Petition — Helmerich & Payne, Inc. v. Rock Island Improvement Co.

Office -S Court, U

s2-16i8 [res

ROEM Ae MAR 30 1983

ALEXANDER L. STEVAS,

CLERK

Gnthe Supreme Court of the United States

OcTOBER TERM, 1982

HELMERICH & PAYNE. INC.

Petitioner

V.

ROCK ISLAND IMPROVEMENT COMPANY

Respondent

Vv.

SAM SEXTON, JR.

Third Party Defendant

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

JAMES R. EAGLETON

MARC F. CONLEY

HOUSTON AND KLEIN, INC.

3200 University Tower

1722 South Carson

P.O. Box 2967

Tulsa, Oklahoma 74101

(918) 583-2131

Attorneys for Petitioner,

Helmerich & Payne, Inc.

April, 1983

QUESTIONS PRESENTED

1. Whether the owner of real property leased for sur-

face coal mining can recover in damages for breach of a

reclamation provision of the coal mining lease $375,000.00,

when counsel for the landowner stipulated at trial that full

and complete reclamation of the land would increase its

fair market value a total of $6,797.00, and that the surface

of the land fully reclaimed would have a total fair market

value of $76,345.00.

2. Whether the question of whether or not the rule of

damages as set out in Peevyhouse v. Garland Coal & Min-

ing Company, 382 P.2d 109 (Okl. 1962), is still the law of

Oklahoma should be certified to the Oklahoma Supreme

Court.

PARTIES TO THE PROCEEDINGS BELOW

All of the parties appearing in the United States Court

of Appeals for the Tenth Circuit are listed in the caption

hereto. The parent corporation of Respondent, Rock Island

Improvement Company, is Rock Island Railroad Company.

—

TABLE OF CONTENTS

PAGE

QUESTIONS PRESENTED 22.2.2 enennnenncenennnnene i

PARTIES TO THE PROCEEDINGS BELOW ........ i

IIE UIE pssncsscentncovesantensesncosiheeaseuresnnssniawchactiiiin 1

JURISDICTIONAL BASIS OF THIS PETITION .... 2

STATUTORY PROVISIONS INVOLVED |... 2

wy le gy | 0, enna nenne ae 3

BASIS OF FEDERAL JURISDICTION 0 6

6

REASONS FOR GRANTING THE WRIT |...

1. The History and ye gin of the ici

Oklahoma Law of Damages .. coeues 9

2. The Peevyhouse Rule is Binding on the Federal

Judiciary Sitting in Diversity . cious 19

3. The Oklahoma Mining Statutes Do Not <snels

OR eee 22

4. The Question of the Continuing Applicability of

Peevyhouse Should Be Certified to the Oklahoma

Supreme Court .. sibacaiaiibiaianbids ee ee

Ee ee EE

CERTIFICATE OF SERVICE follows Petition.

APPENDIX A: Opinion of U.S. Court of Appeals

(10th Cir.) filed Jan. 21, 1983.

APPENDIX B: Order of U.S. Court of Appeals De-

nying Petition for Rehearing, Suggestion for Hear-

ing En Banc and Motion to Certify, dated Feb. 23,

1983.

—iii—

TABLE OF CONTENTS CONTINUED

APPENDIX C: Jury Verdict of U.S. District Court

for the Eastern District of Oklahoma, filed Nov. 12,

1980.

APPENDIX D: Judgment of U.S. District Court for

the Eastern District of Oklahoma, filed Nov. 12, 1980.

APPENDIX E: The Mining Lands Reclamation Act

(45 O.S. 1971 § 721, et seq.).

APPENDIX F: Letter Opinion of Attorney General

of Oklahoma, dated October 16, 1078.

APPENDIX G: Tract Appraisals dated Nov. 3, 1980.

— {|

TABLE OF AUTHORITIES

Cases PAGE(S)

Allied Hotels, Ltd. v. Barden, 389 P.2d 968 (Okl. 1964) 11

Associated Stations, Inc. v. Cedars Realty & Develop-

ment Corp., 454 F.2d 184 (4th Cir. 1972) 20000000. «=©18

Bowes v. Saks & we 397 F.2d 113 hike Cir.

ee eee 12, 18-19, 27

Conkin v. Ruth, 581 P.2d 923 (Okl. App. 1976) _.....15-16, 23

Erie Railroad se v. Sicbieieatinse 304 U.S. 64, 82

L.Ed. 1189 (1937) . ee wate ...19, 29

Gallaspy v. Warner, 324 P.2d 848 (Okl. 1958) 10-11

Groendyke ‘cat Inc. v. Merchant, 380 P.2d 682

(Okl. 1962) . Gs eceoeasneneccmaeiannaaniceadennansacsaate. ~ an

Hitchcock v. Peter Kiewit & Sons eae , Inc., 479

F.2d 1257 (10th Cir. 1973) —........ as 15, 23

Hood v. Dunn & Bradstreet, Inc., 486 F. 2d 25 ( 5th Cir.

1973) . ae :-

Jacob & —. Inc, v. Kent, 230 N.Y. 239, 129 N.E.

889 (1921) . se 27

Lehman Bros. v. Schein, 416 U.S. 386, 48 L.Ed.2d 215

(1974) . era 26

McKenna v. Ortho Pharmaceutical Peay 622 F.2d 657

(3rd Cir. 1980) .. saa 20, 26

Meredith v. Winter. Haven, 320 US. 228, 88 L.Ed. 9

(1943) .. es 19, 20

Middendorf \ V. , Fuqua Industries, Inc., 623 F, 2d 13 ( 6th

Cir. 1980) - cacaraadioiba 17-18

Missouri Baptist Hospital v v. UU, Ss, 555 F.2d 290 vole C.

1977) . Mie eieiscinnaseasemanene

Pana v. Garland Coal & & Mining C Company, 382

P.2d 109 (Okl. 1962) .. cece passim

Pennsylvania Cement Co. v. Bradley Contracting C Co.,

11 F.2d 687 (2d Cir, 1926) . Mncdiisienccsebaamedededinge ae

— |

AUTHORITIES CONTINUED PAGE(S)

Pollock v. Farmers’ Loan & Trust piace: 157 U.S.

429, 39 L.Ed. 759 (1895) ................... 28

Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832 (2d

Cir. 1967) 22

Ruddach v. Don Johnston Ford, Inc., 621 P2d 744

(Wash. App. 1980) ..................... scanbiatsletsiitinadaeaa

Warner v. Gregory, 415 F.2d 1345 (7th Cir. 1969) . 21

Western Natural Gas Co, vy, Cities Service Gas Co., 507

P.2d 1236 (Okl. 1972) . 14, 23

Williams v. Kaiser, 323 US. 471, 89 LEd. 398 (1944). 19

Oklahoma Statutes

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NII IEEE TTT senccsnsasssonvetonutscsmmnnsnenensicenneveiiadeiinetanainesedints 3

EEE TEES TENET sccurescdhiestnnsenseseosinienninriemaninbeencasiionseetoineiae 3

RNG TIE FD issscssenensasrecsecnsisuvesensnebesainacniveinimventedenccatsrsniat mE

kf, | mA Ns

45 O.S. Supp. 1968 §§ 701-713 piocaeenh. Sa

oe ek Fe

RE WIE PD cetccccttscenterescsenseeremertsersinneminneeae: aan

SE TED paceceeicossciserensicneninmiernsicsennteonchete a 24

I TI TID nsininiscsasteciresccocietsiaiincoscnsesseummanacmmtonmenonan: aE

ES IEEE IIIPY ccnisciessinccistinsinnecsentcnnsissnsnmnssiisacsemneianitnotoaimanngas: Tn

Fe ee EA fens:

re ks SSE fae

Federal Practice and Procedure, 32 Am.Jur.2d §§ 294,

2065 ...... Re Te Ta ORL AR APEC NONE A nes Fo 19

Oklahoma Attorney General’s Opinion of October 16,

IE cicciscssisuscicsuctenietht cctticiina nieces tladiedantaliemainaetediane ees 25

(es a

In the

Supreme Court of the United States

OctToper TERM, 1982

HELMERICH & PAYNE, INC.

Petitioner

Vv.

ROCK ISLAND IMPROVEMENT COMPANY

Respondent

v.

SAM SEXTON, JR.

Third Party Defendant

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

The opinion of the United States Court of Appeals for

the Tenth Circuit entered January 21, 1983, is reported as

Rock Island Improvement Co. v. Helmerich & Payne, Inc.,

v. Sam Sexton, Jr., _... F.2d -.. , No. 81-1080 (10th Cir.

1983), and is set out as Appendix A hereto. The Order of

the Court of Appeals for the Tenth Circuit denying Helm-

erich & Payne’s Petition for Rehearing, Suggestion for Hear-

ing En Banc, and Motion to Certify Question to the Okla-

homa Supreme Court, dated February 23, 1983, is set out

as Appendix B hereto.

There was no opinion in the District Court for the

Eastern District of Oklahoma. The jury verdict and judg-

ment of the District Court are set out as Appendices C

and D hereto, respectively.

pa

JURISDICTIONAL BASIS OF

THIS PETITION FOR WRIT OF CERTIORARI

The Petitioner seeks, by Writ of Certiorari to the United

States Court of Appeals for the Tenth Circuit, review of the

final judgment of that court entered on January 21, 1983

(Appendix A, infra).

The Court of Appeals for the Tenth Circuit denied a

Petition for Rehearing, Suggestion for Hearing En Banc,

and Motion to Certify Question to the Oklahoma Supreme

Court, on February 23, 1983 (Appendix B, infra). There

has been no Order granting an extension of time within

which to petition for certiorari.

Jurisdiction for this Court to review the judgment in

question is believed to be conferred by 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

Title 23 O.S. 1981 § 96, provides:

Notwithstanding the provisions of this chapter’,

no person can recover a greater amount in damages

for the breach of an obligation, than he could have

gained by the full performance thereof on both sides,

except in cases where recovery may be for exemp-

lary damages and penal damages, and in Sections 2871

and 2878. R.L.1910, § 2889.

1R.L.1910, ch. 24, now incorporated in this title.

*Sections 40, 67 of this title.

Title 23 O.S. 1981 § 97, provides:

Damages must, in all cases, be reasonable, and

where an obligation of any kind appears to create a

right to unconscionable and grossly oppressive dam-

ages, contrary to substantial justice, no more than

reasonable damages can be recovered. R.L.1910, § 2890.

ae

Section 2871 referred to in § 96, supra, is codified at

23 O.S. 1981, § 40, which provides:

The damages for the breach of a promise of mar-

riage rest in the sound discretion of the jury. R.L.

1910, § 2871.

Section 2878 referred to in § 96, supra, is codified at

23 O.S. 1981 § 67, which provides:

‘The damages for seduction rest in the sound dis-

cretion of the jury. R.L.1910, § 2878.

The 1971 Oklahoma Mining Lands Reclamation Act, 45

O.S. 1971 §§ 721-738, as it existed at all times pertinent

hereto is set out in full as Appendix E hereto.

The decision of the Attorney General of the State of

Oklahoma dated October 16, 1978, construing the 1971 Ok-

lahoma Mining Lands Reclamation Act as applied to the

land involved herein is set out as Appendix F hereto.

STATEMENT OF FACTS

April 8, 1968, Rock Island Improvement Company

(hereinafter Rock Island) granted a Lease of Coal De-

posits to Helmerich & Payne covering 5,205 acres for a term

ending July 31, 1977, which provided for the lessee to pay

yearly delay rentals of $5,204.93, together with ad valorem

taxes, and providing in part in paragraph 3, page 1, in ref-

erence to reclamation:

Upon the abandonment or completion of any mining

operation, or part thereof, including but not limited

to any strip operation, the surface shall be restored

as nearly as possible to its condition prior to said

mining operation, including the removal of any and

par

all such works, buildings, plants, structures and ap-

pliances placed thereon for said mining operation.

Helmerich & Payne did not mine any coal under the sub-

ject lease.

November 20, 1974, Helmerich & Payne entered into a

Sublease and Agreement with Sam Sexton, Jr., giving him

the right to mine coal as operator under the Subject Lease.

In early 1977, Billy R. Weiher, Assistant State Mine

Inspector, reported, in reference to a portion of the leased

land known as the Heavener pit (also known as Tract 1),

that there were approximately 50 acres disturbed; and in

reference to a portion of the leased land known as the

Petros pit (also known as Tract 2), that there were ap-

proximately 45 acres disturbed; and that the operator “has

continuaily made an effort to comply with the Oklahoma

Mining Laws and to fulfill all recommendations in safety

and reclamation made by an inspector of the Oklahoma

Department of Mines.”

July 31, 1977, the subject lease expired.

May 18, 1978, Oklahoma Department of Mines for-

feited and obtained in cash the $50,000.00 bonds posted by

the operator for reclaiming Tracts 1 and 2.

