Nollie F. Reynolds v. Amerada Hess Corporation ( 1999 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 1999-CA-00585-SCT
NOLLIE F. REYNOLDS AND LARRY REYNOLDS
v.
AMERADA HESS CORPORATION AND DENBURY MANAGEMENT, INC.
DATE OF JUDGMENT: 02/22/1999
TRIAL JUDGE: HON. FRANKLIN C. McKENZIE, JR.
COURT FROM WHICH APPEALED: WAYNE COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANTS: JAY BOLING
O. MARVIN OATES, JR.
ROBERT A. PRITCHARD
STANFORD YOUNG
ATTORNEYS FOR APPELLEES: JAMES L. HALFORD
VICTORIA W. THOMAS
WILLIAM F. BLAIR
JEFFERSON D. STEWART
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: AFFIRMED - 09/28/2000
MOTION FOR REHEARING FILED: 10/26/2000; denied 3/15/2001
MANDATE ISSUED: 3/22/2001
BEFORE PRATHER, C.J., MILLS AND COBB, JJ.
MILLS, JUSTICE, FOR THE COURT:
¶1. This case arises from a controversy involving a surface lease agreement entered into between Buel O.
Reynolds and Trans-State Oil Company, now Amerada Hess Corporation (Hess). Chancellor Frank C.
McKenzie, Jr. granted the summary judgment motions of Hess and its successor, Denbury Management,
Inc., and entered a final judgment and permanent injunction enjoining Nollie F. and Larry Reynolds, Buel's
successors in title, from interfering with the operation of the equipment and facilities at issue and dismissing
the Reynoldses' counterclaims. We affirm.
FACTS AND PROCEEDINGS BELOW
¶2. The facts in this case are undisputed. In 1940 the mineral owner of a large tract of land known as the
Eucutta Field in Wayne County executed an oil and gas lease with Humble Oil Company, later known as
Exxon. The lease granted Humble the following:
the right of operating for and producing therefrom oil, gas and/or other minerals, casinghead gas and
casinghead gasoline, with right of way and easements for pipelines, telegraph and telephone lines,
tanks, power houses, stations, gasoline plants and fixtures for producing, treating and caring for such
products and any and all rights and privileges necessary, incident to or convenient for the economical
operations of said land for oil, gas and/or other minerals, casinghead gas and casinghead gasoline.
This lease has been maintained by production of oil and gas to the present date.
¶3. On April 6, 1965, Buel Reynolds acquired title to the surface of approximately 300 acres in the heart of
the Eucutta Field. This case concerns a 2.676 acre tract of this land. Reynolds acquired only the surface
estate in the tract subject to the interest and rights of the mineral owners and the 1940 lease from the
mineral owners to Humble.
¶4. In April, 1966, the Mississippi State Oil and Gas Board approved the East Eucutta Fieldwide Unit,
naming Trans-State Oil Company (subsequently named Amerada Hess Corporation) the operator of the
unit, under a Unitization Agreement and Unit Operating Agreement, to conduct secondary and pressure
maintenance operations in the Eutaw Pool of the Eucutta Field. All mineral owners of the 2.676 acre tract
ratified both the Unitization Agreement and Unit Operating Agreement (together the Fieldwide Unit
Agreements). Additionally, Humble ratified the Fieldwide Unit Agreements, thus agreeing to the designation
of Trans-State as operator of the Fieldwide Unit. The trial court found that as operator under the
agreements Trans-State had authority from Humble to use the surface in the lands leased by Humble for the
economical development, operation, and production of the fieldwide unit under the same rights and powers
described above which Humble had received under the 1940 lease.
