for the good government and management of
said asylum; and said directors shall appoint a medical
superintendent, and employ a steward and matron, and all such
nurses as they may think necessary; and shall make a full and
detailed report of all the affairs of said institution to each
session of the legislature; and shall hold their offices for two
years, and until their successors are appointed and qualified."
The institution was continued by chapter 12 of the Revised Code
of 1857, which provided for a board of trustees who "shall manage
and direct the concerns of the institution, and make all
necessary by-laws and regulations, not inconsistent with the
Constitution of the state or of this act, and shall have power to
receive, hold, dispose of, and convey all real and personal
property conveyed to them, by gift, devise or otherwise, for the
use of said institution," and who "shall have charge of the
general interests of the institution." Articles 1 and 2.
Section 2073 of the Code of 1871 provided that:
"The Mississippi State Lunatic Asylum, heretofore established,
shall continue to exist as a body politic and
Page 445
corporate, by that name and style, with all the rights, powers
and privileges incident to such a body, and necessary and proper
to accomplish the end of its organization, and may receive, hold
and dispose of, all real and personal property, conveyed to it."
While section 2079 of that Code provided that:
"The trustees shall manage and direct the affairs of the
asylum, and make all necessary by-laws and regulations for the
control and government of said institution, not inconsistent with
the Constitution and laws of this state."
Under the provisions of chapter 13, Code of 1880, the
institution and its board of trustees were continued in
substantially the same terms and with the same powers as were
fixed and conferred by the Code of 1871.
Section 2807, Code of 1892, reads as follows:
"The lunatic asylum heretofore established at Jackson, with the
annex for colored patients authorized by the Act of February 24,
1890, shall continue to exist as a body politic and corporate,
under the name of the `State Lunatic Asylum,' with all the
privileges conferred and duties enjoined on it by law; and it may
receive and hold and use, as required by law, all the property,
real and personal, belonging, or which may be given, to it for
the purposes of its establishment."
Section 2812 of the Code of 1892 provides that:
"The board of trustees shall have charge of the interests of
the asylum, and shall manage and direct its affairs and make all
proper by-laws and regulations for its control and government not
contrary to law."
Chapter 92 of the Code of 1906, and chapter 134, Hemingway's
Code 1927, continue the institution and its board of trustees
upon the same terms and with the same powers, in so far as they
are here material, as were fixed or conferred by the Code of
1892.
From an examination of these statutes it will be noted that
prior to the adoption of the Code of 1892, the institution,
Page 446
through its board of trustees, had the authority to dispose of
the real and personal property belonging to it, but since the
adoption of that Code there has been no express provision for the
trustees to sell or dispose of any of the property of the
institution.
The question as to whether or not, under the powers and the
authority conferred on the board of trustees "to have charge of
the interests of the asylum, and manage and direct its affairs,"
the board of trustees, taking into consideration the extent,
location, and nature of the property, and the needs,
requirements, and best interest of the institution, had the
implied power and authority to make and execute the instrument in
question will be determined by a consideration of the legal
effect of the instrument and the nature and character of the
estate conveyed thereby.
In consideration of the grantee agreeing to explore, test, and
develop the said lands for oil and gas, the instrument in
question granted to her, and her assigns, the exclusive right to
enter and possess the land itself, with no limitation upon the
number of wells the grantee might sink, or the extent of her
operations in that connection, and consequently no qualification
of her right of possession of all such parts of the surface of
the land as might be necessary to its full use by the grantee for
the purposes named, except that no well should be drilled on the
territory between the administration building and the building
adjacent thereto and the homes of the employees of the
institution, or nearer than two hundred feet to any dwelling
house or barn on said premises without the consent of the
trustees. Under this instrument the title to seven-eighths of the
oil in the land is vested in the grantee, while she is given the
exclusive right to purchase all gas produced therefrom at a fixed
and unchangeable price. Under the provisions of the instrument
the rights conferred thereby continue so long as oil or gas, or
either of them, is produced on said land,
Page 447
provided drilling was commenced by a fixed date. Under this
provision, the termination of the grant is wholly uncertain, and
the rights granted may endure forever.
From a practical standpoint, the rights of the grantee under an
instrument which conveyed the oil and gas under the land and
granted the exclusive right to conduct operations to produce and
dispose of the same, or under an instrument which leased,
demised, and let the land for the same purpose, would be no
other, different, or greater than the rights of the grantee in
the instrument here involved, and we are of the opinion that this
instrument is, in legal effect, a lease of the land and a
conveyance of an interest therein. It follows from the views
herein expressed that, in the absence of legislative authority so
to do, the board of trustees was without the power and authority
to make the contract in question.
