Farragut v. Massey

• Decision Date: 20 May 1992
• Docket Number: No. 89-CA-0675,89-CA-0675
• Parties: Mrs. Rosemary T. FARRAGUT v. David H. MASSEY, Mary A. Barnett, Graham Royalty, Ltd., E.V. "Buddy" Cleveland.
• Court: Mississippi Supreme Court

Page 325

612 So.2d 325

Mrs. Rosemary T. FARRAGUT v. David H. MASSEY, Mary A. Barnett, Graham Royalty, Ltd., E.V.

"Buddy" Cleveland.

No. 89-CA-0675.

Supreme Court of Mississippi.

May 20, 1992.

As Modified on Denial of Rehearing Feb. 4, 1993.

Thomas W. Tardy, III, Terryl K. Rushing, Alston Rutherford Tardy & Van Slyke, Mark F. McIntosh, Jackson, for appellant.

David H. Massey, Clark & Massey, Laurel, Robert H. Bass, Tollison Austin & Twiford, Oxford, for appellees.

Before DAN M. LEE, P.J., and ROBERTSON and McRAE, JJ.

McRAE, Justice, for the Court:

Appellees David Massey and Mary Barnett, oil producers, hold a mineral lease covering property owned by appellant Rosemary Farragut. Appellees E.V. Cleveland and Graham Royalty, Ltd. ¹ have conducted drilling operations on adjoining property. Both groups of appellees produce salt water as a by-product of their operations. Massey and Barnett began to dispose of their own salt water in an abandoned well situated on the leasehold property. When Farragut discovered that Massey and Barnett had additionally begun to dispose of salt water from the adjoining property, she sued for damages. The trial court granted summary judgment against Farragut. On appeal, Farragut raises the following issues:

I. Whether the lower court erred in finding the oil, gas and mineral lease authorized disposal of salt water produced off the leasehold?

II. Whether the lower court erred in finding that a release executed in favor of Massey and Barnett extinguished Farragut's right to recover?

III. Whether the lower court erred in denying Farragut's motion to strike the affidavit of David Massey and in considering the affidavit in deliberating on the parties' motions for summary judgment?

IV. Whether the lower court erred in granting summary judgment to defendants?

In their separate appellate brief, Cleveland and Graham Royalty raise the following additional issue:

V. Whether consent by the possessor of property creates privilege or license to enter?

Finding that summary judgment was wrongfully granted in favor of the appellees, we reverse and remand for a trial against all defendants.

FACTS

Rosemary Farragut owns a one-seventh royalty interest in a 212-acre parcel in Jones County, Mississippi. In February of 1980, she, along with her cotenants, executed a mineral lease in favor of Massey and Barnett. The lease agreement contained the following clause:

[Lessors do] hereby grant, lease and let unto lessee the land covered hereby for the purposes and with the exclusive right of exploring, drilling, mining and operating for, producing and owning oil ..., together with the right to make surveys on the land, lay pipe lines, establish and utilize facilities for surface and subsurface disposal of salt water, construct [other improvements], necessary or useful in lessee's operations in exploring, drilling for, producing, treating, storing and transporting minerals produced from the land covered hereby or any other land adjacent thereto.

Massey and Barnett drilled an oil well ("Townsend No. 1") on the property in September, 1980. In February, 1981, Massey and Barnett obtained permission from the Mississippi State Oil and Gas Board to convert an abandoned well ("Townsend No. 3") located on the property for use as a salt water repository.

According to Farragut's affidavit, she knew nothing about the salt water repository until she discovered a crew reworking the Townsend No. 3 well. She allegedly made a demand for surface damages in the amount of $1,500.

In the Spring of 1981 Massey and Barnett drilled a second oil well ("Townsend No. 2") on Farragut's property and tied the new well into the Townsend No. 3 salt water disposal system. Massey and Barnett subsequently sent Farragut two [T]he undersigned does hereby release and relinquish any and all claims against David H. Massey, Mary A. Barnett, and Barnett and Massey, resulting from their preparation and the making location for the drilling and continuous operations of the Townsend No. 2 Well and Townsend No. 3 Well, and the establishment of production and the continuous production operations and disposal of salt water on the above set out land. The undersigned party does hereby release any and all claims against David H. Massey, Mary A. Barnett, and Barnett and Massey covering damages occurring on the lands set out above.

checks totaling $1,500 and submitted a release containing the following language:

Farragut executed the release on September 23, 1981.

In April, 1982, Anderson Oil Co., Inc., and Adams Exploration Company (collectively: "Anderson") completed a well ("N.G. Stainton No. 1") located on a separate parcel of land to the southwest of Massey and Barnett's wells. In June, Massey and Barnett offered to dispose of Anderson's salt water in the Townsend No. 3 well.

