Case Title: COMET ENERGY SERVICES, LLC, a Nevada limited liability company V. POWDER RIVER OIL & GAS VENTURES LLC, a Colorado limited liability company

Citation: 

Docket Number: S-07-0063

State: wyoming

Court: Wyoming Supreme Court

Date: 2008-06-19T00:00:00Z

Document:
COMET ENERGY SERVICES, LLC, a Nevada limited liability company V. POWDER RIVER OIL & GAS VENTURES LLC, a Colorado limited liability company2008 WY 69185 P.3d 1259Case Number: S-07-0063Decided: 06/19/2008
APRIL 
TERM, A.D. 2008

 
 
COMET 
ENERGY SERVICES, LLC, a Nevada limited liability 
company,Appellant(Defendant),v.POWDER RIVER OIL 
& GAS VENTURES LLC, a Colorado limited liability 
company,Appellee(Plaintiff).

 
 
Appeal 
from the DistrictCourtofCampbellCounty

The 
Honorable Dan R. Price II, Judge

 
 

Representing 
Appellant:

Thomas 
F. Reese and Orintha E. Karns of Brown, Drew & Massey, LLP, Casper, Wyoming.  
Argument by Mr. Reese.

 
 

Representing 
Appellee:

Blake M. 
Pickett of Welborn Sullivan Meck & Tooley, PC, Denver, Colorado.

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

 
 
VOIGT, 
Chief Justice.

 
 
[¶1]      Comet Energy 
Services, LLC (Comet) appeals from the denial of its cross motion for summary 
judgment and from the award of summary judgment in favor of Powder River Oil 
& Gas Ventures LLC (Powder River).  
The dispute was over the proper interpretation of an assignment of 
certain interests.  The district 
court found that the assignment was unambiguous and awarded summary 
judgment.  We reverse and 
remand.

 
 
FACTS

 
 
[¶2]      In August of 
1998, Powder River purchased from Forcenergy Onshore, Inc. (Forcenergy) certain 
interests conveyed by an Assignment, Bill of Sale and Conveyance (1998 
Assignment).  The 1998 Assignment 
specifically referenced one well  Federal 44-4.  This well was situated on a federal oil 
and gas lease, BLM Lease No. WYW 0309256A, which lease covered approximately 760 
acres.

 
 
[¶3]      In January 2005, 
Comet contacted Powder River for the purpose of purchasing Powder River's interest held under the 1998 
Assignment.  During the course of 
the discussions between Comet and Powder River concerning the sale, a question 
arose as to the nature and extent of the interest conveyed by Forcenergy to 
Powder River under the 1998 Assignment.  Comet conducted due diligence in the 
form of title opinions and additional investigation in an attempt to ascertain 
what interest Powder River held as a result of the 1998 Assignment.  In June of 2005, Comet contacted 
Forcenergy to determine what interest it conveyed to Powder 
River in the 1998 Assignment.  
Forcenergy and Comet eventually agreed that only the well unit was 
conveyed to Powder River and that Forcenergy 
had retained its interest in the remaining portion of the 760-acre lease.  Thus, on August 2, 2005, Forcenergy 
conveyed to Comet its interest in BLM Lease No. WYW 0309256A.  In August of 2005, Comet recorded this 
assignment with the BLM and subsequently informed Powder 
River of the assignment. 

 
 
[¶4]      On November 3, 
2005, Powder River filed a declaratory judgment action seeking determination 
that "as between Powder River and Comet, Powder 
River owns all right, title, and interest to the Subject Interest 
conveyed by [Forcenergy] and that Comet does not own any right, title or 
interest in the same."  On December 
29, 2005, Comet filed its Answer, Affirmative Defenses and Counterclaim seeking 
a counter-declaration that Powder River only 
obtained a limited wellbore interest under the 1998 Assignment, and that Comet, 
based on the 2005 Agreement with Forcenergy, acquired the balance of 
Forcenergy's interest in the lease.  Powder 
River filed a motion for summary judgment on September 14, 
2006.  Comet responded to Powder River's motion and filed a cross-motion for summary 
judgment on November 1, 2006.  The 
district court held a summary judgment hearing on November 6, 2006, and entered 
an order granting summary judgment in favor of Powder 
River on February 6, 2007.  This appeal 
followed.

