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Murphy v. Karnek

Superior Court of Pennsylvania

April 21, 2017

HAROLD B. MURPHY, JR., WILLIAM J. MURPHY AND SIDNEY C. KARNEKE Appellant
v.
STEVE KARNEK, KARNEK FAMILY PARTNERS, LP AND RANGE RESOURCES APPALACHIA, LLC APPEAL OF: STEVE KARNEK, KARNEK FAMILY PARTNERS, LP HAROLD B. MURPHY, JR., WILLIAM J. MURPHY AND SIDNEY C. KARNEKE Appellants
v.
STEVE KARNEK, KARNEK FAMILY PARTNERS, LP AND RANGE RESOURCES APPALACHIA, LLC

         Appeal from the Order Dated February 29, 2016 In the Court of Common Pleas of Washington County Civil Division at No(s): 2015-1827

          BEFORE: LAZARUS, J., SOLANO, J., and STRASSBURGER, J. [*]

          OPINION

          SOLANO, J.

         Before the Court are consolidated cross-appeals filed by Appellants Steve Karnek and Karnek Family Partners, LP, and Appellees Harold B. Murphy, Jr., William J. Murphy, and Sidney C. Karneke from the trial court's February 29, 2016 order disposing of the parties' cross-motions for summary judgment.[1] We affirm.

         This matter arises out of an intra-family dispute regarding ownership of oil and gas underlying a parcel of land in Washington County that the parties have referred to as the "Scott Heirs' Farm." Determination of the ownership interests depends upon a series of deeds and wills. The two documents at the center of this dispute are a deed to John and Mary Pirih (the "Pirih Deed") and the will of Bessie Krynovske.

         The Scott Heirs' Farm was conveyed by members of the Scott family to Joe Krynovske and Bessie Krynovske, husband and wife, in 1931. The conveyance was by a general warranty deed that described the property as consisting of 137 acres 20 perches in Smith Township.[2] The deed excepted certain mineral rights that are not at issue here.

         On September 1, 1938, the Krynovskes separated the oil and gas rights from the rest of the property by a series of transactions involving a third party, A. Kirk Wrenshall. First, as husband and wife, the Krynovskes conveyed the entire Scott Heirs' Farm property to Wrenshall. Second, Wrenshall conveyed the Scott Heirs' Farm back to Joe (but not to Bessie) by a deed containing the following clause:

EXCEPTING AND RESERVING hereout and herefrom all the oil and gas in or underlying said parcel of ground, together with the perpetual and irrevocable right, privilege, and easement of entering upon said lands and searching for, drilling wells, sinking shafts, mining, digging, extracting, taking and carrying away all of the oil and gas in or under said lands, or that may be found therein or thereunder; and, also, the right of possession and use of so much of said premises at all times as may be necessary to the practical carrying out of the purposes and provisions of this exception, provided, however, that no wells shall be drilled within 200 feet of the buildings on said tract of land.

Third, Wrenshall conveyed to Bessie "for and during the term of her natural life, with remainder over in fee to Joe Krynovske . . . ALL the Oil and Gas in and underlying all that parcel of ground [comprising the Scott Heirs' Farm] . . . BEING the same Oil and Gas and rights as Excepted and Reserved in Deed of A. Kirk Wrenshall, unmarried, to Joe Krynovske, dated September 1, 1938 . . . ." The parties agree that as a result of these transactions, (1) Joe owned the Scott Heirs' Farm, but not the farm's oil and gas and related interests (the "Oil and Gas"), and (2) Bessie owned a life estate in the Oil and Gas and Joe owned a remainder interest in the Oil and Gas.

         In 1939, Joe and Bessie, as husband and wife, executed the Pirih Deed, which conveyed the Scott Heirs' Farm to John and Mary Pirih. The Pirih Deed contained an "EXCEPTING AND RESERVING" clause that was identical to the clause in the Wrenshall deed to Joe. It stated:

EXCEPTING AND RESERVING hereout and herefrom all the oil and gas in or underlying said parcel of ground, together with the perpetual and irrevocable right, privilege, and easement of entering upon said lands and searching for, drilling wells, sinking shafts, mining, digging, extracting, taking and carrying away all of the oil and gas in or under said lands, or that may be found therein or thereunder; and, also, the right of possession and use of so much of said premises at all times as may be necessary to the practical carrying out of the purposes and provisions of this exception, provided, however, that no wells shall be drilled within 200 feet of the buildings on said tract of land.

         The deed continued:

THIS CONVEYANCE is also made UNDER AND SUBJECT TO a deed of A. Kirk Wrenshall, to Bessie Krynovske dated September 1st, 1938 . . . by which conveyance all of the oil and gas rights were conveyed to the said Bessie Krynovske.

         One of the issues in this appeal is whether the Pirih Deed somehow terminated Bessie's life estate in the Oil and Gas and made Joe and Bessie owners of the Oil and Gas as tenants by the entireties.

         Joe died intestate in 1959. He was survived by Bessie and five children: Helen Goodman, Mary Krynovske, Olga Murphy, Joseph Karneke, and Steve Karnek, Sr. The parties agree that if Bessie still had a life estate in the Oil and Gas at the time of Joe's death, then, under the then-prevailing law of intestacy, [3] Bessie inherited one-third (5/15) of Joe's remainder interest in the Oil and Gas and each of the five children inherited one-fifth of the remaining two-thirds (that is, 2/15 each) of the Oil and Gas.[4]

         Bessie died testate on November 9, 1963. Her Last Will and Testament, dated June 9, 1962, [5] provided in Paragraph SECOND:

I give, devise and bequeath all my real estate property to my daughter, namely Helen Goodman. Property consists of on [sic] lot 30 by 150 feet of the Gordon Land Co. Plan, Lot #192, situated at 567 Buena Vista Street, Canton Twp., Washington County, Penna. She is to receive all royalties from 7 oil wells situated on John Scott's heirs Farm, R.D. #3, Burgettstown, Pa. The wells are owned by Wolf Head Oil Refinery Co., Inc. Farm No. 1013S. Also Helen Goodman will be her sister, Mary Krynovske, guardian and she is to live in the house during her entire life.

