Case Title: HICKMAN v. GROVES

Citation: 

Docket Number: 02-173

State: wyoming

Court: Wyoming Supreme Court

Date: 2003-06-17T00:00:00Z

Document:
HICKMAN v. GROVES2003 WY 7671 P.3d 256Case Number: 02-173Decided: 06/17/2003
April Term, A.D. 2003

 

 

JOHN 
W. HICKMAN; FRED J.

BOYCE; 
and LANE BOYCE,

 

Appellants(Defendants) 
,

 

v.

 

BERNICE 
GROVES; JAMES E.

DRAKE; 
and EDRA JUNE DRAKE,

 

Appellees(Plaintiffs) 
.

 

 

Appeal 
from the District Court of Campbell County

 

Representing 
Appellants:

Cameron 
S. Walker of Schwartz, Bon, Walker & Studer, LLC, Casper, WY.  Argument by Mr. 
Walker.

 

Representing 
Appellees:

Kendal 
R. Hoopes of Yonkee & Toner, LLP, Sheridan, WY.  Argument by Mr. 
Hoopes.

 

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

 

 

 

LEHMAN, 
Justice.

 

[¶1]      This 
is an appeal from summary judgment entered in favor of appellees Bernice Groves, 
James E. Drake, and Edra June Drake (collectively appellees) and against 
appellants John W. Hickman, Fred J. Boyce, and Lane Boyce (collectively 
appellants).  In granting summary 
judgment, the district court ruled that appellants' predecessors had not 
reserved any rights to gas, whether from oil or coalbed methane gas (CBM), when 
they transferred certain real property located in Campbell County to appellees' 
predecessors.  Upon our review, we 
reverse and remand. 

 

ISSUES

 

[¶2]      Appellants 
present the following summarized issues:

 

A.  Did the colloquial phrase "oil rights" in the warranty 
deed unambiguously include or exclude gas?
 

B.  Did the district court err by failing to consider the 
historical context of the phrase "oil rights" to determine its meaning as used 
in the warranty deed?
 

C. Did the district court err when it held that the colloquial 
ter­minology "oil rights" was clear, unambiguous, and did not include gas in 
the warranty deed?
 

Appellees 
set forth the issue before this court as:

 

Does 
a reservation of "one-half of all oil and commercial gravel rights" in a 
warranty deed include coalbed methane gas?

 

 

 

[¶3]      
On October 14, 1944, Jerry Hickman and Effie F. Hickman, husband and 
wife, exe­cuted a warranty deed that conveyed to Ed R. Willard real property 
located in Campbell County but reserved "to the grantors one-half of all oil and 
commercial gravel rights" in such real property.  Appellants are the successors in 
interest to Jerry Hickman and Effie F. Hickman, while appellees are the 
successors in interest of Ed R. Willard.  

 

[¶4]      
On July 20, 2001, appellees filed an action seeking to quiet title to all 
CBM underly­ing the subject real property.  Subsequently appellants filed a 
counterclaim seeking a judgment that they owned one-half of the gas, including 
CBM, underlying the involved real property pursuant to the reservation of "oil 
rights" contained within the warranty deed.  Both parties then filed cross-motions 
for summary judgment.  Upon 
consideration and hearing, the district court entered summary judgment in favor 
of appellees and against appellants ruling that the warranty deed was 
unambiguous and that the reservation language of "oil rights" did not reserve 
any gas rights, including CBM, as a matter of law.  This appeal followed.  
 

 

STANDARD 
OF REVIEW

 

[¶5]      In McGee v. 
Caballo Coal Co., 2003 WY 68, ¶6, __ P.3d __, ¶6 (Wyo. 2003) (quot­ing 
Garnett v. Coyle, 2001 WY 94, ¶¶3-5, 33 P.3d 114, ¶¶3-5 (Wyo. 2001)), we 
again recognized that our standard of review in summary judgment cases is well 
established.  

 

            
Summary judgment motions are determined under the fol­lowing language 
from W.R.C.P. 56(c):

 

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.
 

