Westmoreland N. Gas Co. v. DeWitt

[To be reported.] 1. Under a lease of land for the sole purpose of drilling and operating for oil and gas, the lessee’s right in the surface of the land is in the nature of an easement of entry and examination, with a right of possession arising where the particular place of operation is selected, and the easement of ingress, egress, storage, transportation, etc., during the continuance of operations. 2. The real subject of possession to which the lessee is entitled, is the oil or gas contained in or obtainable through the land: these are minerals ferae naturae, and are part of the land and belong to its owner only so long as they are in it and under his control; the lessee, when he has drilled a gas well and controls the gas produced thereby, is in possession of all the gas within the land. 3. The fact that the gas from such well is not kept flowing into the pipeline of the lessee, but is shut in the well as a reserve for use in emergencies, does not affect the possession of it by the lessee when he is in control thereof by means of a connection between the well and his pipeline, so arranged that he can have the gas flow into his line at any time. 4. That the lessor, claiming a forfeiture of the lease, ordered the lessee’s agent, who was measuring the pressure of the well, off the premises, and the agent withdrew, or, that in consequence of a like order, agents of the lessee who were on the land to locate a second well, withdrew without doing- so, is no evidence of an ouster of the lessee from his possession. 5. Where the lessee is thus in possession of the gas underlying the premises, equity has jurisdiction to restrain the lessor from drilling on the leasehold, the rights granted to the lessee being necessarily exclusive, and the damage to arise from the threatened waste, being entirely incapable of measurement at law, even if not irreparable. 6. When the premises embraced in an oil- and gas-lease, are described as “ all that certain tract of land,” etc., a clause therein providing that no wells shall be drilled within a limited area, is neither an exception nor a reservation, but simply a limitation upon the privilege of drilling granted to the lessee, confining his drilling without the area specified. 7. A clause in a lease providing for a forfeiture thereof, in the event of a default by the lessee in the performance of his covenants, is not self-operating, so as to make the forfeiture take place, ipso facto, upon the occurrence of the default; but, being for the benefit of the lessor, it rests with him to enforce or waive it. 8. Forfeitures are to be construed strictly; and where a lease provides that it shall become forfeited, if any of the payments provided for are not made, a whole payment is meant, not a balance on a running account; wherefore, if a part of a payment be accepted before it is due, no forfeiture is incurred by a failure to pay the remainder in the time specified.

APPEAL BY PLAINTIFF FROM THE COURT OF COMMON PLEAS OF WESTMORELAND COUNTY, IN EQUITY. No. 167 October term 1889, Sup. Ct.; court below, number and term not given. On May 31, 1887, the Westmoreland and Cambria Natural Gas Company filed a bill in equity against Ira DeWitt, John H. Brown and others, averring that tbe defendant John H. Brown, being the owner of a certain tract of land in tbe bill described, demised tbe same to J. M. Guffey & Co. on December 7, 1885, for the sole and only purpose of drilling and operating for petroleum oil and gas; that this lease was afterwards duly assigned to tbe plaintiff and tbe plaintiff entered upon tbe possession and enjoyment of its estate in said land, drilled a large gas well tbereon, and, relying upon tbe supply of gas to be obtained from said well and others in tbe vicinity, bad expended large sums in laying pipe-lines for its transportation to engage in tbe business of supplying natural gas to the public; that said Brown, alleging tbe forfeiture of said lease by reason of tbe non-payment of a small sum of money, bad made.a second lease of said land to the defendant DeWitt, who, with the assistance of the other defendants, was about to drill a gas well on the premises; that such well could be drilled and gas obtained in about forty days, and that defendants thereby could commit enormous waste upon the estate of the plaintiff, and do irreparable damage to its property and business, long before final hearing; praying for an injunction to restrain the defendants from drilling such well or in any way committing waste upon the plaintiff’s estate, and for general relief. Attached to the bill, as an exhibit, was a copy of the lease from Brown to J. M. Guffey & Co., the material parts of which were as follows : “This agreement, made this 7th day of December, 1885, .....witnesseth that the party of the first part [J. H. Brown] in consideration of the stipulations, rents and covenants hereinafter contained on the part of the said party of the second part [J. M. Guffey & Co.], Ms executors, administrators and assigns, to be paid, kept and performed, hath granted, demised and let unto the said party of the second part, his executors, administrators and assigns, for the' sole and only purpose of drilling and operating wells, and storing, transporting and conveying petroleum oil or gas through, over and from it, all that certain tract of land,..... No wells to be drilled within three hundred yards of the brick or stone building belonging to J. H. Brown. To have and to hold the said premises for