Caballo Coal Company v. Fidelity Exploration & Production Company, 03-91.

• Decision Date: 10 February 2004
• Docket Number: No. 03-91.,03-91.
• Citation: 84 P.3d 311,2004 WY 6
• Parties: CABALLO COAL COMPANY, a Delaware Corporation, Appellant (Defendant), v. FIDELITY EXPLORATION & PRODUCTION COMPANY, a Delaware Corporation, Appellee (Plaintiff), and Marion Jankowski; The Catherine L. Demchock Family Mineral Trust Dated 9-25-01; Charles Irwin Jenkins; Patricia Marie Stricker; Donald Ray Jenkins, Appellees (Defendants).
• Court: Wyoming Supreme Court

84 P.3d 311

2004 WY 6

CABALLO COAL COMPANY, a Delaware Corporation, Appellant (Defendant), v. FIDELITY EXPLORATION & PRODUCTION COMPANY, a Delaware Corporation, Appellee (Plaintiff), and Marion Jankowski; The Catherine L. Demchock Family Mineral Trust Dated 9-25-01; Charles Irwin Jenkins; Patricia Marie Stricker; Donald Ray Jenkins, Appellees (Defendants).

No. 03-91.

Supreme Court of Wyoming.

February 10, 2004.

Representing Appellant: Dan B. Riggs and Michael C. Steel of Lonabaugh and Riggs, Sheridan, WY. Argument by Mr. Steel.

Representing Appellee Fidelity Exploration: S. Thomas Throne of Throne & Hurst, Sheridan, WY.

Representing Appellee Jankowski: Lynn M. Smith of Hart & Beisher, Sheridan, WY.

Representing Appellees Jenkinses and Stricker: Clay B. Jenkins, Sheridan, WY. Argument by Mr. Jenkins.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

LEHMAN, Justice.

[¶ 1] This is an appeal from summary judgment entered in favor of appellees Marion Jankowski, the Catherine L. Demchock Family Mineral Trust dated 9/25/01, Charles Irwin Jenkins, Patricia Maria Stricker, and Donald Ray Jenkins (collectively appellees) and against appellant Caballo Coal Company (CCC). In granting summary judgment, the district court ruled that appellees' predecessors had not conveyed the rights to coalbed methane gas (CBM) when they transferred certain rights in real property to CCC's predecessors. We reverse.

ISSUES

[¶ 2] Appellant sets forth the following issue:

Do warranty deeds that grant "all minerals contained in or associated with" coal, without any reservation, convey the Grantors' interest in coalbed methane?

Appellees style the issue on appeal as:

Do 1975 deeds that grant coal "[t]ogether with all of grantors' undivided interests in and to all other minerals, metallic or nonmetallic contained in or associated with the deposits of coal conveyed hereby or which may be mined and produced with said coal, subject to the reserved royalty hereinafter provided" convey gas as well, simply because the gas reservoir is in the coal formation?

Appellee, Fidelity Exploration & Production Company (FEPC), who initiated this action as an interpleader pursuant to W.R.C.P. 22 does not set forth an issue on appeal.

FACTS

[¶ 3] On January 8, 1975, Theresa Scullen and Annie Jenkins issued a warranty deed to the Carter Oil Company conveying specific interests in land located near Sheridan, Wyoming (Scullen deed). Three days later, Elizabeth C. Lynch also issued a warranty deed to the Carter Oil Company conveying specific interests in land located near Sheridan, Wyoming (Lynch deed).

[¶ 4] Both the Scullen and Lynch deeds set forth, in applicable part:

GRANTOR ... CONVEYS AND WARRANTS to THE CARTER OIL COMPANY, GRANTEE, ... all of GRANTOR'S undivided interest in and to the coal upon and within and underlying the following described lands situate in the County of Sheridan, State of Wyoming....

TOGETHER WITH all of GRANTOR'S UNDIVIDED interest in and to all other minerals, metallic or nonmetallic, contained in or associated with the deposits of coal conveyed hereby or which may be mined and produced with said coal, subject to the reserved royalty hereinafter provided.

The warranty deeds both also provided that the grantors would be paid certain royalties with respect to the coal mined from the property. However, the grantors did not reserve any other interests in the subject land in either of the deeds.

[¶ 5] Appellees are the successors in interest to Theresa Scullen, Annie Jenkins, and Elizabeth C. Lynch under the Scullen and Lynch deeds. CCC is the successor in interest of Carter Oil Company under the Scullen and Lynch deeds. FEPC acquired oil and gas leases from CCC and appellees, which cover lands including those which are specified in the Scullen and Lynch deeds, and currently produce CBM from coal seams located on the land.

[¶ 6] On May 22, 2002, FEPC filed a complaint for interpleader asking the district court to determine who was entitled to receive royalty payments on the production of CBM. Upon cross-motions, the district court entered summary judgment in favor of appellees and against CCC. This appeal followed.

