Arkansas Fuel Oil Co v. Louisiana


304 U.S. 197
Arkansas Fuel Oil Co v. Louisiana
No. 102 Argued: April 7, 1938
Decided: May 2, 1938

Messrs. Robert Roberts, Jr., and H. C. Walker, Jr., both of Shreveport,
La., for appellant.

Mr. John B. Files, of Shreveport, La., for appellee.

Mr. Justice BLACK delivered the opinion of the Court.

Opinion of the Court

Appellant (defendant below) challenges Act No. 64 of 1934 of Louisiana on
the ground that the Act ‘if enforced * * *, in the manner relied upon * *
*, would require * * * (appellant) to pay to * * * (appellee) the value of
property which did not belong and never has belonged to * * * (appellee),
thereby leaving (appellant) responsible and liable to the true owner of
such property for the value thereof, and in that manner depriving * * *
(appellant) of its property without due process of law, and denying to it
the equal protection of the laws contrary to the provisions and
requirements in the Constitution of the United States and of the State of

The act (the pertinent part of which is set out below)[1] provides that a
purchaser of oil can extinguish the indebtedness for the oil (as against
all other parties) by paying the person who drilled and sold it under a
lease from the last ‘record owner,’ if the recorded instrument of
conveyance is sufficient to pass title in Louisiana, and in the absence of
any suit filed to test the title of the land or oil or due notice by
registered mail of the filing of such suit. Section 3 authorized purchasers
to delay payment for purchases previously made until a lapse of 60 days
after effective date of the act (August 1, 1934), and denied protection to
purchasers who paid the ‘last record’ owner before the expiration of that
period. The Louisiana Court of Appeal decided this 60-day period was in
effect a short statute of limitations as against any possible owners not
shown of record.

The district court of Caddo parish rendered judgment for appellee. The
Louisiana Court of Appeal, Second Circuit, sustained[2] and the Supreme
Court of Louisiana denied certiorari. The presiding judge of the Louisiana
Court of Appeal granted an appeal to this Court under authority of 28
U.S.C. § 344(a), 28 U.S.C.A. § 344(a).

May 24, 1927, Ackerman Oil Company, a corporation, by its president and
secretary, executed a deed to A. C. Best and Sherman G. Spurr for the land
in question, which was duly recorded as provided by Louisiana law. April
18, 1933, Best and Spurr executed an oil lease to Hyman Muslow (appellee)
under which the owners would receive one-eighth of the oil produced and
Muslow seven-eighths. Thereafter, Muslow entered upon the leased land;
equipped a well; contracted to sell oil to the Louisiana Oil Refining
Corporation;[3] laid a mile and a half pipe line to appellant’s line
and-between July, 1933, and September, 1934 delivered oil to appellant
under the contract of sale. May 20, 1935, Muslow filed suit under the 1934
Act for mandamus to require payment for the oil. An alternative writ of
mandamus was issued returnable May 28, 1935, on which date the company
filed petition in bankruptcy under section 77B of the National Bankruptcy
Act, 11 U.S.C.A. § 207. Appellant later answered and did not question that
it owed someone $445 for the oil, but asserted that the conveyance to Best
and Spurr was not translative of title to the oil due to inadequate
consideration and lack of authority on the part of the corporate officers
who signed the deed. Denial was made that Best and Spurr were the true
owners of the land, on the same grounds. The courts of Louisiana decided
these questions against appellant. Appellant also alleged that ‘* * * the
said lands, having been forfeited to the State of Louisiana for non-payment
of taxes on July 31, 1915, as appears from the forfeiture * * * are the
property of the State of Louisiana.’ Concerning the statute under attack,
the Court of Appeal of Louisiana has said:[4]

‘We experience little difficulty in determining the legislative intent in
adopting this act. It supplied a long-felt need, and in its operative
effect will serve to prevent imposition upon and unjust discrimination
against those whom it was intended to protect. The act establishes a rule
of conduct for the protection of lessors, and their assigns, under oil and
gas leases, and also a rule of security and safety for lessees and those
holding under or purchasing from them. * * * The act was designed also to
protect those persons whose rights arose from or are based upon contracts
with the last record owner of the lands covered thereby, and to those who
deal with or acquire from such persons.’

