Welch v. Cayton

• Decision Date: 26 June 1990
• Docket Number: No. 19144,19144
• Citation: 395 S.E.2d 496,183 W.Va. 252
• Court: West Virginia Supreme Court
• Parties: , 12 UCC Rep.Serv.2d 1054 Mary M. WELCH, et al. v. Don B. CAYTON, et al.

Page 496

395 S.E.2d 496

183 W.Va. 252, 12 UCC Rep.Serv.2d 1054

Mary M. WELCH, et al. v. Don B. CAYTON, et al.

No. 19144.

Supreme Court of Appeals of West Virginia.

June 26, 1990.

Syllabus by the Court

1. Where a fee estate in the "surface only" of a parcel of land is erroneously listed in the sheriff's tax books and taxed as if it contained oil and gas rights as well, but the oil and gas rights are still separately held and taxed, the erroneous taxing of oil and gas along with the surface does not transfer ownership of the oil and gas to the surface owner under any theory of West Virginia property law.

2. The good faith purchaser for value Rule of UCC Article 2, W.Va.Code, 46-2- 403(1) [1963], does not protect a purchaser whose seller did not himself receive at least "voidable title" in a "transaction of purchase".

Walton S. Shepherd, Sissonville, for Ralph A. Grady Sr.

Eobert Bays, Ruley & Everety, Parkersburg, for Cabot Corp.

Orville L. Hardman, Hardman & Powell, Parkersburg, Alan Simms, Elizabeth, for Mary M. Welch, Michael D. Coccia.

John R. Haller, Haller & Wagner, Weston, for Don Cayton, Edward N. Hitt, Inland Oil Co.

Richard A. Hayhurst, Parkersburg, for Ashland Oil Co.

NEELY, Justice:

This case involves the ownership of the oil and gas underlying a forty-five acre tract of land located in Ritchie County. It is a dispute among an owner of the oil and gas estate, an owner of the surface, who believes he has title to the oil and gas as well, an oil exploration firm who found and extracted oil and gas under a lease from the surface owner, and two companies which purchased oil and gas from the exploration company.

Mary Welch, et al., the appellees, (hereinafter Welch) claim ownership of the oil and gas by virtue of record title going back to 1889. The appellants, who clearly have rights to the surface, claim that the appellees' predecessors in title never took the oil and gas rights in their deed from the State because appellant Grady's predecessor had already acquired those rights through operation of W.Va. Const., Article XIII, § 3, ¹ and under the rule in Peterson v. Hall, 57 W.Va. 535, 50 S.E. 603 (1905). After reviewing the questions presented and the record developed, we conclude that the appellants have failed to establish their claim to the oil and gas in question, and we affirm the trial court's holding that Welch was the sole owner of the oil and gas estate.

In 1895, John Williamson, who owned a "fee" ² interest in the forty-five acre tract involved in this case, deeded all of the oil and gas rights in the land to Charles Schmitz, et al. At that time, then, the oil and gas became separate from the surface estate, and each was vested in separate parties. For a number of years after the separation, however, the property continued to be entered on the land books of Ritchie County as a single "fee" estate.

In 1913, the oil and gas estate was first separately entered on the land books of Ritchie County, in the name of Charles Schmitz, et al. Mr. Schmitz, et al., paid taxes on the separate estate until 1932, when Schmitz, et al. allowed the taxes to go delinquent. As a result of the delinquency, the oil and gas estate was sold to the State in 1933. After it had been sold to the State, the oil and gas estate continued to be listed in the land books in the name of Schmitz, et al., but with a notation indicating that the land was sold to the state for taxes. In 1952, the oil and gas estate was finally sold by the Deputy Commissioner for Delinquent and Forfeited Lands to N.M. Welch. Mary Welch inherited the land from N.M. Welch. It is significant to the ultimate outcome of this case that the mineral estate was separately listed in the land books every year from 1913.

Since 1895 the surface has been held and taxed separately from the oil and gas. In 1906, John Williamson conveyed the surface to Elizabeth Gorrell. In 1910, Ms. Gorrell conveyed the surface to B.C. Williamson, the deed noting that the 45 acres was subject to the former conveyance of the oil and gas rights by John Williamson. The 1931 taxes were not paid, and in 1936, the surface was sold at a sheriff's sale to H.P. Williamson. The tax deed, executed by the Clerk of Court of Ritchie County, expressly limited the conveyance to the surface only. ³ Mr. Williamson, in 1947, conveyed one-half of one acre to a Mr. Schrader, reserving all the oil and gas for the grantor. ⁴ In 1969, Mr. Williamson conveyed the 45 acres, 20 poles, less the one-half acre, to Appellant Grady, in a deed without reservation.

