Title: WYOMING RESOURCES CORPORATION v. T-CHAIR LAND COMPANY

State: wyoming

Issuer: Wyoming Supreme Court

Document:

WYOMING RESOURCES CORPORATION v. T-CHAIR LAND COMPANY2002 WY 10449 P.3d 999Case Number: 00-333Decided: 07/10/2002

APRIL TERM, A.D. 2002

 

                                                                                                            

 

WYOMING 
RESOURCES CORPORATION,

a South 
Dakota corporation, 

Appellant(Plaintiff),

 

v.

 

T-CHAIR 
LAND COMPANY, a

Wyoming 
limited partnership, 

Appellee(Defendant).

 

 

Appeal 
from the District Court of Campbell County

The 
Honorable Dan R. Price II, Judge 

 

Representing 
Appellant:

Randall 
T. Cox, Gillette, Wyoming. 

Representing 
Appellee:

Haultain 
E. Corbett and Thomas J. Klepperich of Lonabaugh and Riggs, Sheridan, 
Wyoming.  Argument by Mr. 
Corbett.

 

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

GOLDEN, 
Justice. 

[¶1]           
Appellant 
Wyoming Resources Corporation (WRC) and Appellee T-Chair Land Company (T-Chair) 
entered into contractual agreements providing WRC access to oil and coalbed 
methane production wells by roads on T-Chair's ranch property.  A dispute arose after T-Chair contended 
that improperly controlled water produced from WRC's coalbed methane production 
wells was damaging the surface of its ranch property.  When WRC began to operate more wells 
without resolving this dispute, T-Chair blocked WRC's access to the roads on its 
property, denying WRC access to its wells. Wyoming statute permits a gas 
production company to obtain an access easement through a condemnation action 
when necessary.  After determining 
that WRC had access by contract, the district court decided that the easement 
was not necessary and dismissed the condemnation action.  The primary issue in this appeal is the 
meaning of the statutory language, "the property sought to be acquired is 
necessary for the project," found in Wyo. Stat. Ann. § 1-26-504(a)(iii) 
(LexisNexis 2001).  Addressing the 
limited question whether contractual rights preclude condemnation proceedings, 
we hold that the district court's conclusion on this question is in error as a 
matter of law and reverse its determination.  The issue of public use and necessity 
has many components, and because the trial court did not determine those issues 
or others as required under W.R.C.P. 71.1, we reverse and remand for further 
proceedings.  

 

 

ISSUES

 

[¶2]           
WRC 
presents the following issues for our review:

 

I.  Whether the district court erred as a 
matter of law by dismissing the plaintiff's complaint and motion to file a 
supplemental complaint

A.  Whether the district court disregarded 
settled case law and statutory provisions regarding necessity for easements when 
it held that the plaintiff failed to prove necessity

B.  Whether the district court erred in 
forcing the plaintiff to make an election of remedies

 

II.  Whether the district court erred by 
permitting the defendant to deny that the plaintiff needs an easement when the 
defendant has repeatedly refused to permit the plaintiff to use the 
road

 

T-Chair 
rephrases the issues as follows:

 

A.  Was there sufficient evidence to support 
the trial court's finding that Plaintiff/Appellant had a contractual right of 
access to Defendant/Appellee's lands?

 

B.  Is the trial court's determination that 
Plaintiff/Appellant failed to meet its burden of demonstrating that condemnation 
was "necessary" clearly erroneous?

 

C.  Did the trial court correctly rule that 
Plaintiff/Appellant may not invoke condemnation proceedings to avoid the 
obligations contained in existing contracts between it and 
Defendant/Appellee?

 

 

FACTS

 

[¶3]           
T-Chair 
Land Company is the owner of a family ranch in southern Campbell County, 
Wyoming.  WRC filed an amended 
complaint for condemnation seeking to condemn a right-of-way, thirty feet in 
width, for access across T-Chair's lands for the purpose of operating oil and 
gas exploration, drilling, production and transportation facilities and related 
improvements.  The district court 
found that WRC operates and owns interests in existing oil wells on lands owned 
by T-Chair and on lands adjacent to the ranch that are accessed by roads on 
T-Chair land.  WRC plans to drill 
additional oil and coalbed methane wells and conduct additional development of 
both types of wells on T-Chair lands and on lands adjacent to the ranch that are 
accessed by crossing the ranch's lands.  
At the time that WRC acquired operating rights in ten existing oil wells 
located with the T-Chair Ranch, these ten oil wells were subject to eleven 
annually renewable access agreements between the parties.  Under these existing access agreements, 
WRC paid T-Chair $22,400 in 1999 for access to ten oil wells by fifteen miles of 
private roadway. 

