Gastar Exploration Inc. v. Rine

• Decision Date: 19 October 2017
• Docket Number: No. 16-0962,16-0962
• Citation: 806 S.E.2d 448
• Court: West Virginia Supreme Court
• Parties: GASTAR EXPLORATION INC. and Rona Lee McCardle, Defendants Below, Petitioners v. Gary RINE, as the Administrator of the Estate of Okey Franklin Yoho, et al. Plaintiffs Below, Respondents

806 S.E.2d 448

GASTAR EXPLORATION INC. and Rona Lee McCardle, Defendants Below, Petitioners
v.
Gary RINE, as the Administrator of the Estate of Okey Franklin Yoho, et al. Plaintiffs Below, Respondents

No. 16-0962

Supreme Court of Appeals of West Virginia.

Submitted: October 4, 2017
Filed: October 19, 2017

William M. Herlihy, Esq., Spilman Thomas & Battle, PLLC, Charleston, West Virginia, Matthew P. Heiskell, Esq., Spilman Thomas & Battle, PLLC, Morgantown, West Virginia, Counsel for Petitioner Gastar Exploration Inc.

Jeffrey A. Kimble, Esq., Robinson & McElwee, PLLC, Clarksburg, West Virginia, Counsel for Petitioner Rona Lee McCardle

Jeffrey V. Kessler, Esq., Berry, Kessler, Crutchfield, Taylor & Gordon, Moundsville, West Virginia, Counsel for Respondents Gary Rine, individually and as the Administrator of the Estate of Okey Franklin Yoho; Dinah A. Gray; and Carl Smith

Teresa C. Toriseva, Esq., Joshua D. Miller, Esq., Toriseva Law, Wheeling, West Virginia, Counsel for Respondents Betty Pyzell; Norma Ash; Debbie Rine; LeRoy Yoho; Kim Yoho; Ron Yoho; Jodi Yoho; Vicki Williams; Connie Streight; Nancy Brown ; Mark Campbell ; and Harold Yoho

Justice Ketchum :

This case concerns a 1977 deed and its effect on the ownership of a one-half interest in oil and gas beneath a tract of land in Marshall County, West Virginia. When a deed is ambiguous, a court must weigh extraneous evidence like the conduct of the grantor and grantee to determine the parties' intent. A court must also adopt any reasonable interpretation of the deed most favorable to the grantee.

806 S.E.2d 452

As we discuss below, we find the 1977 deed is ambiguous and of such doubtful meaning that reasonable minds disagree as to the deed's intent. The Circuit Court of Marshall County incorrectly found the deed was clear, and incorrectly found that the grantors did not convey the one-half interest in oil and gas to the grantee. Because the deed was ambiguous, the circuit court should have considered the parties' conduct after delivery of the deed—namely that the grantors to the deed stopped paying taxes on the oil and gas interest while the grantee started paying taxes. We reverse the circuit court's decision, and remand the case for entry of a judgment in favor of the grantee.

I.

FACTUAL AND PROCEDURAL BACKGROUND

Before 1957, Clifford and Beulah Franklin owned the entire tract of land in dispute in this case. Then, by a deed dated January 30, 1957, the Franklins conveyed the tract to Okey and Frances Yoho in fee simple, with one important reservation: the Franklins "excepted and reserved" for themselves an undivided one-half interest in the oil and gas underlying the tract. They conveyed the other one-half interest to the Yohos. The 1957 deed provided:

There is further excepted and reserved from this conveyance an undivided one-half (1/2) interest in the oil and gas, including gas storage rights, within and underlying the land hereby conveyed, together with such mining rights and privileges as may be necessary and convenient to the operation thereof for production, storage or observation of said oil and gas and the strata containing the same.

Hence, the parties agree that, under the 1957 deed, the Yohos owned the surface of the tract and owned a one-half undivided interest in the oil and gas.

Over the next 20 years, tax documents in the record indicate that the Yohos paid real estate taxes on that one-half oil and gas interest. For instance, tax records for 1976 show that the Yohos were assessed taxes on the tract and the one-half oil and gas interest, described in the tax records as "102.080 [acres] Long Run &½ O&G." The tax records also show the Franklins were assessed taxes on the other one-half interest, described as, "½ Int[erest] 102.08 [acres] O&G Long Run."

In a deed dated April 5, 1977, the Yohos conveyed the tract to defendant Rona Lee McCardle.¹ The 1977 deed conveyed to Ms. McCardle "the same property conveyed to Okey F. Yoho and Frances A. Yoho, his wife, by Clifford E. Franklin and Beulah Franklin, his wife, by deed dated the 30^th day of January, 1957[.]"

