Case Title: BOLEY v. GREENOUGH

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 2001-05-11T00:00:00Z

Document:
BOLEY v. GREENOUGH2001 WY 4722 P.3d 854Case Number: 99-299Decided: 05/11/2001
         

GABRIELLE 
MANIGAULT BOLEY;

EDWIN 
L. "TOOTER" ROGERS and

ELIZABETH 
JOSEPHINE ROGERS,

husband 
and wife; and FRED L.

OEDEKOVEN 
and MARY ANN

OEDEKOVEN, 
Trustees of the Fred

and 
Mary Oedekoven Family

Trust 
dated September 12, 1995,

                   
 
Appellants(Defendants),                       
 

                                                                                    
 

v.

DOUGLAS 
C. GREENOUGH; GARY F.

GREENOUGH; 
JESS S. GREENOUGH;

MICHAEL 
W. GREENOUGH; PATRICK

B. 
GREENOUGH; MYRTLE A. WALLIS;

and 
KATHRYN M. YORK,

Appellees

(Plaintiffs).

Appeal 
from the District Court of Campbell County

The 
Honorable Terrence L. O'Brien, Judge

Representing 
Appellants:

John 
M. Daly and Patrick G. Davidson of Daly Law Associates, P.C., Gillette, 
Wyoming  

Representing 
Appellees:

            
Haultain E. Corbett and Dan B. Riggs of Lonabaugh and Riggs, Sheridan, 
Wyoming  

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

*This 
case was originally assigned to Justice Thomas on August 21, 2000, for the 
rendering of a proffered majority opinion.  
The case was reassigned to Justice Kite on February 5, 
2001.

            
KITE, Justice.

[¶1]      When oil was 
discovered on ranch property owned by Frank and Doris Greenough (the 
Greenoughs), they sought to share that benefit by conveying royalty interests to 
their children.  The resulting 
seventy-seven separate assignments each used the terms "royalty interest" and 
"over-riding royalty," inter alia, in reference to the nature of the 
interest transferred. Thirty years later, subsequent purchasers of various 
tracts in the ranch property disputed the Greenough children's royalty 
interests.  They claimed the 
interests assigned were not perpetual nonparticipating royalty interests.  The appellants relied exclusively on the 
use of the term "over-riding royalty" in the assignment documents and the 
contemporary definition of that technical term to contend the assignments 
transferred only an overriding royalty on leases in existence at the time of the 
conveyance.  They argued the 
assignments were void, ab initio, because the Greenoughs held no 
leaseholds or overriding interests at the time of conveyance and, therefore, had 
nothing to convey.  The district 
court entered summary judgment in favor of the Greenough children.  We affirm because the assignments, on 
their face, permit no other interpretation than that which passes perpetual 
nonparticipating royalty interests.

ISSUES

[¶2]      The appellants 
articulate three issues:

1.  Did 
the District Court err in determining that the Greenoughs' Assignments of 
Royalty conveyed a perpetual royalty interest to the 
Appellees?

2.  Did 
the District Court err in determining that the Greenoughs' Assignments of 
Royalty were doubtful and uncertain, so as to allow the extrinsic evidence as to 
the intent of the Greenoughs in making their assignments?

3.  Did 
the District Court err in granting the Plaintiffs' (Appellees') Motion for 
Summary Judgment?

The 
appellees state essentially the same issues:

A.  Did 
the trial court correctly rule that the Assignments of Royalty conveyed 
perpetual royalty interests that were applicable to existing and subsequent 
leases of the underlying mineral estate?

B.  Was 
the trial court correct in considering extrinsic evidence as to the facts and 
circumstances surrounding the execution of the Assignments of 
Royalty?

C.  Did 
the trial court correctly rule that there were no genuine issues as to material 
fact and that the interpretation of the Assignments of Royalty was a question of 
law for the court to decide?

FACTS

[¶3]      In the 1960s, the 
Greenoughs owned a fee interest in surface and mineral rights to approximately 
one hundred sections of land in northern Campbell County near Recluse.  In 1967, a commercial quantity of oil 
was discovered on the Greenough ranch.  
Between November 28, 1967, and January 15, 1969, the Greenoughs executed 
and delivered to their children, the appellees, seventy-seven different 
documents, each entitled "Assignment of Royalty."

