Court Opinion

ID: 168042
Source: CourtListenerOpinion
Date Created: 2010-08-14 10:09:21+00
Date Added: 2024-06-11T17:24:55.631964
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit

                                                                       August 25, 2006
                    UNITED STATES CO URT O F APPEALS
                                                                    Elisabeth A. Shumaker
                                 TENTH CIRCUIT                          Clerk of Court

PHILLIP G. CLINE,

              Plaintiff-A ppellant,
                                                         No. 05-3228
v.
                                                     (District of K ansas)
                                                 (D.C. No. 03-CV-2655-GTV)
SO U TH ER N STA R C EN TR AL GAS
PIPELINE, INC., formerly known as
W illiams G as Pipelines Southcentral,
Inc.,

              Defendant-Appellee.

                            OR D ER AND JUDGM ENT *

Before M U RPH Y, EBEL, and M cCO NNELL, Circuit Judges.

I. Introduction

      Phillip G. Cline and Southern Star Central Gas Pipeline, Inc. (“Southern

Star”) are parties to a set of contracts concerning oil, gas, and other minerals

underlying Cline’s land in northeast Kansas. Cline sued Southern Star in a

      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
diversity action in the U nited States District Court for the District of Kansas. He

alleged Southern Star breached its contractual obligations and forfeited its rights

under the contracts. He also brought claims for fraud, intentional infliction of

emotional distress, and conversion. Southern Star counterclaimed, requesting a

judgment quieting title to certain natural gas and other property and seeking a

declaratory judgment stating its agreements with Cline remained valid. The

district court eventually granted summary judgment in favor of Southern Star on

all claims and counterclaims. Cline appeals the district court’s judgment. This

court exercises jurisdiction pursuant to 28 U.S.C. § 1291 and affirm s.

II. Background

      Cline owns property within the boundaries of the M cLouth Storage Field, an

underground natural gas storage field in Jefferson County, Kansas. W hen Cline

acquired the property, it was subject to an oil and gas lease, a gas storage lease,

and an acknowledgment of payment (collectively “gas storage contract”). Cline’s

predecessors and Cities Service Gas Co. (“Cities Service”) executed these

agreements on June 16, 1951. Southern Star is the successor-in-interest to Cities

Service, and is the current owner of the M cLouth Storage Field and the gas storage

and oil and gas interests associated with Cline’s property.

      In the 1951 gas storage contract, Cities Service agreed to provide a limited

amount of gas, free of charge, to Cline’s predecessors. The gas storage contract

provided that Cline’s predecessors “or their assigns, shall lay and maintain in good

                                          -2-
condition the necessary service lines and appurtenances to receive and utilize the

gas so delivered, all at their sole cost, risk and expense.” App. at 110.

      Cline first expressed interest in obtaining free natural gas in November

1978. At that time, Cline wrote to Cities Service and asked whether he could tap

his neighbor’s gas well and run a gas line to his farm. Cities Service approved

Cline’s request, but told him it would need to obtain federal regulatory approval

before providing service to his property. It also told Cline he would be required to

pay a $350.00 connection charge fee, along with $10.50 in state taxes and a $10.00

security deposit. Although Cities Service obtained federal approval, sent Cline the

necessary application, and notified Cline before the federal approval was set to

expire, Cline took no further action at that time.

      In October 1988, Cline wrote a letter to Cities Service’s successor, W illiams

Natural G as Co. (“W illiams Natural”). The letter stated,

              W hen I purchased this land I was given permission to connect
      to a gas line, is this still permissible? I am living in a mobile home
      and would like to drill a gas well or hook on to the line per our
      agreement.
              W hen I was told I could connect to a gas line I did not have the
      money to do so, but now my finances are such that I can afford to
      drill a gas w ell.

App. at 299. W illiams Natural approved Cline’s request in a letter dated

November 2, 1988. The letter informed Cline he was responsible for paying a

connection fee in the amount of $350.00 plus sales tax. It also advised Cline that

he was responsible for constructing a service line from his property to its pipeline

                                          -3-
at his expense, and that he would need to obtain easements from his neighbors if

the service line crossed their land. Again, Cline took no immediate action.

