Loeb v. Conley

• Decision Date: 06 October 1914
• Citation: 169 S.W. 575,160 Ky. 91
• Parties: LOEB ET AL. v. CONLEY ET AL.
• Court: Kentucky Court of Appeals

169 S.W. 575

160 Ky. 91

LOEB ET AL. v. CONLEY ET AL.

Court of Appeals of Kentucky.

October 6, 1914

Appeal from Circuit Court, Morgan County.

Suit by M. L. Conley and others against Norman Loeb and others. From a judgment for plaintiffs, defendants appeal. Affirmed.

J. J C. Bach and Grannis Bach, both of Jackson, O'Rear &amp Williams, of Frankfort, and John B. Phipps, of West Liberty for appellants.

Fogg & Kirk, of Paintsville, and S. M. Nickell, of Lexington, for appellees.

CARROLL J.

In May, 1912, A. E. Sebastian and his wife leased by a written instrument to the appellee, M. L. Conley, a tract of land in Morgan county described in the lease as follows:

"On the waters of Prater fork of Caney creek, bounded substantially as follows: On the north by the lands of Mason Jones; on the east by the lands of Mason Jones; on the south by the lands of Willie Sebastian; on the west by the lands of Manson Haney, containing 40 acres more or less, and being the same land conveyed to the first party by Daniel McGuire, et al. by deed bearing date October 23, 1911."

The land thus described was leased by Conley for the purpose of exploring it for oil and gas, and if either of these products was discovered by the boring of wells, Conley was to pay to Sebastian a royalty specified in the lease. This lease, after being signed and acknowledged by the lessors, was recorded in the clerk's office of Morgan county in September, 1912. In October, 1912, Sebastian and his wife leased to the appellants Norman and Fred Loeb a tract of land in Morgan county described in the lease as being bounded--

"on the north by lands of L. M. Haney; on the east by lands of Mason W. Jones; on the south by lands of J. T. Fugate; on the west by lands of J. T. Fugate and L. M. Haney, containing 12 acres more or less, and being the same land conveyed to the first parties by Noah McGuire and wife."

This land was also leased to the Loebs for the purpose of exploring it for oil and gas. This lease was put to record in the proper office in November, 1912. In April, 1913, Conley and other parties, to whom he had assigned an interest in the lease, brought their suit in equity against the Loebs and A. E. Sebastian, charging that the land leased by Sebastian in October, 1912, to the Loebs was included in the boundary of land leased by Sebastian to Conley in May, 1912; that the Loebs, with actual as well as constructive notice of the lease to Conley and the boundary of land that it described, procured from Sebastian, in fraud of their rights, the lease executed to them in October, 1912, and that the Loebs were asserting an interest in the land by virtue of their lease and threatening to drill oil and gas wells on the land described in their lease and appropriate the oil and gas that might be found to their own use. They asked that the Loebs be enjoined from entering upon the land described in the lease to them and from drilling any wells on the land; that their lease be canceled and the title of Conley and his lessees to the land claimed by the Loebs be quieted. In an amended petition subsequently filed it was set up that the Loebs had bored some oil-producing wells on the land leased to them and from these wells had obtained a large quantity of oil, and they asked judgment against the Loebs for the value of the oil produced in these wells and sold by the Loebs. It further appears that in August, 1913, another amended petition was filed in which it was set up that the defendants had entered upon the land in controversy and drilled oil-producing wells, from which the defendants were taking oil. In this amended petition there was a prayer that a receiver be appointed to take charge of the lease and lands in controversy and operate the same until the rights of the parties were finally adjudicated. In November a motion was made before the judge of the Morgan circuit court for the appointment of a receiver, and pending the disposition of this motion it was agreed by the parties that the Loebs would executed to Conley a bond conditioned that they would perform the judgment of the court by paying to the plaintiff such sums of money as might be adjudged to him. In accordance with this agreed order the Loebs executed the bond required in the order. The Loebs, in their answer, averred that they leased the land described in their lease from Sebastian in good faith and for a valuable consideration, without either actual or constructive notice that it was embraced in the land leased to Conley. They further averred that at an expense of some $16,000 they had sunk several wells on the land leased to them by Sebastian, and prayed that in the event it should be adjudged that they were not entitled to the land described in their lease, they be adjudged a lien on the land for the amount expended by them in drilling the wells. Sebastian also filed an answer, in which he set up in substance that there was only leased to Conley, as Conley well knew, the land that had been conveyed to Conley by Daniel McGuire, and that he did not intend to lease, nor did he lease, to Conley the land conveyed to him by Noah McGuire, which land he subsequently leased to the Loebs. Other pleadings were filed by the parties, but what we have set out is sufficient to illustrate the issues between them.

