Kentucky Coke Co. v. Keystone Gas Co.

• Decision Date: 15 February 1924
• Docket Number: 3885.
• Citation: 296 F. 320
• Parties: KENTUCKY COKE CO. v. KEYSTONE GAS CO.
• Court: U.S. Court of Appeals — Sixth Circuit

296 F. 320

KENTUCKY COKE CO. v. KEYSTONE GAS CO.

No. 3885.

United States Court of Appeals, Sixth Circuit.

February 15, 1924

Matthew O'Doherty, of Louisville, Ky., and Joseph D. Harkins, of Prestonsburg, Ky., for appellant.

George B. Martin, of Catlettsburg, Ky. (Martin & Smith, of Catlettsburg, Ky., on the brief), for appellee.

Before DENISON and MACK, Circuit Judges, and ROSS, District Judge.

ROSS District Judge.

This case presents a controversy as to the ownership of the oil and gas rights in a 100-acre tract of land situated in Floyd county, Ky. Each of the parties is a corporation. On the 1st day of November, 1905, Apperson Hays, who is variously referred to in the record as Epperson, Eperson, Epison, Epp and Ep Hays, and his wife, conveyed to the Beaver Creek Coal & Coke Company, a corporation, all the mineral on the land in controversy, together with certain timber and mining rights but reserving all the oil and gas therein. On April 15, 1911 Hays and his then wife conveyed the land in controversy to Louisa Hoover, wife of Melvin Hoover. In this deed no reference was made to the former deed to the Beaver Creek Coal & Coke Company. August 16, 1913, Louisa Hoover and husband conveyed the land to Daisy Dudley, wife of Ballard Dudley, and in the deed executed by them there is contained the following clause:

'Excluding the, all the mineral on said land, excluding all the timber that belongs to Epperson Hays.'

January 2, 1915, Ballard Dudley and wife, Daisy Dudley, executed to G. H. Dimick, Jr., a lease to the oil and gas on this land which lease was by G. H. Dimick, Jr., assigned to G. H. Dimick, Sr., on January 9, 1915. By virtue of a power of attorney executed January 28, 1914, by G. H. Dimick, Sr., to G. H. Dimick, Jr., and Tom Dimick, his sons, said lease was assigned to the appellee, Keystone Gas Company, on the 1st day of February, 1917. These conveyances were duly placed of record, following the dates upon which they were respectively executed. On the 2d day of May, 1921, there was placed of record in Floyd county an instrument, of date April 20, 1921, bearing the signatures of Melvin Hoover and Louisa Hoover, which appear to have been stricken out, and the signatures of Epperson Hays and Nannie Hays, which instrument purports to be a deed of correction, and which by its terms conveys to Daisy Dudley 'all the oil and gas in, under or upon' the lands in controversy. June 6, 1921, Melvin Hoover and wife, Louisa Hoover, executed to appellant, the Kentucky Coke Company, an instrument whereby they purported to lease to appellant the oil and gas, together with certain other rights incident to the production thereof, in said 100-acre tract of land, which is described generally in this instrument and referred to as 'the same land conveyed to the lessor, by Epperson Hays by deed dated April . . ., 1911.'

Acting under this latter conveyance the Kentucky Coke Company proceeded to go upon said land, to prospect and drill for oil and gas, whereupon appellee, Keystone Gas Company, on October 19, 1921, filed its bill in the District Court of the United States for the Eastern District of Kentucky, setting up therein that it was the owner of the oil and gas rights in and to this land by reason of the chain of title above set out, vesting, as it claimed, absolute title thereto in it, and alleging that the lease under which appellant claimed of June 6, 1921, was procured with full notice of appellee's rights and the condition of the title as it then existed, that this lease vested no rights whatsoever in the lessee, and that the same was a cloud upon the title of appellee.

By the bill it was sought to have the title to said oil and gas declared to be in appellee; to have the instrument under which appellant claimed declared void and set aside as a cloud upon the title of appellee; to have appellant enjoined from in any wise going upon said lands or interfering with the rights of appellee as claimed therein, and for an accounting for all damages done by reason of any prospecting or drilling thereon, and it is particularly alleged in the bill that the exclusion clause appearing in the deed above mentioned from Melvin Hoover and wife, Louisa Hoover, was inserted by mistake, that what was intended by the clause quoted was to except from the deed only the coal which had been sold by Apperson Hays to the Beaver Creek Coal & Coke Company, and upon this theory the bill sought to have the deed corrected or reformed, so as to show the true meaning of the parties. It is set out, however that, if mistaken in the rights claimed under the deed of August 16, 1913, appellee is the owner of said oil and gas rights by virtue of the deed of April 20, 1921.