the said purpose only, unto the party of the second part, his executors, administrators and assigns, for, during and until the full term of twenty years next ensuing the day and year above written; . . . . It is further agreed, that if gas is obtained in sufficient quantities and utilized, the consideration in full to the party of the first part shall be five hundred dollars, for each and every well drilled on the premises herein described, per 'annum, payable quarterly in advance from completion of each and every well drilled and utilized. . . . . The said party of the first part to fully use and enjoy the said premises for the purpose of tillage, except such part as shall be necessary for said operating purposes..... Operations on the above described premises shall be commenced, and one well completed within three months from the date hereof; and in case of failure to complete one well within such time, the party of the second part hereby agrees to pay to the party of the first part for such delay the sum of one hundred and twenty-five dollars (1125.00) every three months from the date of this agreement, payable to J. H. Brown; and the party of the first part hereby agrees to accept such sum as full consideration and payment for such delay until one well shall be completed; and a failure to complete one well, or to make any of such payments within such time and at such place as above mentioned, renders this lease null and void and to remain without effect between the parties hereto. It is further agreed, that a second well shall be completed within fifteen months after the completion of the first well. It is further agreed, that if any of the within payments remain unpaid thirty days, then this lease to to be null and void..... It is understood by and between the parties to this agreement that all conditions between the parties hereto shall extend to their heirs, executors and assigns,” etc. Upon the filing of the bill, a preliminary injunction was granted, and by a subsequent order the injunction was continued until final hearing. The defendants answered the bill, denying that the plaintiff had expended large sums in laying lines for the transportation of gas from the premises leased to J. M. Guffey & Co.; that the gas from said premises was necessary to the plaintiff’s business, or that its loss would result in irreparable injury; and averring that the said lease was forfeited by reason of the plaintiff’s default in making the payments therein mentioned; that the plaintiffs had no claim or title to, or rights in, the land within a radius of three hundred yards from the buildings of the lessor, and the well proposed to be drilled by the defendants was located within the limits of said radius; praying that the injunction be dissolved and the defendants dismissed, etc. Issue having been joined upon the bill and answer, the case was referred to Mr. Joseph A. Me Curdy, as examiner and master, who on February 6, 1888, filed a report as follows: FINDINGS OK KAOT. 1. On and prior to December 7, 1885, John H. Brown, one of the respondents named in the bill, was the owner in fee of a certain tract of land, situate in Penn and Hempfield townships, Westmoreland county, adjoining lands of Ivlingensmith’s heirs, George Croushore, Penna. R. Go., J. F. Thompson, Matthew Black, Gust Mensinger and others, and containing one hundred and forty acres, more or less. 2. On the said 7th December, 1885, the said John H. Brown executed and delivered to J. M. Guffey & Co. the lease set forth and contained in the appendix to the complainant’s bill. Said lease is duly recorded. 3. J. M. Guffey & Co. afterwards duly assigned and transferred to the Westmoreland and Cambria Natural Gas Company, the corporation complainant, the said lease, as appears by their assignment duly recorded. 4. The complainant entered upon the premises described in said lease and drilled a gas well thereon, which well was completed on April 23,1886. Said well is of great capacity, showing a high pressure of gas. Said complainant also laid a pipe line from said well, but has never regularly used the gas from said well, it being shut in nearly all the time. 5. J. M. Guffey & Co., or their assignee, the corporation complainant, paid to John H. Brown, on account of said lease as follows, to wit: on December 8,1885, per receipt on agreement, $250; on June 22, 1886, per complainant’s exhibit B, $250. 6. [During several months prior to the filing of the bill in this case, from January 7,1887, John H. Brown, claiming a forfeiture of said lease, had taken full and absolute possession of the premises and rights mentioned and granted in the lease.] 1 7. On March 17, 1887, John H. Brown filed a bill in equity, at No. 57, Equity Docket, Common Pleas of Westmoreland county, claiming that the above named lease had been forfeited and praying, inter alia, the court to order and decree that the said lease be declared null and void. But on June 23, 1887, John H. Brown, the complainant in said bill, discontinued his action. 8. On May 10,1887, John H. Brown leased the said tract of land for gas purposes to Ira DeWitt, another of the respondents in this case. 9. Said Ira DeWitt, under his lease from Brown, entered upon said tract of land, and, with the assistance of the other respondents, his employees, having collected thereon lumber and other necessary material, began the erection of a derrick for the purpose of drilling a gas well, within three hundred yards of the stone building belonging to said John H. Brown, and so continued until restrained by the injunction served in this case. 10. The tract of land described in the lease lies wholly within the Grapeville natural gas belt, and has become very valuable as natural gas territory. 