STANDARD OF REVIEW

[¶ 7] We have often stated our well-established standard of review for summary judgments. In McGee v. Caballo Coal Co., 2003 WY 68, ¶ 6, 69 P.3d 908, ¶ 6 (Wyo.2003) (quoting Garnett v. Coyle, 2001 WY 94, ¶¶ 3-5, 33 P.3d 114, ¶¶ 3-5 (Wyo.2001)), we stated:

Summary judgment motions are determined under the following language from W.R.C.P. 56(c):

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

The purpose of summary judgment is to dispose of suits before trial that present no genuine issue of material fact. Moore v. Kiljander, 604 P.2d 204, 207 (Wyo.1979). Summary judgment is a drastic remedy designed to pierce the formal allegations and reach the merits of the controversy, but only where no genuine issue of material fact is present. Weaver v. Blue Cross-Blue Shield of Wyoming, 609 P.2d 984, 986 (Wyo.1980). A fact is material if proof of that fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties. Schuler v. Community First Nat. Bank, 999 P.2d 1303, 1304 (Wyo.2000). The summary judgment movant has the initial burden of establishing by admissible evidence a prima facie case; once this is accomplished, the burden shifts and the opposing party must present specific facts showing that there is a genuine issue of material fact. Boehm v. Cody Country Chamber of Commerce, 748 P.2d 704, 710 (Wyo.1987); Gennings v. First Nat. Bank of Thermopolis, 654 P.2d 154, 156 (Wyo.1982).

This Court reviews a summary judgment in the same light as the district court, using the same materials and following the same standards. Unicorn Drilling, Inc. v. Heart Mountain Irr. Dist., 3 P.3d 857, 860 (Wyo.2000) (quoting Gray v. Norwest Bank Wyoming, N.A., 984 P.2d 1088, 1091 (Wyo.1999)). The record is reviewed, however, from the vantage point most favorable to the party who opposed the motion, and this Court will give that party the benefit of all favorable inferences that may fairly be drawn from the record. Garcia v. Lawson, 928 P.2d 1164, 1166 (Wyo.1996).

See also Hickman v. Groves, 2003 WY 76, ¶ 5, 71 P.3d 256,

¶ 5 (Wyo.2003).

DISCUSSION

[¶ 8] The underlying facts and the main issue presented in this case are very similar to those that existed in the cases of Newman v. RAG Wyoming Land Co., 2002 WY 132, 53 P.3d 540 (Wyo.2002) and McGee, previously determined by this court. In both Newman and McGee we considered whether CBM had been conveyed by 1970 deeds conveying the surface of certain property and "coal and minerals commingled with [the] coal" and reserving all "oil, gas, and other minerals" not otherwise conveyed. Newman, at ¶¶ 1 and 3-5, and McGee, at ¶¶ 3-5. Recently, in Hickman, we considered whether CBM had been reserved by landowners who in 1944 conveyed rights in land but reserved "one-half of all oil and commercial gravel rights" and, in doing so, clarified the principles we employ when interpreting such conveyances.

[¶ 9] Our analysis in Newman and McGee began by setting forth the historical background of CBM. This court recognized that for over a century CBM had been well known and had long been considered a dangerous waste product of coal mining. However, in the 1970s the value of CBM was realized resulting in concerted research and development in the area. In the early 1990s techniques were perfected for the efficient development of CBM. Prior to this time, CBM was simply allowed to escape from the coal in the course of open pit surface mining, and no attempt was made to capture it as a valuable resource. Newman, at ¶¶ 6-8, and McGee, at ¶ 8.

[¶ 10] Further in Newman and McGee, we noted the chemistry and composition of CBM. CBM is chemically identical (CH4) to gas produced through conventional methods, and both CBM and gas produced from conventional methods are known as "natural gas." Natural gas emanates from the decay of organic material over time under great pressure and temperature. CBM gas exists in coal in three basic states: as free gas, as gas dissolved in the water in coal, and as gas "absorbed" on the solid surface of the coal. Newman, at ¶¶ 9-10, and McGee, at ¶ 9.¹

[¶ 11] Finally, this court concluded that the ultimate issue to be resolved in Newman and McGee was whether the parties to the deeds in question intended CBM to be conveyed along with the coal estate or reserved to the grantor as part of the oil and gas estate. Newman, at ¶¶ 11 and 14; McGee, at ¶ 10. As explained in Hickman, in making our determinations in these cases, we apply the following standards:

"According to our established standards for interpretation of contracts, the words used in the contract are afforded the plain meaning that a reasonable person would give to them. When the provisions in the contract are clear and unambiguous, the court looks only to the `four corners' of the document in arriving at the intent of the parties. In the absence of any ambiguity, the contract will be enforced according to its terms because no construction is appropriate." Amoco Production Company v. EM Nominee Partnership Company, 2 P.3d 534, 539-40 (Wyo.2000) (citations omitted).

Assignments are contracts and are construed according to the rules of contract interpretation. The determination of the parties' intent is our prime focus in interpreting or construing a contract. If an agreement is in writing and its language is clear and unambiguous, the parties' intention is to be secured from the words of the agreement. When the agreement's language is clear and unambiguous, we consider...