DWG Oil & Gas Acquisitions, LLC v. Southern Country Farms, Inc.

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2017 Term FILED
_______________ January 19, 2017
released at 3:00 p.m.
No. 16-0069 RORY L. PERRY, II CLERK
SUPREME COURT OF APPEALS
_______________ OF WEST VIRGINIA
DWG OIL & GAS ACQUISITIONS, LLC,
Plaintiff Below, Petitioner
v.
SOUTHERN COUNTRY FARMS, INC.;
HARLAN KITTLE and BARBARA KITTLE; and
LORI D. CARPENTER,
Defendants Below, Respondents
_______________
Appeal from the Circuit Court of Marshall County
The Honorable David W. Hummel, Jr., Judge
Civil Action No. 14-C-22
_______________
AFFIRMED
_______________
Submitted: January 10, 2017
Filed: January 19, 2017
Bradley W. Stephens, Esq. Thomas E. White, Esq.
Stephens Law Office White & Clyburn Law Offices
Morgantown, West Virginia Moundsville, West Virginia
Kelly Mayhew, Esq. Counsel for Respondent
Kelly Mayhew, PLLC Southern Country Farms, Inc.
Morgantown, West Virginia
Counsel for the Petitioner
JUSTICE KETCHUM delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “A circuit court’s entry of a declaratory judgment is reviewed de novo.” Syl. pt. 3,
Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995).
2. “In order to create an exception or reservation in a deed which would reduce a
grant in a conveyance clause which is clear, correct and conventional, such exception or
reservation must be expressed in certain and definite language.” Syl. pt. 2, Hall v. Hartley,
146 W.Va. 328, 119 S.E.2d 759 (1961).
3. “Where there is ambiguity in a deed, or where it admits of two constructions, that
one will be adopted which is most favorable to the grantee.” Syl. pt. 6, Paxton v. Benedum-
Trees Oil Co., 80 W.Va. 187, 94 S.E. 472 (1917).
Justice Ketchum:
This declaratory judgment action is before this Court upon the appeal of the petitioner
and plaintiff below, DWG Oil & Gas Acquisitions, LLC (“DWG”), from the December 28,
2015, order of the Circuit Court of Marshall County. As set forth in the order, the circuit
court determined that the oil and gas underlying a parcel of land in Marshall County was
conveyed to A. B. Campbell by deed dated June 5, 1913. A. B. Campbell is a predecessor
in title of the respondents and defendants below, Southern Country Farms, Inc. (“Southern
Country Farms”), Harlan and Barbara Kittle, and Lori D. Carpenter. As a result of the circuit
court’s ruling, title to the oil and gas is currently vested in the respondents, rather than
DWG.1
DWG contends that it is the current owner of the oil and gas underlying the parcel by
virtue of a competing chain of title emanating from a deed executed by P. P. Campbell, Sr.
(“Campbell, Sr.”), on April 10, 1908.
The dispositive facts are not in dispute, and the issue before this Court is a question
of law. Our review is, therefore, de novo. For the reasons stated herein, this Court is of the
1
DWG and Southern Country Farms filed briefs in this Court. No briefs were
filed by Harlan and Barbara Kittle or Lori D. Carpenter.
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opinion that the circuit court correctly applied the law and that title to the oil and gas
underlying the parcel is currently vested in the respondents. Accordingly, the December 28,
2015, order of the Circuit Court of Marshall County is affirmed.
I. Factual Background
DWG is a West Virginia limited liability company engaged in acquiring and leasing
oil and gas interests. In the current matter, DWG embarked on efforts to purchase the oil and
gas underlying a parcel of land in Franklin District, Marshall County, based on a title report
indicating that the oil and gas was owned by the successors of the heirs of Campbell, Sr.
However, according to the respondents, ownership of the oil and gas passed through a
different route to the heirs of A. B. Campbell, through which the respondents claim title. The
resolution of the conflict requires an analysis of three deeds made and recorded between
1908 and 1913. Campbell, Sr., was a party to each deed. For purposes of discussion, the
deeds will be described as Campbell Deed # 1, Campbell Deed # 2, and Campbell Deed # 3.
Campbell Deed # 1
By deed made April 10, 1908, Campbell, Sr., conveyed to P. P. Campbell, Jr.
