Court Opinion

ID: 4670770
Source: CourtListenerOpinion
Date Created: 2021-03-23 21:19:12.035451+00
Date Added: 2024-06-11T08:02:09.958141
License: Public Domain

STATE OF WEST VIRGINIA
                           SUPREME COURT OF APPEALS

Cunningham Energy, LLC,
                                                                                   FILED
Proposed Intervenor Below, Petitioner                                          March 23, 2021
                                                                              EDYTHE NASH GAISER, CLERK
                                                                              SUPREME COURT OF APPEALS
vs.) No. 20-0346 (Kanawha County 20-P-20)                                         OF WEST VIRGINIA

Board of Education of the County of Kanawha, a Statutory Corporation,
Petitioner Below, Respondent

                              MEMORANDUM DECISION

        Petitioner Cunningham Energy, LLC, by counsel Gerald M. Titus III, Travis H. Eckley,
and Wesley A. Shumway, appeals the March 10, 2020, order of the Circuit Court of Kanawha
County denying its motion to intervene in the underlying condemnation action. Respondent Board
of Education of the County of Kanawha, by counsel J. Nicholas Barth, filed a response in support
of the circuit court’s order. Petitioner filed a reply.

        This Court has considered the parties’ briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
presented, the Court finds that the court below erred by failing to apply the correct standard in
ruling on petitioner’s motion to intervene. Accordingly, we reverse the circuit court’s order and
remand this case for further proceedings consistent with this decision. Because this case satisfies
the “limited circumstances” requirement of Rule 21(d) of the West Virginia Rules of Appellate
Procedure, we find that a memorandum decision is appropriate to resolve the issues presented.

        The dispute in this case concerns a 34.66-acre parcel of land (“the parcel”) in Kanawha
County and the mineral interests underneath and adjacent to the parcel. Until her death in March
of 2011, Patsy Haas owned the surface of the parcel. She died intestate, and her children, Kelly
Barnhart and James Haas, Jr., each inherited an undivided one-half interest in the surface of the
parcel. On August 11, 2011, by general warranty deed, petitioner obtained an interest in the surface
of the parcel. 1 Beginning in 2010 and continuing through September 2018, petitioner also

       1
           Petitioner and respondent dispute whether petitioner obtained only Kelly Barnhart’s
interest in the surface of the parcel or whether petitioner obtained both Kelly Barnhart’s interest
and James Haas, Jr.’s interest. Regardless, petitioner was assessed the county property taxes on
the full surface of the parcel from tax year 2013 through 2019, and petitioner paid those taxes.

                                                 1
accumulated various leasehold interests in the minerals underneath the parcel and underneath the
property surrounding the parcel. 2 Petitioner is a business that owns and develops oil and gas
interests.

         On November 29, 2018, petitioner and Vesta O&G Holdings, LLC (“Vesta”) executed a
letter of intent (“the first LOI”), agreeing that Vesta would form a Delaware limited liability
company for the purpose of acquiring and holding certain real property and leases held by
petitioner (“the assets”). Among other things, the assets included petitioner’s interest in the surface
of the parcel, petitioner’s leasehold interests in the minerals underneath the parcel, and petitioner’s
leasehold interests in minerals underneath property adjacent to the parcel. Under the first LOI,
petitioner proposed transferring the assets to Vesta for Vesta to then transfer to a new limited
liability company. Petitioner would be offered a minority ownership position in the new company,
and Vesta would contribute capital to pay certain debts of petitioner and fund the drilling of seven
oil wells in West Virginia. Petitioner claims that, within days of executing the first LOI, Vesta
began paying petitioner’s debts as agreed, and on December 4, 2018, petitioner transferred the
assets to Vesta. Petitioner claims that although Vesta formed the new limited liability company as
agreed, Vesta did not transfer the assets to that company.

        In December of 2018, petitioner applied to the West Virginia Department of Environmental
Protection (“WVDEP”) for five “well work” permits for shallow horizontal oil wells. 3 The
following February, petitioner applied to the WVDEP for two additional permits. The applications
for the permits proposed that a well pad would be located on the surface of the parcel, with
“laterals” extending through and beyond the parcel. WVDEP granted the applications and issued
the seven permits in February and March of 2019.