October 16, 1978, the Attorney General of the State of

Oklahoma advised the Oklahoma Department of Mines by

letter opinion (Appendix F, infra, at p.3f) that the sole

remedy for failure to complete the reclamation on Tracts

1 and 2 under the permits issued by the Oklahoma De-

partment of Mines was the forfeiture of the performance

bonds of $50,000.00 by the operator, which had previously

occurred.

a

November 10-12, 1980, this case was tried before a

jury in the United States District Court for the Eastern

District of Oklahoma, at which time the Honorable Judge

Frank H. Seay ruled that the measure of damages was

governed by Peevyhouse v. Garland Coal & Mining Co.,

382 P.2d 109 (Okl. 1962), as the law of Oklahoma.

During trial the chief executive officer of Rock Island,

Bruce E. Clinton, testified that in his opinion there could

be remaining 750,000 to 1,000,000 mineable tons of coal

under Tract 1, and that in 1976 and 1977 he had run two

general advertisements soliciting bids from various coal

companies to mine coal under the subject tracts.

During trial the attorney for Rock Island, David L.

Russell, stipulated that the testimony of Otis Eversole, as

set out in Defendant’s Exhibits 81 and 82, regarding the

value of the subject property, was true. Exhibits 81 and

82 are set out as Appendix G hereto. This stipulation pro-

vided that on July 31, 1977, with full and complete recla-

mation the surface of the “Rees-Heavener” tract (Tract 1)

had a fair market value of $50,567.00, and the surface of

the “Rees-Petros” tract (Tract 2) had a fair market value

of $25,778.00. Thus, the total surface value of the subject

tracts fully restored was stipulated by Rock Island to be

$76,345.00. The diminution in value so stipulated to, oc-

casioned by the failure to reclaim, was $6,797.00.

The jury returned a verdict against Helmerich & Payne

in the amount of $375,000.00 as the cost of reclamation.

a

BASIS OF FEDERAL JURISDICTION

This controversy was tried to the United States Dis-

trict Court for the Eastern District of Oklahoma as a mat-

ter arising out of diversity of citizenship jurisdiction, with

an amount in controversy of greater than $10,000.00, pur-

suant to 28 U.S.C. § 1332.

The final judgment of the District Court was appealed

to the United States Court of Appeals for the Tenth Cir-

cuit pursuant to 28 U.S.C. §§ 1291, 1294.

REASONS FOR GRANTING THE WRIT

The principal issue in this controversy is the measure

of damages suffered by a lessor of coal deposits upon the

failure of the lessee to perform fully a reclamation pro-

vision of the lease subsequent to surface mining.

The Oklahoma Supreme Court addressed this identical

issue in Peevyhouse v. Garland Coal & Mining Company,

382 P.2d 109 (Okl. 1962), holding:

Syllabus by the Court

Where, in a coal mining lease, lessee agreed to

perform certain remedial work on the premises con-

cerned at the end of the lease period, and thereafter

the contract is fully performed by both parties, ex-

cept that the remedial work is not done, the measure

of damages in an action by lessor against lessee for

damages for breach of contract is ordinarily the rea-

sonable cost of performance of the work; however,

where the contract provision which was breached was

merely incidental to the main purpose in view, and

where the economic benefit which would result to

lessor by full performance of the work is grossly dis-

=

proportionate to the cost of performance, the damages

which lessor may recover are limited to the diminu-

tion in value resulting to the premises because of the

nonperformance. rT —

23 O.S. 1961 §§ 96 “ 97 neu as follows:

“$96. * * * Notwithstanding the provisions

of this chapter, no person can recover a greater

amount in damages for the breach of an obliga-

tion, than he would have gained by the full per-

formance thereof on both sides * * *.

“$97. * * * Damages must, in all cases, be

reasonable, and where an obligation of any kind

appears to create a right to unconscionable and

grossly oppressive damages, contrary to substan-

tial justice no more than reasonable damages can

be recovered.”

Although it is true that the above sections of the

statute are applied most often in tort cases, they are

by their own terms, and the decisions of this court,

also applicable in actions for damages for breach of

contract. It would seem that they are peculiarly ap-

plicable here where, under the “cost of per‘ormance”

rule, plaintiffs might recover an amount about nine

times the total value of their farm. Such would seem

to be “unconscionable and grossly oppressive damages,

contrary to substantial justice” within the meaning of

the statute. Also, it can hardly be denied that if plain-

tiffs here are permitted to recover under the “cost of

performance” rule, they will receive a greater benefit

from the breach than could be gained from full per-

formance, contrary to the provisions of Sec. 96.

The law of Oklahoma, then, as set forth by its highest

court, is clear. Upon the breach of a reclamation provision

of a coal mining lease, the measure of damages is the dimi-

at a

nution in value to the property where the cost of recla-

mation is grossly disproportionate to that disminished value

and reclamation is incidental to the main purpose of the

lease.

At the trial of this controversy, counsel for Rock Is-

land stipulated to Helmerich & Payne’s evidence that the

diminution in value of the land in question by failure to

reclaim was $6,797.00, and further that the total fair mar-

ket surface value of the land fully reclaimed would be

$76,345.00.

The Trial Court declined to interpret the unambiguous

lease with respect to whether or not the reclamation pro-

vision was incidental to its main purpose. Instead, the

interpretation of the lease was submitted to the jury, in

the absence of any evidence regarding negotiation of the

lease, and the circumstances and conditions existing when

the lease was granted. Rock Island never alleged that the

reclamation provision was a main purpose of the lease.

The Trial Court correctly instructed the jury that

Peevyhouse, supra, accurately stated the law of Oklahoma.

The jury returned a verdict in favor of Rock Island for

$375,000.00 as the cost of reclaiming the land. The Trial

Court denied timely motions for judgment notwithstanding

the verdict, to amend the judgment, and for a new trial.

The Court of Appeals for the Tenth Circuit correctly

found that the Trial Court erred in submitting the inter-

pretation of the lease to the jury (Appendix A, infra, at

p. 4a). Neither did the Court of Appeals question the stip-

ulated fair market value nor diminution in value of the

land.

Nonetheless, the Court of Appeals affirmed the jury’s

verdict on the grounds that Peevyhouse, supra, no longer

states the law of Oklahoma. In so ruling, the Court of

Appeals relied upon the 1971 Mining Lands Reclamation

Act, 45 O.S, 1971 § 721, et seq. There have been some re-

visions in this Act since this action was commenced. The

statute as originally enacted is set out at Appendix EF, infra.

1. The History and Development of the Applicable

Oklahoma Law of Damages.

A full appreciation of the Oklahoma law of damages

which precludes the type of windfall recovery awarded in

this action, and sanctioned by the Court of Appeals, is best

imparted by chronologically setting out the pertinent Okla-

homa authority. Contained within this chronology are ci-

tations of authority from other jurisdictions which have

considered this matter and have followed the rule of Peevy-

house, supra.

August 27, 1890, the first Legislative Assembly of Ok-

lahoma Territory set forth the law of Oklahoma with re-

spect to damages for breach of contract as follows:

St. 1890, § 2656:

Notwithstanding the provisions of this chapter, no

person can recover a greater amount in damages for

the breach of an obligation, than he could have gained

by the full performance thereof on both sides, except

in [the cases specified in the articles on exemplary

damages and penal damages, and in Sections 2638,

2645 and 2646] cases where recovery may be had for

exemplary damages and penal damages, and in Sec-

tions 2871 and 2878.

— i

Now codified at 23 O.S. 1981 § 96, as originally enacted.

The bracketed language was revised as underlined in 1910,

Rev. L. 1910, § 2889.

St. 1890, § 2657:

Damages must, in all cases, be reasonable, and

where an obligation of any kind appears to create a

right to unconscionable and grossly oppressive dam-

ages, cont.ary to substantial justice, no more than

reasonable damages can be recovered.

Now codified at 23 O.S. 1981 $97, as originally enacted.

From 1910 to the present date, the Oklahoma Legis-

lature has not changed 23 OS. §§ 96, 97, supra,

February 4, 1958, the Oklahoma Supreme Court held

in Gallaspy v. Warner, 324 P.2d 848, 852-53 (Okl. 1958):

Plaintiff in error contends that the judgment is in

excess of the damage sustained by plaintiff and greater

than he could have gained by the continued operation

of the well. We think the contention must be sus-

tained. Our attention is called to 23 O.S. 1951 § 96,

which provides that no person can recover a greater

amount in damages for the breach of an obligation

than he could have gained by the full performance

thereof on both sides, except where recovery may be

for exemplary and penal damages. The statute is re-

ferred to and applied in Rucker v. Mason, 61 Okl. 270,

161 P. 195; Gilmore v. Battles, 193 Okl. 396, 144 P.2d

114; and Anderson v. Hodges, 187 Okl. 43, 100 P.2d

853. Anderson v. Hodges, supra, holds:

“In an action for the breach of a lease contract,

the contract itself and the law applicable thereto

must furnish the measure of damages, and the

amount recovered cannot except in cases where

recovery may be had for exemplary damages and

ow] jo

penal damages, exceed the amount the plaintiff

could have gained by a full performance of the

the lease contract on both sides.”

February 6, 1962, the Supreme Court of Oklahoma held

in Groendyke Transport, Inc. v. Merchant, 380 P.2d 682,

686-87 (Okl. 1962):

Syllabus by the Court

3. In action for breach of contract, the contract

itself and the law applicable thereto must furnish the

measure of damages, and the amount recovered can-

not exceed amount plaintiff could have gained by full

performance of contract on both sides except in cases

where recovery may be had for exemplary and penal

damages.

December 11, 1962, the Supreme Court of Oklahoma in

Peevyhouse v, Garland Coal & Mining Company, supra, ap-

plied the above-quoted damage statutes to the breach of a

reclamation provision of a coal mining lease.

January 7, 1964, the Oklahoma Supreme Court held in

Allied Hotels, Ltd. v. Barden, 389 P.2d 968, 972-73 (Okl.

1964):

In the second paragraph of the syllabus of Ellison v.

Walker, Okl., 281 P.2d 931, we held:

“The measure of damages to real property which

are of a temporary character is the reasonable cost

of repairing the damage or restoring the property

to its former condition, where, as herein, the cost

of restoration or repairing is shown to be less than

the fair va'ue of the property before and after the

injury and the building can be restored to substan-

tially the condition it was prior to the injury.”

(Emphasis added)

a

May 27, 1968, the Court of Appeals for the Seventh

Circuit approved Peevyhouse, supra, in Bowes v. Saks &

Company, 397 F.2d 113, 116-17 (7th Cir. 1968):

Cost of repairs is merely a convenient way to

quantify the damage a lessor has suffered. Where

the facts indicate that cost of repairs is unrelated to

lessor’s actual damage, the rule is not applied. Penn-

sylvania Cement Co. v. Bradley Contracting Co., 11

F.2d 687, 688 (2d Cir. 1926) (L. Hand, J.).

“In an action for breach of contract, as opposed to

a suit sounding in specific performance, the lessor is

entitled only to the damages that were caused to the

property by the failure to restore. Where the expense

of restoration exceeds the diminution in the market

value of the property caused by the lessee’s nonper-

formance, the diminution in fair market value is the

proper measure of damages.” Dodge Street Building

Corp. v. United States, 341 F.2d 641, 644, 169 Ct.Cl. 496

(1965). If the “cost of repair’ rule will give lessors

a greater benefit from the breach than could be gained

from full performance, a different measure of dam-

ages must be applied to avoid injustice. Peevyhouse

v. Garland Coal & Mining Co., 382 P.2d 109, 113 (Okla.

1963). Accord, Giordano v. Brandywine Mushroom

Corp., 32 Pa.Dist & Co, R.2d 522, 525-26 (1963). And

see Realty Associates v. United States, 138 F.Supp.

875, 134 Ct.Cl. 167 (1956).

The rule is analogous to the doctrine governing

breach of construction contracts, most clearly stated

by Judge Cardozo in Jacob & Youngs, Inc. v. Kent,

230 N.Y. 239, 129 N.E. 889 (1921). “The owner is

entitled to the money which will permit him to com-

plete, unless the cost of completion is grossly and un-

fairly out of proportion to the good to be attained.

When that is true, the measure is the difference in

value.” 230 N.Y. at 244, 129 N.E. at 891. Accord, Mc-

Cormick, Damages § 168. (Footnotes omitted)

eaittion

January 17, 1972, the Court of Appeals for the Fourth

Circuit held in Associated Stations, Inc, v. Cedars Realty &

Development Corp., 454 F.2d 184, 188 (4th Cir, 1972):

In assessing damages, the district court used the

“cost of restoration” standard. Damages were based

on the amount it would have cost to restore the prop-

erty to the condition it had been in when the prop-

erty was leased to Cedars. This is the general rule

for determining damages to leasehold property in Vir-

ginia. See Sharlin v. Neighborhood Theatre, Inc., 209

Va. 718, 167 S.E.2d 334 (1969); Vaughan v. Mayo

Milling Co., 127 Va. 148, 102 S.E. 597 (1920); Moses v.

Old Dominion Iron and Nail Works Co., 75 Va. 95

(1880). In none of these cases, however, was there

any contention that the cost of restoring the property

to its former condition greatly exceeded any benefit

to the market value of the property. Cedars has made

this very assertion — that the cost of repair does ex-

ceed any benefit to the value of the property — and

thus we have no controlling Virginia ruling on this

point.