Meanwhile, Cleveland had drilled a well ("Ramsey 3-15 No. 2") on property to the south of and adjacent to the property covered by the Farragut-Massey/Barnett lease. Cleveland inquired with Massey and Barnett concerning the possibility of injecting saltwater from the Ramsey 3-15 No. 2 well into the Townsend No. 3 repository.

Late in 1982, Anderson and Cleveland constructed pipelines connecting the N.G. Stainton No. 1 well and the Ramsey 3-15 No. 2 well to the Townsend No. 3 salt water repository. Massey and Barnett began to dispose of salt water from Anderson's and Cleveland's operations at a charge of twenty cents per barrel.

According to Farragut, an employee of Graham Royalty approached her in May or June of 1986 and offered to pay damages for a spillage from the salt water pipeline. Farragut claims that prior to being approached by Graham Royalty she did not know that Massey and Barnett were accepting salt water from other operations. She avers in her affidavit that Massey and Barnett had misled her to believe that the pipelines carried natural gas.

On April 30, 1987, Farragut filed suit against the appellees. She sought recovery from Massey and Barnett on grounds of trespass, unjust enrichment, fraud and concealment, intentional breach of contract, breach of fiduciary duty and tortious breach of contract. Farragut sought relief from Cleveland and Graham Royalty on grounds of trespass.

The defendants filed a motion for summary judgment in which they asserted that the granting clause in Farragut's lease to Massey and Barnett, along with the release Farragut signed, defeated the plaintiff's claims. Farragut filed a motion for partial summary judgment on grounds that the lease agreement did not provide for the importation of salt water from off the leasehold premises and that the release was void as against public policy. On May 9, 1989, the trial court granted summary judgment for the defendants and denied Farragut's motion.

LAW

I. WHETHER THE LOWER COURT ERRED IN FINDING THE OIL, GAS AND MINERAL LEASE AUTHORIZED DISPOSAL OF SALT WATER PRODUCED OFF THE LEASEHOLD?

The appellees note that the Farragut's lease agreement grants Massey and Barnett the authority to construct and operate facilities for disposing of salt water "produced from the land covered hereby or any other land adjacent thereto." They concede that the lease requires the facilities to be "necessary or useful" to the lessees operations, but argue that disposing of salt water from adjoining properties is both necessary and useful: "useful" in that the proceeds paid by Cleveland and Graham Royalty make Massey's and Barnett's operation more profitable; "necessary" in that reinjecting saltwater produced by other wells extends the useful life of the oil field and thus prevents waste.

The trial court below agreed. In its Findings of Fact and Conclusions of Law, the court found that the lease was "without ambiguity" and "gave the Defendants the right to dispose of salt water, subsurface and surface from lands and adjacent lands to the lease."

The trial court is superficially correct in finding that the lease agreement permits the importation of salt water from adjoining properties. Both the trial court and the appellees neglect to note, however, that the lease permits the practice only where the lessee's operations extend to the adjoining properties. The lease clearly states:

[Lessee may] establish and utilize [salt water disposal facilities] necessary or useful in lessee's operations in ... producing ... minerals ... from the land covered hereby or any other land adjacent thereto.

The phrase "adjacent thereto" unambiguously refers to properties from which the lessee extracts minerals; it is not syntactically tied to the source of the salt water.

Where the language of a lease is unambiguous, it must be enforced according to its plain meaning. See Barnett v. Getty Oil Co., 266 So.2d 581, 586 (Miss.1972) (where lease is clear and unambiguous, Court should look solely to language of instrument and give same effect as written); Wagner v. Mounger, 253 Miss. 83, 90-91, 175 So.2d 145, 147-48 (1965) (where terms of lease are clear and unambiguous, court should not enlarge terms by needless construction). Guided by this principle, an Illinois Court in Gill v. McCollum, 19 Ill.App.3d 402, 311 N.E.2d 741 (Ill.App.Ct.1974) found that the holder of a mineral lease does not have the right to import salt water from adjacent lands absent an express grant of authority. Professor Kuntz recognizes the same rule:

The right of the mineral owner to use and occupy the land is restricted to operations for exploring for and extracting minerals from that land. Thus, the land cannot be used ... to dispose of salt water from other land.

1 E. Kuntz, A Treatise on the Law of Oil and Gas, Sec. 3.2 at 87-88 (1987).

Citing Gill, Kuntz notes that "[the] grant of the right to inject liquids and gas does not give the lessee the right to use a well on the leased premises for the disposal of salt water from other leases." 4 E. Kuntz, Sec. 50.4(c) (Supp.1989).

Appellees Cleveland and Graham Royalty argue in their brief that "it has been...