11. The bill and answer and evidence in this case disclose an earnest contest between complainant and respondents as to who has the legal right to the property described in the said annexed lease. The facts found above are not disputed in the bill, the answer, the pleadings, or the evidence. Owing to his findings of law on the above facts, and his opinion given below, the master deems it proper not to proceed any further for the present in his findings of fact. CONCLUSIONS OB' LAW. The complainant’s bill and the respondents’ answer, as well as the evidence produced, present simply a case of property claimed by one party, complainant, [in the possession of another party, respondents.] 8 The complainant claiming to have the legal right to the premises and property in dispute, asks that the respondents be restrained by injunction from in anywise invading said estate or doing any act that would tend to waste and destroy the same; while, on the other hand, the respondents, who are in possession, deny that the complainant has any right whatever to the property, and furthermore claim that the legal right to the estate in the premises is in themselves. By the terms of. the lease from John H. Brown to J. M. Guffey & Co., the premises described in the lease were leased “ for the sole and only purpose of drilling and operating wells, and storing, transporting and conveying petroleum oil or gas through, over and from ” the same premises, under certain covenants, conditions and stipulations set forth in the lease. Natural gas and petroleum oil are fluids that, from what scientific knowledge can be obtained on the subject, and from the evidence in this case of J. M. Guffey and other experts, may be classed together, when the property in them and the rights thereto are considered in law. From the words of the lease, “ petroleum oil or gas,” it would seem that the parties to the lease so regarded them. The Supreme Court have decided that “ oil is a mineral, and being a mineral, is a part of the realty: ” Funk v. Haldeman, 53 Pa. 248; Stoughton’s App., 88 Pa. 201. Mr. Justice Gordon says, in the last cited case: “ In this, it [oil] is like coal or any other natural product which in situ forms part of the land......Whenever a conveyance is made, of it, whether that conveyance be called a lease or deed, it is in effect the grant of part of the corpus of the estate and not of a mere incorporeal right.” It must follow then, that, if from a legal standpoint natural gas be classed with oil, it is a mineral, and is, therefore, a part-of the realty, and the above opinion of the learned justice is applicable also to natural gas. But it matters not how the property or rights mentioned in the lease may be considered. The title in it is strictly a legal one. In the case of the North Penn. Coal Co. v. Snowden, 42 Pa. 488, the Supreme Court have decided this question and the opinion of Mr. Justice Strong is directly applicable to this case. In it he says, inter alia: “ Even the title stated by the complainant to be in himself, is a strictly legal one, whether it be a corporeal or incorporeal hereditament, or an easement; ” .....“ and if the complainant’s rights are incorporeal, rather than an interest in the coal or minerals, the case which he presents is not the less a case at law, and without the jurisdiction of a court of equity. His rights are strictly legal, and his remedies are at law. His bill does not even allege that he is without an adequate remedy at law. It may be admitted that to prevent the disturbance of an acknowledged easement, a court of equity will interfere. But the right of the plaintiff must be acknowledged or established at law before he can resort to a chancellor.” The rights of the parties in this case depend upon the question of title; and this must be decided in the legal way of settling questions of title. The complainant, being out of possession, but claiming title to the property, asks the court to restrain by injunction the respondents, who are in possession. If the complainant has a clear and undisputed title, the intervention of the court by injunction to restrain the respondents might be the proper procedure. But, if, as the respondents contend, the complainant has no title to the premises, the complainant would certainly not be entitled to the injunction. [The case, then, narrows itself down to a pure question of title, and, with the complainant out of possession and the respondents in possession, is really an ejectment bill.] 3 The parties stand in no relation to each other that would give a court of equity jurisdiction, and there is no complication of accounts or other ground of equitable relief. Much of the testimony taken relates to title. The simple, denial of the respondents in possession of the complainant’s right, is conclusive against jurisdiction, until the right has been established at law and is sufficient to warrant their ejectment. “ Orders and decrees in equity, where there is no jurisdiction, are simply coram non judice.” The remedy of the complainant was by ejectment. —Citing Barclay’s App., 93 Pa. 50; Washburn’s App., 105 Pa. 480; Messimer’s App., 92 Pa. 168; Long’s App., 92 Pa. 171; North Penn. Coal Co. v. Snowden, 42 Pa. 448; Gloninger v. Hazard, 42 Pa. 389; Kennedy’s App., 81* Pa. 163; Norris’s