McGee v. Caballo Coal Co.

• Decision Date: 29 May 2003
• Docket Number: No. 02-109.,02-109.
• Citation: 69 P.3d 908,2003 WY 68
• Parties: John E. McGEE and Betty A. McGee Trustees of the McGee Mineral Trust dated January 15, 1992, and Allen Clark, a/k/a Melvin Allen Clark, Appellants (Plaintiffs), v. CABALLO COAL COMPANY, Appellee (Defendant).
• Court: Wyoming Supreme Court

69 P.3d 908

2003 WY 68

John E. McGEE and Betty A. McGee Trustees of the McGee Mineral Trust dated January 15, 1992, and Allen Clark, a/k/a Melvin Allen Clark, Appellants (Plaintiffs), v. CABALLO COAL COMPANY, Appellee (Defendant).

No. 02-109.

Supreme Court of Wyoming.

May 29, 2003.

Charles R. Hart of Hart & Beisher, Sheridan, WY, Representing Appellants.

Dan B. Riggs of Lonabaugh and Riggs, Sheridan, WY, Representing Appellee.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

LEHMAN, Justice.

[¶ 1] This is an appeal from summary judgment entered in favor of appellee Caballo Coal Company (CCC) and against appellants John E. McGee and Betty A. McGee, Trustees of the McGee Mineral Trust dated January 15, 1992, and Allen Clark (collectively appellants). In granting summary judgment, the district court ruled that appellants' predecessors had conveyed the rights to coalbed methane gas (CBM) when they transferred certain real property located in the Fort Union formation of the Powder River Basin of Wyoming to CCC's predecessors. Upon review, we reverse.

ISSUE

[¶ 2] Appellants present the following issue:

Does a conveyance of "all coal and all other minerals ... contained in or associated with coal and which may be mined and produced with coal which Grantor owns or holds in said lands" convey coalbed methane gas, or does a reservation of "oil, gas and other minerals" reserve coalbed methane gas?

CCC styles the issue before this court as:

Did the 1973 warranty deed between McGees and Carter Oil Company and the 1973 warranty deed between Clarks and Carter Oil Company convey coalbed methane underlying the described lands?

FACTS

[¶ 3] On December 17, 1973, John E. McGee and Betty A. McGee issued a warranty deed conveying to Carter Oil Company the surface estate and any interests in coal that they may have or hold in certain real property located in Campbell County for an amount of $340,000.00 and a two percent per ton royalty on certain mined coal. The McGees did not own any coal rights with respect to this land because these rights had been reserved to the United States in the original patents. On this same date, Melvin D. and Ethel L. Clark conveyed to the Carter Oil Company, also via warranty deed, the surface estate in other real property for $1,510,000.00 but reserved the coal rights in this land. These warranty deeds were issued pursuant to prior agreements.

[¶ 4] Pertinent parts of the agreements set forth:

Grantor agrees to grant and convey good and merchantable title to said lands to Grantee ... together with all coal and all other minerals metallic or non-metallic, contained in or associated with coal and which may be mined and produced with coal which Grantor owns or holds in said lands[.] ... [E]xcepting and reserving to Grantor all oil, gas, and other minerals in said lands which Grantor now holds, other than those specified above to be conveyed to Grantee and excepting all coal in the SE¼ of Sec. 5, Township 48 North, Range 70 West [NE¼ NE¼ of Section 24, Township 48 North, Range 71 West].

The warranty deeds both state in applicable part:

... hereby releasing and waiving all rights [to the lands described above] together with all coal and all other minerals, metallic or nonmetallic, contained in or associated with coal and which may be produced with coal which Grantor owns or holds in said lands[.] ... EXCEPTING AND RESERVING to Grantor all oil, gas and other minerals in said lands which Grantor now owns, other than those included above in the conveyance to Grantee, and excepting all coal in the SE¼ of Sec. 5, Township 48 North, Range 70 West [NE¼NE¼ of Section 24, Township 48 North, Range 71 West].

Further, the warranty deeds contain a non-merger clause which states: "This deed is executed pursuant to agreement between Grantor and Grantee dated December 17, 1973, the provisions of which are not merged herein."

[¶ 5] Appellants are the successors in interest to John E. and Betty A. McGee and Melvin D. and Ethel L. Clark, while CCC is the successor in interest of Carter Oil Company. On June 21, 2001, appellants filed a declaratory judgment and quiet title action seeking a determination that the McGees and Clarks reserved CBM with respect to the warranty deeds. The parties then filed cross-motions for summary judgment. Upon consideration and hearing, the district court entered summary judgment in favor of CCC and against appellants. This appeal followed.

