CASES

ARGUED AND DETERMINED

IN THE

UNITED STATES CIRCUIT COURTS OF APPEALS THE CIRCUIT AND DISTRICT COURTS

AND THE COMMERCE COURT

TEXAS CO. v. CENTRAL FUEL OIL CO. et al.

(Circuit Court of Appeals, Eighth Circuit. February 13, 1912.)

No. 3,652.

1. VENUE (§ 7*)—Local or TRANSITORY ACTION-SUIT FOR SPECIFIC PERFORM

ANCE.

A suit to enforce specific performance of a contract by which defendants agreed to deliver the oil produced from wells operated by them into the pipe lines of complainant extending to such wells is personal and transitory, and may be maintained in any court having jurisdiction of the person of defendants.

[Ed. Note. For other cases, see Venue, Cent. Dig. §§ 13-16; Dec. Dig. § 7.*]

2. COURTS (§ 269*)-FEDERAL COURTS-DISTRICT OF SUIT-LOCAL ACTIONS.

Where a contract gave complainant a lien to secure its performance on property of defendants, consisting of oil leases and wells, a suit to enforce such contract and lien may, under the federal judiciary act (Act March 3, 1875, c. 137, § 8, 18 Stat. 472 [U. S. Comp. St. 1901, p. 513]), be maintained in the district in which the property is situated, regardless of the residence of the parties, provided the requisite diversity of citizenship exists.

[Ed. Note. For other cases, see Courts, Cent. Dig. § 809; Dec. Dig. § 269.*

Jurisdiction of federal courts as affected by possession of subject-matter, see note to Adams v. Mercantile Trust Co., 15 C. C. A. 6.]

3. COURTS (§ 276*)—FEDERAL COURTS-DISTRICT OF SUIT-WAIVER OF OBJEC

TION.

The objection of a defendant that a federal court is without jurisdiction because neither complainant nor defendant is a resident of the district, where the requisite diversity of citizenship exists, is waived by the filing of a general demurrer going to the merits of the bill.

[Ed. Note. For other cases, see Courts, Cent. Dig. § 815; Dec. Dig. § 276.*

Waiver of right as to district in which suit may be brought, see note to Memphis Savings Bank v. Houchens, 52 C. C. A. 192; McPhee & McGinnity Co. v. Union Pac. R. Co., 87 C. C. A. 634.]

•For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes 194 F.-1

4. APPEAL AND ERROR ($ 878*)-REVIEW-ASSIGNMENT OF CROSS-ERRORS.

An appellee or defendant in error who takes no appeal or writ of error himself cannot by assigning cross-errors, or by brief or argument confer on a federal appellate court jurisdiction to consider, review or decide upon rulings against him in the court below.

[Ed. Note. For other cases, see Appeal and Error, Cent. Dig. §§ 35733580; Dec. Dig. § 878.*]

5. UNITED STATES (§ 125*)—JURISDICTION OF Federal Courts-SUIT AGAINST INDIAN AGENT.

An agent of the Interior Department having charge of the affairs of Indian tribes under direction of the Secretary is not exempt from process of the court, and is a proper, although not indispensable, party to suit to determine rights under leases of Indian lands.

[Ed. Note. For other cases, see United States, Cent. Dig. §§ 113, 114; Dec. Dig. § 125.*]

6. CORPORATIONS (§ 506*)-PARTIES SUIT AGAINST CORPORATION.

To a suit in a federal court against a corporation to enforce specific performance of a contract made by it in behalf of subsidiary companies which it controls through ownership of their stock, such subsidiary companies are not indispensable nor even necessary parties.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 1958-1970; Dec. Dig. § 506.*]

7. SPECIFIC PERFORMANCE (§ 5*)—JurisDICTION OF EQUITY-REMEDY AT LAW. A remedy at law to exclude the jurisdiction of a court of equity of a suit for specific performance must be plain and adequate, and as certain, prompt, complete, and efficient to attain the ends of justice and its prompt administration as the remedy in equity.