      Cline next contacted W illiams Natural in November 1991, when he asked

for a copy of the gas storage contract covering his land. In response, W illiams

Natural sent Cline a copy of the gas storage contract along with another letter

informing Cline that, to obtain free gas, he was required to construct a service line

at his own expense, secure easements from his neighbors, and pay the $350.00

connection fee.

      In April 1992, Cline wrote to W illiams N atural and accused it of refusing to

honor the free gas provision of the gas storage contract. Cline informed W illiams

Natural he w as w illing to go to court to enforce his rights. He w arned, however,

that if the court ruled against W illiams Natural, it could be a “financially crippling

blow” to the company. App. at 307. Cline stated W illiams N atural could avoid

the risk of litigation by installing, at its expense, a service line to his property and

by forever providing free gas, for any use, to him and his family. In reply to

Cline’s letter, W illiams Natural told Cline he could construct a service line,

connect to the company’s pipeline, and use gas according to the terms and

conditions of the gas storage contract.

      Cline filed suit against W illiams Natural in state court in December 1995.

He alleged Williams Natural breached the gas storage lease by failing to make

rental payments in 1992 and 1993 and by unlaw fully storing gas under his property

                                            -4-
since October 1992. W illiams Natural removed the suit to federal court. The

parties eventually agreed to dismiss the case with prejudice, stipulating that

W illiams Natural timely made all annual payments and that the gas storage lease

continued with full force and effect.

      In October 1998, Cline sent W illiams Natural a check for $368.38 and a

signed application to connect to the company’s pipeline. W illiams Gas Pipeline

Southcentral, Inc. (“W illiams Gas”), W illiams Natural’s successor, acknowledged

Cline’s check and application in a letter dated November 4, 1998. The letter

advised Cline he needed to make arrangements with his neighbors to run a service

line across their land. M oreover, it informed Cline that due to governmental

safety regulations, W illiams Gas was no longer allowing customers to construct

their own service lines; the company instead required third-party contractors to

perform the work. Also, because of changes in the costs of making service line

connections, W illiams Gas told Cline it now charged the actual cost of connecting

a service line and installing the metering facilities instead of charging a $350.00

flat fee. W illiams Gas informed Cline that, if he obtained the necessary right-of-

way to connect to its pipeline, he would also need to submit in advance a $5000

deposit to cover construction of the metering facility, service line, and connection

tap. If the actual cost of construction fell below $5000, W illiams Gas would issue

a refund to Cline. If the costs exceeded that amount, W illiams Gas would charge

Cline for the additional costs.

                                          -5-
      Cline responded to W illiams Gas in November 1998 and questioned the new

costs, but took no further action at that time. Cline submitted another request for a

gas tap connection several years later. In a letter dated April 4, 2001, W illiams

Gas approved the request, so long as Cline secured permission to set a meter on

his neighbor’s property, signed an Application for Transportation Contract, paid a

$5000 tap installation fee, and employed a contractor certified by the Department

of Transportation to install the service line. W illiams Gas also informed Cline that

under the terms of the gas storage contract, he was entitled to a limited amount of

free gas, and that the free gas could be used only for his residence, not for his

barns. In July 2002, W illiams Gas sent Cline a copy of its April 4, 2001 letter

after Cline made yet another request for information about installing a gas tap on

his property.

      In September 2003, Cline sent a letter to W illiams Gas’ successor, Southern

Star. Cline asserted Southern Star’s requirement that he pay a $5000 tap

installation deposit constituted a violation of the free gas provision in the gas

storage contract. Cline informed Southern Star he would file suit against the

company unless it provided him with a connection to its pipeline without any

conditions or charges and compensated him for gas it had denied him in the past.

      Cline filed suit in federal district court in December 2003, alleging breach

of contract, fraud, intentional infliction of emotional distress, and conversion.

Southern Star counterclaimed. It sought a judgment quieting title in oil, gas, and

                                          -6-
mineral interests underlying Cline’s land and any wells, pipelines, or other

property it placed on Cline’s property. Southern Star also sought a declaratory

judgment stating that it had not breached its agreement to provide free gas to Cline

and that its gas storage lease remained valid. It also asked the district court to

declare the terms and conditions Cline must satisfy to receive free gas in the

future.