(“Campbell, Jr.”), real estate in Franklin District, Marshall County, which included a 146
acre tract and an adjacent 20 acre tract. The conveyances were set forth in the April 10,
1908, deed in separate paragraphs. A third paragraph in the deed stated: “Excepting
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therefrom Fifty acres on west side of the 146 acre tract also reserving therefrom all the coal
oil and Gas with permission sell lease release and operate the same” [.]2
By separate deed, also made April 10, 1908, Campbell, Sr., conveyed to himself and
A. B. Campbell, in trust for Laura C. McHenry, the fifty acres excepted from Campbell Deed
# 1. The conveyance in trust for Laura C. McHenry stated:
Fifty acres of land being the South West Fifty Acres conveyed by the
Deed made to P. P. Campbell Jr this day and excepted there from, All the coal
Oil and Gas with with the right to sell lease release and operate. The same is
reserved to the first party, and the said first party hereby covenants with the
said second parties that he will warrant generally the property here by
conveyed.
Campbell Deed # 2
By deed made May 27, 1913, Campbell, Jr., conveyed back to Campbell, Sr., the same
146 acre tract and the adjacent 20 acre tract. The May 27, 1913, deed included the following
provision:
The above described tracts or parcels of land are the same conveyed to
said P. P. Campbell, Jr., by the said P. P. Campbell, Sr., by deed bearing date
the 10th day of April, 1908, of record in the office of the clerk of the county
2
As can be seen, the third paragraph of Campbell Deed # 1 employs no
punctuation marks, such as commas or periods, and the wording is awkward. Moreover,
although the paragraph references “coal,” the appendix-record indicates that the
controversy between the petitioner and the respondents involves oil and gas only.
Draftsmanship issues appear regarding the other deeds relied on by the parties.
3
court of said Marshall county in Deed Book No. 124, page 444, reference
being here made to said deed and record for a more particular description of
the same: And the right, title and interest of the parties of the first part in and
to said lands are conveyed subject to the exceptions and reservations set forth
in said deed, reference being here made to said deed and record for more
particular description of said exceptions and reservations
Campbell Deed # 3
Finally, by deed made June 5, 1913, Campbell, Sr., conveyed to A. B. Campbell the
146 acre parcel and the adjacent 20 acre parcel. The June 5, 1913, deed included the
following provision:
The said tracts of land hereby conveyed being the same property
conveyed to the said P. P. Campbell, Sr., by P. P. Campbell, Jr., and wife by
deed dated the 27th day of May, 1913, and duly of record in Deed Book No.,
138, page 552, of Marshall County records. Subject, however, to all the
reservations as contained in or referred to in said deed.3
As discussed herein, DWG maintains that, the conveyance to A. B. Campbell in
Campbell Deed # 3 notwithstanding, title to the oil and gas remained vested in Campbell, Sr.,
until his death, intestate, in May 1922, at which time title passed to Campbell, Sr.’s heirs and
ultimately to DWG. The respondents, however, contend that A. B. Campbell acquired both
3
In 2013, a series of deeds was made to clarify the amount of surface acreage
actually conveyed and excepted under Campbell Deed # 1 and the effect of the true
acreage as to Campbell Deed # 2 and Campbell Deed # 3. In short, the tract excepted
from Campbell Deed # 1 and separately conveyed in trust for Laura C. McHenry
contained twenty-four acres rather than fifty acres. That adjustment to the acreage,
however, does not otherwise inform our analysis of the Campbell Deeds.
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the surface and the underlying minerals by way of Campbell Deed # 3, through which the
respondents assert title to the oil and gas.
II. Procedural Background
On February 21, 2014, DWG filed a complaint for declaratory judgment in the Circuit
Court of Marshall County.4 The complaint alleged:
Under the valid chain of title to DWG’s Interest (the “Valid Chain”),
as of the execution and recording of Campbell Deed # 3, title to the oil and gas
underlying the Subject Tract remained vested in Palemon P. Campbell, Sr.,
until his death, intestate, on May 1, 1922, at which time title to the Subject Oil
and Gas passed, in proportionate shares, to ten heirs. DWG’s Interest has been
acquired from various heirs, successors, and assigns of these heirs of Palemon
P. Campbell, Sr. - the parties holding valid title to interests in the Subject Oil
and Gas.
DWG’s complaint further alleged that, based on the respondent’s assumption that
Campbell Deed # 3 passed title to the oil and gas to A. B. Campbell, a company known as
Gastar Exploration USA, Inc., improperly acquired oil and gas exploration and development
rights to a portion of the Franklin District parcel through a spurious chain of title. However,
4
W.Va. Code, 55-13-2 [1941], provides that any person “interested under a deed”
may seek relief pursuant to the West Virginia Uniform Declaratory Judgments Act. See
W.Va. R. Civ. P. 57 addressing circuit court procedures in declaratory judgment actions.