The object of damages in a contract case is to re-

store the plaintiff to the position he would have been

in had the contract not been breached. The “cost of

restoration” rnethod is one convenient way of deter-

mining the amount of damages to be awarded the

plaintiff where a breach had occurred. There are,

however, certain situations where this method of com-

puting damages does not restore the plaintiff to the

position he would have been in had the contract not

been breached, but rather places him in a better po-

sition, thus providing him with a windfall. In those

cases courts have resorted to alternative methods of

computing damages in order to insure that, as far as

possible, the plaintiff neither loses nor benefits from

the breach.

eins

May 9, 1972, the Oklahoma Supreme Court cited Peevy-

house, supra, with approval, although finding it did not

apply, in Western Natural Gas Co, v, Cities Service Gas

Co,, 507 P.2d 1236, 1239 (Okl. 1972):

Cities contends also that Western was required to

utilize the damage theory which would result in the

lowest damage estimate. In support Peevyhouse v.

Garland Coal and Mining Company (Okl., 382 P.2d

109, 110) is cited. The claimed applicable language

is: “* * * where the contract provision which was

breached was merely incidental to the main purpose

in view, and where the economic benefit which would

result to lessor by full performance of the work is

grossly disproportionate to the cost of performance,

the damages which lessor may recover are limited to

the diminution in value resulting to the premises be-

cause of nonperformance.” In Peevyhouse, the lessee

was required, upon the expiration of the coal mining

lease to perform certain remedial work which was not

done. To do the remedial work would have cost $29,-

000 with the result that the value of the premises

would only be increased $300.00. We held only $300.00

could be recovered. Peevyhouse is not applicable. The

efforts of Cities to defeat Western’s application to

abandon service to Cities, thus freeing Western’s gas

for a more lucrative market is more than incidental

to the main purpose of the Contract.

In 1972 the Honorable Luther B. Eubanks, Judge for

the United States District Court for the Western District

of Oklahoma, ruled in Hitchcock, infra, that Peevyhouse,

supra, was the law of Oklahoma.

June 19, 1973, the Tenth Circuit Court of Appeals, in

a decision by Circuit Judge Seth, sitting on a panel with

Circuit Judge Barrett and Senior District Judge Talbot

otiin

Smith, found that Peevyhouse, supra, accurately states the

law of Oklahoma in Hitchcock v. Peter Kiewit & Sons Com-

pany, Inc., 479 F.2d 1257 (10th Cir. 1973):

At no time does it appear that the jury was told

even though Peevyhouse was to be followed if appli-

cable, it was their duty to determine whether the

provisions relative to sloping the land and replacing

the topsoil were “main” purposes of the contract here

concerned, or merely “incidental.” They were only

told that if they found that the provisions were inci-

dental, they were to apply the rule as to damages set

forth in Peevyhouse. Thus the jury never decided this

question. The court seemingly read Peevyhouse to

them as having made that determination as a matter

of law. The result of the injection of the state court

opinion into the case as a direct instruction to the

jury resulted inadvertently in taking from the jury

the determination of whether or not the restoration

of the land surface was incidental to the agreement

or not. This is a fact question for the jury.

A careful reading of the transcript convinces us

that there was at least a strong probability that the

jury thought that they were foreclosed from deciding

this issue because of the Oklahoma Supreme Court’s

decision in Peevyhouse. Further remarks regarding

the Peevyhouse rule and the instructions to the jury,

adequate in themselves, were not clear enough and un-

equivocal enough to clear up the initial misdirection.

November 23, 1976, the Oklahoma Court of Appeals

held in Conkin v. Ruth, 581 P.2d 923, 925 (Okl. App. 1976):

The measure to be applied in compensatorily as-

sessing “temporary” damage to realty arising out of

the diversion of surface water flowage is the reason-

able costs of repairing the damage, restoring the land

to its prediversion state, or otherwise abating the det-

—16—

riment, if such cost is less than the fair prediversion

value of the property. Allied Hotels, Ltd. v. Barden,

Okl., 389 P.2d 968 (1964). If the damage is perma-

nent, however, then the measure to be used is the

difference between the value of the property before

the diversion and its value afterward. Keck v. Brus-

ter, Okl., 368 P.2d 1003 (1962). (Emphasis added)

Damage to realty is deemed to be permanent if

irreparable, irremedial, or the remedial costs exceed

the value of the property. Allied Hotels, Ltd. v. Bar-

den, supra.

April 27, 1977, the United States Court of Claims found

Peevyhouse, supra, controlling in Missouri Baptist Hospital

v. U.S., 555 F.2d 290, 294-95 (C.C. 1977):

The Government relies on cases such as Bowes v.

Saks & Co., 397 F.2d 113 (7th Cir. 1968); Dodge Street

Building Corp. v. United States, 341 F.2d 641, 169 Ct.

Cl. 496 (1965); Spitzel v. United States, 146 Ct.Cl.

399 (1959); Realty Associates, Inc. v. United States,

138 F.Supp. 875, 134 Ct.Cl. 167 (1956); and Eaddy v.

United States, 139 F.Supp. 49, 134 Ct.Cl. 338 (1956)

to support its contention that the measure of damages

for breach of a covenant to return the leased premises

to the lessor in its original condition, is not the cost

of repair where such cost exceeds the diminution in

fair market value of the premises.

Plaintiff strenuously urges that these cases con-

cern cost of restoration clauses and not cost of repair

clauses; that costs to restore are not the same as costs

to repair premises; and that a contrary rule should

apply in repair cases. We disagree, and hold for de-

fendant except with regard to its two counterclaims,

which we deny pursuant to the trial judge’s opinion,

infra.

a, | a

The overall purpose of the aforementioned mea-

sure of damages rule, as we see it, is to avoid wind-

fall recoveries.

We hold that repair costs are subjected to a ceil-

ing. That ceiling is the diminution in fair market

value attributable to defendant’s breach.

June 16, 1980, the Court of Appeals for the Sixth Cir-

cuit held in Middendorf v. Fuqua Industries, Inc., 623 F.2d

13, 18-19 (6th Cir. 1980):

A number of states follow the rule that where a land-

lord sues before the end of the term of a lease for

breach of a covenant to repair, the measure of dam-

ages is the injury to the reversion rather than the

cost of repairs. E.g., Tobin v. Union News Co., 18

A.D.2d 243, 239 N.Y.S.2d 22, 26 (N.Y.Sup.Ct.App.Div.

1963), aff’d, 13 N.Y.2d 1155, 247 N.Y.S.2d 385, 196 N.E.

2d 735 (1964); National Bank of Detroit v. Voight’s

Estate, 357 Mich. 647, 99 N.W.2d 504, 507 (1969);

Corbett v. Derman Shoe Co., 338 Mass. 405, 155 N.E.

2d 423, 429 (1969); Pennsylvania Cement Co. v. Brad-

ley Contracting Co., 11 F.2d 687, 688 (2d Cir. 1926)

(applying New York Law). See also Annot. 80 A.L.R.

2d 983, 987, 989 (1961).

In actions by lessors for damage to leased prem-

ises in excess of ordinary wear and tear at the time of

the surrender of the property, the Ohio rule was stated

in Sopronyi v. Asztalos, 101 N.E.2d 161, 162 (Ohio

App. 1949), as follows:

The measure of damages is the difference between

the market value of the property would have had

at the time of the surrender of possession by the

defendant, if it had remained in the condition in

which it was at the time possession was taken by

the lessee, and its market value in the condition

—138—

in which it was placed by the action of the defen-

dant during the tenancy. Blosser v. Enderlin, 113

Ohio St. 121, 148 N.E. 393. The plaintiff is entitled

to recover such amount as will fairly and reason-

ably compensate him for the damage done as pro-

vided by the terms of the lease. The cost of re-

pairs may be admitted in evidence but only for the

purpose of assisting in arriving at the fair and

market value of the real estate at the times under

consideration.

November 2, 1980, Peevyhouse, supra, was also applied

in Ruddach v. Don Johnston Ford, Inc., 621 P.2d 744-45

(Wash. App. 1980):

A lessee who breaches a provision of the lease

requiring him to make certain repairs or to deliver

up the premises at the termination of the lease in

a certain condition is liable in damages for the

reasonable cost of making such repairs or of put-

ting the premises in the condition prescribed by

the lease.

Crystal Concrete Corp. v. Braintree, 309 Mass. 463,

470, 35 N.E.2d 672, 675 (1941).

Cost of repairs is merely a convenient way to

quantify the damages a lessor has suffered. Where

the facts indicate that cost of repairs is unrelated

to lessors’ actual damage, the rule is not applied.

Pennsylvania Cement Co. v. Bradley Contracting

Co., 11 F.2d 687, 688 (2d Cir. 1926) (L. Hand, J.).

“In an action for breach of contract, as opposed

to a suit sounding in specific performance, the les-

sor is entitled only to the damages that were

caused to the property by the failure to restore.

Where the expense of restoration exceeds the dimi-

nution in the market value of the property caused

by the lessee’s nonperformance, the diminution in

= =

fair market value is the proper measure of dam-

ages.” Dodge Street Building Corp. v. United

States, 341 F.2d 641, 644, 169 Ct.Cl. 496 (1965).

If the “cost of repair” rule will give lessors a

greater benefit from the breach than could be

gained from full performance, a different measure

of damages must be applied to avoid injustice.

Peevyhouse v. Garland Coal & Mining Co., 382

P.2d 109, 113 (Okl[a]. 1963). Accord, Giordano v.

Brandywine Mushroom Corp., 32 Pa. Dist. & Co.

[R.]2d 522, 525-26 (1963). And see Realty Asso-

ciates v. United States, 138 F.Supp. 875, 134 Ct.Cl.

167 (1956).

Bowes v. Saks & Co., supra at 116-17.

This chronology of authorities makes clear that the

rule of Peevyhouse, supra, is not an aberration subject to

being discarded by a federal court sitting in diversity.

2. The Peevyhouse Rule Is Binding on the Federal

Judiciary Sitting in Diversity.

Nearly fifty years ago, the United States Supreme

Court ruled in Erie Railroad Company v. Tompkins, 304

U.S. 64, 82 L.Ed. 1189 (1937), that federal courts are bound

to follow state law with respect to substantive rights in

actions arising from diversity jurisdiction, Further, the pro-

nouncements of that law by the highest state court are

afforded the greatest weight, and are controlling without

regard to whether or not the federal courts agree with the

result or with the grounds of such decisions. Williams v.

Kaiser, 323 U.S. 471, 473, 89 L.Ed. 398, 401 (1944); Mere-

dith v. Winter Haven, 320 U.S. 228, 234, 88 L.Ed. 9, 13

(1943); Federal Practice and Procedure, 32 Am.Jur.2d §§

294, 295.

—2—

The Court of Appeals acknowledged the binding effect

of state supreme court cases when it decided the case at

bar, but stated further that “we need not adhere to a de-

cision if we think it no longer would be followed.” (Ap-

pendix A, infra, at p. 6a). As evidenced by Meredith, supra,

a federal court may not deviate from state law unless it

can point with assurance to further developments of state

law which indicate that the previous decisions of the state’s

highest court will not be followed.

The authorities relied upon in Judge Logan’s decision

either involve an actual change in the statutory or case

law of the state in question, or decline to deviate from

the established state law.

McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657,

665 (3rd Cir. 1980), dealt with conflicting state supreme

court decisions with respect to the applicable state statute

of limitations for medical malpractice actions, and expressly

found that the more recent state supreme court decision

constituted an abandonment by that court of the doctrine

set forth in its previous decision. McKenna, supra, did

not involve a speculative determination of the current state

law. The highest state court had spoken on the matter, and

the question was concluded insofar as the federal court was

concerned. A contrary result would have been surprising

in view of the express finding of the court regarding the

controlling nature of state supreme court decision, an ex-

pression omitted from the Court of Appeals’ opinion in the

instant case (Appendix A, infra, at p. 6a-7a), which omitted

language provides at 622 F.2d 662:

The primary source that must be analyzed of course,

is the decisional law of the Ohio Supreme Court. In

— )

the absence of authority directly on point, decisions

by that court in analogous cases provide useful indi-

cation of the court’s probable disposition of a particu-

lar question of law.

Here there is no absence of authority directly on point.

The Oklahoma Supreme Court has expressly applied to a

coal mining lease damage statutes which have existed in

Oklahoma since the nineteenth century. The Oklahoma coal

mining statutes have no impact upon the contractual rela-

tionships between Helmerich & Payne and Rock Island. It

simply cannot be said with any assurance that the Okla-

homa Supreme Court would no longer apply these long-

standing damage statutes to the present controversy.

Hood v. Dunn & Bradstreet, Inc., 486 F.2d 25 (5th Cir.

1973), likewise does not logically support the court’s radical

deviation from the established Oklahoma law on damages.

In Hood, supra, the court recognized that federal courts are

not immutably bound to follow state court decisions, but

found that the case before it failed the strict test applicable

to such federal independent judgment on matters of state

law. 486 F.2d 25. Likewise, there exists no compelling rea-

son for the long-standing legislative policy of Oklahoma to

be held for naught by the federal court.

Judge Logan’s opinion further relies upon Warner v.

Gregory, 415 F.2d 1345, 1347 (7th Cir. 1969), wherein the

court determined that an actual change in the applicable

state statute had occurred. Thus, the federal court was able

to say with some assurance that case law construing the

old statute would no longer be followed. That is not true

of the present case, and the settled law of Oklahoma on

damages should not be abrogated by the federal judiciary.

