N. Silo Res., LLC v. DeSelms

• Decision Date: 22 September 2022
• Docket Number: S-21-0267, S-21-0291
• Citation: 517 P.3d 556
• Parties: NORTH SILO RESOURCES, LLC, a Delaware limited liability company, Appellant (Plaintiff), v. Kirstin J. DESELMS; Singletree Land, LLC, a Wyoming limited liability company; Hugh Deselms; Paul A. Woods ; Cheryl S. Woods; Shelli R. Woods; Cody S. Woods; Charlotte Joan Hutton; Hutton Family Partnership; Mike Hutton and Hutton Minerals, LLC, a Wyoming limited liability company, Appellees (Defendants).
• Court: Wyoming Supreme Court

517 P.3d 556

NORTH SILO RESOURCES, LLC, a Delaware limited liability company, Appellant (Plaintiff),
v.
Kirstin J. DESELMS; Singletree Land, LLC, a Wyoming limited liability company; Hugh Deselms; Paul A. Woods ; Cheryl S. Woods; Shelli R. Woods; Cody S. Woods; Charlotte Joan Hutton; Hutton Family Partnership; Mike Hutton and Hutton Minerals, LLC, a Wyoming limited liability company, Appellees (Defendants).

S-21-0267, S-21-0291

Supreme Court of Wyoming.

September 22, 2022

Representing North Silo Resources, LLC: Warren W. Harris and Stephani A. Michel , Bracewell LLP, Houston, Texas; Anthony T. Wendtland , Wendtland & Wendtland LLP, Sheridan, Wyoming; William E. Sparks and Nicol T. Kramer , Beatty & Wozniak, P.C., Denver, Colorado, and Casper, Wyoming. Argument by Mr. Wendtland.

Representing Kirstin J. Deselms; Singletree Land, LLC; and Hugh Deselms: Kristopher C. Koski and Justin A. Daraie , Long Reimer Winegar LLP, Cheyenne, Wyoming. Argument by Mr. Daraie.

Representing Paul A. Woods and Cheryl S. Woods: Alexander K. Davison and Patrick D. Kent , Patton & Davison LLC, Cheyenne, Wyoming. Argument by Mr. Kent.

Representing Shelli R. Woods and Cody S. Woods: No appearance.

Representing Charlotte Joan Hutton; Hutton Family Partnership; Mike Hutton; and Hutton Minerals, LLC: J. Mark Stewart , Davis & Cannon, LLP, Cheyenne, Wyoming. Argument by Mr. Stewart.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

GRAY, Justice.

¶1] This case arises from a dispute over mineral ownership and the corresponding rights of a mineral lessee. Appellant North Silo Resources, LLC (North Silo), the mineral lessee, sought a declaratory judgment and to quiet title in certain minerals underlying property in Laramie County, Wyoming. It also asserted a claim for breach of lease against the mineral owner. The district court held that North Silo did not have standing to quiet title or to claim breach of its lease and that its mineral lease encumbers only 50% of the mineral estate. North Silo appeals. We find North Silo's lease encumbers 100% of the mineral estate. North Silo had standing to quiet title and standing to assert a claim for breach of lease. We reverse and remand

ISSUES

[¶2] While the parties present varying issue statements, the dispositive issues are:

[517 P.3d 561

1. What minerals are encumbered by North Silo's mineral lease?2. Does North Silo have standing to assert a claim seeking to quiet title to its leasehold and for breach of lease?

FACTS

Initial Conveyances to the Huttons and the Woods

¶3] In 1987, C Bar J Ranches, Inc. (C Bar J) owned 100% of the surface and minerals of property located in Laramie County, Wyoming (Property).¹ On May 7, 1987, C Bar J sold the Property to William R. Hutton and Charlotte J. Hutton (the Huttons) and provided them a warranty deed (the C Bar J-Hutton Deed). The C Bar J-Hutton Deed conveyed the Property and one-half of the existing mineral rights. It reserved "One-Half of the existing mineral rights for 20 years" and provided that "At the end of the 20 years, the mineral rights are to become the property of the purchasers."

[¶4] On April 27, 1992 (before C Bar J's twenty-year reserved mineral interest terminated), the Huttons sold the Property to the Woods defendants by a contract for deed (Woods Contract for Deed). The Woods Contract for Deed was memorialized in a memorandum of sale recorded in April 1992. A warranty deed conveying the Property to the Woods (the Hutton-Woods Deed) was held in escrow pending the Woods' performance of their obligations under the contract for deed. In the Hutton-Woods Deed, the Huttons granted the Woods "all rights" to the Property, but reserved a life estate in all minerals owned by the Huttons and the right to develop those minerals during their lifetime:

[The Huttons] reserve to [themselves] for the period of their lives, all minerals, including oil and gas they may own, that may be on, in, under or produced from the above described land.[The Huttons and the Huttons'] assigns shall, during their lives, have the exclusive right and privilege of making, executing and delivering leases of the land for the extraction or production of minerals. On termination of this reservation, the interest reserved shall be owned by [the Woods and the Woods'] heirs and assigns.