Here, the named defendants included respondents Southern Country Farms, Harlan
and Barbara Kittle, and Lori D. Carpenter. Other named defendants, later dismissed from
the action, were James A. Channing; Darald L. Channing; Wayne E. Channing; Wanda
Lou Channing; Hilda-Marie Gilbertson-Wayt; Kimberly Ann Wayt; Kerry Dean Wayt;
and Kenneth E. Rastall.
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the respondents asserted before the circuit court that Campbell Deed # 3 conveyed both the
surface and the underlying minerals of the subject parcel to A. B. Campbell.
Following a hearing, the circuit court stated in a July 17, 2015, letter that judgment
would be entered for the respondents. Accordingly, on December 28, 2015, the circuit court
entered an order declaring that the oil and gas underlying the subject parcel in Franklin
District, Marshall County, was conveyed along with the surface thereof to A. B. Campbell
in Campbell Deed # 3. Consequently, inasmuch as A. B. Campbell is a predecessor in title
of the respondents, title to the oil and gas is currently vested in the respondents, rather than
DWG.
The circuit court based its ruling on two constructions of the following exception and
reservation language set forth in Campbell Deed # 1: “Excepting therefrom Fifty acres on
west side of the 146 acre tract also reserving therefrom all the coal oil and Gas with
permission sell lease release and operate the same” (emphasis added).5 Regarding one
5
As can be seen, the above language includes both the words “excepting” and
“reserving.” According to Robert Tucker Donley, The Law of Coal, Oil and Gas in West
Virginia and Virginia, § 29 (Michie 1951), technically, the words “exception” and
“reservation” have different meanings. However, in this action, those terms have been
employed interchangeably. See Malamphy v. Potomac Edison Co., 140 W.Va. 269, 273,
83 S.E.2d 755, 758 (1954) (“Notwithstanding that the language in a deed of conveyance
may be phrased as a ‘reservation’, such language may be regarded and treated as an
exception if it is necessary in order to carry out the plain purposes of the parties to the
instrument.”).
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construction, the circuit court determined that, if by that language, Campbell, Sr., retained
the oil and gas, then his conveyance to Campbell, Jr., in Campbell Deed # 1 was of the
surface only. Consequently, when Campbell, Jr., conveyed the surface back to him in
Campbell Deed # 2, the surface and mineral interests merged. Thus, Campbell, Sr.’s, later
conveyance to A. B. Campbell in Campbell Deed # 3 was in fee simple, since there was no
clear severance of surface and minerals at that time.
The circuit court’s alternative construction of the language set forth in Campbell Deed
# 1 was that the exception and reservation of the oil and gas pertained solely to the fifty acres
on the west side of the subject parcel. The circuit court noted that such a construction was
corroborated by the simultaneous conveyance of the fifty acres in trust for Laura C.
McHenry, with an oil and gas reservation. Therefore, subject to the fifty acre exception,
Campbell, Sr., retained no oil and gas interest in the larger parcel consisting of the 146 acre
tract and the 20 acre tract conveyed to Campbell, Jr., and ultimately to A. B. Campbell.
Under either construction by the circuit court, A. B. Campbell, the respondents’
predecessor in title, acquired title to both the surface and the oil and gas in Campbell Deed
# 3. Contesting title to the minerals, DWG appeals to this Court.
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III. Standard of Review
Syllabus point 3 of Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995), holds: “A
circuit court’s entry of a declaratory judgment is reviewed de novo.” Accord, syl. pt. 1,
Estate of Fussell v. Fortney, 229 W.Va. 622, 730 S.E.2d 405 (2012); syl. pt. 1, Flanagan v.
Stalnaker, 216 W.Va. 436, 607 S.E.2d 765 (2004). In Cox, this Court observed that, because
the purpose of a declaratory judgment action is to resolve legal questions, “a circuit court’s
ultimate resolution in a declaratory judgment action is reviewed de novo; however, any
determinations of fact made by the circuit court in reaching its ultimate resolution are
reviewed pursuant to a clearly erroneous standard.” 195 W.Va. at 612, 466 S.E.2d at 463.
