Court Opinion

ID: 9522796
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:32:23.958545+00
Date Added: 2024-06-11T13:03:56.358859
License: Public Domain

JUSTICE HARRISON, dissenting: In my view the majority’s conclusion that section 23.2(a) of the Oil and Gas Conservation Act is dispositive of this appeal operates to sidestep the question presented, and not to answer it. There is, of course, no question that owners may validly agree to integrate their interests in their land for purposes of oil production, and that, once this has been done, production from any single tract is construed as production from the unit for the obvious purpose of dividing up profits and expenses. It does not follow, however, that the unitization agreement operates as a device to insulate participants from the effects of preexisting clauses in the deeds by which they have acquired or retained their interests in the participating tracts. Accordingly, I dissent. While the majority stresses the policy considerations favoring the promotion of oil production and recovery, those policy considerations do not and cannot dictate the proper result here. When Broyles conveyed his land to plaintiffs in 1962, two years before the unitization agreement was signed, he reserved to himself the mineral interest in the land for “as long as there is production on said described real estate.” It is axiomatic that a deed should be construed most favorably on behalf of the grantee (Logue v. Marsh (1977), 50 Ill. App. 3d 493, 496, 365 N.E.2d 1159), and I know of no Illinois precedent for relaxing this rule on the basis that the subject land contains oil. Thus, the question presented is fundamentally one involving construction of a deed, and it is the deed itself, and not the importance of oil production, which we must look to in order to determine the appropriate result. When the legal principles pertaining to deed construction are applied to Broyles’ reservation of the mineral interest in the conveyed property, I believe that we must conclude, as did the trial court, that the reservation terminated in 1973, when the well physically located on the land stopped producing oil. While no Illinois case has focused precisely on this issue, at least one Texas court has held that the phrase “production on said land” means, in its ordinary use, production from wells physically located on the land in question. (Campbell v. Dreier (Tex. Civ. App. 1964), 382 S.W.2d 179, 182.) In my view, this is the interpretation most appropriately given to the reservation here, particularly since, as noted above, the deed must be construed most strictly in favor of the grantee, and hence most strictly against an expansive reading of Broyles’ reservation. This conclusion is buttressed by the fact, noted by the majority, that the statute permitting unitization agreements was in effect well before the time of the conveyance from Broyles to plaintiffs. A unitization agreement was certainly not unheard of in 1962; had Broyles wished to reserve the mineral rights in the Shelton land for as long as production either came from wells on the land or was allocated to the land by virtue of its participation in a unitization agreement, he could easily have expressed such an intention in the 1962 deed. Additionally, I cannot agree with the majority’s cryptic observation that the Illinois cases discussed by the parties “strongly indicate the conclusion” that production from the tract has not ceased. In my opinion, these cases are either distinguishable from the case at bar or in fact contrary to the majority’s position. In Belden v. Tri-Star Producing Co. (1982), 106 Ill. App. 3d 192, 204-05, 435 N.E. 2d 927, we noted: “[A] lessor who does not sign a unitization agreement is entitled to royalties only from the oil and gas produced on his leasehold, and the lessor’s relationship with his lessee must be determined according to the original lease. From this description of the rights of unsigned interests, it follows that in order to extend a lease under its habendum clause where that lease is located within a unit which the lessor had not joined, production must be from the leasehold rather than from elsewhere in the unit. (Morris v. Mayden (1976), 35 Ill. App. 3d 338, 341 N.E.2d 428.)” While the instant case involves the reservation of mineral interest in a grantor by way of an habendum clause in a deed, I believe that the principles articulated in Belden apply with equal force here. Just as the lessor’s relationship with the lessee in Belden had to be determined with reference to the original lease, so must the relationship between plaintiffs and defendant here be analyzed with reference to the 1962 deed defining that relationship. Here, plaintiffs did not join in the unit, and permitting use of allocated mineral production to extend defendant’s mineral interest in the Shelton land operates to defeat the intentions of Broyles and plaintiffs as expressed in the 1962 deed. Additional support for a result contrary to that reached by my colleagues may be found by reference to our decision in Morris v. Mayden (1976), 35 Ill. App. 3d 338, 341 N.E.2d 428. In Morris, the plaintiffs acquired fee simple title to certain real estate, subject to a 1957 reservation in which defendants Mayden had reserved to themselves all mineral interests in the land “for the period which the present oil and gas lease to the Pure Oil Company, a corporation, remains in effect,” and further reserved in themselves an undivided one-half interest in minerals produced from the property at any time following termination of that lease. Subsequently, Pure Oil Company assigned its interests under the lease to Union Oil, and, in 1968, Union, Maydens