=~

Finally, Roginsky v. Richardson-Merrell, Inc., 378 F.2d

832, 841 (2d Cir. 1967), declined to speculate that state law

had changed, finding that the Erie doctrine prevented such

engagement in local law-making.

The gist of these authorities is not that a federal court

must slavishly adhere to discarded state precedents. None-

theless, the Oklahoma Supreme Court in Peevyhouse, supra,

spoke directly and forcefully on the very dispositive issue

of this action. There is no compelling reason to abandon

the Oklahoma controlling authority, and it simply cannot

be said with any assurance that the Oklahoma Supreme

Court would do so if faced with this controversy.

3. The Oklahoma Mining Statutes Do Not Abrogate

the Peevyhouse Rule.

The Oklahoma law of damages is clear. Damages must

in all cases be reasonable. One may not recover more for

the breach of a contract than he would have gained by full

performance thereof, without regard to the agreement of

the parties. Recovery for injury to real property cannot

under these facts exceed the diminution in value caused

by the breach, and cannot in any event exceed the fair

market value of the property fully restored. By its opinion

of January 21, 1983, the Court of Appeals has ruled that

these basic and long-standing damage rules do not apply

to reclamation under a coal mining lease due to the enact-

ment of the 1971 Oklahoma Mining Lands Reclamation Act,

supra,

Nonetheless, it cannot be said with any assurance that

the Oklahoma Supreme Court would so hold. The mining

statute relied upon was enacted on June 12, 1971, more

x on

than three years after the parties hereto entered into the

subject lease, and could not possibly have altered the ob-

ligations of these parties. Additionally, the 1971 Mining

Lands Reclamation Act, supra, was enacted prior to the

express findings of the Oklahoma Supreme Court in West-

ern Natural Gas, supra, and the Oklahoma Court of Appeals

in Conkin, supra, that Peevyhouse, supra, is the law of Ok-

lahoma, That Act was also passed prior to the findings of

the District Court and Court of Appeals in Hitchcock, supra,

that Peevyhouse, supra, is the law of Oklahoma. Therefore,

the conclusion of Justice Logan that the 1971 mining statute

changed the law of Peevyhouse, supra (Appendix A, infra,

at p. 6a-7a), is simply without support, and constitutes an

impermissible deviation from the Oklahoma law controlling

in this controversy.

However, assuming that the mining statute is appli-

cable to a determination of the contractual rights of the

parties, the critical factual issue in making that determina-

tion is whether or not the mining statute requires the rec-

lamation upon which the damage award of $375,000.00 was

based. The record herein is conclusive and unrebutted that

no such reclamation is required.

The testimony of Rock Island’s own expert witness,

Don Westhoff, with respect to the cost of reclamation, and

the work included in that cost, reveals that approximately

88 percent of the $375,000.00, or $40,000.00 to $45,000.00,

was attributable to “closing the last cut,” in other words,

draining and filling the pit and knocking down the high

wall. It is undisputed and of record, however, that the 1971

Oklahoma Mining Lands Reclamation Act, supra, does not

require closing the last cut where mineable coal remains in

the ground.

cenit

May 1, 1967, the Oklahoma Legislature passed the Open

Cut Land Reclamation Act, Lows 1967, ch. 186, § 1, et seq.

(codified at 45 O.S. Supp. 1968, $§ 701-713). This Act pro-

vided for reclamation and conservation of land disturbed

by open cut mining after mining operations are completed.

The obligation to reclaim after mining was completed was

placed solely on the operator, and no obligation was placed

on the landowner, lessor or lessee.

June 12, 1971, the State of Oklahoma adopted the Min-

ing Lands Reclamation Act, Laws 1971, Ch. 332, § 1, et seq.

(codified at 45 O.S. 1981 §§ 721, et seq.), which repealed

the Open Cut Land Reclamation Act, supra. Like its prede-

cessor, the 1971 Mining Lands Reclamation Act, supra, pro-

vides for reclamation and conservation of lands after min-

ing, placing the sole obligation on the operator, and not

upon the landowner, lessor or lessee. This Act (set out in

full as Appendix E, infra) provides in § 725(d) as follows:

(d) The operator may construct earth dams to

form lakes in pits resulting from surface mining op-

erations, provided that the formation of lakes shall

not interfere with other mining operations or damage

property of others.

Under the 1971 Oklahoma Mining Lands Reclamation

Act, supra, the Oklahoma Mine Inspector put out Invita-

tions to Bid on Reclamation Jobs which provided, in part:

3. Open pits will be leveled and graded unless

otherwise specified for water reservoir.

The Oklahoma Department of Mines distributes a bro-

chure printed in 1974 reflecting how coal miners are to

make reclamation under the 1971 Mining Lands Reclama-

—25—

tion Act, supra; and which shows as reclaimed land that

has mineable coal left, a high wall and a water reservoir,

with the coal seam (“button”) protected.

In fact, Rock Island admitted in its Brief of Appellee

to the Court of Appeals that the reclamation upon which

damages were based in this case was not required by the

state mining statutes, Brief of Appellee, p. 13:

State law does not in every case require the filling in

of open pits which may have been formed — the lease

did.

it should also be noted that the mining statutes place

no obligation on the landowner, lessor or lessee, but place

the sole obligation to reclaim upon the operator, 45 O.S.

1981 § 723(k), as was recognized by the Court of Appeals

(Appendix A, infra, at p. 5a).

Further, counsel for Rock Island stipulated at trial that

the sole remdey for the failure to reclaim pursuant to the

statute is the forfeiture of performance bonds, in accord-

ance with the opinion of the Oklahoma Attorney General

(Appendix F, infra, at p. 3f). That sole remedy has already

occurred in this matter.

Finally, assuming the mining statute had any applica-

tion here, the Trial Court excluded all evidence offered by

Helmerich & Payne that showed compliance with the policy

of the statute as to flora, fauna and quality of water.

Simply stated, then, Oklahoma law does not under

these circumstances allow Rock Island to recover more than

the diminution in value to this land, and in no event can

it recover more than the fair market value of the property

in damages for failure to reclaim. Nonetheless, while pur-

=o

porting to apply the 1971 Oklahoma Mining Lands Recla-

mation Act, supra, the Court of Appeals has imposed upon

Helmerich & Payne an excessive penalty of cost of reclama-

tion five times the value of the property, and which would

increase the value of the surface by only $6,797.00, based

upon reclamation that is not required by the Act. To apply

the Oklahoma law of damages is not, as Judge Logan's

opinion suggests, to assume that the reclamation cause of

the lease was to have no force (Appendix A, infra, at p. 7a).

There was never any question that the reclamation pro-

vision was fully effective, nor that Helmerich & Payne was

liable to Rock Island for the breach of that provision. None-

theless, the measure of damages for that breach as estab-

lished by Oklahoma statute and the decisions of the Okla-

homa Supreme Court is the diminution in value occasioned

by the falure to reclaim, and cannot, in any event, exceed

the fair market value of the property fully restored.

4. The Question of the Continuing Applicability

of Peevyhouse Should Be Certified to the Okla-

homa Supreme Court.

McKenna, supra, cited in Judge Logan’s opinion, urges

a determination of the applicable Oklahoma law at 622 F.2d

661 n. 15:

It is regrettable that Ohio has not yet established

a certification procedure that would enable this Court

to obtain a definitive answer to the crucial question

in this case from the Ohio Supreme Court. The United

States Supreme Court has expressed its approval of

such a procedure.

See also Lehman Bros, v. Schein, 416 U.S. 386, 390-91, 394-

95, 94 S.Ct. 1741, 1743-44, 1745-46, 48 L.Ed.2d 215, 220

(1974).

a

Oklahoma has such a certification procedure, Uniform

Certification of Question of Law Act, 20 O.S. 1981, § 1602.

This Court should certify to the Oklahoma Supreme Court

whether or not Peevyhouse is still the law of Oklahoma.

It is true that no such request had been made in these

proceedings prior to Helmerich & Payne’s motion denied by

the Court of Appeals February 23, 1983 (Appendix B,

infra). However, the need or desirability of doing so was

not an issue in this lawsuit until the Court of Appeals’

decision of January 21, 1983, as at no time did the Trial

Court rule, or even suggest, that Peevyhouse was no longer

the law of Oklahoma. Helmerich & Payne does not believe

that the Oklahoma Supreme Court would allow the re-

covery of damages for injury to real property which ex-

ceed by more than 490 percent the actual market value of

that property. If the long-standing policy of the state is

now to be cast aside, such a decision should be that of the

Oklahoma Supreme Court, rather than a federal appeals

court sitting in another state.

CONCLUSION

The elementary principles of damages, abandoned by

the Court of Appeals herein, were espoused by no lesser

jurists than Judge Cardozo in Jacob & Yo ngs, Inc, v. Kent,

230 N.Y. 239, 129 N.E. 889 (1921), quoted in Bowes v. Saks

& Company, supra; and by Justice Learned Hand in Penn-

sylvania Cement Co, v. Bradley Contracting Co., 11 F.2d 687

(2d Cir. 1926), quoted in Ruddach, supra. Yet, the Opinion

of the Court of Appeals casts aside all authority in deter-

mining, for the State of Oklahoma, what its law with re-

= =

spect to damages shall be. It is true that no individual’s

sacred liberties are here at stake, nor is any pressing Con-

stitutional issue presented. Still, we are a country of laws,

and wisdom may be found in the words of Justice White in

Pollock v. Farmers’ Loan & Trust Company, 157 U.S. 429,

652, 39 L.Ed. 759, 844 (1895) (White, J., dissenting):

The fundamental conception of a judicial body is

that of one hedged about by precedents which are

binding on the court without regard to the personality

of its members. Break down this belief in judicial

continuity, and let it be felt that on great Constitu-

tional questions this court is to depart from the settled

conclusions of its predecessors, and to determine them

all according to the mere opinion of those who tempo-

rarily fill its bench, and our Constitution will, in my

judgment, be bereft of value and become a most dan-

gerous instrument to the rights and liberties of the

people.

In ordering the affairs of their business and everyday

lives, the citizens of Oklahoma have a right to rely upon

the continuity of its laws. The Oklahoma Supreme Court

recognized Peevyhouse, supra, as the law of Oklahoma after

the 1971 Oklahoma Mining Lands Reclamation Act, supra,

was enacted by the Legislature. Now, the Court of Appeals

herein has usurped the right and duty of the Oklahoma

courts by rejecting Peevyhouse, supra. The Court of Ap-

peals rationalizes this result by noting that Peevyhouse,

supra, contained a strong dissent (Appendix A, infra, at

p. 6a). In fact, the Court of Appeals has done nothing other

than set aside the reasoned and express opinion of the Ok-

lahoma Supreme Court, and adopt for the State the minor-

ity view of the controlling decision by the State’s highest

—29—

court. Such encroachment on local law-making was con-

demned in Erie, supra, and should not be allowed to stand.

The January 21, 1983 Opinion of the Court of Appeals

does not cite a single case from anywhere in the United

States, much less from Oklahoma, which has allowed such

a windfall recovery. The damage award is grossly dispro-

portionate to the benefit Rock Island would have gained

by full performance, unreasonably excessive, and in no

sense advances the interests of the people of the State of

Oklahoma. If Rock Island had wished the land reclaimed,

it could have sued for specific performance. Bowes v. Saks

& Co., supra. Having sued for damages, it should be bound

by state law as a limit on its recovery. Rock Island has

neither the obligation nor the incentive to use the award to

reclaim this land. In fact, the only evidence adduced at

trial was that they did not intend to do so, but instead were

seeking to lease it again for further mining of the substan-

tial coal deposits remaining, as the highest and best use of

the land.

WHEREFORE, Petitioner prays that a Writ of Certio-

rari issue from this Honorable Court to review the judg-

ment of the United States Court of Appeals for the Tenth

Circuit in Rock Island Improvement Co. v. Helmerich &

Payne, Inc., v. Sam Sexton, Jr.; No. 81-1080. In the event

that the Petition is granted, Petitioner prays that the judg-

ment of the Court of Appeals below be reversed, that the

cause be remanded, and that the Court of Appeals be di-

rected to render an Opinion in conformity with the findings

of this Court. Additionally, should this Court find reason

to believe that Peevyhouse, supra, may no longer be the

—

law of Oklahoma, Petitioner prays that the question be

certified to the Oklahoma Supreme Court for such a de-

termination.

Respectfully submitted,

JAMES R. EAGLETON

MARC F. CONLEY

HOUSTON AND KLEIN, INC.

3200 University Tower

1722 South Carson

P.O. Box 2967

Tulsa, Oklahoma 74101

(918) 583-2131

Attorneys for Petitioner,

Helmerich & Payne, Inc.

