Croston v. Emax Oil Co.

• Decision Date: 30 October 1995
• Docket Number: No. 22686,22686
• Citation: Croston v. Emax Oil Co., 195 W.Va. 86, 464 S.E.2d 728 (W. Va. 1995)
• Parties: , 132 Oil & Gas Rep. 655 Amon CROSTON, Lois Croston, Rettie Newman and Fred Newman, Plaintiffs Below, Appellants, v. EMAX OIL COMPANY, A VIRGINIA CORPORATION, Defendant Below, Appellee.
• Court: West Virginia Supreme Court

Page 728

464 S.E.2d 728

195 W.Va. 86, 132 Oil & Gas Rep. 655

Amon CROSTON, Lois Croston, Rettie Newman and Fred NewmanPlaintiffs Below, Appellants, v.EMAX OIL COMPANY, A VIRGINIA CORPORATION, Defendant Below, Appellee.

No. 22686.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 27, 1995.

Filed Oct. 30, 1995.

Syllabus by the Court

1." 'A motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify that application of the law.'Syllabus point 3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of New York, 148 W.Va. 160, 133 S.E.2d 770(1963)."Syllabus point 1, Andrick v. Town of Buckhannon, 187 W.Va. 706, 421 S.E.2d 247(1992).

2."Summary judgment is appropriate where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, such as where the nonmoving party has failed to make a sufficient showing on an essential element of the case that it has the burden to prove."Syllabus point 4, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755(1994).

3."Fraud cannot be predicated on a promise not performed.To make it available there must be a false assertion in regard to some existing matter by which a party is induced to part with his money or his property."Syllabus point 1, Love v. Teter, 24 W.Va. 741(1884).

4.The failure to plead particularly the circumstances constituting fraud not only inhibits full review of the substance of the claim of fraud by this Court on appeal from the grant of summary judgment; such failure also precludes the introduction of evidence supportive of any general allegation of fraud contained in the complaint had the case gone to trial, unless permitted by Rule 15(b),R.Civ.P. Rule 9(b),West Virginia Rules of Civil Procedure.

5." 'Where the same lessee holds under two adjoining lessors, he may not fraudulently or evasively so drill his wells as to drain the property of one to the detriment of the other.'Barnard v. Monongahela Natural Gas Co., 216 Pa. 362, 65 Atl. 801."Syllabus point 1, Dillard v. United Fuel Gas Company, 114 W.Va. 684, 173 S.E. 573(1934).

6.Although an oil and gas lessee, who also is lessee of adjoining land, has a duty to avoid the fraudulent or evasive drainage of the property of one to the detriment of the other, there presently is no implied duty to unitize or "pool" the leasehold of the one with the leasehold of the other with respect to shallow wells not located in a coal field or utilized in a secondary recovery program.

Thomas R. Michael, Michael & Kupec, Clarksburg, for appellants.

Boyd L. Warner, Waters, Warner & Harris, Clarksburg, for appellee.

ALBRIGHT, Justice:

This is an appeal by Amon Croston and others from an order of the Circuit Court of Barbour County granting the appellee, Emax Oil Company, summary judgment in an action brought by the appellants over an oil and gas lease.The appellants alleged in their complaint that Emax Oil Company had induced them to enter into the lease through fraud and had then failed to protect their land from drainage by another well drilled by Emax on an adjoining tract of land.On appeal, the appellants claim that there were issues of material fact remaining when summary judgment was entered and that, under the circumstances, the circuit court erred in granting the motion.After reviewing the questions raised and the facts presented, this Court disagrees with the appellants' assertions.The judgment of the circuit court is, therefore, affirmed.

Amon Croston and the other appellants in this proceeding owned approximately fourteen and one-half acres located in Barbour County, West Virginia, when, in 1991, the appellee, Emax Oil Company, showed an interest in leasing certain land in the area.Upon learning that Emax had an interest in leasing land in the area, the appellants contacted Emax and expressed an interest in leasing their property to Emax.

The record shows that, while negotiations were in progress, the geologist for Emax believed that the appellants' tract could be unitized or "pooled" with adjoining land, including a tract owned by Roy and Ruth Ann Mayle.Further, according to evidence adduced by the appellants, during the discussions, the appellants were positively told that their tract would be unitized or "pooled" with the Mayle tract.