            
The purpose of summary judgment is to dispose of suits before trial that 
present no genuine issue of material fact.  
Moore v. Kiljander, 604 P.2d 204, 207 (Wyo. 1979).  Summary judgment is a drastic remedy 
designed to pierce the formal alle­gations and reach the merits of the 
controversy, but only where no genuine issue of material fact is present.  Weaver v. Blue Cross Blue Shield of 
Wyoming, 609 P.2d 984, 986 (Wyo. 1980).  A fact is material if proof of that fact 
would have the effect of establishing or refuting one of the essential elements 
of a cause of action or defense asserted by the parties.  Schuler v. Commu­nity First Nat. 
Bank, 999 P.2d 1303, 1304 (Wyo. 2000).  
The summary judgment movant has the initial burden of establishing by 
admissible evidence a prima facie case; once this is accom­plished, the 
burden shifts and the opposing party must present specific facts showing that 
there is a genuine issue of material fact.  
Boehm v. Cody Country Chamber of Commerce, 748 P.2d 704, 710 (Wyo. 
1987); Gennings v. First Nat. Bank of Thermopolis, 654 P.2d 154, 156 
(Wyo. 1982).

 

            
This Court reviews a summary judgment in the same light as the district 
court, using the same materials and following the same standards.  Unicorn Drilling, Inc. v. Heart 
Mountain Irr. Dist., 3 P.3d 857, 860 (Wyo. 2000) (quoting Gray v. Norwest 
Bank Wyoming, N.A., 984 P.2d 1088, 1091 (Wyo. 1999)).  The record is reviewed, however, from 
the vantage point most favorable to the party who opposed the motion, and this 
Court will give that party the benefit of all favorable infer­ences that may 
fairly be drawn from the record.  
Garcia v. Lawson, 928 P.2d 1164, 1166 (Wyo. 1996). 

 

 

DISCUSSION

 

[¶6]      
Appellants argue the district court erred by not considering the 
historical context and rural background of the makers of the warranty deed.  Essentially, they argue that the use of 
the words "oil rights" in 1944 by landowners in rural Wyoming included "gas" 
rights.  They further assert this 
conclusion is supported by the fact that the Petroleum Ownership Map Company and 
previous owners of the land assumed that appellants continued to possess rights 
in the gas.1  Appellants also argue that in the 1940s 
gas was not produced separately from oil and, therefore, these rights were 
considered, as a practical matter, inseparable.  In response, appellees primarily argue 
that the words used within the warranty deed are unam­biguous and there is 
clearly a distinction between "oil" and "gas."  Further, appellees claim that extrinsic 
evidence cannot be utilized because no ambiguity in the warranty deed 
lan­guage exists.  We do not 
agree.  

 

"According 
to our established standards for interpreta­tion of contracts, the words 
used in the contract are afforded the plain meaning that a reasonable person 
would give to them.  When the 
provisions in the contract are clear and unambiguous, the court looks only to 
the four corners' of the document in arriving at the intent of the 
parties.  In the absence of any 
ambiguity, the contract will be enforced according to its terms because no 
con­struction is appropriate."  
Amoco Production Company v. EM Nominee Partnership Company, 2 P.3d 534, 539-40 (Wyo. 2000) (citations omitted).

 

            
Assignments are contracts and are construed according to the rules of 
contract interpretation.  The 
determination of the parties' intent is our prime focus in interpreting or 
construing a contract.  If an 
agreement is in writing and its language is clear and unambiguous, the parties' 
intention is to be secured from the words of the agreement.  When the agreement's language is clear 
and unambiguous, we consider the writing as a whole, taking into account 
relationships between various parts. In interpreting unambiguous contracts 
involving mineral interests, we have consistently looked to surrounding 
circumstances, facts showing the relations of the parties, the subject matter of 
the contract, and the apparent purpose of making the 
contract.

 

Boley 
v. Greenough, 
2001 WY 47, ¶¶10-11, 22 P.3d 854, ¶¶10-11 (2001) (some citations omitted).  Although substantial dis­agreement 
exists over the meaning of the deed, neither party suggests the language of the 
deed is ambiguous.  Differing 
interpretations of contracts alone do not constitute ambiguity requiring 
extrinsic evidence.  Moncrief v. 
Louisiana Land and Exploration Company, 861 P.2d 516, 524 (Wyo. 
1993).