April, 1983

CERTIFICATE OF SERVICE

I, James R. Eagleton, a member of the Bar of the Su-

preme Court of the United States and counsel of record for

Helmerich & Payne, Inc., Petitioner herein, hereby certify

that on the ........... day of ....................-.--) Ion, PU

to Rule 28 of the Rules of the Supreme Court, I served

three (3) copies of the foregoing Petition for Writ of Cer-

tiorari to the United States Court of Appeals for the Tenth

Circuit on each of the parties required to be served herein

as follows:

On Rock Island Improvement Company, the Respon-

dent herein, by mailing the copies in duly addressed en-

velopes, with first-class postage prepaid, to John R. Cain,

counsel of record for Rock Island Improvement Company,

at his office at 880 City National Bank Tower, Oklahoma

City, Oklahoma 73102; and on Judge David L. Russell,

counsel on brief for Rock Island Improvement Company,

at his office at Federal Building, Oklahoma City, Oklahoma

73102.

On Sam Sexton, Jr., Third Party Defendant herein, by

mailing the copies in a duly addressed envelope, with first-

class postage prepaid, to Sam Sexton, Jr., appearing pro se,

at his office at P.O. Box 1526, Fort Smith, Arkansas 72902.

All parties required to be served have been served.

James R. Eagleton

Counsel for Petitioner

APPENDIX A

PUBLISH

[Filed Jan. 21, 1983]

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

ROCK ISLAND IMPROVEMENT )

COMPANY, )

Plaintiff-Appellee, )

v. )

)

HELMERICH & PAYNE, ) No. 81-1080

INCORPORATED, )

Defendant-Appellant _)

Third Party Plaintiff, )

v. )

)

)

)

SAM SEXTON, JR.,

Third Party Defendant.

Appeal from the United States District Court

For the Eastern District of Oklahoma

(D.C. No. 79-20-C)

James R. Eagleton (Marc F. Conley with him on the briefs),

of Eagleton, Eagleton & Owens, Tulsa, Oklahoma, for De-

fendant-Appellant.

John R. Cain (David L. Russell of Benefield & Russell on

the brief), Oklahoma City, Oklahoma, for Plaintiff-Appellee.

Before BARRETT, McKAY, and LOGAN, Circuit Judges.

[APPENDIX]

LOGAN, Circuit Judge.

In this diversity case Helmerich & Payne, Inc. appeals

a jury verdict in favor of Rock Island Improvement Com-

pany for breach of contract and appeals the trial court’s

denial of its motions for judgment nowithstanding the ver-

dict and for a new trial or amendment of the judgment.

From 1968 to 1977 Hemerich & Payne leased two tracts

of land in Oklahoma from Rock Island for coal mining pur-

poses. These tracts are referred to as the ‘“Rees-Heavener”

and “Rees-Petros” mines. The lease contained a reclama-

tion clause that stated: “Upon the abandonment of com-

pletion of any mining operation, or part thereof, including

but not limited to any strip operation, the surface shall be

restored as nearly as possible to its condition prior to said

mining operation. .. .” Helmerich & Payne subleased the

land to Sam Sexton, Jr., who used stripmining techniques

to remove substantial amounts of coal. When the lease

period ended, the tracts were left with two strip pits and

were not otherwise reclaimed to Rock Island’s satisfaction.

Rock Island sued Helmerich & Payne for breach of the

lease’s reclamation provision, seeking damages equal to the

amount necessary to reclaim the land. Helmerich & Payne

filed a third party complaint against Sexton, who agreed to

pay any judgment won by Rock Island. The jury awarded

Rock Island $375,000.

On appeal the issues may be classified under the fol-

lowing headings: (1) the applicable Oklahoma damages

law, (2) the admissibility of testimony by Rock Island’s

experts, (3) the excessiveness of the damages, (4) the fair-

ness of the trial, (5) the assessment of damages for land

that the State of Oklahoma had condemned, and (6) the

crediting against the judgment, as stipulated by the parties,

of $50,000 that Sexton had forfeited to Oklahoma.

I

Helmerich & Payne contends that the trial court im-

properly applied Oklahoma damages law. In instructing

3a

[APPENDIX}

the jury on damages,' the trial court relied on Peevyhouse

v. Garland Coal & Mining Company, 382 P.2d 109 (Okla.),

cert, denied, 375 U.S. 906 (1963). In Peevyhouse the Okla-

homa Supreme Court examined a coal mining lease re-

quiring the lessee to reclaim any land it stripmined. At

issue was whether the proper measure of damages for the

lessee’s failure to reclaim was the cost of performance

($29,000) or the diminution in the fair market value of

the land ($300). The court held that the proper measure

of damages was the reasonable cost of reclamation, unless

the reclamation requirement was incidental to the lease’s

main purpose and the cost of reclamation would be grossly

disproportionate to the diminution in the land’s fair market

value. In the latter case, the lessor’s damages were limited

to the diminution in value. Id. at 114.

In the instant case the trial court submitted the issue

of the reclamation clause’s importance to the jury. We

have held that a trial court must submit this issue to the

jury when the parties have introduced extrinsic evidence

of their intent, Hitchcock v. Peter Kiewit & Sons Co., 479

F.2d 1257 (10th Cir. 1973); otherwise, the trial court should

treat interpretation of the contract clause as a matter of

law. See Walker v. Telex Corp., 583 P.2d 482, 485 (Okla.

1 The trial court instructed the jury as follows:

“The measure of damages is the reasonable cost of performing

the contract, or in this case, restoring the land to the same condition

it was in before stripmining, unless you find:

1. That the lease provision requiring restoration of Plaintiff's land

to the same condition it was in before stripmining was merely

incidental to the main purpose of the lease; and

2. That the economic benefit to the Plaintiff by restoring the land

would be grossly disproportionate to the cost of restoring the land.

“Then, if you so find, the amount of damages to which Plaintiff

is entitled is the reduced value of Plaintiff's land, that is, the differ-

ence between the present fair market value of the land as it is, and

the present fair market value of the land restored to the same con-

dition it was in before the stripmining.”

4a

[APPENDIX]

1978). Neither Rock Island nor Helmerich & Payne intro-

duced evidence establishing the parties’ intent in including

the restoration clause.“ Therefore, the trial court should

not have submitted interpretation of the contract to the

jury.

Helmerich & Payne asserts the trial court should have

held that the lease unambiguously focused upon coal min-

ing as its main purpose and that reclamation was merely an

incidental purpose. Furthermore, Helmerich & Payne argues

that because the parties stipulated the diminution in value

of the land was $6,797, and the evidence presented showed

that restoring the land would cost $375,000, the court should

have held the cost of reclamation was disproportionate to

the diminution in land value. Thus, following Peevyhouse,

the proper measure of damages would be diminution in

market value, an amount the parties stipulated, and thus

not a jury issue. Rock Island’s response is that Peevyhouse

no longer represents Oklahoma law on damages for breach

of mining contracts because of subsequent developments in

that state’s policy toward reclamation.

At the time the parties in Peevyhouse entered into

their lease, Oklahoma had no stated policy concerning land

reclamation after mining operations. Thus, in Peevyhouse

the court considered only the economic benefits to the

parties of a situation the court termed “artificial,” “un-

* Helmerich & Payne attempted to introduce a letter it had received

from an agent of Rock Island's parent corporation one year before the

lease became effective, as relating to the issue of Rock Island's under-

standing of the meaning of the reclamation clause. The trial court ex-

cluded the letter as not clearly relating to the contract in question and

as being potentially confusing to the jury. Helmerich & Payne asserts

that the trial court erred in excluding this letter as extrinsic evidence.

Rulings regarding the admission of evidence fall within the trial court's

discretion and will not be disturbed on appeal unless clearly erroneous.

Keen Vv. Detroit Diesel Allison, 569 F.2d 547, 549 (10th Cir. 1978). We

have read the letter and have determined that the trial court did not abuse

its discretion.

5a

[APPENDIX;:

reasonable,” and “unrealistic”: that a property owner would

agree to pay a great deal for “improvements” that would

increase the property’s value by only a small amount. The

court was concerned that if the landowner did not spend

the large amount to reclaim the land, he would receive a

windfall by recovering the amount from the lessee. 382

P.2d at 112.

However, after the decision in Peevyhouse but before

Rock Island leased the tracts to Helmerich & Payne, Okla-

homa enacted the Open Cut Land Reclamation Act. 1967

Okla. Sess. Laws Ch. 186 (current version at Okla. Stat.

Ann. tit 45, §§ 721-792). The Act stated in part:

“It is hereby declared to be the policy of this State

to provide, after mining operations are completed, for

the reclamation and conservation of land subjected to

surface disturbance by open cut mining and thereby

to preserve natural resources, to aid in the protection

of wildlife and aquatic resources, to establish recre-

ational, home and industrial sites, to protect and per-

petuate the taxable value of property, and to protect

and promote the health, safety and general welfare

of the people of this State.”

Id. at §2 (current version at Okla. Stat. Ann. tit 45, § 722).

The statute declares today, as it did in 1967, that the

operator of a strip mine has a duty to reclaim the land and

that the state may contract for the work to be done if the

operator defaults. The statute makes no exception for cases

in which the expenditures for reclamation are dispropor-

tionate to the resulting increase in value of the land. To

be sure the statute looks to the operator as the party re-

sponsible for reclamation, and limits the state’s recovery

to the amount of the bond it has required.* Nevertheless,

8 At the time of the Rock Island-Helmerich & Payne contract the

maximum bond required was $50 per acre. Today there is no maximum;

the bond must cover the estimated reclamation costs. Okla. Stat. Ann. tit

45, § 728(B).

6a

[APPENDIX]

there are many reasons a landowner in Rock Island’s posi-

tion would want a reclamation provision in the lease — to

enhance its image in the community, to protect against

possible tort liability for conditions on its premises, and

to allay any fear that under the recently enacted law it

might somehow be held responsible for defaults of the op-

erator. There are reasons a lessee might readily accept

such a provision — it already has a duty to reclaim under

the state statute.

We are convinced that the Oklahoma Supreme Court

would no longer apply the rule it established in Peevyhouse

in 1963 if it had the instant dispute before it. Peevyhouse

was a 5-4 decision with a strong dissent. More importantly,

the public policy of the state has changed, as expressed in

its statutes. Although we are bound by decisions of a state

supreme court in diversity cases, we need not adhere to a

decision if we think it no longer would be followed.

“An accurate forecast of [a state’s] law, as it would

be expressed by its highest court, requires an exami-

nation ot all relevant sources of that state’s law in

order to isolate those factors that would inform its

decision. .. . It is important to note, however, that

our prediction ‘cannot be the product of a mere reci-

tation of previously decided cases.’ In determining

state law, a federal tribunal should be careful to avoid

the ‘danger’ of giving ‘a state court decision a more

binding effect than would a court of that state under

similar circumstances.’ Rather, relevant state prece-

dents must be scrutinized with an eye toward the

4 Peevyhouse has been cited in only two Oklahoma Supreme Court

cases. In Western Natural Gas Co. V. Cities Service Gas Co., 507 P.2d

1236, 1249 (Okla.), cert. denied, 409 US. 1052 (1972), it was held to be

inapplicable to the facts before the court. In State ex rel. Cartwright V.

Dunbar, 618 P.2d 900, 911 (Okla. 1980), its supplemental opinion on

rehearing was cited for an unrelated point of constitutional law.

7a

[APPENDIX]

broad policies that informed those adjudications, and

to the doctrinal trends which they evince.”

McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 662

(3d Cir.), cert. denied, 449 U.S. 976 (1980). Accord Hood v.

Dun & Bradstreet, Inc., 486 F.2d 25, 31 (5th Cir. 1973), cert.

denied, 415 U.S. 985 (1974); Warner v. Gregory, 415 F.2d

1345, 1346 (7thCir. 1969), cert. dismissed, 397 U.S. 930

(1970); Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832,

851 (2d Cir. 1967). When the parties negotiated the con-

tract in question, they expressly included a reclamation

clause and required the lessee to bear the cost of reclama-

tion. Given the attention focused by Oklahoma on the im-

portance of reclaiming stripmined lands, it is more logical

to assume that the parties meant what they said, calcu-

lated their costs and benefits under the contract accord-

ingly, and intended the provision to insure proper reclama-

tion of the land, than it is to assume that they expected

the reclamation clause to have no force.®

Even though the trial court should not have submitted

the issue of the reclamation clause’s importance to the jury,

we need not reverse. Because we hold that cost of per-

formance is the proper measure of damages, and the jury

used this measure in calculating damages, the court’s error

is harmless.

II

The trial court denied Helmerich & Payne’s motion to

strike Rock Island’s expert witness’ testimony that the cost

of restoring the land as nearly as possible to its original

5 In Peevyhouse the court relied in part on Oklahoma damages statutes

requiring that a party receive no more in damages than it would have

gained by full performance. See 382 P.2d at 113 (citing Okia. Stat. Ann.

tit. 23, §§ 96,97). Helmerich & Payne contends that these statutes limit

the amount of its damages. Because the anticipated cost of reclamation

may have affected the contract price, these damages statutes do not pre-

clude use of the cost-of-performance measure of damages.

8a

[APPENDIX}

condition would be $375,000. Helmerich & Payne claims that

the expert’s testimony should have been disregarded be-

cause on cross-examination the expert inadequately dis-

closed the underlying facts for his opinion. See Fed R. Evid.