STANDARD OF REVIEW

[¶ 6] Our standard of review in summary judgment cases is well established.

Summary judgment motions are determined under the following language from W.R.C.P. 56(c):

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

The purpose of summary judgment is to dispose of suits before trial that present no genuine issue of material fact. Moore v. Kiljander, 604 P.2d 204, 207 (Wyo. 1979). Summary judgment is a drastic remedy designed to pierce the formal allegations and reach the merits of the controversy, but only where no genuine issue of material fact is present. Weaver v. Blue Cross-Blue Shield of Wyoming, 609 P.2d 984, 986 (Wyo.1980). A fact is material if proof of that fact would have the effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties. Schuler v. Community First Nat. Bank, 999 P.2d 1303, 1304 (Wyo.2000). The summary judgment movant has the initial burden of establishing by admissible evidence a prima facie case; once this is accomplished, the burden shifts and the opposing party must present specific facts showing that there is a genuine issue of material fact. Boehm v. Cody Country Chamber of Commerce, 748 P.2d 704, 710 (Wyo.1987); Gennings v. First Nat. Bank of Thermopolis, 654 P.2d 154, 156 (Wyo. 1982).

This Court reviews a summary judgment in the same light as the district court, using the same materials and following the same standards. Unicorn Drilling, Inc. v. Heart Mountain Irr. Dist., 3 P.3d 857, 860 (Wyo.2000) (quoting Gray v. Norwest Bank Wyoming, N.A., 984 P.2d 1088, 1091 (Wyo.1999)). The record is reviewed, however, from the vantage point most favorable to the party who opposed the motion, and this Court will give that party the benefit of all favorable inferences that may fairly be drawn from the record. Garcia v. Lawson, 928 P.2d 1164, 1166 (Wyo.1996).

Garnett v. Coyle, 2001 WY 94, ¶¶ 3-5, 33 P.3d 114, ¶¶ 3-5 (Wyo.2001).

DISCUSSION

[¶ 7] Initially, we recognize that the facts and issue presented in this case are akin to those which existed in the case of Newman v. RAG Wyoming Land Co., 2002 WY 132, 53 P.3d 540 (Wyo.2002), recently before this court. In Newman, we considered whether or not CBM had been conveyed or reserved by landowners in a 1974 land conveyance. In Newman, the grantors owned both the surface and mineral estate in certain Campbell County property and deeded the surface of such property and "coal and minerals commingled with [the] coal" to a neighboring coal mine operator reserving all "oil, gas, and other minerals" not otherwise conveyed. Newman, at ¶ 1.

[¶ 8] In Newman, we began our analysis by setting forth the historical background of CBM. In particular, this court recognized that CBM had been well known for over a century and had long been considered a dangerous waste product of coal mining until the 1970s. At that time, the value of CBM was realized resulting in concerted research and development in the area through the issuance of government grants. Nevertheless, it was not until the early 1990s that techniques were perfected for the efficient development of CBM. Prior to this time, CBM was simply allowed to escape from the coal in the course of open pit surface mining, and no attempt was made to capture it as a valuable resource. Newman, at ¶¶ 6-8.

[¶ 9] Newman further explored the chemistry and composition of CBM. In doing so, we recognized that CBM is chemically identical (CH4) to gas produced through conventional methods. Both CBM and gas produced from conventional methods are known as "natural gas" and emanate from the decay of organic material over time under great pressure and temperature. CBM gas exists in coal in three basic states: as free gas; as gas dissolved in the water in coal; and as gas "absorbed" on the solid surface of the coal. Newman, at ¶ 9. Many of these facts are also established in this case through the affidavit of Jimmy Goolsby, a consulting geologist, submitted by appellants in support of their summary judgment motion and the affidavit of Anthony W. Gorody, an earth science professional, proffered by CCC in support of its motion for summary judgment.

[¶ 10] Finally, this court explained that the ultimate issue to be resolved in Newman was whether the parties to the deed in question intended CBM to be conveyed along with the coal estate or reserved to the grantor as part of the oil and gas estate. Newman, at ¶¶ 11 and 14. We are faced with exactly the same conclusive issue in this case. [¶ 11] In making such a determination, we apply the following standards:

"According to our established standards for interpretation of contracts, the words used in the contract are afforded the plain meaning that a reasonable person would give to them. When the provisions in the contract are clear and unambiguous, the court looks only to the `four corners' of the document in arriving at the intent of the parties. In the absence of any ambiguity, the contract will be enforced according to its terms because no construction is appropriate." Amoco Production Company v. EM Nominee Partnership Company, 2 P.3d 534, 539-40 (Wyo.2000) (citations omitted).

Assignments are contracts and are construed according to the rules of contract

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