 

            
We must first examine the terms of the deed and give them their plain and 
ordinary meaning.  Wolter v. 
Equitable Resources Energy Company, Western Region, 979 P.2d 948, 951 (Wyo. 
1999); Pete Lien & Sons, Inc. v. Ellsworth Peck Construction Co., 896 P.2d 761, 763 (Wyo. 1995).  Plain 
meaning is that "meaning which [the] language would convey to reasonable persons 
at the time and place of its use."  
Moncrief, 861 P.2d  at 524.

 

Newman 
v. RAG Wyoming Land Co., 
2002 WY 132, ¶¶11-12, 53 P.3d 540, ¶¶11-12 (Wyo. 2002) (emphasis added).  See also McGee, ¶11 and 
WADI Petroleum v. Ultra Resources, Inc., 2003 WY 41, ¶11, 65 P.3d 703, 
¶11 (Wyo. 2003). 

 

[¶7]      We also 
recognized in Newman, at ¶¶19 and 27, as well as McGee at ¶11, 
when faced with circumstances like those present here, we must focus on the 
general intent of the parties, concentrating on the purpose of the grant in 
terms of the respective manner of enjoyment of sur­face and mineral estates 
and the exploitation of the mineral resources involved.  It reasonably follows that a similar 
review must be made when considering the general intent of the parties when 
reservations of rights are involved.

 

[¶8]      In Newman 
and McGee, we determined, after careful consideration of the historical 
development of the commercial capture of CBM, that those involved parties in 
1973 and 1974 clearly could not have intended CBM to have been treated 
separately from oil and gas.  We 
reached this conclusion in part because the value of CBM only became known long 
after the conveyance through the discovery of new methods for its capture and 
changes in economics making its collection profitable.  Therefore, given the surrounding facts 
and circumstances which existed at the time of the execution of the warranty 
deeds in those cases, we concluded that the parties had no specific intent to 
convey rights in CBM separately from oil and gas because those granting parties 
would have been wholly unaware that CBM was of any value. Again, in the early 
1970s, the separate production of CBM did not occur.  Rather, CBM was then a useless waste 
by-product and possible hazard of coal excavation.  See Newman, at ¶¶6-8; 
McGee, at ¶¶21-23.

 

[¶9]      Upon reviewing 
the language utilized in the conveyances made in McGee, this court noted 
the McGees expressly conveyed good and merchantable title to the lands involved 
"together with all coal and all other minerals, metallic or non-metallic, 
contained in or asso­ciated with coal and which may be produced with coal" 
owned or held by the grantors in those lands.  These warranty deeds also reserved to 
the grantors "all oil, gas and other miner­als in said lands" which the 
grantors then owned, "other than those included above in the conveyance to 
Grantee."  Applying the same 
reasoning as in Newman, we therefore con­cluded the parties generally 
intended the coal to be conveyed and the gas, wherever it may be located within 
the property, to be reserved to the landowners.  Coalbed methane, being a gas, remained 
the landowners' property.  As we 
expressed in Newman at ¶32 (emphasis added):

 

            
On the basis of the unambiguous language of the deed and the 
surrounding facts and circumstances, we conclude the parties generally 
intended the coal to be conveyed and the gas, wherever it may be located within 
the property, to be reserved to the landowners.  Coalbed methane, being a gas, remained 
the landowners' property.  By this 
ruling, we do not intend to imply that, in all circumstances, the conveyance of 
coal excludes the conveyance of the coalbed methane.  Parties can certainly sever the coalbed 
methane from the remainder of the oil and gas estate and convey it 
separately.  Such an explicit 
severance occurred in this case when the oil and gas lessee vertically 
segregated its oil and gas leasehold interest and assigned from the surface to 
1,000 feet beneath the surface, which contained the coal seam, to Hi-Pro.  However, the warranty deed from the 
landowners to the coal operator in this case, which conveyed "all coal and 
minerals commingled with coal that may be mined or extracted in association 
therewith or in conjunction with such coal opera­tions" but reserved all oil 
and gas, did not accomplish such a segregation.