       Meanwhile, respondent was considering the parcel as the location for a new elementary
school. On March 19, 2019, respondent purchased a special warranty deed from James Haas, Jr.
purporting to convey to respondent a one-half undivided interest in the surface of the parcel.

         On May 15, 2019, petitioner filed a lawsuit against Vesta in federal district court, alleging,
among other things, that Vesta had breached the terms set forth in the first LOI. Vesta asserted a
counterclaim against petitioner. A few months later, on October 18, 2019, they executed a second
letter of intent (“the second LOI”) along with a Memorandum of Understanding (“MOU”).
Through these two documents, petitioner and Vesta agreed to dismiss all claims pending in federal
district court without prejudice. The claims were eventually dismissed as agreed. Petitioner and
Vesta also agreed to perform certain proposed transactions by November 15, 2019. The second
LOI stated that, “[i]n the event the parties do not consummate the Proposed Transaction by []
[November 15, 2019], the [assets] shall be immediately assigned back to [petitioner].”

       2
          We note that while the appendix record includes information concerning the various
mineral leases obtained by petitioner, such as when they were obtained and from whom, these
details are not germane to the resolution of this appeal.
       3
        “It is unlawful for any person to commence any well work, including site preparation
work which involves any disturbance of land, without first securing from the [WVDEP] a well
work permit.” W. Va. Code § 22-6-6(a) (in part).
                                                  2
       The second LOI and the MOU acknowledged that the parcel would most likely be sold or
condemned so that a school could be built on the parcel. The MOU stated that “[c]ondemnation
and subsequent construction of the school would disrupt and effectively prohibit planned
development of oil and gas resources underlying the [parcel], [and] the valuation of such
development is projected to be $42,000,000 in present day terms.” In the MOU, petitioner and
Vesta agreed that, upon sale or condemnation of the parcel, Vesta would receive the first
$5,000,000 and the remaining funds would be distributed as follows:

       (1) if Vesta and [petitioner] are able to finalize a deal for further development of
           West Virginia and Canada resources, the next $25,000,000 of proceeds from
           the [parcel] will be allocated to development and operation of West Virginia
           resources, with any remaining funds directed to Canada operations.
       (2) If, after good-faith negotiation, a deal for further development in West Virginia
           and Canada is not reached, the any [sic] remaining proceeds from the sale of
           the [parcel] (i.e. those above the first $5,000,000) will be allocated as follows:
           80% to [petitioner] and 20% to Vesta. Additionally, all leaseholds and other
           interests previously transferred to Vesta from [petitioner] would be
           conveyed/transferred to [petitioner].

        Petitioner obtained a report from a licensed professional engineer estimating the present
value of future revenue that would be lost if petitioner was unable to drill seven horizontal wells.
That report estimated the lost revenue would total $58,800,000. The report also estimated that an
additional $21,000,000 would have been paid to the royalty owners during the estimated years of
production. By letter dated October 31, 2019, Petitioner and Vesta jointly offered to sell their
interests in the parcel to respondent for $42,000,000. Respondent did not accept the offer.

       Petitioner alleges that Vesta did not comply with the second LOI and that Vesta failed to
consummate the transactions proposed in the second LOI by November 15, 2019. Thereafter, in
December of 2019 and January of 2020, petitioner made demands of Vesta to return the assets.
Vesta did not return the assets to petitioner.

       On January 16, 2020, respondent filed a petition for condemnation of the parcel and the
mineral interests underlying the parcel (“the subject property”) in the Circuit Court of Kanawha
County. Vesta was named as a respondent in that proceeding. Petitioner was not.

        On January 24, 2020, petitioner filed a second lawsuit against Vesta in federal district court,
alleging breaches of the first LOI, the second LOI, and the MOU, and asking that Vesta be required
to perform its obligations under the first LOI or return the assets to petitioner. Four days later, on
January 28, 2020, petitioner filed a notice of lis pendens in the federal action seeking to enforce
an equitable ownership interest in the parcel, the leasehold interests in the minerals underneath the
parcel, and the leasehold interests in the minerals underneath the property surrounding the parcel.