 

[¶4]           
On June 
26, 1999, WRC and T-Chair executed a surface use agreement for additional access 
and surface use rights for the purpose of developing coalbed methane gas and oil 
wells on the T-Chair Ranch.  T-Chair 
claims that the surface use agreement required WRC to prevent produced coalbed 
methane water from overflowing the existing Brown Reservoir.  WRC made initial payments under this 
agreement and drilled eight coalbed methane wells on T-Chair Ranch.  On December 7, 1999, T-Chair notified 
WRC that it had breached the agreement by the unauthorized discharge of produced 
water and demanded that WRC honor its contractual commitment to curtail the 
water production; however, WRC had not curtailed it as of September 7, 
2000.  In March of 2000, T-Chair 
learned that WRC planned to drill fourteen additional coalbed methane wells on 
the ranch, and, at that time, T-Chair prevented access.  The parties disputed whether T-Chair 
suspended access pending remedy of the default or terminated the access 
agreement.

 

[¶5]           
On June 
14, 2000, WRC filed a complaint in condemnation and sought to condemn a road it 
already accessed pursuant to the eleven oil well access agreements between the 
parties.  As required by statute, 
WRC offered to purchase the easement it sought to condemn.  It proposed a one-time payment of $6,000 
although at the time it was contractually obligated to pay $22,400 for the 
year.

 

[¶6]           
The 
district court determined that T-Chair had suspended, not terminated, access and 
WRC had not established necessity for condemnation as required by Wyoming's 
Eminent Domain Act because it had existing contractual access to T-Chair 
lands.  The district court dismissed 
the complaint, and this appeal followed.

 

 

STANDARD OF 
REVIEW

 

[¶7]           
Eminent 
domain proceedings are authorized by constitutional and statutory provisions and 
governed by W.R.C.P. 71.1.  The 
district court determines all issues arising on the complaint for condemnation 
including notice, the plaintiff's right to make the appropriation, plaintiff's 
inability to agree with the owner, the necessity for the appropriation, and the 
regularity of the proceedings.  
W.R.C.P. 71.1(e)(2)(A).  Only 
the issue of compensation may be tried before a jury.  W.R.C.P. 71.1(j).  

 

[¶8]           
When we 
review the district court's determination of issues required by Rule 71.1(e)(2), 
"we uphold the judgment if there is evidence to support it, and in doing so we 
look only to the evidence submitted by the prevailing party and give to it every 
favorable inference which may be drawn therefrom, without considering any 
contrary evidence."  Town of 
Wheatland v. Bellis Farms, Inc., 806 P.2d 281, 284 (Wyo. 1991).  Where the district court's ultimate 
conclusions decide questions of law, we afford no deference to its 
decision.  See Coronado Oil Co. 
v. Grieves, 603 P.2d 406, 410 (Wyo. 1979); see also Homesite Co. v. Board 
of County Comm'rs of Laramie, 240 P.2d 885, 889 (Wyo. 1952).  

 

 

DISCUSSION

 

[¶9]           
Article 
1, Section 32 of the Wyoming Constitution provides: 

 

Private 
property shall not be taken for private use unless by the consent of the owner, 
except for private ways of necessity . . . nor in any case without due 
compensation.

 

Eminent 
domain is the State's right and power to appropriate private property to promote 
the general welfare.  Coronado 
Oil Co., 603 P.2d  at 410.  The 
Wyoming Eminent Domain Act is set forth in Wyo. Stat. Ann. § 1-26-501 through § 
1-26-817.  Wyo. Stat. Ann. § 
1-26-502(a)(vi) (LexisNexis 2001).  
The right of eminent domain is extended to gas production companies by 
Wyo. Stat. Ann. §§ 1-26-814 and 815 (LexisNexis 2001)1 for acquisition of easements.  We have previously recognized that the 
obvious purpose of the constitutional and statutory provisions is to provide a 
means whereby a landowner or owner of an interest in lands, enclosed on all 
sides by lands of others and unable to get to the land from a public road or 
highway, can get relief by condemning a right of way to it across intervening 
land.  Coronado Oil Co., 603 P.2d  at 410.2  Coronado Oil Co. concluded 
that the legislature intended that the interests of a federal oil and gas lessee 
were sufficient to permit the lessee to condemn private property to obtain a 
right-of-way to its oil and gas leases.  
Id. at 410-11. The Wyoming Constitution recognizes the proposition 
that the uses there outlined while serving a private purpose indirectly benefit 
the general public.  "A private use 
is by constitutional edict given the force and effect of a public use."  Id. at 410 (citing Grover 
Irrigation & Land Co. v. Lovella Ditch, Reservoir & Irrigation Co., 
21 Wyo., 204, 131 P. 43 (1913)).  
This Court has previously decided that the eminent domain statutes 
provide a separate and distinct remedy from the private road application 
process.  Id. at 412.  

