295 F. 16

ROBERTS et al. v. ATLANTIC OIL PRODUCING CO.

(Circuit Court of Appeals, Sixth Circuit.

January 19, 1924.)

No. 3993.

1. Constitutional law <@=>54 — Mines and minerals <@=>58 — Statutes <@=>76(I)— Statute providing that oil and gas leases shall be valid and enforceable contracts held valid.

Acts Ky. 1920, c. 24, § 2, providing that oil and gas leases shall be-valid and enforceable contracts in accordance with their terms, and shall be so construed by the courts, is not invalid as an attempted exercise of judicial power, nor as class legislation, within the inhibition of Const. Ky. § 59, subd. 29, but is valid as a declaration of the public policy of the state.

2. Statutes <@=>64(1) — Rule for determining whether partial invalidity invalidates entire act.

Where it is necessary, to a determination of whether invalidity of a portion of a statute invalidates the entire act, to consider the question whether or not the act would have been passed without the invalid provisions, if the mere elision of the words or provisions which give an unconstitutional effect will leave a consistent and workable act, the remainder will be valid, while, if modifications or limitations must be inserted or understood to avoid the fatally broad effect of the statutory language, the whole act must fail.

3. Statutes <@=>64(2) — Kentucky statute validating oil leases held constitutional and valid as to future leases, though invalid as to existing leases.

Acts Ky. 1920, c. 24, § 2, declaring valid and enforceable in accordance with their terms “all valid existing or future” oil or gas leases, though held invalid by the Kentucky Court of Appeals as to then existing leases, is valid as to future leases; the effect of such decision being only to require the elision of the words “existing or.”

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Appeal from the District Court of the United States for the Eastern District of Kentucky; Andrew M. J. Cochran, Judge.

Suit in equity by Nancy Roberts and others against the Atlantic Oil Producing Company. Decree for defendant, and complainants ap-. peal.

Affirmed.

Hugh Riddell, of Irvine, Ky. (Riddell & Shumate, of Irvine, Ky., on the brief), for appellants.

John T. Metcalf, of Winchester, Ky. (Beverly R. Jouett, of Winchester, Ky.,, on the brief), for appellee.

Before DENISON and DONAHUE, Circuit Judges, and WESTENHAVER, District Judge.

DENISON, Circuit Judge.

The customary form of oil lease, long in use in the older oil territory, was generally adopted in Kentucky 'when the development of its oil regions began. A typical form of this lease grants, for a period of ten years, the right to drill for oil and gas for a share of what is found, and provides that the lessee shall complete the first well within one year or pay an annual rental of ten cents per acre until the well is drilled. It was found that a large territory would be tied up by leases of this kind, which the lessees kept alive by paying the agreed rental, but upon which they did not drill, while *17the landowners could not permit development by other operators, and must sometimes stand by and see their oil drained away to adjacent wells. In this situation, the Kentucky Court of Appeals declared it to be an implied condition of all such leases that there should be a reasonably prompt development or testing by wells, regardless of the conditional delay given by the language of the lease, and it was said to be the law of Kentucky that a lessor could demand reasonably prompt drilling, and, not getting it, could terminate the lease, although the agreed rental might be tendered. This was first declared in Monarch Co. v. Richardson, 124 Ky. 602, 99 S. W. 668, and is spoken of as the Monarch-Richardson rule. Whether it was more than a dictum was long doubted, but eventually it was thoroughly established, and became a part of the public policy and rules of property of Kentucky. See Lyon v. Union Co. (C. C. A. 6) 281 Fed. 674, 677.

Opponents of the rule urged that it was injurious and unwise, because a pipe line was essential for the development of any new territory, and such a line required so much capital that it could only be built by an interest controlling a large territory, over which the drilling could advance gradually for a long time. Hence, they said, the Monarch-Richardson rule impeded progress. Moved apparently by these considerations, the Legislature passed chapter 24 of the Acts of 1920, section 2 of which is given in the margin.1 The Kentucky Court of A.p-peals has held another section of this act to be unconstitutional so far as it relates to leases then existing. Union Co. v. Diles, 254 S. W. 205. The instant case presents to this court the question whether the statute is also invalid so far as it applies to the future leases which it mentions.

