Case Title: DAVID K. STONE and NICHOLAS B. LOUNDAGIN V. DEVON ENERGY PRODUCTION COMPANY, L.P., and CARPENTER & SONS, INC.

Citation: 

Docket Number: S-08-0267

State: wyoming

Court: Wyoming Supreme Court

Date: 2009-09-15T00:00:00Z

Document:
DAVID K. STONE and NICHOLAS B. LOUNDAGIN V. DEVON ENERGY PRODUCTION COMPANY, L.P., and CARPENTER & SONS, INC.2009 WY 114216 P.3d 489Case Number: S-08-0267Decided: 09/15/2009
APRIL 
TERM, A.D. 2009

 
 
DAVID 
K. STONE and NICHOLAS B. 
LOUNDAGIN,Appellants(Plaintiffs),v.DEVON ENERGY 
PRODUCTION COMPANY, L.P., and CARPENTER & SONS, 
INC.,Appellees(Defendants).

 
 

Appeal 
from the District Court of Johnson County

The 
Honorable John G. Fenn, Judge

 
 
Representing 
Appellants:

Stephen 
R. Winship of Winship & Winship, P.C., Casper, 
Wyoming.

 
 
Representing 
Appellees:

Scott 
P. Klosterman of Williams, Porter, Day & Neville, P.C., Casper, 
Wyoming.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.

 
 
KITE, 
Justice.

 
 
[¶1]      David K. Stone 
and Nicholas B. Loundagin assigned their operating rights under a state oil and 
gas lease to Devon Energy Production Company, L.P. (Devon) and Carpenter & 
Sons, Inc. (Carpenter).  When Devon 
and Carpenter did not offer to reassign the operating rights to them six months 
before the lease expiration date, Mr. Stone and Mr. Loundagin filed an action 
against them for breach of contract, ejectment, trespass, conversion, an 
accounting and injunctive relief.  
In an appeal certified under W.R.C.P. 54 (b)1 from an order granting summary 
judgment for Devon and Carpenter on the breach of contract claim, we held that 
the contract required Devon and Carpenter to make a reassignment offer six 
months before the lease expiration date, but affirmed the partial summary 
judgment because we concluded Mr. Stone and Mr. Loundagin could not prove they 
suffered any damages.  Stone v. Devon Energy Production Co., 
L.P., 2008 WY 49, ¶ 24, 181 P.3d 936, 944 (Wyo. 2008) (Stone I).  While noting that proof of the remaining 
claims for ejectment, trespass and conversion seemed unlikely, we remanded the 
case to the district court for a determination as to those claims.2  On remand, the district court granted 
summary judgment for Devon and Carpenter on the remaining claims.  Mr. Stone and Mr. Loundagin 
appealed.      

 
 
ISSUES

 
 

[¶2]      The dispositive 
issue in this case is whether the district court properly granted summary 
judgment for Devon and Carpenter on the claims for ejectment, 
specific performance, trespass, conversion, an accounting and injunctive 
relief.  

 
 
FACTS

            

[¶3]  Mr. Stone acquired a state oil and gas 
lease covering land located in Johnson County, Wyoming in 1997.  He later assigned 
an undivided 50% of the operating rights under the lease to Stone Exploration, 
Inc. (SEI) and the other undivided 50% of the operating rights to Mr. 
Loundagin.  SEI and Mr. Loundagin 
then assigned the "shallow" rights under the lease to Carpenter while reserving 
an overriding royalty interest in the shallow rights and retaining ownership of 
the "deep" rights.  The letter 
agreement provided that Carpenter would offer reassignment of the operating 
rights to SEI and Mr. Loundagin one year prior to the expiration of the 
lease.  A document attached to the 
letter agreement identified the expiration date for the lease as April 2, 2002, 
the date the primary term ended.   

 
 
[¶4]  The parties entered into a supplemental 
agreement in May of 2000 by which Devon acquired most of the rights previously 
assigned to Carpenter.  Carpenter 
retained a 10% working interest.  
The supplemental agreement modified the reassignment clause by requiring 
Devon and Carpenter to make a reassignment offer not later than six months prior 
to the expiration of the lease.  At 
the time the parties executed the supplemental agreement, there was no 
production of oil and gas on the lease and it was set to expire on April 2, 
2002.  