         The will contained no residuary clause. Although there is no specific discussion of the issue in Bessie's will, the parties agree that one of Bessie's objectives was to take care of her daughter Mary, who apparently was unable to care for herself, by providing her with a guardian, a house (the devised property in Canton Township), and income. See Trial Ct. Op. at 7; Appellees' Brief at 23. The will appointed Helen as Mary's guardian and required Helen to live in the house, apparently so that she could care for Mary there. Letters testamentary were issued to Helen, and on October 27, 1964, the Orphans' Court issued an Adjudication and Decree awarding Helen the Canton Township property; the decree made no mention of Oil and Gas rights on the Scott Heirs' Farm or of royalties from those rights. See Washington County Orphans' Court Adjudication and Decree, No. 269 of 1964. One of the questions in this appeal is what interests in the Oil and Gas rights, if any, each of Bessie's children inherited upon Bessie's death.

         Bessie's five children all are now deceased:

• Mary Krynovske died intestate in 1967. She was unmarried and had no children.
• Helen Goodman died testate in 1987. She left the house and lot in Canton Township to Olga Murphy, and stated that "all the rest, residue and remainder" of her estate was bequeathed to her brother, Steve Karnek, Sr. In a handwritten note at the bottom of her will, she explained: "My brother, Steve Karnek, Sr., deserves all of what little I possess as he and I cared financially (physically healthwise), to Bessie Krynovske, mother and Mary, sister - both ill. No other family member aided."
• Steve Karnek, Sr. died intestate in 1988, survived by his wife, Lucy Karnek, and his son, Steven Karnek, Jr. (referenced in the litigation as "Steve Karnek"). In 2010, Lucy and Steve conveyed their interests to Karnek Family Partners, LP, a limited partnership. In 2014, Karnek Family Partners leased its interest in the Oil and Gas under the Scott Heirs' Farm to Range Resources Appalachia, LLC.
• Joseph Karneke died intestate in 1989, survived by his son, Sidney Karneke.
• Olga Murphy died testate in 2013. Her will left her entire estate to her two sons, Harold Murphy, Jr. and William Joseph Murphy.

         On April 6, 2015, the heirs of Joseph and Olga - Harold B. Murphy, Jr., William Joseph Murphy, and Sidney C. Karneke ("the Murphy Plaintiffs") - filed the instant quiet title action against Steve Karnek and Karnek Family Partners ("the Karnek Defendants") and Range Resources in which they sought a declaratory judgment regarding ownership of the Oil and Gas. Specifically, the Murphy Plaintiffs asked the trial court to declare that Karnek Family Partners owns 50%, Harold and William Murphy each own 12.5%, and Sidney Karneke owns 25% of those rights. They reached this result by assuming that (1) Bessie's life estate and Joe's remainder interest remained intact after execution of the Pirih Deed, (2) when Joe died, Bessie inherited one-third of Joe's remainder interest and the five children equally divided the remaining two-thirds; (3) when Bessie died, the five children equally divided Bessie's one-third interest among themselves; and (4) when each of the five children died, their interests then passed according to their wills or the intestacy laws.[6]

         The Karnek Defendants filed a counterclaim asking the trial court to quiet title in their favor, enter an order ejecting the Murphy Plaintiffs from any possessory rights in the Oil and Gas, and issue an order determining the rights of the parties to the Oil and Gas. They claimed that 100% of the Oil and Gas is owned by Karnek Family Partners. They reached this result by assuming that: (1) the Pirih Deed caused the Oil and Gas rights to be owned by Joe and Bessie as tenants by the entireties; (2) Bessie therefore inherited 100% of those rights upon Joe's death; (3) Bessie's will devised 100% of those rights to Helen; (4) Helen's will devised all of her rights to her brother Steve Sr.; (5) Steve Sr.'s interest was inherited by his wife and son; and (6) Steve Sr.'s wife and son ultimately conveyed their interests to Karnek Family Partners.

         The parties filed cross-motions for summary judgment.[7] On

         February 29, 2016, the trial court issued an opinion and order in which it agreed with the Murphy Plaintiffs that following the execution of the Pirih Deed, Bessie continued to own a life estate in the Oil and Gas and Joe continued to own the remainder interest. When Joe died intestate in 1959, Bessie inherited one-third of Joe's remainder interest and each of Joe's five children equally divided the rest. Trial Ct. Op. at 2. The trial court then departed from the Murphy Plaintiffs' analysis and concluded that when Bessie died in 1963 and her life estate disappeared, her one-third interest in the remainder interest passed, pursuant to her will, to Helen, from whom it then ultimately passed to Karnek Family Partners. Id. at 5-7. Thus, the court determined the ownership interests in the Oil and Gas to be:

• Harold Murphy - 1/12th (.08333, or 8.3%);
• William Murphy - 1/12th (.08333, or 8.3%);
• Sidney Karneke - 1/6th (.16667, or 16.7%);
• Karnek Family Partners - 2/3rds (.66667, or ...

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