Paxton v. Benedum-trees Oil Co

Decision Date17 April 1917
Docket Number(No. 3122.)
Citation80 W.Va. 187,94 S.E. 472
CourtWest Virginia Supreme Court
PartiesPAXTON . v. BENEDUM-TREES OIL CO.

Rehearing Denied Dec. 4, 1917.

(Syllabus by the Court.)

[Ed. Note.—For other definitions, see Words and Phrases, First and Second Series, Latent Ambiguity.]

Miller, J., dissenting.

Appeal from Circuit Court, Roane County.

Suit by C. C. Paxton and others against the Benedum-Trees Oil Company. Decree for defendant, and plaintiffs appeal. Affirmed.

Ryan & Boggess, of Spencer, for appellants.

John M. Baker, of Spencer, and Pendleton, Mathews & Bell, of Grantsville, for appellee.

RITZ, J. On the 18th day of March, 1904, the plaintiff C. C. Paxton, being the owner In fee of a tract of land situate in Roane county, together with his wife, the plaintiff Phoebe Paxton, joined with a number of other parties in a deed which conveyed an interest in the oil and gas in the several tracts of lands owned by the various parties thereto to T. H. Kemper, the granting clause of which is:

"Witnesseth, that the said parties of the first part in consideration of the respective amounts hereinafter provided for, the said parties of the first part do grant and convey unto the parties of the second part the one-sixteenth of all the oil and one-half of all of the gas within and underlying the several and respective tracts of land hereinafter described, including in this conveyance the one-half of all the royalties, incomes and rentals that may hereafter arise therefrom or accrue upon the real estate hereinafter described by virtue of any oil and gas lease, or leases now on said several tracts of land or which may hereafter be placed on said several tracts of land or any of them; that is to say."

Then follows the description of ten tracts of land in which plaintiffs are not interested and resuming in regard to the Paxton land says:

"And the said C. C. Paxton and Phoebe F. Paxton, his wife, in consideration of $217.50 in hand paid do grant and convey unto the said T. H. Kemper one-sixteenth of all the oil and one-half of all the gas or the income from the gas within and underlying the following described tracts of land situate in said countv and state, and fully described in the deeds from L. S. Hersman and wife, W. H. Hershman, W. T. Jennings and Mason Campbell to C. C. Paxton, and dated respectively October 29, 1901, March 14, 1902, September 5, 1898, March 28, 1901, and March 2. 1880, and recorded in said clerk's office in D. B. 36, page 518; D. B. 35, page 520; D. B. 30, page 104; D. B. 34, page 118; D. B. 8, page 282, respectively, and containing in all 145 acres, more or less."

On the 9th day of August, 1909, the plaintiff C. C. Paxton and his wife executed an oil and gas lease to I. A. Whitecotton and C. A. Hayhurst, covering this land. This lease contained the provisions usual in such leases, except that it provided for the payment to the lessor of one-fourth of the oil produced instead of the usual one-eighth. No operations were conducted under this lease, and it was on September 30, 1909, surrendered and canceled by agreement of the parties, and on the same date plaintiffs executed another lease for oil and gas purposes covering this land to I. A. Whitecotton. This lease grants the right to explore for and remove the oil and gas from the land for a period of one year from its date, and so much longer as oil or gas is produced therefrom. It provides for the delivery to the grantee of one-eighth of all oil produced as royalty, and for the payment of?300 per year for each gas well drilled, the product from which is marketed. There is a further provision in the lease in the following language:

"Party of the second part does agree to carry parties of the first part a one-sixteenth working interest clear through on this lease; if oil and gas be found in paying quantity to continue to drill the same until the farm is drilled up."

There is also a paragraph at the end of the lease as follows:

"One-sixtetmth of the oil and one-half of the gas or income from the gas is sold."

This sufficiently states the terms and conditions of the lease for the solution of the questions arising in this case. It contains other covenants and provisions not involved in this litigation.

Shortly after he procured this lease Whitecotton transferred it to the defendant Benedum-Trees Oil Company, and thereafter it began to explore for oil and gas. The first well was completed in the spring of 1910, and produced oil in paying quantities. Other wells were subsequently drilled until at the time of the trial of this case in the court below in January, 1916, there had been five wells completed, all of which produced oil in paying quantities.

