Texas American Energy Corporation
v. Citizens Fidelity Bank & Trust Company
Court of Kentucky, 1987.
Facts: Texas American bought Western
Kentucky Gas. Western Kentucky Gas buys
gas and pipes it into underground storage in Kentucky. Texas American wanted to use these gas
reserves as collateral for loans. They
claimed it was personal property requiring only a “security interest”, but the
bank said it was part of the real estate, which would require a “mortgage
Issue: Is the natural gas the
personal property of Texas American, or is it part of the real estate?
Rule: NEW RULE! Once natural gas is extracted from the ground
and thus converted to personal property, it will remain so even if it is stored
in underground reservoirs (so long as they don’t leak).
Analysis: The court notes that Hammonds is the controlling case, but chooses to
limit its application. In Hammonds, leaking gas under a woman’s property was
found not to be a trespass because it was considered not to be private
property, but rather sort of wild
the court rejects this analogy.
Conclusion: The stored gas is private personal
Back to Who is the Owner?
Back to Casebook Notes