## Facts

- Northern Pacific Railway Company conveyed Montana land (“section 23”) to Russell’s predecessors in 1918 by contract and warranty deed while reserving “the minerals upon or in the land.”
- Northern Pacific later leased the mineral estate in section 23 to The Texas Company (Texas Co.), which conducted drilling operations under the lease.
- Texas Co. also used section 23’s surface (roads, rock, and water) in connection with operations on adjacent lands, conduct characterized as beyond the lease’s surface-use rights.
- On October 30, 1952, Russell sent Texas Co. a written offer of a revocable license allowing surface use for $150 per day, expressly permitting acceptance by continued use.
- Texas Co. did not sign the license but continued surface use after receiving the offer until about November 22, 1952, and later sent notice in December stating it rejected the offer.
- The district court granted summary judgment for Northern Pacific on Russell’s quiet-title claim challenging the mineral reservation and later awarded Russell damages against Texas Co., including $3,600 (24 days × $150) under the proposed license and $237.60 based on other lease-related surface use.

## Issues

1. Whether federal land-grant legislation limited Northern Pacific’s title such that it lacked power to reserve mineral rights when conveying section 23 in 1918.
2. Whether Texas Co.’s continued use of section 23’s surface after receiving Russell’s license offer constituted acceptance by conduct, creating a contract to pay $150 per day.
3. Whether the district court applied an erroneous measure of damages for Texas Co.’s surface use under the lease and for use exceeding lease rights.

## Decision

- The Ninth Circuit affirmed judgment for Northern Pacific on the quiet-title claim, holding the 1918 mineral reservation was valid and the oil and gas lease to Texas Co. was not void.
- The Ninth Circuit affirmed the award of $3,600 against Texas Co., holding Texas Co. accepted Russell’s license offer by continuing to use the surface with knowledge of the offer’s terms.
- The Ninth Circuit rejected Russell’s challenge to the damage measure for the additional $237.60 component and found no reversible error in the overall damage determination.

## Legal Principles

- Absent an express statutory restriction, a federally granted landholder with legal title may sever estates and reserve minerals when conveying the surface.
- Contract acceptance is judged by objective manifestations; an offeree who, with knowledge of an offer, exercises dominion over the offer’s subject matter may accept by conduct.
- When an offer specifies that continued use will constitute acceptance, continued use after notice can form a binding agreement, particularly where the offeree’s conduct exceeds any preexisting legal entitlement.

## Conclusion

The Ninth Circuit upheld a railroad’s reserved mineral estate against a statutory challenge and enforced a landowner’s paid surface-use license where the oil company continued non-privileged use after receiving an offer that made continued use the mode of acceptance.


Russell v. Tex. Co., 238 F.2d 636 (9th Cir. 1956)