Hobson v. Cimarex Energy Co.

• Decision Date: 17 September 2019
• Docket Number: No. 116,721,116,721
• Citation: 453 P.3d 482
• Parties: Talen Paul HOBSON, Plaintiff/Appellant, v. CIMAREX ENERGY CO., a Delaware Corporation, Defendant/Appellee.
• Court: Oklahoma Supreme Court

453 P.3d 482

Talen Paul HOBSON, Plaintiff/Appellant,

v.CIMAREX ENERGY CO., a Delaware Corporation, Defendant/Appellee.

No. 116,721

Supreme Court of Oklahoma.

FILED SEPTEMBER 17, 2019

REHEARING DENIED NOVEMBER 4, 2019

A. Gabriel Bass and Jana L. Knott, Bass Law, Oklahoma City, Oklahoma, for Plaintiff/Appellant.

Bradley W. Welsh and Ryan A. Pittman, Gable Gotwals, Tulsa, Oklahoma, for Defendant/Appellee.

COMBS, J.:

¶1 The issue presented is whether a vested remainderman is a surface owner under the Surface Damages Act (SDA).We hold he is not.For purposes of the SDA, surface owner means one who holds a current possessory interest.

FACTS AND PROCEDURAL HISTORY

¶2 Through a quitclaim deed, Timothy Hobson, father of Talen Hobson, holds a present life estate in the surface rights of property located in Canadian County, Oklahoma.Talen Hobson holds a vested remainder interest in the surface rights to his father's life estate.Cimarex Energy Co.(Cimarex) is a mineral lessee of the Property.Before drilling, Cimarex reached an agreement with the life tenant regarding surface damages under the SDA.After drilling, Cimarex paid the life tenant according to that agreement.

¶3Talen Hobson(Hobson) then sued Cimarex claiming he is entitled to compensation under the SDA.Hobson further alleges that as a surface owner under the SDA, Cimarex should have negotiated with him for surface damages as well.Cimarex responded that a future interest owner does not qualify as a surface owner under the SDA.Alternatively, Cimarex argued that if a future interest owner does qualify as a surface owner his proper cause of action is against the life tenant.The trial court held that a vested remainderman does not qualify as a surface owner under the SDA and dismissed the action with prejudice.On appeal, the Court of Civil Appeals disagreed, reasoning that the SDA focuses on ownership rather than possession.The appeals court reversed and remanded the case for further proceedings.

¶4 Cimarex filed a Petition for Writ of Certiorari with this Court on July 9, 2018.We granted certiorari on November 5, 2018, and the matter was assigned to this office on April 23, 2019.

STANDARD OF REVIEW

¶5This Court's review of a dismissal for failure to state a claim is conducted de novo .Lockhart v. Loosen,1997 OK 103, ¶ 4, 943 P.2d 1074, 1077;Washington v. State ex rel. Dep't of Corr.,1996 OK 139, ¶ 7, 915 P.2d 359, 361.Questions of statutory interpretation are pure questions of law and are reviewed de novo .Ward Petroleum Corp. v. Stewart , 2003 OK 11, ¶ 4, 64 P.3d 1113, 1115.

¶6"The fundamental rule of statutory construction is to ascertain and give effect to legislative intent, and that intent is first sought in the language of the statute."YDF, Inc. v. Schlumar, Inc.,2006 OK 32, ¶ 6, 136 P.3d 656, 658.If there is an ambiguity, we apply the rules of statutory construction.Id .Ambiguity exists if there is more than one reasonable interpretation.Id ."In construing ambiguous statutory language ... we look to the various provisions of the relevant legislative scheme to ascertain and give effect to the legislative intent and the public policy underlying that intent."Id .

ANALYSIS

¶7This case concerns the interpretation of "surface owner" under the SDA.The SDA provides that "[p]rior to entering the site with heavy equipment, the operator shall negotiate with the surface owner for the payment of any damages which may be caused by the drilling operation."52 O.S. § 318.5(A).The SDA defines "surface owner" as "the owner or owners of record of the surface of the property on which the drilling operation is to occur."52 O.S. § 318.2(2).

¶8 The SDA modifies the common law relationship between mineral owners and surface owners.Ward Petroleum Corp. , 2003 OK 11, ¶ 5, 64 P.3d at 1115.We therefore liberally construe the statute to give effect to legislative intent and promote justice.12 O.S. § 2.

