Warner v. Haught, Inc.

• Decision Date: 11 April 1985
• Docket Number: No. 16184,16184
• Citation: 174 W.Va. 722,329 S.E.2d 88
• Court: West Virginia Supreme Court
• Parties: Richard M. WARNER, et al. v. HAUGHT, INC., etc.

Page 88

329 S.E.2d 88

174 W.Va. 722

Richard M. WARNER, et al. v. HAUGHT, INC., etc.

No. 16184.

Supreme Court of Appeals of

West Virginia.

April 11, 1985.

Syllabus by the Court

1. "A written contract merges all negotiations and representations which occurred before its execution, and in the absence of fraud, mistake, or material misrepresentations extrinsic evidence cannot be used to alter or interpret language in a written contract which is otherwise plain and unambiguous on its face." Syl. pt. 3, Iafolla v. Douglas Pocahontas Coal Corporation, 162 W.Va. 489, 250 S.E.2d 128 (1978).

2. Under circumstances that do not permit forfeiture or indicate abandonment, an oil and gas lease binding the lessee to drill a well on the leased premises within a certain period, or, in lieu thereof, make periodical payments of delay rental, and containing no clause of special limitation which would effect an automatic termination of the lease for failure of the lessee to perform one of the specified obligations, is not terminable due to nonpayment of the rental without the lessor's compliance with the notice and demand provisions under West Virginia Code § 36-4-9a (1985 Replacement Vol.). However, leases subject to automatic termination for failure to pay delay rentals are unaffected by these statutory provisions.

3. Under West Virginia Code § 36-4-9a (1985 Replacement Vol.), an oil and gas lessee's repeated failure to pay rentals on time, thereby forcing the lessor to repeatedly seek relief under that section, may permit a finding that the indifference, laches or injurious conduct of the lessee justifies a declaration of equitable forfeiture of the leasehold.

4. "A motion by both plaintiff and defendant for summary judgment under Rule 56, R.C.P. does not constitute a determination that there is no issue of fact to be tried and if a genuine issue of material fact is involved both motions should be denied." Syl. pt. 3, Haga v. King Coal Chevrolet Company, 151 W.Va. 125, 150 S.E.2d 599 (1966).

5. "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." Syl. pt. 3, Aetna Casualty and Surety Company v. Federal Insurance Company, 148 W.Va. 160, 133 S.E.2d 770 (1963).

Sponaugle, Sponaugle & Bowers, Jeffrey S. Bowers, Franklin, for appellants.

Renner, Everett, Bush & Powell, Richard A. Bush, William G. Powell, Parkersburg, for appellee.

McGRAW, Justice:

This is an appeal from an order of the Circuit Court of Pendleton County dated February 9, 1983, constituting the final judgment in eight separate civil actions brought in that court and subsequently consolidated pursuant to Rule 42(a) of the West Virginia Rules of Civil Procedure. The appellants, plaintiffs in four of the actions below, assert several points of error in support of their request for reversal of the circuit court's final order. Upon the findings and conclusions which follow, the ruling of the circuit court is reversed.

I

During the month of November, 1979, the appellants leased, by separate instruments, various tracts of land in Pendleton County to D. & H. Oil Company, for oil and gas exploration and development. Each lease provides for a primary term of ten years. Further, in each lease, the lessee agreed to pay an annual delay rental, in advance, until a well yielding a royalty to the lessors is drilled on the premises. The leases contain no provision setting forth a remedy or course of action in the event of late payment or nonpayment of the delay rental. Each of the appellants, however, alleges that the agent for the lessee represented to them at the time of the execution of each lease, that if the terms were not complied with, including the rental provision the lease would be null and void. Each lease does contain a surrender clause which permits the lessee, or its successors or assigns, to cancel the lease at any time, upon the payment of one dollar to the lessor. In May of 1980, all of the subject leases were assigned by D. & H. Oil Company to the appellee, Haught, Inc., and shortly thereafter, recorded in the Pendleton County Clerk's office.