For an able and elaborate discussion of an analogous question,
and a collation of the authorities which support the view herein
expressed, see the case of Stephens County v. Mid-Kansas Oil &
Gas Co., 113 Tex. 160, 254 S.W. 290, 29 A.L.R. 566.
The decree of the court below will therefore be affirmed.
Affirmed.
ETHRIDGE, J. (dissenting).
I think the construction placed upon the powers of the trustees
of the insane hospital is too narrow and restrictive, and that it
would be better to hold that the board of trustees had the power
to execute the contract here involved.
Section 5768, Hemingway's Code 1927 (section 3187, Code of
1906), provides that the state insane hospital heretofore
established shall continue to exist as a body politic and
corporate, with all the privileges conferred and duties enjoined
on it by laws; and it may "receive
Page 448
and hold and use, as required by law, all property, real and
personal, belonging or which may be given to it for the purposes
of its establishment." Section 5771, Hemingway's Code 1927
(section 3190, Code of 1906), as amended by the Laws of 1908,
chapter 183, creates a board of trustees and provides that the
control and management of the insane hospital shall be vested in
such board. Section 5773, Hemingway's Code 1927 (section 3192,
Code of 1906), provides that the trustees shall have charge of
the hospital, and shall manage and direct its affairs and make
all proper by-laws and regulations for its control and government
not contrary to law.
The word "use" in the first section above named is a word of
comprehensive signification, and, in my opinion, warrants the
contract here involved. This word is defined in 39 Cyc. 845, as
follows:
"Usefulness, utility, advantage, productive of benefit; the act
of employing anything or applying it to one's service,
application, employment, conversion to some purpose; the act of
being so employed or applied; application, employment, conversion
to some purpose, the act of using, employment, as of means of
material for a purpose; application to an end, particularly a
good or useful end; a synonym of benefit."
In the note to this volume cases are cited furnishing examples
of the meaning of the word "use," and at the top of note on page
846 it is said:
"It is the ancient definition for every form of beneficial or
equitable ownership. There is no more all-embracing term for any
estate which is less than legal" (citing Matter of Scharmann, 63
Misc. Rep. 640, 118 N.Y.S. 687). "In its general and popular
acceptation, the term refers to a temporary occupancy of land,
rather than to an estate in it, coupled with the power of
alienation. Fay v. Fay, 1 Cush. (Mass.), 93, 104."
The word "use" also has been defined in 29 Am. and Eng. Encyc.
of Law, p. 439, as follows:
Page 449
"To use is to make use of, to convert to one's service; to
avail one's self of; to employ; to put to a purpose, as to use a
plow, to use a chair, to use a book, to use time, to use flour
for food; to accustom to and habituate. One of common meanings of
the noun `use' is usefulness, utility, advantage, productive of
benefit. In the notes will be found a number of phrases in which
the word `use' or some of its derivatives which have been
constructed by the courts."
At the top of page 444 of this last-named book, under "Gifts,
Bequests, and Conveyances of Use of Property," I find the
following:
"As a general rule the use of a thing does not mean the thing
itself, but means that the user is to enjoy, hold, occupy, or
have in some manner the benefit thereof. If the thing to be used
is in the form of real estate, the use thereof is its occupancy
or cultivation, etc., or the rent which can be obtained for its
use. If it is money or its equivalent, generally speaking, it is
the interest which it will earn. A wider signification, however,
is sometimes given to the word,"
— and this book then states the nature of such enjoyment of
property by the tenant for life.
It must be remembered that the insane hospital owns land in fee
simple, and the evident purpose of the legislature was to permit
authority to use this land in any legitimate way for the benefit
of the hospital, and the legislature evidently only meant to
restrict the alienation of the corpus of the soil itself. The
word "use" therefore should be given its most liberal
signification to render the land of the highest practical
utilization to the institution.
The contract itself provides every reasonable safeguard to
protect the state or the institution in the carrying out of the
contract, and the terms therein imposed, or contracted for by the
parties, are as liberal to the institution as is customary in
such leases, as will appear
Page 450
from a statement in one of the cases collected on this
proposition. The majority opinion relies upon the case of
Stephens County et al. v. Mid-Kansas Oil & Gas Co., 113 Tex. 160,
254 S.W. 290, 29 A.L.R. 566. This case seems to hold that
oil lying beneath the surface is to be treated as minerals, such
as coal, iron, and the like. There is an important difference
between oil and gas lying under the soil and minerals of the
nature of coal, iron, etc. The latter are still, immovable, and
can be removed only by going into the earth upon some point of
the land and removing it. It cannot be removed in any other way.