[Ed. Note. For other cases, see Specific Performance, Cent. Dig. §§ 5-8; Dec. Dig. § 5.*]

8. SPECIFIC PERFORMANCE (§ 5*)—JURISDICTION OF EQUITY—INADEQUACY OF LEGAL REMEDY.

The insolvency of a defendant is a circumstance proper to be considered in determining whether equity has jurisdiction of a suit for specific performance of a contract on the ground that the remedy at law by an action for its breach is inadequate.

[Ed. Note. For other cases, see Specific Performance, Cent. Dig. §§ 5-8; Dec. Dig. § 5.*]

9. SPECIFIC PERFORMANCE (§ 68*)-CONTRACTS ENFORCEABLE-CONTRACTS RELATING TO PERSONAL PROPERTY.

A contract relating to personal property may be specifically enforced in equity where the property is such that it cannot be obtained in the market, or only at great expense and inconvenience, and a failure to obtain it would cause a loss to complainant which could not be adequately compensated in an action at law.

[Ed. Note. For other cases, see Specific Performance, Cent. Dig. § 199; Dec. Dig. § 68.*]

10. SPECIFIC PERFORMANCE (§ 75*)-GROUNDS FOR RELIEF CONTRACT FOR SALE OF OIL PRODUCTION.

Complainant, which operated an oil pipe line in Texas and into Oklahoma and also several refineries, entered into a contract with defendant, which through subsidiary companies owned a number of leases on which it operated wells in the Bartlesville oil field in Oklahoma, by which complainant agreed to extend its pipe line to such field and to a connection with defendant's wells, and defendant agreed to run all of its oil into such line for a term of 10 years, to be paid for by complainant as provided for by the contract. At that time there was but one pipe line in such field, and defendant was compelled to accept the prices made by it without the benefit of competition while complainant needed the oil for its *For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

refineries. Complainant built the extension of its pipe line at a cost of $700,000, and for a time received the oil from defendant's wells, after which defendant refused to make further deliveries. Held, that com plainant was entitled to enforce specific performance of the contract in equity, on a bill alleging such facts; that defendant was insolvent; that without the oil contracted for its pipe line extension was comparatively valueless; and that it could not otherwise procure sufficient oil to keep its refineries in full operation.

[Ed. Note. For other cases, see Specific Performance, Cent. Dig. § 210; Dec. Dig. § 75.*]

11. SPECIFIC PERFORMANCE (§ 75*)-CONTRACTS ENFORCEABLE-CONTRACT FOR CONTINUOUS ACTS.

It is no objection to the specific enforcement in equity of a contract for the sale of the production of oil wells, to be delivered into the purchasers' pipe line, that the contract extends over a term of years, there being no personal services, skill, or judgment required, nor anything likely to require the supervision of the court if the contract is performed in good faith.

[Ed. Note. For other cases, see Specific Performance, Cent. Dig. § 210; Dec. Dig. § 75.*]

12. APPEAL AND ERROR (§ 1078*)-REVIEW-QUESTIONS NOT ARGUEd.

An issue raised by the pleadings, but not argued in the appellate court, will be treated as abandoned, and not considered.

[Ed. Note. For other cases, see Appeal and Error, Cent. Dig. §§ 42564261; Dec. Dig. § 1078.*]

13. SPECIFIC PERFORMANCE (§ 16*)-CONTRACTS ENFORCEABLE-FAIRNESS.

A contract is not unconscionable in such sense that it will not be specifically enforced in equity because by reason of matters arising after it was made it has become more burdensome on one of the parties than was anticipated, nor because the cost of performance by the other party was less than anticipated.

[Ed. Note.-For other cases, see Specific Performance, Cent. Dig. §§ 35, 36; Dec. Dig. § 16.*]

14. APPEAL AND ERROR (§ 870*)-REVIEW-INTERLOCUTORY ORDERS—APPEAL FROM FINAL DECREE.

While under section 7 of the act establishing Circuit Courts of Appeals (Act March 3, 1891, c. 517, 26 Stat. 5), as amended by Act Feb. 18, 1895, c. 96, 28 Stat. 666, and Act June 3, 1900, c. 803, 31 Stat. 660 (U. S. Comp. St. 1901, p. 550), and Act April 14, 1906, c. 1627, 34 Stat. 116 (U. S. Comp. St. Supp. 1909, p. 220), an appeal does not lie from an order refusing to grant a temporary injunction or to appoint a receiver, such an order is reviewable on appeal from a final decree dismissing the bill.