 

[¶10]   The language of the warranty deed 
in this case conveyed the real property but reserved to the grantors "one-half 
of all oil and commercial gravel rights" in that real prop­erty.  This situation is far different than the 
circumstances faced by this court in either Newman or McGee 
because no specific grant of coal or specific reservation of gas was expressed 
by the grantors.  To the contrary, 
the utilization of the term "oil rights," in and of itself, in the reservation 
clause of the warranty deed, at a time when gas was produced only in conjunction 
with oil, casts doubt on the true intent of the grantors with regard to the 
gas.  Therefore, we hold that a 
genuine question of material fact exists and that the granting of summary 
judgment was inappropriate.

 

[¶11]   We acknowledge that the district 
court's ruling in this matter is based on the ultimate conclusion that in 
determining whether a deed is ambiguous, and if so, in determining its meaning, 
an objective test must be applied.  
The basic tenet of such test is that the intent of the grantor must be 
decided solely from the words used and no venture into the area of extrinsic 
evidence, including the circumstances surrounding the making of a contract, can 
be made unless an ambiguity exists within the document itself.  However, we do not believe that this 
accurately reflects the status of the law in Wyoming, particularly as it is 
applied to contracts involving mineral interests.  In addition to the authorities cited 
above, we agree with the opinion issued by the Colorado Supreme Court in KN 
Energy, Inc. v. Great Western Sugar Co., 698 P.2d 769, 776 -77 (Colo. 1985) 
(citations omitted and emphasis added):

 

[T]he intent 
of the parties to a written instrument must be determined primarily from the 
written terms.  "It is only where 
the terms of an agreement are ambiguous or are used in some special or technical 
sense not apparent from the contractual document itself that the court may look 
beyond the four corners of the agreement in order to determine the meaning 
intended by the parties."  Whether 
an ambiguity exists, as a matter of law, is for the court to determine.  In making this determination, the 
court may consider extrinsic evidence bearing upon the meaning of the written 
terms, such as evidence of local usage and of the circumstances surrounding the 
making of the con­tract.  
However, the court may not consider the parties' own extrinsic 
expressions of intent.  

 

[¶12]   We further find appropriate those 
statements found at 11 Samuel Williston, A Treatise on the Law of 
Contracts, § 32:7 (4th ed. 1999) 
(footnotes omitted):

 

            
In theory, the circumstances surrounding the execution of a contract may 
always be shown and are always relevant to a determination of what the parties 
intended by the words they chose.  
In construing a contract, a court seeks to ascertain the meaning of the 
contract at the time and place of its execution.  Thus, although the parties may not, 
because of the parol evi­dence rule, testify as to agreements they made 
before or contemporaneously with the execution of the contract, the 
cir­cumstances surrounding the execution of the contract bear upon the 
contract's meaning.  Some courts, 
not fully appreciating the distinction between the rule that permits evidence of 
the sur­rounding circumstances to be considered, and the rule which 
prohibits the introduction of evidence of collateral agreements, have held that 
the former rule runs afoul of the latter, the parol evidence rule.  Indeed, pronouncements can be found in 
numer­ous cases to the effect that evidence of the circumstances surrounding 
the execution of a contract may be admitted, like any other parol evidence, only 
where the contract's meaning is ambiguous.  
These decisions in truth, reflect a misunderstanding both of the scope 
and purpose of the parol evidence rule, and the meaning of the phrase 
"surrounding circumstances;" "sur­rounding circumstances" do not embrace 
either the prior or contemporaneous collateral agreements of the parties or 
their understanding of what particular terms in their agreement mean.  Rather, the term refers to the 
commercial or other setting in which the contract was negotiated and other 
objectively deter­minable factors that give a context to the transaction 
between the parties.  Such matters 
as, for example, whether one or both parties was new to the trade, whether 
either or both had counsel, and the nature and length of their relationship, as 
well as their age, experience, education and sophistication would all be part of 
the "surrounding circumstances," admissible, if relevant, notwithstanding the 
parol evidence rule. 

 

[¶13]   Williston also teaches, in 
addressing the subject of proof of usage for the purpose of defining words in a 
contract, at Volume 12, §34:5 that:

 

            
Historically, it has been recognized that familiar words may have 
different meanings in different places and that every contract will therefore 
have a relation to the custom of the country where it is made . . . 
.

