The Oklahoma Enabling Act provided that sections 33 of the
public lands, theretofore reserved, should be apportioned and
disposed of as the legislature might prescribe; that, where any of
the lands granted the state were valuable for minerals, they should
not be sold before January 1, 1915, but might be leased for periods
not exceeding five years on royalties, providing that agricultural
lessees in possession should be reimbursed by the mining lessees
for damages done their interests by mining operations; that the
lands. "if sold," might be appraised and sold at public sale, under
such regulations as the state might prescribe, the preference right
to purchase at the highest bid being given the lessee "at time of
such sale" --
held that an agricultural lessee was not
entitled under the act to compel a sale of the land covered by his
lease in order that he might purchase it, and that the state was
authorized, finding the tract valuable for oil and gas, to execute
an oil and gas lease to other parties, subject to the surface
rights of the agricultural lessee. Act of June 16, 1906, §§ 8, 10,
c. 3335, 34 Stat. 267. P.
267 U. S.
421.
86 Okla. 105
affirmed.
Page 267 U. S. 416
Error to a judgment of the Supreme Court of Oklahoma reversing a
decree in favor of the plaintiff in error, Price and wife, in a
suit brought by the petroleum company to enjoin them from
interfering with its operations under an oil and gas lease on land
covered by a prior agricultural lease to Price. The state
intervened to assert its ownership of the land and uphold the oil
and gas lease.
MR. JUSTICE SANFORD delivered the opinion of the Court.
The subject matter of this controversy is a tract of land held
by the State of Oklahoma as part of its public land, on which it
made two leases: the first an agricultural lease to William T.
Price; the second an oil and gas lease to the Magnolia Petroleum
Co. The Magnolia Company brought a suit in equity in a district
court of the state to enjoin Price and wife from interfering with
its operations under the oil and gas lease. They made defense,
alleging that the oil and gas lease was invalid and impaired their
preference right under the agricultural lease to purchase the
entire tract, including the oil and gas therein. The state, as
intervener, asserted its ownership of the land and the validity of
the oil and gas lease. The district court, on final hearing,
entered a decree in favor of Price and wife. This was reversed by
the Supreme
Page 267 U. S. 417
Court of Oklahoma, which adjudged and decreed that the oil and
gas lease to the Magnolia Company was valid, and that Price and
wife be perpetually enjoined from interfering with its operations.
86 Okl. 105.
The federal questions presented rest in substance upon the
contention that, as applied in this case, the Oklahoma Acts under
which the gas and oil lease to the Magnolia Company was executed
deprived Price, as the agricultural lessee, of a preference right
to purchase the land in its entirety, vested in him by the Oklahoma
Enabling Act of 1906.
The tract in controversy is a quarter of a section numbered 33
lying within the lands formerly included in the Territory of
Oklahoma that were opened to settlement by an Act of June 6, 1900.
[
Footnote 1] This Act provided
that sections 13 and 33 in each township should not be subject to
entry, but should be "reserved" for "university, agricultural
colleges, normal schools and public buildings of the Territory and
future State of Oklahoma."
Prior to statehood, the Territorial Leasing Board made short
term agricultural leases on these reserved lands, with preference
rights of releasing. [
Footnote
2]
The Enabling Act of June 16, 1906, [
Footnote 3] by § 7 and § 8, granted to the state, upon its
admission, sections 13, 16 and 36 in the several townships of the
Territory of Oklahoma for the use and benefit of universities,
colleges, and schools, as therein specified.
By § 8, it was provided that sections 33 therefore reserved for
charitable and penal institutions and public buildings, should "be
apportioned and disposed of as the legislature of said state may
prescribe," and, further, that "where any . . . of the lands
granted by this Act to the state . . . are valuable for
minerals,"
Page 267 U. S. 418
including gas and oil, they should not be sold by the state
before January 1, 1915, but might be leased for periods not
exceeding five years at a fixed royalty in addition to any bonus
offered,
"Provided, however, that agricultural lessees in possession of
such lands shall be reimbursed by the mining lessees for all damage
done to said agricultural lessees' interest therein by reason of
such mining operations."
By § 10, it was provided that
"said sections thirteen and thirty-three, aforesaid, if sold,
may be appraised and sold at public sale . . . under such rules and
regulations as the legislature of said state may prescribe,
preference right to purchase at the highest bid being given to the
lessee at the time of such sale, but such lands may be leased for
periods of not more than five years . . . :
Provided,
that, before any of the said lands shall be sold . . . the said
lands and the improvements thereon shall be appraised by three
disinterested appraisers . . . and in case the leaseholder does not
become the purchaser, the purchaser at said sale shall . . . pay to
. . . the leaseholder the appraised value of said improvements, and
to the state the amount bid for the said lands, exclusive of the
appraised value of improvements."