After the operating company began to produce oil a dispute arose as to the amountwhich, should be delivered to Kemper and his assignees under the deed from Paxton and wife of March 18, 1904, above referred to. Paxton contended that the effect of that deed was to convey to Kemper one-sixteenth of the oil, he (Paxton) being entitled to one-eighth of fifteen-sixteenths as royalty; that if Kemper allowed the lessee to extract all of the oil, it would be incumbent upon him to secure an accounting or his one-sixteenth from the lessee, such lessee being, so far as the interest of Kemper is concerned, a trespasser. The provision of the lease requiring the lessee to carry a one-sixteenth working interest for Paxton also became involved in the controversy, Paxton contending that under this provision he is entitled to a one-sixteenth interest in the oil produced after the payment of royalties free of any charge against the same for the cost of production, while the defendant operating company insists that under this provision Paxton is entitled to have one-sixteenth of the profits arising from the operation, without obligation on his part to furnish any money or to pay any losses in case the wells drilled were not productive. Paxton also claimed that the defendant operating company was not drilling upon the land as rapidly as the covenant in the lease required.

Paxton brought this suit for the purpose of having his rights determined, and to compel the operating company to drill additional wells upon the land.

(1-3] The first question to be settled is, What interest did Kemper take under the deed of March 18, 1904? Terms contained in the lease subsequently executed by Paxton are relied upon to aid in the construction of this deed. This cannot be done. The interest of Kemper and those claiming under him is fixed by the deed, and cannot be affected by expressions in a paper subsequently made to which Kemper was not a party. Looking to the deed we find in the granting clause this language:

"Do grant and convey unto the parties of the second part the one-sixteenth of all the oil and one-half of all of the gas within and underlying the several and respective tracts of land hereinafter described, including in this conveyance the one-half of all the royalties, incomes and rentals that may hereafter arise therefrom or accrue upon the real estate hereinafter described by virtue of any oil and gas lease, or leases, now on said several tracts of land or which may hereafter be placed on said several tracts of land or any of them."

What is the effect of the language, "the one-sixteenth of all the oil within and underlying the several tracts of land"? The defendant contends that when Paxton subsequently made the lease to its assignor purporting to lease all of the oil, he impliedly covenanted that his lessee should have quiet enjoyment of all of the oil. This covenant was broken it contends by reason of the outstanding Kemper interest, and because of such breach it is entitled to take one-half of Paxton's royalty and turn it over to the Kemper interest..If this deed conveyed one-sixteenth of the oil, and that is all it purports to convey by the language now under consideration, Paxton's breach of the covenant for quiet enjoyment would not enlarge the Kemper interest. If the owners of the Kemper interest did not desire the oil to be produced under the lease made by Paxton, they, as tenants in common in the oil, could enjoin operations thereunder, as such operations would as to them constitute waste. Williamson v. Jones, 43 W. Va. 562, 27 S. D. 411, 38 L. R. A. 694, 64 Am. St. Rep. 891; South Penn Oil Co. v. Haught, 71 W. Va. 720, 78 S. E. 759. If, however, they desired to have the oil produced under the lease and with knowledge of the operations permitted them to go on, they might thus in effect ratify the lease, in which case they could compel the operating company to account to them for their part of the oil. The basis of such accounting is determined in the case of South Penn Oil Co. v. Haught, 71 W. Va. 720, 78 S. E. 759, to be the proportion of the royalty that they owned of the oil in place. Cecil v. Clark, 49 W. Va. 459, 39 S. E. 202. If the Kemper interest under the deed is one-sixteenth of the oil in place, then the owners of this interest would be entitled to one-sixteenth of the royalty. Conceding that there is a covenant for quiet enjoyment in the Paxton lease, and that the same has been broken, the lessee thereunder would only be entitled to compensation for the breach. It will not do to say that Paxton would lose half of his royalty if the outstanding interest was only one-sixteenth of the oil. Upon this reasoning, if he had sold one-eighth of the oil in place and subsequently made a lease such as that involved here, he would lose all of his royalty; in other words, if he sold only one-eighth of what he had and then made a covenant for quiet enjoyment of the whole, the breach of such covenant would deprive him of the seven-eighths, and transfer it to the grantee of the one-eighth. Following this reasoning still further, if he had sold one-fourth, and then made a lease such as that involved here, he would not only lose all of the royalty, but would have to account to his grantee for an additional amount equal...

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