HEER (CODY C.) VS. CHADWICK (ROBERT), ET AL.
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RENDERED:
MARCH 14, 2008; 2:00 P.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2006-CA-001489-MR
CODY C. HEER
APPELLANT
APPEAL FROM METCALFE CIRCUIT COURT
HONORABLE PHIL PATTON, JUDGE
ACTION NO. 06-CI-00002
v.
ROBERT CHADWICK AND
ELLEN CHADWICK
AND
APPELLEES
NO. 2006-CA-001735-MR
CODY C. HEER
V.
APPELLANT
APPEAL FROM METCALFE CIRCUIT COURT
HONORABLE PHIL PATTON, JUDGE
ACTION NO. 05-CI-00163
CORA FRASER; VIRGINIA JANES;
SUE HOOD AND JANETTE PHILLIPS
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
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ACREE AND LAMBERT, JUDGES; HENRY,1 SENIOR JUDGE.
Senior Judge Michael L. Henry sitting as Special Judge by assignment of the
Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and
Kentucky Revised Statute (KRS) 21.580.
ACREE, JUDGE:
Cody C. Heer appeals from orders of the Metcalfe
Circuit Court entered in two separate but related actions.
appeals, therefore, have been consolidated.
The
We will, however,
address them independently.
Heer v Fraser, et al, No. 2006-CA-001735
In this case, the facts are not in dispute.
In
January 2005, Heer entered into an oil and gas lease with Cora
Fraser and her three sisters (the Fraser sisters) which included
the condition that “[i]f no well be commenced on said premises
on or before the 1 [sic] day of July 2005 this lease shall
terminate as to both parties.”
For the Fraser sisters, obtaining access to their
landlocked property was as important as tapping the oil reserves
under it.
So, as consideration, the lease agreement included
the provision that, “[i]nstead of upfront money for lease, Cody
Heer will attempt to get permanent right of way, 20 foot [sic]
wide.”
This was not the first time the Fraser sisters leased
the property.
Approximately 10 to 15 years earlier, East Fork
Crude had rights to, and did successfully, extract oil and gas.
For part of that leasehold period, East Fork Crude traversed an
adjoining property with the permission of the owner, Robert
Chadwick.
But the withdrawal of Chadwick’s permission caused
East Fork Crude to end its lease.
Once Heer had leased the property, he attempted to
purchase a permanent easement from the owners of three separate
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properties surrounding the Fraser sisters’ land.
adjoining property owners declined.
All of those
They also denied Heer
permission to temporarily travel on their land to access the
property during the lease term.
Undaunted, Heer hired a bulldozer operator to
construct a roadway across Robert Chadwick's property to the
Fraser sisters' land, approximating the route previously used by
East Fork Crude.
Chadwick filed criminal mischief and criminal
trespass charges against Heer who was ordered to stay off
Chadwick’s property.
However, Heer apparently continued to
trespass as he pursued his oil production plans.
Heer hired Roger Pickett to clean out the old East
Fork Crude oil well on the property and to install replacement
rods and tubes in the well.
At trial, Pickett testified that
the work he performed was considered "regular maintenance."
This maintenance alone was sufficient to re-establish the old
East Fork Crude well and once again effectuate the successful
extraction of commercial quantities of crude oil.
However, no
drilling, deepening or widening of the well occurred and no new
wells were drilled.
In April 2005, Heer was able to produce and sell a
load of oil from the Fraser sisters' property.
He delivered a
small royalty check to the Fraser sisters for the oil sold.
Despite the royalty check, the Fraser sisters were
disappointed that Heer had secured no legal means of entry and
egress to their property.
Furthermore, they also believed Heer
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did not comply with the lease agreement’s requirement that he
commence a well before July 1, 2005.
On October 6, 2005, the
Fraser sisters filed a complaint in Metcalfe Circuit Court
asserting these claims and seeking termination of the lease and
ejection of Heer from their property.
All of the issues in both appeals can be dispensed
with by focusing on one issue – whether a well was commenced on
the property.
There is no factual dispute regarding what Heer
did to produce commercial quantities of oil.
Therefore,
resolution requires our examination of how this case proceeded
and how the law was applied to these facts.