On May 1, 1991, the appellants entered into the lease in issue in the present case.That lease contained a number of provisions particularly relevant to the present proceeding.First, it provided that Emax Oil Company had the right to surrender the lease, apparently at any time, for cancellation.It specifically stated:

[T]he party of the second part [Emax Oil Company], its successors and assigns, shall have the right to surrender this lease for cancellation, after which all payments and liabilities thereafter to accrue under and by virtue of its terms shall cease and determine, and this lease becomes absolutely null and void.

The lease also provided that Emax could unitize or "pool"the appellants' acreage with other acreage.The lease provided:

The Lessor further grants to Lessee, his heirs and assigns, the right to unitize this lease or any part thereof with other leases to prevent unnecessary drilling for and excessive depletion of such natural resources or to meet Gas Purchase Contract acreage requirements in the procuring of such contracts or to obtain maximum payments permitted by such contracts.In the event this lease is so unitized, the Lessor agrees to accept, in lieu of the royalty herein before recited, such proportion of the royalty above provided, as the acreage unitized by this lease bears to the total acreage comprising the unit.Unitization has the same effect as if a well were drilled on this tract, excepting provisions for free gas.

Lastly, the lease contained two somewhat conflicting free gas clauses.The first free gas clause, which was a part of the printed form which provided the essential background or structure of the lease, provided:

The Lessor may, at his sole expense, from any one well drilled on said land at a point of connection designated by the Lessee, take gas therefrom free for his own use, subject, however to the operations, maintenance and abandonment of the well by Lessee.Lessor is to install and use such gas in a safe, proper manner at their own risk thereby releasing and discharging Lessee from any liability arising therefrom.Said free gas shall be limited to 200,000 cubic feet annually and all gas in excess of said limit shall be paid for by the Lessor at the current price of the gas utility serving the area.

The second free gas clause, which was typed onto the basic form, stated:

Free gas will be available at the wellhead with a limit of 200,000 cubic feet.It can be divided between three dwellings and gas used over the limit will be withheld from the royalty of the party or parties using the gas.This applies to any well drilled on the lease or any lease pooled herewith.

After the appellants executed the lease, Emax Oil Company drilled a well on the adjoining Mayle tract within forty feet of the appellants' property.This well was a "shallow well" within the definition of W.Va.Code § 22C-8-2(21), and it appears to have been drilled for new production and not for secondary recovery purposes.¹A second well was drilled on another neighboring parcel within several hundred feet of the appellants' property.This well was also a shallow well within the statutory definition and appears also to have been drilled for new production and not for secondary recovery purposes.Although the drilling produced wells capable of production, actual production was delayed because of the necessity of constructing pipelines to collect and transport the gas.

According to the appellants, after the two wells were drilled Emax contacted them and demanded that they sign a new lease without a free gas clause.Emax was apparently concerned that, given the conflicting free gas clauses in the appellants' lease, as well as the language in its leases with the Mayles and other lessors, it could not legally supply the appellants with free gas from a unit or pool.

In the discussions relating to a new lease, the appellants remained adamant on the free gas issue, and when it appeared that a new agreement could not be reached between the parties, Emax surrendered the lease on October 9, 1992, pursuant to the surrender and cancellation right granted to it in the lease.

Emax did not begin actual production of gas from its wells on the land adjoining that of the appellants until August 4, 1993, almost a year after it surrendered the lease with the appellants.

On May 6, 1993, before actual production on the adjoining tracts began, the appellants filed the complaint instituting the present proceeding.The complaint contained the following allegation:

The Defendant[Emax Oil Company] has made willful, and intentionally fraudulent, and false misrepresentations to the State of West Virginia and to the Plaintiffs and has intentionally attempted to subvert and destroy the implied covenant to protect against drainage and has in fact failed to protect against drainage of the Plaintiffs' oil and gas.

Following the filing of the complaint and other pleadings, extensive discovery was conducted.Thereafter the appellee, Emax Oil Company, moved for summary judgment.The circuit court granted that motion on June 2, 1994.In granting the motion, the court specifically found that Emax Oil Company had the right to surrender the lease and that the lease was surrendered prior to the time Emax Oil Company began production on an adjoining lease.The court also, in essence, found that there had been no drainage of the appellants' property while the lease was in effect and that Emax had not violated any duty which it owed the appellants to protect their property against drainage.

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