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[U] Grow v. Ohio Kentucky Oil Corporation

Superior Court of Pennsylvania

February 26, 2014

GEORGE C. GROW AND CHRISTINA SHREWSBURY Appellant
v.
OHIO KENTUCKY OIL CORPORATION Appellee

NON-PRECEDENTIAL DECISION

Appeal from the Order of December 22, 2011 In the Court of Common Pleas of McKean County Civil Division at No.: No. 1143 C.D. 2009

BEFORE: DONOHUE, J., SHOGAN, J., and WECHT, J.

MEMORANDUM

WECHT, J.

George C. Grow and Christina Shrewsbury (hereinafter "Lessors") challenge the trial court's December 22, 2011 order denying Lessors' post-trial motions. We find that the trial court lacked jurisdiction over the underlying litigation due to the parties' collective failure to join an indispensable party. Consequently, we vacate the trial court's order and remand for further proceedings.

At issue in this case is the distribution of proceeds from the extraction of oil from property as to whose oil several parties lay fractional claims. For purposes of trial, the parties entered into the following stipulations, which provide sufficient factual background to support the analysis to follow:

1. [Lessors] are George C. Grow . . . and Christina Shrewsbury . . . .
2. Defendant is Ohio Kentucky Oil Corporation [hereinafter, "Lessee")] . . . .
3. [Lessors] are brother and sister and are the surviving heirs of George C. Grow, Jr.
4. George C. Grow, Jr.[, ] died seized of the oil, gas and mineral rights in, on and under lands in Otto Township, McKean County, Pennsylvania . . . .
5. The said oil, gas and mineral rights of George C. Grow, Jr.[, ] were formerly owned by his grandfather, George N. Grow . . . .
6. The aforesaid deed contains the following exception and reservation [hereinafter, the "Bingham Royalty"]:
EXCEPTING AND RESERVING, nevertheless, out of this grant, the following named parts or shares of all coal, iron-ore, petroleum, rock or carbon oil, or other minerals which shall or may be discovered, excavated, mined, pumped or raised upon or from the land herein described, to wit: one equal one-sixteenth part or share of the total product of any and all well and wells whereof the average daily production is ten barrels or less than ten barrels per day; one equal one-twelfth part or share of the total product of any and all well and wells whereof the daily production is more than ten barrels but less than twenty barrels per day; and one equal one-eighth part or share of the total product of any and all well and wells whereof the average daily production is twenty barrels or more than twenty barrels per day; to be delivered to the parties of the first part, their successors or assigns, as the same is excavated mined, produced or pumped in the crude state, in tanks or reservoirs to be provided by the said parties of the first part, or to such accessible Pipe Line Company as may be approved by the said parties of the first part, their agent or attorney, successors or assigns, as to such Pipe Line Company, and as the manner of such delivery. The delivery as aforesaid shall be made monthly, at the close of each calendar month, or within five days thereafter, so long as petroleum, coal oil or other valuable mineral substance shall continue to be excavated, mined, pumped or raised from the tracts of land above described. This conveyance is made and accepted subject to the foregoing reservation, and it is further understood and agreed that the said party of the second part, for himself, his heirs, executors, administrators and assigns shall and will keep or cause to be kept, in proper books for that purpose, an accurate and just account of all the petroleum and other valuable minerals produced in, upon or from the above described tracts of land, (which said books and accounts shall at all reasonable times be open to the inspection and examination of the said party of the first part, their agent or attorney, successors or assigns); and also that he will close and settle the said accounts monthly, at the end of each and every calendar month, and that he will deliver to the said parties of the first part, their agent or attorney, successors or assigns, the oil and minerals which upon such settlement shall be found due to them at the time and times, and in the manner herein before provided . . . .
7. George C. Grow, Jr.[, ] died on March 27, 2003. An exemplified copy of his estate proceedings were recorded in McKean County on November 19, 2003 . . . .
8. George C. Grow, Jr.[, ] was survived by his wife, Ruth A. Grow, and his children, [Lessors].
9. George C. Grow, Jr.[, ] left his estate in part to his wife, Ruth A. Grow, and in part in trust for her benefit, and upon her death, to be distributed to [Lessors]. Ruth A. Grow died on July 15, 2007. By deed dated February 12, 2010, . . . the said oil, gas and mineral rights of George C. Grow, Jr.[, ] were transferred to [Lessors]. . . .
10. . . . [O]n August 19, 2005, the Estate of George C. Grow, Jr.[, ] entered into an Oil and Gas Lease [the "Lease"] with [Lessee] covering the property described in the aforesaid deeds and did in Article IV(a) thereof reserve for itself a 1/8th royalty on all oil sold. . . .
11. [Lessee] subsequently drilled ten (10) wells on the property capable of producing oil.
12. [Lessors] and [Messer Oil Corp. (hereinafter "Messer"), holder of the Bingham Royalty, ] are the lawful owners of the royalties payable out of production of oil from the property.
13. [Lessors] learned that ARG[, the purchaser of the oil, ] is paying a 1/12th royalty to [Messer] on all oil production rather than the 1/16th, 1/12th, or 1/8th royalty determined by the average number of barrels produced per well as called for by the language of the Bingham [R]oyalty.
14. On or about December 5, 2008, [Lessors] were asked to sign Division Orders by [ARG]. The division orders proposed to divide [Lessors'] 1/8th royalty as follows: [Messer] (2/3rds of 1/8th or 0.08333334), [Lessors, 1/6 of 1/8 or 0.0208333, each]. [Lessors] refused to sign the division orders and gave as their ...

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