Kelly v. Keys

Opinion by Mr. Justice Stewart, The defendant, Keys, being the owner of a certain tract of land in Washington county, by instrument in writing duly executed and acknowledged, granted to Kelly, the plaintiff, the exclusive right to mine and produce therefrom petroleum and natural gas, with possession of so much of the land as might be necessary for such purposes, for a term of two years, subject [297] to certain conditions and stipulations which, do not here call for recital. Kelly never exercised any rights under the grant, and never entered into possession of any part of the premises. Subsequently, Keys, claiming that by reason of a default, Kelly had forfeited his rights under the grant, conveyed a like right in the premises to C. D. Greenlee and the Southern Oil Company, the other defendants, who proceeded to explore the property and succeeded in producing oil therefrom in paying quantity. Kelly, averring compliance on his part with all the conditions and stipulations of the grant under which he claimed, and denying a forfeiture, brought this action of ejectment against the defendants to compel surrender of possession to himself. The action resulted in a verdict for the plaintiff, subject to the decision of the court on a question reserved, viz.: whether ejectment in such case would lie. Upon consideration judgment was rendered upon the reserved point in favor of the plaintiff. The assignment of error that relates to the action of the court on this point, is the only one that calls for present consideration. In reaching his conclusion on the point reserved, the learned judge gave full recognition to the binding authority of Funk v. Haldeman, 58 Pa. 229, and the cases that follow it, wherein it is held that the grant of exclusive privileges to go on land for the purpose of prospecting for oil, the grantor to receive part of the oil mined, as in this case, does not vest in the grantee any estate in the land or oil, but is merely a license or grant of an incorporeal hereditament. This court has found frequent occasion to assert its continued adherence to the doctrine of these cases. Only recently, in the case of Hicks v. American Natural Gas Company, 207 Pa. 570, it reasserted it without qualification. Once it was determined that the subject of such a grant was an incorporeal hereditament, and not an estate in the land or oil, it logically and necessarily resulted, that it would not support an action in ejectment. And this view has been steadily adhered to. In no case has ejectment been sustained under such a grant, except where possession had been acquired by the grantee, and he had been wrongfully disseised. In the present case disseizin was, not, and could not be, asserted. Nor could it be contended, [298] that the instrument under which Kelly claimed, though spoken of as a lease, and so denominated in the instrument itself, is in point of fact and law, a lease, notwithstanding it allows possession of so much of the surface of the premises as may be necessary to conduct mining operations. This much will be implied without express stipulation; and the stipulation being expressed in no way distinguishes this from the cases' where such an instrument is held to be merely a grant or license. The court below put no other construction on this, so long as it concerned no one but grantor or grantee; but because the defendants holding under a subsequent lease, being in possession, had produced and were producing oil in paying quantity, reached the conclusion that what had been the grant of an incorporeal hereditament, now that the oil had been found and was being produced, was an estate in the land, since oil was a mineral, and 'therefore part of the land; and that Kelly being entitled to be put in possession of so much of the estate, ejectment could be brought for such purpose. This line of argument overlooks the very consideration on which the authorities cited rest. In no case is it held that the grant of an exclusive right to mine for and produce oil, though it be a mineral, is a sale of the oil that may afterward be discovered. When under such a grant oil has been discovered, it is the grantee’s right to produce it and sever it from the soil; so much as is thus severed, belongs to the parties entitled under the terms of the grant, not as any part of the real estate, however, but as a chattel, and only so much as is produced and severed passes under the grant: as to all not produced there is no change of property. It is expressly so ruled in Funk v. Haldeman, 53 Pa. 229 ; and the same l’uling was repeated and emphasized in the case next following on the same subject, Dark v. Johnston, 55 Pa. 164. These were the first cases in which grants of rights to explore for oil were considered and passed upon by this court. The rulings therein have been steadily and consistently followed. In this connection it is only necessary to refer to the case of Union Petroleum Company v. Bliven Petroleum Co., 72 Pa. 173, where the grant was the same as in the present case, with the additional fact that there as here, oil had actually been discovered and was being produced, and Barnhart v. Lockwood, 152 Pa. 82. [299] The reason for the rule thus established, is to be found in the peculiar character of mineral oil. This is very clearly indicated in the earlier cases, where the distinction is drawn between minerals which are fugacious in their nature, such as water, gas and oil, and those which have a fixed situs and are necessarily part of the land; and this distinction has been allowed with controlling significance whenever oil in situ has been the subject of the dispute. Both rule and reason are against the theory that prevailed with the court below, to the effect that the mineral once discovered, all that was in situ became in law part of the real estate. With the rights of the appellee thus defined and limited by the cases cited above, it is manifest, without discussion, that he is in no position to maintain ejectment for the property. The question reserved was to this very point, and was raised in the first point submitted by the defendant, denying plaintiff’s right to ejectment. The latter should have been affirmed. Its refusal is the subject of the eighth assignment of error, which must be sustained. It is unnecessary to consider the other assignments of error. Judgment reversed, and judgment is directed to be entered on the point reserved in favor of defendant, non obstante veredicto.