[Ed. Note. For other cases, see Appeal and Error, Cent. Dig. §§ 3451, 3487-3512; Dec. Dig. § 870.*

Finality of judgments and decrees for purposes of review, see notes to Brush Electric Co. v. Electric Imp. Co. of San Jose, 2 C. C. A. 379; Central Trust Co. v. Madden, 17 C. C. A. 238; Prescott & A. C. Ry. Co. v. Atchison, T. & S. F. R. Co., 28 C. C. A. 482.]

15. SPECIFIC PERFORMANCE (§ 108*)-PRELIMINARY INJUNCTION-SUIT FOR SPECIFIC PERFORMANCE.

In a suit for specific performance of a contract, where the bill states a cause of action for such relief, complainant is entitled to a preliminary injunction to restrain violation of the contract, and such injunction may be granted if the equities require it, even if the contract is one not specifically enforceable.

[Ed. Note.—For other cases, see Specific Performance, Cent. Dig. § 353; Dec. Dig. § 108.*]

For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

Appeal from the Circuit Court of the United States for the Eastern District of Oklahoma.

Suit in equity by the Texas Company against the Central Fuel Oil Company and others. From a decree dismissing the bill on demurrer, complainant appeals. Reversed.

The appellant, a corporation created by and having its domicile in the state of Texas, filed its bill in the court below against the defendants, seeking specific performance of a contract made by it with the defendant Central Fuel Oil Company. A temporary restraining order was granted on an ex parte hearing on the bill and affidavits filed with it. The defendants Bankers' Trust Company, Indian Territory Illuminating Oil Company, Sagamore Oil & Gas Company, Waukesha Oil Company, Wigwam Oil Company, Stevens Point Oil Company, and the Sachem Oil Company filed special pleas to the jurisdiction of the court upon the ground that neither the complainant nor these defendants were citizens or residents of the Eastern District of Oklahoma. The defendants Hugh Pitzer and Dana H. Kelsey also filed special pleas to the jurisdiction of the court, alleging that they are Indian superintendents, having charge, in behalf of the Secretary of the Interior and under his direct management and control, of the affairs of the Five Civilized Tribes of Indians, and that they were simply engaged in carrying out the policy and execution of the laws of the United States in its dealings with these Indians in their tribal property, and for that reason, although they are citizens of the state of Oklahoma and residents of the Eastern District, they are not subject to the jurisdiction of the courts.

The pleas to the jurisdiction of the defendants Bankers' Trust Company, Indian Territory Illuminating Oil Company, Hugh Pitzer, and Dana H. Kelsey were by the court sustained. The other defendants who had filed special pleas to the jurisdiction filed at a later day a general demurrer to the bill, and thereupon the special pleas were by the court overruled. At the hearing of the motion of defendants to dissolve the restraining order and that of complainant to grant a temporary injunction, the court announced its readiness to allow a temporary injunction upon certain conditions which complainant declined to accept, whereupon the temporary order was dissolved, and the application for the temporary injunction denied. The court, at the same time, also sustained the general demurrer filed by the defendants to the bill. That part of the decree reads as follows: "And the court thereupon announced that in view of the action of the plaintiff in declining to accept and consent to the conditions upon which the court proposed to grant the temporary injunction, and in view of the other holdings and findings of the court and actions of the plaintiff, the respective demurrers filed by the defendants Central Fuel Oil Company and subsidiary corporations will be sustained. Therefore be it ordered, adjudged, and decreed that the defendants' demurrers be sustained, the application of the plaintiff for a temporary injunction be denied, that the restraining order heretofore entered be dissolved, and the plaintiff's bill dismissed at the plaintiff's cost." From this decree and all interlocutory orders made by the court, by which the appellant felt aggrieved, this appeal is prosecuted. As the final decree was rendered upon the demurrer to the sufficiency of the bill, it is advisable that the allegations in the bill, upon which it was sought to obtain specific performance of a contract, be set forth more fully than would otherwise be necessary.