 

[¶10]      
In an 
eminent domain proceeding, the district court reviews the condemnor's actions 
vis-a-vis the three statutory requirements found in Wyo. Stat. Ann. § 
1-26-504(a).  Bellis Farms, Inc., 
806 P.2d  at 281.  That statute 
provides:

 

§ 
1-26-504. Requirements to exercise eminent domain.

 

(a) 
Except as otherwise provided by law, the power of eminent domain may be 
exercised to acquire property for a proposed use only if all of the following 
are established:

            
(i) The public interest and necessity require the project or the use of 
eminent domain is authorized by the Wyoming Constitution;

            
(ii) The project is planned or located in the manner that will be most 
compatible with the greatest public good and the least private injury; 
and

            
(iii) The property sought to be acquired is necessary for the 
project.

 

Wyo. 
Stat. Ann. § 1-26-504(a) (LexisNexis 2001).

 

[¶11]      
The 
district court ruled that WRC could not demonstrate necessity for condemnation 
as required by statute because it had access pursuant to its existing 
agreements.  A number of other 
jurisdictions have decided that, unless precluded by statute, the existence of a 
lease agreement between property owners does not preclude an action for eminent 
domain if necessary to protect property interests or maintain facilities and 
improvement.  Bear Creek 
Development Corp. v. Dyer, 790 P.2d 897, 898 (Colo. App. 1990)(citing 
cases).  Generally, however, these 
decisions were made where condemnors sought the fee simple title to the 
property, facts showed that the necessity was permanent, and the public could 
not reasonably require expensive and permanent buildings to be constructed on 
the land in which the petitioner had only a limited interest by virtue of a 
lease agreement.  Central Hanover 
Bank & Trust v. Pan American Airways, 188 So. 820, 824-25 (Fla. 1939) 
(discussing cases).   

 

[¶12]      
By 
statute, the Wyoming legislature has given the condemnor discretion to acquire 
property either by purchase, contract, or eminent domain proceedings,  Wyo. Stat. Ann. § 1-26-503,3 and we conclude that by this 
language alone the eminent domain act does not preclude a condemnation action 
although an access agreement exists between the parties.  Although WRC is not seeking a fee simple 
title to property, but rather an easement; its necessity is not permanent 
because it holds a leased property interest presumably of limited duration; and 
nothing in the record shows that expensive and permanent buildings have been 
constructed which would cause the property owners' objection to condemnation to 
be unreasonable, we nevertheless hold that a different rationale exists 
permitting WRC to acquire its easement by eminent domain proceedings.    

 

[¶13]      
The 
taking of private property for a private way of necessity is recognized as valid 
in Wyoming because "[t]here is a public interest in giving access by individuals 
to the road and highway network of the state as a part and an extension thereof 
for economic reasons and the development of land as a resource for the common 
good, whether residential or otherwise." Hulse v. First American Title Co. of 
Crook County, 2001 WY 95, ¶30, 33 P.3d 122, ¶30 (Wyo. 2001). "[T]he right to 
condemn a way of necessity under constitutional and statutory provisions is an 
expression of public policy against landlocking property and rendering it 
useless." Id.; see Coronado Oil Co., 603 P.2d  at 410.  

 

[¶14]      
The 
legislature has enacted the eminent domain and private road establishment acts 
so that access will be available to permit mineral estate owners to realize the 
full benefit of their property ownership and landlocked property will not be 
rendered useless.  The dismissal is 
reversed and remanded for further proceedings required pursuant to W.R.C.P. 
71.1.  In addition to further 
judicial review of necessity, those proceedings should include judicial review 
of whether WRC has complied with the requirements of Wyo. Stat. Ann. §§ 1-26-509 
and 510 (LexisNexis 2001).  Those 
statutes provide:

 

§ 
1-26-509. Negotiations; scope of efforts to purchase.

 

(a) A 
condemnor shall make reasonable and diligent efforts to acquire property by good 
faith negotiation.

(b) In 
attempting to acquire the property by purchase under W.S. 1-26-510, the 
condemnor, acting within the scope of its powers and to the extent not otherwise 
forbidden by law, may negotiate and contract with respect 
to:

            
(i) Any element of valuation or damages recognized by law as relevant to 
the amount of just compensation payable for the property;

            
(ii) The extent or nature of the property interest to be 
acquired;

            
(iii) The quantity, location or boundary of the 
property;

            
(iv) The acquisition, removal, relocation or disposition of improvements 
upon the property and of personal property not sought to be 
taken;

            
(v) The date of proposed entry and physical 
dispossession;

            
(vi) The time and method of payment of agreed compensation or other 
amounts authorized by law;  
and

            
(vii) Any other terms or conditions deemed appropriate by either of the 
parties. 

            

 

§ 
1-26-510.  Preliminary efforts to 
purchase.