¶5. The 1940 lease appears to have authorized extensive use of the land in conducting oil and gas
operations. It is unclear whether the minerals had been severed from the surface prior to execution of the
oil, gas, and mineral lease. Nevertheless, Trans-State entered into a lease agreement with Buel and Nollie
Reynolds on October 1, 1968, for the use of the surface of the 2.676 acre tract at issue in this case. This
surface lease stated a ten-year term and authorized Trans-State to construct buildings; install tanks, pumps,
engines, pipelines, pits, fuel lines, and gas lines; to dig water wells; produce water; and store equipment. The
lease also granted any other rights incidental to these rights. Trans-State constructed surface facilities on the
2.676 acre tract and designated those facilities as Plant No. 6. These facilities consist primarily of tanks,
pumps, motors, electrical panels and lines, and pipeline headers and connections which, according to the
findings of the trial court, may all be removed without damage to the real property. Plant No. 6 is one of
several locations in the Eucutta Field used to gather saltwater piped from wells producing out of the Eutaw
Oil Pool in the Fieldwide Unit and then pump that water through pipelines to water injection wells located
on other lands in the field.
¶6. The surface lease provided a renewal option for an additional ten-year term and a ninety-day period,
following termination, for the lessee to remove its equipment and materials from the site. In 1978 Trans-
State, by this time known as Amerada Hess Corporation, exercised the renewal option. The surface lease
expired by its terms on October 1, 1988. On or about that date, Buel Reynolds, claiming that Amerada
Hess had no further right to use the surface of his property, shut down the facilities at Plant No. 6.
¶7. On October 4, 1988, Hess filed a complaint in the Chancery Court of Wayne County against Buel O.
Reynolds, and his wife, Nollie F. Reynolds, seeking an injunction to prohibit the Reynoldses' interference
with Hess's operations of the equipment and facilities referred to as Plant No. 6 on the 2.676 acre tract of
the Reynoldses' surface lands. An agreed order granting a preliminary injunction was approved by the court
on November 8, 1988, and, subject to Hess's posting of a $10,000 bond, restrained the Reynoldses from
interfering with the operation of Plant No. 6. This agreed order reserved all rights and defenses of the
parties.
¶8. The case lay dormant until February 28, 1996, when the Reynoldses filed a counter-complaint alleging
breach of contract and conversion and seeking an award of actual and punitive damages. On August 15,
1996, Hess posted the $10,000 bond ordered in the 1988 agreed order. Upon the death of Buel Reynolds
in 1998, the suit was revived in the name of his estate and surviving heirs, Nollie F. and Larry Reynolds.
Subsequent proceedings led to the summary judgment in favor of Denbury and Hess whereby the trial court
entered final judgment and a permanent injunction enjoining the Reynoldses from interfering with Plant No.
6 and dismissing their counterclaims. The Reynoldses timely perfected this appeal.
STANDARD OF REVIEW
¶9. This Court conducts de novo review of a trial court's grant of summary judgment. Merrimack Mut.
Fire Ins. Co. v. McDill, 674 So. 2d 4, 7 (Miss. 1996); Short v. Columbus Rubber & Gasket Co.,
Inc., 535 So. 2d 61, 63 (Miss. 1988). Thus, the standard that the trial court initially employed under Rule
56(c) is applied here. 10 Wright, Miller & Kane, Federal Practice & Procedure § 2716 (1983 & Supp.
1988). The Court must review all evidentiary matters before it in the record: affidavits, depositions,
admissions, interrogatories, etc. The evidence must be viewed in the light most favorable to the nonmoving
party, and that party is to be given the benefit of every reasonable doubt. Smith v. Sanders, 485 So. 2d
1051, 1054 (Miss. 1986); Dennis v. Searle, 457 So. 2d 941, 944 (Miss. 1984). The burden of
demonstrating that no genuine issue of fact exists is on the moving party. Short, 535 So. 2d at 63-64.
However, this burden is one of production and persuasion, not of proof. Fruchter v. Lynch Oil Co., 522
So. 2d 195, 198 (Miss. 1988). A motion for summary judgment lies only when there is no genuine issue of
material fact, and the moving party is entitled to judgment as a matter of law. Miss. R. Civ. P. 56(c). This
Court does not try issues on a Rule 56 motion, it only determines whether there are issues to be tried.
Comment, Miss. R. Civ. P. 56.