705. Specifically, it complains that the expert did not know

how many acres would be reclaimed under his estimate. Al-

though the expert admitted he could only guess the number

of acres to be reclaimed, he testified that he had measured

the strip pits in feet to calculate his estimate and that when

the pits were filled the spoils areas (hills of surface ma-

terial that had been removed to gain access to the coal)

would have been graded and leveled. Since the bulk of

the expert’s estimate concerned filling the pits, the total

number of acres involved was a minor element in figur-

ing the cost of reclamation. He testified that his reclama-

tion estimate included filling in the pits, grading and level-

ing the spoils, and revegetating. The expert also testified

about iis prior experience in reclaiming mined lands. Based

upon these disclosures, we cannot find that the trial court

erred in denying the motion to strike.

Helmvrich & Payne also maintains that the expert’s esti-

mate cannct support the verdict because it included work

that was not required by the lease: filling the pit on the

Rees-Heavener tract and grading and leveling the Rees-

Petros tract. Helmerich & Payne asserts that the lease did

not require filling the pit on the Rees-Heavener tract be-

cause Sexton had fulfilled Helmerich & Payne’s duty to re-

store the surface by reclaiming another pit and spoils area

on the same tract that had been left over from previous

6 Additionally, Helmerich & Payne asserts that the expert included this

work in his estimate because of an erroneous interpretation of state law

given him by the Oklahoma Deputy Chief Mine Inspector. Because Rock

Island sought recovery only for breach of the lease reclamation clause, the

state law requirements are irrelevant here. We have read the expert's

testimony and find that it is consistent with the scope of the lease recla-

mation clause.

9a

{APPENDIX}

mining. Furthermore, Helmerich & Payne mainiains that

Sexton had already graded and leveled the Rees-Petros

tract as nearly as possible to its prior condition.

In assessing damages the jury could properly consider

Rock Island’s expert’s estimate, which included filling and

grading the new pit on the Rees-Heavener tract and re-

storing the Rees-Petros tract. The lease stated, “[T|he sur-

face shall be restored as nearly as possible to its condition

prior to [the] mining operation.” The extent and cost of

restoration required by the lease was the heart of this liti-

gation, and the lease arguably required the work Rock

Island’s expert included in his estimate. Although Helm-

erich & Payne had no duty under the lease to reclaim the

previously mined area, nothing in the lease indicates that

it could fulfill its duty to reclaim the surface area it dis-

turbed on a tract by reclaiming a different part of the tract.

Helmerich & Payne neither sought restitution for reclaim-

ing the previously mined area nor submitted evidence of

the cost of that reclamation. Similarly, the expert’s opinion

that $25,000 would pay for leveling and grading the Rees-

Petros tract related to the parties’ dispute over how much

restoration that tract required.

III

Helmerich & Payne contends that reasonable damages

fall in the range of $40,000 to $65,000 for regrading the

spoils area and that the $375,000 verdict, which included

regrading and filling the strip pits, was excessive. Helm-

erich & Payne argues that in these circumstances the court

should have ordered a new trial. In reviewing a trial court’s

refusal to grant a motion for a new trial because of an ex-

cessive verdict, we apply the abuse of discretion standard.

Garrick v. City and County of Denver, 652 F.2d 969, 971

(10th Cir. 1981). We cannot say that the jury or trial court

erred by interpreting the reclamation clause to include fill-

ing the pits. Furthermore, because testimony of Rock Is-

land’s expert witness supports the $375,000 verdict, the trial

court did not abuse its discretion in denying the motion.

10a

(APPENDIX)

IV

Helmerich & Payne raises a number of complaints con-

cerning evidentiary rulings and instructions that it contends

rendered the trial unfair. It claims that the court improp-

erly instructed the jury on Helmerich & Payne’s obligation

to reclaim the land under the lease. The trial court in-

structed the jury that the lease required Helmerich & Payne

to restore the surface of Rock Island’s land “to the same

condition it was in before the coal was strip mined.” The

lease required restoration of the surface “as nearly as pos-

sible to its condition prior to [the] mining operation.” The

pretrial order included as an issue for trial, “Is it reason-

ably possible to restore the surface of subject real property

to the condition it was on April 8, 1968, and the cost there-

of.” Helmerich & Payne claims error in the instruction’s

omissions of the lease language “as nearly as possible” and

of the pretrial language cf a “reasonable” possibility of

restoration. Helmerich & Payne concedes that restoration is

possible, but asserts that it agreed to restore the land only

as nearly as possible or as reasonably possible and that

spending $375,000 to restore land whose value will thereby

be increased by less than $7,000 is not reasonably possible.

Helmerich & Payne is merely rearguing the proper measure

of damages, an issue we have already resolved against it.

Helmerich & Payne correctly argues that the trial court

erred in instructing the jury on the diminution in value of

the land by focusing on the land’s value at the time the

jury was deciding the issue, rather than on its value at

the end of the lease term. However, the error was harm-

less because we have already determined that the cost of

reclaiming the land was the proper measure of damages.

Helmerich & Payne also alleges that the trial court

erred (1) in excluding extrinsic evidence of the reclama-

tion clause’s meaning, testimony concerning lease payments

to Rocl: Island, land records whereby Rock Island acquired

the land it leased to Helmerich & Payne, and evidence of

the land’s present condition; (2) in admitting the sublease

reclamation provision and Sexton’s applications to the Okla-

lla

[APPENDIX]

homa Department of Mines for mining permits; (3) in in-

structing the jury on the Oklahoma reclamation statutes

and on waiver and estoppel; and (4) in permitting certain

testimony of witnesses and certain statements of counsel.

Finally, Helmerich & Payne maintains that the errors col-

lectively deprived it of a fair trial. After reading the record

and considering Helmerich & Payne’s contentions separately

and collectively, we conclude that the trial was fair and

that the trial court committed no error justifying reversal.

Vv

Helmerich & Payne contends that the trial court should

have granted its motion to amend the pretrial order to per-

mit adding the issue whether Rock Island could recover

damages for land condemned by Oklahoma. Helmerich &

Payne sought to add this issue less than one month before

trial. From the record it appears that Oklahoma filed an

action on February 22, 1974 to condemn 13.35 acres of the

land at issue in this lawsuit. By the time of trial the state

apparently had not taken possession, although on May 1,

1974, the state paid into court an amount covering assessed

value and costs. The Helmerich & Payne attorney who

signed the motion and supporting memorandum stated he

had had no knowledge of the condemnation action before

October 10, 1980. Sexton did not indicate whether he was

aware of the condemnation, but he supported the motion,

claiming Rock Island should not recover for damage to land

it did not own. Rock Island opposed the motion asserting

that the motion raised a new issue on the eve of trial, that

both Helmerich & Payne and Sexton were aware of the con-

demnation proceedings and were involved in negotiations

with the condemnor, and that the condemnation proceed-

ings were irrelevant because they had never been com-

pleted, negotiations were ongoing, and Rock Island still

held legal title to the land. The trial judge gave no reason

for denying the motion to amend.

A pretrial order controls the subsequent course of the

suit unless the trial court modifies it to prevent manifest

12a

[APPENDIX])

injustice. See Seneca Nursing Home v. Secretary of Social

and Rehabilitation Services of Kansas, 604 F.2d 1309, 1314

(10th Cir. 1979); Fed. R. Civ. P. 16. Here the trial court’s

refusal to modify the pretrial order did not create mani-

fest injustice. In Epperson v. Johnson, 190 Okla. 1, 119 P.2d

818 (1941), an Oklahoma condemnor filed condemnation

proceedings and paid the commissioners’ assessment into

court. Applying constitutional and statutory provisions sub-

stantially similar to those applicable to the condemnation

of the Rock Island property, the Oklahoma Supreme Court

found that the condemnor did not take title to the property

simply by paying the commissioners’ award into court. 119

P.2d at 823; accord Board of Commissioners v. Rayburn,

192 Okla. 694, 138 P.2d 820, 822 (1943); State ex rel. De-

partment of Highways v. Waters, 376 P.2d 288, 290-91 (Okla.

1962); Oklahoma Turnpike Authority v. Dye, 208 Okla. 396,

256 P.2d 438, 441-42 (1953). In the case before us, Helm-

erich & Payne does not contend that the state took posses-

sion of the land. To the contrary, after the condemnation

was filed, Helmerich & Payne subleased this land, received

royalties from the sublessee for mining coal on the land,

and paid Rock Island royalties for coal. Accordingly, the

trial judge did not prejudice Helmerich & Payne by deny-

ing its motion to amend the pretrial order.

VI

Finally, Helmerich & Payne contends that the trial court

erred in failing to amend the judgment to give credit for

Sexton’s forfeiture to Oklahoma of $50,000 in performance

bonds. The parties stipulated at pretrial that Helmerich &

Payne would be credited in this amount and reaffirmed the

stipulation in the briefs on appeal and at oral argument.

The trial court should have amended the judgment to re-

flect the stipulation.

Subject to the modification of $50,000 credited to Helm-

erich & Payne as stipulated by the parties, the judgment is

AFFIRMED.

APPENDIX B

JANUARY TERM — February 23, 1983

Before Honorable Oliver Seth, Honorable William J. Hollo-

way, Jr., Honorable Robert H. McWilliams, Honorable

James E. Barrett, Honorable William E. Doyle, Honorable

Monroe G. McKay, Honorable James K. Logan, and Hon-

orable Stephanie K. Seymour, Circuit Judges

ROCK ISLAND IMPROVEMENT CO., _)

Plaintiff-Appellee, )

vs. )

HELMERICH & PAYNE, INC., ) No. 81-1080

Defendant-3rd Party )

Plaintiff-Appellant, )

vs. )

SAM SEXTON, JR., )

Third-Party Defendant )

This matter comes on for consideration on appellant’s

petition for rehearing and suggestion for rehearing in banc,

and the motion to certify question to the Oklahoma Su-

preme Court.

Upon consideration whereof, the petition for rehearing

is denied by the panel that rendered the decision sought

to be reheard.

The petition for rehearing having been denied by the

panel to whom the case was argued and submitted, and no

member of the panel nor judge in regular active service on

the court having requested that the court be polled on re-

hearing in banc, Rule 35, Federal Rules of Appellate Pro-

cedure, the suggestion for rehearing in banc is denied.

The motion to certify question to the Oklahoma Su-

preme Court is denied.

HOWARD K. PHILLIPS, Clerk

By (s) Robert L. Hoecker

Chief Deputy Clerk

APPENDIX C

[Filed Nov. 12, 1980]

UNITED STATES DISTRICT COURT

FOR THE

EASTERN DISTRICT OF OKLAHOMA

ROCK ISLAND IMPROVEMENT CO., i

Plaintiff,

-VS-

HELMERICH AND PAYNE, INC.,

Defendant,

~V~ » No. 79-20-C

HELMERICH AND PAYNE, INC.,

Third-Party Plaintiff,

-VS-

SAM SEXTON, JR.,

Third-Party Defendant.

J

We, the Jury, duly empaneled and sworn, upon our

oaths, find in favor of the plaintiff, Rock Island Improve-

ment Co., and against the defendant, Helmerich and Payne,

Inc., and assess recovery for plaintiff at $375,000.

11-12 , 1980 (s) Ronald S. Price

(Date) (Foreman)

APPENDIX D

[Filed Nov. 12, 1980]

UNITED STATES DISTRICT COURT

FOR THE

EASTERN DISTRICT OF OKLAHOMA

Crvit Action Fite No. 79-20-C

ROCK ISLAND IMPROVEMENT CoO., |

(Plaintiff)

VS.

HELMERICH & PAYNE, INC.

(Defendant & Third Party Pitf.)

vs.

SAM SEXTON, JR.

(Third Party Defendant)

-JUDGMENT

This action came on for trial before the Court and a

jury, Honorable Frank H. Seay, United States District

Judge, presiding, and the issues having been duly tried

and the jury having duly rendered its verdict,

It is Ordered and Adjudged that Plaintiff, Rock Island

Improvement Co., recover of the Defendant, Helmerich &

Payne, Inc., the sum of $375,000.00.

It is further Ordered and Adjudged that Third Party

Plaintiff, Helmerich & Payne, Inc., recover of the Third

Party Defendant, Sam Sexton, Jr., the sum of $375,000.00.

Dated at Muskogee, Oklahoma, this 12 day of Novem-

ber, 1980.

(s) Lewis Vaughn

Clerk of Court

APPENDIX E

45 O.S. 1971 § 721, et seq.

THE MINING LANDS RECLAMATION ACT

§ 721. Short title

This act may be known and cited as “The Mining Lands

Reclamation Act”.

§ 722. Declaration of policy

It is hereby declared to be the policy of this state to

provide for the reclamation and conservation of land sub-

jected to surface disturbance by mining and thereby to

preserve natural resources, to encourage the productive use

of such lands after mining, to aid in the protection of wild-

life and aquatic resources, to encourage the planting of

trees, grasses and other vegetation, to establish recreational,

home and industrial sites, to protect and perpetuate the

taxable value of property, to aid in the prevention of ero-

sion, landslides, floods and the pollution of waters and air,

to protect the natural beauty and aesthetic values in the

affected areas of this state, and to protect and promote the

health, safety and general welfare of the people of this

state.

§ 723. Definitions

Whenever used or referred to in this act, unless a dif-

ferent meaning clearly appears from the context:

(a) “Overburden” means all of the earth and other

materials which lie above natural deposits of minerals, and

also means such earth and other materials disturbed from

their natural state in the process of surface mining.

