Summary 2008 WY 101

Summary of Decision issued August 28, 2008

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: Jacobs Ranch Coal Co. v. Thunder Basin Coal Co, LLC

Citation: 2008 WY 101

Docket Number: S-07-0280

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

Representing Appellant: Thomas P. Johnson and Andrea Wang, Davis Graham & Stubbs, LLP, Denver, Colorado; Amy Jo Stefonick, Rio Tinto Energy America, Gillette, Wyoming.

Representing Appellee, Thunder Basin Coal: Stephen D. Bell, Dorsey & Whitney, LLP, Denver, Colorado; Randall T. Cox, Randall T. Cox, PC, Gillette, Wyoming.

Representing Appellee Consolenergy, Inc.: No appearance.

Facts/Discussion: Jacobs Ranch appealed the district court’s summary judgment decision that Thunder Basin was not liable for surface royalty payments in this case because the surface royalty at issue was not a covenant running with the land.
Covenant that runs with the land: In Mathisen v. Thunder Basin the Court stated that the party seeking to establish that a covenant runs with the land must demonstrate the original covenant is enforceable; the parties to the original covenant intended that the covenant run with the land; the covenant touches and concerns the land; and there is privity of estate between the parties to the dispute. The surface royalty provision in question specified that Consol as “Grantee shall pay” the surface royalty but as in Mathisen there was no language indicating that Consol’s successors in interest or assigns would be bound by the provision. Jacobs Ranch raised two main arguments against the conclusion that the surface royalty was not a covenant running with the land. First, Jacobs Ranch argued that it presented undisputed evidence that when the property was conveyed both parties intended that the surface royalty would run with the land. The Court looked to the language of the written instrument and noted that the language was not ambiguous. The evidence offered by Jacobs Ranch was inadmissible as it constituted only the parties’ own extrinsic expressions of intent.
Jacobs Ranch next maintained that no coal company would intentionally obligate itself to pay a royalty for coal mined by its competitors. Thunder Basin asserted that Consol was free to agree on the purchase price it paid and even if it appears unwise in hindsight, the agreement should be enforced as written. The Court agreed with the district court. There was no agreement on Thunder Basin’s part to assume the surface royalty obligation so Consol’s promise to pay a surface royalty as part of the purchase price cannot be enforced against Thunder Basin.
Thunder Basin obligated to indemnify Jacobs Ranch: Jacobs Ranch asserted an express indemnity claim against Thunder Basin. The Court agreed with the district court that the claims in the case were not of such character to be included within the indemnity provision. The claims arose from Jacobs Ranch’s own contractual obligations and not from Thunder Basin’s operations on or use of the land.
Jacob Ranch’s claim for implied indemnity suffered the same flaw as its claim for express indemnity: the claims do not arise from Thunder Basin’s coal mining activities on the land but from Jacob Ranch’s own contractual obligations.
Jacobs Ranch and Thunder Basin have an express indemnity agreement which does not apply to claims for surface royalty agreements. The Court stated it would be inappropriate to enlarge or add to Jacob Ranch’s rights of indemnification using an equitable indemnity theory.

Holding: The Court agreed with the district court that there was no agreement on Thunder Basin’s part to assume the surface royalty obligation so Consol’s promise to pay surface royalty as part of the purchase price cannot be enforced against Thunder Basin. The Court affirmed the district court’s summary judgment decision denying Jacob Ranch’s indemnity claim under the three theories of express, implied, and equitable indemnity.

Affirmed.

J. Burke delivered the decision.

Link: http://tinyurl.com/5gsflp .

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