The defendant the Central Fuel Oil Company, hereafter called the "Central Company," was a holding company. It held a majority of the stock of numerous corporations which had subleases of lands, some of which originally belonged to the Osage Indians, the Creek Indians, and the Cherokees, under which those companies were entitled to drill for and take oil from the land. Some of these leases were subject to restrictions, and others were free from such restrictions. The Central Company by virtue of its ownership and control of these subsidiary companies and the leases was enabled to produce large quantities of oil in the Bartlesville field, but there was only one method by which it could get this oil to the market, and that was by sale to the Prairie Oil & Gas Company, a subsidiary company of the Standard Oil Company,

that being the only company which had a pipe line in that territory. It was desirous of getting a pipe line into the Bartlesville field, so that it might transport its oil out without paying tribute to the Prairie Oil & Gas Company. The complainant, the Texas Company, was a refining company and the owner of pipe lines piping oil from Tulsa, Okl., and other regions to the Gulf of Mexico in the state of Texas, and the Central Company entered into negotiations with the Texas Company to procure an outlet for its oil.

The result of these negotiations was a contract between the two companies, the Texas Company and the Central Fuel Oil Company, made on June 13, 1910, by the terms of which it was agreed:

(1) The Central Company was to deliver to the Texas Company, and the latter agreed to receive, all crude petroleum which might be tendered by the Central Company from the property it owned or controlled by corporations, which were fully described, and also from other properties which the Central Company might then own, or thereafter acquire during the term of the contract in the Bartlesville or northern Oklahoma field, either directly or through ownership of a majority of the outstanding stock.

(2) The crude petroleum was to be of merchantable quality, and be delivered from the tanks owned or designated by the Central Company in the north Oklahoma field and subject to the customary and usual deduction in determining the quantity, and be of gravity not less than 30 degrees Beaume, but the Texas Company was not to be required to receive more than 20,000 barrels in any one day nor more than 540,000 barrels in any one month of 30 days. The Central Company also agreed that it would operate or cause to be operated all of the properties covered by the contract, and would tender all of the products realized from these properties up to the maximum stated.

(3) This paragraph provides that all the oil delivered to the Texas Company shall be carried in a separate account on the books of the company so that the quantity thereof may be readily identified. The Texas Company agreed that it would deliver to the Central Company or to its order an amount of merchantable fuel oil equal in quantity to the 50 per cent. of the crude petroleum it delivered to the Texas Company, the same to be charged against said account as 50 per cent. of the crude petroleum and for the remaining 50 per cent. the Texas Company is to pay the Central Company 894 cents per barrel, which price is predicated upon an arbitary basis of 42 cents per barrel for crude petroleum, which basis should continue for the first five years of the term of the contract. For the balance of the term of the contract the price to be paid by the Texas Company for said remaining 50 per cent. is to be regulated by the prevailing prices for crude petroleum in the oil field within the above limits from which said crude petroleum is taken, and be arrived at by adding to such price of 894 cents per barrel 1 cent for each 1 cent the prevailing price may advance above said 42 cents per barrel.

(4) Delivery points for the fuel oil shall be at Miller's Switch Station, south of Dallas, on the Houston & Central Railroad, and at Houston, Tex., on the Texas & New Orleans Railroad, the deliveries to be made free on board tank cars or in storage tanks to be furnished by the Central Company or its customers, but the Texas Company was to have the option, on emergency conditions preventing deliveries as above, of making the deliveries due at Miller's Switch Station, Tex., at Corsicana, Tex., and deliveries due at Houston, Tex., at Humble, Tex., and for all oil delivered at Houston or at Humble, Tex., the Texas Company was to be paid an additional allowance of 12 cents per barrel.

(5) The Texas Company obligated itself to extend its pipe line system to the Central Company's oil fields as soon as possible, and not later than January 22, 1911.

(6) Settlement shall be had and payments made monthly, the Texas Company to charge the Central Company storage at the rate of 1 cent per barrel per month on all oils remaining more than 30 days, but the storage charge to apply only to balances exceeding 100,000 barrels, the Central Company to be charged and pay to the Texas Company for each month of the life of the contract the sum of $70,000.

(7) This paragraph refers to a loan of $3,000,000, which is more fully set out in another part of the contract.