See W.Va. Code, 55-13-7 [1941] (Orders, judgments and decrees entered under the West
Virginia Uniform Declaratory Judgments Act “may be reviewed as other orders, judgments
and decrees.”).
IV. Discussion
As the circuit court correctly determined, the resolution of this matter largely depends
upon the construction of the following exception and reservation language found in Campbell
Deed # 1: “Excepting therefrom Fifty acres on west side of the 146 acre tract also reserving
therefrom all the coal oil and Gas with permission sell lease release and operate the same”
[.] (emphasis added). DWG contends that, pursuant to that language, its predecessor in title,
Campbell, Sr., retained the oil and gas underlying the subject parcel, and A. B. Campbell
8
only acquired the surface thereof, as indicated by the references to the exception and
reservation set forth in Campbell Deeds # 2 and # 3. The circuit court, however, ruled that
A. B. Campbell, the respondents’ predecessor in title, acquired both the surface and the oil
and gas by way of Campbell Deed # 3.
Our approach to the problem begins with the general principle expressed in syllabus
point 1 of Maddy v. Maddy, 87 W.Va. 581, 105 S.E. 803 (1921):
In construing a deed, will, or other written instrument, it is the duty of
the court to construe it as a whole, taking and considering all the parts
together, and giving effect to the intention of the parties wherever that is
reasonably clear and free from doubt, unless to do so will violate some
principle of law inconsistent therewith. (emphasis added)
Accord, syl. pt. 5, Faith United Methodist Church and Cemetery v. Morgan, 231 W.Va. 423,
745 S.E.2d 461 (2013).
Manifestly, the exception and reservation language in Campbell Deed # 1 is inartfully
drafted. No punctuation marks, such as commas or periods, were employed in the 1908 deed,
and, as a result, it is unclear whether Campbell, Sr., intended to retain the oil and gas
9
underlying the subject parcel or underlying the smaller fifty acre parcel which was separately
conveyed in trust for Laura C. McHenry.6
Syllabus point 2 of Hall v. Hartley, 146 W.Va. 328, 119 S.E.2d 759 (1961), aptly
states: “In order to create an exception or reservation in a deed which would reduce a grant
in a conveyance clause which is clear, correct and conventional, such exception or
reservation must be expressed in certain and definite language.” Accord, syl. pt. 1, Highway
Properties v. Dollar Savings Bank, 189 W.Va. 301, 431 S.E.2d 95 (1993); syl. pt. 2, G & W
Auto Center, Inc. v. Yoursco, 167 W.Va. 648, 280 S.E.2d 327 (1981). Accordingly, in the
circumstances herein, we must additionally note the long-standing principle set forth in
syllabus point 6 of Paxton v. Benedum-Trees Oil Co., 80 W.Va. 187, 94 S.E. 472 (1917):
“Where there is ambiguity in a deed, or where it admits of two constructions, that one will
be adopted which is most favorable to the grantee.” Accord, syl. pt. 8, Zimmerer v. Romano,
223 W.Va. 769, 679 S.E.2d 601 (2009); syl. pt. 3, Hall v. Hartley, supra. Specifically,
syllabus point 2 of Harding v. Jennings, 68 W.Va. 354, 70 S.E. 1 (1910), holds: “An
exception in a deed conveying land must describe the thing excepted with legal certainty, so
6
In The Law of Coal, Oil and Gas in West Virginia and Virginia, § 27 (Michie
1951), Robert Tucker Donley observes: “The difficulties confronting the courts in
connection with the conveyancing of subsurface minerals have arisen largely because of
defective draftmanship.”
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as to be ascertained, else the thing sought to be excepted will pass to the grantee.” Accord,
Bennett v. Smith, 136 W.Va. 903, 912, 69 S.E.2d 42, 47 (1952).
Here, Campbell, Sr.’s, immediate grantee of the subject parcel was Campbell, Jr., in
the 1908 Campbell Deed # 1. Campbell, Sr.’s, immediate grantee of the smaller fifty acre
parcel, in the separate 1908 deed, was the Trust for the benefit of Laura C. McHenry.
