Duquesne Natural Gas Co. v. Fefolt

• Decision Date: 19 March 1964
• Citation: 203 Pa.Super. 102,198 A.2d 608
• Parties: DUQUESNE NATURAL GAS COMPANY, a Corporation, v. Joseph FEFOLT and Hannah Fefolt, his wife, Appellants, and William Marlett, Jr., and Ruth Marlett, his wife.
• Court: Pennsylvania Superior Court

198 A.2d 608

203 Pa.Super. 102

DUQUESNE NATURAL GAS COMPANY, a Corporation, v. Joseph FEFOLT and Hannah Fefolt, his wife, Appellants, and William Marlett, Jr., and Ruth Marlett, his wife.

Superior Court of Pennsylvania.

March 19, 1964.

Robert L. Ceisler, Washington, for appellants.

Tempest & Simmons, Paul A. Simmons, Monongahela, for appellee.

Before RHODES, P. J., and ERVIN, WRIGHT WOODSIDE, WATKINS, MONTGOMERY, and FLOOD, JJ.

WATKINS, Judge.

This appeal is from the judgment of the Court of Common Pleas of Washington County, sitting in equity, in an interpleader, by which it was determined that title to certain oil and gas was reserved to William Marlett, Jr., and Ruth Marlett, his wife as an estate in land.

The issue, so determined, was whether '* * * reserving however, to first party, the equal one-eighth (1/8th) part of all oil produced and saved from said premises, to be delivered in the pipe line to the credit of the first party, free of charge * * *' and whether the 'consideration in full to the grantor for each and every well so producing gas upon the said land shall be as follows: one-eighth (1/8th) part of all gas sold from each well' is personalty or realty and whether it passes with the land or remains the property of the original grantors-lessors.

In January 1925, Joseph Fefolt and Hannah Fefolt, his wife, the appellants, entered into an oil and gas lease with Byers Oil & Gas Company. The real estate involved was conveyed to several successive grantees ending in William Marlett, Jr. and Ruth Marlett, his wife, the appellees, in July, 1960. The Marletts made demand for royalties in December, 1961. This interpleader was filed by the plaintiff company, Duquesne Natural Gas Company, an assignee of Byers Oil & Gas Company. The Fefolts granted and conveyed '* * * all oil and gas in and under the following described premises', but in addition said, '* * * reserving however, to first party, the equal one-eighth (1/8th) part of all oil produced and saved from said premises, to be delivered in the pipe line to the credit of the first party, free of charge * * *'. The Fefolts conveyed all their right, title and interest in said land to their daughter, Justine Roper, who in turn conveyed all her right, title and interest in said land to the Marletts.

The Fefolts contend that they conveyed all of the gas and oil rights in the said land to the Byers Oil & Gas Company, so causing a complete severance of all gas and oil in said land. They contend that the reservation of the one-eighth (1/8th) part was personalty only and did not pass with the conveyance to Justine Roper.

The Marletts contend that only seven-eighths (7/8ths) of said oil and gas was actually conveyed to Byers Oil & Gas Company. The reservation of the one-eighth (1/8th) interest remained vested as real property in the Fefolts and passed by deed to them.

All of the Pennsylvania cases are in accord that the original grant and conveyance by the Fefolts to the company created an estate in real property and severed the gas and oil from the rest of the real estate. The question posed here is whether the reservation of the one-eighth (1/8th) interest in gas and oil was a reservation of an estate in land or that the entire gas and oil interest in real estate vested in the grantee subject to the payment of a royalty upon the delivery of gas and/or oil out of the land and so personalty.