In preparation for a jury trial, both parties
submitted proposed jury instructions which differed
significantly in their definition of the term “commencement of a
well.”
Relying largely on the instruction submitted by Heer’s
attorney, the trial court crafted the following:
INSTRUCTION NUMBER 2
Definitions
You shall use the following legal definitions
to apply to the evidence that you have heard
herein.
1. “Commencement of a well” means the
drilling of a new well, or the re-drilling,
re-working or deepening of an abandoned well
to bring it into production.
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Both parties moved for a directed verdict and both
motions were denied.
The case was submitted to the jury which
returned a verdict in favor of Heer.
The Fraser sisters moved
for a judgment notwithstanding the verdict (JNOV) or,
alternatively, for a new trial.
At the hearing of these
motions, the Fraser sisters withdrew their motion for a new
trial but pressed their right to a JNOV.
The essence of the
Fraser sisters’ argument was that the judge had erroneously
instructed the jury by defining “commencement of a well” to
include “re-working . . . an abandoned well[.]”
On July 19, 2006, the Metcalfe Circuit Court granted
the sisters’ motion for JNOV.
Typically, a trial judge faced with a motion for
judgment notwithstanding the verdict must assess the quantum of
evidence presented.
16, 18-19 (Ky. 1998).
See, e.g., Bierman v. Klapheke, 967 S.W.2d
Our review of this JNOV is atypical
because it is not based on the judge’s rejection of the jury’s
assessment of the evidence.
Here, Judge Patton, candidly
assessed his own work and admirably concluded he had erroneously
instructed the jury on the law, specifically, that he had
presented to the jury the wrong legal meaning of the term
“commence a well.”2
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It is not clear, and Heer does not assert, that Instruction Number 2 was not
a factor in the verdict. Therefore, we cannot say “that the error has been
‘cured’ by the verdict.” John S. Palmore, Kentucky Instructions to Juries,
Civil, § 13.17 (2005) citing Fuson v. VanBebber, 454 S.W.2d 111, 113
(Ky.1970).
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Our review of this judgment notwithstanding the
verdict, then, offers only two alternatives.
If the original
instruction was correct, as Heer asserts, then the circuit court
committed error by granting the JNOV.
If the original
instruction was incorrect, as the Fraser sisters assert, then
the circuit court cured the error by granting the JNOV.
John S.
Palmore, Kentucky Instructions to Juries, Civil, § 13.18 (2005)
citing Blair v. Louisville & N. R. Co., 390 S.W.2d 178, 181 (Ky.
1965)(erroneous instruction becomes immaterial once court holds
the party against whom the error is claimed was entitled to a
directed verdict).
Our determination of the correct alternative
is strictly a matter of law, which we review de novo.
Radioshack Corp. v. ComSmart, Inc., 222 S.W.3d 256, 259-60
(Ky.App. 2007).
Both parties make superior arguments.
Heer’s argument
can be summarized as follows:
“What constitutes beginning of a well is determined
from the facts and circumstances of each case[,]”
Durbin v.
Osborne, 292 Ky. 464, 166 S.W.2d 841, 843 (1942), and, in this
case, the jury determined that Heer had commenced a well.
Furthermore, argues Heer, authorities emphasize that “the
primary objective of the parties [to an oil and gas lease] is
the production of oil or gas and that such primary objective
should control[.]”
3 Eugene Kuntz, A Treatise on the Law of Oil
and Gas § 48.3(a)(1)(1998 & Cum.Supp. 2005).
Following this
reasoning Heer argues that, since he did produce commercial
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quantities of oil, it would be incongruous to hold that he did
not commence a well.
Finally, Heer asserts that “[t]he element
of good faith is an important consideration . . . and that any
act, the performance of which has a tendency to produce the
desired result, is a commencement.” 58 C.J.S. Mines and Minerals
§ 260 (2007).
The Fraser sisters make equally compelling arguments.
They correctly note that in every case cited in the briefs
involving the re-working of an abandoned well there is a common
factor not present in the case before us.
The factor is that
the re-working resulted in the first production of commercial
quantities of oil or gas.
We would add to that a second factor.
