Opinion ID: 2586675
Heading Depth: 1
Heading Rank: 2

Heading: Ownership of the NPI

Text: [¶ 184] As noted in the majority opinion, the plaintiffs trace their ownership of the NPI through a series of mesne conveyances that must be reviewed in detail to understand the arguments of the parties. To begin with, Novi merged into Woodson Oil Company (Woodson) on January 20, 1958. Subsequently, Woodson defaulted on a loan owed to The Prudential Insurance Company of America (Prudential), and on November 8, 1961, Woodson conveyed to Prudential certain properties, in lieu of foreclosure. Included within the conveyed properties were the following: (i) All of the oil and gas leases, oil, gas and mineral leases, leasehold estates, mineral interests, royalty interests, overriding royalty interests, production payments, net profit interests, and other interests in oil, gas and other minerals affecting lands located in the State of Colorado, Louisiana, Oklahoma and Wyoming that are described in Exhibits A and Exhibits B attached hereto and made a part hereof for all purposes, all of which are covered by and subject to the Deed of Trust; (ii) All other oil and gas leases, oil, gas and mineral leases, leasehold estates, mineral interests, royalty interests overriding royalty interests, production payments, net profit interests, and other interests in oil, gas and other minerals now owned by Woodson which are located in the State of Colorado, Louisiana, Oklahoma and Wyoming; . . . . (iv) All of the interest of Woodson under all contracts, operating agreements, unit agreements, gas contracts, rights of way, easements, surface leases, and permits and licenses affecting any of the properties and interests in properties described in Exhibits A and Exhibits B attached hereto, including but not limited to all contracts and other instruments described or referred to in Exhibits A and Exhibits B attached thereto. . . . . EXHIBIT A SUBLETTE COUNTY, WYOMING OIL AND GAS LEASES  PRODUCING I. LEASEHOLD INTERESTS A 5% net profits interest in the Pinedale Unit, created by the Pinedale Unit Agreement dated April 1, 1954, by and between El Paso Natural Gas Company, as Operator, and Continental Oil Company et al, as Non-Operators, which net profits interest is created by a certain Net Profits Contract dated April 1, 1954, by and between Malco Refineries, Inc., El Paso Natural Gas Company, Continental Oil Company, and Novi Oil Company, both the Pinedale Unit Agreement and the Net Profits Contract being filed in the Office of the Bureau of Land Management, Cheyenne, Wyoming; reference being hereby made to the Pinedale Unit Agreement, and to the record thereof in the Bureau of Land Management, Cheyenne, Wyoming, for all purposes, including a description of the leases subject thereto and the lands covered thereby, and reference being hereby made to said Net Profits Contract and to the record thereof in the Bureau of Land Management, Cheyenne, Wyoming, for all purposes. . . . . . [¶ 185] Under the heading Exhibit B Sublette County, Wyoming Oil and Gas LeasesNon-Producing, Exhibit B contained the description of that portion of the Lozier fee lease shown in Exhibit A to the Area NPI Contract, but not the description of Lease No. 019548 that also appears in that Exhibit A. Clearly, the conveyance from Woodson to Prudential intended to transfer Woodson's interest in the NPI connected to the Pinedale Unit and the leases committed to it in the original Exhibit A, plus Woodson's interest in the area NPI as it related to the non-unit portion of the Lozier lease shown in the original Exhibit A. The intent of the Woodson-Prudential transfer in regard to the nonunit portion of Lease No. 019548 is not so clear, other than the fact that it was not included in any particularized description of what was being transferred. [¶ 186] Immediately upon receiving the above-described properties from Woodson, Prudential transferred the same to Texas Pacific Coal and Oil Company (TP Coal), reserving unto itself a $2,000,000 production payment, which has since been satisfied, plus a 50% Net Profit Overriding Royalty Interest defined as 50% of the net profits, if any, as hereinafter defined, that are realized by Texas Pacific from the ownership, maintenance, and operation of the Woodson Properties. ... The lease descriptions attached to this conveyance as Exhibits A and B are identical in relevant part to those attached as exhibits to the Woodson-Prudential conveyance. Were it not for the reservation, it would be clear that Prudential transferred to TP Coal everything it received from Woodson. The question becomes what it was, as pertinent to the Pinedale NPI, that Prudential intended to reserve. It did not simply reserve 50% of the NPI. Instead, it reserved 50% of net profits realized from operation of all the Woodson properties. The problem