[¶4]      Each assignment 
recites that the consideration therefor is the "[l]ove and affection" of the 
receiving child, and each assignment specifies that it "is intended as a gift" 
for that named child.  Each 
assignment further recites that the Greenoughs

do 
hereby SELL, ASSIGN, SET OVER, TRANSFER and CONVEY . . . all right 
title and interest in, of and to ______________ Percent (______ %) of all the 
oil, gas and other hydrocarbon substances produced and saved from the following 
described lands . . . .

Each 
assignment is for either one-half of one percent or one percent of the oil, gas, 
and other hydrocarbons produced from one of eleven tracts of land within the 
Greenough ranch.  The net effect of 
those seventy-seven separate documents was to convey to each of the Greenough 
children a shared seven percent interest in the oil produced from some of those 
eleven tracts and a three and a half percent interest in the remaining 
tracts.  Each habendum clause is 
identical:

TO 
HAVE AND TO HOLD said royalty interest unto said assignee, [his] heirs, 
successors and assigns as above set forth; the said oil, gas and other 
hydrocarbon substances so produced and saved from said land to be delivered free 
of cost to assignee, his successors or assigns, in the pipe line or pipe lines 
serving said premises or into tanks erected for the purpose of storing said 
products, together with the rights, privileges and benefits derived 
therefrom.  Assignors covenant and 
agree that they have lawful right to sell and convey said royalty, and that they 
will warrant and defend the title to the same.

Each 
assignment also contains the following language:  "This is an OVER-RIDING royalty conveyed 
by assignors and accepted by assignee subject to the terms of the lease, leases, 
operating agreement and operating agreements now held by assignors covering said 
lands."

[¶5]      Notwithstanding 
the foregoing language, the parties agree that the Greenoughs did not own 
leasehold interests in any of the lands described in the assignments and did not 
possess overriding royalty interests in any of the lands.  Nor did they possess any overriding 
royalty interests as a lessee.

[¶6]      In 1974, the 
Greenoughs sold their ranch to the TR Ranch Limited Liability Company (TR 
Ranch), reserving certain mineral interests but conveying the remainder to the 
purchaser. It is not contested that the Greenough children's interests were 
recorded or that those children received royalty payments from all the lands 
covered by the assignments from 1967 to 1998 because of the assignments.  Nothing in the record suggests that 
either the parents or the children questioned the nature or scope of the royalty 
interest granted during the thirty-one years after the assignments were 
made.  In 1995, TR Ranch conveyed 
portions of the ranch to Edwin and Elizabeth Rogers.  In 1996, TR Ranch conveyed the balance 
of the ranch to Gabrielle Manigault Boley who, in turn, conveyed a portion of 
the land to the Oedekoven Trust.  
Each of the foregoing transactions conveyed lands burdened by the 
assignments.

[¶7]      In early 1998, 
the Boley No. 31-36 Well was drilled and completed.  A portion of the spacing unit for this 
well was subject to the Greenough children's assignments.  The well operator obtained a Drilling 
Title Opinion and a Division Order Title Opinion, both of which concluded the 
author could not determine whether the assignments to the Greenough children 
were intended to be perpetual royalty interests or were limited to any oil and 
gas leases in effect at the time of the assignments.  The operator was thus advised to hold 
royalties in suspense pending resolution of the meaning of the 
assignments.

[¶8]      Faced with the 
first interruption of royalty payments in thirty years, the Greenough children 
sought a declaratory judgment as to their interests in production from the lands 
subject to the assignments.  They 
bolstered their position with their own affidavits in addition to affidavits 
from their mother (their father had died in the interim) and the attorney who 
drafted the assignments, which provided some factual background for the 
assignments and the subjective intent of the assignors to pass perpetual 
nonparticipating royalties to the children.  The appellants, however, took the 
position that, because the assignments used the term "over-riding royalty" and 
the Greenoughs held neither leaseholds nor overriding royalty interests in any 
of the subject lands, the assignments were, as a matter of law, either limited 
to any leases that were outstanding at the time or void, ab 
initio.

