Emmett Ranch, Inc. v. Goldmark Engineering, Inc.

• Decision Date: 15 December 1995
• Docket Number: No. 94-291,94-291
• Citation: 908 P.2d 941
• Parties: EMMETT RANCH, INC., a Wyoming corporation, Appellant (Plaintiff), v. GOLDMARK ENGINEERING, INC., a Wyoming corporation; and Unicorn Drilling, Inc., a Wyoming corporation, Appellees (Defendants).
• Court: Wyoming Supreme Court

Page 941

908 P.2d 941

EMMETT RANCH, INC., a Wyoming corporation, Appellant (Plaintiff), v. GOLDMARK ENGINEERING, INC., a Wyoming corporation; and Unicorn Drilling, Inc., a Wyoming corporation, Appellees (Defendants).

No. 94-291.

Supreme Court of Wyoming.

Dec. 15, 1995.

Thomas F. Reese of Brown & Drew, Casper, representing Appellant.

Steven R. Cranfill of McCarty, Cranfill & Sommers, Cody, representing Appellee, Goldmark Engineering, Inc.

Jody M. Vannoy and Robert P. Golden, Cody, representing Appellee, Unicorn Drilling, Inc.

Before GOLDEN, C.J., and THOMAS, MACY, TAYLOR and LEHMAN, JJ.

TAYLOR, Justice.

Appellant asks this court to review a district court's interpretation of a Surface and Damage Agreement executed between a rancher and an oil company. The district court granted summary judgment in favor of the oil company, regarding the continued validity of the Surface and Damage Agreement, and postponed the trial on certain claims raised by the rancher regarding alleged breaches of that agreement.

We affirm.

I. ISSUES

Appellant, Emmett Ranch, Inc., states the issues on appeal:

1. Is the defendant Unicorn bound by its admissions that the Surface Damage Agreement terminated?

2. Pursuant to Wyoming Statute Annotated § 3-1-141 is the Surface Damage Agreement of no force and effect?

3. Is there a material question of fact as to whether or not the defendant Goldmark terminated production and drilling activities on the subject property?

4. Were there multiple breaches of the Surface Damage Agreement by the defendant resulting in damage?

5. Is there sufficient evidence to allow the issue of punitive damages to be heard by the jury?

Appellee, Goldmark Engineering, Inc., states the issues:

1. Did the district court properly hold that the Surface and Damage Agreement is still in full force and effect?

A. Did the district court properly hold that it could not consider, in ruling on a motion for summary judgment, the conclusions of law sought by appellant's request for admissions?

B. Did the district court properly hold that pursuant to Wyoming Statute Annotated § 3-1-141 the Surface and Damage Agreement is still in full force and effect?

C. Did the district court properly hold, as a matter of law, that there was not a hiatus of six months or more in production activity?

D. Did the district court properly hold that there was no material question of fact regarding alleged breaches of the Surface and Damage Agreement?

2. Did the district court properly grant summary judgment regarding punitive damages?

Appellee, Unicorn Drilling, Inc., reiterates the issues:

1. Did the district court correctly rule that the defendant Unicorn is not bound by its failure to respond to plaintiff Emmett's request for admissions?

2. Did the district court correctly rule that Wyoming Statute Annotated § 3-1-141 does not negate the Surface and Damage Agreement?

3. Did the district court correctly rule that there was never a six-month hiatus in production activity on the subject property?

4. Was there sufficient undisputed and admissible evidence presented by the appellant to show there were multiple breaches of the Surface and Damage Agreement by the appellees resulting in damage?

5. Did the district court correctly rule that the appellant is not entitled to punitive damages in this case?

II. FACTS

Emmett Ranch, Inc., by and through W. Ray Emmett (Emmett), entered into a Surface and Damage Agreement in 1984 with Goldmark Engineering, Inc. (Goldmark). The Surface and Damage Agreement allowed Goldmark access to Emmett's property for the purpose of drilling and producing oil and gas. The well was directionally drilled from Emmett's property to access oil and gas located on federal lease lands adjacent to Emmett's property. On January 29, 1991, a pump unit failed and the well was shut in on February 1, 1991. Following the failure of the pump unit, Emmett indicated a desire to acquire a working interest in the well.

Unicorn Drilling, Inc. (Unicorn) replaced Goldmark as the operator and ultimately acquired a working interest in the well and assigned portions of that working interest to several new owners. Emmett was not among the new owners. On October 1, 1991, the Bureau of Land Management approved the assignment of the federal lease from Goldmark to Unicorn. On November 15, 1991, the well was returned to production. Emmett believed, for various reasons, that the Surface and Damage Agreement was terminated and filed suit. Motions for summary judgment were filed by all parties and the district court granted the motions of Unicorn and Goldmark as those motions pertained to the continued validity of the Surface and Damage Agreement. At Emmett's request, the district court postponed the trial on the remaining issues to enable Emmett to file this appeal.

III. DISCUSSION

Summary judgment is appropriate when the moving party is entitled to judgment as a matter of law and there are no genuine issues of material fact. Pete Lien & Sons, Inc. v. Ellsworth Peck Const. Co., 896 P.2d 761, 762 (Wyo.1995). Interpretation of an unambiguous contract presents a question of law. Id. Since we conclude that there are no material facts at issue in this case, summary judgment is appropriate and we will consider the remaining question of whether the district court's rulings were correct as a matter of law. Those decisions, which are being reviewed de novo, will be granted no special deference. Id.

Emmett's first three arguments attack the validity of the Surface and Damage Agreement which he drafted. The Surface and Damage Agreement gave Goldmark, Unicorn's predecessor in interest, access to Emmett's property for the purpose of drilling and producing oil and gas. Emmett argues that the Surface and Damage Agreement is no longer in effect because (1) Unicorn admitted during discovery that the Surface and Damage Agreement is no longer in effect; (2) the easement articulated in the Surface and Damage Agreement is no longer in effect because it was not recorded within one year of its execution as required under Wyo.Stat. § 34-1-141(c) (1990); (3) the Surface and Damage Agreement terminated pursuant to its own cessation of production clause since the well was out of production for more than six continuous months; and (4) multiple breaches of the Surface and Damage Agreement by Goldmark and Unicorn have resulted in the termination of the agreement. We are not persuaded by Emmett's arguments. We agree with the district court that the Surface and Damage Agreement remains in full force and effect.

Our analysis will address Emmett's first three arguments in reverse order. Emmett argues that since the pump unit on the well failed on January 29, 1991 and production was not resumed until November 15, 1991, the Surface and Damage Agreement terminated pursuant to its own cessation of production clause, which states: "All clean up and restoration requirements shall be completed by Operator within six (6) months after termination of drilling or production activities at any well site or right-of-way." Emmett contends that since the well produced no oil between January 29, 1991 and November 15, 1991, the cessation of production clause terminated the Surface and Damage Agreement.

In Wyoming, the word "production" refers to the severance of minerals from the ground. State v. Pennzoil Co., 752 P.2d 975, 979 (Wyo.1988). However, the phrase "production activities" has a broader meaning. The use of the word "activities" implies an intention to consider more than the severing of minerals from the ground when considering whether production has ceased pursuant to the Surface and Damage Agreement. Production cannot, of course, take place if no activities associated with production occur; however, activities intended to result in production may occur even though those actions fail to result in actual production.

It is undisputed that Goldmark remained on site through the end of March and continued to complete...