(b) “Mine” means an underground or surface ex-

cavation and development with or without shafts, slopes,

drifts or tunnels for the extraction of minerals, with hoist-

ing or haulage equipment and appliances for the extrac-

tion thereof, and shall embrace any and all of the land or

2e

[APPENDIX]

property of the plant, and the surface and underground,

that contribute directly or indirectly to the Mining prop-

erties, concentration or handling of minerals.

(c) “Mining” means the extraction of minerals from

natural deposits by any method or process.

(d) “Minerals” means asphalt, clay, coal, copper, gran-

ite, gravel, gypsum, lead, marble, salt, sand, shale, stone,

tripoli, voleanic ash and zinc, or any other substance com-

monly recognized as a mineral, and includes ores or rock

containing any such substances, but excludes oil, gas and

any other mineral found naturally in a liquid or gaseous

state.

(e) “Underground mining” means those mining oper-

ations carried out beneath the surface by means of shafts,

slopes, tunnels or other openings leading to the mineral

being mined and the extraction of the mineral through

such shafts, slopes, tunnels or their openings.

(f) “Surface mining” means those mining operations

carried out on the surface, including strip mining, auger

mining, quarrying, dredging, pumping, or the use of hy-

draulic methods. Surface mining shall not include excava-

tion or removal of shale, sand, gravel, clay, rock or other

materials in remote areas by an owner or holder of a pos-

sessory interest in land for the primary purpose of con-

struction or maintenance of access roads to or on such land-

owner’s property. Surface mining shall not include exca-

vations or grading conducted for forming, on-site road con-

struction or other on-site construction, or the extraction of

minerals other than anthracite and bituminous coal by a

landowner for his own noncommercial use from land owned

or leased by him; nor the extraction of such non-coal min-

erals for commercial purposes in an amount less than five

hundred (500) tons per acre of aggregate or mass of min-

eral matter in any permit year; nor the extraction of sand,

gravel, rock, stone, earth or fill from borrow pits for high-

way construction purposes, so long as such work is per-

3e

[APPENDIX!

formed under a bond, contract and specifications which

substantially provide for and require reclamation of the

area affected in the manner provided by this act; nor to

the handling, processing or storage of slag on the premises

of a manufacturer as a part of the manufacturing process.

(g) “Strip mining” means those mining operations

carried out by removing the overburden lying above nat-

ural deposits of minerals, and mining directly from such

natural deposits thereby exposed, but excludes auger min-

ing, quarrying, dredging, pumping or the use of hydraulic

methods.

(h) “Reclamation” means conditioning affected land

to make it suitable for any uses or purposes consistent

with those enumerated in 45 O.S.1971, § 722, and to avoid,

minimize or correct adverse environmental effects of min-

ing operations.

(i) “Box cut” means the first open cut in strip mining

which results in the placing of overburden on unmined

land adjacent to the initial pit and outside the area to be

mined.

(j) “Consolidated material” means material of suf-

ficient hardness or ability to resist weathering and to in-

hibit erosion or sloughing.

(k) “Operator” means any person, partnership, firm or

corporation engaged in and controlling a mining operation.

(1) “Pit” means a tract of land from which over-

burden or minerals have been or are being removed in

the process of surface mining.

(m) “Affected land” means the area of land from

which overburden shall have been removed, or upon which

overburden or refuse has been deposited, or both.

(n) “Refuse” means all waste material directly con-

nected with the production, cleaning or preparation of min-

erals which have been mined by either underground or

surface mining method.

4e

[APPEND!IX)

(o) “Ridge” means a lengthened elevation of over-

burden created in the surface mining process.

(p) “Peak” means a projecting point of overburden

created in the surface mining process.

(q) “Department” means the office of the Chief Mine

Inspector, herein called the Department of Mines and Min-

ing, or such department, bureau or commission as may law-

fully succeed to the powers and duties of such department.

(r) “Director” means the Chief Mine Inspector of the

State of Oklahoma or such officer, bureau or commission

as may lawfully succeed to the powers and duties of such

Chief Mine Inspector.

$724. Permits — Application — Bond

(a) It shall be unlawful for any operator to engage

in any mining operations in this state without first obtain-

ing from the Department a permit to do so for each sep-

arate mining operation in such form as is hereinafter pro-

vided. The Department shall determine what constitutes

a separate mining operation by rules and regulations pro-

mulgated under this act.

(b) Any operator desiring to engage in surface min-

ing shall make written application to the Department for

a permit. Application for such permit shall be made upon

a form furnished by the Department, which form shall

contain a description of the tract or tracts of land and the

estimated number of acres thereof to be affected by sur-

face mining by the operator until the next succeeding June

30, which description shall include the section, township,

range and county in which the land is located and shall

otherwise describe the land with sufficient certainty so that

it may be located and distinguished from other lands, and

a statement that the operator has the right and power by

legal estate owned to mine by surface mining the land so

described.

5e

[APPENDIX

(c) Any operator desiring to engage in underground

mining shall make written application to the Department

for a permit. Application for such permit shall be made

upon a form furnished by the Department, which form

shall contain a description of the tract or tracts of land to

be used as refuse disposal areas until the next succeeding

June 30, which description shal! include the section, town-

ship, range and county in which the land is located and

shall otherwise describe the land with sufficient certainty

so that it may be located and distinguished from other

lands, and a statement that the applicant has the right and

power by legal estate owned to use the land so described

as a refuse disposal area.

(d) Each application for a permit under subsections

(b) and (c) of this section shall be accompanied by a plan

of reclamation of the affected land that meets the require-

ments of this act, and shall set forth the proposed use to be

made of the affected land, the grading to be accomplished,

the type of revegetation, and shall include the approximate

time of grading and initial revegetation effort.

(e) Each application for a permit under subsections

(b) and (c) of this section shall be accompanied by the

bond or security meeting the requirements of Section 8 of

this act, or proof that such bond or security is still in effect,

and a fee of Fifty Dollars ($50.00), which shall be deposited

in the General Revenue Fund of the State Treasury.

(f) Upon the receipt of such application, bond or se-

curity and fee due from the operator, the Department shail

issue a permit to the applicant which shall entitle him to

engage thereafter in mining on the land therein described

until the next succeeding June 30, the period for which

such permits are issued being hereafter referred to as the

“permit year”. Except in the case of permits for new min-

ing operations commenced after the effective date of this

act, all applications for permits shall be filed between June

1 and June 30 of each year.

6e

[APPENDIX]

(g) An operator desiring to have his permit amended

to cover additional land may file an amended application

with the Department. Upon receipt of the amended appli-

cation, and such additional bond as may be required under

the provisions of this act, the Department shall issue an

amendment to the original permit covering the additional

land described in the amended application, without the pay-

ment of any additional fee.

(h) An operator may withdraw any land covered by

a permit, deleting affected land therefrom, by notifying the

Department thereof, in which case the penalty of the bond

or security filed by such operator pursuant to the provisions

of this act shall be reduced proportionately.

(i) Permits issued hereunder to an operator shall not

be transferable to another operator.

§ 725. Procedure for reclaiming land

(a) All affected land other than lands affected by coal

mining operations shall be reclaimed as provided in this

section.

(b) The operator shall determine which parts of the

affected land shall be reclaimed for forest, pasture, crop,

horticultural, homesite, recreational, industrial or other use

including food, shelter and ground cover for wildlife.

(c) All ridges and peaks of overburden created by

surface mining shall be graded to a rolling topography tra-

versable by machines or equipment customarily used in

connection with the use to be made of the land after rec-

lamation, but such slopes need not be reduced to less than

the original grade of the area prior to mining, and the slope

of the ridge of overburden resulting from a box cut need

not be reduced to less than twenty-five (25) degrees from

horizontal. Surface mining operations conducted in the

flood plains of streams and rivers and subject to periodic

flooding shall be exempt from the grading requirements

of this section.

Te

[APPENDIX)

(d) The operator may construct earth dams to form

lakes in pits resulting from surface mining operations, pro-

vided that the formation of lakes shall not interfer with

other mining operations or damage property of others.

(e) The operator shall cover the exposed face of a

mineral seam, where significant concentrations of acid-

forming materials are present, to a depth of not less than

three (3) feet with earth that will support plant life or

with a permanent water impoundment.

(f) The operator shall grade down the banks of any

pits or depressions created by the removal of sand or gravel

by surface mining to a degree of slope determined by the

Department, which shall give due consideration to the nat-

ural topography of the land affected and adjacent lands,

the composition of such banks and the most beneficial use

of the pits and depressions comprising the affected land

after reclamation.

(g) All affected land except that which is to be cov-

ered with water or used for homesites or industrial pur-

poses shall be revegetated by the planting of seeds, plants,

trees, shrubs or other plantings appropriate to the use to

be made of the land as determined by the operator. No

planting of any kind shall be required on any affected land

so long as the chemical and physical characteristics of the

soil of such affected land are toxic, deficient in plant nu-

trients or composed of sand, gravel, shale or stone to such

an extent as to seriously irhibit plant growth. The De-

partment may prescribe by rules and regulations the re-

quired density of such plantings, and may make replanting

requirements.

(h) Except where prevented by weather conditions,

all grading shall be completed within one year after min-

ing of the affected land has been completed. Initial seed-

ing of planting shall be made at the first appropriate time

following completion of grading. If the operator is unable

to acquire sufficient planting stock of desired species from

8e

{APPENDIX}

state nurseries, or acquire such species elsewhere at com-

parable prices the Department shall grant the operator an

extension of time until planting stock is available to plant

such land as originally planned.

§ 726. Refuse disposal areas

All refuse disposal areas shall be reclaimed or treated

or the refuse be contained by the operator to avoid ad-

verse environmental effects.

$727. Inspection

The Department, or its accredited representatives, may

enter upon the lands of the operator at all reasonable times,

for the purpose of inspection, to determine whether the

provisions of this act have been complied with.

§ 728. Bond — Cash deposit

(a) Any bond herein provided to be filed with the

Department by the operator shall be in such form as the

Director prescribes, payable to the State of Oklahoma, con-

ditioned that the operator shall faithfully perform all re-

quirements of this act and comply with all rules of the

Department made in accordance with the provisions of this

act. Such bond shall be signed by the operator as princi-

pal, and by a good and sufficient corporate surety, licensed

to do business in the state, as surety.

(b) The penal sum of such bond shall be determined

by the Department as not less than Three Hundred Fifty

Dollars ($350.00) nor more than Six Hundred Fifty Dollars

($650.00) for each acre, or fraction thereof, of the affected

land. For coal and copper mining, the minimum bond shall

be Five Thousand Dollars ($5,000.00). For all other mining,

the bond shall be the amount per acre as determined by

the department times the number of acres, or fraction of

acres involved; however, in no event shall the bond be less

than One Thousand Dollars ($1,000.00). Provided no bond

9e

f[APPENDIX)

will be required for any sand or gravel producer who sells

less than One Thousand Dollars ($1,000.00) per year, when

a statement of proof for exemption in the form of a certi-

fied affidavit shall be provided by the sand or gravel pro-

ducer each year before July 1 for the previous twelve (12)

months from July 1 through June 30.

In determining the amount of the bond within the

above limits, the Department shall take into consideration

the character and nature of the overburden, the future suit-

able use of the land involved and the cost of reclamation

to be required. In a particular instance where the circum-

stances are such to warrant an exception, the Department

may reduce the amount of the bond for a particular oper-

ation to less than the required minimum, or increase the

bond for a particular operation to more than the prescribed

maximum.

(c) A bond shall not be cancelled by the surety ex-

cept after not less than ninety (90) days’ prior written

notice to the Department. Bonds may be continued in effect

from year to year, and a new bond need not be provided

for each permit year. A single bond may cover all of the

operator’s mining operations in the state. The penalty of

the bond or amount of cash and securities, as provided in

subsection (3) of this section, shall be increased or reduced

from time to time as provided in this act.

(d) If the license to do business in the state of any

surety upon a bond filed with the Department pursuant to

this act shall be suspended or revoked, the operator, within

thirty (30) days after receiving notice thereof from the

Department, shall substitute for such surety a good and

sufficient corporate surety licensed to do business in the

state. Upon failure of the operator to make substitution

of surety as herein provided, the Department shall have

the right to suspend the permit of the operator to conduct

operations upon the land described in such permit until

such substitution has been made.

10e

[APPENDIX)

(e) In lieu of such bond, the operator may deposit

cash and government securities with the Department in an

amount equal to that of the required bond on conditions

as above prescribed. In the discretion of the Department

surety bond requirements may also be fulfilled by using

existing reclaimed areas, in excess of cumulative permit or

mined acres, that have been completed under the juris-

diction of this act and approved by the Department.

(f) Such bond or security shall remain in effect until

the mined acres have been reclaimed, approved and re-

leased by the Department. If the Department determines

that grading has been satisfactorily completed pursuant to

this act, the Department may release up to eighty percent

(80%) of the penal sum of the bond filed for each acre

of land graded.

$729. Violations — Notice — Hearing — Enforcement

The Department shall notify the operator and the

surety in writing of any claimed violation of the provisions

of this act or the rules and regulations of the Department.

