U.S. Exploration, LLC v. Griffin Producing Co.

• Citation: 844 S.E.2d 89
• Decision Date: 08 June 2020
• Docket Number: No. 18-0847,18-0847
• Court: Supreme Court of West Virginia
• Parties: U.S. EXPLORATION, LLC, and Harry Slack, individually, Defendants, Below, Petitioners v. GRIFFIN PRODUCING COMPANY, Plaintiff Below, Respondent

844 S.E.2d 89

U.S. EXPLORATION, LLC, and Harry Slack, individually, Defendants, Below, Petitioners

v.GRIFFIN PRODUCING COMPANY, Plaintiff Below, Respondent

No. 18-0847

Supreme Court of Appeals of West Virginia.

Submitted: January 28, 2020

Filed: June 8, 2020

Edmund L. Wagoner, Esq., David E. Goddard, Esq., Goddard & Wagoner PLLC, Clarksburg, WV 26301, Counsel for Petitioners.

Rodney C. Windom, Esq., Scott A. Windom, Esq., Windom Law Offices, PLLC, Harrisville, WV 26362, Counsel for Respondent.

WORKMAN, Justice:

This is an appeal from the Circuit Court of Ritchie County, West Virginia, which granted the motion of plaintiff/respondent Griffin Producing Company ("Griffin") for partial summary judgment in a dispute concerning ownership of certain oil and gas leases and royalty interests. The court concluded that an unrecorded assignment of leasehold interests to defendant/petitioner U.S. Exploration, LLC ("U.S. Exploration") did not defeat a subsequent modification and surrender of those same interests to Griffin. Subsequent to the court's ruling, Griffin voluntarily dismissed its remaining claims, without prejudice, leading to the court's issuance of a final order. This appeal followed.

Based upon our careful review of the appendix record, the parties’ briefs and oral arguments, and the applicable law, we affirm the judgment of the court below.

I. FACTS AND PROCEDURAL BACKGROUND

Griffin is, and at all times relevant hereto has been, the owner of the oil, gas and minerals within and underlying approximately four thousand contiguous acres situated in the Grant District of Ritchie County, West Virginia.¹ The acreage is divided into forty separate tracts that are commonly referred to as the Kennedy Tracts. Some of the Kennedy Tracts are leased for development of oil and gas, including the tracts at issue in this litigation, approximately thirty in number, which were leased to Magnum Oil Corporation ("Magnum").² Additionally, Magnum held overriding royalty interests in various depths on some or all of its leased tracts.

During the relevant time period of this case, defendant/petitioner Harry Slack ("Mr. Slack") was the vice-president of Magnum and his then-wife, Kathleen Fitzpatrick ("Ms. Fitzpatrick"), was the entity's president. We are told that whether Magnum was marital property or was the separate property of Ms. Fitzpatrick was a hotly-contested issue in divorce proceedings in Vermont and North Carolina; however, because no documentation of the divorce proceedings was included in the appendix record for review by this Court, we express no opinion as to this issue and our decision herein does not rest in any way upon its resolution.

Also during the relevant time period of this case, Mr. Slack owned his own oil and gas company, petitioner U.S. Exploration. Of significance to this case, U.S. Exploration did not own any interests in the leasehold estates for any of the Kennedy Tracts prior to December 12, 2012, on which date an entity designated as Magnum Oil Company ,³ acting through its vice president, Mr. Slack, assigned all of its right, title and interest in the subject leasehold estates and overriding royalties to U.S. Exploration. This Oil and Gas Lease and Overriding Royalty Assignment (hereinafter "the Assignment") provided, in relevant part, that:

This ASSIGNMENT and BILL OF SALE made and entered into as of this date of December 28, 2012 by and between Magnum oil [sic] Company being the ASSIGNOR and US Exploration LLC being the ASSIGNEE.

WITNESSETH.

The ASSOGNOR [sic], does, for and in consideration of one dollar, ($1.00), and other valuable consideration ... hereby grant, bargain, assign, sell, transfer and set over unto the said ASSIGNEE, subject to any previous reservations and/or any reservation's [sic] herein, without warranty, all of the ASSIGNORS (sic) right title and interest in and to the oil and gas wells, leases, overriding royalties and rights of ways. Better known as the Griffin producing [sic] the Kennedy tracts 1 through 40 each containing 100 acres in Grant district ...

According to Mr. Slack's deposition testimony, the Assignment was given for the express purpose of "protect[ing] the leasehold estate ... [f]rom [Ms. Fitzpatrick] giving it away to somebody else, third party, to get the money on the backside." U.S. Exploration did not record the assignment until July 15, 2014, nearly nineteen months later, as Mr. Slack was keeping its existence a secret for use as a possible "nuclear option" in the divorce proceedings.

