Case Title: Wolter v. Equitable Resources Energy Co., Western Region

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1999-05-14T00:00:00Z

Document:
Wolter v. Equitable Resources Energy Co., Western Region1999 WY 58979 P.2d 948Case Number: 98-299Decided: 05/14/1999Supreme Court of Wyoming

GEORGE 
P. WOLTER, JR.; MARGARITE WOLTER; WOLTER OIL COMPANY; THE WILLIAM

 

L. HERSHELMAN TRUST; ANN M. CUNNINGHAM; MARY ANN 
REINHARDT; JERRY D. BUSCH; and ELIZABETH M. KESSLER, Appellants 
(Plaintiffs),

v.

EQUITABLE RESOURCES ENERGY COMPANY, WESTERN REGION, 
Appellee (Defendant).

 

                                 

Appeal from the District Court 
of Natrona County, The Honorable

W. Thomas Sullins, 
Judge.

   

 

William H. Everett and Kevin 
D. Huber of Williams, Porter, Day & Neville, P. C., Casper, Wyoming, 
representing appellants.

 Neil J. Short, Casper, Wyoming, representing 
appellee.

 

     Before LEHMAN, 
C.J., and THOMAS, MACY, GOLDEN & HILL, JJ.

 

     MACY, 
Justice.

    
[¶1]     Appellants George Wolter, Jr., Margarite 
Wolter, Wolter Oil Company, the William L. Hershelman Trust, Ann Cunningham, 
Mary Ann Reinhardt, Jerry Busch, and Elizabeth Kessler (hereinafter referred to 
as the royalty owners) appeal from the district court's order which granted a 
partial summary judgment in favor of Appellee Equitable Resources Energy 
Company, Western Region.

 

   [¶2]     We affirm.

 

                                
ISSUES

 

   [¶3]     The royalty owners present the following 
issues for our consideration:

 

A. Did the District Court err in not granting the 
Royalty Owners summary judgment on the issue of whether the Royalty Owners 
should be paid their proportionate share of the proceeds of sales of production 
from the oil and gas lease in which they own overriding royalty interests on a 
"lease" basis, rather than a "unit" 
basis?

 

B. Did the District Court err in excluding evidence 
of the circumstances and usage at the time of the reservation of those 
overriding royalty interests in determining whether or not the language of the 
reservation was ambiguous, so as to truly determine the intent of the 
parties?

 

C. Did the District Court err in refusing to rule in 
the Royalty Owners' favor on their motions for judgment on the issue of 
conversion by the Company of the Royalty Owners' share of casinghead gas 
production from the oil and gas lease in which they own overriding royalty 
interests?

 

                                 
FACTS

 

   [¶4]     In 1970, Wyco, Inc. assigned its 
interest in two federal oil and gas leases to Diamond Shamrock Corporation and 
Texas Gas Exploration Corporation. George Wolter, Jr. was the president of Wyco 
at the time of the assignment, and he executed the assignment on its behalf. In 
the assignment, Wyco reserved an overriding royalty interest. The relevant part of the 
reservation language stated:

 

Said overriding royalty, which is reserved in this 
assignment, shall be computed and paid on the same basis, in the same manner, at 
the same time and on the same products, substances and elements, as is the 
royalty payable to the Lessor.

 

The lessor referred to in 
the reservation language is the United States government. The royalty owners are 
the owners of the overriding royalty.

 

    [¶5]  Portions of the federal leases were 
included within the North Grieve Field, a producing oil and gas field in Natrona 
County.  The North Grieve Field was 
unitized, but the royalty owners did not commit their interests to the 
unit.

 

   [¶6]     Since July 1974, the federal 
government's royalty payments have been computed and paid in accordance with the 
terms of the unit agreement. The royalty owners, however, have been paid on the 
basis of the actual production from the leases rather than under the terms of 
the unit agreement. After January 1995, Equitable Resources - the operator of 
the North Grieve Field and unit  began depositing the overriding royalty 
payments into an escrow account.

