Kanawha Valley Bank v. United Fuel Gas Co.
| Decision Date | 28 February 1939 |
| Docket Number | 8835. |
| Citation | 1 S.E.2d 875,121 W.Va. 96 |
| Parties | KANAWHA VALLEY BANK v. UNITED FUEL GAS CO. |
| Court | West Virginia Supreme Court |
Harold A. Ritz and B. J. Pettigrew, both of Charleston, for plaintiff in error.
Brown Jackson & Knight, of Charleston, for defendant in error.
John T. Copenhaver and E. S. Bock, both of Charleston, amici curiæ.
Defendant operates a producing gas and oil lease which calls for payment to lessor "for each gas well from the time and while gas is marketed therefrom at the rate of one-eighth of the wholesale market value thereof at the well." As such operator, the lessee paid a tax assessed under Code 11-13-2(a), upon it, because engaged in the business of producing gas for sale, etc. Then the lessee withheld from its royalty payment to the lessor a sum equal to one-eighth of its production tax. This is an action by the assignee of the lessor to recover the sum so withheld. The circuit court entered judgment for plaintiff.
The appellant contends that its reimbursement for one-eighth of its production tax is justified under any of the following propositions, to-wit, that the lessor (1) is a joint adventurer with the lessee; (2) is the principal of the lessee; or (3) is part owner of the gas produced with the lessee.
The contract herein terms itself a lease and the respective parties lessor and lessee, not merely once but a number of times. When the parties themselves, dealing at arm's length, have carefully, intelligently and in good faith defined their relationship, as in this contract, courts ordinarily do not change that label. Whatever the relationship here, the rights and liabilities of the parties are fixed by the contract. It was first executed in 1932. The production tax had then been imposed annually since 1921. The lessee, as a producer of gas prior to 1932, necessarily knew of the tax. Nevertheless, the lessee bound itself to pay the lessor a full one-eighth of the market price of gas at the well--not such price less one-eighth of the production tax. The lessee's deduction would be a material, unilateral modification of the contract, a modification which courts cannot sanction.
Appellant cites as "directly in point" the case of Miller v. Oil Co., 38 Wyo. 505, 269 P. 43, 44, 73 A.L.R. 821 where, under a similar lease, the lessee was allowed to deduct from the royalty one-eighth of the tax paid. While the Wyoming statute levied a tax on...
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