Halbert v. Hendrix

• Decision Date: 29 November 1950
• Docket Number: No. 18067,18067
• Citation: 121 Ind.App. 43,95 N.E.2d 221
• Parties: HALBERT v. HENDRIX et al.
• Court: Indiana Appellate Court

Page 221

95 N.E.2d 221

121 Ind.App. 43

HALBERT v. HENDRIX et al.

No. 18067.

Appellate Court of Indiana, in Banc.

Nov. 29, 1950.

William C. Welborn, Milford M. Miller, Evansville, for appellant.

William L. Mitchell, Evansville, De Roo Weber and Clements & McClellan, all of Mount Vernon, for appellees.

WILTROUT, Chief Judge.

Appellee Hendrix filed his complaint against the appellant and the appellee Clay, as well as others as to whom the action was dismissed. The complaint alleges that Hendrix entered into an agreement with appellant whereby Hendrix was to move a drilling rig from a location in Illinois to a location in Kentucky and for a consideration of $7,500.00 to drill a well to the depth of 1700 feet; that said well was so drilled in accordance with the contract; and that there remains due on said contract the sum of $4,700.00 which appellant refuses and neglects to pay.

Thereafter appellee Hendrix filed his affidavit for attachment which states, among other things, that the appellant is a nonresident of this state. An attachment bond was filed and approved and an order of attachment issued. The sheriff made a return of the writ, together with an inventory and appraisement. The return recites that the sheriff, with the assistance and in the presence of a disinterested and credible householder, proceeded to attach the lands and tenements, goods and chattels of appellant subject to execution, and attached property of appellant, the same being a portion of an overriding royalty reserved by appellant when he made an assignment or transfer to one John Clay of an oil and gas lease from one Elmer Elliott as lessor to appellant as lessee, and referring to the book and page of the county lease records.

Appellant appeared generally and filed his unverified motion to dissolve the attachment. This motion was overruled by the court, and that ruling is assigned as error. We are asked to determine that said proceedings are defective upon the face thereof.

Appellant first contends that the affidavit for attachment is defective in that it does not show that there is property of appellant within the jurisdiction of the court which is subject to execution. This same contention was made, and was answered adversely to appellant in U. S. Capsule Co. v. Isaacs, 1899, 23 Ind.App. 533, 55 N.E. 832. Upon the authority of that case we hold that the affidavit here involved is not defective by reason of its failure to contain such a showing.

The second argument advanced by appellant for dissolving the attachment is that the overriding royalty attached by the sheriff is not a property interest which is subject to attachment. In determining the problem thus presented it may be well to examine the nature of oil and gas rights.

It is now established in this state that the owner of lands does not have an absolute title to the oil and gas in place as corporeal real property, but rather has the 'exclusive right' to explore for oil and gas and reduce it to possession and to a consequent absolute ownership. Such an estate is not a corporeal interest, but is in the nature of an incorporeal hereditament. Monon Coal Co. v. Riggs, 1944, 115 Ind.App. 236, 56 N.E.2d 672, 57 N.E.2d 598; Campbell v. Smith, 1913, 180 Ind. 159, 101 N.E. 89; Fairbanks v. Warrum, 1914, 56 Ind.App. 337, 104 N.E. 983, 1141; Rupel v. Ohio Oil Co., 1911, 176 Ind. 4, 95 N.E. 225.

In Callihan v. Bander, 1947, 117 Ind.App. 467, 73 N.E.2d 360, 362, this court held that the oil and gas leaseholds there involved created an interest in real estate within the meaning of the statute of frauds. That case cites with approval the case of Heller v. Dailey, 1902, 28 Ind.App. 555, 63 N.E. 490, and says: 'In the case of Heller v. Dailey, et al., supra, this court, in a well-reasoned opinion, held that oil and gas leases created an exclusive and assignable interest in land; that they were in the nature of an incorporeal hereditament (a kind of metaphysical creature of the law) and as such could pass only by written instrument.'

Again, in Heeter v. Hardy, 1948, 118 Ind.App. 256, 76 N.E.2d 590, 593 (transfer denied), it is stated: 'Oil and gas leases create an interest in real estate known to the law as an incorporeal hereditament.' And we regard this as the present law on this subject.

There remains to be considered the nature of an overriding royalty. 'The term 'overriding royalty' is applied generally in the industry to such fractional interests in the production of oil and gas as are created from the lessee's estate. This is true whether the overriding royalty is created by reservation when the original lessee transfers his interest by a sub-lease or whether it is created by grant when the original lessee conveys a fractional share to a third person * * *.' La Laguna Ranch Co. v. Dodge, 1941, 18 Cal.2d 132, 114 P.2d 351, 353, 135 A.L.R. 546.

As in the case of leases generally, there is a clear distinction between the assignment of an oil lease and a sublease. An assignment merely transfers an existing estate into new hands, but a sublease creates a new estate. An assignment signifies parting with the whole unexpired term and all interest therein. Thus, a transfer of the leasehold is to be regarded as an assignment if the transferor retains no right of any kind therein, but will be deemed a sublease if he reserves a rental or an overriding royalty. 24 Am.Jur., Gas and Oil, § 84, p. 591; Glassmire, Oil and Gas Leases and Royalties § 86, p. 318 (2d Ed.)

We also conclude that where a lessee subleases his...