 

   [¶7]     The royalty owners filed an action in 
the Natrona County district court, seeking payment for the production that was 
attributable to their overriding royalty interests. The royalty owners 
maintained that Equitable Resources did not have the right to place the royalty 
payments which were due to them in an escrow account and that they were entitled 
to relief under Wyoming's royalty payment act, Wyo. Stat. Ann. §§ 30-5-301 to 
305 (Michie 1997). They also presented a claim for conversion because Equitable 
Resources had not accounted to them for the casinghead gas it 
produced.

 

   [¶8]     Equitable Resources answered and filed 
two counterclaims. It sought a declaratory judgment on the meaning of the 
reservation language, claiming that the reservation language provided that the 
royalty owners were to be paid on the same basis as the lessor and that, because 
the federal government was paid in accordance with the unit agreement, the overriding 
royalty payments should also have been calculated with reference to the unit 
agreement. Equitable Resources also filed a counterclaim against the royalty 
owners, seeking repayment of more than a million dollars that it claimed the 
royalty owners had been overpaid. Equitable Resources maintained further that it 
did not convert the casinghead gas because it reinjected the gas into the 
formation to maintain reservoir pressure.

 

   [¶9]     The parties filed several dispositive 
motions. After holding hearings on the motions, the district court issued a 
decision letter on August 13, 1996, and granted a partial summary judgment in 
favor of Equitable Resources on its declaratory judgment claim. It determined 
that the reservation language was clear and unambiguous and that the language 
mandated that the royalty owners be paid on the same basis as the lessor. The 
district court concluded, therefore, that, like the federal government, the 
royalty owners must be paid in accordance with the unit agreement. It also 
determined that Equitable Resources was not authorized to place the uncontested 
payments which were due to the royalty owners into an escrow account and granted 
relief to the royalty owners under Wyoming's royalty payment act. The district 
court found that genuine issues of material fact existed with regard to the 
remainder of the claims in the case and declined to grant a summary judgment on 
those issues.

 

   [¶10]  The royalty owners filed a motion for 
reconsideration. The district court denied the motion and certified that the 
order granting a partial summary judgment was a final, appealable order under 
W.R.C.P. 54(b). The royalty owners subsequently perfected their appeal to the 
Wyoming Supreme Court.

 

                          
STANDARD OF REVIEW

 

   [¶11]  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).

 

                              
DISCUSSION

 

                        
A. Reservation Language

 

   [¶12]  The royalty owners maintain that the 
district court erred by granting a summary judgment in favor of Equitable 
Resources. They claim that the reservation language was ambiguous and that the 
district court should have considered extrinsic evidence to determine the true 
intent of the contracting parties. Equitable Resources contends that the 
district court's decision was correct. We agree with Equitable 
Resources.

 

   [¶13]  The reservation language at issue in 
this case was included in an assignment of an oil and gas lease. An assignment 
of an oil and gas lease is a contract. See Moncrief v. Harvey, 816 P.2d 97, 103 
(Wyo. 1991); Farr v. Link, 746 P.2d 431, 433 (Wyo. 1987).  We will, therefore, examine the 
reservation language in accordance with our general principles of contract 
interpretation. Id. Our prime focus in construing or interpreting a contract is 
to determine the parties' intent. Woods Petroleum Corporation v. Hummel, 784 P.2d 242, 243 (Wyo. 1989). Our initial inquiry centers on whether the language 
of the contract is clear or ambiguous.  
See Treemont, Inc., 886 P.2d  at 592. Courts make that determination as a 
matter of law. Svalina v. Split Rock Land and Cattle Company, 816 P.2d 878, 881 
(Wyo. 1991). "An ambiguous contract is one which has language conveying a double 
or obscure meaning."  Treemont, 
Inc., 886 P.2d  at 592.

