Summary 2006 WY 14

Summary of Decision issued January 24, 2006

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Case Name: Mulinnix LLC. V. HBK Royalty Trust
Hickman v. Groves

Citation: 2006 WY 14

Docket Number: 05-80, 05-81

Appeal from the District Court of Campbell County, Honorable John R. Perry, Judge

Case No. 05-80

Representing Appellants (Plaintiffs): Cameron S. Walker of Schwartz, Bon, Walker & Studer, Casper, Wyoming.

Representing Parnell Appellees (Defendants): James L. Edwards of Stevens, Edwards, Hallock & Carpenter, Gillette, Wyoming.

Representing Appellee Pennaco Energy, Inc.: S. Thomas Throne of Throne & Hurst, Sheridan, Wyoming.

Case No. 05-81

Representing Appellants (Defendants): Cameron S. Walker of Schwartz, Bon, Walker & Studer, Casper, Wyoming.

Representing Appellees (Plaintiffs): Kendal R. Hoopes and Jay A. Gilbertz of Yonkee & Toner, Sheridan, Wyoming.

Date of Decision: January 24, 2006

Issues: Whether the reservation of "oil and commercial gravel rights" included gas or coalbed methane. Whether "circumstances surrounding" an unambiguous document should be considered when determining the intent of the parties to a deed. Whether a document without words of conveyance recorded 20 years after the date of the deed changed the ownership transferred by the deed.

Holdings: The party asserting a particular trade usage of a term has the burden of proving the existence of the trade usage. Appellants attempted to prove that ranchers, who may not have been highly educated or sophisticated, often referred to their entire bundle of minerals rights as "oil rights" without distinguishing between oil and gas. Consequently, they maintained the use of the term "oil rights" in the deeds was meant to include the gas, as well as the oil. The Appellees agreed that, in the 1940s, people may have used the term "oil rights" in casual conversation to mean a broader variety of mineral rights. Nevertheless, they claimed, in formal documents such as deeds, landowners (including ranchers) were more specific and described with particularity the interests being conveyed and/or reserved. According to the Appellees, the term "oil rights" was used in the deeds to mean simply that *oil and not gas*. In deciding whether the Appellants had satisfied their burden of proof, the district court considered the understanding of persons who had occasion to negotiate land transactions at the time the deeds were executed and found that while the general term "oil rights" was undoubtedly used during informal discussions to refer to the bundle of rights associated with surface and sub-surface holdings, warranty deeds recorded during the period habitually referred with more exacting specificity to those substances being reserved by the grantor in a conveyance. The testimony and documentary evidence presented at the trial supports the district court's conclusion that the term "oil rights" in the deeds did not include "gas." The ultimate goal of the interpretation of any contract, including a deed, is to discern the intention of the parties to the document. In doing so, the court first looks to the plain meaning of the words of the deed. The plain meaning of a contract's language is that meaning which the language would convey to reasonable persons at the time and place of its use. The function of the parol evidence rule is to prevent parties from supplementing or contradicting the terms of the contract. Once the terms of the agreement are identified, the parol evidence rule ceases to operate. The rule does not prohibit use of extrinsic evidence of the circumstances surrounding the execution of the deed to interpret the meaning of its terms. By allowing evidence of the circumstances surrounding execution of the deed, courts are more apt to arrive at the parties' true intention at the time of the execution of the deed. Custom and usage of a particular place or trade can be proved to give to the words of a written contract a meaning different from that which would be given to the words by their more general usage without violating the parol evidence rule. Therefore, evidence of usage may be admissible to give meaning to apparently unambiguous terms of a contract where other parol evidence would be inadmissible. Thus, circumstances known to the parties at the time they entered into contract, such as what that industry considered to be the norm, or reasonable or prudent, should be considered in construing a contract, while the parties' statements of what they intended the contract to mean are not admissible. Custom and usage may be proved to show the intention of parties to a written contract or other instrument in the use of phrases of a peculiar technical meaning which, when unexplained, are susceptible of two or more plain and reasonable constructions. Parol evidence may be admitted to establish a technical meaning where certain provincialisms and technicalities of science and commerce have acquired a known, fixed and definite meaning different from their ordinary meaning by legal custom or usage. Thus, in the interpretation of technical terms used in a contract, it is proper to consider the meaning given to those terms in the course of prior dealings between the parties, as well as by business or trade custom or usage. The correct rule with reference to the admissibility of evidence as to trade usage under the circumstances presented here is that while words in a contract are ordinarily to be construed according to their plain, ordinary, popular or legal meaning, as the case may be, if in reference to the subject matter of the contract, particular expressions have by trade usage acquired a different meaning, and both parties are engaged in that trade, the parties to the contract are considered to have used them according to their different and peculiar sense as shown by such trade usage. Parol evidence is admissible to establish the trade usage, and that is true even though the words are in their ordinary or legal meaning entirely unambiguous, since, by reason of the usage, the words are used by the parties in a different sense." Pursuant to its plain language, the Declaration of Interest did not affect the parties' interests in the mineral estate. It was signed only by the parties who were the grantees in the original deed, so it could not modify the interests transferred and/or reserved in the original deed. Furthermore, the Declaration of Interest did not contain words of conveyance indicating the grantees were relinquishing or conveying any interest they held to the appellants. Although no particular words are required to convey real property, the language of the document must indicate a specific intention to convey the property. There were no such words of conveyance included in the Declaration of Interest. Consequently, the declaration failed to modify legal title to the property.

Affirmed.

J. Kite delivered the opinion for the court.

Link to the case: http://tinyurl.com/8f7bu .