Cunningham Energy, LLC v. Bd. of Educ.
| Decision Date | 23 March 2021 |
| Docket Number | No. 20-0346,20-0346 |
| Parties | Cunningham Energy, LLC, Proposed Intervenor Below, Petitioner v. Board of Education of the County of Kanawha, a Statutory Corporation, Petitioner Below, Respondent |
| Court | Supreme Court of West Virginia |
Petitioner Cunningham Energy, LLC, by counsel Gerald M. Titus III, Travis H. Eckley, and Wesley A. Shumway, appeals the March 10, 2020, order of the Circuit Court of Kanawha County denying its motion to intervene in the underlying condemnation action. Respondent Board of Education of the County of Kanawha, by counsel J. Nicholas Barth, filed a response in support of the circuit court's order. Petitioner filed a reply.
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 that the court below erred by failing to apply the correct standard in ruling on petitioner's motion to intervene. Accordingly, we reverse the circuit court's order and remand this case for further proceedings consistent with this decision. Because this case satisfies the "limited circumstances" requirement of Rule 21(d) of the West Virginia Rules of Appellate Procedure, we find that a memorandum decision is appropriate to resolve the issues presented.
The dispute in this case concerns a 34.66-acre parcel of land ("the parcel") in Kanawha County and the mineral interests underneath and adjacent to the parcel. Until her death in March of 2011, Patsy Haas owned the surface of the parcel. She died intestate, and her children, Kelly Barnhart and James Haas, Jr., each inherited an undivided one-half interest in the surface of the parcel. On August 11, 2011, by general warranty deed, petitioner obtained an interest in the surface of the parcel.1 Beginning in 2010 and continuing through September 2018, petitioner alsoaccumulated various leasehold interests in the minerals underneath the parcel and underneath the property surrounding the parcel.2 Petitioner is a business that owns and develops oil and gas interests.
On November 29, 2018, petitioner and Vesta O&G Holdings, LLC ("Vesta") executed a letter of intent ("the first LOI"), agreeing that Vesta would form a Delaware limited liability company for the purpose of acquiring and holding certain real property and leases held by petitioner ("the assets"). Among other things, the assets included petitioner's interest in the surface of the parcel, petitioner's leasehold interests in the minerals underneath the parcel, and petitioner's leasehold interests in minerals underneath property adjacent to the parcel. Under the first LOI, petitioner proposed transferring the assets to Vesta for Vesta to then transfer to a new limited liability company. Petitioner would be offered a minority ownership position in the new company, and Vesta would contribute capital to pay certain debts of petitioner and fund the drilling of seven oil wells in West Virginia. Petitioner claims that, within days of executing the first LOI, Vesta began paying petitioner's debts as agreed, and on December 4, 2018, petitioner transferred the assets to Vesta. Petitioner claims that although Vesta formed the new limited liability company as agreed, Vesta did not transfer the assets to that company.
In December of 2018, petitioner applied to the West Virginia Department of Environmental Protection ("WVDEP") for five "well work" permits for shallow horizontal oil wells.3 The following February, petitioner applied to the WVDEP for two additional permits. The applications for the permits proposed that a well pad would be located on the surface of the parcel, with "laterals" extending through and beyond the parcel. WVDEP granted the applications and issued the seven permits in February and March of 2019.
Meanwhile, respondent was considering the parcel as the location for a new elementary school. On March 19, 2019, respondent purchased a special warranty deed from James Haas, Jr. purporting to convey to respondent a one-half undivided interest in the surface of the parcel.
On May 15, 2019, petitioner filed a lawsuit against Vesta in federal district court, alleging, among other things, that Vesta had breached the terms set forth in the first LOI. Vesta asserted a counterclaim against petitioner. A few months later, on October 18, 2019, they executed a second letter of intent ("the second LOI") along with a Memorandum of Understanding ("MOU"). Through these two documents, petitioner and Vesta agreed to dismiss all claims pending in federal district court without prejudice. The claims were eventually dismissed as agreed. Petitioner and Vesta also agreed to perform certain proposed transactions by November 15, 2019. The second LOI stated that, "[i]n the event the parties do not consummate the Proposed Transaction by [] [November 15, 2019], the [assets] shall be immediately assigned back to [petitioner]."
The second LOI and the MOU acknowledged that the parcel would most likely be sold or condemned so that a school could be built on the parcel. The MOU stated that "[c]ondemnation and subsequent construction of the school would disrupt and effectively prohibit planned development of oil and gas resources underlying the [parcel], [and] the valuation of such development is projected to be $42,000,000 in present day terms." In the MOU, petitioner and Vesta agreed that, upon sale or condemnation of the parcel, Vesta would receive the first $5,000,000 and the remaining funds would be distributed as follows:
Petitioner obtained a report from a licensed professional engineer estimating the present value of future revenue that would be lost if petitioner was unable to drill seven horizontal wells. That report estimated the lost revenue would total $58,800,000. The report also estimated that an additional $21,000,000 would have been paid to the royalty owners during the estimated years of production. By letter dated October 31, 2019, Petitioner and Vesta jointly offered to sell their interests in the parcel to respondent for $42,000,000. Respondent did not accept the offer.
Petitioner alleges that Vesta did not comply with the second LOI and that Vesta failed to consummate the transactions proposed in the second LOI by November 15, 2019. Thereafter, in December of 2019 and January of 2020, petitioner made demands of Vesta to return the assets. Vesta did not return the assets to petitioner.
On January 16, 2020, respondent filed a petition for condemnation of the parcel and the mineral interests underlying the parcel ("the subject property") in the Circuit Court of Kanawha County. Vesta was named as a respondent in that proceeding. Petitioner was not.
On January 24, 2020, petitioner filed a second lawsuit against Vesta in federal district court, alleging breaches of the first LOI, the second LOI, and the MOU, and asking that Vesta be required to perform its obligations under the first LOI or return the assets to petitioner. Four days later, on January 28, 2020, petitioner filed a notice of lis pendens in the federal action seeking to enforce an equitable ownership interest in the parcel, the leasehold interests in the minerals underneath the parcel, and the leasehold interests in the minerals underneath the property surrounding the parcel.The lis pendens was recorded in Kanawha County's property records on February 19, 2020. The federal lawsuit is still pending.4
Petitioner filed a motion to intervene in the condemnation action on February 19, 2020, arguing that it has a right to intervene under Rule 24(a)(2) of the West Virginia Rules of Civil Procedure and State ex rel. Ball v. Cummings, 208 W. Va. 393, 540 S.E.2d 917 (1999). The circuit court held a hearing on the motion on February 26, 2020. Although petitioner asserted that it was the rightful owner of the subject property pursuant to the second LOI, respondent opposed intervention, stating, "I would suggest it be reversible error to allow a non-deed holding party as a defendant in a condemnation action." Vesta did not take a position as to whether petitioner should be permitted to intervene. The circuit court denied petitioner's motion, explaining, "I believe that because at the time of the filing of this petition there was no notice other than this deed, that the motion to intervene is not proper in this case."
The circuit court entered an order on March 10, 2020, memorializing its ruling from the hearing. The circuit court found that, as of the date the petition for condemnation was filed, petitioner owned no interest in the subject property because petitioner had conveyed its interest in the surface of the parcel and its leasehold interests in the underlying minerals to Vesta. The circuit court also found that the lis pendens was filed after the petition for condemnation was filed. The circuit court, in denying the motion to intervene, concluded that petitioner had no interest in the subject property and, therefore, was not a proper party to the condemnation proceeding.
Petitioner appeals the circuit court's March 10, 2020 order.5 In its sole assignment...
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