Case Title: Emmett Ranch, Inc. v. Goldmark Engineering, Inc.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1995-12-15T00:00:00Z

Document:
Emmett Ranch, Inc. v. Goldmark Engineering, Inc.1995 WY 203908 P.2d 941Case Number: 94-291Decided: 12/15/1995Supreme Court of Wyoming
EMMETT RANCH, INC., a 
Wyoming corporation, 

Appellant 
(Plaintiff),

v.

GOLDMARK ENGINEERING, 
INC., a Wyoming corporation;

 and Unicorn Drilling, Inc., a Wyoming 
corporation, 

Appellees 
(Defendants).

Appeal from The District 
Court, Park County, Hunter Patrick, J.

Thomas F. Reese 
of Brown & Drew, Casper, representing 
Appellant.

Steven R. 
Cranfill of McCarty, Cranfill & Sommers, Cody, representing Appellee, 
Goldmark Engineering, Inc.

Jody M. Vannoy 
and Robert P. Golden, Cody, representing Appellee, Unicorn Drilling, 
Inc.

Before 
GOLDEN, C.J., and THOMAS, MACY, TAYLOR and LEHMAN, JJ.

TAYLOR, 
Justice.

[¶1]      Appellant asks 
this court to review a district court's interpretation of a Surface and Damage 
Agreement executed between a rancher and an oil company. The district court 
granted summary judgment in favor of the oil company, regarding the continued 
validity of the Surface and Damage Agreement, and postponed the trial on certain 
claims raised by the rancher regarding alleged breaches of that 
agreement.

[¶2]      We 
affirm.

I. 
ISSUES

[¶3]      Appellant, Emmett 
Ranch, Inc., states the issues on appeal:

1.         Is 
the defendant Unicorn bound by its admissions that the Surface Damage Agreement 
terminated?

2.         
Pursuant to Wyoming Statute Annotated § 3[4]-1-141 is the Surface Damage 
Agreement of no force and effect?

3.         Is 
there a material question of fact as to whether or not the defendant Goldmark 
terminated production and drilling activities on the subject 
property?

4.         Were 
there multiple breaches of the Surface Damage Agreement by the defendant 
resulting in damage?

5.         Is 
there sufficient evidence to allow the issue of punitive damages to be heard by 
the jury?

[¶4]      Appellee, 
Goldmark Engineering, Inc., states the issues:

1.         Did 
the district court properly hold that the Surface and Damage Agreement is          
still in full force and effect?

A.                    
Did the district court properly hold that it could not consider, in 
ruling on a motion for summary judgment, the conclusions of law sought by 
appellant's request for admissions?

B.                    
Did the district court properly hold that pursuant to Wyoming Statute 
Annotated § 3[4]-1-141 the Surface and Damage Agreement is still in full force 
and effect?

C.                    
Did the district court properly hold, as a matter of law, that there was 
not a hiatus of six months or more in production activity?

D.                    
Did the district court properly hold that there was no material question 
of fact regarding alleged breaches of the Surface and Damage 
Agreement?

2.         
Did the district court properly grant summary judgment regarding punitive 
damages?

[¶5]      Appellee, Unicorn 
Drilling, Inc., reiterates the issues:

1.         Did 
the district court correctly rule that the defendant Unicorn is not bound by its 
failure to respond to plaintiff Emmett's request for 
admissions?

2.         
Did the district court correctly rule that Wyoming Statute Annotated § 
3[4]-1-141 does not negate the Surface and Damage 
Agreement?

3.         Did 
the district court correctly rule that there was never a six-month hiatus in 
production activity on the subject property?

4.         
Was there sufficient undisputed and admissible evidence presented by the 
appellant to show there were multiple breaches of the Surface and Damage 
Agreement by the appellees resulting in damage?

5.         Did 
the district court correctly rule that the appellant is not entitled to punitive 
damages in this case?

II. 
FACTS

[¶6]      Emmett Ranch, 
Inc., by and through W. Ray Emmett (Emmett), entered into a Surface and Damage 
Agreement in 1984 with Goldmark Engineering, Inc. (Goldmark). The Surface and 
Damage Agreement allowed Goldmark access to Emmett's property for the purpose of 
drilling and producing oil and gas. The well was directionally drilled from 
Emmett's property to access oil and gas located on federal lease lands adjacent 
to Emmett's property. On January 29, 1991, a pump unit failed and the well was 
shut in on February 1, 1991. Following the failure of the pump unit, Emmett 
indicated a desire to acquire a working interest in the 
well.