In 1981, the appellee failed to make the delay rental payments on any of the subject leases when due. After the expected payments became overdue by a month or longer, all but one set of appellants separately mailed to the appellee or the original lessee, D. & H. Oil Company, by regular mail, notices of cancellation advising that the lessors considered the leases to be null and void due to the failure to pay delay rentals when due. On January 21, 1982, prior to the dates of some of the above-mentioned notices, the appellee mailed delay rental checks in the appropriate amounts to all of the appellants. The checks were back-dated to the respective due dates under each lease. The appellants, in all instances, refused the delay rental checks.

In February and March of 1982, each set of appellants initiated a separate civil action in the Circuit Court of Pendleton County, seeking a declaratory judgment declaring their lease forfeited and abandoned due to the appellee's failure to make timely payment of the delay rental, and removing the lease as a cloud upon the title to their real estate. The appellee answered the civil actions setting forth that the appellants had no right to the relief sought, principally because they had failed to comply with the provisions of West Virginia Code § 36-4-9a (1985 Replacement Vol.). Ultimately, counsel for both sides submitted motions for summary judgment, with supporting affidavits and memoranda, on behalf of their respective clients. On February 9, 1983, the circuit court issued a memorandum order denying the appellants' motion and granting the appellee's motion, thereby dismissing the appellants' complaints. It is from that final order that the appellants have brought this appeal.

II

The central issue presented to this Court is whether the lease cancellation provision of West Virginia Code § 36-4-9a (1985 Replacement Vol.) applies to the oil and gas leases which are the subject of this appeal. The statute provides, in pertinent part, that:

Except in the case where operations for the drilling of a well are being conducted thereunder, any undeveloped lease for oil and/or gas in this State hereafter executed in which the consideration therein provided to be paid for the privilege of postponing actual drilling or development or for the holding of said lease without commencing operations for the drilling of a well, commonly called delay rental, has not been paid when due according to the terms of such lease, or the terms of any other agreement between lessor and lessee, shall be null and void as to such oil and/or gas unless payment thereof shall be made within sixty days from the date upon which demand for payment in full of such delay rental has been made by the lessor upon the lessee therein, as hereinafter provided, except in such cases where a bona fide dispute shall exist between lessor and lessee as to any amount due or entitlement thereto or any part thereof under such lease.

No person, firm, corporation, partnership or association shall maintain any action or proceeding in the courts of this State for the purpose of enforcing or perpetuating during the term thereof any lease heretofore executed covering oil and/or gas, as against the owner of such oil and/or gas, or his subsequent lessee, if such person, firm, corporation, partnership or association has failed to pay to the lessor such delay rental in full when due according to the terms thereof, for a period of sixty days after demand for such payment has been made by the lessor upon such lessee, as hereinafter provided.

The demand for payment referred to in the two preceding paragraphs shall be made by notice in writing and shall be sufficient if served upon such person, firm, partnership, association, or corporation whether domestic or foreign, whether engaged in business or dissolved, by United States registered mail, return receipt requested, to the lessee's last known address.

A copy of such notice, together with the return receipt attached thereto, shall be filed with the clerk of the county commission in which such lease is recorded, or in which such oil and/or gas property is located in whole or in part, and upon payment of a fee of fifty cents for each such lease, said clerk shall permanently file such notice alphabetically under the name of the first lessor appearing in such lease and shall stamp or write upon the margin of the record in his office of such lease hereafter executed the words "canceled by notice"; and as to any such lease executed before the enactment of this statute said clerk shall file such notice as hereinbefore provided and shall stamp or write upon the margin of the record of such lease in his office the words "enforcement barred by notice."

As the record indicates, none of the appellants complied with, nor do they claim to have complied with, the "demand for payment" requirements of the statute. ¹ Rather, the appellants contend that the above-quoted provision applies only to "or" type oil and gas leases. Further, the appellants assert that the leases in question are not "or" type leases, but are "unless" type leases, and therefore, beyond the purview of the statute.

A brief review of the general characteristics and primary distinctions between these two classical types of oil and gas leases is warranted at this point. To begin, the "or" and "unless" nomenclature stems from the effect and obligations created under the drilling and rental clauses of typical leases. ² In an "or" lease, the lessee covenants to do some alternative act, usually to drill a well or to pay periodic rentals, to maintain the lease during its primary term. Simply put, the lessee must "drill or pay". Conversely, the lessee in an "unless" lease does not...