and certain other parties entered into a unitization agreement. In their complaint, plaintiffs sought, among other things, money damages against defendants Mayden for oil and gas alleged to have been wrongfiilly appropriated from the time of the unitization agreement until the filing of the complaint. In affirming the trial court’s dismissal of the complaint, this court relied upon the fact that the complaint failed to allege that production had ceased from the land in question: “The plaintiffs’ interest becomes possessory upon the termination of the oil and gas lease between defendants Mayden et al. and the Pure Oil Company. This lease, although amended and assigned, still remains operative. By the express terms contained in the lease it remains ‘in force’ for ‘as long * * * as oil or gas or either of them is produced from said land by lessee.’ As observed by Professor Summers in his treatise on Oil and Gas law, ‘the term cannot be extended by a pooling or unitization in which the holder of the reversion upon the term interest is not joined unless production is from the term acreage ***.' (5 Summers, The Law of Oil and Gas 96 (1966.) (Emphasis supplied.) Consequently, in view of the absence of any allegation that production has ceased from such land (the term acreage), the trial court was correct in dismissing plaintiffs’ amended complaint.” Morris v. Mayden (1976), 35 Ill. App. 3d 338, 341-42. While Morris came before us in a different procedural posture than does the instant case, I believe that what we said in that case constitutes at least an implicit, and a correct, rejection of the position taken by the majority here. Like the lease between Mayden and Pure Oil Company, the mineral interest retained by S. D. Broyles in the 1962 deed in this case was to last only so long as there was mineral production from the subject land. Had we taken the view in Morris v. Mayden (1976), 35 Ill. App. 3d 338, 341 N.E.2d 428, that production from other lands which were part of the unitization agreement could constitute production from the subject land for purposes of perpetuating the lease, the absence of an allegation that production on the term acreage has ceased would not alone have been dispositive of the entire case; instead, we would have been required to examine the additional question of whether plaintiffs’ complaint also alleged the absence of allocated production from the unitization agreement. Our failure to require such additional examination, and our adherence to the rule articulated by Professor Summers, indicate our past unwillingness to extend the meaning of the term “production” in a manner which would override the expressed intentions of the parties to the original deed or lease. The cases relied upon by defendant are distinguishable. Neither Ragsdale v. Superior Oil Co. (1968), 40 Ill. 2d 68, 237 N.E.2d 492, nor Bi-County Properties v. Wampler (1978), 61 Ill. App. 3d 799, 378 NE.2d 311, dealt with situations in which the holders of a “reversionary” interest in minerals had not, either by express consent or by ratification, become parties to a unitization agreement in which the current mineral interest holder had joined. The Bi-County case arose in the context of determining the amount of royalty payments owed to an undisputed holder of a royalty interest, and did not deal with the more fundamental question of what person or persons owned the mineral interest itself. Thus, the rule relied upon in Morris v. Mayden (1976), 35 Ill. App. 3d 338, 341 N.E.2d 428, and directly applicable to this case, was not a relevant factor in Bi-County, where all litigants had consented to the unitization agreement either by written agreement or by actions amounting to a ratification. (61 Ill. App. 3d 799, 805.) Ragsdale v. Superior Oil Co. (1968), 40 Ill. 2d 68, 237 N.E.2d 492, also does not mandate the result reached by the majority herein. While the court in Ragsdale recognized that a unitization arrangement “creates a single ownership of the entire unit by the owners of the several tracts making up the unit” (40 Ill. 2d 68, 70), it does not follow that participation in a unit operates to insulate the owner of the mineral interest in each single tract from the operation of clauses contained in the deed by which he has acquired or reserved his mineral rights. Defendant’s reliance on Ego Oil Co. v. Garner (1983), 115 Ill. App. 3d 82, 450 N.E.2d 375, is also misplaced. In Ego Oil, we held that “production of oil within a unit extends [a] lease beyond its primary term as to the lands covered by the lease but not included in the unitized area.” (115 Ill. App. 3d 82, 87.) While this rule governs the relationship between a lessor and lessee regarding continuation of the lease, I cannot see how it would operate to permit the lessor to expand his own interest in the land at the expense of the other party to the deed by which he has acquired or retained his own mineral rights. As recognized in a similar context in Scott v. Union Producing Co. (5th Cir. 1959), 267 F.2d 469, 470, “It is the mineral deed, not the lease, that should have contained a provision securing to the term mineral owners the benefit of a shut-in *** provision.” These authorities, coupled with proper analysis of the deed by which S. D. Broyles created and retained the mineral interest at issue, compel the conclusion that the judgment of the trial court is correct. The maximization of oil production, while a salutary goal, has not until today been allowed to override the fundamental right of our citizens to convey their property as they see fit, or the fundamental responsibilities of our courts to fairly interpret and enforce the terms of those conveyances. I dissent.