[¶7]      Unicorn Drilling, 
Inc. (Unicorn) replaced Goldmark as the operator and ultimately acquired a 
working interest in the well and assigned portions of that working interest to 
several new owners. Emmett was not among the new owners. On October 1, 1991, the 
Bureau of Land Management approved the assignment of the federal lease from 
Goldmark to Unicorn. On November 15, 1991, the well was returned to production. 
Emmett believed, for various reasons, that the Surface and Damage Agreement was 
terminated and filed suit. Motions for summary judgment were filed by all 
parties and the district court granted the motions of Unicorn and Goldmark as 
those motions pertained to the continued validity of the Surface and Damage 
Agreement. At Emmett's request, the district court postponed the trial on the 
remaining issues to enable Emmett to file this appeal.

III. 
DISCUSSION

[¶8]      Summary judgment 
is appropriate when the moving party is entitled to judgment as a matter of law 
and there are no genuine issues of material fact. Pete Lien & Sons, Inc. v. 
Ellsworth Peck Const. Co., 896 P.2d 761, 762 (Wyo. 1995). Interpretation of an 
unambiguous contract presents a question of law. Id. Since we conclude that 
there are no material facts at issue in this case, summary judgment is 
appropriate and we will consider the remaining question of whether the district 
court's rulings were correct as a matter of law. Those decisions, which are 
being reviewed de novo, will be granted no special deference. 
Id.

[¶9]      Emmett's first 
three arguments attack the validity of the Surface and Damage Agreement which he 
drafted. The Surface and Damage Agreement gave Goldmark, Unicorn's predecessor 
in interest, access to Emmett's property for the purpose of drilling and 
producing oil and gas. Emmett argues that the Surface and Damage Agreement is no 
longer in effect because (1) Unicorn admitted during discovery that the Surface 
and Damage Agreement is no longer in effect; (2) the easement articulated in the 
Surface and Damage Agreement is no longer in effect because it was not recorded 
within one year of its execution as required under Wyo. Stat. § 34-1-141(c) 
(1990); (3) the Surface and Damage Agreement terminated pursuant to its own 
cessation of production clause since the well was out of production for more 
than six continuous months; and (4) multiple breaches of the Surface and Damage 
Agreement by Goldmark and Unicorn have resulted in the termination of the 
agreement. We are not persuaded by Emmett's arguments. We agree with the 
district court that the Surface and Damage Agreement remains in full force and 
effect.

[¶10]   Our analysis will address Emmett's 
first three arguments in reverse order. Emmett argues that since the pump unit 
on the well failed on January 29, 1991 and production was not resumed until 
November 15, 1991, the Surface and Damage Agreement terminated pursuant to its 
own cessation of production clause, which states: "All clean up and restoration 
requirements shall be completed by Operator within six (6) months after 
termination of drilling or production activities at any well site or 
right-of-way." Emmett contends that since the well produced no oil between 
January 29, 1991 and November 15, 1991, the cessation of production clause 
terminated the Surface and Damage Agreement.

[¶11]   In Wyoming, the word "production" 
refers to the severance of minerals from the ground. State v. Pennzoil Co., 752 P.2d 975, 979 (Wyo. 1988). However, the phrase "production activities" has a 
broader meaning. The use of the word "activities" implies an intention to 
consider more than the severing of minerals from the ground when considering 
whether production has ceased pursuant to the Surface and Damage Agreement. 
Production cannot, of course, take place if no activities associated with 
production occur; however, activities intended to result in production may occur 
even though those actions fail to result in actual 
production.

[¶12]   It is undisputed that Goldmark 
remained on site through the end of March and continued to complete and submit a 
variety of state and federal forms, at least one of which was filed in July of 
1991. On September 30, 1991, Goldmark assigned its interest in the federal lease 
to Unicorn. Over the next month and a half, Unicorn replaced the defective pump 
unit and brought the well into production. Under these circumstances, production 
activities were ongoing during the period of non-production. The Surface and 
Damage Agreement did not terminate pursuant to its own terms and the district 
court's ruling was correct.

[¶13]   Next, Emmett contends that the 
Surface and Damage Agreement was rendered a nullity since it contained an 
easement that was never recorded pursuant to Wyo. Stat. § 34-1-141(c), which 
provides, in pertinent part:

For purposes of this act 
[section] an easement or agreement which does not specifically describe the 
location of the easement or which grants a right to locate an easement at a 
later date shall be valid for a period of one (1) year from the date of 
execution of the easement or agreement. If the specific description is not 
recorded within one (1) year then the easement or agreement shall be of no 
further force and effect.