 

. . . 
[I]n subsequent years, numerous cases were decided where words with a clear 
normal meaning were shown by usage to bear a meaning which was not suggested by 
the ordinary lan­guage used.  
This is not only true of technical terms, but of language which, at least 
on its face, has no peculiar or technical meaning or 
significance.

 

            
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.

 

            
It is currently the widely-accepted rule that 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. . . . 

 

. . .

 

            
It has also been said that usage is admissible to explain what is 
doubtful but never to contradict what is plain.  If this statement means that usage is 
not admitted to contradict an apparently plain meaning if proof of the usage 
were excluded (and this is what the statement seems naturally to mean), it is 
inconsistent with many decisions and incorrect on principle.  Consequently, 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.

 

[¶14]   Appellants, in opposition to the 
motion for summary judgment filed by appellees and in support of their own 
motion for summary judgment, submitted the affidavits of Arch W. Deuel, John P. 
Dever, David F. Dick, F. H. Merback, Clinton C. Putnam, Robert J. Scheeler, 
Thomas F. Stroock, and Johny W. Mullinnix, each "landmen" working in the area of 
oil and gas leases with substantial past experience in the Rocky Mountain 
Region.  These affidavits each 
provide testimony that in the early 1950s and prior it was common for rural 
residents to refer to "oil rights" when referring to both oil and gas rights, 
without differentiating between the two substances.  Appellants also submitted the affidavit 
of John W. Hickman which detailed the somewhat meager educational background and 
simple ranch related living and business conditions experienced by his father 
and mother, Jerry Hickman and Effie F. Hickman, the grantors of the warranty 
deed, as well as the ranching related life and business background of Ed R. 
Willard, the grantee of the warranty deed.  
Appellees, in support of their motion for summary judgment, submitted the 
affidavit of Dr. Anthony W. Gorody, an expert in oil and gas development. This 
affidavit sets forth testimony that the terms "oil" and "gas" and other terms 
have well known meanings in the oil and gas industry along with the historical 
background concerning the commercial development of CBM.  Simply put, these affidavits raise a 
material question of fact as to the actual meaning of the words "oil rights" as 
used within the warranty deed and whether those rights were intended to include 
both "oil and gas rights," either including or excluding CBM, or conversely 
solely oil with no atten­dant "gas rights" of whatever nature.  

 

[¶15]   Finally, appellees argue there is a 
difference between "gas" associated with oil and "gas" not associated with oil, 
such as coalbed methane gas.  
Appellees also contend that natural gas was well recognized as a valuable 
resource independent from oil at the time of the warranty deed.  Therefore, had the grantors truly 
intended the result furthered by appel­lants, they would have so 
specified.  By asserting these very 
arguments, appellees admit that a question of material fact exists as to whether 
or not the grantors intended to entirely convey all gas, in whatever derivative, 
to the grantee or intended to reserve one-half an interest in such gas.   In addition, by proffering their 
latter contention that natural gas was a well recog­nized valuable commodity 
separate from oil at the time of the warranty deed, appellees have essentially 
invited review of the historical circumstances that existed at that time.  It would be patently unfair to review 
only those historical contexts set forth by appellees in support of their 
arguments while refusing to do so with respect to those facts put forth by 
appellants in providing foundation for their arguments.

 

 

CONCLUSION

 

[¶16]   We hold that the district court 
improperly determined that summary judgment should be granted to appellees.  The record before us presents issues of 
material fact.  This matter is, 
therefore, reversed and remanded for further proceedings consistent with this 
opinion.

 

FOOTNOTES

1Evidence 
within the record establishes that the Petroleum Ownership Map Company and 
previous owners of the land may have understood the language of the reservation 
clause within the warranty deed to include both oil and gas.  Yates Petroleum Corporation, Yates 
Drilling Company, ABO Petroleum Corporation, MYCO Industries, Inc., and Phillips 
Petroleum Company were also added as defendants in the Amended Complaint filed 
in this action because they claimed an interest in oil and gas leases covering 
the subject real property.  However, 
these defendants are not directly involved in this appeal.