      Southern Star moved for summary judgment. The district court determined

Cline’s contract and tort claims were barred by the applicable Kansas statutes of

limitations. In the alternative, the court concluded Cline’s contract and tort claims

failed on their merits. The district court granted Southern Star’s counterclaim for

declaratory judgment, but denied its quiet title claim because neither of the parties

had furnished the court with a legible copy of the oil and gas lease, and because

neither party explained the significance of a provision in the gas storage lease that

concerned Cline’s royalty interests in oil and gas developed under his property.

      Both parties filed motions to alter or amend the judgment pursuant to Rule

59(e) of the Federal Rules of Civil Procedure. The district court denied C line’s

motion. After examining a legible copy of the oil and gas lease, the district court

reconsidered its ruling on Southern Star’s quiet title counterclaim; it held Southern

Star was entitled to an order quieting title to the gas, oil, and other minerals under

Cline’s property.

                                          -7-
III. Analysis

      Cline appeals the summary judgment. He asserts the district court erred

when it determined his contract and tort claims w ere barred by the applicable

statutes of limitations and when it concluded his contract and tort claims failed on

the merits. He also contends the district court erred when it determined Southern

Star did not forfeit its gas storage lease. Lastly, he claims the district court erred

when it quieted title in favor of Southern Star.

      “This court reviews de novo a district court’s grant of summary judgment.”

Holt v. Grand Lake M ental Health Ctr., Inc., 443 F.3d 762, 765 (10th Cir. 2006).

Summary judgment is appropriate when there is no genuine issue of material fact

and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.

56(c). “If there is no genuine issue of material fact in dispute, we determine

whether the district court correctly applied the substantive law.” Holt, 443 F.3d at

765 (quotation omitted).

      A. Statute of Limitations: Breach of Contract, Fraud, and Intentional
      Infliction of Em otional D istress Claims

      In his Reply M emorandum Opposing Summary Judgment, Cline asserted

Southern Star and its predecessors breached their gas storage contract by creating

obstacles, such as the $5000 connection deposit, which prevented him from

receiving free gas. The district court determined Cline’s breach of contract claim

accrued more than five years before he filed his complaint in district court and

                                          -8-
therefore was barred by Kan. Stat. Ann. § 60-511(1), a five-year statute of

limitations applicable to actions on contracts in writing. On appeal, Cline asserts

the district court’s conclusion was in error.

      Cline attempts to circumvent the statute of limitations by arguing that each

of his requests for free gas made in the five years before he filed suit gave rise to

new and independent causes of action. He contends these new causes of action

accrued less than five years before he filed suit and therefore are not barred by §

60-511(1). Although Cline’s argument is not a model of clarity, 1 he appears to

advance two theories in support of his contention: a “temporary injury” theory and

a “continuing contract” theory.

      First, Cline argues the gas company’s responses to his requests for free

gas— namely its assertions he was required to pay a connection fee or deposit in

order to receive the gas— constituted a series of temporary injuries, each of which

gave rise to a new and independent cause of action. Kansas courts have

recognized a temporary injury theory in nuisance actions, where a plaintiff suffers

temporary, occasional, or recurrent physical damage to his real property. See, e.g.,

Dougan v. Rossville Drainage Dist., 15 P.3d 338, 346 (Kan. 2000) (allowing

      1
       Cline fails to articulate a cogent argument in support of his position. The
argument section of Cline’s brief-in-chief contains a number of lengthy
quotations, but provides us with little guidance as to how the quoted material
applies to his contentions. Our understanding of Cline’s arguments is further
hindered by his failure to include in his brief a summary of his argument. See
Fed. R. App. P. 28(a)(8).

                                           -9-
independent causes of action for periodic episodes of flooding); Henderson v.

Talbott, 266 P.2d 273, 281 (Kan. 1954) (recognizing separate causes of action for

injuries to plaintiff’s land caused by occasional flooding). Cline has cited no case,

however, in which a Kansas court has applied the concept of temporary damages

to a claim for breach of contract. W e therefore conclude Cline’s temporary injury

argument is without merit.

      Second, Cline advances a continuing contract theory. He characterizes

Southern Star’s contractual obligation to deliver free gas as a form of rent; he

contends Southern Star and its predecessors failed to pay this rent because they

asserted Cline was required to pay a connection fee or deposit before becoming

eligible to receive free gas. Under this continuing contract theory, Cline alleges a

new breach of contract claim accrued each time Southern Star or its predecessors

did not pay rent in the form of delivering free gas.