[¶14]   We find it somewhat ironic that 
Emmett, the party who drafted the Surface and Damage Agreement, is seeking 
refuge from the terms of that agreement in the brambles of this unartfully 
drafted statute. Emmett insists that since the easement in the Surface and 
Damage Agreement was not recorded within one year of the time it was executed, 
it is of no force and effect. In assuming this position, he conveniently glosses 
over key facts and ignores important principles of law. The primary fact he 
disregards is that he continued to enjoy the benefit of yearly rental payments 
under the "unrecorded" agreement for over seven years before he filed suit. 
Emmett's suit was filed only after he failed to acquire a controlling interest 
in the oil well.

[¶15]   Under a contract that is clear and 
speaks to a particular point, the parties are bound by its plainly stated terms. 
Rainbow Oil Co. v. Christmann, 656 P.2d 538, 545 (Wyo. 1982). Further, a 
contract will be construed against the party who drafted it. McNeiley v. Ayres 
Jewelry Co., 855 P.2d 1242, 1244 (Wyo. 1993). With these principles in mind, we 
note the Surface and Damage Agreement stated that "[t]his Agreement shall not be 
placed of record without the written consent of both parties." There is no 
indication in the record of any such consent between the parties. We will not 
permit Emmett to use the statute as a sword to avoid the agreement under these 
circumstances. Recording laws are to be construed to prevent fraud, not to 
produce it. Cheyenne Nat. Bank v. Citizens Sav. Bank, 391 P.2d 933, 936 (Wyo. 
1964). Moreover, as a general rule, and we consider the general rule especially 
applicable here, the failure to record is not fatal where the proponent of the 
failure to record has full notice of the conveyance in question and suffers no 
prejudice. See 66 Am.Jur.2d Records & Recording Laws §§ 71 & 160 
(1973).

[¶16]   The final argument regarding the 
validity of the Surface and Damage Agreement revolves around Unicorn's 
inexcusable failure to answer a request for admission submitted by Emmett. The 
request asked Unicorn to admit "that the Surface and Damage Agreement is no 
longer in effect[.]" Unicorn failed to answer this request for admission. It 
must, therefore, be deemed admitted pursuant to W.R.C.P. 36. TZ Land & 
Cattle Co. v. Condict, 795 P.2d 1204, 1208 (Wyo. 1990). If Unicorn felt that the 
request sought an admission of law, as Unicorn contends on appeal, the proper 
response was to object to the request on those grounds.

[¶17]   The question before us is whether 
Unicorn's failure to answer the request for admission renders the Surface and 
Damage Agreement invalid. We hold that it does not. Unicorn's failure to respond 
to the request for admission, standing alone, cannot render the Surface and 
Damage Agreement invalid. It is the duty of the court, not the parties, to 
determine questions of law. The fact that Unicorn has, in essence, admitted that 
the Surface and Damage Agreement is no longer in effect has no bearing on our 
determination of the same question. In light of our earlier conclusion that the 
Surface and Damage Agreement was not invalidated by its own terms, we find that 
the Surface and Damage Agreement remains in full force and 
effect.

[¶18]   Finally, Emmett argues that the 
easement articulated in the Surface and Damage Agreement has been terminated 
because Goldmark breached the agreement by failing to pay yearly rent. This 
argument lacks merit. We agree with the district court's analysis in its 
decision letter, which provided, in pertinent part:

[I]t is readily apparent 
and undisputed from competent evidence in the record that the payment was late, 
EMMETT did not give the notice required by the agreement, the rent was paid by 
depositing it with the Clerk of District Court, and EMMETT is not now in a 
position to claim the right to terminate the easement because of the late 
payment.

[¶19]   Emmett's argument that he is 
entitled to punitive damages as a result of the illegal trespass must be 
rejected since we have concluded that the Surface and Damage Agreement and the 
accompanying easement remain in full force and effect; therefore, the issue of 
punitive damages has no validity. The remainder of the alleged breaches can be 
addressed during the trial on the merits which the district court postponed 
pending this appeal.

IV. 
CONCLUSION

[¶20]   The district court's decision is 
affirmed in all respects. The case is remanded for trial on the remaining 
issues.