is that the NPI is calculated from the operations of the Pinedale Unit on the committed leases, whereas the 50% is calculated from the net profits realized from operation of all the Woodson properties. An example may show the difficulty: what happens if the Pinedale Unit leases showed a profit for a particular period, while the Woodson properties as a whole showed a loss? It must be remembered that Prudential conveyed away the NPI, keeping only a 50% interest in the net profits of the Woodson properties. Would TP Coal, in that situation, be entitled to the 5% NPI from the Pinedale Unit leases' profit, while Prudential would be entitled to nothing, because the Woodson properties, as a whole, did not have a net profit? [¶ 187] On September 13, 1984, Prudential assigned and conveyed to Doyle Hartman, one of the plaintiffs herein, the 50% Net Profit Overriding Royalty Interest that it had reserved in its conveyance to TP Coal. The Hartman plaintiffs identify this transaction as the source of half of their ownership of the NPI. Prudential, however, did not own half of the NPI. TP Coal owned the NPI. Prudential reserved, and therefore owned, only the 50% interest in any net profits from all the Woodson properties. I fail to see how the conveyance in 1984 transferred any part of the ownership of the NPI to Hartman. [¶ 188] Meanwhile, on November 1, 1963, TP Coal conveyed to Joseph E. Seagram & Sons, Inc. (Seagram) all of the mineral, royalty, overriding royalty, production payment, fee and other interests, rights and properties listed in an attached exhibit, which listed properties included the Lozier fee lease NPI and the NPI for Wyoming state leases 015315, 015314, and 019548. The three numbered Wyoming state leases are three of the four Novi leases listed in the Unit NPI Contract, while the legal description for the Lozier fee lease combines the separate legal descriptions from the Unit NPI Contract and the Area NPI Contract. The conveyance from TP Coal to Seagram also transferred the following: C. Without limiting the foregoing all of Grantor's right, title and interest (whether now owned or hereafter acquired by operation of law or otherwise) in, to and under all mineral, royalty, overriding royalty, production payment, fee and other interests, rights and properties of every kind and character insofar as the same cover or relate to lands located in any County, Parish or State referred to in Exhibit A, even though such mineral, royalty, overriding royalty, production payment, fee and other interests, rights and properties be incorrectly described or referred to, or a description thereof be omitted in this Conveyance. ... Notably absent from this conveyance is any specific indication of an intent to transfer TP Coal's interest in the balance of the Pinedale Unit leases and the NPI related thereto. [¶ 189] On June 19, 1970, Seagram conveyed to Texas Pacific Oil Company, Inc. (TP Oil) its interests in the four Sublette County leases, specifically referencing the original Unit NPI Contract, and the Prudential-TP Coal conveyance. [27] On its face, the intent of this transaction was to convey to TP Oil the interests Seagram received from TP Coal. Ten years later, however, on August 29, 1980, Seagram made a second conveyance to TP Oil, this time conveying, inter alia, all of Grantor's right, title, interest and estate of every nature and description, if any, in and to any additional oil, gas and/or mineral leases; and any other mineral interests held as of the Effective Date which were acquired by Grantor from Texas Pacific Coal and Oil Company ... or otherwise acquired in connection with Grantor's oil and gas operations ... covering lands located within the United States of America.... Apparently, there was a perceived need in 1980 to clear up the Seagram to TP Oil conveyance with a catch-all transfer. A catch-all or cover-all clause, sometimes called a Mother Hubbard clause, is, however, meant to extend the land description in an instrument to cover small contiguous parcels that may inadvertently have been omitted from a description. Courts have been reluctant to apply such clauses to incorporate into a transaction a quantum of land of considerable size in relation to that actually described. See 2 Kuntz, The Law of Oil and Gas § 22.3 (Lexis 1989); 1 Williams & Meyers, Oil and Gas Law § 221.3 (Lexis 2009). [¶ 190] On August 29, 1980, TP Oil conveyed the following to Sun Oil Company (Delaware) (Sun): . . . . U. The oil, gas and other mineral interests, rights and properties which are specifically described in Schedule B attached hereto and made a part hereof for all purposes. ... . . . . Z. Without limitation of the foregoing, all of TP's right, title, interest and estate of every nature and description, if any, in and to any additional oil, gas and/or mineral leases covering, and