ANALYSIS
I. WHETHER THE LOWER COURT WAS CORRECT IN GRANTING SUMMARY
JUDGMENT TO APPELLEES, RULING THAT THE CONTRACT PREPARED BY THE
APPELLEES' PREDECESSOR IN TITLE, IN EXISTENCE BETWEEN THE PARTIES
AND RECOGNIZED BY THEM AS VALID FOR TWENTY YEARS
NOTWITHSTANDING, WAS BARRED AS A MATTER OF LAW.
¶10. The Reynoldses assert that Trans-State, with the apparent authority of Humble, contracted in the
surface lease of 1968 to alter the mineral lessee's surface rights created by the 1940 mineral lease. While
they acknowledge that an implicit right to use the surface as reasonably necessary exists in mineral lease
contracts, the Reynoldses argue that such a right can be bargained away. They contend that precisely such
a bargaining occurred in the case at bar. Hess and Denbury, on the other hand, point to the undisputed fact
that the Reynoldses purchased the surface rights subject to the previously severed rights of the mineral
owner and mineral lessee to make reasonable use of the surface in mineral exploration and production.
Hess argues that its predecessor, Trans-State, under the Fieldwide Unit Agreements, was denied the
authority to modify the rights of Humble and that, as a result, the 1968 surface lease cannot supersede the
1940 mineral lease.
¶11. Long-established law in Mississippi provides that the severed mineral owner or lessee has the right to
use the surface of the lands for all reasonable purposes to explore and drill for oil and gas and may use as
much of the surface as is reasonably necessary to exercise its rights, but it cannot intentionally or negligently
damage or use more of the land surface than is reasonably necessary in its mining operation. Charles F.
Hayes & Assocs., Inc. v. Blue, 233 So. 2d 127, 128 (Miss. 1970) (collecting authorities). It is
undisputed in this case that these rights were granted to Humble in the 1940 lease and that Trans-State
(Hess) was later given the same rights while serving as operator of the Eucutta Fieldwide Unit.
¶12. The Reynoldses' assertion that the surface lease supersedes the existing mineral lease has been
rejected time and again in other jurisdictions. In Mingo Oil Producers v. Kamp Cattle Co., 776 P.2d
736, 740 (Wyo. 1989), the Wyoming Supreme Court found that the termination of the surface lease
between the surface owner and operator does not affect the continued right, under the mineral lease, to use
as much of the surface as reasonably necessary for oil and gas production and development. Mingo
acquired mineral leases which had previously been executed in 1979. In 1984 the surface owner, Kamp
Cattle, denied access to Mingo. The two parties then entered into a "Surface Access Agreement" in 1985.
In 1987 Kamp Cattle again denied access to Mingo claiming that the agreement had been breached. The
Wyoming Supreme Court held that, notwithstanding the agreement, Mingo had the absolute right as mineral
lessee to conduct operations on the surface. The court noted that "[w]ithout any agreement, Mingo Oil
already had the right, as a function of its dominant estate, to possession provided by the oil and gas lease."
Id.
¶13. In Livingston v. Indian Territory Illuminating Oil Co., 91 F.2d 833 (10th Cir. 1937), the
plaintiff executed a mineral lease to the defendant in 1923. Three years later the plaintiff executed a surface
lease in favor of the defendant for a term of three years with an extension option for successive annual
terms. In 1929, after it had drilled numerous wells on the premises and built storage tanks, roads, power
and telephone lines, and even residences for its employees, Indian Territory notified Livingston that it did
not intend to exercise its option to renew the surface lease. Livingston sued for trespass and damages.
Applying Oklahoma law, the Tenth Circuit affirmed the trial court's directed verdict for Livingston. The
verdict awarded only nominal damages. The court held that Indian Territory had the right, under the mineral
lease, to use the surface after expiration of the surface lease as reasonably necessary for orderly and
efficient operations. Id. at 834-35.
