Summary 2007 WY 161

Summary of Decision issued October 11, 2007

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Case Name: Betty Mathisen, Harold Shipley, Patricia Brown, Vicki Ruiz, Bobby Shipley, Jr., Jimmy Shipley, Monica Miller and Robin Shipley v. Thunder Basin Coal Co., LLC, Jacobs Ranch Coal Co., Consol Energy, Inc., and Consolidation Coal Co.

Citation: 2007 WY 161

Docket Number: 06-276

Appeal from the District Court of Campbell County, the Honorable Michael N. Deegan, Judge

Representing Appellants (Plaintiffs): Patrick Dixon, Casper, Wyoming

Representing Appellee Thunder Basin Coal Co. (Defendants): Thomas J. Davidson of Dorsey & Whittney LLP, Cheyenne, Wyoming.

Representing Appellees Jacobs Ranch Coal Co., Consolidation Coal Co. and Consol Energy, Inc. (Defendants): Mark D. Taylor, Gillette, Wyoming; Thomas P. Johnson and Andrea Wang of Davis Graham & Stubbs LLP, Denver, Colorado. Argument by Mr. Johnson.

Issues: Whether under the terms of the deed, Consol was obligated to pay the surface royalty even though it never mined the coal. Whether the surface royalty clause ran with the land so as to obligate Consol’s successors, Jacobs Ranch and /or TBCC, to make surface royalty payments to the Mathisens when the coal was mined.

Facts/Discussion: The Appellants’ predecessors in interest conveyed 120 acres in Campbell County to Appellee Consolidation Coal Company (Consol). Even though the federal government owned the coal underlying the property and Consol did not have a right to mine it, the deed stated that part of the consideration for the transfer included a “surface royalty” for all coal removed and sold “by Consol” from the property. Consol never acquired the right to mine the coal underlying the property; consequently, it never removed any coal or paid any surface royalty to the Appellants or their predecessors. Appellee Jacobs Ranch Coal Company (Jacobs Ranch) eventually acquired the title to the property. Appellee Thunder Basin Coal Company, LLC (TBCC) ultimately obtained the federal lease to mine the coal, leased the surface property from Jacobs Ranch and began mining operations. The Appellants filed a complaint for payment of the surface royalty contemplated in the deed.
Standard of Review: When a district court considers materials outside the pleadings in entering a judgment on the pleadings or ordering a W.R.C.P. 12(b)(c) dismissal, the Court treats the ruling as a summary judgment. The Court reviews a summary judgment de novo.
The Court began with the language of the deed in which the Shipleys conveyed the Property to Consol. The Court interpreted the deed as a type of contract, examining the terms of the deed and giving them their plain and ordinary meaning. The obligation to pay the royalty was limited by its plain language to coal mined, removed and sold by Consol. The language supported the district court’s ruling that because Consol did not mine any coal, it was not obligated to pay the Mathisens a surface royalty.
The next question was whether Jacobs Ranch as Consol’s successors in interest was obligated to pay the surface royalty when the coal was actually mined. The Mathisens maintained the provision was a covenant that ran with the land. They needed to demonstrate that the original covenant was enforceable, the parties to the original covenant intended that the covenant run with the land, the covenant touched and concerned the land, and that there was privity of estate between the parties to the dispute.
The Court focused on whether the original parties intended the covenant to run with the land. The selective inclusion of the terms of succession in specific places throughout the deed strongly indicated to the Court that the failure to include similar language in the surface royalty provision was deliberate. The provision also specifically stated that the surface royalty obligation was given as “further consideration…by Owner to Consol” indicating the obligation was personal between the Shipleys and Consol and related only to the original sale.
The Mathisens argued the Court should consider the circumstances surrounding the transfer of the Property. The undisputed fact that Consol did not have a federal lease to mine the coal when it purchased the Property was a circumstance that should be considered in interpreting the deed. But, the Court stated it did not help the Mathisens’ argument because it could suggest the parties intended the provision to run with the land so the Shipleys or their successors would eventually receive further compensation or, Consol could have been uncertain it would ever be able to mine the coal and so may not have wanted to encumber the Property with such a covenant that could burden it in the future. The Court declined to speculate.
The Mathisens suggested that the value of the coal was unknown at the time the deed was executed and the royalty payment would have been necessary for them to have received fair value for their property. However, they provided no evidence in support of that position.
Because neither the plain language of the deed nor evidence of the circumstances surrounding the transfer raised a question of material fact, the Court found no basis for overturning the trial court’s conclusion that the parties to the deed did not intend for Consol’s successors to be bound by the surface royalty obligation. The Court’s finding that the parties did not intend that the surface royalty provision run with the land was dispositive making it unnecessary for the Court to consider the other requirements for a covenant to run with the land or the other arguments presented by the parties in the case.

Holding: The Court held that the district court properly granted judgment as a matter of law to the Appellees. The plain language of the deed established that Consol was not obligated to pay a surface royalty to the Mathisens because it never mined the coal on the Property. Moreover, the Mathisens failed to establish an essential element required for the surface royalty provision to run with the land, i.e., the original parties intended it to run with the land. Thus, Consol’s successors in interest were not obligated to make surface royalty payments to the Mathisens when the coal was mined.

Affirmed.

J. Kite delivered the opinion.

Link: http://tinyurl.com/24oqcd .