 

(a) 
Except as provided in W.S. 1-26-511, an action to condemn property may not be 
maintained over timely objection by the condemnee unless the condemnor made a 
good faith effort to acquire the property by purchase before commencing the 
action.

(b) 
Negotiations conducted in substantial compliance with W.S. 1-26-509(b)(i) 
through (vi) are prima facie evidence of "good faith" under subsection (a) of 
this section.

 

Reversed 
and remanded for further proceedings in accordance with W.R.C.P. 
71.1.

 

FOOTNOTES

1  § 1-26-814. Right of eminent domain 
granted; petroleum or other pipeline companies; purposes.

 

            
Whenever any utility or any petroleum or other pipeline company, 
authorized to do business in this state, has not acquired by gift or purchase 
any land, real estate or claim required for the construction, maintenance and 
operation of their facilities and appurtenances or which may be affected by any 
operation connected with the construction or maintenance of the same, the 
utility or company has the right of eminent domain and may condemn the easement 
required by the utility or company.

 

§ 1-26-815. Right of eminent domain 
granted; ways of necessity for authorized businesses; purposes; 
extent.

 

            
(a) Any person, association, company or corporation authorized to do 
business in this state may appropriate by condemnation a way of necessity over, 
across or on so much of the lands or real property of others as necessary for 
the location, construction, maintenance and use of reservoirs, drains, flumes, 
ditches including return flow and wastewater ditches, underground water 
pipelines, pumping stations and other necessary appurtenances, canals, electric 
power transmission lines, railroad trackage, sidings, spur tracks, tramways, 
roads or mine truck haul roads required in the course of their business for 
agricultural, mining, exploration drilling and production of oil and gas, 
milling, electric power transmission and distribution, domestic, municipal or 
sanitary purposes, or for the transportation of coal from any coal mine or 
railroad line or for the transportation of oil and gas from any 
well.

            
(b) The right of condemnation may be exercised for the purpose 
of:

                        
(i) Acquiring, enlarging or relocating ways of necessity; 
and

(ii) Acquiring easements or 
rights-of-way over adjacent lands sufficient to enable the owner of the way of 
necessity to construct, repair, maintain and use the structures, roads or 
facilities for which the way of necessity is acquired.

            
(c) A way of necessity acquired hereunder shall not exceed one hundred 
(100) feet in width on each side of the outer sides or marginal lines of the 
reservoir, drain, ditch, underground water pipeline, canal, flume, power 
transmission line, railroad trackage, siding or tramway unless a greater width 
is necessary for excavation, embankment or deposit of waste from 
excavation.  In no case may the area 
appropriated exceed that actually necessary for the purpose of use for which a 
way of necessity is authorized.

 

2  "Our decision in the second 
Coronado case, [Coronado Oil Co. v. Grieves,] 642 P.2d 423 [(Wyo. 
1982)], did not consider the expanded range of compensation factors that the 
legislature recognized in adopting the Act.  Pursuant to the provisions of the Act, 
the landowner whose property is the subject of a partial taking is entitled to 
prove not only the difference between the fair market value of the property 
prior to the taking and the fair market value of the remainder after the taking, 
under the before and after rule,' but he also is entitled to prove the value of 
the property rights taken.  The 
measure of compensation is the greater of those alternative amounts.  Section 1-26-702(b), W.S.1977.  The landowner may prove the fair market 
value of the property taken by any method of valuation that is just and 
equitable if there is no relevant market establishing the value. Section 
1-26-704(a)(ii), W.S.1977.  In  § 1-26-706(a)(i), the legislature 
provided that the fair market value of the remainder should reflect increases or 
decreases in value caused by the proposed project including impairment of the 
use of [the landowner's] other property caused by the condemnation' and, in the 
following subsection (ii), provision is made for increase in damage to [the 
landowner's] property by the general public which could reasonably be expected 
to occur as a result of the proposed actions of the condemnor;  * * *.'   The effect of this statutory 
scheme is to permit the landowner to establish the appropriate amount of just 
compensation for a partial taking by any rational method so long as he is able 
to introduce competent evidence to that end."  L.U. Sheep Co. v. Board of County 
Comm'rs of County of Hot Springs, 790 P.2d 663, 671-72 (Wyo. 
1990).

3  Wyo. Stat. Ann. § 
1-26-503 (LexisNexis 2001) provides:

(a) Nothing in this act requires that 
the power of eminent domain be exercised to acquire property.  Whether property necessary for public 
use is to be acquired by purchase, other means or by eminent domain is a 
decision left to the discretion of the person authorized to acquire the 
property.

            
(b) Subject to any other statute relating to the acquisition of property, 
any person or public entity authorized to acquire property for a particular use 
by eminent domain may also acquire the property for the use by grant, purchase, 
lease, gift, devise, contract or other means.