 
 
[¶5]  Devon and Carpenter did not offer to 
reassign the operating rights under the lease to Mr. Stone and Mr. Loundagin by 
October 2, 2001, six months before the lease's primary term was to expire.  However, Devon and Carpenter began 
drilling operations on March 30, 2002, and those operations were being 
diligently conducted prior to expiration of the primary term.  The well was completed and production 
obtained by mid-April 2002.   

 
 
[¶6]  In 2006, with production continuing and 
Devon and Carpenter still claiming ownership of the shallow rights under the 
lease, Mr. Stone and Mr. Loundagin filed their complaint for ejectment, specific 
performance, breach of contract, trespass, conversion, an accounting and 
injunctive relief.  On the parties' 
cross motions for summary judgment, the district court granted Devon's and 
Carpenter's motion for summary judgment on the breach of contract claim.  While concluding the reassignment clause 
required Devon and Carpenter to offer to reassign the operating rights to Mr. 
Stone and Mr. Loundagin prior to six months before the lease actually expired, 
the district court held that the obligation to make the offer never arose 
because the lease term did not expire but was extended by the drilling 
operations that occurred prior to the end of the lease term.  

 
 
[¶7]  In Stone I, we affirmed the summary 
judgment on the breach of contract claim but reached that result for different 
reasons than the district court.  We 
agreed that the reassignment clause required Devon and Carpenter to make the 
reassignment offer by October 2, 2001, six months before the lease expiration 
date.  Stone I,  ¶ 19, 181 P.3d  at 942.  However, we did not agree that the 
drilling operations after the expiration date extinguished the reassignment 
obligation retroactively.  We held 
that the district court erred in its interpretation of the reassignment clause, 
however, we affirmed the summary judgment because we concluded Mr. Stone and Mr. 
Loundagin could not show they were damaged by the breach given that the lease 
never terminated and they continued to enjoy the benefit of the bargain, e.g. 
the timely payment of overriding royalties due under the lease.  Id. ¶¶ 20, 24, 181 P.3d  at 942-44.  

 
 
[¶8]  Addressing the remaining claims in Stone I, ¶ 26, 181 P.3d  at 944, we said: 

 
 
            
With respect to the remaining claims for ejectment, trespass and 
conversion, it seems clear from the limited record before us that they, like the 
damages, cannot be established.  
Throughout the contractual relationship, Devon has held the right to 
drill and produce from the lands subject to the lease.  The reassignment clause was intended to 
give Mr. Stone and Mr. Loundagin the right to reassignment of the operating 
rights in the event it appeared the lease was going to be lost.  It was not lost and Devon was operating 
properly as the working interest owner under the terms of the assignment.  It, therefore, seems unlikely that the 
assignors can prove the elements of ejectment, trespass and conversion because 
each of these claims requires proof that Devon wrongfully entered and exercised 
dominion over the property to the exclusion of the assignors.  However, the district court has not 
addressed these claims and we remand this matter for that 
purpose.

 
 
[¶9]  Back in district court, the parties 
again filed cross motions for summary judgment on the remaining claims.  After a hearing, the district court 
entered an order granting Devon's motion.  
Mr. Stone and Mr. Loundagin appealed.                      

 
 
STANDARD 
OF REVIEW

 
 
[¶10]   Our review of the district court's 
order is governed by the same standards we applied in Stone I:

 
 
            
When reviewing an order granting summary judgment, we consider the record 
de novo.  Our review of orders granting summary 
judgment is governed by W.R.C.P. 56(c), which provides in pertinent 
part:

 
 
The 
judgment sought shall be rendered forthwith if the pleadings, depositions, 
answers to interrogatories, and admissions on file, together with the 
affidavits, if any, show that there is no genuine issue as to any material fact 
and that the moving party is entitled to a judgment as a matter of law.  

 
 
We 
view the evidence in the light most favorable to the party opposing the motion 
and give that party the benefit of all favorable inferences which may be fairly 
drawn from the record.  A genuine 
issue of material fact exists when a disputed fact, if proven, would have the 
effect of establishing or refuting an essential element of an asserted cause of 
action or defense.  We interpret 
unambiguous contracts as a matter of law.  