There must be an invasion of the soil by the person taking it, in
order to remove it. While as to oil and gas, it may be taken from
the land by an adjoining landowner, who may bore for it on his
own land and draw or pump it from the reservoir, and thus extract
oil and gas not only that which lies under his own tract, but
also that which lies under contiguous tracts.
Beginning on page 586 of 29 A.L.R., there is a case note by the
editor in which are cited cases belonging to the majority rule
upon the subject. However, there is a minority rule on page 589
in which are cited cases decided by the United States Supreme
Court which hold differently, and which recognize a distinction
between oil and gas, and other minerals such as coal, iron, etc.;
and there are several cases which take the view that:
"Oil and gas are somewhat in the nature of animals ferae
naturae or of waters percolating through the earth, and are of
vagrant nature and liable to escape, and therefore that while in
place they are not the subject of an absolute, but only of
qualified, ownership until reduced to possession, and that there
can be no transfer of title to them before they have been so
reduced." Brown v. Spilman, 155 U.S. 665, 15 S.Ct. 245, 39
L.Ed. 304; Ohio Oil Co. v. Indiana, 177 U.S. 190, 20 S.Ct.
576, 44 L.Ed. 729, 20 Morr. Minn. Rep. 466; Walls v. Midland
Carbon Co., 254 U.S. 300; 41 S.Ct. 118, 65 L.Ed. 276;
Page 451
People's Gas Co. v. Tyner, 131 Ind. 277, 31 N.E. 59, 16
L.R.A. 443, 31 Am. St. Rep. 433, 17 Morr. Min. Rep. 481; Heller
v. Dailey, 28 Ind. App. 555, 63 N.E. 490; Wagner v.
Mallory, 169 N.Y. 501, 62 N.E. 584, 22 Morr. Min. Rep. 42;
Shepherd v. McCalmont Oil Co., 38 Hun (N.Y.), 37; and other
cases.
The reasoning of the Supreme Court of the United States upon
this proposition in the several cases cited is very convincing,
and seems to me to be, by far, the most reasonable view to take.
I never feel lonesome, and seldom doubtful, when in company with
the Supreme Court of the United States. Its Judges are usually of
the most profound learning, and they are diligent in the
examination and consideration of their cases. At page 247 of 15
S.Ct. of Brown v. Spilman (155 U.S. 669), the court said:
"The subject of the grant was not the land, certainly not the
surface. All of that except the portions actually necessary for
operating purposes and the easement of ingress and egress was
expressly reserved to Taylor. The real subject of the grant was
the gas and oil contained in or obtainable through the land, or
rather the right to take possession of the gas and oil by mining
and boring for the same. Petroleum gas and oil as substances of a
peculiar character, and decisions in ordinary cases of mining,
for coal and other minerals which have a fixed situs, cannot be
applied to contracts concerning them without some qualifications.
They belong to the owner of the land, and are part of it, so long
as they are on it or in it or subject to his control; but when
they escape and go into other land, or come under another's
control, the title of the former owner is gone. If an adjoining
owner drills his own land, and taps a deposit of oil and gas,
extending under his neighbor's field, so that it comes into his
well, it becomes his property. Brown v. Vandergrift, 80 Pa. 147;