                                                  3
The lis pendens was recorded in Kanawha County’s property records on February 19, 2020. The
federal lawsuit is still pending. 4

       Petitioner filed a motion to intervene in the condemnation action on February 19, 2020,
arguing that it has a right to intervene under Rule 24(a)(2) of the West Virginia Rules of Civil
Procedure and State ex rel. Ball v. Cummings, 208 W. Va. 393, 540 S.E.2d 917 (1999). The circuit
court held a hearing on the motion on February 26, 2020. Although petitioner asserted that it was
the rightful owner of the subject property pursuant to the second LOI, respondent opposed
intervention, stating, “I would suggest it be reversible error to allow a non-deed holding party as a
defendant in a condemnation action.” Vesta did not take a position as to whether petitioner should
be permitted to intervene. The circuit court denied petitioner’s motion, explaining, “I believe that
because at the time of the filing of this petition there was no notice other than this deed, that the
motion to intervene is not proper in this case.”

        The circuit court entered an order on March 10, 2020, memorializing its ruling from the
hearing. The circuit court found that, as of the date the petition for condemnation was filed,
petitioner owned no interest in the subject property because petitioner had conveyed its interest in
the surface of the parcel and its leasehold interests in the underlying minerals to Vesta. The circuit
court also found that the lis pendens was filed after the petition for condemnation was filed. The
circuit court, in denying the motion to intervene, concluded that petitioner had no interest in the
subject property and, therefore, was not a proper party to the condemnation proceeding.

        Petitioner appeals the circuit court’s March 10, 2020 order. 5 In its sole assignment of error,
petitioner argues that the circuit court applied the wrong legal standard in denying its motion to
intervene as a matter of right. Petitioner asserts that it was not required to produce proof that it was
the record owner of the subject property at the time the petition for condemnation was filed.
Likewise, petitioner avers that it was not required to have record notice of a claimed property
interest in the subject property at the time the petition for condemnation was filed. Rather,
petitioner contends that it was only required to show a direct and substantial interest in the subject
property and that it made such a showing in this case. Accordingly, petitioner states that the circuit
court’s decision to deny the motion was in error.

       4
          In the federal action, petitioner asked the federal district court to grant its motion for “a
mandatory preliminary injunction requiring the specific performance” of the second LOI and
require Vesta to return the assets. Cunningham Energy, LLC v. Vesta O&G Holdings, LLC, No.
2:20-cv-00061, 2020 WL 6140463, at *3 (S.D. W. Va. May 21, 2020). This request was denied
on March 21, 2020, on the ground that a preliminary injunction would not “preserve the court’s
ability to render a meaningful judgment on the merits.” Id. at *5.
       5
         The circuit court’s order contained rulings on issues other than the motion to intervene,
including respondent’s motion for an order of entry, petitioner’s motion to stay the proceedings,
and Vesta’s motion to inspect the property. As the only issue on appeal involves petitioner’s
motion to intervene, the circuit court’s other rulings will not be addressed or disturbed in this
memorandum decision.
                                                   4
        Rule 24(a)(2) of the West Virginia Rules of Civil Procedure describes when intervention
of right shall be permitted:
                (a) Intervention of right. — Upon timely application anyone shall be
        permitted to intervene in an action: . . . (2) when the applicant claims an interest
        relating to the property or transaction which is the subject of the action and the
        applicant is so situated that the disposition of the action may as a practical matter
        impair or impede the applicant’s ability to protect that interest, unless the
        applicant’s interest is adequately represented by existing parties.

In Syllabus Point 2 of Ball, we held:

                West Virginia Rule of Civil Procedure 24(a)(2) allows intervention of right
        in an action if an applicant meets four conditions: (1) the application must be
        timely; (2) the applicant must claim an interest relating to the property or
        transaction which is the subject of the action; (3) disposition of the action may, as
        a practical matter, impair or impede the applicant’s ability to protect that interest;
        and (4) the applicant must show that the interest will not be adequately represented
        by existing parties.