 
 
STANDARD 
OF REVIEW

 
 
[¶5]                  
            
A summary judgment is appropriate when no 
genuine issue as to any material fact exists and when the prevailing party is 
entitled to have a judgment as a matter of law.  Covington v. W.R. Grace-Conn., 
Inc., 952 P.2d 1105, 1106 (Wyo. 1998); see also W.R.C.P. 56(c). 
 We evaluate the propriety of a summary judgment by employing the same standards and by using 
the same materials as the lower court employed and used.  Kirkwood v. CUNA Mutual Insurance Society, 
937 P.2d 206, 208 (Wyo. 1997).  We do not accord deference to the 
district court's decisions on issues of law.  Kanzler v. Renner, 937 P.2d 1337, 
1341 (Wyo. 
1997).  In cases requiring the 
interpretation of a contract, a summary judgment is appropriate only if the contract is clear 
and unambiguous.  Kirkwood, 937 P.2d  at 208; Treemont, Inc. 
v. Hawley, 886 P.2d 589, 592 (Wyo. 1994).

 
 

Wolter 
v. Equitable Res. Energy Co., 979 P.2d 948, 951 (Wyo. 1999).  "The court considers the record from the 
viewpoint most favorable to the party opposing the motion, giving all favorable 
inferences to be drawn from the facts contained in affidavits, depositions and 
other proper material appearing in the record to the opposing party."  Powder River Oil Co. v. Powder River 
Petroleum Corp., 830 P.2d 403, 406-07 (Wyo. 1992).

 
 
DISCUSSION

 
 
[¶6]      This dispute 
centers on the meaning of the term "leasehold estate" as used in the 1998 
Assignment.  "Assignments are 
contracts and are construed according to the rules of contract interpretation." 
 Hickman v. Groves, 2003 WY 76, ¶ 6, 
71 P.3d 256, 258 (Wyo. 2003) (quoting Boley v. Greenough, 2001 WY 47, ¶ 11, 22 P.3d 854, 858 (Wyo. 2001)).  The 
ultimate goal when interpreting a contract "is to discern the intention of the 
parties to the document."  Mullinix, LLC v. HKB Royalty Trust, 2006 
WY 14, ¶ 22, 126 P.3d 909, 919 (Wyo. 2006).  In doing so, we first look to the 
specific terms of the contract and give them their plain and ordinary meaning. 
 Id.; 
Wolter, 979 P.2d  at 
951.  Plain meaning is that "meaning 
which [the] language would convey to reasonable persons at the time and place of 
its use."  Moncrief v. Louisiana 
Land & Exploration Co., 
861 P.2d 516, 524 (Wyo. 1993).  "If the language of the contract is 
clear and unambiguous, then we secure the parties' intent from the words of the 
agreement as they are expressed within the four corners of the contract."  Wadi Petroleum, Inc. v. Ultra Res., Inc., 2003 WY 41, ¶ 11, 65 P.3d 703, 708 
(Wyo. 2003) (quoting Williams Gas 
Processing-Wamsutter Co. v. Union Pac. Res. Co., 2001 WY 57, ¶ 12, 25 P.3d 1064, 1071 (Wyo. 2001).

 
 
[¶7]      With these 
principles in mind, we turn to the specific language of the 1998 
Assignment.  The granting clause 
provided:

 
 
. . . 
Assignor hereby transfers, grants, conveys and assigns to Assignee all of 
Assignor's right, title and interest in and to the following (all of which are 
herein called the "Interests"):

 
 

1.       
The oil 
and gas well(s) described on Exhibit "A" attached hereto ("Wells"), together 
with all equipment and machinery associated therewith;

 
 

2.       
The 
leasehold estate created by the lease(s) upon which the Wells are located and/or 
pooled/unitized therewith ("Leases") and all licenses, permits and other 
agreements directly associated with the Wells and/or 
Leases;

 
 

3.       
All the 
property and rights incident to the Wells, and the Leases, including, to the 
extent transferable, all agreements, surface leases, gas gathering contracts, 
salt water disposal leases and wells, equipment leases, permits, gathering 
lines, rights-of-way, easements, licenses and all other agreements directly 
relating thereto; and

 
 

4.       
All of 
the personal property, fixtures and improvements appurtenant to the Wells or 
used or obtained in connection with the operation of the 
Wells.