After the case had been prepared for trial by the taking of a number of depositions, it was submitted for hearing, and the court adjudged that Conley and his associates were entitled, under the lease to Conley, to the exclusive right to the oil and gas on the tract of land described in the judgment, which included both the Daniel and Noah McGuire tracts. It was further adjudged that their title to this body of land, which embraced the land described in the deed to the Loebs, should be quieted, and that the Loebs be "restrained from entering upon said land or removing any oil or gas therefrom." It was further adjudged:

"That the Loebs entered on the land in controversy and drilled and operated for oil and gas thereon with both actual and constructive notice of plaintiffs' ownership thereof, and not in good faith, and that all of said operations were done after defendants had both actual and constructive notice of plaintiffs' ownership, and that the drilling and operating thereon by the defendants has not in any way enhanced the value of said property to the plaintiffs, and therefore adjudges that the defendants recover nothing on their counterclaim herein, and the same is dismissed. It is further adjudged that the plaintiffs recover of the defendants Loeb the sum of $2,400 for the oil taken and appropriated by them from the tract of land in controversy, with interest thereon from this date."

From this judgment the Loebs prosecute this appeal, insisting, first, that they should be adjudged entitled to all the rights conveyed in the lease made to them by Sebastian, which would of course include the right to enter upon the land described in this lease and sink wells and appropriate for their own use and benefit the product of the wells so sunk, but that if not entitled to this relief, they should at least have compensation for the value of the improvements placed by them on this land, which improvements consisted of wells that had been sunk by them pending this controversy.

It will be observed that the principal question in this case is, Did the Loebs acquire under the lease to them the rights and interests in the land specified in the lease? If they did, of course the judgment should be reversed in its entirety, for if this lease conveyed to them the rights and interests it purported to convey, they had the right to enter upon the land, sink wells thereon, and appropriate to their own use the product of these wells.

Taking up first this main question, it appears from the evidence that, although the lease to Conley recited that the boundary of land described in the lease contained 40 acres more or less, it in fact contained only about 13 acres, and that, although the lease to the Loebs recited that the boundary of land therein described contained 20 acres more or less, it in fact contained only about 5 acres. It further appears that the land described in these two leases, although lying in one body, was purchased by Sebastian from two different parties, and conveyed to him by two separate deeds; the land leased to Conley having been conveyed to Sebastian as recited in the lease by D. B. McGuire, while the land leased to the Loebs, as recited in the lease, was conveyed to Sebastian by Noah McGuire. It also appears that the deed made by D. B. McGuire to Sebastian was signed and acknowledged by the grantor in October, 1911, and recorded in the proper office in November, 1911, and that the deed from Noah McGuire to Sebastian was made in November, 1911, and recorded in November, 1912. We also think the weight of the evidence shows that the Loebs, at the time they took the lease from Sebastian, had no actual notice of the claim of Conley that the lease to him included the land that they leased. They had been informed by Sebastian that he had not leased the land he proposed to lease them to Conley or any one else, and had the right to believe what he told them.

A good deal is said in the record about the preliminary negotiations between Conley and Sebastian that culminated in the execution of the lease, but we regard all of these verbal negotiations as wholly immaterial in disposing of this case. It is not important what land Sebastian thought he was leasing to Conley, or how much land Conley thought he was leasing from Sebastian. Conley and Sebastian put their contract into writing in the form of a recorded lease, and by the terms of this instrument the rights of Conley and the Loebs are to be determined. The...