However, the parties dispute the meaning of language in the 1977 deed regarding the one-half interest in the oil and gas. The scrivener of the 1977 deed included an "excepted and reserved" paragraph identical, word-for-word, to that contained in the Franklins' 1957 deed, which provided:

There is further excepted and reserved from this conveyance an undivided one-half (1/2) interest in the oil and gas, including gas storage rights, within and underlying the land hereby conveyed, together with such mining rights and privileges as may be necessary and convenient to the operation thereof for production storage or observation of said oil and gas and the strata containing the same.

In an affidavit, Ms. McCardle stated that it was her "understanding and intention" that she purchased one-half of the oil and gas beneath the tract. Over the next 30-plus years after 1977, tax documents indicate that Ms. McCardle paid real estate taxes on the one-half oil and gas interest. For instance, tax records from 1978 show Ms. McCardle was assessed taxes on land described as "102.080 [acres] Long Run & 1/2 O&G." In her affidavit, Ms. McCardle stated that since 1977 she has paid all of the real estate taxes due on the surface estate and on the one-half oil and gas interest.

806 S.E.2d 453

The same tax documents show that, after conveying the property to Ms. McCardle in 1977, the Yohos did not pay real estate taxes on the oil and gas interest. An entry in the 1977 tax records indicates that the Yohos were initially assessed taxes on the tract. However, the tax entry for the Yohos has a line scrawled through with the handwritten notation, "to Rona Lee McCardle DB 465 p. 256 4-5-77 Pd$39500." The 1977 deed from the Yohos to Ms. McCardle is on record in the Marshall County Clerk's Office in Deed Book 465 at page 256. There are no entries in the tax records suggesting that the Yohos paid taxes on the tract or the one-half oil and gas interest after 1977.

In 2008, Ms. McCardle entered into an oil and gas lease with defendant Gastar Exploration, Inc. The lease covers the Marshall County tract described in the 1977 deed between Ms. McCardle and the Yohos. Gastar subsequently drilled a well and began extracting oil and gas from beneath the tract.

Litigation over the 1977 Deed

Mrs. Yoho died in 1979; Mr. Yoho died intestate in 1997. Then, in 2013, sixteen years after Mr. Yoho's death, plaintiff Gary Rine was appointed administrator of the estate of Mr. Yoho, to act on behalf of Mr. Yoho's heirs (a group we hereafter call "the Yoho heirs").

On October 15, 2013, plaintiff Rine and the Yoho heirs filed a complaint² against defendants Gastar and Ms. McCardle. The Yoho heirs asserted that, in the 1977 deed, the Yohos retained ownership of the one-half undivided interest in the oil and gas. In other words, the heirs contend that the Yohos did not convey their one-half interest to Ms. McCardle, and that the interest eventually passed on to the Yoho heirs. The Yoho heirs alleged that the defendants have trespassed on their oil and gas interest and, by taking oil and gas from the ground, engaged in conversion. As relief, the Yoho heirs sought compensatory damages, an injunction, and an order creating a lease between the heirs and Gastar.

The Yoho heirs later amended the complaint to request a declaratory judgment interpreting the 1977 deed. In December 2015, the parties informed the circuit court that they had agreed to dispose of the declaratory judgment action while staying the remainder of the case. Based upon the parties' agreement, the circuit court stayed discovery on all claims except the declaratory judgment claim.

In April 2016, the Yoho heirs filed a motion for summary judgment on the declaratory judgment claim and stated that no genuine question of material fact existed regarding ownership of the disputed oil and gas rights.³ The Yoho heirs argued that the 1977 deed conveyed only the surface of the tract to Ms. McCardle and unambiguously reserved to the Yohos ownership in the one-half interest in the oil and gas. The defendants opposed the motion and asked the circuit court to enter judgment in the defendants' favor. The defendants argued that the 1977 deed was ambiguous, and argued that the parties' actions in the decades after delivery of the deed left no question that the Yohos believed Ms. McCardle was the sole owner of the one-half interest after 1977.

In an order dated September 13, 2016, the circuit court decided that the 1977 deed was clear and unambiguous. The circuit court declared that the Yohos kept for themselves the one-half interest in the oil and gas and that the deed "did not convey any mineral interest" to Ms. McCardle. Defendants Gastar and Ms. McCardle now appeal the circuit court's declaratory judgment order.

II.

STANDARD OF REVIEW

The salutary purpose of a declaratory judgment action is to resolve legal questions.

806 S.E.2d 454

Hence, "[a] circuit court's entry of a declaratory...