In 2008, the Woods fulfilled the terms of the Woods Contract for Deed and recorded the Hutton-Woods Deed.

Subsequent Conveyances by the Woods

[¶5] Also in 2008, the Woods entered into two separate contracts for deed, one with Kirstin Deselms and one with Hugh Deselms (collectively, the Woods-Deselms Contracts for Deed). By these deeds, the Woods conveyed the Property and "one-half of the oil, gas, and other minerals" the Woods "now owned" or would "later acquire[]" and reserved the other half for their lives and their children's lives. The Woods-Deselms Contracts for Deed provided:

Buyer acknowledges and agrees that all mineral rights associated with the Property were previously reserved by William and Joanne [Charlotte] Hutton for their joint lifetimes, and that it cannot be determined with certainty when Sellers will acquire clear title to the mineral rights associated with the Property.

Kirstin Deselms and Hugh Deselms completed their obligations under the Woods-Deselms Contracts for Deed and recorded warranty deeds in 2013 (the Woods-Deselms Deeds). In 2015, Kirstin Deselms conveyed her interest in the Property to Singletree Land, LLC.

Subsequent Conveyances by the Huttons

[¶6] In November 1994, the Huttons quitclaimed "all rights, title, any interest owned, claimed, or held ... in and to the mineral rights and interest in and to real property" to The Hutton Family Partnership. In October 2016, The Hutton Family Partnership quitclaimed "all of its interest in and to all the oil, gas and other minerals in and under and that may be produced" from the Property to Hutton Minerals, LLC. We refer to the Huttons, The Hutton Family Partnership, and Hutton Minerals, LLC, as "the Huttons"

[517 P.3d 562

unless context requires a distinction to be made.

¶7] In 2010, after C Bar J's twenty-year reserved mineral interest terminated, the Huttons leased "all of" their oil and gas mineral interests under the Property to Cirque Resources (Cirque). The lease provided Cirque an option to extend. Cirque exercised its option in 2015. Through a series of assignments in 2018 and 2019, North Silo acquired Cirque's interests under the lease and is the current mineral lessee

The Dispute and the District Court's Rulings

[¶8] The parties dispute the mineral ownership created by the outlined conveyances.

[¶9] North Silo asserts that the 1987 C Bar J-Hutton Deed transferred one-half of the minerals to the Huttons outright, and one-half of the minerals to the Huttons as a vested remainder subject to C Bar J's twenty-year reservation. Therefore, the Huttons own a life estate in 100% of the minerals and the corresponding executory rights. These interests are measured by the lives of William R. Hutton and Charlotte J. Hutton. Accordingly, North Silo argues that its mineral lease encumbers 100% of the minerals.

[¶10] The remaining parties interpret the transactions differently. They assert the minerals reserved by C Bar J were unvested, and that they did not vest in the Huttons in 1987, and had not vested when the Huttons sold the property to the Woods in 1992. The Huttons' reservation of a life estate in "all minerals, including oil and gas they may own, that may be on, in, under or produced from" the Property was limited to the minerals conveyed and did not include the minerals reserved by C Bar J. The reserved, unvested minerals transferred to the Woods when the twenty-year contingency expired. They assign mineral ownership as follows:

• The Hutton Family Partnership owns a life estate in 50% of the minerals, measured by the lives of William R. Hutton and Charlotte J. Hutton;• The Woods received the 50% C Bar J remainder and subsequently sold half of this interest and half of their future interest in the Huttons' 50% of the minerals to the Deselms. They own a present life estate in 25% of the minerals obtained when the C Bar J reservation expired—measured by the lives of the Woods and their children—and they own a life estate in a future interest in 25% of the minerals reserved by the Huttons;• Singletree Land, LLC, and Hugh Deselms own a present interest in 25% of the minerals, a future interest in 25% of the minerals reserved by the Huttons, and a future interest in the remaining minerals reserved by the Woods in the Woods-Deselms Deeds.

From this position, these parties assert that North Silo's lease encumbers only 50% of the minerals—those minerals subject to the Hutton life estate. In August 2019, the Huttons, Woods, Deselms, and Singletree executed a "Stipulation of Interests and Cross-Conveyance" (the Stipulation) stipulating to the apportionment of mineral ownership set forth above. They filed the Stipulation with the county clerk.²

[¶11] North Silo filed this lawsuit, seeking a declaration as to the percent of the mineral estate encumbered by its lease. It asserted claims for quiet title to its mineral lease, slander of title, bona fide purchaser of the mineral lease, and breach of the lease. The defendants filed motions to dismiss, which the district court largely granted. It dismissed North Silo's claims for slander of title and bona fide purchaser. Concluding that North Silo had no standing to quiet title or to claim breach of its lease, it also dismissed North Silo's claims to quiet title and for breach of lease. The district court allowed North Silo to proceed with its declaratory judgment claim.

[¶12] The Woods, Singletree Land, LLC, and Hutton Minerals, LLC, filed counterclaims. Following discovery, all parties filed motions for summary judgment. The summary judgment motions focused on North Silo's claim for a declaration determining the mineral ownership percentages encumbered by its lease. The district...