The terms and conditions of the Enabling Act were accepted by
the State of Oklahoma by an "irrevocable" ordinance.
Coyle v.
Oklahoma, 221 U. S. 559,
221 U. S. 564;
Sperry Oil Co. v. Chisholm, 264 U.
S. 488,
264 U. S. 493.
And the state, by its constitution, accepted all grants of land
made by the United States under the Act "for the uses and purposes
and upon the conditions, and under the limitations for which the
same are granted." [
Footnote
4]
The state constitution placed the sale and rental of the public
lands in charge of Commissioners of the Land Office. [
Footnote 5] By subsequent Acts of the
legislature, it was provided:
Page 267 U. S. 419
that the Commissioners should have an appraisal made of all
lands granted the state for educational and public building
purposes, showing the value of the lands and of the improvements
thereon, and the names of the lessees occupying them; [
Footnote 6] that, when any tract of the
public lands was known or deemed by the Commissioners to contain
oil or gas or to be valuable for such purposes, they should
segregate the oil and gas deposits from the surface use and
interest, thereby withdrawing the land from sale until they
terminated such segregation, and might separately lease the oil and
gas interest therein; [
Footnote
7] that the Commissioners should sell certain of the public
lands, including § 33 granted to the state for charitable
institutions and penal buildings at public auction at which any
lessee holding a lease thereon should "have the preference right to
purchase" at the highest bid; [
Footnote 8] and that the reserved lands whose proceeds
were to be used for penal, charitable, and public buildings should
be leased until sold as provided by law. [
Footnote 9]
Oklahoma was admitted as a state in November, 1907. [
Footnote 10] The quarter section in
controversy was not known then or for many years thereafter as oil
and gas land. It was then held by one Click under an agricultural
lease from the Territorial Leasing Board to January 1, 1908, with
"a preference right" of releasing. This right of releasing was not
questioned by the state. The lease was extended for two successive
years, first under a general statute [
Footnote 11] and then under rules of the
Page 267 U. S. 420
Commissioners. In January, 1909, the land and the improvements
thereon were appraised. In October, Price purchased the interest of
the lessee. After January 1, 1910, he continued to occupy the land
and pay rentals thereon to the Commissioners, and was recognized by
them as the lessee. In 1911, the Commissioners, after
advertisement, sold at public sale the three other quarters of the
same section 33, and other public lands in the vicinity. There is
evidence that Price appeared at this sale and requested the
officers in charge to sell his quarter section also, and that this
was refused, the reason given being that it had not been
advertised. There is no evidence that he thereafter requested at
any time that a sale be made of this quarter section.
In 1913, the Commissioners leased Price this quarter section,
for agricultural and grazing purposes, until December 31, 1914. The
lease recited that it was subject to the right of the state to sell
the land at any time, and that, upon such sale, Price, as lessee of
the land, should be entitled to purchase the same at the highest
bid, subject to the conditions provided by law, and also provided
that he should have "the preference right" to release the land as
provided by the laws of the state. This lease was subsequently
extended for one year, and thereafter Price, without any formal
extension or renewals of the lease, continued in possession of the
premises and paid rentals to the Commissioners, and was in such
possession, holding over as the agricultural lessee recognized by
the Commissioners at the time this suit was commenced. His status
as a lessee has not been questioned in any way, and the case has
been tried by all parties on the theory that he has the full rights
of an agricultural lessee of the land.
In 1915, the Commissioners declared this quarter section
valuable for mineral purposes, and adopted a motion segregating the
same and withholding it from sale. And,
Page 267 U. S. 421
in 1919, they executed the oil and gas lease to the Magnolia
Company that is now in controversy. The lease contained a provision
that the company should be liable to the surface lessee for all
damage accruing to the surface interest. This liability the company
has never disputed.
The Supreme Court of Oklahoma held, in substance, that Price had
no right either under the Enabling Act or the Oklahoma statutes to
require the state to sell the land at any time, and that the action
of the Commissioners in withholding the land from sale, segregating
the oil and gas, and leasing the same to the Magnolia Company, was
in accordance with the provisions of the state statutes, and not in
violation of any right vested in Price as an agricultural lessee
either under those statutes or under the Enabling Act.