Assuming DWG’s assertion is correct that Campbell, Sr., retained the oil and gas to the
larger, subject parcel and only conveyed the surface to Campbell, Jr., such an assertion is of
no moment. That is because the circuit court correctly concluded that when Campbell, Jr.,
conveyed the surface back to Campbell, Sr., the surface and the mineral interests merged into
a consolidated title. In the December 28, 2015, order, the circuit court explained:
[E]ven if [DWG] were correct that somehow P. P. Campbell effectively
reserved the oil and gas in Campbell Deed # 1, then when P. P. Campbell, Jr.
conveyed back to him in Campbell Deed # 2, his prior reservation would
become meaningless and extinguished as he would have then owned both
surface and minerals. * * * P. P. Campbell, Sr. owned fee simple at the
time he conveyed the subject property to A. B. Campbell. There was not at
that time a severance of the surface and minerals. Consequently, any reference
to “be subject to” or to honor a prior severance was a reference to “be subject
to” something that did not exist. He needed to specifically and expressly
indicate he was keeping the oil and gas if he so intended. He did not do so.
When Campbell, Sr., then conveyed the subject parcel to A. B. Campbell in Campbell
Deed # 3, nothing was excepted or reserved anew. Campbell, Sr., merely indicated that the
conveyance was subject to “all the reservations as contained in or referred to in said deed,”
11
i.e., Campbell Deed # 2. Inasmuch as Campbell, Sr., was the grantee in Campbell Deed #
2, he would not have been the party to place an exception or reservation in that document.
Thus, the reference by Campbell, Jr., in Campbell Deed # 2 to the exception and reservation
in Campbell Deed # 1 must be considered. However, given the resulting merger of the
surface and mineral interests, the final conveyance by Campbell, Sr., to A. B. Campbell in
Campbell Deed # 3 was in fee simple, and the perfunctory reference in Campbell Deed # 3
to the exception and reservation language in the prior deeds was insufficient to cut the fee
and sever the mineral interests.
As stated in N. Saint-Paul, 1A Revised, Summers Oil and Gas § 8:8 (3rd ed. 2015):
“When the owner of a separate interest in the oil and gas under a tract of land acquires title
to the surface of the land, that separate mineral interest is extinguished by the merger
doctrine.” Similarly, syllabus point 2 of Henline v. Miller, 117 W.Va. 439, 185 S.E. 852
(1936), holds: “When the owner of a dominant estate acquires the fee simple title to the
servient estate, an easement appurtenant to the dominant estate is extinguished.” Accord,
Folio v. City of Clarksburg, 221 W.Va. 397, 401, 655 S.E.2d 143, 147 (2007) (referring to
syllabus point 2 of Henline as the “doctrine of merger”).7 See, Hunter v. Rosebud County,
7
In Pingley v. Pingley, 82 W.Va. 228, 95 S.E. 860 (1918), this Court stated:
No one can use part of his own estate adversely to another part, and
the proposition, therefore, must be true that if the owner of one of the
estates, whether the dominant or servient one, becomes the owner of the
12
240 Mont. 194, 783 P.2d 927, 929 (1989) (When the owner of the previously excepted
mineral estate conveyed that estate to the owner of the subservient remaining estate, the
remaining estate was merged into the mineral estate.).
Here, Campbell Deed # 3 did not set forth an exception and reservation of mineral
interests in clear and definite terms as required under Hall v. Hartley. Under the doctrine of
merger, and given the ambiguities in each of the three deeds, the circuit court was warranted
in ruling in favor of the respondents. Accordingly, this Court is of the opinion that the
respondents, as successors in title to A. B. Campbell, currently own the oil and gas
underlying the subject parcel.
Having so concluded, this Court need not address that circuit court’s alternative
construction of Campbell Deed # 1 to the effect that the exception and reservation of the oil
and gas pertained solely to the fifty acres separately conveyed in trust for Laura C. McHenry.
The circuit court determined in that regard that Campbell, Sr., thus retained no oil and gas
interest in the larger parcel ultimately conveyed to A. B. Campbell.
other, the servitude which one owes to the other is merged in such
ownership, and thereby extinguished.
82 W.Va. at 229, 95 S.E. at 861.
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Rather, the issue before this Court solely concerns the larger, subject parcel and
whether Campbell, Sr., died intestate owning the oil and gas thereunder, or whether he
conveyed both the surface and the oil and gas to A. B. Campbell in Campbell Deed # 3. We
have resolved that issue in favor of A. B. Campbell and the respondents. Campbell, Sr.’s,
heirs did not inherit the oil and gas, and, consequently, DWS’s claim of ownership in the
mineral interests is without merit.
V. Conclusion
The circuit court correctly applied the law, and title to the oil and gas underlying the
subject parcel is currently vested in the respondents. The December 28, 2015, order of the
Circuit Court of Marshall County is affirmed.
Affirmed.
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