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Kidder v. Montani Energy, LLC

Supreme Court of West Virginia

November 17, 2017

Dennis Kidder, Sandra Charlene Kidder Lutz, Marcia Lynn Mitchell, Nelson Kidder, Louise Craft, Elaine Kidder, Linda Carpenter, Lois Jane Ristau, Larry W. Kidder, Jeannette M. Kidder, and Robert E. Kidder, Defendants and Third-Party Plaintiffs Below, Petitioners
v.
Montani Energy, LLC; Whittle Corporation; Statoil USA Onshore Properties; Inc., Ralph Koontz, Mary Jo Koontz, Barbara K. Baker, Linda P. Sherwood, David Allen Sherwood, Phillip K. Sherwood, Lynn E. McCann, Ray McCann, Stephen Schubach, Danny Ray Booher, Christina Faye Booher, William D. Hope, Lois Marlene Fletcher Stern, Velma Well, James L. Kleeh, and Marilyn Kleeh, Defendants Below, Respondents

         Tyler County 14-C-4H

          MEMORANDUM DECISION

         Petitioners Dennis Kidder, Sandra Charlene Kidder Lutz, Marcia Lynn Mitchell, Nelson Kidder, Louise Craft, Elaine Kidder, Linda Carpenter, Lois Jane Ristau, Larry W. Kidder, Jeannette M. Kidder, and Robert E. Kidder (collectively, "the Kidder heirs"), by counsel Gerasimos Sklavounakis, appeal the order of the Circuit Court of Tyler County, entered on October 26, 2016, that granted the motion for summary judgment of Respondent Statoil USA Onshore Properties, Inc. ("Statoil").[1] Respondent Statoil appears by counsel Denise D. Pentino, Jacob A. Manning, Christopher J. Prezioso, and Stuart C. Hollimon. Respondents Ralph Koontz, Mary Jo Koontz, Barbara K. Baker, Linda P. Sherwood, David Allen Sherwood, Phillip K. Sherwood, Lynn E. McCann, Ray McCann, Stephen Schubach, Danny Ray Booher, Christina Faye Booher, William D. Hope, Lois Marlene Fletcher Stern, Velma Well, James L. Kleeh, and Marilyn Kleeh (collectively, "the Andrew and Okey Rice heirs"); Montani Energy, LLC ("Montani Energy"); and Whittle Corporation appear by counsel Debra L. Steed.

         This Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the order of the circuit court is appropriate under Rule 21 of the Rules of Appellate Procedure.

         This matter concerns the mineral rights beneath approximately 540 acres of land situate in Tyler and Wetzel Counties. Four separate parcels of the subject acreage were conveyed in 1910, by A.J. and Letha Rice, through four separate deeds ("the 1910 deeds"), to four of the Rices' six children: Finley Rice, Andrew Rice, Okey Rice, and Mary Kidder. Each deed provided, in part:

The parties of the first part reserve and except from the operation of this deed and do not convey the usual royalty of one eighth of all the oil produced and saved from said land and also the consideration for gas for each gas well drilled on said land and producing gas and used and marketed off premises for the use and benefit of all the grantors' children, to wit: Finley Rice, Andrew Rice, Okey L. Rice, Mrs. Linda Rabel, Mrs. Belle Stamm, and Mrs. Mary F. Kidder, equally, to share and share alike each with the other therein.

         The elder Rices died intestate and, around 1916, the reserved interest passed in equal shares to the six children. Later, in 1919, Mary Kidder and her husband conveyed approximately 112 acres of their 116-acre tract to Andrew Rice, "subject to the same reservations as to oil and gas, contained in [the 1910 deeds]. . . ."[2] Petitioners are the heirs of the interest of Mary Kidder.

         Between 2010 and 2014, Respondent Statoil acquired oil and gas leases on portions of the subject property through various transactions.[3] Statoil designated certain of those tracts Nos. 120, 121, 123, and 124.

