Rubin Res., Inc. v. Morris

• Citation: 787 S.E.2d 641,237 W.Va. 370
• Decision Date: 10 June 2016
• Docket Number: No. 15–0122,15–0122
• Court: Supreme Court of West Virginia
• Parties: Rubin Resources, Inc., Plaintiff Below, Petitioner v. Garold “Gary” W. Morris, II, Defendant Below, Respondent

237 W.Va. 370
787 S.E.2d 641

Rubin Resources, Inc., Plaintiff Below, Petitioner
v.
Garold “Gary” W. Morris, II, Defendant Below, Respondent

No. 15–0122

Supreme Court of Appeals of West Virginia.

Submitted: March 2, 2016
Filed: June 10, 2016

David Allen Barnette, Esq., Vivian H. Basdekis, Esq., Jackson Kelly, PLLC, Charleston, West Virginia, Attorneys for Petitioner.

David D. Johnson, III, Esq., Winter & Johnson PLLC, Charleston, West Virginia, Attorney for Respondent.

Workman, Justice:

In this legal malpractice action, Petitioner Rubin Resources, Inc. (“Rubin”), filed suit asserting that Respondent Garold “Gary” W. Morris, II (“Mr. Morris”) was negligent in performing a title examination and preparing a title opinion for Rubin regarding an oil and gas leasehold, and that as a direct result of that negligence, Rubin incurred monetary damages totaling $278,455. Mr. Morris admitted that he was negligent in performing the title examination and preparing the title opinion, but he contested his liability for the damages claimed by Rubin. Following discovery, the parties filed cross-motions for summary judgment. After considering arguments on the motions, the Circuit Court of Lewis County, West Virginia, granted summary judgment in favor of Mr. Morris and awarded Rubin no damages.

On appeal to this Court, Rubin argues it is entitled to summary judgment because the undisputed facts demonstrate Mr. Morris's professional negligence was the proximate cause of the damages at issue. Upon review of the parties' briefs and oral arguments, the appendix record, and the pertinent authorities, we conclude that Rubin's arguments have merit. We therefore reverse the judgment of the circuit court and remand with instructions to enter summary judgment in favor of Rubin.

I. FACTUAL AND PROCEDURAL HISTORY

Since it organized in 1983, Rubin has been engaged in the oil and gas production industry. In 2000, Rubin entered into an agreement with Jackson L. Smith Enterprises, Inc., dba West Virginia Energies (“WVE”), to purchase WVE's interest in the leasehold estate of a 120–acre tract of land in Ritchie County, West Virginia, for the consideration of $5,000 plus royalties. The agreement between Rubin and WVE provided, in relevant part, that Rubin would procure a title examination concerning the tract; and, in the event it was determined that WVE did not hold good and marketable title to the leasehold estate, WVE would substitute other property acceptable to Rubin. The agreement provided the following substitution clause:

For and upon receipt of Five Thousand ($5,000.00) from [Rubin] as payment for the leasehold estate(s) ..., [WVE] hereby agrees to warrant title. Upon legal examination of such leasehold(s), should the title be found to be defective, [WVE] shall, at their [sic] expense, perform any curative action that is necessary and required by [Rubin's] legal examiner. Should the title be found to be not a “good and marketable” leasehold then [WVE] hereby agrees to replace the lease with substitute property agreeable to [Rubin].

Rubin retained attorney Mr. Morris to conduct the title examination and prepare a title opinion letter pertaining to the leasehold estate of the 120–acre tract. Mr. Morris did so and presented his title opinion letter to Rubin in July of 2000. However, Mr. Morris failed to identify a declaration of pooling, which was of record at that time in Ritchie County, and affected the 120–acre tract such that Rubin could not acquire the oil and gas

787 S.E.2d 644

rights to the tract.¹ Inasmuch as Mr. Morris failed to identify this declaration of pooling, Rubin did not exercise its right of substitution.²

In 2000, Rubin drilled a well on the 120–acre tract and it has been producing gas from that well for sale to a third party continuously since then. Rubin spent approximately $200,000 to produce this well and its total income from the production and sale of gas therefrom has been in excess of $270,000.

In 2012, Antero Resources Appalachian Corporation (“Antero”) offered to purchase Rubin's right to produce gas from the Marcellus Shale³ underlying the 120–acre tract for the sum of $216,000, together with an overriding royalty of 2.375% (worth approximately $30,000). However, Antero conducted a title examination and discovered that the oil and gas leasehold estate in the 120–acre tract had been held by production by CNG since 1990. Antero gave notice to Rubin of this title defect, and advised that it would not go forward with its purchase of Rubin's Marcellus Shale rights. After learning about the declaration of pooling, Rubin informed Mr. Morris about the problem.

