232 Pa. Super. 224 | Pa. Super. Ct. | 1975
Opinion by
This is an appeal from the Court of Common Pleas of Warren County, Civil Division, involving the interpretation of a complicated oil lease agreement.
On May 29, 1963, Elsie Davis was the owner in fee of 58acres of seated land in Brokenstraw Township, Warren County, Pennsylvania. On that date she entered into an oil lease agreement with Howard G. Donaldson and Carl Burgchardt. Under the terms of the agreement, more fully discussed below, she would receive 1/8 part of all oil produced and saved from the leased premises in return for allowing the lessees to drill for oil and gas. Donaldson and Burgchardt com
In 1965, Crotty’s interest was assessed as realty by the tax authorities under the Act of May 29, 1931, P. L. 280, as amended, 72 P.S. §5971, et seq., which act related to the taxation and sale of seated lands. No one paid the 1965 taxes and on August 7, 1967, Maurice Dickey, the appellee in this case, successfully bid for the interest at a County Treasurer’s sale. He received a Treasurer’s tax deed purporting to convey to him, as realty, Crotty’s interest in the oil production. This deed was recorded.
Subsequently, Clark and ITogsett brought suit by an action to quiet title claiming that the entire proceedings were error and that they retained their interests as sold to them by Crotty. Their interests had been transferred to The Pennsylvania Bank and Trust Company, which substituted itself as plaintiff in the action to quiet title.
The matter proceeded to trial and on November 15, 1973, the court below decided that there was a severance under the lease of Elsie Davis Avith a grant in fee of the said minerals to the original lessees. The court held that the lease created a severance of the minerals from the surface which resulted in a separate taxable estate in the oil produced which could, in turn, be taxable and taxed under the aforesaid statute. Thus, the actions of the taxing authority were legal and proper, the tax sale Avas valid, and Dickey was the rightful owner of the minerals in question, pursuant to his Treasurer’s deed. The appellant excepted to the court’s finding and on March 4, 1974, the court below rendered a supplemental opinion reaffirming its original holding. Appellant then took this appeal.
Appellant argues that the County Treasurer’s deed conveying the minerals to Dickey was invalid because, inter alia, the deed was improper in form in that it did not indicate that no personal property of the owner at the location of the real estate could have been seized and sold as personalty sufficient to pay the taxes involved. This, he argues, is in violation of the Act of June 3, 1885, P. L. 71, Section 1, 72 P.S. §5933, which provides that a sale of seated land is invalid “in any case where there was sufficient personal property on the premises to pay all the taxes assessed thereon, liable under the laws of this Commonwealth to have been seized therefor.” Under this act it is absolutely necessary to a valid tax sale that the record must indicate that there was no personal property on the premises to pay the tax and that a demand had been made on the owner to pay, which had been refused. Weaver v. Meadville Lumber Manufacturing Co., 61 Pa. Superior Ct. 167 (1915). In Weaver, supra, this Court invalidated a Treasurer’s sale where the treasurer had made a mistake in selling certain land as unseated land rather than seated which was the way it was properly assessed. The Court in that case indicated that a return by the collector that there was not sufficient personal property upon the premises with which to pay the tax was made a part of the record but that the return accompanied a return of taxes upon unseated lands when in fact the lands were seated. It was because of the incorrect designation of the lands in question that the court invalidated the sale. In our case the only
Appellant’s second contention is that the lease agreement did not convey a fee interest in realty unto the lessees and thus, the real estate tax levied on this interest by the taxing authorities was improper. If this is the case then the treasurer’s deed must necessarily fall. At the outset it must be pointed out that Pennsylvania law recognizes three separate estates of land: the surface itself, the right of support, and the minerals contained thereunder. Smith v. Glen Alden Coal Co., 347 Pa. 290, 32 A. 2d 227 (1943). Therefore, it is possible to have a situation where any of the three portions of the land may be owned by persons different than the ones owning the other portions. So far as oil and natural gas are concerned the rights thereto ordinarily belong to the owner of the land. The oil and gas are a part of the land so long as they are on it, in it, or are subject to control therein. They are a part of the land while they are in place. However, they can be severed from the ownership of the surface by grant or exception as separate corporeal rights. Duquesne Natural Gas Com
The applicable portion of the lease stated as follows:
“That the said party of the first part, for and in consideration of the sum of one dollar paid to said party of the first part by said party of the second part, the receipt of which is hereby acknowledged, and the covenants and agreements of the respective parties hereto hereinafter contained, has granted, demised, leased and let, and by these presents do hereby grant, demise, lease and let, unto the said parties of the second part, their heirs or assigns, the exclusive right for the sole and only purpose of drilling and operating for oil and gas, and constructing tanks, pipe lines, etc., for taking care of the said product, on all that certain tract of land situated in . . .”