         Prior to Statoil's acquisitions, in 2001, Nancy Fout purchased a tax sale deed to what she asserted were the oil and gas rights of the Andrew Rice interest.[4] Nancy Fout and her husband John Fout filed their "Complaint to Determine Title" in the Circuit Court of Tyler County in early 2014, claiming a 1/5 interest in the oil and gas underlying the subject property.[5] They named sixty-nine defendants, known and unknown. Whittle Corporation, per the Fouts' complaint, had drilled the subject property "without clear title and in conflict with the alleged owners of the oil and gas, " filed an answer together with Montani Energy, to which Whittle Corporation had transferred some or all of its lease interest. The Kidder heirs filed an answer to the complaint, together with a counterclaim, cross-claim, and third-party complaint seeking to quiet title.[6] Respondent Statoil answered the complaint, answered the Kidder heirs' counterclaim, cross-claim, and third-party claim, and also filed a counterclaim, cross-claim, and complaint for declaratory judgment and to quiet title.

         Upon the filing of Respondent Statoil's motion for summary judgment in late 2014, the circuit court found that the 1910 deeds reserved a royalty interest only, and the oil and gas ownership rights thus passed with the land conveyance. The circuit court ruled in favor of respondent, finding that respondent has a leasehold title to Tract Nos. 120, 121, and 124 of the subject acreage, and granted respondent's motion for summary judgment. The Kidder heirs appealed; the Fouts did not. On appeal, petitioners assert two assignments of error. They argue, first, that the circuit court erred in finding that A.J. and Letha Rice reserved only a royalty interest in the 1910 conveyances rather than finding that A.J. and Letha Rice reserved the oil and gas in place. They argue, second, that the circuit court failed to address the ownership of all of the oil and gas that was conveyed in the 1910 deeds. The circuit court's ruling on the Statoil summary judgment motion is before us. Accordingly, we apply a de novo standard of review. Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 190, 451 S.E.2d 755, 756 (1994).

         We begin with petitioners' first assignment of error, in which they argue that the 1910 deed reserved the oil and gas in place. We clarified in 1963:

Where deeds are made by which several undivided interests in a tract of land are conveyed, with the right in the several grantees, their heirs and assigns, to lease the land for oil and gas purposes and to receive the carrying rental, or the bonuses and carrying rentals, but subject to reservations in favor of the several grantors of the oil and gas royalty, when produced, such reservations do not constitute a reservation of the oil and gas in place; but, on the contrary, such deeds constitute a conveyance of the entire tract of land, including the oil and gas in place, but subject to mere royalty interests in the oil and gas when such oil or gas, or both, are produced.

Syl., Davis v. Hardman, 148 W.Va. 82, 82-83, 133 S.E.2d 77, 77 (1963). Petitioners argue that, prior to this clarification, and when the 1910 deeds were executed, "a reservation of the 'usual royalty' was actually a reservation of the oil and gas in place." Relying on Toothman v. Courtney, 62 W.Va. 167, 58 S.E. 915 (1907) and Paxton v. Benedum-Trees Oil Co., 80 W.Va. 187, 94 S.E. 472 (1917)("A grant of the royalties, rents, and income arising from the production of the oil from land is a grant of the oil in such land")[7], petitioners urge us to determine that A.J. and Letha Rice reserved the oil and gas in place when conveying the surface acreage to four of their six children in 1910.

         But the holding of Paxton is not absolute in terms of the effect of a reservation of royalties. As we explained in Davis:

The rule enunciated in Paxton . . . is but a rule of construction and the function of the Court in any situation such as that presented by the present case is to ascertain the true intent of the parties as expressed by them in the deed, lease or other written instrument under consideration. 'A valid written instrument which expresses the intent of the parties in plain and unambiguous language is not subject to judicial construction or interpretation but will be applied and enforced according to such intent.' Cotiga Development Co. v. United Fuel Gas Co., W.Va., pt. 1 syl., 128 S.E.2d 626. In the construction of a deed or other legal instrument, the function of a court is to ascertain the intent of the parties as expressed in the language used by them. [(Citations omitted.)] All rules of construction must yield to the expressed intention of the parties if that can be ascertained. Realty Securitites & Discount Co. v. National Rubber & Leather Co., 122 W.Va. 21, 7 S.E.2d 49; 5 M.J., Deeds, Section 57, page 729. In the present case, therefore, ...

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