Eqt Gathering, LLC v. Big Sandy Co., 2015-CA-000490-MR
| Decision Date | 22 July 2016 |
| Docket Number | NO. 2015-CA-000490-MR,2015-CA-000490-MR |
| Parties | EQT GATHERING, LLC; and EQT PRODUCTION COMPANY APPELLANTS v. BIG SANDY COMPANY, LP APPELLEE |
| Court | Kentucky Court of Appeals |
NOT TO BE PUBLISHED
APPEAL FROM PIKE CIRCUIT COURT
Big Sandy and Kentucky West Virginia Gas Company, LLC ("KWVA"), a predecessor-in-interest to EQT, entered into the aforementioned easement agreement (the "Agreement") on August 1, 2003, for what the Agreement describes as "the construction, operation and maintenance of a pipeline over, through and across certain of Big Sandy's Surface Tracts and Mineral Tracts in Pike County, Kentucky[.]" More particularly, Paragraph 1 of the Agreement provides:
Big Sandy hereby grants and conveys unto KWVA, subject to any conditions or reservations set forth herein or of record, and without warranty or representation of title or condition of the premises of any kind, a non-exclusive sixty foot (60') wide temporary easement for initial construction, and a non-exclusive thirty foot (30') wide right of way and easement (the "Easement") for a pipeline twelve inches (12") or less in diameter, for the transportation of natural gas (the "Pipeline") over, through and across certain Surface Tracts and Mineral Tracts of Big Sandy situated on the waters of Elkhorn Creek in Pike County, Kentucky, the centerline of which is as shown in the color print attached hereto and made a part hereof and marked as Exhibit "A", being a portion of the property conveyed to Big Sandy by Big Sandy Company, Inc., by deed dated July 16, 1984, and recorded in the Clerk's Office of Pike County, in Deed Book No. 581, Page 477.
(Emphasis added.)
The parties generally refer to what is contemplated in this Agreement as the "Myra Pipeline."
Much of the conflict in this litigation has focused upon the meaning of the phrases emphasized above. Big Sandy owns a mineral estate in the thirty-fiveor so numbered tracts of land depicted on the "color print attached" to the Agreement (the "Map"). In some, but not all of those tracts, it also owns a surface estate. The parties disagree whether "certain Surface Tracts and Mineral Tracts of Big Sandy," as stated above, refers to every tract owned by Big Sandy depicted on the color print map, or only to the tracts where Big Sandy owns both a mineral estate and surface estate.
This disagreement has arisen because, to the extent that Big Sandy eventually decides to engage in mining activities in the vicinity of an area covered by the easement described in the Agreement, the Agreement stipulates EQT is required to either purchase the minerals underlying its pipeline or remove and relocate its pipeline at its own expense. Conversely, if the pipeline is not covered by the Agreement, Big Sandy would be liable for these expenses under general principles of Kentucky law. See Columbia Gas Transmission Corp. v. Limited Corp., 759 F.Supp. 343, 350-53 (E.D. Ky. 1990). And, as it happens, Big Sandy intends to commence mining operations in the vicinity of the Myra Pipeline on three of the numbered tracts in which it only holds a mineral estate (depicted in the lower right-hand corner of the Map as tracts "1," "2," and "3").
For its part, EQT found significance in the Map's use of different colors on the Map to differentiate Big Sandy's mineral estates from Big Sandy's mineral and surface estates, as well as the Map's use of colors and notations to differentiate sections of the Myra Pipeline that had already been constructed prior to the Agreement, from sections that had yet to be constructed (the map lists theformer as "pipe in ground" and the latter as "proposed route"). EQT noted that the purpose of the agreement was to allow "construction" of a pipeline and argued that because KWVA had already secured permission from the surface owners of tracts 1, 2, and 3 to construct part of the Myra Pipeline, and because KWVA had already constructed the section of the Myra Pipeline overlying those tracts prior to executing the Agreement with Big Sandy, the parties could not have intended tracts 1, 2, and 3 to be subject to the terms of the Agreement.
In its own analysis of the Agreement, however, the circuit court shared Big Sandy's point of view and focused almost exclusively upon the Map. In relevant part, the circuit court held:
Attached to the Agreement is a map depicting the location of the Myra Pipeline where it crosses Big Sandy's mineral and surface tracts (the "Myra Pipeline Map"). The Myra Pipeline Map is referred to in the Agreement and is a part of the Agreement. On the Myra Pipeline Map the color print indicates pipe in ground in red ink and proposed route in blue ink. Nothing in the Agreement states that it is limited to new pipeline construction. Nothing in the Agreement indicates that the parties would have different duties between the centerline of the pipeline; whether the line was new or old or depicted in blue or red.
