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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1983
- **Citation:** 461 U.S. 944

## Text

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
| ECR ICE cnn.

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0714%3A1. Public record. Not legal advice.