United States District Court, N.D. West Virginia
DONALD R. REYNOLDS, Plaintiff,
ASCENT RESOURCES - MARCELLUS, LLC, Defendant.
MEMORANDUM OPINION AND ORDER DENYING THE PARTIES'
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
M. KEELEY UNITED STATES DISTRICT JUDGE
March 28, 2016, the plaintiff, Donald R. Reynolds
(“Reynolds”), filed this action in the Circuit
Court of Harrison County, West Virginia. On May 2, 2016, the
defendant, Ascent Resources - Marcellus, LLC
(“Ascent”), removed the case to this Court based
on diversity (Dkt. No. 1). The parties have filed competing
motions for summary judgment that are fully briefed and ripe
for review. For the following reasons, the Court DENIES the
motions (Dkt. Nos. 30; 31).
the facts in this case are not in dispute. Reynolds resides
in Jane Lew, Harrison County, West Virginia (Dkt. No. 30-4 at
1). In April 2015, W. Travis McBain (“McBain”),
an Ascent representative, contacted Reynolds regarding
Ascent's interest in leasing certain of his oil and gas
interests (Dkt. No. 12 at 1; 30-4 at 1). Ultimately, Reynolds
agreed to lease Ascent his interest in oil and gas underlying
a 561.61-acre tract known as the Milton Underwood No. 2 Farm,
McClellan District, Doddridge County, West Virginia
(“Milton tract”) (Dkt. No. 30-4 at
prepared and provided a number of documents, dated June 8,
2015, including: 1) the Paid-Up Oil and Gas Lease
(“Lease”), 2) the Memorandum of Oil and Gas
Lease, and 3) the Order of Payment (collectively, the
“Lease documents”) (Dkt. No. 21 at 2). The
Paid-Up Oil and Gas Lease provides in relevant part as
LEASING CLAUSE. Lessor hereby grants, leases, and lets
exclusively to Lessee all the oil and gas . . . and their
liquid or gaseous constituents, whether hydrocarbon or
non-hydrocarbon, underlying the land herein leased . . . .
. . . .
(H) TITLE: If Lessee receives evidence that Lessor does not
have title to all or any part of the rights herein leased,
Lessee may immediately withhold payments that would be
otherwise due and payable hereunder to Lessor until the
adverse claim is fully resolved. Lessor represents and
warrants that there is no existing oil and gas lease which is
presently in effect covering the Leasehold.
TITLE AND INTERESTS. Lessor hereby warrants generally and
agrees to defend title to the Leasehold and covenants that
Lessee shall have quiet enjoyment hereunder and shall have
benefit of the doctrine of after acquired title.
. . . .
ENTIRE CONTRACT. The entire agreement between Lessor and
Lessee is embodied herein and in the associated Order of
Payment (if any).
(Dkt. No. 32-1 at 1-5). The associated Order of Payment
includes the following agreements:
Ascent Resources - Marcellus, LLC will tender payment to the
Lessor identified in the Paid Up Lease (“Lease”)
as indicated herein by check within
45 days of its receipt of the
original of this Order of Payment and the executed Lease.
Payment is conditioned upon title to the property interests
leased being confirmed satisfactorily to Ascent Resources -
Marcellus, LLC, in its sole discretion. . . .
If Lessor owns more or less than the net interest defined
herein, Ascent Resources - Marcellus, LLC may, without
immediate notice to Lessor, increase or reduce the
consideration payable hereunder proportionate to the actual
interest owned by Lessor.
. . . If the Lease has not been surrendered or payment made
by the specified due date, then Lessor shall notify Lessee in
writing and Lessee shall have 30 days from receipt of such
written notice to make payment or surrender the lease without
. . . Lessor agrees that payment made hereunder is final and
will not seek to amend or modify the payment, or seek
additional consideration based upon any differing terms which
Ascent Resources - Marcellus, LLC has or will negotiate with
any other lessor/oil and gas owner.
Id. at 13.
total, the Lease encompassed Reynolds's interest in eight
parcels, including his interest in a certain 90.83-acre tract
(“the Subject Interest”). Id. at 12. Pursuant
to the terms in the Order of Payment, Ascent agreed to pay
Reynolds a signing bonus of $4, 100 per net acre, totaling
$367, 775.237 (Dkt. Nos 30-5; 32-1 at 13). Reynolds executed
the Lease documents on October 9, 2015, and returned them to
Ascent (Dkt. Nos. 30-2 at 2; 30-4 at 2).
thereafter, in late October 2015, McBain called Reynolds to
inform him that Ascent had decided not to fund the lease for
the Subject Interest because the West Virginia Department of
Environmental Protection (“DEP”) “website
indicated that a producing well was located on the parcel and
for that reason the parcel was subject to an existing oil and
gas lease” (Dkt. No. 15-4). On October 28, 2015, Ascent
issued a check to Reynolds in the amount of $267, 956.34,
which reflected that payment had been withheld for the
Subject Interest (Dkt. Nos. 30-5; 32-14).Reynolds received
the check on October 30, 2015, and signed the lease
obligation deposit receipt on November 2, 2015 (Dkt. Nos.
30-4 at 2; 32-13). He then cashed and deposited the check
(Dkt. No. 32-4 at 5).
on November 9, 2015, Reynolds sent a letter to Ascent
demanding that it execute and record a partial release of the
Lease to reflect the fact that it had “failed to make
payment” for the Subject Interest (Dkt. Nos. 30-4 at
4). Prior to receiving this demand letter on November 16,
2015, id. at 5, Ascent had recorded the Memorandum
of Oil and Gas Lease (“Memorandum”) in the Office
of the Clerk of the Commission of Doddridge County, West
Virginia, on November 12, 2016 (Dkt. Nos. 30-2 at 4; 32-12 at
4). The Memorandum was “made and filed for the purpose
of giving third parties notice of the existence of the Lease,
” but was “not intended as an amendment of the
terms and conditions of the Lease” (Dkt. 32-12 at 1).
As it is included in the Lease, the Memorandum includes the
Subject Interest. Id. at 4.
Ascent did not respond to his first demand, Reynolds, by
counsel, sent another letter to Ascent on February 4, 2016
(Dkt. Nos. 30-4 at 2; 30-6). Rather than again request a
release, this second letter demanded that, because the
recorded Memorandum reflected that Ascent had a leasehold in
the Subject Interest, Ascent tender within 21 days “the
agreed upon bonus compensation remaining to be paid in the
amount of $99, 818.93" (Dkt. No. 30-6 at 1). Thereafter,
on March 3, 2016, Ascent recorded a Partial Release of Oil
and Gas Lease, which canceled the Lease in regard to the
Subject Interest (Dkt. No. 4-1). Between receiving the $267,
956.34 check and the release of the Subject Interest,
Reynolds did not take any steps to cure title or hire anyone
to investigate the title and leasehold (Dkt. No. 34-1 at 4).
Further, he has not “taken any steps to lease [the
Subject Interest] to anyone else” (Dkt. No. 32-4 at 6).
Reynolds filed this action in the Circuit Court of Harrison
County, West Virginia, claiming that Ascent had breached the
parties' contract (Dkt. No. 1-1), Ascent removed the case
to this Court and filed a motion to dismiss the complaint for
failure to state a claim (Dkt. Nos. 1; 3). Reynolds responded