 
 

Stone 
I, 
¶ 9, 181 P.3d  at 940 (citations omitted).            
 

 
 
DISCUSSION

 
 
[¶11]  Mr. Stone and Mr. Loundagin contend that 
our decision in Stone I revived their 
claims for ejectment, specific performance, trespass, conversion, an accounting, 
and injunctive relief.  They argue 
that, by holding that Devon breached the contract and remanding the other claims 
to the district court, this Court concluded in Stone I that the contract ended when the 
reassignment offer was not made by October 2, 2001, and Devon did not have the 
right after that date to possess or commence drilling operations.  Mr. Stone and Mr. Loundagin assert that 
they had the right after October 2, 2001, to possess and develop the lease and, 
by retaining possession and going ahead with drilling operations, Devon 
unlawfully kept them out of possession.  
Thus, they contend, the district court erred in granting summary judgment 
on their ejectment, trespass and conversion claims, all of which required them 
to prove only that they had a right to the property in question and Devon 
wrongfully kept them from possession.

 
 
[¶12]  Devon presents various arguments in 
response, including:  1)  this appeal is moot because, while they 
now assert that the claims for ejectment, trespass and conversion were 
effectively resolved by the partial summary judgment order, Mr. Stone and Mr. 
Loundagin failed in Stone I to raise 
any claim of error involving those claims, and argued instead only the breach of 
contract claim; 2) this Court's decision in Stone I is the law of the case and 
statements therein to the effect that Devon, as the working interest owner, 
acted properly in drilling and producing the lease are dispositive of the 
present claims; and 3) the district court correctly concluded that no genuine 
issue of material fact existed on the present claims because Mr. Stone and Mr. 
Loundagin could not show they had the right to possession of the lease and Devon 
illegally possessed it.   

 
 
[¶13]  We conclude that the district court 
properly granted Devon's and Carpenter's motion for summary judgment although we 
arrive at that result for slightly different reasons than those advanced by the 
parties.  Stone I came to this Court upon the 
district court's certification under Rule 54(b) that there was no just reason 
for delay, meaning that the summary judgment order constituted a final judgment 
even though it did not address all of the claims.  Out of an abundance of caution, this 
Court remanded the case to the district court despite the certification that it 
constituted a final judgment because it was clear from the record before us that 
the summary judgment proceedings focused exclusively on the correct 
interpretation of the reassignment provision in the supplemental agreement.  That was the only issue the parties 
addressed at the summary judgment hearing and it was the only issue addressed in 
the district court's decision letter, which stated:  "Summary judgment on the issue of 
interpretation of the relevant portion of the lease and assignment is granted in 
favor of Defendants."     

 
 
[¶14]  It was also clear from the record before 
us in Stone I that the district court 
intended at the time of its decision letter for the summary judgment order to be 
a partial, and not a final, order.  In a footnote, the district court 
instructed defense counsel to draft a proposed order granting "partial" summary 
judgment for Devon for the very reason that resolution of the contract issue 
might not resolve the entire matter.  
What was not clear from the record in Stone I, but is clear from the record 
presented in this second appeal, is that defense counsel did as instructed and 
sent the proposed order to counsel for Mr. Stone and Mr. Loundagin who then 
revised it to reflect the "finality" of the decision by taking out the word 
"partial" and including Rule 54(b) certification.  Counsel made these revisions because in 
his words, "from a practical standpoint, the Judge's interpretation of paragraph 
6 of the Supplemental Agreement has effectively decided this case."  The district court issued the order as 
revised by counsel for Mr. Stone and Mr. Loundagin.3

 
 
[¶15]  Thus, the record currently before this 
Court reflects that at the time the first summary judgment order was entered, 
the parties, including Mr. Stone and Mr. Loundagin, and the district court 
intended the order to be the final judgment.  A district court's determination to 
certify a case under Rule 54(b) is a discretionary one, and this Court will only 
reverse such a determination where there is an abuse of discretion.  Wetering v. Eisele, 682 P.2d 1055, 1059 
(Wyo. 1984).  Given the facts as we 
now know them, this Court would not have concluded the district court abused its 
discretion in certifying the case, even if that claim had been made in Stone I.  The order appealed in Stone I was certified to be a final 
order and the remand to the district court in Stone I was improvident.        
    