[¶9]      The district 
court found the assignments were intended to transfer perpetual royalty 
interests in the described lands which were not limited to the duration of any 
particular lease but instead were applicable to existing and subsequent leases 
of the underlying mineral interests.  
This appeal timely followed.

STANDARD 
OF REVIEW

[¶10]   This court has concisely stated the 
standard of review for summary judgment in contract litigation as 
follows:

A 
summary judgment is appropriate in litigation when there are no genuine issues 
of material fact and the prevailing party is entitled to judgment as a matter of 
law.  In contract litigation, when 
the terms of the agreement are unambiguous, the interpretation is a question of 
law, and a summary judgment is appropriate because there is no genuine issue of 
material fact.  Whether a contract 
is ambiguous is a question of law for the reviewing court.  We review questions of law de 
novo without affording deference to the decision of the district 
court.

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); see also Burbank v. 
Wyodak Resources Development Corp., 11 P.3d 943, 946-47 (Wyo. 
2000).

            

[¶11]   Assignments are contracts and are 
construed according to the rules of contract interpretation.  Wolter v. Equitable Resources Energy 
Company, Western Region, 979 P.2d 948, 951 (Wyo. 1999).  The determination of the parties' intent 
is our prime focus in interpreting or construing a contract.  Id.  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.  
Id.; Moncrief v. Louisiana Land and Exploration Company, 
861 P.2d 516, 524 (Wyo. 1993).  When 
the agreement's language is clear and unambiguous, we consider the writing as a 
whole, taking into account relationships between various parts.  Moncrief, 861 P.2d  at 524.  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.  Cheyenne Mining and Uranium Company 
v. Federal Resources Corporation, 694 P.2d 65, 70 (Wyo. 1985); Dawson v. 
Meike, 508  P.2d 15, 18 (Wyo. 1973).

DISCUSSION

[¶12]   As an initial matter, we note both 
parties requested summary judgment and contended that no material issues of fact 
existed to be tried.  The appellants 
do object to the affidavits as extrinsic evidence purporting to provide the 
grantors' subjective intent at the time of the assignments.  The record indicates the district court 
did not rely on the affidavits finding them self-serving, judgmental, and not 
entitled to much weight.  We 
conclude the assignments are unambiguous on their face and consideration of the 
affidavits would have been, therefore, inappropriate.

[¶13]   The parties agree that, when the 
Greenoughs made the assignments which are the subject of this appeal, they owned 
in fee approximately 64,000 acres of surface and mineral estates, although they 
did not specifically possess leaseholds or overriding royalties.  The assignments were made immediately 
after the first discovery of oil and gas on the lands and had the stated purpose 
of providing the grantors' children with a gift. At the time of the assignments, 
a portion of the lands was subject to leases.  The record does not contain sufficient 
evidence to determine the exact extent, terms, and expiration dates of the 
multitude of leases that have existed on this property.  Given the size of the ranch and the 
extent of oil and gas activity over thirty years, it is safe to presume that 
some leases were held by production and others expired by their terms with new 
leases being issued.  The children 
continued to receive royalty payments on all leases.

[¶14]   Examination of the language 
employed in the assignments offers guidance as to the appropriate 
interpretation.  Each assignment 
purports to transfer a percentage of "all the oil, gas and other hydrocarbon 
substances produced and saved from the . . . described lands."  We have construed instruments which 
employ the language "oil and gas produced and saved" as creating a 
nonparticipating royalty interest.  
Ferguson v. Coronado Oil Company, 884 P.2d 971, 977 (Wyo. 1994) 
(citing 1 Eugene Kuntz, The Law of Oil and Gas § 16.2 
(1987)).

"The 
distinguishing characteristics of a non-participating royalty interest are: (1) 
Such share of production is not chargeable with any of the costs of discovery 
and production;  (2) the owner has 
no right to do any act or thing to discover and produce the oil and gas;  (3) the owner has no right to grant 
leases; and  (4) the owner has no 
right to receive bonuses or delay rentals."

Picard 
v. Richards, 
366 P.2d 119, 122 (Wyo. 1961) (quoting Mounger v. Pittman, 108 So. 2d 565, 566 (Miss. 1959)).