I.The Ordinary Meaning

¶9 The SDA does not define surface owner in a manner that further explains owner, so we look to the ordinary meaning of that term.Black's Law Dictionary defines "owner" as "[s]omeone who has the right to possess, use, and convey something."¹(emphasis added).Merriam-Webster's dictionary defines "own" as "to have or hold as property: possess."²Although the United States Supreme Court stated "ownership does not always mean absolute dominion," the statement indicates that at times ownership does mean absolute dominion.Marsh v. State of Alabama , 326 U.S. 501, 506, 66 S.Ct. 276, 90 L.Ed. 265(1946).The context of that case further illustrates that the common understanding of ownership includes absolute dominion.In that case, the Supreme Court distinguished the dominion of an owner whose property is open to the public in general, like a company-owned town, versus an owner of property not set up for an essentially public function, like a farm.Id . at 506-07, 66 S.Ct. 276.The Court reasoned that in cases where the property is open to the public in general, the owner does not have absolute dominion.But where the property is not set up for an essentially public function, the owner retains more dominion.

¶10 A vested remainder becomes possessory only when the preceding estate, here the father's life estate, comes naturally to its end.Chester H. Smith & Ralph E. Boyer, Survey of the Law of Property, 23, West Publishing Co.(2d ed. 1971).A remainder cannot cut short a preceding estate.Id .The lessee of a mineral lease is statutorily required to negotiate with the person or persons holding a current possessory interest in the surface of the land.Here, Talen Hobson would not hold a possessory interest until his father's life estate came to a natural end.

¶11 This interpretation of surface owner does not violate this State's precedent regarding the SDA.In McCrabb v. Chesapeake Energy Corp ., the appellate court held that an operator is required to negotiate a surface damage agreement with all tenants in common.2009 OK CIV APP 66, ¶ 16, 216 P.3d 312, 315.The court there focused on the SDA's use of the plural form of owner to reach its conclusion.Id .The unique aspect of tenants in common is that each tenant has unity of possession — an undivided equal interest in current possession.De Mik v. Cargill , 1971 OK 61, ¶ 8, 485 P.2d 229, 233.Interpreting surface owner to require current possession does not disturb precedent.

II.Promoting Justice

¶12 Interpreting surface owner as requiring current possessory interest gives effect to legislative intent and promotes justice.Defining surface owner under the SDA as requiring a possessory interest does not modify the rights of life tenants and vested remaindermen.A life estate entering a new minerals lease must still seek the remainderman's consent because removal of minerals will certainly affect the corpus of the property.SeeNutter v. Stockton , 1981 OK 30, 626 P.2d 861.Additionally, if the life tenant's transactions with the mineral leaseholder constitute an unreasonable injury to the remainderman's estate, the remainderman may bring a waste claim.McGinnity v. Kirk , 2015 OK 73, ¶9, 362 P.3d 186, 190.A remainderman maintains recourse for the definite removal of corpus and potential waste from all other actions by the life tenant.This interpretation of surface owner does not thwart the SDA's purpose of promoting rapid payment of compensation to a party whose land is taken after the taking occurs.Tower Oil & Gas Co., Inc. v. Paulk , 1989 OK 105, ¶ 6, 776 P.2d 1279, 1281.

CONCLUSION

¶13 The SDA's definition of surface owner is ambiguous.This Court is persuaded by the common meaning, expressed legislative intent, and interests of justice that the SDA's use of surface owner applies only to those holding a current possessory interest.Under the SDA, a mineral lessee must negotiate surface damages with those who hold a current possessory interest in the property.A vested remainderman does not hold a current possessory interest until the life estate has come to its natural end.The opinion of the Court of Civil Appeals is vacated.The order of the trial court is affirmed.

OPINION OF THE COURT OF CIVIL APPEALS VACATED; ORDER OF THE TRIAL COURT AFFIRMED

¶14Edmondson, Colbert, and Combs, JJ., and Swinton, S.J., concur.

¶15Kauger, J., concurs specially (by separate writing).

¶16Darby, V.C.J., (by separate writing), Hudson, S.J., Kuehn, S.J., and Goree, S.J., dissent.

¶17Gurich, C.J., and Winchester, J., recused.

KAUGER, J., concurring specially:

I concur that under this statute, a surface owner is the one who has current possession of the property.Here, the life tenant father conveyed to his remainderman son without any restriction or exemption.I write specially to acknowledge that grantors can avoid this problem by ensuring that the document creating the life estate restricts the part of the remainderman.For example, the grantor may reserve all income from a successful drilling operation without incurring waste.¹Or a grantor might create a life estate and endow the life tenant with the power to consume or dispose of the corpus of the estate, or grant the life tenant the explicit power to commit waste, or clearly alienate minerals, oil or gas interests for development.²

The person conveying the life estate has great discretion in any conditions they wish to attach to the life estate, provided that the conditions are allowed by law.

Another more recent alternative to the life estate is the Transfer on Death Deed, which went into effect on November 1, 2008, through Oklahoma's "Nontestamentary Transfer of Property Act."This law allows a "record owner" to use a "Transfer-On-Death Deed" to name another person to receive real estate without going through probate.³This preserves total control of the property during the grantor's lifetime, but accomplishes the same legal effect as a life estate with a remainderman.⁴

DARBY, V.C.J., with whom Hudson, S.J., Kuehn, S.J. and Goree, S.J., join, D...