 

   [¶14]  When the contract language is clear and 
unambiguous, we secure the parties' intent from the words of the agreement as 
they are expressed within the four corners of the document.  Treemont, Inc., 886 P.2d  at 592; 
Svalina, 816 P.2d  at 881. This Court looks at the plain meaning of the words 
employed in a clear and unambiguous contract to determine the parties' intent. 
See Woods Petroleum Corporation, 784 P.2d  at 243-44. We turn to extrinsic 
evidence and rules of contract construction only when the contract language is 
ambiguous and its meaning is doubtful or uncertain. Svalina, 816 P.2d  at 881. A 
disagreement between the parties as to the contract's meaning does not give rise 
to an ambiguity which justifies the use of extrinsic evidence. 
Id.

 

   [¶15]  The royalty owners contend that the 
district court erred by refusing to consider extrinsic evidence of the 
circumstances surrounding the 1970 adoption of the reservation language. They 
insist that the district court could not determine the parties' true intent 
without resorting to such evidence. The royalty owners claim that the extrinsic 
evidence showed that the purpose of the reservation language, which stated that 
the royalty owners were to be paid on the same basis as the federal government, 
was to prevent the operator from refusing to pay the royalty owners in an 
appropriate manner. They insist that, when the assignment was executed, many 
operators did not properly pay royalty owners.

 

    [¶16] Although the royalty 
owners' contention is interesting, we agree with the district court that the 
reservation language was clear and unambiguous and that the use of extrinsic 
evidence to determine the parties' intent was not justified. The reservation 
language specifically provided that the royalty owners were to be paid "on the 
same basis" as the lessor. This language can only be interpreted as meaning 
that, if the federal government was paid in accordance with a unit agreement, 
the unit agreement would also be used to calculate the overriding royalty 
payments.

 

   [¶17]  The district court gave a well reasoned 
response to the royalty owners' lamentations that it could not ascertain the 
parties' intent without considering the circumstances surrounding the execution 
of the assignment.

 

While there surely may be many after-the-fact 
thoughts and opinions of concern to the purposes, desires, and reasons for 
adopting the requirement that the overriding royalties be computed and paid on 
the "same basis" as the royalty payable to the lessor, such may not be given 
consideration in this situation since there is nothing about the subject 
contract that is obscure in its meaning[] because of indefiniteness of 
expression[] or because a double meaning is present.

 

   [¶18]The royalty owners also claim 
that we should examine extrinsic evidence for the limited purpose of determining 
whether the reservation language was clear or ambiguous. This Court has, 
however, refused in other cases to examine extrinsic evidence to determine 
whether or not the contract language was ambiguous.

 

The ambiguity which justifies examining extrinsic 
evidence must exist . . . in the language of the document itself. It cannot be 
found in subsequent events or conduct of the parties, matters which are 
extrinsic evidence. The suggestion that one should examine extrinsic evidence 
to determine whether extrinsic evidence may be examined is 
circuitous.

 

   State v. Pennzoil Company, 752 P.2d 975, 978 (Wyo. 1988) (citations omitted and emphasis 
added).

 

   [¶19]  The royalty owners also maintain that 
there was a latent ambiguity in the contract which justifies the use of 
extrinsic evidence. They direct us to two cases which discuss the concept of 
latent ambiguity: Yellowstone Sheep Co. v. Diamond Dot Live Stock Co., 43 Wyo. 
15, 297 P. 1107 (1931) and National Enterprises, Inc. v. First Western Financial 
Corporation, No. 96-2168, 1997 WL 642081 (10th Cir. 1997).1

 

   [¶20]  In Yellowstone Sheep Co., this Court 
examined an agreement providing for the sale of "old ewes." We stated that, 
although the language of the agreement was apparently clear, a latent ambiguity 
existed with regard to the identity of the sheep which were conveyed in the 
agreement. 297 P.  at 1114. Because there was a latent ambiguity as to the 
subject matter of the contract, extrinsic evidence of the parties' negotiations 
was admissible to explain "what was really intended as the subject-matter of 
their bargain." 297 P.  at 
1115.