any other oil, gas and/or mineral interests (including surface estates from which such interests have not been severed) in, any land within the United States of America. ... Schedule B specifically listed Lease XXXXX-XXXX, recorded at W-60564, named TPOC, dated October 1, 1977, and covering certain lands in Sublette County, Wyoming. A little over a year later, TP Oil and Sun entered into a Supplemental Conveyance and Agreement, made effective as of the date of the earlier conveyance, in which the intended conveyance was more specifically identified, including the NPI related to the three federal leases from the Unit NPI Contract, and the combined Lozier legal description from both NPI contracts. As with the earlier TP Coal-Seagram and Seagram-TP Oil transactions, there is no specific showing of an intent to convey any interest in the balance of the leases originally committed to the Pinedale Unit. [¶ 191] On January 2, 1986, Sun and the Hartman group entered into a Conveyance and Agreement whereby the former conveyed to the latter Sun's interests in the properties it obtained from TP Oil on August 29, 1980, including its interests in properties in Sublette County, Wyoming, specifically referencing the Pinedale Unit properties and the Lozier lease. It is the plaintiffs' position that this transaction completed its ownership of the NPI, half coming directly from Prudential, and half coming through the Woodson-Prudential-TP Coal-Seagram-TP Oil-Sun-Hartman route. The defendants contend, on the other hand, that neither series of transactions accomplished a conveyance of the Unit NPI. [¶ 192] The district court concluded that these conveyances unambiguously left the plaintiffs owning the NPI. In reaching that conclusion, the district court applied the following law: Concerning the construction and interpretation of the conveyances referenced above, there are a number of applicable legal principles. The ultimate goal of interpretation of a deed is to discern the intent of the parties. Mullinnix, LLC v. HKB Royalty Trust, [2006 WY 14, ¶ 22,] 126 P.3d 909[, 919] (Wyo.2006) and the nature and extent of a particular conveyance is determined by the intent of the parties. Kennedy Oil v. Lance Oil & Gas Company, Inc., [2006 WY 9, ¶ 29,] 126 P.3d 875[, 884] (Wyo.2006). Therefore, to construe a deed, a Court must consider the intent of the parties from the plain, unambiguous language utilized. Bixler v. ORO[Oro] Management LLC, [2004 WY 29, ¶ 18,] 86 P.3d 843[, 849] (Wyo.2004). The focus must be on the entire document including the title, all parts of the deed and its terms, and any habendum. Smith v. Nugget Exploration, Inc ., 857 P.2d [320,] 323[-24] (Wyo.1993). If the intent of the parties can be gathered in this manner, it should be done so as a matter of law. Glover v. Giraldo, 824 P.2d 552[, 554] (Wyo.1992). In the absence of controlling factors to the contrary, doubtful language in a conveyance is to be treated as transferring the larger, less restricted estate rather than the smaller, more restricted estate. City of Casper v. J.M. Carey & Brother, 601 P.2d 1010[, 1014] (Wyo.1979). W.S. § 34-2-101 provides that every conveyance of real estate shall pass all of the estate, unless the intent to pass a lesser estate shall appear or necessarily be implied. If the intent of the parties does not readily appear, the language used is to be read in light of the surrounding circumstances and when extrinsic evidence is considered, a question of fact exist[s]. Gregory v. Sa[]nders, 635 P.2d 795[, 800] (Wyo. 1981), Knadler v. Adams, 661 P.2d 1052[, 1053] (Wyo.1983). [¶ 193] Large portions of the defendants' numerous briefs are taken up with the contention that the plaintiffs were not entitled to summary judgment as a matter of law because the law was incorrectly applied by the district court. They argue, for instance, that the precepts of City of Casper and Wyo. Stat. Ann. § 34-2-101 (LexisNexis 2009) do not apply in this instance because the NPI, as created by the relevant instruments, is a personal property right, rather than an estate in land. See Ferguson v. Coronado Oil Co., 884 P.2d 971, 975-77 (Wyo.1994). Further, they note that the resolution of doubtful language via application of the larger estate/smaller estate analysis of City of Casper, being a rule of contract construction, may only be applied to ambiguous contracts, and if the contract is ambiguous, summary judgment is not available. See Comet Energy Servs., LLC v. Powder River Oil & Gas Ventures, LLC, 2008 WY 69, ¶ 5, 185 P.3d 1259, 1261 (Wyo.2008); Wolter v. Equitable Res. Energy Co., 979 P.2d 948, 951 (Wyo. 1999); Smith v. Nugget Exploration, Inc., 857 P.2d 320, 324 (Wyo.1993); McNeiley v. Ayres Jewelry Co., 855 P.2d 1242, 1244 (Wyo. 1993); Stewman Ranch, Inc. v. Double M. Ranch, Ltd., 192 S.W.3d 808, 811 (Tex.App. 2006); and