“. . . to have and to hold the premises, for the said purpose only, for the term of one (1) years from this date, and as long thereafter as oil or gas is found, or the rent for failure to commence operations is paid.” (Emphasis added.)
Notwithstanding the fact that the agreement purports to be a lease conveying merely a leasehold interest the determinative fact is whether the agreement did work a severance of the mineral estate from the surface estate. The Act of April 1,1909, P. L. 91, §1, 21 P.S. §2, as amended, provides that unless an instrument in writing expressly limits itself to the granting of a lesser estate, the words “grant and convey”, or either one of said words, passes to the grantee a fee simple title to the premises conveyed. The words of the agreement in the instant case do contain the word “grant” in the conveying clause. However, it must be noted the words “grant” and “convey” are to be given such effect only when the writing fails to expressly limit the conveyance to a lesser estate. It is also apparent from the last clause of this section that the legislative purpose of the section was to enable conveyances to be made in fee without the necessity of using the words “heirs and assigns” since the clause stated: “although there be no words of inheritance or perpetuity in the deed.” Thus, it is clear that the purpose of the act was to validate written instruments purporting to convey realty in fee which use the words “grant” or “convey” but fail to use words of inheritance or perpetuity since before the passage of the Act the failure to employ words of inheritance or perpetuity reduced the conveyance to one of a life estate only. Klingler v. Wick, 266
The agreement in the instant case does grant to the grantees the exclusive right to the oil and gas. Thus it is more than a mere license granting them the right to remove the minerals because the grantor is prohibited, by its terms, from removing the minerals herself or from permitting anyone else to do so. Barnsdall v. Bradford Gas Co., 225 Pa. 338, 74 A. 207 (1909). The agreement also stated that it was for a period of one year and as long thereafter as oil or gas were found. Thus the only time limit on the agreement was to be determined by the existence of the gas and oil themselves. This fact tends to indicate that the agreement did indeed create a corporeal interest in the minerals themselves in the grantees. However, appellant argues that since the grantor was to receive a 1/8 part of all the oil produced she did not in fact convey all of her interest in the mineral estate to the grantees and that this fact negates the proposition that a fee simple interest was created in them because for such an interest to be created it is mandatory that the grantor convey all of the oil and gas in place unto the grantees.
In Barnsdall v. Bradford Gas Co., supra, the court held that where a written instrument states that it “grants, demises, leases and lets unto the party of the second part” a certain tract of land “for the sole and only purpose of mining and operating for oil, gas, and other minerals” the writing creates a corporeal interest in the grantee in the demised premises and is not a mere license to enter and operate for the oil and gas. The court went on to say that, “by the agreement the exclusive right to take and appropriate all the minerals
In Appeal of Baird, 334 Pa. 410, 6 A. 2d 306 (1939), the court held that the tax assessor could properly impose a real estate tax on a grantor’s 1/8 interest in oil and gas, which interest represented the consideration paid to grantor by grantee pursuant to an agreement similar to the one in our case. The court reasoned that the right to receive 1/8 of the oil and gas produced as a royalty was incident to an estate in oil and gas remaining in the grantor as owner of the land. The situation is similar to the one in our case except that in Baird, supra, the real estate assessment was made against the grantor because he had l/8th interest in the mineral estate while in our case the assessment was made against the grantees who liad a 7/8th interest in the mineral estate. In Baird, supra, the court stated that it would be impractical to require the taxing authorities to levy a separate tax on each and every one of the fractional interests in a mineral estate. The court was not obliged to specifically find that the taxing authorities could also have imposed the tax on the grantee’s 7/8th interest and it refrained from so doing since that issue was not ripe for adjudication at that time. In any event the rights of both the grantor and the grantee regarding taxes were set forth in the agreement in that case.
A review of the above case and others pertaining to this type of agreement has failed to reveal any instance
The judgment of the court below is affirmed.