Appellant contends that this law as applied would enable Muslow to recover
the value of the oil delivered to appellant ‘which * * * (Muslow) did not
own’ and that appellant would also be left responsible to the true owner of
the oil. The court below, La.App., 176 So. 686, 690, said that ‘Over eight
years had elapsed when this suit was filed and the company (transferor in
the deed of record), the only person to complain, had not raised its voice
in protest of its officers’ action.’ (Italics supplied.) Although nearly 11
years have elapsed since deed was made to Best and Spurr and almost 4 years
since appellant purchased, received, and did not pay for the oil, the
record does not disclose that there has been any other claimant or
purported owner of the land nor does it show any effort by appellant to pay
the money into court for the benefit of a ‘true owner,’ as it might under
Louisiana law.[5] The only suggestion appellant has made as to any owner
not of ‘record’ was that the property belonged to the State of Louisiana.
That State-alleged by appellant to be the true owner of the land from which
the oil was obtained-passed the 1934 Act and its courts have held that
payment to Muslow will relieve appellant of the indebtedness. Appellant
seeks to escape payment to Muslow for the oil which it purchased in 1934 on
the ground that such payment would not discharge the indebtedness to a
‘true owner’-alleged to be the State of Louisiana. The Louisiana Court of
Appeals, 176 So. 686, 690, speaking in this case has declared that the
statute ‘protects the purchaser in paying the price to the one from whom
the oil has been purchased; and, under the express declarations of the act,
no recourse may thereafter be had by any third person or adverse claimant
against such buyer.’ Since no adverse claimant to the land has appeared in
11 years, it is clear under all the circumstances of this case that payment
for the oil bought from Muslow in 1933 and 1934 will not deprive appellant
of any rights under the Federal Constitution.

‘It is matter of common occurrence-indeed, it is almost the underviating
rule of the courts, both state and Federal-not to decide constitutional
questions (of the validity of a State Act) until the necessity for such
decision arises in the record before the court.’ Baker v. Grice, 169 U.S.
284, 292, 18 S.Ct. 323, 326, 42 L.Ed. 748. We see no such necessity here.
The judgment appealed from is affirmed.

Mr. Justice STONE concurs in the result.

Mr. Justice CARDOZO took no part in the consideration or decision of this


^1 ‘Any person, firm or corporation that has actually drilled or opened on
any land in this State, under a mineral lease granted by the last record
owner, as aforesaid, of such land or of the minerals therein or thereunder
if the mineral rights in and to said land have been alienated, who holds
under an instrument sufficient in terms to transfer the title to such real
property, any well or mine producing oil, gas or other minerals shall be
presumed to be holding under lease from the true owner of such land or
mineral rights and the lessor, royalty owner, lessee or producer, or
persons holding from them, shall be entitled to all oil, gas or other
minerals so produced, or to the revenues or proceeds derived therefrom,
unless and until a suit testing the title of the land or mineral rights
embraced in said lease is filed in the district court of the parish wherein
is located said real property. A duly recorded mineral lease from such last
record owner shall be full and sufficient authority for any purchaser of
oil, gas or other minerals produced by the well or mine aforesaid to make
payment of the price of said products to any party in interest under said
mineral lease, in the absence of the aforementioned suit to test title or
of receipt, by such purchaser, of due notification by registered mail of
its filing, and any payment so made shall fully protect the purchaser
making the same; and so far as said purchaser is concerned as against all
other parties, the producer of such oil, gas or other minerals shall be
conclusively presumed to be the true and lawful owner thereof.’ Section 2.

^2 State v. Louisiana Oil Ref. Co., 176 So. 686.

^3 The Louisiana Oil Refining Corporation went through reorganization
proceedings under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207,
after suit was originally filed against it by Muslow. The Arkansas Fuel Oil
Co. succeeded to its asserts and liabilities and was substituted as

^4 State ex rel. Boykin v. Hope Producing Co., 167 So. 506, 510.

^5 Acts of La. No. 123 of 1922, La.Gen.Stat. (Dart) §§ 1556 1563; cf.
Shell Petroleum Corp. v. Carter, 187 La. 382, 175 So. 1; see Cassard v.
Woolworth, 165 La. 571, 575, 115 So. 755.

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