Painter v. Alexandria Water Co., 202 Va. 431, 117 S.E.2d 674, 678 (1961). [¶ 194] Once again, this is how we review a summary judgment: The propriety of a summary judgment is evaluated by employing the same standards and by examining the same material as the district court. We examine de novo the record, in the light most favorable to the party opposing the motion, affording to that party the benefit of all favorable inferences that may be drawn from the record. If upon review of the record, doubt exists about the presence of issues of material fact, that doubt must be resolved against the party seeking summary judgment. We accord no deference to the district court's decisions on issues of law. Jacobson v. Cobbs, 2007 WY 99, ¶ 7, 160 P.3d 654, 656 (Wyo.2007) (citations omitted) (quoting Linton v. E.C. Cates Agency, Inc., 2005 WY 63, ¶ 7, 113 P.3d 26, 28 (Wyo.2005)). What that means in practical effect is that we must first review the conveyances to determine whether their relevant provisions are unambiguous. If we find that not to be the case, the summary judgment must be reversed and the matter remanded for trial on the ownership issue. If the conveyances are, however, unambiguous, we must then determine if their combined effect is the plaintiffs' ownership of the NPI. This requires a separate analysis of the particular language of each instrument of conveyance. [¶ 195] No one disputes that Novi was the original grantee of the NPI under the Assignment Agreement, the Unit NPI Contract, the Area NPI Contract, and the Pinedale Unit Agreement. Likewise, no one disputes that Novi merged with Woodson, with Novi's rights and interests becoming vested in Woodson. On November 8, 1961, Woodson conveyed to Prudential, in lieu of foreclosure, numerous oil and gas interests in numerous states. Specifically included in that transfer was the NPI created by the Unit NPI Contract. In the attachments to the conveyance, the unit NPI is listed in Exhibit A under the heading Oil and Gas Leases Producing, and the extra-unit Lozier fee lease is listed under Leasehold Interests in Exhibit B under the heading Oil and Gas LeasesNon-Producing, but noting that the interest is subject to the NPI. Combined with the conveyance language set forth earlier herein, this language unambiguously sets over from Woodson to Prudential all of Woodson's interests in the NPI. [¶ 196] On November 8, 1961, Prudential conveyed the Woodson properties to TP Coal, reserving unto itself a Net Profit Overriding Royalty Interest, described as an undivided 50% of all of the oil, gas, other hydrocarbons and other minerals that may be produced, saved and sold from the Woodson Interests. ... The granting clause not only specifically mentioned net profit interests, and specifically identified the interests described in the exhibits, but also contained the following catch-all language: ..., together with all other interests of any such character, wheresoever located, which have been acquired by Prudential from Woodson Oil Company. ... Attached to the conveyance as Exhibits A and B were the identical Exhibits A and B that had been attached to the Woodson-Prudential conveyance. The relevant effect of this transaction, as reflected in the unambiguous wording of the instrument, was that TP Coal became the owner of the NPI. Prudential did not reserve a 50% interest in the NPI; rather, it reserved a 50% interest in the net profits of the Woodson properties. [¶ 197] In the other series of conveyances, the plaintiffs obtained ownership of the NPI only in relation to the four listed leases. The leases, themselves, were not assigned to the plaintiffs, because Novi had already assigned them to the First Parties under the original agreements. The various catch-all clauses cannot be seen as having morphed these transactions from conveyances of interests covering the specified 5,748.41 acres into conveyances of interests covering over 90,000 acres. [28] The district court erred in finding no holes in the plaintiffs' chain of title. Neither Prudential nor Sun held 50% of the unit NPI. Prudential reserved, and conveyed to Hartman, a 50% interest in the net production from all the Woodson properties. Sun obtained from TP Oil, and conveyed to Hartman, the unit NPI as it pertained to the four leases, less whatever interest in the NPI may be said to have been reserved by Prudential as part of the Woodson net profits interest. The balance of the NPI ownership apparently remained with TP Coal. [29] [¶ 198] I would conclude from all of this that the state of the record is not such that the plaintiffs have given the defendants sufficient notice of their ownership of the NPI, if it exists at all, to require the plaintiffs to pay them millions of dollars to satisfy the NPI. Summary judgment should not have been granted to the plaintiffs on the ownership issue.