With regard to the quality of the interest claimed by a proposed intervenor, we have held:

                To justify intervention of right under West Virginia Rule of Civil Procedure
        24(a)(2), the interest claimed by the proposed intervenor must be direct and
        substantial. A direct interest is one of such immediate character that the intervenor
        will either gain or lose by the direct legal operation and effect of the judgment to
        be rendered between the original parties. A substantial interest is one that is capable
        of definition, protectable under some law, and specific to the intervenor. In
        determining the adequacy of the interest in a motion to intervene of right, courts
        should also give due regard to the efficient conduct of the litigation.

Id. at Syl. Pt. 4.

        At the outset, we observe that the circuit court’s order makes no reference to Ball or the
four conditions a proposed intervenor must establish to be entitled to intervene as a matter of right.
Of those four conditions, the substance of the circuit court’s order touches on only the second
condition: whether petitioner has claimed an interest relating to the property that is the subject of
the condemnation proceeding. Because the circuit court limited its discussion to the second
condition, we begin our analysis by examining whether the circuit court correctly denied
intervention on this isolated ground. Our review of this issue is de novo. See Syl. Pt. 3, SWN Prod.
Co. v. Conley, ___ W. Va. ___, 850 S.E.2d 695 (2020) (“The standard of review of circuit court
rulings on the elements governing a timely motion to intervene as a matter of right under Rule
24(a) of the West Virginia Rules of Civil Procedure is de novo.”).

        This Court has never held that, as a prerequisite to intervention, a proposed intervenor must
have an ownership interest in the property at issue at the time the action commenced. We addressed
this precise issue in SWN Production Company, examining the interests of a proposed intervenor

                                                  5
in the context of an action to quiet title to a piece of property. The proposed intervenor, SWN
Production Company, LLC (“SWN”), argued that it should be permitted to intervene in the quiet
title action because it held a leasehold in mineral rights underlying the property. Id. at ___, 850
S.E.2d at 700. It was undisputed that SWN obtained the leasehold years after the quiet title action
commenced. The lower court denied SWN’s motion to intervene, concluding “that the fact that
there was no interest relating to the [property] when the complaint was filed was determinative as
to SWN’s ability to protect its interest.” Id. This Court reversed the lower court’s decision,

        find[ing] no authority supporting [the] argument that the interest in the property . .
        . must exist at the time of the filing of the Complaint. The language of Rule 24(a)(2)
        does not impose such a requirement and we are unwilling to create such a
        requirement in the face of silence in the plain language of the Rule.

Id. at ___, 850 S.E.2d at 705. The Court ultimately determined that SWN had satisfied the second
condition of Ball because SWN established that its interest was “direct, substantial, and legally
protectable.” SWN Prod. Co., ___ W. Va. at ___, 850 S.E.2d at 704.

        Although SWN Production Company involved a quiet title action, our reasoning in that
case applies equally to this condemnation action. We can find no authority supporting the circuit
court’s conclusion that petitioner’s interest in the subject property must have existed at the time
the petition for condemnation was filed. Furthermore, we observe that Rule 24(a)(2) imposes no
such requirement. Instead, to satisfy the second condition of Ball, petitioner must show that its
interest in the subject property is direct, substantial, and legally protectable.

         Petitioner has done so here. Petitioner asserts it is the rightful owner of the subject property,
petitioner has filed a lawsuit in federal court seeking an order requiring Vesta to return the property
to petitioner, and petitioner has filed a lis pendens that has been recorded in the property records
of Kanawha County. Should it be ultimately determined that petitioner is the rightful owner of the
subject property, a determination in the condemnation action will result in petitioner “either
gaining or losing ‘by the direct legal operation and effect of the judgment to be rendered between
the original parties.’” SWN Prod. Co., ___ W. Va. at ___, 850 S.E.2d at 705 (quoting Ball, 208 W.
Va. at 396, 540 S.E.2d at 920, syl. pt. 4 (in part)). Thus, the specific facts of this case compel the
conclusion that petitioner has a direct, substantial, and legally protectable interest in the subject
property. Furthermore, it is clear that petitioner’s participation in the condemnation action will
promote the efficient conduct of the litigation. Accordingly, petitioner has satisfied the second
condition of Ball, and to the extent the circuit court determined otherwise, the circuit court erred.