If the operator denies the alleged violation, the Depart-

ment shall hold a hearing on said charges. Said hearing

shall be held not less than thirty (30) days from the notice

of hearing.

At such hearing the operator shall have the right to

present evidence in opposition to the claimed violation.

If upon such hearing the Department shall determine

that a violation has occurred, the Department shall make

detailed findings of the violation and the necessary cor-

rective measures. The order shall provide a reasonable

time, commensurate with the work to be done, for the

operator to perform the corrective measures. The surety

may perform for the operator.

If the operator fails to perform the corrective work

required by the Department or fails to properly perform

said work, the Department may contract for the work to

lle

[APPENDIX)

be done. The Department shall not issue any permits to

an operator who has failed to perform such corrective work,

or has defaulted with respect to the bond or other security

required by Section 728 of this title, until such obligations

are met by the operator or his surety or agent, as deter-

mined by the Department.

The Attorney Genera}, upon request of the Depart-

ment, shall institute proceedings to recover any damages

and expense which the Department may have sustained

by reason of the default of the operator but in no event

shall such recovery exceed the face amount of the bond.

Such proceedings shall be brought against the operator and

surety either in Oklahoma County or the county in which

the violation occurred.

§ 730. Lateral support

In the case of strip mining operations which remove

and do not replace lateral support, unless pursuant to writ-

ten agreement between the operator and the adjacent prop-

erty owner, the top of the consolidated material of the open

cut adjacent to the property line of other property not

owned or leased by the operator shall, at the time mining

is completed, not be closer to such other property line than

a distance of twenty-five (25) feet plus one and one-half

(11%) times the depth of such cut as measured from orig-

inal ground surface to the top of consolidated material.

§ 731. Maps — Release

The operator shall submit to the Department, no later

than September 1 following the end of each permit year,

a map in a form approved by the Department showing the

location of the pit or pits by section, township, range and

county, with such other description as will identify the

land which the operator has affected by mining during such

permit year and has completed mining operations thereon,

with a .egend upon such map showing the number of acres

of affected land. Such map shall also show in acres the ex-

12e

(APPENDIX)

tent of the reclamation accomplished on the affected land,

including grading and revegetation efforts, as of the end of

the permit year, and shall show by appropriate designation

any deviation from the plan of reclamation filed under sub-

section (c) of Section 724 of this title and the reasons

therefor.

Whenever an operator shall have completed all re-

quirements under the provisions of this act as to any af-

fected land, he shall notify the Department thereof. If the

Department determines that the operator has completed

reclamation requirements and achieved results appropriate

to the use for which the area was reclaimed, the Depart-

ment shall release the operator from further obligations

regarding such affected land and the penalty of the bond

shall be reduced proportionately.

§ 732. Powers and duties of Department

In addition to the duties and powers conferred on the

Department in other provisions of this act, the Department

shall have authority and power to:

(a) Adopt and promulgate reasonable rules and reg:

lations respecting the administration of this act and in con-

formity therewith and the Administrative Procedures Act.

(b) Order, after hearing, the revocation of any permit

issued hereunder for violation of this act.

(c) Cause to be instituted, in any court of competent

jurisdiction, legal proceedings for injunctive or other ap-

propriate relief to enforce this act.

(d) Make investigations and inspections which are

necessary or appropriate to insure compliance with this

act.

(e) Collect and disseminate information relating to

reclamation of affected lanes.

13e

{APPENDIX}

(f) Request the assistance of any federal or state

agency for technical advice or any other type of assistance

deemed necessary to carry out the purposes of this act.

§ 733. Legal assistance

At the request of the Department the Attorney Gen-

eral shall provide such legal assistance as may be needed

in interpreting, enforcing and carrying out the provisions

of this act including but not limited to institution of and

prosecuting legal actions and proceedings for injunctive re-

lief and this improvement shall include the provisions of

Section 17 hereof.

§ 734. Chief Mine Inspector

Any act authorized to be done by the Department may

be performed by the Chief Mine Inspector, or an assistant

designated by him.

§ 735. Sand and gravel — Inspections — Penalties

The Department is designated as the agency to make

safety inspections in sand, sand and gravel and in quarry-

ing operations. Any person required by this act to have a

permit who engages in mining without a valid permit there-

for issued pursuant to this act is guilty of a misdemeanor,

and on conviction thereof shall be fined not less than Fifty

($50.00) nor more than One Thousand Dollars ($1,000.00).

Each day of operation without the permit required by this

act shall be deemed a separate violation.

§ 736. Revoked permits

In no event shall a permit be issued to any operator

if a permit issued to such operator has been revoked under

Section 12 of this act.

14e

[APPENDIX)

§ 737. Governmental agencies to conform

Any municipal or county governmental agency or body

engaged in mining as defined in this act shall conform to

all requirements of this act respecting reclamation of af-

fected lands.

§ 738. Judicial review

All final decisions and orders of the Department shall

be subject to judicial review of the acts of administrative

agencies.

APPENDIX F

STATE OF OKLAHOMA

THE ATTORNEY GENERAL

LARRY DERRYBERRY

State Capitol, Oklahoma City, Oklahoma 73105, Telephone 405 /521-3921

[Seal of the State of Oklahoma]

October 16, 1978

Mr. Ward Padgett

Chief Mine Inspector

Department of Mines

117 State Capitol Building

Oklahoma City, Oklahoma 73105

Re: Rock Island Property

Reclamation

Dear Mr. Padgett:

This letter is being provided pursuant to our previous

discussions and your request for information concerning the

reclamation problem existing on certain property owned by

the Rock Island Improvement Company and located in Lat-

imer and LeF lore Counties, State of Oklahoma.

As you recall, the circumstances giving rise to your

request are basically as follows.

In the instant matter, the Rock Island Improvement

Company, owner, leased certain properties located in Le-

Flore and Latimer Counties, State of Oklahoma, to Helm-

erich and Payne, Inc., a Delaware corporation, the same

said lease being for lessee’s contemplated mining operation

in those areas. Additionally, Helmerich and Payne sub-

leased their interest in said property to one Sam Sexton,

Jr., said sublease and agreement being for the purpose of

allowing sublessee to conduct mining operations in this area.

It is our understanding that the mining permit in ques-

tion, the same being as provided for under the provisions

2f

(APPENDIX)

of Title 45, O.S.1971, $724, was previously issued to the

operator, Sexton, sublessee. It is further our understanding

that the surety bond as required under the provisions of

Title 45, O.S. 1971, $728, was provided, in the amount of

$50,000.00, by said operator.

We have been advised that the property in question is

presently in need of substantial reclamation work, that di-

rections and orders from your office as to such required

reclamation has not heretofore been complied with and

further that the surety bond and corresponding proceeds

thereof has been provided to your office for reclamation

purposes pursuant to the failure of reclamation as required

by law and directives from your office.

With these circumstances, you have requested an ad-

visal from this office regarding liability for reclamation

work presently required, and the cost of which will exceed

the amount and proceeds of bond which have been pro-

vided to the State of Oklahoma.

Monetary recovery for and in behalf of the State of

Oklahoma in the case of failure to perform required recla-

mation is provided for under the provisions under the Okla-

homa “Mining Lands Reclamation Act”, the same being as

is found at Title 45, O.S. 1971, §721 et seq. Specifically,

Section 729 of this Act provides for the referred recovery.

Under this section, once a determination has been made

that corrective reclamation measures must be undertaken

by an operator, authority is given to the mining depart-

ment, in the event of default on the part of the operator,

to contract to have the required work performed. This

statutory provision goes on to state:

“The Attorney General, upon request of the Depart-

ment, shall institute proceedings to recover any dam-

ages and expenses which the Department may have

sustained by reason of the default of the operator

but in no event shall such recovery exceed the face

amount of the bond. Such proceedings shall be

3f

[APPENDIX)

brought against the operator and surety either in

Oklahoma County or the county in which the viola-

tion occurred.”

As can be determined from a plain reading of the

above-quoted section, the Department, by and through this

office, may institute an action to recover damages and ex-

penses incurred in the required reclamation, such recovery

to be from the operator and/or surety. However, such re-

covery is limited to the face amount of the bond previously

required and provided. Accordingly, it appears that if, in

the instant matter, the bond proceeds subject herein have

been provided to the State of Oklahoma, then the State of

Oklahoma has already recovered, from a monetary stand-

point, all that is allowed to be recovered in such proceed-

ings under the violations statute. Stated otherwise, recla-

mation liability as to the State of Oklahoma appears to be

limited for recovery purposes, to the amount of the bond

provided pursuant to Section 728, supra. If the State of

Oklahoma has already been provided with this amount,

then the State of Oklahoma has recovered all that could

be recovered under the statute in a civil proceeding.

With respect to other actions which may be taken, it

should be recalled that 45 O.S. 1971, §724, pertaining to

mining permits, does provide for a criminal sanction for

any operator who engages in mining operations not author-

ized by lawful permit. This section of the statute in essence

provides that if an operator engages in separate mining

operations not authorized by any existing mining permit,

then in that event such operator may be criminally liable

for such acts which exceed mining operations authorized

by law. Accordingly, this section of the statute may be

considered with respect to any further action that may be

taken should it be determined that the operator in ques-

tion exceeded the mining operations authorized by any

permit held by such operator.

4f

{APPENDIX}

It should be noted that this opinion, in respects rele-

vant to reclamation liability, has no effect upon that lia-

hility which may exist between the parties herein, i.e., the

Rock Island Improvement Company (lessor), Helmerich

and Payne, Inc (lessee), and Sam Sexton, Jr. (sublessee).

From our review of the various lease and sublease agree-

ments submitted with your inquiry, it would certainly ap-

pear that the lessee and sublessee herein would be jointly

and severally liable to the land owner, lessor, for improve-

ments which may be required to restore the subject land

to a condition as nearly as possible as its condition prior

to the conduct of mining operations. This would appear

to be reflected at paragraphs numbered 3 and 14 of the

lease agreement between the lessor and lessee as well as

at paragraphs 2, 7 and 12 of the sublease agreement. In

this connection it should be additionally noted that this of-

fice is without authority or jurisdiction to seek to resolve

issues of liability as they pertain to and between the private

parties involved in this matter. However, in response to

that aspect of your inquiry pertaining to this aspect of

the reclamation work, it would be our impression from

the review we have had an opportunity to conduct, that

the lessor in this matter may indeed recover from the les-

see and/or sublessee for restoration work which may be

required above and beyond that which may be secured

with the heretofore submitted operator’s bond proceeds.

Should you require any additional information regard-

ing this matter, please do not hesitate to contact this office

at your convenience.

Sincerely yours,

(s) R. Thomas Lay

R. THOMAS LAY

ASSISTANT ATTORNEY GENERAL

APPENDIX G

APPRAISAL ASSOCIATES

COMPLETE APPRAISAL SERVICE

116 South Fourth Street

Muskogee, Oklahoma 74401

office of Area Code 918 - 682-6640

OTIS H, EVERSOLE, AS.R.A., LP.A.C., CRA,

Re: Tract No. 1 being the interest of Rock

Island Improvement Company in the NE

1/4 of Section 25, Township 5 North,

Range 25 East, LeFlore County, Okla-

homa.

In our opinion, on July 31, 1977, Tract 1,

with full and complete reclamation, would

have had a fair market value of

In our opinion, on July 31, 1977, Tract 1

(As Is Condition) had a fair market value of

Increased value of Tract 1 caused by

complete reclamation ..

In our opinion, on July 31, 1977, Tract 1

less coal, with full and complete reclamation,

would have a fair market value of .

In our opinion, on July 31, 1977, Tract 1

(As Is Condition), less coal, had a fair market

RRL AE ae ae ARN SE

$285,567.00

281,716.00

50,567.00

46,716.00

Increased value of Tract 1, less coal,

caused by complete reclamation ..............

$ 3,851.00

Respectfully submitted, this 3rd day of November, 1980.

APPRAISAL ASSOCIATES

by (s) Otis H. Eversole

2g

[APPENDIX]

APPRAISAL ASSOCIATES

COMPLETE APPRAISAL SERVICE

116 South Fourth Street

Muskogee, Oklahoma 74401

office of Area Code 918 - 682-6640

OTIS H, EVERSOLE, AS.R.A,, LP.A.C., C.R.A,

Re: Tract 2, being the interest of Rock Island

Improvement Company in N!4 NE'™% and

E's NW of Section 31, Towable 5

North, Sues 26 East, LeFlore County,

Oklahoma,

In our opinion, on July 31, 1977, Tract 2,

with full and complete reclamation, would

have had a fair market value of .

In our opinion, on July 31, 1977, Tract 2

(As Was Condition) had a fair market value

i NIM erent rena

Increased value of Tract 2 caused by

complete reclamation ...........

$215,274.00

212, 328.00

$ 2,946.00

In our opinion, on July 31, 1977, Tract 2

less coal, with full and complete reclamation,

would have a fair market value of ...............

In our opinion, on July 31, 1977, Tract 2,

(As Was on less coal, had a fair

market value of . ecicintiaiies diana

25,778.00

22,832.00

Increased value of Tract 2, less coal

caused by complete reclamation .............

Ri 2,946.00

Respectfully submitted, this 3rd day of November, 1980.

APPRAISAL ASSOCIATES

by (s) Otis H. Eversole