¶14. In Ball v. Dillard, 602 S.W.2d 521 (Tex. 1980), the landowner had executed a surface lease to Ball
prior to the execution to Dillard of a mineral lease covering the same property. Ultimately a conflict arose
between these two lessees. The Texas Supreme Court held that the mineral lessee, as owner of the
dominant estate, had the right to use as much of the premises as was reasonably necessary to effectuate the
purposes of the lease. Id. at 523. See also, Dunn v. Southwest Ardmore Tulip Creek Sand Unit, 548
P.2d 685 (Okla. Ct. App. 1976) (holding that mineral lessee had right, independent of an existing waste
water lease, to use well for reasonable development of recovery unit for recovery of oil and gas); Property
Owners of Leisure Land, Inc. v. Woolf & Magee, Inc., 786 S.W.2d 757 (Tex. App. 1990) (holding
that mineral owner could not be limited by subdivision restrictions imposed by surface owners after mineral
estate was severed).
¶15. In opposition to this line of authority, the Reynoldses rely heavily on two Kansas appellate court cases
which, the Reynoldses argue, stand for the proposition that a mineral lessee may extinguish his rights, under
the mineral lease, to use the surface by subsequently entering into a surface lease. In the first case, Monfort
v. Layton, 571 P.2d 80 (Kan. Ct. App. 1977), at issue was a letter, written after the mineral lease was
executed, in which the lessees agreed to pay for saltwater damage to the lessors' crops caused by the
lessees' oil-drilling operations. The letter set forth the agreed method for determining the crop loss each
year. The Monfort court held that the "letter was part and parcel of the original lease, that it could not be
construed as an interminable agreement binding the [lessees] in perpetuity, and that when the lease expired
so did the lessees' obligation to pay annual crop damage." Id. at 86. Monfort did not involve co-existing
surface and mineral leases; nor did it mention the superseding of a contract. It is, thus, inapplicable to the
case at bar.
¶16. The Reynoldses also offer Colburn v. Parker & Parsley Dev. Co., 842 P.2d 321 (Kan. Ct. App.
1992), in furtherance of their theory regarding contract superseding and the bargaining away of implied
surface rights. There the court considered whether a mineral lessee's execution of a saltwater disposal
agreement with the surface owner voided its right, under the mineral lease, for free disposal of on-premises
water. The lessee wanted to dispose of off-premises saltwater in addition to the on-premises water. Thus, a
saltwater disposal agreement was prepared and executed, but it did not distinguish between saltwater
produced on the premises and that produced off the premises. The court explained that, while the right to
dispose of on-premises saltwater is normally implied under the mineral lease, no such implied right exists for
disposal of off-premises saltwater. The court found that the lessee waived his right for free disposal of on-
premises saltwater in favor of expanded rights and the opportunity for economic advantage by receipt of
substantial payments for disposal of off-premises water on the lessors' property. Id. at 328-29.
¶17. Although Colburn is somewhat closer to the mark than Monfort, it, too, is of limited applicability.
First, it does not involve concurrent surface and mineral leases and does not address whether one may
entirely supersede the other. Second, Colburn is factually distinguishable from the case at bar because in
Colburn the mineral lessor and lessee were the same parties who executed the saltwater disposal
agreement. A different situation exists in the present case in which Trans-State (Hess) and the Reynolds
executed the 1968 surface lease, but neither was a party to the original 1940 mineral lease.
¶18. We find that the Reynoldses' surface lease did not supersede the 1940 mineral lease and that summary
judgment was properly granted.
II. WHETHER OR NOT THE LOWER COURT ERRONEOUSLY CONCLUDED, BY
GRANTING APPELLEES' SUMMARY JUDGMENT MOTIONS, THAT THERE WAS
NO FORFEITURE OF THE EQUIPMENT INVOLVED IN THE CONTRACT.
¶19. The Reynoldses assert that Hess was required to remove its equipment from the Plant No. 6 site
within ninety days of the expiration of the surface lease in October, 1988. According to the Reynolds,
because Hess did not accomplish this alleged requirement, the equipment was forfeited and wrongfully
converted to use by Hess and, subsequently, Denbury. Obviously, our holding that the Humble mineral
lease remained in full force and effect, notwithstanding the execution and subsequent expiration of the
surface lease, renders this argument without merit; thus, we shall reject it.