Thereafter, Rubin notified CNX, successor-in-title to CNG, that it had drilled a well on the 120–acre tract without knowing about the declaration of pooling. CNX asserted claims against Rubin, informally, based on Rubin's production of gas from the well. In March of 2013, Rubin entered into a settlement agreement with CNX for the sum of $32,455⁴ to resolve those claims.⁵ In July of 2013, Rubin and CNX entered into a “wellbore interest” assignment and bill of sale in the subject well. Rubin continues to operate the well, selling the gas to Dominion, a company related to CNX.

In April of 2013, Rubin filed this legal malpractice action against Mr. Morris seeking to recover the amount it paid to CNX, and to recover the proceeds lost when its agreement with Antero was cancelled. The parties engaged in discovery through interrogatories and requests for production of documents. During a scheduling conference before the circuit court, the parties agreed the facts material to Rubin's claims against Mr. Morris were largely undisputed and this action should be resolved through summary judgment. Thereafter, the parties prepared a joint stipulation of facts, filed summary judgment motions, and presented oral argument to the circuit court.

By order entered January 6, 2015, the circuit court granted summary judgment

787 S.E.2d 645

against Rubin and in favor of Mr. Morris. The circuit court found that Rubin unnecessarily self-reported the drilling to CNX, and voluntarily entered into the CNX settlement agreement, even though the well had been drilled more than ten years prior. The circuit court reasoned that because Rubin may have acquired title by adverse possession, the voluntary settlement with CNX precluded any finding that the damages were proximately caused by Mr. Morris's negligence. The circuit court further found that Mr. Morris's negligence did not lead to the loss of the Antero deal because Mr. Morris “cannot be charged with the loss of a contract to sell rights that [Rubin] never would have owned.” Finally, the circuit court rejected Rubin's claim it would have owned other valuable Marcellus Shale rights through the substitution clause had it been aware of the title defect as “too remote and speculative.”

II. STANDARD OF REVIEW

Rubin appeals the circuit court's order awarding summary judgment to Mr. Morris and denying its motion for summary judgment. Both parties agree that the facts material to Rubin's claims are largely undisputed and that this action should be resolved through summary judgment. We review the circuit court's decision de novo, according no deference to the legal conclusions reached. As we held in syllabus point one of Painter v. Peavy , 192 W.Va. 189, 451 S.E.2d 755 (1994) : “A circuit court's entry of summary judgment is reviewed de novo. ”

III. DISCUSSION

“Generally, in a suit against an attorney for negligence, the plaintiff must prove three things in order to recover: (1) the attorney's employment; (2) his/her neglect of a reasonable duty; and (3) that such negligence resulted in and was the proximate cause of loss to the plaintiff.” Syl. Pt. 1, Calvert v. Scharf, 217 W.Va. 684, 619 S.E.2d 197 (2005).

Syl. Pt. 1, Humphries v. Detch , 227 W.Va. 627, 712 S.E.2d 795 (2011).

In this case, we are concerned only with the third element because Mr. Morris neither disputed that an attorney-client relationship existed nor that he was negligent in performing the title examination and title opinion. With regard to the third element, we held in syllabus point three of Keister v. Talbott , 182 W.Va. 745, 391 S.E.2d 895 (1990), that “[d]amages arising from the negligence of an attorney are not presumed, and a plaintiff in a malpractice action has the burden of proving both his loss and its causal connection to the attorney's negligence.” Consequently, “in order to prevail in a malpractice action against a lawyer, the plaintiff must establish not only his or her damages, but must additionally establish that, but for the negligence of the lawyer, he or she would not have suffered those damages.” Calvert v. Scharf , 217 W.Va. 684, 695, 619 S.E.2d 197, 208 (2005). The purpose of this requirement is to safeguard against speculative and conjectural claims. See, e.g., Harrison v. Casto, 165 W.Va. 787, 271 S.E.2d 774 (1980) (finding no error in lower court's dismissal of case alleging malpractice against attorney who failed to file complaint on behalf of client upon finding that, although attorney did not file complaint, client had not been harmed as statute of limitations on action had not run at time malpractice action was instituted).

Before turning to the arguments of the parties, we note that this case involves malpractice...