Sutherland v. Meridian Granite Co.

• Decision Date: 10 April 2012
• Docket Number: Nos. S–11–0091,S–11–0092.,s. S–11–0091
• Citation: 273 P.3d 1092,2012 WY 53
• Parties: John SUTHERLAND and Minerva Selbe Sutherland, Appellants (Plaintiffs), v. MERIDIAN GRANITE COMPANY, a Delaware Corporation, d/b/a Martin Marietta Materials, Appellee (Defendant).Meridian Granite Company, a Delaware Corporation, d/b/a Martin Marietta Materials, Appellant (Defendant), v. John Sutherland and Minerva Selbe Sutherland, Appellees (Plaintiffs).
• Court: Wyoming Supreme Court

2012 WY 53

273 P.3d 1092

John SUTHERLAND and Minerva Selbe Sutherland, Appellants (Plaintiffs),

v.MERIDIAN GRANITE COMPANY, a Delaware Corporation, d/b/a Martin Marietta Materials, Appellee (Defendant).Meridian Granite Company, a Delaware Corporation, d/b/a Martin Marietta Materials, Appellant (Defendant),

v.John Sutherland and Minerva Selbe Sutherland, Appellees (Plaintiffs).

Nos. S–11–0091

S–11–0092.

Supreme Court of Wyoming.

April 10, 2012.

Representing Sutherlands: Bruce S. Asay, Associated Legal Group, LLC, Cheyenne, Wyoming.

Representing Meridian Granite Company: Franklin D. O'Loughlin and Jaclyn K. Casey, Rothgerber, Johnson & Lyons, LLP, Denver, Colorado. Argument by Mr. O'Loughlin.

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

BURKE, Justice.

[¶ 1] John Sutherland and Minerva Selbe Sutherland entered into a mining lease granting Meridian ¹ the right to conduct mining operations on the Sutherlands' property. A dispute developed between the Sutherlands and Meridian regarding the Sutherlands' obligation to pay taxes relating to the mineral production. The dispute led to litigation. On cross-motions for summary judgment, the district court ruled that the Sutherlands were obligated to pay the disputed taxes. It therefore granted Meridian's motion and denied the Sutherlands'. The Sutherlands appealed the district court's ruling, and Meridian filed a cross-appeal. We affirm.

ISSUES

[¶ 2] The Sutherlands present a single issue:

Did the district court err in allowing Meridian to deduct ad valorem and severance taxes from payments to the Sutherlands when such tax payments are not required by the State?

In its cross-appeal, Meridian raises four issues:

A. Did the district court err in allowing the Sutherlands to pursue claims barred by the applicable statutes of limitation?

B. Did the district court err when it failed to dismiss the Sutherlands' claims based on the doctrine of laches?

C. Did the district court err in allowing the Sutherlands to pursue a claim for declaratory judgment when the Sutherlands simultaneously asserted a claim for breach of contract?

D. Did the district court err in denying Meridian's motion to dismiss for failure to join an indispensable party, where the party not joined was a party to the contract at issue?

FACTS

[¶ 3] In September, 1988, the Sutherlands executed a mining lease with Granite Canyon Quarry, a joint venture, with Meridian as the “managing joint venturer.” The single mining lease covers two separate parcels of property, identified as “Parcel 1” and “Parcel 2.” The Sutherlands own both the surface estate and the mineral estate of Parcel 1, but only the surface estate of Parcel 2.² The mining lease requires Meridian to pay a “Production Royalty” to the Sutherlands of 10¢ per ton on all minerals produced and sold from Parcel 1, and 6¢ per ton on all minerals produced and sold from Parcel 2. ³

[¶ 4] With regard to the payment of taxes, the mining lease contains this provision:

Lessor [Sutherlands] shall pay when due all general and ad valorem taxes levied and assessed against the Premises and any taxes imposed upon or measured by advance royalties or Production Royalties paid to Lessor. Lessee [Meridian] shall pay when due all taxes lawfully assessed and levied against improvements and equipment placed upon the Premises by Lessee, upon production from the Premises except such portions thereof as are payable for Production Royalty paid to Lessor and upon other rights, property and operations of Lessee.

[¶ 5] Throughout the term of the mining lease, Meridian has made royalty payments to the Sutherlands, but has withheld amounts asserted by Meridian to reflect the Sutherlands' share of ad valorem and severance taxes. The amounts withheld by Meridian have been used to pay a portion of the taxes paid by Meridian. The Sutherlands objected to Meridian's withholding as early as 1990, when mining operations were being conducted only on Parcel 1. They maintained their objections in 2003 after mining operations began on Parcel 2. After considerable correspondence between the parties, the Sutherlands acquiesced to Meridian's withholding taxes relating to mineral production on Parcel 1, but continued to object to withholding taxes relating to mineral production on Parcel 2. The Sutherlands' position, simply stated, was that they owed taxes for Parcel 1 because they owned the minerals, but they did not owe taxes for Parcel 2 because they did not own the minerals. Meridian continued to assert that the Sutherlands were liable for taxes for both Parcel 1 and Parcel 2.