 

   [¶21]  In National Enterprises, Inc., the 
release language included in a settlement agreement was apparently clear on its 
face; however, the Tenth Circuit Court of Appeals recognized that there was a 
latent ambiguity as to whether or not the release language applied to a 
particular note. 1997 WL 642081, at 3. The court determined that the existence 
of a latent ambiguity concerning the subject matter of the contract made a 
summary judgment inappropriate. 1997 WL 642081, at 4.

 

   [¶22]  The courts in Yellowstone Sheep Co. and 
National Enterprises, Inc. considered a very specific aspect of contract law. In 
those cases, the courts were presented with contracts that were apparently clear 
and unambiguous. Nevertheless, the courts discovered that there were latent 
ambiguities concerning the subject matters of the contracts. Yellowstone Sheep 
Co., 297 P. at 1110-15; National Enterprises, Inc., 1997 WL 642081, at 
3.

 

   [¶23]  The sole issue in the case at bar is the 
proper method of computing the payments which are due to the royalty owners. 
There is no question in this case about the identity of the subject matter of 
the assignment. We do not need to examine extrinsic evidence to determine the 
interest which was assigned or the interest which was reserved. The concept of 
latent ambiguity, therefore, is not applicable in this 
case.

 

   [¶24]  The royalty owners also maintain that we 
must give consideration to the parties' historical performance of the contract 
in order to determine the parties' intent. It is true that, when a court 
determines that the contract language is ambiguous, it may consider the parties' 
historical performance of the contract in order to determine their intent. True 
Oil Company v. Sinclair Oil Corporation, 771 P.2d 781, 792 (Wyo. 1989); Sunburst 
Exploration, Inc. v. Jensen, 635 P.2d 822, 825 (Wyo. 1981); Holliday v. Templin, 
56 Wyo. 94, 103 P.2d 408, 413 (1940). We do not, however, look to extrinsic 
evidence of the parties' historical performance of a contract when the contract 
language is clear on its face. See True Oil Company, 771 P.2d  at 790; Sunburst 
Exploration, Inc., 635 P.2d  at 823-24. The contract language in this case is 
clear, and we refuse, therefore, to consider the parties' performance of the 
contract to determine its meaning.

 

   [¶25]  We conclude that the district court did 
not err when it granted a summary judgment in favor of Equitable Resources on 
its declaratory judgment action.

 

                    
B. Conversion of Casinghead Gas

 

   [¶26]  The royalty owners requested that the 
district court grant a judgment on the pleadings on their claim that Equitable 
Resources had converted the casinghead gas. The district court treated their 
motion for a judgment on the pleadings as a summary judgment motion under 
W.R.C.P. 12(c) because the parties presented matters outside the pleadings. The 
district court subsequently denied the royalty owners' motion, stating that 
genuine issues of material fact existed on the conversion claim.  The royalty owners contend, on appeal, 
that the district court erred by denying their summary judgment 
motion.

 

   [¶27]  A denial of a motion for a summary 
judgment generally is not an appealable, final order. LVW v. J (Adoption of 
MSVW), 965 P.2d 1158, 1161 (Wyo. 1998). Although there are exceptions to this 
general rule, the district court's denial of the royalty owners' summary 
judgment motion does not fall within any of those exceptions. See LVW, 965 P.2d  
at 1161-62. Consequently, we refuse to rule on the propriety of the district 
court's decision.

 

   [¶28]  Affirmed.

          

 

FOOTNOTES

    1 We note that the National 
Enterprises, Inc. case is an unpublished Tenth Circuit Court of Appeals 
decision. The notice accompanying the decision states: "Although citation of 
unpublished opinions remains unfavored, unpublished opinions may now be cited if 
the opinion has persuasive value on a material issue, and a copy is attached to 
the citing document or, if cited in oral argument, copies are furnished to the 
Court and all parties."