We found that in each case in which an existing well is reworked, there has been additional drilling, either to a greater
depth or by widening the shaft.
In the most factually similar Kentucky case, Durbin v.
Osborne, 292 Ky. 464, 166 S.W.2d 841 (1942), a well had been
drilled in 1919, but oil had not been discovered in commercial
quantities.
Nearly 20 years later, Osborne leased the property
on the condition that a well would be drilled within 40 days.
The lessee removed the old casing and drilled an additional 16
feet in depth.
Oil was discovered at that additional depth in
commercial quantities for the first time.
In the Texas case of Kothmann v. Boley, 308 S.W.2d 1
(1957), which cites Osborne, a previous lessee drilled three dry
wells and then plugged those holes with concrete, rocks, mud,
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and other materials.
Kothmann leased the property and agreed to
commence a well within 60 days.
He focused his attention on
those previously drilled and later plugged wells.
at the first well was fruitless.
His attempt
At the second, however, after
drilling through the plug to the original 3,000 foot depth, he
drilled an additional 400 feet where commercial quantities of
oil were discovered in that well for the first time.
At the
third, the original five-inch shaft was widened and commercial
quantities of oil were discovered for the first time.
It was
significant to the Texas court that
Before minerals could be discovered or
produced, however, it was necessary to open
a hole where none existed. This petitioners
did by boring from the surface through mud,
cavings, rock, cement and other materials to
a depth where gas was discovered in
commercial quantities.
Kothmann at 3 (emphasis supplied); see also Wellman v. Energy
Resources, Inc., 210 W.Va. 200, 557 S.E.2d 254, 258, 267
(2001)(Lessee “reworked the previously-abandoned well drilled by
the prior lessee and placed it back in operation” but “did not
commence the drilling of a well under any construction of the
evidence[.]”
Heer, however, cites West v. Continental Oil Co., 194
F.2d 869 (5th Cir. 1952) for the proposition that new drilling is
not necessary where a previously abandoned well is put back into
production.
As the Fraser sisters point out, West is easily
distinguishable because the parties to the lease construed by
the court in West carefully defined “drilling operations” to
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include “reestablish[ing] production” from an existing well.
West at 872.
Those parties “clearly t[ook] into consideration
the case of a well in existence on the leased premises at the
time of the execution of the lease.”
Id.
Heer and the Fraser
sisters did not.
We therefore hold that Heer did not comply with the
lease’s requirement that he commence a well before July 1, 2005.
Heer neither drilled the existing well deeper or wider, nor did
he produce commercial quantities of oil from that well for the
first time.
The Fraser sisters were entitled to a directed
verdict prior to trial and, therefore, the entry by the Metcalfe
Circuit Court of a judgment notwithstanding the verdict in their
favor is affirmed.
Heer v Chadwick, et al, No. 2006-CA-001489
In this case, Cody Heer asserted his entitlement to an
easement by adverse possession across the property of Robert and
Ellen Chadwick.
He claimed that entitlement because of the
leasehold interest he acquired from the Fraser sisters on
January 21, 2005, and through his predecessors-in-interest, East
Fork Crude, the Fraser sisters, and their predecessors-ininterest.
The Metcalfe Circuit Court entered summary judgment
in favor of the Chadwicks because Heer produced no evidence to
establish the existence of an easement by adverse possession.
Heer appeals claiming:
(1) the summary judgment was
premature as he had not completed discovery; and (2) he did not
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receive notice of the hearing at which the summary judgment
motion was argued.
We need not address Heer’s arguments in this case
because we held, supra, that he no longer owns any interest in
the dominant tenement.
For this reason, the summary judgment,
and the order denying Heer’s motion to alter, amend or vacate
the summary judgment of the Metcalfe Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
Bryan E. Bennett
Campbellsville, Kentucky
BRIEF FOR APPELLEE, ROBERT
CHADWICK AND ELLEN CHADWICK:
Timothy J. Crocker
Mark A. Thurmond
Franklin, Kentucky
BRIEF FOR APPELLEE, CORA
FRASER; VIRGINIA JANES; SUE
HOOD AND JANETTE PHILLIPS:
William Colvin
Greensburg, Kentucky
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