NCNB Texas Nat. Bank, N.A. v. West

• Decision Date: 08 October 1993
• Citation: 631 So.2d 212
• Parties: NCNB TEXAS NATIONAL BANK, N.A., now known as NationsBank of Texas, N.A., et al. v. Neva Watkins WEST, et al. NCNB TEXAS NATIONAL BANK, N.A., now known as NationsBank of Texas, N.A., et al. v. Neva Watkins WEST, et al. 1920549, 1920550.
• Court: Alabama Supreme Court

Page 212

631 So.2d 212

NCNB TEXAS NATIONAL BANK, N.A., now known as NationsBank of Texas, N.A., et al. v. Neva Watkins WEST, et al.

NCNB TEXAS NATIONAL BANK, N.A., now known as NationsBank of Texas, N.A., et al. v. Neva Watkins WEST, et al.

1920549, 1920550.

Supreme Court of Alabama.

Oct. 8, 1993.

As Modified on Denial of Rehearing

Dec. 10, 1993.

Victor T. Hudson and William W. Watts III of Reams, Philips, Brooks, Schell, Gaston & Hudson, P.C., Mobile, and Randy J. McClanahan, Houston, TX, for appellant.

Conrad P. Armbrecht, Edward A. Dean and Duane A. Graham of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, for appellee.

SHORES, Justice.

This opinion addresses two appeals presenting the same issue of first impression.

These appeals involve two consolidated actions to quiet title to coalbed methane gas in, on, and under, land in Tuscaloosa County. The land was subject to 1953 and 1954 deeds from Phil Davant that conveyed his interest in coal and coal mining rights to Center Coal Company ("Center Coal") and reserved his interest in all gas. ¹ The issue is whether a deed conveying all the coal and connected mining rights owned by the grantor, but specifically reserving the grantor's rights to all of the gas on the property, also reserves to the grantor all of the coalbed methane gas. ² The resolution of this issue answers the question indirectly raised but not answered in Vines v. McKenzie Methane Corp., 619 So.2d 1305 (Ala.1993), that is, What is necessary for a grantor to convey separate estates in coal and coalbed methane gas?

The appellants in this case are the owners of a 22 1/2% interest in all gas reserved by the deed in question. The appellees are owners/lessees of the coal rights conveyed by the deed. The appellant gas owners' interests are represented in this case by a trust administered by NCNB Texas National Bank, N.A. ("NCNB"). For the sake of clarity, the appellants will hereinafter be referred to as the "gas owners" or as "NCNB," and the appellees will be referred to as the "coal owners."

On February 6, 1991, appellees Neva Watkins West, Wesley West Cattle Company, Jim Walter Resources, Inc. ("Jim Walter"), United Land Corporation, and Sonat Coal Gas, Inc., sued appellant NCNB Texas National Bank, N.A., now known as NationsBank of Texas, N.A. ("NCNB"), as trustee under the trust created by the last will and testament of Hortense E. Davant, seeking to quiet their title to coalbed methane gas in, on, and under, 40 acres of land in Tuscaloosa County. ³ NCNB counterclaimed, seeking to quiet its title to an undivided 22 1/2% interest in all gas, including coalbed methane gas, contained within the lands described in the February 27, 1953, deed from Phil Davant to Center Coal Company; these lands (the "Property") include the 40 acres at issue in the original complaint. Because some of the appellee coal owners had been producing and marketing coalbed methane gas from the Property, the counterclaim sought declaratory relief, damages for conversion, and an accounting as to the proceeds from the sale of NCNB's alleged interest in the gas already produced from the Property by certain counterclaim defendants.

NCNB moved on behalf of the appellant gas owners to consolidate with this action an action that it had filed against Center Coal Company, Ltd., Black Warrior Methane Corporation, Black Warrior Transmission Corporation, Southern Natural Gas Company, and certain trusts, all of which were involved in production and marketing of coalbed methane gas from the Property. The trial court granted the motion to consolidate and severed certain claims against Black Warrior Transmission Corporation, Southern Natural Gas Company, and Center Coal Company for a separate trial.

In response to a special interrogatory at the conclusion of the consolidated trial on September 24, 1992, the jury determined that all of the gas produced from the Property was coalbed gas and that none of the gas resided in non-coal strata before disturbance of the coal. ⁴ The jury returned a verdict in favor of appellees Black Warrior Methane Corporation and Sonat Coal Gas, Inc., on NCNB's claims for damages for the alleged production and sale of gas other than coalbed methane gas. The trial court then addressed the legal issue of the ownership of the coalbed methane gas in a final order and judgment entered December 31, 1992, which reads in part:

"FINAL ORDER AND JUDGMENT AMENDED AND REISSUED SUA SPONTE

"The trial of these consolidated cases commenced on September 14, 1992, and lasted for ten days. This Court heard and reviewed the evidence presented and considered the arguments of counsel concerning matters of law, and the jury returned a verdict concerning the issues of fact. The issues, findings, conclusions, and rulings are stated below.