App., 64 Pa. 275; .Tillmes v. Marsh, 67 Pa. 507; Grubb’s App., 90 Pa. 228; Bispham’s Eq., §§ 37,440; Brown v. Vandergrift, 80 Pa. 142; Munroe v. Armstrong, 96 Pa. 311; Rhea v. Forsyth, 37 Pa. 503; Leininger’s App., 106 Pa. 398; Brown’s App., 62 Ba. 17; High on Injunctions, § 651, the master proceeded : The answer of the respondents does not raise the objection to the jurisdiction of a court of equity, but .the objection was pressed by their counsel in the argument; before the master; and, from the opinion of your Honor rendered on June 20,1887, the master infers that it was raised in the nature of a demurrer at the preliminary'hearing. In Wiser’s App., 9 W. N. 508, the Supreme Court decided that filing an answer and proceeding to proof is not a waiver of objection to the jurisdiction of a court of equity. The respondent is not bound to take the objection in limine. “ It is clear that the objection to the jurisdiction in equity may be taken on final hearing.” Although, according to legal precedent, when a bill in equity is dismissed for want of jurisdiction the payment of costs falls Upon the complainant, yet in this case the respondents did not regularly demur to the bill, nor did they object to the jurisdiction in their answer; and in the light of Messimer’s App., 92 Pa. 168; Long’s App., 92 Pa. 171, and Maguire’s App., 102 Pa. 120, it would seem proper that the complainant should pay all the costs of this case except those of the respondents’ witnesses, which should be paid by the respondents. In his findings of fact and law in this case, tbe master has not expressed any opinion respecting the merits of the controversy. Under the circumstances this would be improper. From the law and the evidence of the case, as understood and found by the master, he is clearly of the opinion: [That the bill of the complainant ought to be dismissed and the injunction dissolved:] 4 That the complainant ought to be ordered to pay all the costs except the costs of the witnesses for respondents ; and that the respondents ought to be ordered to pay the costs of their own witnesses. Exceptions on the part of the plaintiff to the master’s findings of fact,1 2 and conclusions of law,3 4 which had been filed with and overruled by the master, were upon the filing of his report renewed before the court. In the exception to the finding respecting the plaintiff’s possession of the leased premises,1 were embodied quotations from the testimony of witnesses for the plaintiff, tending to show: That, from the time of its completion down to the hearing before the master, the Brown well, drilled by the plaintiff on the demised land, was connected with the plaintiff’s main line, ready to be turned in at any minute, the gas being shut in and held as a reserve, for immediate use in case of anjdhing happening to either of the other wells in actual use for supplying the city of Johnstown, and as a reserve well it was of great importance and value to the plaintiff; that at any time, by simply opening a valve the gas from the Brown well would be turned into the line and would go to Johnstown; that on one occasion, during the winter of 1886-7, it was turned into the line for about five minutes to try it. There was other testimony which, the defendants claimed, had a bearing upon the question of possession, and established the fact that Brown had taken exclusive possession of the leased premises prior to the filing of the bill. It was to the effect that on April 5, 1887, W. S. Guffey, representing the plaintiff company, came upon the land to see about locating a second' well under the provisions of the lease, whereupon Brown said to him: “Mr. Guffey, you have no right upon this land; you have forfeited all claims and all rights under that certain lease and I want you and your men to please withdraw; ” that Mr. Guffey replied: “ Well, Mr. Brown, just put that in writing; ” that then Brown drew up and handed to Guffey a paper notifying him that the plaintiff company had forfeited all its rights under the lease of December 7, 1885, and that any trespassing upon the premises would not be permitted ; that Mr. Guffey and the men who were with him then withdrew; that on April 22, 1887, J. H. Galey, the superintendent of the plaintiff company, went to the well on the demised land for the purpose of measuring the pressure of the gas; that Brown went to him and told him to leave and take his men off the premises as fast as he could, to which Galey replied that he would do so in five minutes, when Brown told him to leave in one minute; and that Galey and his men did leave in a very few minutes. There was also testimony that on January 15, 1887, the plaintiff offered to pay Brown $250, on account of rentals on the lease, but that he refused the tender on the ground that the lease was forfeited. The exceptions filed by the plaintiff to the report of the master were disposed of in the following opinion by Hunter, P. J.: “We have carefully examined the master’s report, his finding of the facts and his exhaustive opinion, together with authorities cited and the reasons given by him, and we are unwilling to say that he has erred either in the finding of the facts or in his opinion. We admit the case is a close one.” A decree was then entered dismissing the bill and directing that the plaintiff pay the costs, except the fees of the defendants’ witnesses. Thereupon the plaintiff took this appeal, specifying that the court erred in overruling the plaintiff’s exceptions and in entering the final decree.