We agree with the court below that the property interest reserved, viz: '* * * one-eighth (1/8th) part of all gas sold from each well * * *' as is described in the oil and gas lease in this case is real property. Penn-Ohio Gas Company v. Franks' Heirs, 322 Pa. 233, 185 A. 280 (1936); Barnsdall v. Bradford Gas Co., 225 Pa. 338, 74 A. 207, 26 L.R.A., N.S., 614 (1909). If the transfer of the oil and gas rights to the company conveys realty it seems to clearly and logically follow that the reservation clearly set forth in the agreement of a portion of that gas and oil to the grantors must also be realty even though payment was provided by royalties on delivery. This is also the holding of the courts in most of the oil and gas producing states. Hager v. Stakes, 116 Tex. 453, 294 S.W. 835.

As the court below said: 'It is true that the Act of 1909, P.L. 91 Section 1 [21 P.S. § 2], does cause a fee simple title to be conveyed when those words are used unless the grant is expressly limited to a lesser estate; and as to seven-eighths (7/8ths) of said gas and oil, the Plaintiff does have a fee simple title. This is true for the reason The Supreme Court of Pennsylvania has held that the words 'grant and convey' do cause a severance of the oil and gas from the surface, but only to the extent of seven-eighths (7/8ths) where there is, as in the case at bar, reservation in the grant of '* * * the equal one-eighth (1/8th) share of all oil produced and saved * * *.'

'The right of property in natural gas and oil ordinarily belongs to the owner of the land. The oil and gas are a part of the land so long as they are on it or in it or are subject to control therein. In other words, they are part of the land while they are in place. They can be severed from the ownership of the surface by grant or exception as separate corporeal rights. Accordingly, they may be the subject of a sale, separate and apart from the surface and from any minerals beneath it; they belong to the owner in fee, or his grantee, as long as they remain part of his property, although use of them is not possible until they are severed from the freehold exactly as done in the case of all other minerals beneath the surface. Hence, a freehold of inheritance may be created in oil and gas.' 24 P.L.E. Mining; Oil and Gas § 11, page 144.

So far as the law of property is concerned the ownership of oil and gas is similar to that of coal, where there are three estates of land, the coal itself, the surface and the right of support. Smith v. Glen Alden Coal Co., 347 Pa. 290, 32 A.2d 227 (1943).

The appellants rely heavily on Prager's Estate, 74 Pa.Super. 592 (1920), in which this Court held that a reservation such as appears in this case did not create a technical reservation and so the property in question passed entirely to the grantees and held that the royalties were personal property. The theory being that no oil or gas was reserved.

The language of the instrument in the Prager's Estate case is quite similar to that of the instant case but in view of the more recent decision of the Supreme Court in Penn-Ohio Gas Company v. Franks' Heirs, supra, we are constrained to agree with the court below that the reservation is effective in keeping title to an estate in land, to wit, the oil and gas to the extent of a one-eighth (1/8th) interest, in the grantors.

Judgment affirmed.

MONTGOMERY Judge (dissenting).

I respectfully disagree with the majority in its conclusion that Prager's Estate, 74 Pa.Super. 592 (1920), does not control the present case. The instrument now before us is very similar to if not identical with the one in that case. It conveys to the Byers Oil and Gas Company, a trust, and to its successors and assigns 'all the oil and gas in and under' the tract of land described therein, with the right to use water and the surface land for the purpose of producing and transporting oil, gas and water; 'reserving however, to first party the equal one-eighth (1/8) part of all oil produced and saved from said premises, to be delivered in the pipe line to the credit of the first party free of charge, * * *' (Emphasis supplied.)

It provides further: 'If and as long as gas in found in sufficient quantity to convey to market, the consideration in full to the grantor for each, and every well so producing gas upon said land, shall be as follows: 1/8th part of all gas sold from each well'; also 'In addition to the above mentioned royalty, first party shall have gas for fuel, for one dwelling, * * *.' (Emphasis supplied.)

This was a conveyance of the fee simple title to the oil and gas with limited rights to the surface and was not a lease or a license to explore.

Penn-Ohio Gas Company v. Franks' Heirs, 322 Pa. 233, 185 A 280 (1936), referred to in the...