"1. These consolidated cases involve basically two disputes. One is the question of who owns the Coalbed Gas ... in the property described in Exhibits A and B hereto [taken from the 1953 and 1954 deeds to Center Coal]; and the other dispute is a factual question concerning whether all of the hydrocarbon gas production from gob wells in the Brookwood Coal Degasification Field in Tuscaloosa County, Alabama, is Coalbed Gas.

"....

"3. While many entities are parties to this lawsuit, they are conveniently and agreeably aligned and allied into just two opposing camps. To be concise, this decree will refer to one camp as the 'Jim Walter Parties' and the other camp as the 'Trustee Bank.'

"The Jim Walter Parties consist of Jim Walter Resources, Inc., Black Warrior Methane Corp., and Sonat Coal Gas Inc., which hold rights or interests under leases granted by the owners of the coal in and under said property, and Neva Watkins West, Wesley West Cattle Company, Wesley West Mineral Corporation, and the Betty Ann Stedman Trust [and other trusts of members of the Stedman family], who own coal and mining rights in and under said property. The Trustee Bank is NCNB Texas National Bank (now known as NationsBank of Texas), as trustee under the last will and testament of Hortense E. Davant and also as sole trustee under that certain agreement of trust dated November 19, 1986, between the beneficiaries of the Hortense E. Davant testamentary trust and InterFirst Bank, Corsicana, N.A. The Trustee Bank owns an undivided 22.5% interest in the oil, gas, petroleum, and sulfur in, on, and under the real property in question but owns no interest in the coal and mining rights. [Emphasis added.]

"4. These lawsuits arose because the Jim Walter Parties not only have been ventilating Coalbed Gas from their mines and coal seams but also have been producing and selling it. The Trustee Bank also alleged that the Jim Walter Parties produced other gas from non-coal strata.

"The Jim Walter Parties have produced the Coalbed Gas by three types of wells: gob wells, horizontal boreholes, and vertical degasification wells. A basic understanding of each of these production methods promotes clear analysis of the issues in these cases.

"A gob well is one drilled from the surface of the earth down to a stratum where Coalbed Gas released from a coal mine 'gob' can be extracted. The gob is produced by the longwall mining method, in which a huge machine grinds progressively into a face, or 'wall,' in the coal seam to tear away the coal, which is then conveyed to the surface. As the mining machine grinds further and further into the wall, it leaves behind it a void into which the ceiling of the mine collapses [creating a 'gob' of rubble] and into which great quantities of Coalbed Gas collect. The collapse of the ceiling of the mine also leaves the overlying strata unsupported, and gravity causes them to subside and to fracture. Some degree of subsidence extends all the way to the surface, and the fractures in the overlying strata extend from the gob area upward toward the surface. Thus, Coalbed Gas from the gob may travel upward into non-coal strata, where it may be collected and extracted through the gob well. Of all three methods of Coalbed Gas production, this one is the most prolific. ⁵

"A horizontal borehole is, as the name implies, a hole bored horizontally into the coal seam from a point within the coal mine itself. The seam releases some of its adsorbed or trapped Coalbed Gas into the borehole from which the gas may then be produced.

"Finally, a vertical degasification well is one drilled more or less vertically from the surface and directly into an unmined coal seam to extract such Coalbed Gas as may be trapped or collected. The release of the Coalbed Gas from the coal seam into the vertical degasification well may be increased by various methods of fracturing the coal seam in the vicinity of the bottom of the well. The fracturing methods generally involve forcing water, other substances, or a combination thereof down the well and into the coal seam. An emerging method is to blast water out the bottom end of the well so violently that it rips out an area of coal. This method may evolve into a way of producing not only Coalbed Gas but also coal itself.

"In the course of their mining in the Brookwood Field, the Jim Walter Parties have been producing Coalbed Gas by gob wells and by horizontal boreholes. In addition, in preparation for mining, the Jim Walter Parties have been producing Coalbed Gas from vertical degasification wells. The Jim Walter Parties claim that all three production methods are necessary to the safe degasification of the mines, just as are the massive fan-driven ventilation systems. The Jim Walter Parties, predictably, want to keep the production and its proceeds; but the Trustee Bank, as an owner of a fractional interest in gas, asserts claims to various portions of the production on various theories, which this decree will discuss in due course.

"5. Several of the Jim Walter Parties initiated this litigation by filing the complaint in Civil Action No. 91-443 requesting declaratory and quiet...