[1] We must overrule the objection that the entire statute is invalid, because it is a legislative attempt to exercise judicial power, contrary to the established line of separation in Kentucky. See the cases on this subject reviewed by us in Louisville Co. v. Western Union Co., 268 Fed. 4, 10. As to the future, we regard the statute as plainly an effort to change and fix the public policy of the state, and this is a legislative function. This is not special legislation, within the inhibition of section 59 (29) of the Kentucky Constitution. It applies to all persons and to all contracts of the class described. The selection of the particular contracts named is plainly justified by the applicable principles of classification.

[2] The question remains whether the partial invalidity as to existing leases affects the whole. The general rule clearly is that, when a statute is in part unconstitutional, the remainder is valid if, and only if, it is “separable' that is, if the Legislature would have passed it in the restricted form necessary to make it legally effective. The dif*18ficulty is in determining what the Legislature would have done, if it had not done what it did do. Upon this question the federal courts will follow the Supreme Court of the state. Smiley v. Kansas, 196 U. S. 447, 455, 25 Sup. Ct. 289, 49 L. Ed. 546 (but see Spraigue v. Thompson, 118 U. S. 94, 95, 6 Sup. Ct. 988, 30 L. Ed. 115 contra). Sometimes the question is solved by an express declaration in the act that, if any section be found invalid, other sections will stand.2 Sometimes the remainder of the statute and other considerations justify a positive conclusion by the court that the legislation was3 or was not4 separable in the sense now involved. There are many cases between these two extremes, and in which the inference must be uncertain, unless it may be aided by a presumption or formula which the law draws or applies. The Supreme Court, under the facts in one case, has said that the valid portion of the law will not be enforced unless the court can see that it would have been passed in the modified form,5 and in another case it has said that such remaining part will be carried intp effect unless the court can see that the act would not have passed if thus limited.6 In neither of these cases was it necessary thus to place the burden of inference.

From a review of all the Supreme Court decisions, we think it may safely be said, as to those cases where it is necessary or advisable to solve or aid in solving the problem by resort to such a presumption or rule of inference, that if we find that a mere elision of those words, or even sections, which give an unconstitutional effect, will leave a consistent and workable act, this remainder will be held valid; while if (also in cases where such resort is needed) modifications or limitations must be inserted or understood, to avoid the fatally broad effect of the statutory language, the whole act must fail. In other words, we may strike out the excess, but may not add a limitation. Illustration of this distinction may be found in two cases otherwise not easily reconciled. The first Employers’ Liability Act (34 Stat. 232) provided that all employes of railroads which were within the District of Columbia and the territories, or which were engaged in interstate commerce, should have certain rights of action. In the Employers’ Liability Cases, 207 U. S. 463, 501, 28 Sup. Ct. 141, 52 L. Ed. 297, it was held" that the extension to all employes of railroads, which railroads *19were engaged in interstate commerce, was unconstitutionally broad, and that the provision could not, in order to save it, be restricted to those employes who were themselves so engaged. That would be adding a limitation which Congress had not approved; and the whole statute, so far as it reached interstate commerce, was found inoperative. The same statute was again considered in El Paso v. Gutierrez, 215 U. S. 87, 30 Sup. Ct. 21, 54 L. Ed. 106, and it was held valid, as to employes in the District of Columbia or the territories, because all defects could be cured by striking out the interstate commerce clause. The cases of this marginal or uncertain class are collected in the note, and they seem to support this distinction.7 We observe that wfiile, *20in an exceptional case or two, the court has enforced a statute in the aspect in which there was power to pass it, even though to do so required placing a limitation upon the language used, yet it has usually refused to take this course, but that in those cases in this marginal class, where the invalidity could be cured merely by elision, the court has, without exception, held the remainder of the statute valid and enforceable.

[3] Turning to the instant case: Some features, including some found in other sections of the act, are rather persuasive that the act would have been passed if it had referred alone to future leases. It may be that we would be compelled to that conclusion without the aid of any such rule as we have been discussing; but if there is otherwise doubt as to this inference, we are satisfied to let it be thus determined. If the two words “existing or” are cut out, the remainder of this section is valid, consistent, and complete; and, accordingly, we conclude that it is in full force and effect as to this lease,-and affirm the decree below.

Roberts v. Atlantic Oil Producing Co.
295 F. 16

Case Details

Name
Roberts v. Atlantic Oil Producing Co.
Decision Date
Jan 19, 1924
Citations

295 F. 16

Jurisdiction
United States

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