On July 12, 2013, after Magnum Oil Company had assigned the leaseholds to U.S. Exploration but before U.S. Exploration had recorded the Assignment, Magnum Oil Corporation, acting through its president, Ms. Fitzpatrick, surrendered its right to produce and market oil and gas from the subject leasehold estates, as well as its overriding royalty interests, to Griffin. The two documents evidencing the transaction, a Modification and Partial Surrender of Overriding Royalty and a Surrender of Oil and Gas Lease , were recorded on August 20, 2013. The Modification and Partial Surrender of Overriding Royalty (hereinafter "the Modification") provided, in relevant part, that:

THIS MODIFICATION OF OVERRIDING ROYALTY, made this 12^th day of July, 2013, by and between MAGNUM OIL CORPORATION, PARTY OF THE FIRST PART, and GRIFFIN PRODUCING COMPANY, PARTY OF THE SECOND PART.

WHEREAS the Party of the First Part is the owner of a 3.25% overriding royalty interest in those certain tracts of real estate being situate on the waters of Buky Run and Goose Creek in Grant District, Ritchie County, West Virginia, and designated as Kennedy Tracts No. 1 through 40 ....

WHEREAS the parties herein desire to modify that particular overriding royalty interest only insofar as it pertains to all formations from the top of the Rhinestreet Formation to the base of the Marcellus Shale.

THEREFORE WITNESSETH: That the Party of the First Part, in consideration of the sum of One Dollar, and other valuable consideration ... does hereby MODIFY the overriding royalty interest for all oil, gas or other constituents produced, saved or sold from all formations and strata from the top of the Rhinestreet Formation to the base of the Marcellus Shale. That the Party of the First Part, hereby SURRENDERS the overriding royalty for the same.

This Modification does not apply to the production from existing wells on the subject Kennedy Tracts and does not apply to any future production from any formations or strata above the Rhinestreet Formation or below the Marcellus Formation.

The Partial Surrender of Oil and Gas Lease (hereinafter "the Surrender") provided, in relevant part, that

THIS DEED OF SURRENDER OF OIL AND GAS LEASE, made this 12th day of July, 2013, by MAGNUM OIL CORPORATION, PARTY OF THE FIRST PART, and, GRIFFIN PRODUCING COMPANY, PARTY OF THE SECOND PART.

WITNESSETH: That the Party of the First Part, in consideration of the sum of One Dollar, and other valuable consideration ... does hereby fully surrender and release unto the Party of the Second Part all right title and interest to produce and market oil and gas and their constituents from that certain tract of real estate being situate on the waters of Buky Run and Goose Creek in Grant District, Ritchie County, West Virginia, and described as follows:

Kennedy tracts No. 1 through 40 each containing approximately 100 acres, in Grant District ....

It is undisputed that prior to August 20, 2013, neither U.S. Exploration nor Mr. Slack had ever informed Ms. Fitzpatrick of the existence of the earlier, unrecorded, Assignment.⁴ They claim, however, that Griffin was on constructive notice based on an incident that occurred during one of the Slack/Fitzpatrick divorce hearings in Vermont (or, more likely, outside in the hall). A gentleman named Jim Eliopulos, who was a friend of Ms. Fitzpatrick and had some sort of professional relationship with Griffin,⁵ was at the hearing. At some point that day, Mr. Slack told Mr. Eliopulos that "he, and by extension Magnum, would never agree to sell the Kennedy Lease to him or to Griffin."

On September 10, 2014, Griffin and Magnum filed a "Complaint for Declaratory Relief" against U.S. Exploration and Mr. Slack, seeking an order "setting forth the leasehold ownership interests and rights of the respective parties." The complaint contained further allegations made against Mr. Slack, personally, that he had "fraudulently attempted to cloud Plaintiffs’ respective titles." On September 22, 2017, the circuit court entered an order granting Griffin's motion for partial summary judgment, concluding as a matter of law that Magnum's Modification and Surrender "were not ‘conveyances’ or ‘sales of interests in real estate’ and therefore are not subject to the requirements of the recording statutes, West Virginia Code § 40-1-8 and 40-1-9." Subsequently, Griffin voluntarily dismissed its fraud claims, without prejudice, whereupon the circuit court entered a final order affirming and incorporating the terms of its initial order. This appeal followed.

II. STANDARD OF REVIEW

This case is before us on review of the circuit court's entry of summary judgment in favor of the plaintiff/respondent. In that regard, we have held that " ‘[a] motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law.’ Syllabus point 3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of New York , 148 W. Va. 160, 133 S.E.2d 770 (1963)." Syl. Pt. 1, M.M. ex rel. Jeanette M. v. Pfizer, Inc. , 239 W. Va. 876, 806 S.E.2d 800 (2017).

On appeal, " ‘[a] circuit court's entry of summary judgment is reviewed de novo. ’ Syllabus point 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994)." J.A. St. & Assocs., Inc. v. Thundering Herd Dev., LLC , 228 W. Va. 695, 697, 724 S.E.2d 299, 301 (2011). An additional principle of review applies where, as here, the...