The underlying federal question presented is based upon the
contention that, under the provisions of the Enabling Act,
constituting a trust upon which the public lands were granted to
the state, Price, as an agricultural lessee, was vested with the
preference right to purchase the land as an entirety, and to
require the state to sell the entire interest in the same, and that
the Oklahoma statutes authorizing the segregation of the oil and
gas and the execution of a separate lease thereto, as applied in
this case, impaired the value of the fee in the land and deprived
Price of his preference right to purchase the land as an entirety,
in violation of the due process clause of the Fourteenth
Amendment.
We cannot sustain this contention. By § 8 of the Enabling Act,
it was provided that § 33 should be apportioned and disposed of "as
the legislature . . . may prescribe," and further that, where any
of the lands granted to the state "are valuable for minerals," they
should not be sold before January 1, 1915, but might be leased upon
royalty, provided that the mining lessee
Page 267 U. S. 422
should reimburse the agricultural lessee for damage done by the
mining operation. This authority to make mining leases clearly
applied not merely to the land then known to be valuable for
minerals, but to such as might thereafter be found to be valuable
for such purposes, and it did not require the state to sell such
lands at any time, but merely prohibited their sale before the date
specified. It impliedly authorized the making of mining and
agricultural leases upon the same land. Furthermore, § 10, by its
specific terms, did not require the state to sell section 33 at any
time, but merely provided that, "if sold," they might be appraised
and sold at public sale under such rules and regulations as the
state might prescribe, the preference right to purchase at the
highest bid being given to the lessee "at the time of such
sale."
We think it clear that these provisions of the Enabling Act,
read together, gave the state entire discretion as to the time of
selling these lands and the extent to which they should be sold.
They did not require that all or any part of them should be sold,
but merely provided that "if" the state sold them, they must be
sold in the manner prescribed, and the preference right of purchase
be given the lessee in possession at the time of sale.
The state was not bound to sell them at any time, or at all, but
might retain them as long as it deemed proper, and make meanwhile
such leases as it desired not in conflict with the provisions of
the Act. There was no provision in the Act, and none is implied,
that the agricultural lessee might require the state to sell the
land in its entirety whenever he desired to purchase the same, and
nothing that gave him any right to purchase the land in its
entirety or that prevented the state from executing oil and gas
leases, as well as agricultural leases, whenever it deemed this the
most advantageous method of realizing the full value of the lands
for the public purposes for which they were granted to it. Plainly
it was not intended
Page 267 U. S. 423
that the mere making of an agricultural lease should put the
state at the mercy of the lessee and require a sale of the land
before its value had been ascertained or the available revenue
derived from it. In short, the preference right of purchase given
the lessee by the Act was merely the preference of purchasing the
land in the condition in which it might be when and if the state
chose to sell it, and not a right to compel the state to sell it,
either in its entirety or otherwise, whenever he wished to buy.
It results that the Oklahoma statutes under which, as held by
the supreme court of the state, the Commissioners were authorized
to withhold this quarter section from sale and to execute the oil
and gas lease to the Magnolia Company did not impair any right
vested in Price as an agricultural lessee by the provisions of the
Enabling Act, or deprive him of any right as such lessee in
violation of the Fourteenth Amendment.
Insofar as the other federal questions presented were in issue
under the pleadings or raised in the court below, they are
necessarily answered by what we have already said, and need not be
considered in detail. They show no error in respect to any federal
question. And the judgment is
Affirmed.
[
Footnote 1]
31 Stat. 672, c. 813, § 6.
[
Footnote 2]
Act of May 4, 1894, c. 68, 28 Stat. 71.
[
Footnote 3]
34 Stat. 267, c. 3335.
[
Footnote 4]
Article XI, § 1.
[
Footnote 5]
Article VI, § 32.
[
Footnote 6]
Laws 1907-08, c. 49, art. 2, p. 484.
[
Footnote 7]
Laws 1907-08, c. 49, art. 4, p. 490, modified in immaterial
respects by Laws 1917, c. 253, p. 462.
[
Footnote 8]
Laws 1909, c. 28, art. 2, p. 448.
[
Footnote 9]
Laws 1909, c. 28, art. 1, p. 440.
[
Footnote 10]
Proclamation of the President, Nov. 16, 1907, 35 Stat. pt. 2, p.
2160.
[
Footnote 11]
Laws 1907-08, c. 49, art. 2, p. 484.