[¶ 6] On May 7, 2008, the Sutherlands filed a complaint against Meridian in state district court, claiming generally that Meridian was wrongfully withholding taxes for Parcel 2. They asserted a breach of contract claim and also sought declaratory judgment. Meridian answered, raised several affirmative defenses, and filed a motion to dismiss. Both parties filed motions for summary judgment. After a hearing, the district court denied Meridian's motion to dismiss. It denied the Sutherlands' motion for summary judgment. It granted Meridian's motion for summary judgment, ruling against Meridian on the affirmative defenses but in favor of Meridian on the merits. Both parties filed timely appeals.

STANDARD OF REVIEW

[¶ 7] We review a district court's summary judgment rulings de novo, using the same materials and following the same standards as the district court. The facts are considered from the vantage point most favorable to the party who opposed the motion, and we give that party the benefit of all favorable inferences that may fairly be drawn from the record. Cook v. Shoshone First Bank, 2006 WY 13, ¶ 11, 126 P.3d 886, 889 (Wyo.2006); Garcia v. Lawson, 928 P.2d 1164, 1166 (Wyo.1996). Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. W.R.C.P. 56(c).

DISCUSSION

[¶ 8] A mineral lease is a contract, and is interpreted under general principles of contract interpretation. Wyoming Bd. of Land Comm'rs v. Antelope Coal Co., 2008 WY 60, ¶ 8, 185 P.3d 666, 668 (Wyo.2008). Our purpose in interpreting any contract is to ascertain the true intent of the parties. State v. Pennzoil Co., 752 P.2d 975, 978 (Wyo.1988). If the language of a contract is plain and unequivocal, that language is controlling. Dewey v. Dewey, 2001 WY 107, ¶ 20, 33 P.3d 1143, 1148 (Wyo.2001). The plain meaning of the contract is the meaning which the language would convey to reasonable persons at the time and place of its use. Dickson v. Thomas (In re Estate of Thomas), 2009 WY 10, ¶ 7, 199 P.3d 1090, 1094 (Wyo.2009). We interpret the language of an unambiguous agreement as a matter of law, and rely on extrinsic evidence only if the contract is ambiguous. Union Pacific Resources Co. v. Texaco, 882 P.2d 212, 219–20 (Wyo.1994).

[¶ 9] The parties do not dispute any material facts, leaving only the question of which party is entitled to judgment as a matter of law. The key to answering this question is the language of the mining lease governing the payment of taxes, excerpted here:

Lessor [Sutherlands] shall pay when due all general and ad valorem taxes levied and assessed against the Premises and any taxes imposed upon or measured by advance royalties or Production Royalties paid to Lessor.

[¶ 10] The Sutherlands focus on the lease's requirement that they must pay “all general and ad valorem taxes levied and assessed against the Premises.” They assert that the mining lease defines the term “Premises” to refer to the surface and mineral estates of Parcel 1, but only to the surface estate of Parcel 2. Severance and ad valorem taxes on Parcel 2 are therefore not levied against the “Premises,” and on this basis, the Sutherlands contend that they are not required to pay these taxes.

[¶ 11] We agree with the Sutherlands that the taxes at issue are not levied or assessed against “the Premises.” Indeed, in Wyoming, mineral severance and ad valorem taxes are imposed on the mineral product after severance, not upon the lands or “Premises” at all. See Oregon Basin Oil & Gas Co. v. The Ohio Oil Co., 70 Wyo. 263, 280, 248 P.2d 198, 205 (Wyo.1952). However, the Sutherlands overlook the fact that the mining lease requires them to pay taxes levied against the Premises “ and any taxes imposed upon or measured by advance royalties or Production Royalties paid to Lessor.” (Emphasis added.) The Sutherlands are obligated to pay not only taxes levied against the Premises, but also taxes imposed upon or measured by royalties.

[¶ 12] The taxes at issue in this case are “imposed upon or measured by advance royalties or Production Royalties paid to Lessor.” Meridian asserts that royalty payments are, and must be, included in the calculation of severance and ad valorem taxes. In support of that assertion, Meridian offered undisputed evidence on summary judgment that the Wyoming Department of Revenue's Form 8301, the “Annual Gross Products Report for Miscellaneous Minerals,” requires the taxpayer to report all royalties. Of particular significance to this case, Form 8301 specifically requires the taxpayer to include the value of the private royalties as part of the taxable value of the minerals. Because the taxable value of the minerals includes the value of the private royalties, it follows that the severance and ad valorem taxes at issue are “measured by” the royalties Meridian pays to the Sutherlands. Accordingly, the unambiguous language of the mining lease obligates the Sutherlands to pay the taxes attributable to those royalties.

[¶ 13] The Sutherlands argue against this conclusion, emphasizing that the State of Wyoming imposes severance and ad valorem taxes only on the owner of the minerals. They rely on the established Wyoming rule that, “with regard to taxes assessed on the gross products of a mine or well, both the lessee and lessor are responsible for payment in...