On Friday, October 9, 2015, a three-judge panel of the Pennsylvania Superior Court held that a reservation of oil, gas and mineral rights in a deed does not terminate merely because the lease under which those rights were previously leased has expired. Rather, specific language is required in order to release oil, gas and mineral rights reserved by the grantor in a deed.
In Wright v. Misty Mountain Farm LLC, 2015 PA Super 218, Patricia Wright appealed an order granting summary judgment in favor of Misty Mountain Farm LLC, and the Superior Court affirmed the trial court's decision. Patricia Wright had sought declaratory judgment that Misty Mountain Farm LLC has no ownership rights in the oil, gas or minerals beneath the surface of certain real property now owned by Ms. Wright, but the trial court ruled in favor of Misty Mountain Farm LLC.
In 1950, the property in question was conveyed by deed from Fred and Jeanetta Buck to Robert and Marjorie Wright. However, the Bucks reserved and excepted "all rights in oil, gas and minerals on the property" from this conveyance. The oil and gas rights had previously been leased by the Bucks under a lease that appears to have expired in or around 1971. Also in 1971, Robert and Marjorie Wright leased the property and the oil and gas rights, and in 1988 conveyed by deed both the land and oil and gas rights to David and Patricia Wright. David and Patricia Wright leased the land and subsurface rights in 2001 and again in 2005. The present dispute arose in 2010, when Shirley Matthews, administratrix of the estate of Jeanetta Buck conveyed the subsurface rights to Misty Mountain Farm LLC.
Patricia Wright argued that the exception and reservation made by the Bucks terminated when the lease expired in or around 1971. The court rejected this argument, reasoning that the exception and reservation language in the deed from the Bucks to the Wrights creates an exception as a matter of law because the thing or right reserved was in existence. Under Pennsylvania precedent, an exception does not pass with the grant, and it demises through the grantor's estate (i.e., to Shirley Matthews as administratix). Further, the court concluded that without specific language in the deed, there is no exception to the exception, whereby the thing or right reserved would pass to the grantee. The court stated that in order to find an exception to the exception, the deed would have needed to specifically state that the oil and gas rights vest in the grantee upon termination or expiration of the lease under which the rights were leased. Despite the fact that the Wrights had an established record of over four decades of leasing the subsurface rights, title to such rights had always belonged to the Bucks, and their successors in interest, Misty Mountain Farm LLC.
As this particular case illustrates, when oil, gas or minerals rights have been separated from the land in Pennsylvania through a reservation in a deed, lessees of such rights need to pay careful attention to the language used to create such reservation. Conversely, property owners or other potential lessors of oil and gas rights need to thoroughly review the chain of title to ensure that they in fact hold title to the rights they purport to lease.
For more information about this case, please click here. For the full text of the decision, please click here.
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