        Having concluded that petitioner has satisfied the second condition of Ball, we now turn to
the third and fourth conditions: whether disposition of the condemnation action without petitioner
will impair or impede petitioner’s ability to protect its interest in the subject property and whether
petitioner’s interest will be adequately represented by existing parties. As previously noted, in
denying petitioner’s motion to intervene, the circuit court did not evaluate these conditions;
however, because our review of these factors is de novo, we may proceed to evaluate them in this
appeal. See SWN Prod. Co., ___ W. Va. at ___, 850 S.E.2d at 697, Syl. Pt. 3.

                                                    6
        Petitioner asserts on appeal, as it did below, that disposition of the action without its
participation will impair or impede its ability to protect its interests and that the existing parties to
the action are unable to adequately represent petitioner’s interests. We agree with petitioner on
both points. If petitioner is not permitted to intervene in this case, petitioner will be precluded from
taking actions to protect its interests, such as pursuing a motion to dismiss the petition for
condemnation, filing a counterclaim for inverse condemnation, or participating in the process of
determining the amount of just compensation. Additionally, Vesta is unable to adequately
represent petitioner’s interest because, as is evident from the second LOI and MOU, petitioner’s
interests are distinct from and potentially adverse to Vesta’s interests. Vesta’s counsel even
acknowledged as much during the February 26, 2020, hearing, stating that “in terms of whether
we are virtually representing them, given the adversities, I certainly would understand
[petitioner]’s feeling that [we]’re not.” Therefore, upon our de novo review, we conclude that
petitioner has satisfied the third and fourth conditions of Ball.

         Although the satisfaction of the second, third, and fourth conditions of Ball weigh in favor
of granting petitioner’s motion to intervene, whether petitioner is ultimately entitled to intervene
depends on whether the first condition of Ball—timeliness—is satisfied. We have recognized that
“the question of the timeliness of a motion to intervene is a threshold issue.” SWN Prod. Co., ___
W. Va. at ___, 850 S.E.2d at 701. We review a lower court’s determinations as to timeliness for
an abuse of discretion. See id. at Syl. Pt. 1 (“‘While Rule 24 of the West Virginia Rules of Civil
Procedure provides for the intervention of parties upon a timely application, the timeliness of any
intervention is a matter of discretion with the trial court.’ Syl. Pt. 3, State ex rel. Ball v. Cummings,
208 W.Va. 393, 540 S.E.2d 917 (1999).”). Problematically, the circuit court failed to make any
findings or conclusions concerning timeliness in its order, and we are unable to properly consider
this issue on appeal. Consequently, we are unable to conclusively determine whether petitioner is
entitled to intervene in the condemnation action. Therefore, we must remand this matter to the
circuit court to make appropriate findings of fact and conclusions of law addressing the timeliness
of petitioner’s motion to intervene. 6 Should the circuit court determine that the motion was timely
filed, it shall grant the motion.

        For the foregoing reasons, we reverse the portion of the March 10, 2020, order denying
petitioner’s motion to intervene. We remand this case and direct the circuit court to make
appropriate findings of fact and conclusions of law addressing the timeliness of petitioner’s motion
to intervene. Should the circuit court determine that the motion was timely filed, it shall grant the
motion to intervene.

                                                                              Reversed and remanded.

        6
          “[T]imeliness of the application to intervene is not subject to mechanistic inquiry. In other
words, there is no bright line delineating the point at which the passage of time, without more, is
a bar to intervention as a matter of right.” SWN Prod. Co., ___ W. Va. at ___, 850 S.E.2d at 703.
Furthermore, “[w]hile it is axiomatic that parties often do not want others meddling in their
litigation, intervention should be permitted when there is no prejudice and greater justice could be
obtained with the inclusion of a non-party who has a real interest in the matter being litigated.” Id.
at ___, 850 S.E.2d at 704 (citing McDonald v. E.J. Lavino, 430 F.2d 1065, 1074 (5th Cir. 1970)).
                                                   7
ISSUED: March 23, 2021

CONCURRED IN BY:

Chief Justice Evan H. Jenkins
Justice Elizabeth D. Walker
Justice John A. Hutchison
Justice William R. Wooton

NOT PARTICIPATING:

Justice Tim Armstead

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