Kiser v. Eberly

• Decision Date: 14 May 1952
• Docket Number: No. 164,164
• Citation: 88 A.2d 570,200 Md. 242
• Parties: KISER et ux. v. EBERLY.
• Court: Maryland Court of Appeals

Page 242

200 Md. 242

88 A.2d 570

KISER et ux. v. EBERLY.

No. 164.

Court of Appeals of Maryland.

May 14, 1952.

Thomas Lohr Richards, Cumberland, and Neil C. Fraley, Oakland, for appellants.

Stephen R. Pagenhardt, Oakland, and Earl E. Manges, Cumberland, for appellee.

Before MARBURY, C. J., and DELAPLAINE, COLLINS, HENDERSON and MARKELL, JJ.

DELAPLAINE, Judge.

This appeal from an injunction decree of the Circuit Court for Garrett County presents the question whether an oil and gas lease of property at Mountain Lake Park described as 'all of that tract known as the Hamilton Hall property,' includes a vacant lot containing about one acre.

The case grew out of the discovery of natural gas in the Mountain Lake Park region. The lease was obtained by Orville Eberly, complainant, and oil and gas producer, of Uniontown, Pennsylvania, from Harry C. Kiser and Mary M. Kiser, his wife, on September 29, 1950. The lease granted to complainant all of the oil and gas in four properties, together with the exclusive right to drill for, produce and market oil and gas, and the right to enter upon the land for the purpose of drilling and operating for oil and gas, laying pipe lines, erecting tanks, machinery, powers and structures, to use so much of the premises as may be necessary and convenient for said purposes, and to convey the products therefrom by pipe lines or otherwise. The properties, containing four acres, more or less, were: (1) all of that tract known as the Hamilton Hall property; (2) all of the Hotel England property; (3) all of the Braethorn tract; (4) all of the Kiser Nursery Home tract.

In May, 1951, the Kisers, upon complainant's request, signed two pooling agreements, one for the northern area, the other for the southern area. Each agreement provided that two wells were to be drilled in the area, and each lessor would share in gas royalties in the proportion that his pooled acreage bore to the whole pooled acreage regardless of where the wells were drilled. The Hamilton Hall property was in the northern area, the other three properties in the southern area.

In June, 1951, the Kisers executed a lease giving Roy L. Fletcher the right to drill for oil and gas on the one-acre lot in dispute. Kiser and Fletcher had been advised by William R. Offutt, a member of the Garrett County bar, that the lot could not be considered as a part of the Hamilton Hall property. Fletcher set up his drilling rig on the lot at an expense of about $1,800. Complainant thereupon instituted this suit to enjoin the Kisers and Fletcher from drilling on the lot. The Court stated that the case resolved itself into a question of credibility, and found that the tract was a part of the property leased to complainant. From a decree enjoining defendants from drilling on the lot, they appealed to this Court.

The lease now before us provides that it shall remain in force for two years, and as long thereafter as operations for oil and gas are being conducted on the premises or oil or gas is found in paying quantities thereon. In some States it has been held that a contract giving the right to explore land for oil and gas and to extract such minerals for a prescribed period of time, and as long thereafter as they are found in paying quantities, on no consideration other than prospective royalties, conveys no corporeal estate in the land, but merely gives a license to mine for the oil and gas and to extract them upon payment of the royalties. Under that holding, so much of the oil or gas as is removed from the land belongs to the parties entitled thereto under the terms of the contract, not as part of the realty but as personalty, and only so much as is removed passes under the grant. Kelly v. Keys, 213 Pa. 295, 62 A. 911; Steelsmith v. Gartlan, 45 W.Va. 27, 29 S.E. 978, 44 L.R.A. 107; Walla Walla Oil, Gas & Pipe Line Co. v. Vallentine, 103 Wash. 359, 174 P. 980. It appears, however, that such a holding is not applicable to an instrument, such as the one before us, which expressly purports to lease the land for the purposes specified, thereby conveying title. Barnsdall v. Bradford Gas Co., 225 Pa. 338, 74 A. 207, 26 L.R.A.,N.S., 614; Kennedy v. Burns, 84 W.Va. 701, 101 S.E. 156.

It has been held in other States that, since oil and gas in place are realty, subject to sale while under the earth's surface, an oil and gas lease grants to the lessee a qualified or determinable fee in the property. People ex rel. Carrell v. Bell, 237 Ill. 332, 86 N.E. 593, 19 L.R.A.,N.S., 746; Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 160, 254 S.W. 290, 29 A.L.R. 566; Federal Land Bank of New Orleans v. Mulhern, 180 La. 627, 157 So 370, 95 A.L.R. 948; Chandler v. Hart, 161 Cal. 405, 119 P. 516.

In Guffey v. Smith, 237 U.S. 101, 35 S.Ct. 526, 529, 59 L.Ed. 856, the United States Supreme Court, speaking through Justice Van Devanter, observed that the Illinois Supreme Court had decided that an oil and gas lease passes to the lessee, his heirs and assigns, a present vested interest in the property, and held that the decision of the State court constitutes a rule of property and must be accepted and applied by the Federal court in passing upon the rights of the parties. Similarly, in Group No. 1 Oil Corporation v. Bass, 283 U.S. 279, 51 S.Ct. 432, 75 L.Ed. 1032, and Burnet v. Harmel, 287 U.S. 103, 53 S.Ct. 74, 76, 77 L.Ed. 199, Justice Stone, observing that decisions of the Texas courts had characterized oil and gas leases as 'present sales of the oil and gas in place,' applied the rule of those decisions that ownership of the oil and gas passes upon the execution of the lease from the lessor to the lessee.

In this case it is unnecessary to express any view as to the exact nature of the substantive rights that pass under the oil and gas lease. For, notwithstanding considerable real or apparent conflict in the decisions as to the nature of such rights, all of the cases, with the possible exception of Walla Walla Oil, Gas & Pipe Line Co. v. Vallentine, 103 Wash. 359, 174 P. 980, hold that an oil and gas lease conveys an interest in or concerning land. Mills and Willingham, Law of Oil and Gas, sec. 36; Warren, Formal Requirements for Creation of the Oil and Gas Lessee's Interest, 5 Vanderbilt L. Rev., 177.

We accordingly hold that the agreement before us was required to be in writing by the fourth section of the Statute of Frauds, which provides that 'no action shall be brought whereby * * * to charge any person * * * upon any contract or sale of lands, tenements, or hereditaments, or any interest in or concerning them; * * * unless the agreement upon which such action shall be brought, or some memorandum or note thereof shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized.' 2 Alexander's British Statutes, Coe's Ed., 689, 690; Albert v. Winn, 5 Md. 66, 73; Markoff v. Kreiner, 180 Md. 150, 158, 23 A.2d 19.

The Court below admitted in evidence complainant's copy of the lease, on which there were pencil notations as to acreage. Complainant claimed that he made the notations from information given to him by the Kisers. But the Kisers categorically denied that they had given him any such information. As the notations do not appear either on the Kisers' copy of the lease or on the transcript in the land records of Garrett County, they were clearly inadmissible. It is a familiar general rule that parol evidence is inadmissible to vary or contradict the terms of a written instrument. One reason for this rule of evidence is that when contracting parties have discussed and agreed upon their obligations to each other and have reduced them to writing, the instrument is more reliable as evidence than the uncertain memory of man. All prior and contemporaneous negotiations are merged in the written instrument, which is treated as the exclusive medium for ascertaining the extent of the obligations of the parties. Therefore, parol evidence of conversations before...