 
 
Exhibit 
A to the 1998 Assignment provided:

 

This 
Exhibit "A" contains the description of the wells/units with such description 
intended to incorporate all of Seller's/Assignor's interest in such wells/units 
and is not intended to be limited to Assignor's/Seller's interest in the 
geographic boundaries of the specific spaced/drillsite unit description 
therein.

 
 


State/County

Location

Well/Unit

Name

 
 
Field

Wyoming/Campbell

4-53N-75W

Federal 
      44-4

Black 
      Hill

 
 
 
 
[¶8]      The parties 
interpret the term "leasehold estate" as used in paragraph two above quite 
differently.  See supra ¶ 7.  Comet points out that the language of 
the 1998 Assignment does not make reference to any specific lease, but only the 
"leasehold estate" corresponding to Federal 44-4 well.  The assignment conveys the "leasehold estate created by the lease(s) upon which the Well(s) are 
located." Comet argues that if the parties had intended to convey a specific 
lease, they could have simply said "lease upon which the Well(s) is/are 
located," and then specifically referred to the BLM lease.  Comet cites the rule of contract 
interpretation requiring "[a]ll the parts and every word in a contract should, 
if possible, be given effect," Sunburst 
Exploration, Inc. v. Jensen, 635 P.2d 822, 825 (Wyo. 1981), and contends 
that the use of the term "leasehold estate" separately from 
"lease upon which the Well(s) are 
located" requires that the two terms have different meanings.  Comet concludes that the parties to the 
1998 Assignment intended the term "leasehold estate" to mean the 40-acre 
"drilling unit" surrounding Federal 44-4 well as established by the Wyoming Oil 
and Gas Conservation Commission.1

 
 
[¶9]      In response, 
Powder River argues the intention of the parties could not have been to limit 
the "leasehold estate" to a 40-acre drilling unit or wellbore assignment, as the 
term "wellbore" is not found anywhere in the plain language of the 1998 
Assignment.  Additionally, 
Powder River contends that the drilling unit 
does not correlate to ownership interest but is merely an administrative, 
geographic and/or geologic designation established by the Wyoming Oil and Gas 
Commission.  Finally, Powder River argues that the lease language specifically 
rejects Comet's argument that the meaning of "leasehold estate" be limited to 
the acreage corresponding to the "drilling unit," pointing to the following 
language in Exhibit "A":

 
 
This 
Exhibit "A" contains the description of the wells/units with such description 
intended to incorporate all of Seller's/Assignor's interest in such wells/units 
and is not intended to be limited to 
Assignor's/Seller's interest in the geographic boundaries of the specific 
spaced/drillsite unit description therein.

 
 
(Emphasis 
added.)  Powder 
River maintains that the term "leasehold estate" should be read to 
include the entire approximately 760 acres comprising the BLM lease upon which 
Federal 44-4 well is located.

 
 
[¶10]   Without further examining the 
specifics of the parties' arguments, we reiterate that the meaning of "leasehold 
estate" must first be evaluated by examining the term as used within the four 
corners of the 1998 Assignment.  See supra ¶ 6.  Nevertheless, both parties attempt to 
define the term "leasehold estate" by pointing to extrinsic sources of 
information:  Comet looks to the 
40-acre acre drilling unit as defined by the Wyoming Oil and Gas Conservation 
Commission, while Powder River relies upon the 
BLM lease upon which the assigned Federal 44-4 well is situated.  Neither the BLM lease nor the 40-acre 
drilling unit is specifically mentioned in the 1998 Assignment. 

 
 
