Hetrick v. Apollo Gas Co.

• Decision Date: 13 May 1992
• Citation: 608 A.2d 1074,415 Pa.Super. 189
• Parties: James C. HETRICK and Clara A. Hetrick, Appellants, v. APOLLO GAS COMPANY, a Corporation.
• Court: Pennsylvania Superior Court

Page 1074

608 A.2d 1074

415 Pa.Super. 189

James C. HETRICK and Clara A. Hetrick, Appellants, v. APOLLO GAS COMPANY, a Corporation.

Superior Court of Pennsylvania.

Argued Dec. 11, 1991.

Filed May 13, 1992.

George D. Kulakowski, Punxsutawney, for appellants.

John Porter, Pittsburgh, for appellee.

Before ROWLEY, President Judge, and KELLY and CERCONE, JJ.

CERCONE, Judge:

This is an appeal from an order granting summary judgment in favor of defendant/appellee, Apollo Gas Company. For the reasons appearing below, we affirm.

The events underlying the instant appeal began in May of 1917, when Clara Niel, a predecessor in title to an estate in land currently owned by plaintiffs/appellants, James and Clara Hetrick, entered into a drilling agreement with Mahoning Gas and Oil Company (hereinafter "Mahoning"). ¹ Cast in the form of an oil and gas lease, the document signed on May 3, 1917, gave Mahoning the right to drill wells and extract oil and gas from the Niel property in exchange for the payment of certain moneys on a regular schedule. James and Clara Niel, as well as their successors in interest, were also entitled to take 200,000 cubic feet of natural gas per calendar year free of charge to use on the premises for domestic purposes. Appellants have not alleged any default regarding the timely payment of royalties by appellee and its predecessors in interest; however, the instant case does raise a question concerning the acquisition of free natural gas by appellants and their predecessors in interest.

In an attempt to prevent appellee from extracting further minerals under color of the purported 1917 agreement and to enforce what they view as their cumulative right to free natural gas, appellants filed a complaint in equity seeking both money damages and a prohibitory injunction. ² Appellants have proceeded under two theories of entitlement in the instant action. First, they contend that the drilling agreement signed by Clara Niel was not a lease but was actually an attempt to convey a mineral estate in fee simple. The crux of this argument is that the document signed in 1917 must be treated as a failed deed, void under the Married Women's Property Act of 1893, ³ because Clara Niel's alleged husband James never signed it. Consequently, appellants' claim that the rights of the parties in the instant action are governed by the common law of corporeal interests in land rather than by the terms of the agreement signed in May of 1917. Second, appellants argue that they have the right to receive cumulative arrearages amounting to 7,000,000 cubic feet of free natural gas which they allege accrued between 1917 and the date on which natural gas service was actually connected to their domicile. ⁴ Appellants contend that since 1975, they have been unfairly required to pay for gas use in excess of 200,000 cubic feet per calendar year, despite the many years in which appellee failed to supply any free natural gas. They further aver that they have made the allegedly unjust payments to Apollo Gas Company, albeit under protest.

After a trial schedule was established and discovery was accomplished, appellee filed a motion for summary judgment. Appellee's motion was granted on March 14, 1991 and the instant timely appeal followed by which appellants raise two issues for our consideration: (1) whether an agreement which provides for gas and oil drilling for a term of fifteen years, and as long thereafter as oil or gas is produced in "paying quantities" constitutes a conveyance in fee of such oil and gas; and (2) whether a contract right for a specified amount of free gas each year is cumulative. These challenges to the lower court's ruling must be evaluated under the relevant standard of review as set forth by the Pennsylvania Supreme Court:

Summary judgment is properly granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Pa.R.C.P. [No.] 1035(b) [, 42 Pa. C.S.A.] An entry of summary judgment may be granted only in cases where the right is clear and free from doubt. Musser v. Vilsmeier Auction Co., Inc., 522 Pa. 367, 369, 562 A.2d 279, 280 (1989). The moving party has the burden of proving the nonexistence of any genuine issue of material fact. Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 202-204, 412 A.2d 466, 468-69 (1979). The record must be viewed in the light most favorable to the nonmoving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Davis v. Pennzoil Co., 438 Pa. 194, 264 A.2d 597 (1970).