This dispute arose because the appellants, with rights to the surface only, sold oil and gas from the forty-five acre tract. In 1981, appellant Grady leased the oil and gas rights to appellant Hitt, who then assigned the lease to Inland Oil to do the actual drilling. Inland Oil, through its subsidiary Inland Exploration, completed a producing well in December of that year and began extracting oil and gas, selling the oil to Ashland Oil and the gas to Cabot Corporation. The Welches learned that oil and gas were being sold from the 45 acres, and brought suit to recover for the oil and gas removed from the oil and gas estate. Once Cabot Corporation and Ashland Oil received notice of the title dispute, they placed payments for further sales in suspense. The trial court granted Welch recovery against all of the defendants, including Ashland Oil and Cabot Corporation, for all oil and gas taken from the oil and gas estate, less the reasonable cost of production.

Appellants' claim to the oil and gas rights derives from the claim that their predecessor, H.P. Williamson, had. Mr. Williamson, like Mr. Grady, owned only the surface, but he claimed to own the oil and gas as well. Also like Mr. Grady, he granted an oil lease.

I.

Appellants claim the oil and gas by operation of a Constitutional provision dealing with forfeited lands, W.Va. Const., Article XIII, § 3, ⁵ as well as by operation of an old statute applied in the case of Peterson v. Hall, 57 W.Va. 535, 50 S.E. 603 (1905).

Article XIII, § 3 provides for three ways to obtain good title to forfeited land. First, one who has actual continuous possession of the land for 10 years, and pays the taxes for five successive years during the possession will gain good title to the land. Second, if there is no one who fulfills the above requirements, one who holds title, regularly derived, from the State of West Virginia or the Commonwealth of Virginia, and pays taxes for five successive years, can take good title to the land. If no one meets the preceding requirements, then someone who possesses the land for five years and pays the taxes for those 5 years will gain good title to the land.

Mr. Grady's predecessor, H.P. Williamson, did not meet the requirements of any of the above provisions; he may have paid the taxes for more than five years, but he never took possession of the oil and gas estate. He possessed the surface only, which he had a right to possess. This Court has made it abundantly clear that "[m]ere possession of the surface, when it has been severed from the underlying minerals, is not possession of the severed minerals." Bennett v. Neff, 130 W.Va. 121, 145, 42 S.E.2d 793, 806 (1947).

To possess the oil and gas, H.P. Williamson would have had to take oil and gas out of the land, such as by drilling a producing oil well. This Court said in Kiser v. McLean, "[t]hough he own the surface and all other strata, he does not own the oil and gas. His possession of the surface cannot constructively extend to them.... He can only take possession of them by drilling wells." Kiser v. McLean, 67 W.Va. 294, 297, 67 S.E. 725, 726 (1910).

Drilling a dry well, however, such as was done under the lease from H.P. Williamson cannot accomplish the possession of oil and gas. In Trust Co. v. Harless, 108 W.Va. 618, 152 S.E. 209 (1930), this Court said, "[t]he mining of property for coal occasionally does not constitute possession." 108 W.Va. at 629, 152 S.E. at 213. In that case the court insisted that to establish adverse possession by mining a mineral, one who asserts adverse possession must "keep his flag flying in a visible and hostile manner." Ibid.

The concern is that if the possession is not done continuously and openly, the owner may never have an opportunity to see that someone is threatening his rights. This is even more of a problem when the person asserting "possession" of minerals has a right to occupy the surface, as in the case at bar.

The second method of acquiring good title does not require possession, but requires some claim of title through a chain of title from the sovereign. H.P. Williamson held no such claim of title. His claim of title as asserted by the change from "surface" to "fee" in the land tax books is not the kind of title referred to in this section, so he was not, and appellants are not, helped by this provision.

As for the third method, Mr. Williamson did not possess the oil and gas estate for even a moment, so he cannot meet the requirement of five years of possession. If he had taken oil from a producing well for five years and paid taxes on the "fee" for those five years, he would have taken title to the forfeited oil and gas estate. Because he never took possession, however, he never took title under this provision.

Appellants cite the case of Peterson v. Hall, 57 W.Va. 535, 50 S.E. 603 (1905), in support of their claim that they received the oil and gas rights through the tax deed to the surface. In particular they quote from a syllabus point which states:

When the surface of land is owned by one person, the oil in place by another, a sale for taxes in the name of the owner of the surface will also pass the oil owned by the other person, his estate not being charged on the tax books, under section 25, chapter 31, Code 1899 57 W.Va. at 535, 50 S.E. at 603. The syllabus point could easily mislead a lawyer who overlooks the language, "his estate not...