[¶11]   We have said that we will construe 
contract language "in the context in which it was written, looking to the 
surrounding circumstances, the subject matter, and the purpose of the agreement 
to ascertain the intent of the parties at the time the agreement was made."  Stone v. Devon Energy Prod. Co., 
L.P., 2008 WY 49, ¶ 18, 181 P.3d 936, 942 (Wyo. 2008).  However, we will not "rewrite contracts 
under the guise of interpretation, and so long as there is no ambiguity, we are 
bound to apply contracts as they have been scrivened." Amoco Prod. Co. v. EM Nominee P'ship Co., 2 P.3d 534, 540 (Wyo. 
2000).  Ambiguity is present where a 
contract term "is obscure in its meaning because of indefiniteness of expression 
or because it contains a double meaning." Ferguson v. Reed, 822 P.2d 1287, 1289 
(Wyo. 
1991).  "Ambiguity is not created, 
however, by the parties' subsequent disagreement over the meaning of the 
contract." Union Pac. Res. Co. v. Texaco, 
Inc., 882 P.2d 212, 220 (Wyo. 1994); 
Rainbow Oil Co. v. Christmann, 656 P.2d 538, 542 (Wyo. 1982).  The existence of ambiguity is a question 
of law.  Amoco Prod. Co. v. Stauffer Chem. Co. of Wyo., 612 P.2d 463, 465 (Wyo. 1980).

 
 
[¶12]   "In cases requiring the 
interpretation of a contract, a summary judgment is appropriate only if the contract is clear 
and unambiguous."  Wolter, 979 P.2d  at 951.  The meaning of specific terms and 
conditions and the intent of the parties generally 
are questions of fact to be resolved by the fact-finder.  Parkhurst v. Boykin, 2004 WY 90, 
¶ 18, 94 P.3d 450, 459 (Wyo. 2004); Ewing v. Hladky Constr., Inc., 2002 WY 95, ¶ 
11, 48 P.3d 1086, 1088 (Wyo. 2002).  
Summary judgment is only appropriate where "the parties' intent is clear 
such that reasonable minds could not differ. . . ."  Cordero Mining Co. v. United States 
Fid. & Guar. Ins. Co., 2003 WY 48, ¶ 9, 67 P.3d 616, 621 (Wyo. 
2003).

 
 
[W]here the existence of a contract or the terms of it is the 
point in issue, as here, and the evidence is conflicting or admits of more than 
one inference, "it is for the jury . . . to 
determine whether the contract did in fact exist. . . .  So, . . . when the terms of the contract 
are a matter of controversy under the evidence, the question should be put to 
the trier of the facts as a matter for their determination, and it is not the 
province of the court to determine and to instruct the jury what the terms 
are."

 
 

Roussalis 
v. Wyo. Med. Ctr., Inc.,  
4 P.3d 209, 232 (Wyo. 2000) (quoting 17A C.J.S. Contracts § 611, at 
1225-28 (1963)).

 

[¶13]   The parties designated documentary 
evidence and affidavits in support of their respective appellate arguments.  However, they dispute the effect, 
significance and legitimacy of much of that evidence.  After reviewing the entire record, and 
viewing the facts in the light most favorable to Comet, we conclude that 
material questions of fact exist regarding the intent of the parties at the time 
they entered into the 1998 Assignment. We find it impossible reasonably to 
discern the intent of the parties to the 1998 Assignment by only looking within 
its four corners.  The 1998 
Assignment is ambiguous because the term "leasehold estate" is obscure in its 
meaning due to indefiniteness of expression and because it can reasonably be 
interpreted to have more than one meaning.

 
 
CONCLUSION

 
 
[¶14]   
We hold that the district court improperly 
determined that summary judgment was appropriate under the facts of this 
case.  The term "leasehold 
estate," as used in the 1998 Assignment, is ambiguous.  This ambiguity gives rise to a genuine 
issue of material fact concerning the intent of the parties to the assignment. 
 This 
matter is, therefore, reversed and remanded for further proceedings consistent 
with this opinion.

 
 
FOOTNOTES

 
 

1"The 
terms spacing unit' or drilling unit' are used in the oil and gas industry to 
describe the area which an administrative agency has determined one well can 
efficiently drain."  Union Pac. Res. Co. v. Texaco, 
Inc., 882 P.2d 212, 221 (Wyo. 1994).  "Wyoming law refers to drilling units."  Id.  
Wyo. Stat. Ann. § 30-5-109(a) (LexisNexis 2007) 
provides:

 
 
When 
required, to protect correlative rights or, to prevent or to assist in 
preventing any of the various types of waste of oil or gas prohibited by this 
act, or by any statute of this state, the commission, upon its own motion or on 
a proper application of an interested party, but after notice and hearing as 
herein provided shall have the power to establish drilling units of specified and 
approximately uniform size covering any pool.

 
 
(Emphasis 
added.)