[¶15]   Central to our interpretation of 
the questioned assignments is the Greenoughs' fee ownership of the surface and 
mineral rights at the time the assignments were made.  We have consistently treated a mineral 
fee as being in the nature of a bundle of rights or incidents which may be 
granted or reserved. Silas R. Lyman, Note, Creation of Royalties Prior to 
Leasing, 13 Wyo. L.J. 244, 246-47 (1959) (citing Denver Joint Stock Land 
Bank of Denver v. Dixon, 57 Wyo. 523, 122 P.2d 842 (1942)).  Fee owners, such as the Greenoughs, have 
the capacity to create and convey any one or all of a myriad of separately 
identifiable interests in oil and gas under their property, including royalty 
interests.  Williams v. Watt, 
668 P.2d 620, 624 (Wyo. 1983); Bensinger v. Scott, 625 P.2d 775, 777 
(Wyo. 1981).  Such royalty interests 
may be created for years, for life, or in fee.  Williams, 668 P.2d  at 624 (citing 
1A W. L. Summers, The Law of Oil and Gas § 136 (1954)).  "It is also observed that a right to 
royalty may be reserved or granted before any mineral lease is executed, and 
such right is generally termed a perpetual nonparticipating royalty', where no 
right is granted or reserved to participate in making future leases."  Oregon Basin Oil & Gas Co. v. 
Ohio Oil Co., 70 Wyo. 263, 275,  
248 P.2d 198, 203 (1952).  
The fact the Greenoughs may have already leased some of the parcels to 
third parties at the time of the assignments is no impediment to interpretation 
of those assignments as conveying perpetual nonparticipating royalties.  "A perpetual nonparticipating royalty 
may be created by grant or reservation after and subject to an existing oil and 
gas lease."  3A W. L. Summers, The 
Law of Oil and Gas § 599 at 238 (1958).

[¶16]   Reservation or grant of a royalty 
interest prior to the lease of the subject property "is generally termed a 
perpetual nonparticipating royalty, if no right is granted or reserved to 
participate in the making of future leases." Dixon, 122 P.2d  at 844.  It is clear from the "heirs, successors 
and assigns" language in the habendum clauses of the assignments that the 
Greenoughs were creating perpetual nonparticipating royalties as opposed to a 
life estate or a term of years.  The 
assignments were recorded, and the appellants do not claim they took the 
property without notice of the rights of the appellees to nonparticipating 
royalties.

[¶17]   The question remains whether use of 
the term "over-riding royalty" in one clause is so contrary to our 
interpretation of the balance of the assignment language as to render those 
assignments void.  At least one 
commentator has asserted "[t]he rights created by the parties, not the name, nor 
an occasional inadvertent or malapros phrase, establishes what  it is." John D. Lawyer, Fee Royalty 
Conveyancing in Wyoming, 2 Land & Water L. Rev. 117, 122 (1967) (citing 
Picard, 366 P.2d at 123).  
The interpretation urged by the appellants would render meaningless the 
conveyance clause which granted "all right, title and interest" in a certain 
percentage of all oil and gas produced from all the described lands without any 
limitation to particular leases.

 [¶18]  "[N]o single provision taken alone, much 
less a single c[l]ause in a sentence, has controlling effect.  [The court] must consider and give 
effect to all the provisions of the contract so that none will be rendered 
meaningless."  West Texas 
Utilities Co. v. Exxon Coal USA, Inc., 807 P.2d 932, 936 (Wyo. 1991).  In West Texas Utilities Co., this 
court rejected a similar argument which urged the application of a single remedy 
clause in such a manner as to abrogate a twenty-year coal supply contract.  The court recognized such a result was 
contrary to the parties' intent as determined from the contract and the 
surrounding circumstances.  We 
follow a similar course here and give effect to the grantors' obvious intent to 
assign a perpetual nonparticipating royalty interest in all the lands covered by 
the assignment.