 
 
[¶16]  Turning to the arguments Mr. Stone and 
Mr. Loundagin present in this second appeal, we conclude they are without 
merit.  We held in Stone I that Devon breached the 
supplemental agreement when it did not make the reassignment offer by October 2, 
2001.  We further concluded, 
however, that the lease never terminated and Devon retained the right to drill 
and produce the lands subject to the lease.  Id., ¶¶ 24, 26, 181 P.3d  at 944.  The construction Mr. Stone and Mr. 
Loundagin give to Stone I, i.e., that 
the agreement ended upon the breach and Devon lost its right to possess and 
develop the lease, ignores this conclusion.   

 
 
[¶17]  Wyo. Stat. Ann. § 1-32-202 (LexisNexis 
2009), the provision Mr. Stone and Mr. Loundagin rely upon to support their 
claim for ejectment, provides as follows:

 
 
            
In an action to recover real property it is sufficient if the plaintiff's 
petition states that he has a legal estate in and is entitled to possession of 
the real property . . . and that the defendant unlawfully keeps him out of 
possession. . . .

 
 
Because 
under Stone I Devon retained the 
right to drill and produce the lands subject to the lease, Mr. Stone and Mr. 
Loundagin cannot show that they were entitled to possession of those lands or 
that Devon unlawfully kept them out of possession. 

 
 
[¶18]  Their claims for trespass and conversion 
fail for the same reason.  A claim 
for trespass requires the plaintiff to show that he had the right to take 
immediate possession at the time of the trespass.  Skane v. Star Valley Ranch Ass'n, 826 P.2d 266, 268 (Wyo. 1992).  In an 
action for conversion, the plaintiff must show: 

 
 
(1) 
he had legal title to the converted property;  (2) he either had possession of the 
property or the right to possess it at the time of the conversion;  (3) the defendant exercised dominion 
over the property in a manner which denied the plaintiff his rights to use and 
enjoy the property;  (4) in those 
cases where the defendants lawfully, or at least without fault, obtained 
possession of the property, the plaintiff made some demand for the property's 
return which the defendant refused;  
and (5) the plaintiff has suffered damage by the loss of the 
property.  

 
 

Johnson 
v. Reiger, 
2004 WY 83, ¶ 27, 93 P.3d 992, 999-1000 (Wyo. 2004).  Mr. Stone and Mr. Loundagin cannot make 
the requisite showing to sustain their claims for trespass and conversion.  They likewise cannot make the showing 
required to entitle them to specific performance or injunctive relief.  Stone I precludes all of these 
claims.  The district court properly 
granted summary judgment for Devon and Carpenter.

 
 
[¶19]  Affirmed.

FOOTNOTES

1W.R.C.P. 54(b) provides in pertinent part:

 
 
      (b) 
Judgment upon multiple claims . . .  
When more than one claim for relief is presented in an action . . . the court 
may direct the entry of a final judgment as to one or more but fewer than all of 
the claims or parties only upon an express determination that there is not just 
reason for delay and upon an express direction for the entry of judgment.  In the absence of such determination and 
direction, any order or other form of decision . . . which adjudicates fewer 
than all the claims . . . shall not terminate the action. . . 
.

  

An order granting partial summary judgment is not a final, appealable 
order unless the district court certifies it in accordance with Rule 54(b).  Stewart Title Guaranty Co. v. Tilden, 
2005 WY 53, ¶ 6, 110 P.3d 865, 869 (Wyo. 2005).  The intent of the rule is to prevent 
piecemeal appeals.  Olmstead v. Cattle, Inc., 541 P.2d 49, 
51 (Wyo. 1975).

 
 

2Mr. Stone and Mr. Loundagin moved for summary judgment on both the breach 
of contract and ejectment claims.  
However, the ejectment claim was not addressed at the summary judgment 
hearing; the summary judgment order addressed only the breach of contract 
claim.

 
 

3The district court may have issued the revised order despite having 
instructed defense counsel to prepare a partial summary judgment order because 
the parties had indicated at the summary judgment hearing that determination of 
the contract issue likely would assist them in resolving the remaining issues. 
 Upon presentation of the revised 
order containing the Rule 54(b) certification, the district court may well have 
thought the parties had in fact resolved the case in its 
entirety.