III. WHETHER THE LOWER COURT ERRED IN DISMISSAL OF APPELLANTS'
BREACH OF CONTRACT SUIT FOR ACTUAL AND PUNITIVE DAMAGES WHEN IT
CONCLUDED THERE WERE NO GENUINE ISSUES OF MATERIAL FACT ON
DAMAGES TO BE DETERMINED BECAUSE THE CONTRACT WAS BARRED AS A
MATTER OF LAW.
¶20. Since we find that Hess and Denbury are not in breach, this issue is without merit.
IV. WHETHER THE TRIAL COURT WAS CORRECT WHEN IT IGNORED
APPELLEES' FAILURE TO POST BOND UNTIL ALMOST EIGHT YEARS AFTER
THE COURT APPROVED AN AGREED ORDER GRANTING PRELIMINARY
INJUNCTION ENTERED INTO BETWEEN THE PARTIES, FOLLOWING THE
FILING OF THE INITIAL COMPLAINT FOR INJUNCTIVE RELIEF.
¶21. The Reynoldses contend that the agreed order granting the preliminary injunction of November 8,
1988, was void and of no effect because Hess did not post a $10,000 bond until August 15, 1996. They
reason that the failure to make a timely submission of the bond renders the ultimate judgment and permanent
injunction defective. Hess and Denbury maintain that Hess's failure to post bond under the agreed order is
moot.
¶22. The Reynoldses cite two cases which address the mandatory nature of the bond-posting requirement.
In Invesat Corp. v. Harrison Enterprises, Inc., 386 So. 2d 721, 722 (Miss. 1980), this Court
determined that a preliminary injunction was void and should be dissolved because the complainants failed
to post the bond required by the chancellor's order. In International Ass'n of Bridge, Structural and
Ornamental Ironworkers, AFL-CIO, Local Union 710 v. Howard L. Byrd Bldg. Serv., Inc., 284
So. 2d 301 (Miss. 1973), this Court explained that "[a] condition precedent to the issuance of a preliminary
injunction is that the party at whose instance the injunction is granted must post bond in a form and amount
to be determined by the issuing court." Id. at 304 (citations omitted).
¶23. While these cases clearly mandate the posting of a bond for preliminary injunctions, they are
distinguishable from the case sub judice. In Invesat no permanent injunction was ever issued. The case
came to this Court on interlocutory appeal, and the Court reversed the chancellor's order overruling
Invesat's motion to dissolve the preliminary injunction. 386 So. 2d at 722. In the present case, Hess
eventually posted the bond, albeit almost eight years later. Subsequently, a final order with a permanent
injunction was entered by the trial court. We have previously held that failure to post bond for a preliminary
injunction is a moot issue given the appropriateness of the later grant of a permanent injunction. See, e.g.,
Carl v. Craft, 258 So. 2d 237, 240 (Miss. 1972); Yellow Cab Co. of Biloxi, Inc. v. Checker Taxicab
Owners' Ass'n, 233 Miss. 735, 103 So. 2d 350 (1958).
¶24. In the Ironworkers case, this Court ruled that the lower court was without jurisdiction and that the
injunction was wrongfully issued. 284 So. 2d at 304. The bond in that case was timely posted in
accordance with the requirements of the trial court. Id. at 302. An issue arose on appeal as to the
appropriateness of the amount of the bond, but there was no question as to its being posted. Id. While this
Court did express the mandatory nature of the bond, the permanent injunction was dissolved on other
grounds. Id. at 303-04. Thus, Ironworkers is inapplicable.
¶25. Finally, the agreed order provided that Hess post a bond "for payment of such costs and damages as
may be incurred or suffered by [the Reynoldses] if they are found to be wrongfully restrained or enjoined."
The trial court ultimately found that no damages or costs were due from Hess. Since we agree with this
finding, this issue is without merit.
