What Pennsylvania Courts Say About Deed Holders’ Underground Gas Rights

Shale gas under Pennsylvania farm land is very valuable. Those who might have rights to such land are often challenging each other for the oil rights. In this article, we point out the importance of deed language in deciding these disputes.

Whose Shale Is This?

Consider the story of a deed holder in rural Pennsylvania. Meet John Comerford, the most recent deed holder of land that’s been passed down through the family for a century.

John Comerford leased access rights to an oil and gas drilling company. This allowed the Comerford family to receive monthly royalties. But one day the drilling company sent notice that a competing claim turned up for the oil and gas rights. The payments stopped. Instead of going to the Comerfords, the funds went into an escrow account.

The competing claim comes from heirs to a long-ago deed holder. Those heirs say that when the deed was transferred to the Comerford family a century back, the oil and gas rights were kept by their family as part of the mineral rights that the deed never conveyed.

The case went to the Pennsylvania Superior Court.

Give Us Our Royalties Back!

The court declared that the Comerfords’ royalties should resume. In Comerford Family Limited Partnership v. Ainbinder, a judge examined the deeds that had passed down to and through the Comerford family, owners of vast lands in Sullivan County, Pennsylvania:

• In a 1955 deed conveying land from William Monahan to the White Ash Land Association. Monahan excepted and reserved “all mineral rights and all minerals” including gas, oil, coal and iron — and surface rights to access the minerals.

• In a 1958 deed, William conveyed to a nephew, John Monahan, “all of the mineral and surface rights” to a portion of the acreage.

• A 2016 deed, from John’s heir Robert Ainbinder, quitclaimed oil and gas rights that had been transferred to John through William’s 1958 deed.

In 2017, the Comerford Family Limited Partnership (heirs of William Monahan) filed a quiet title action. Their argument? Under Pennsylvania’s Dunham Rule, William could not have legally transferred oil and gas rights because oil and gas are not “minerals” in Pennsylvania.

Let the Royalties Resume!

In 2021, Sullivan County’s Court of Common Pleas declared that the Comerford family owned the oil and gas. The 2016 quitclaim was an invalid cloud on the Comerfords’ title, said the court. It was ordered stricken from the county records. And the royalties resumed.

On appeal, the Superior Court discussed the legal language of Pennsylvania property deeds:

• The word “exception” in a deed means withholding something from the deed transfer (which would have otherwise passed to the party receiving the deed).

• The word “reservation” in a deed creates a new property interest that did not exist before.

Title to excepted or reserved property remains with the person who’s granting the deed. What’s excepted or reserved does not go to the deed recipient.

Dunham Rule Alive and Well in Pennsylvania

Now we get to the Dunham Rule. Established in an 1882 Pennsylvania court case, the Dunham Rule makes Pennsylvania different from most other states on oil and gas rights. Under the Dunham Rule, shale gas and oil don’t meet the definition of minerals. Transferring a property deed with a reservation or an exception for “minerals” does not effectively reserve gas or oil rights.

So, William’s grant of “all mineral and surface rights” in the 1958 deed failed to vest the oil and gas in his nephew John. Therefore, no oil and gas rights were legally transferred by the 2016 deed. That left the Comerford family with the oil and gas rights.

To this day, Pennsylvania heirs’ claims to oil and gas rights fail if their families withheld or reserved “minerals” rather than naming oil and gas specifically. The Dunham Rule, says the Pennsylvania court, “remains alive and well here in Pennsylvania.”

In Adjacent Ohio, Mineral Rights Prove Hard for Treasure-Hunting LLCs to Dig Up

Last year in Ohio, the Seventh District Court of Appeals decided the case of Cardinal Minerals, LLC v. Miller, which addressed the state’s Dormant Mineral Act. We talked about this case then, but it bears reviewing here.

In 1922, the Pfalzgrafs conveyed a deed to property in Monroe County, Ohio — except for the oil and gas rights.

Ultimately the Miller family acquired this property. The Millers wanted to lease the property to Eclipse Resources, an oil and gas drilling company. Eclipse spotted the Pfalzgraf deed language. This got in the way of the Millers’ plans. In 2013, the Millers submitted a Dormant Mineral Act filing. This would let them claim the mineral rights if certain conditions are met — like notifying the heirs of those long-ago withheld rights to the resources.

Following the Dormant Mineral Act, the county recorder added a notation of abandonment to the Pfalzgraf transfer. That notation freed the Millers to sign an oil and gas lease with Eclipse Resources, which they did in 2014. As we shall see, the Ohio courts would back them up.

Mineral-Hunting LLC Comes for the Millers’ Royalties

Cardinal Minerals, LLC was established to acquire deeds with abandoned resource interests and litigate over them. They zeroed in on cases where notice was served by newspaper publication — so they could argue that certified mail is a more dependable form of notifying heirs. As it happened, the Millers’ title company had served notice to the Pfalzgraf heirs by a newspaper publication, not by certified mail.

In 2022, Cardinal paid Pfalzgraf heirs $100 each for quitclaims releasing any potential oil and gas interests they might have had. Cardinal also got the heirs to sign over Assignment of Claims so the LLC could make claims to the oil — buying rights to a lawsuit.

Next, Cardinal sued the Millers and the oil company for trespass. The trial court dismissed the suit, and declared Cardinal’s purchased deeds void.

Seventh District Court of Appeals Affirms

On appeal, the Millers’ rights were upheld.

A lack of mailed notification to the heirs by the Millers did not convince the court that the LLC had a case.

Moreover, the appeals court agreed with the trial court’s use of the broadly used (not just in Ohio) doctrine of champerty and maintenance, which courts use to deter people from orchestrating court cases and cutting deals with the parties to grab a share of the proceeds. In short, the court was not willing to suffer an LLC creating legal trouble to make a profit.

Important note: Articles on Deeds.com are for general information only. Case-specific circumstances impact the outcome of legal questions and disputes. Contact a reputable lawyer in your state for individual guidance.