The Kentucky Coke Company in its answer presented an issue as to all the principal contentions set out in the bill, and particularly was it averred in the answer that by the deed of August 16, 1913, no oil and gas rights were conveyed, and that no intention to convey the same existed on the part of Melvin Hoover and wife, and that their intention to reserve the same from the conveyance expressly appears by the clause quoted above from this deed; that no right of correction or reformation existed, and that by the deed of April 20, 1921, no rights whatever were acquired by appellee, for the reason that this deed was never executed nor delivered within the meaning of the law; and that appellant acquired full title to all oil and gas and the rights sought to be conveyed incident thereto by the instrument of June 6, 1921; furthermore, that the mesne conveyances and assignments whereby appellee claimed said rights were respectively void and without authority. It is further set up in the answer as a defense that a suit was instituted in the Floyd county circuit court of Kentucky by Louisa Hoover against Daisy Dudley, whereby it was sought to have Louisa Hoover adjudged to be the owner of the oil and gas in said lands, and that a decree was rendered by the state court so adjudging; but it appears that this suit is not now urged with much seriousness, if relied upon at all.

Upon the pleadings thus presented proof was heard before the court orally and by depositions, and after a careful consideration of all the questions presented the court decreed in favor of appellee, holding that it was the owner of the oil and gas rights in and to said land by virtue of said deed of August 16, 1913, and the subsequent conveyances thereunder; that the injunction sought should be made perpetual, and that an accounting be had to ascertain the amount due for all waste committed on said premises, and for the reasonable value of all oil or gas 'produced, marketed, or used.' From this decree an appeal was duly prayed by the Kentucky Coke Company, and 16 assignments of error were filed to the action of the District Judge, only 7 of which it seems are urged in this court.

The foregoing statement of facts is necessary to a proper understanding of this case. The assignments of error now relied upon are as follows: (1) To the ruling of the court holding that the appellee had shown any title to the leasehold in question. (2) To the ruling of the court that the appellee had shown such title thereto as entitled it to the injunction prayed for, or to a decree quieting its title, and in effect ousting appellant from possession. The seventh, eighth, ninth, tenth, and eleventh assignments of error are as follows:

'(7) The court erred in holding that the plaintiff had such title to the leasehold in controversy as entitled it to the injunction prayed for, and to a decree quieting its title.

'(8) Plaintiff's remedy, if entitled to any, was by action in ejectment, in which its title and that of Louisa Hoover and her husband, Melvin Hoover, and their assigns, could be tried and determined.

'(9) The plaintiff did not establish its title to the oil or gas on the leasehold in dispute. The defendant established the better title. The very most the court could have properly done in plaintiff's favor on the record before it, and as defendant was in actual possession of the leasehold, was to dismiss plaintiff's bill, with leave to bring an action at law in ejectment for the leased premises.

'(10) It appearing that the defendant under claim of title was in actual possession of the leasehold in controversy at and prior to the institution of this action, and continuously thereafter, actually engaged in the drilling of gas wells and taking and transporting gas therefrom, the court erred in granting the injunction prayed for. The plaintiff was not, in any event, entitled to equitable relief by injunction or otherwise. Its remedy, if entitled to any, was by an action in ejectment. The plaintiff had a plain remedy at law, and the court erred by its decree in denying the defendant its constitutional right to have its title to the leasehold tried and tested by the verdict of a jury in a common-law action.

'(11) Louisa Hoover's right to the gas and royalties of oil, if discovered, were involved in the case, and she is a necessary party defendant.'

Assignments from 2 to 7 were not relied upon. As shown by the deeds above mentioned, the common source of the title to the oil and gas rights in question is Louisa Hoover, and the determinative question in the case is the proper construction to be given the clause, 'Excluding the, all the mineral on said land, excluding all the timber that belongs to Epperson Hays,' appearing in the deed from Louisa Hoover and husband to Daisy Dudley, executed August 16, 1913.

There can be no question but that at the time of the execution of this deed the oil and gas rights in the lands conveyed were then vested in Louisa Hoover by the deed of Apperson Hays and that the only rights which she would not...