Westmoreland & C. Nat. Gas Co.'s appeal (130 Pa. 235),
18 A. 724 (5 L.R.A. 731)."
Page 452
In Ohio Oil Co. v. Indiana, 177 U.S. 190, 20 S.Ct. 576, 44
L.Ed. 729; 20 Morr. Min. Rep. 466, the court had occasion to
consider the question as to the nature of the ownership of gas
and oil beneath the soil in an attack upon the constitutionality
of the statute enacted by the state of Indiana referred to in
said case. It was there held to be unlawful to permit a flow of
gas or oil from a well to escape into the open air, without being
confined within the well or proper pipes, or other safe
receptacle for more than two days after gas or oil shall have
been struck. It was considered by the court in that case that if
the oil and gas were the absolute property of the owner who had
bored the well, and he was permitting them to escape, then it
would be within the protection of the due process of law and
equal protection clauses of the Fourteenth Amendment. At page 581
of 20 S.Ct. (177 U.S. 202), the court in this case said:
"The confusion of thought which permeates the entire argument
is twofold: First, an entire misconception of the nature of the
right of the surface owner to the gas and oil as they are
contained in their natural reservoir, and this gives rise to a
misconception as to the scope of the legislative authority to
regulate the appropriation and use thereof. Second, a
confounding, by treating as identical, things which are
essentially separate; that is, the right of the owner of land to
bore into the bosom of the earth, and thereby seek to reduce the
gas and oil to possession, and his ownership after the result of
the borings has reached fruition to the extent of oil and gas by
himself actually extracted and appropriated. In other words, the
fallacy arises from considering that the means which the owner of
the land has a right to use to obtain a result is in legal effect
the same as the result which may be reached. . . . Does the
peculiar character of the substances, oil and gas, which are here
involved, the manner in which they are held in their natural
reservoirs, the method by which and the time when they may
Page 453
be reduced to actual possession or become the property of a
particular person, cause them to be exceptions to the general
principles applicable to other mineral deposits, and hence
subject them to different rules? True it is that oil and gas,
like other minerals, are situated beneath the surface of the
earth, but except for this one point of similarity, in many other
respects they greatly differ. They have no fixed situs under a
particular portion of the earth's surface within the area where
they obtain. They have the power, as it were, of
self-transmission. No one owner of the surface of the earth,
within the area beneath which the gas and oil move, can exercise
his right to extract from the common reservoir, in which the
supply is held, without, to an extent, diminishing the source of
supply as to which all other owners of the surface must exercise
their rights. The waste by the owner, caused by a reckless
enjoyment of his right of striking the reservoir, at once,
therefore, operates upon the other surface owners. Besides,
whilst oil and gas are different in character, they are yet one,
because they are unitedly held in the place of deposit. In
Brown v. Spilman, 155 U.S. 665, 669, 670, 15 S.Ct. 245, 247,
39 L.Ed. 304, 305, these distinctive features of deposits of gas
and oil were remarked upon."
In the light of the above cases, the court has further
discussed the question, but I will not take up space to set the
language out in this opinion.
It is manifest, however, that wise husbandry of the state's
property would require those in charge to act promptly, and
secure such oil as might be found, before others occupying
adjoining lands could tap the reservoir and withdraw from the
earth the entire deposit of oil or gas, leaving the state with
nothing.
At the time the contract here involved was made, there was much
activity in buying leases in this territory, and great hopes were
indulged that some well might be dug that would produce a gusher.
There is still, in parts of
Page 454
the state, experimental drilling for gas and oil, and great hopes
are entertained that this will be successful and oil may be
struck. Should deposits be found near the state's property, or
property belonging to the different institutions of the state,
where no specific provision has been made to authorize contracts
like those here involved, it will be possible for adjoining
owners to extract all the oil or gas from the reservoir before
the state could act, as it would be necessary to assemble the
legislature and get specific authority at each institution to
make contracts or to develop lands themselves. The risks involved
in experimental development are great, and it is not likely that
the state will enter that field. The contract in the present case
is highly beneficial to the state, and is as liberal as any of
those in the various decisions which have set out the contracts
involved in them. Where the state owns land in fee, and no other
person's rights are involved, liberal construction should be
placed upon the power of the managing officers of these
institutions, to utilize the land for any particular advantage.
It seems to me that the principle involved in the sixteenth
section cases ought to be applicable in the present case.
In section 211 of the state Constitution 1890, preserving to
the people the sixteenth sections for school purposes, sale of
the lands was expressly prohibited, and, of course, the
legislature could take no action prohibited by this section, but
it was held in Dantzler Lumber Co. v. State, 97 Miss. 355,
53 So. 1, that the word "land" did not embrace the timber growing
thereon, although by statute, and construction of the word "land"
by this court, growing timber was part of the realty. The word
"land" was given a particularly restricted meaning in that case,
as embracing only the soil itself. That decision has been
followed in numerous other decisions, and is the settled law of
this state. It has enabled the utilization of the state's great
asset of wealth, growing timber, for the benefit of the schools
of the state.
Page 455
If we could uphold the contract, that might be the means of
bringing to the state great wealth, and still do no great,
material harm, as all the risk and expense incident to the boring
for oil were contracted to be borne by the appellant. It is hoped
that the legislature will enact laws permitting proper contracts
to meet the situation.