Marks v. Tasman, 527 Pa. 132, 134-35, 589 A.2d 205, 206 (1991). See Penn Center House, Inc. v. Hoffman, 520 Pa. 171, 176, 553 A.2d 900, 903 (1989) (entire record before lower court must be thoroughly examined and all doubts as to the existence of a genuine issue of material fact are to be resolved against a grant of summary judgment). An appellate court will overturn a trial court's entry of summary judgment only if there has been an error of law or a clear abuse of discretion. McCain v. Pennbank, 379 Pa.Super. 313, 318, 549 A.2d 1311, 1313 (1988).

Appellants first argue that the written agreement concluded on May 3, 1917 between Mahoning and Clara Niel must be deemed a deed and not a lease. Under this theory, the purported agreement is rendered void and of no legal effect because only Clara Niel actually signed the document and her action was never ratified by her alleged husband. Appellants contend that based on the behavior of the parties following May 3, 1917, the transaction which transpired constituted the conveyance of a mere corporeal interest in the natural gas actually transferred to Mahoning and its various successors in interest. ⁵ Thus, appellants urge this court to vacate the lower court's order entering summary judgment against them. However, in order to grant appellants the relief they seek with regard to their first claim, we must arrive at two legal conclusions not reached by the trial court. First, we would have to determine that the agreement in question was a failed conveyance of the mineral estate in fee simple rather than a fully consummated conveyance of a leasehold in the mineral estate. Second, we must conclude that the Married Women's Property Act of 1893, supra, required both James and Clara Niel to sign the challenged contract in order to give it legal effect.

Pennsylvania law recognizes three discrete estates in land: the surface estate, the mineral estate, and the right to subjacent (surface) support. Gioia v. Gioia, 382 Pa.Super. 538, 547 n. 4, 555 A.2d 1330, 1335 n. 4 (1989), citing Smith v. Glen Alden Coal Co., 347 Pa. 290, 304, 32 A.2d 227, 234-35 (1943). Because these estates are severable, different owners may hold title to separate and distinct estates in the same land. Id. As appellants have correctly argued, the Pennsylvania rule permitting severance of the mineral estate for coal and other solid minerals applies with equal force to oil and gas. Duquesne Natural Gas Company v. Fefolt, 203 Pa.Super 102, 105, 198 A.2d 608, 610 (1964). As with any estate in land, the owner of the mineral estate may convey his entire bundle of rights in fee or may grant a mere portion thereof via leasehold. See id. (quoting 24 P.L.E. Mining; Oil and Gas § 11 at 144). Unfortunately, under our law the precise nature of any particular agreement is a complex question because a document purporting to grant only a leasehold may in actuality constitute a sale of the mineral in situ which conveys a fee interest to the mineral estate in favor of the grantee. See, e.g., Lichtenfels v. Bridgeview Coal Co., 344 Pa.Super. 257, 262-263, 496 A.2d 782, 785 (1985) (construing the legal character of a purported coal lease). Thus any court attempting to settle a controversy regarding the ownership of minerals in place must first determine the nature of the contract between the parties.

The seminal Pennsylvania cases construing the nature of mining agreements are Benson v. Miners' Bank, 20 Pa. 370 (1853), which held that an unrestricted right to take and carry away all the coal under a tract of land constitutes a corporeal right, and Caldwell v. Fulton, 31 Pa. 475 (1858), the landmark decision which interpreted a mining agreement as a sale of coal in place. However, more pertinent to our resolution of the issue before this court is the more recent case of Hummel v. McFadden, 395 Pa. 543, 150 A.2d 856 (1959). In Hummel, the Pennsylvania Supreme Court recognized that a mining agreement may constitute "a sale absolute, a conditional sale, a lease in the ordinary acceptance of that term, or a mere license to mine and remove the minerals." Id., 395 Pa. at 553-54, 150 A.2d at 861, quoting Girard Trust Co. v. Delaware & Hudson Company, 246 Pa. 161, 166, 92 A. 129, 130 (1914). When determining the precise nature of a particular mining agreement, the form of the document employed and the language utilized are not themselves dispositive. Id., 395 Pa. at 555, 150 A.2d at 861. Rather, "the character of the transaction [is] controlling." Id. (emphasis in original). In Hummel, the court found it highly material that the disputed mining agreements contained no minimum royalty payable upon sale of the coal, and failed to impose "any limitation in respect to the time, the quantity or the purpose of removal of the coal [or] upon the person who is to remove the coal." Id., 395 Pa. at 556, 150 A.2d at 862. Because the agreements in question gave McFadden "full and complete dominion over the coal until the exhaustion thereof," they were deemed "sales of the coal in place." Id.

Transferring the principles enunciated in Hummel to the context of a drilling agreement for gaseous and/or liquid minerals is a difficult proposition. Owing to the marked...