V. WHETHER AS A MATTER OF LAW THE GRANT OF INJUNCTIVE RELIEF BY
THE TRIAL COURT WAS ERRONEOUS BASED ON SUSTAINING APPELLEES'
MOTION FOR SUMMARY JUDGMENT.
¶26. The Reynoldses fail to expand on this point of error other than to simply assert once again that genuine
issues of material fact do exist. They cite no authorities. This Court has frequently held that an argument
unsupported by cited authority need not be considered by the Court. See, e.g., Hankins v. Hankins, 729
So. 2d 1283, 1286 (Miss. 1999); Drennan v. State, 695 So. 2d 581, 585-86 (Miss. 1997); Grey v.
Grey, 638 So. 2d 488, 491 (Miss. 1994). However, we have already determined that there was no
genuine issue as to any material fact and that summary judgment was properly granted. We further find that
the chancellor's grant of a permanent injunction was supported by the evidence.
¶27. The Reynoldses allege that genuine issues of material fact are raised by their own assertions and by the
affidavits of their experts. However, they identify no specific material facts as being in dispute but instead
address only the legal significance of the undisputed facts. "Mere allegations which do not reveal detailed
and precise facts will not prevent the award of summary judgment." Ellis v. Powe, 645 So. 2d 947, 952
(Miss. 1994) (quoting Brown v. Credit Ctr., Inc., 444 So. 2d 358, 362 (Miss. 1983)). A deposition or
affidavit relied upon in an attempt to show that summary judgment was wrongfully granted must do more
than make general assertions and legal conclusions which do not give rise to a genuine issue of material fact.
Liberty Leasing Co. v. Hillsum Sales Corp., 380 F.2d 1013, 1015 (5th Cir. 1967). Such are the types
of allegations, assertions, and conclusions which have been presented by the Reynoldses. Therefore, this
Court finds that the motions for summary judgment were properly granted.
¶28. Further, we find that the permanent injunction was supported by the evidence. To obtain a permanent
injunction, a party must show an imminent threat of irreparable harm for which there is no adequate remedy
at law. City of Water Valley v. Trusty, 343 So. 2d 471, 472 (Miss. 1977). In the present case it is
undisputed that on or about October 1, 1988, the date of expiration of the surface lease, Buel Reynolds,
claiming that Hess no longer had the authority to utilize the equipment or the surface of his lands, shut down
the pumps at Plant No. 6. In granting the preliminary and permanent injunctions, the trial court was
apparently satisfied with Hess's showing of the magnitude of the potential irreparable harm that would have
occurred as a result of Reynolds's actions. According to Hess, if the water injection plant is peremptorily
shut down, the Reynoldses' property as well as other nearby property could be irreparably harmed from
saltwater spills. Also, a disruption in the operation of the saltwater injection plant would require Hess to shut
down all producing wells affected by the plant, resulting in damage to the entire project and to the oil
reservoir. This Court has previously recognized that an oil and gas lessee is entitled to injunctive relief when
a surface owner interferes with its operations. See, e.g., Lewis v. Ada Oil Co., 279 So. 2d 622, 625
(Miss. 1973); Pace v. State ex rel. Rice, 191 Miss. 780, 4 So. 2d 270, 279 (1941). Hess met its burden
in showing the immediacy of the threat of irreparable harm. Furthermore, Hess and Denbury would have no
adequate remedy at law to prevent Reynolds and his successors from continuing this harmful action.
Therefore, the permanent injunction was properly granted.
CONCLUSION
¶29. The Reynoldses have presented no compelling legal authority to support their claims that the 1968
surface lease superseded the 1940 Humble mineral lease. Furthermore, the Reynoldses have failed to show
any genuine issues of material fact in dispute in this case. Therefore, we affirm the trial court's final judgment
and permanent injunction.
¶30. AFFIRMED.
PRATHER, C.J., PITTMAN AND BANKS, P.JJ., SMITH, COBB AND DIAZ, JJ.,
CONCUR. McRAE, J., CONCURS IN RESULT ONLY. WALLER, J., NOT
PARTICIPATING.