[¶19]   "As a general rule, words in a 
contract will be given their usual and primary meaning at the time of the 
execution of the contract. The foregoing rule applies to technical words in a 
contract and the meaning of such words must be construed as of the date of the 
execution of the contract." Oresta v. Romano Bros., 73 S.E.2d 622, 628 
(W. Va. 1952) (citation omitted); see also Fairfax Village Condominium 
VIII Unit Owners' Association v. Fairfax Village Community Association, 
Inc., 726 A.2d 675, 677 (D.C. 1999); 17A Am. Jur. 2d Contracts 
§ 359 (1991).  In this context, 
the term "over-riding royalty" need not be interpreted as limiting the effect of 
this assignment.

The 
term "overriding royalty" has been defined in numerous judicial opinions as an 
interest in oil and gas production at the surface, free of the expense of 
production, and in addition to the usual land owner's royalty reserved to the 
lessor in an oil and gas lease.  As 
stated in 2 Williams and Meyers, Oil and Gas Law, § 418.1, p. 341: "An 
overriding interest is, first and foremost, a "royalty 
interest."

Cities 
Service Oil Company v. Pubco Petroleum Corporation, 
497 P.2d 1368, 1372 (Wyo. 1972) (footnote omitted); see also Connaghan 
v. Eighty-Eight Oil Company, 750 P.2d 1321, 1324 (Wyo. 
1988).

[¶20]   Over time, the use of the term 
"overriding royalty" has evolved and has more recently been used to describe an 
interest carved out of the lessee's share of the oil and gas.  Howard R. Williams & Charles J. 
Meyers, Manual of Oil and Gas Terms at 750 (10th ed. 1997).  A discussion of the evolution of the 
term is contained in the Manual of Oil and Gas Terms and confirms that, during 
the time frame these assignments were executed, "overriding royalty" was also 
used to indicate a nonparticipating royalty and "added nothing to the meaning of 
the term royalty.'"  Id., at 
749.  Recent treatises continue to 
use the phrase to apply to nonparticipating royalties:

Perhaps 
the only safe way to define the term "overriding royalty" is to say that it is a 
fractional interest in the gross production of oil and gas, in addition to the 
usual royalties paid to the lessor.  
The term may be used in referring to a nonparticipating royalty interest 
in perpetuity or for a term of years created by the land or mineral owner prior 
to a lease for oil and gas.

3 
W. L. Summers, The Law of Oil and Gas § 554 at 624 (1958).

[¶21]   The record in this case confirms 
that operators used the term in such a fashion during the same time period as 
the assignments were executed.  One 
of the leases from the Greenoughs to Phillips Petroleum Company, dated September 
21, 1967, reserved the usual one-eighth royalty and an additional four percent 
"overriding royalty" to the lessors.  
Consequently, it is reasonable to construe the term in this assignment in 
a manner which gives effect to the obvious intent of the parties and is 
consistent with the remaining language of the instrument.  

[¶22]   In 1989, the legislature weighed in 
on the issue, defining "overriding royalty" as "a share of production, free of 
the costs of production, carved out of the lessee's interest under an oil and 
gas lease." Wyo. Stat. Ann. § 30-5-304(a)(v) (Lexis 1999); 1989 Wyo. Sess. Laws 
ch. 255, § 1.  The appellants point 
to Wyoming's statutory definition of the term overriding royalty for the 
proposition that the assignment did not convey a perpetual royalty on all 
lands.  We conclude, in the limited 
context of the specific facts of this case, the statute, enacted over twenty 
years after the assignments were executed, is of little help in determining the 
parties' intent.  The Greenoughs, 
being possessed of a fee estate, could convey any portion thereof as they saw 
fit.

CONCLUSION

[¶23]   The seventy-seven assignments 
giving rise to this appeal are unambiguous assignments of perpetual 
nonparticipating royalties to the appellees.  The fact that the Greenoughs were 
neither leaseholders nor overriding royalty holders at the time of assignment 
does not serve to void the assignments.  
Being the fee owners of the estate in question, the Greenoughs could 
convey as little or as much thereof to their children as they saw fit.  Use of the term "over-riding royalty" in 
one clause of the documents did not preclude the creation of nonparticipating 
royalty interests in perpetuity to the benefit of their children.  For these reasons, summary judgment for 
the appellees is affirmed.