. . . .
The Agreement unambiguously states that the easement is "for a pipeline twelve inches (12") or less in diameter, . . . the centerline of which is as shown on the color print attached hereto and made a part hereof and marked as Exhibit 'A'. . . ." The parties agree that the Myra Pipeline Map was made a part of the Pipeline Easement Agreement. The Myra Pipeline Map shows numbered tracts of land along the Pipeline's route, and the tracts arecolor-coded to indicate where Big Sandy is the "coal owner" and where it has "right of way" rights. The numbered tracts are not addressed in the Agreement itself. Had the parties intended to exclude specific tracts from the scope of the Pipeline Easement Agreement, they would have included language to that effect in the Agreement or on the Myra Pipeline Map. No such language is evident. Therefore, according to the plain and unambiguous language of the Agreement, the Court holds that the parties intended for the Agreement to cover the entire pipeline depicted on the Myra Pipeline Map, including the portion overlying Tracts 1, 2 and 3. The same reasoning applies to the different colors of the pipe center line.
With that said, we now proceed to address the arguments raised by EQT on appeal.
In its brief, EQT summarizes its first argument as follows: "The notice provision in the Pipeline Easement Agreement is vague and ambiguous, requiring a determination of fact as to whether Big Sandy provided sufficient notice to EQT to require EQT to make an election under the Agreement."
We have no jurisdiction to review this argument because it is unrelated to the scope of the easement contemplated in the Agreement, the sole issue addressed in the circuit court's judgment that was made appealable pursuant to Kentucky Rules of Civil Procedure 54.02. Rather, this argument is directed toward an issue that remains pending and has yet to be addressed below, i.e., whether, as a predicate to declaring EQT in breach of contract, Big Sandy properly invoked its rights under the notice provision of their Agreement.
Next, EQT argues the only proper interpretation of the Agreement (or, at least for purposes of determining ambiguity, an equally reasonable interpretation of the Agreement) is that it excludes the portion of the "pipe in ground" pipeline depicted on the Map overlying Tracts 1, 2, and 3. This, it reasons, is because (1) nothing in the Agreement specifically states that all of the pipeline, as depicted on the Myra Pipeline map, is subject to the Agreement; (2) the map uses colors to differentiate pipeline that has already been constructed ("pipe in ground") from additional segments of the pipeline that would later connect to the already-constructed pipeline ("proposed route"); (3) the Agreement specifically grants an easement for the "construction, operation and maintenance of a pipeline" (EQT's emphasis), which must mean that it only applies to pipeline segments that will be constructed; and (4) in any event, it would have made no sense for EQT to secure some sort of easement from Big Sandy to place a pipeline on the surface of tracts where Big Sandy did not own the surface, but only owned the minerals (i.e., tracts 1, 2, and 3).
Findings of fact resulting from a trial in a declaratory action shall not be set aside unless clearly erroneous. Baze v. Rees, 217 S.W.3d 207, 210 (Ky. 2006) (citing Largent v. Largent, 643 S.W.2d 261 (Ky. 1982)); see also American Interinsurance Exchange v. Norton, 631 S.W.2d 851, 852 (Ky. App. 1982). However, our review is de novo as to the trial court's conclusions of law. Baze, 217 S.W.3d at 210. The "interpretation and construction of a contract is a matter of law for the courts to decide." New Life Cleaners v. Tuttle, 292 S.W.3d 318, 321(Ky. App. 2009). When interpreting a contract, the primary purpose is "to effectuate the intentions of the parties." Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 384 (Ky. App. 2002). The best evidence of the intent of the parties is the words the parties deliberately included in their agreement. When a court finds the language of the agreement to be clear and unambiguous, the "written instrument will be strictly enforced according to its terms." Mounts v. Roberts, 388 S.W.2d 117, 119 (Ky. 1965).
With this standard in mind, we agree with EQT's conclusion that the Agreement unambiguously excludes the section of its pipeline overlying tracts 1, 2, and 3, but EQT's reasoning largely ignores the contractual language supporting this conclusion. Paragraph 5, for example, provides:
There is expressly excepted from the foregoing grant and demise [i.e., the entire easement contemplated in the Agreement], and...
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