      Kansas recognizes that “an obligation to make periodic payments is a

severable obligation, so that for limitations purposes each period for which a

payment is due is considered separately.” Goff v. Aetna Life & Cas. Co., 563 P.2d

1073, 1078 (Kan. Ct. App. 1977). The issue in Cline’s breach of contract claim,

however, is not whether Southern Star and its predecessors refused to make a

series of separate periodic payments in the form of free gas. The gas storage

contract does not provide for periodic payments of gas. Instead, the issue is

whether the gas company dishonored its agreement at the outset, when it insisted

                                         -10-
Cline pay a connection fee before providing him with free gas. The company’s

adherence to this position in the face of Cline’s later requests does not give rise to

a series of separate causes of action. See Ariadne Fin. Servs. Pty. Ltd. v. United

States, 133 F.3d 874, 879 (Fed. Cir. 1998) (“[T]he continuing claims doctrine does

not apply to a claim based on a single distinct event which has ill effects that

continue to accumulate over time.”). In short, this court is unpersuaded by Cline’s

arguments that a new cause of action accrued each time Southern Star or its

predecessors rejected his requests for free gas.

      Under Kansas law, the statute of limitations begins to run when “the

plaintiff could first have filed and prosecuted his action to a successful

conclusion.” Pancake House, Inc. v. Redmond ex rel. Redmond, 716 P.2d 575, 579

(Kan. 1986). In contract disputes, the cause of action accrues “once a plaintiff

realizes that a defendant has no intention of honoring an agreement.” Johnson v.

Kan. Pub. Employees Ret. Sys., 935 P.2d 1049, 1054 (Kan. 1997). Accordingly,

we conclude Cline’s cause of action accrued at the time he realized the gas

company was going to demand a connection fee or deposit before providing him

with free gas.

      Beginning in 1978, Southern Star’s predecessors told Cline he would need

to pay a connection fee before they would supply him with free gas. In its letter

dated November 4, 1998, W illiams G as told Cline in unmistakable terms it would

not provide him with free gas until Cline paid a $5000 connection deposit charge.

                                          -11-
Cline should have realized the gas company’s intentions, at the very latest, when

he received the November 4 letter. Thus, a single cause of action accrued, and the

statute of limitations began to run, no later than that time. Because Cline filed his

breach of contract claim more than five years after his receipt of the N ovember 4

letter, and because no independent causes of action arose after his receipt of the

November 4 letter, Cline’s breach of contract claim is barred by Kan. Stat. Ann. §

60-511(1).

      In addition to his breach of contract claim, Cline claims the gas company’s

insistence that he pay a connection fee or deposit gave rise to claims for fraud and

intentional infliction of emotional distress. Under K ansas law , these claims are

governed by a two-year statute of limitations. Kan. Stat. Ann. § 60-513(a)(3)–(4).

A claim for fraud does not accrue “until the fraud is discovered.” Id. § 60-

513(a)(3). “Under Kansas law, a fraud is discovered at the time of actual

discovery or when, with reasonable diligence, the fraud could have been

discovered.” Waite v. Adler, 716 P.2d 524, 527 (Kan. 1986). A claim for

intentional infliction of emotional distress accrues “on the date w hen the injury

was incurred and the emotional impact was felt.” M oore v. Luther ex rel. Luther,

291 F. Supp. 2d 1194, 1199 (D. Kan. 2003). The district court determined Cline’s

fraud and intentional infliction of emotional distress claims accrued more than tw o

years before he filed suit against Southern Star. It therefore concluded the statute

of limitations barred these claims and granted summary judgment to Southern Star.

                                         -12-
       On appeal, Cline argues his fraud and intentional infliction of emotional

distress claims are not barred by the statute of limitations because they concern

temporary, not permanent, injuries. He asserts the temporary nature of his injuries

creates a continuing claim that is not barred by the statute of limitations. Cline

contends the Kansas Supreme Court’s discussion of temporary injuries in Dougan

supports his argument, but fails to explain why this is the case. See Dougan, 15

P.3d at 343–46. As noted above, Dougan concerns a nuisance action brought

because of repeated incidents of flooding. Id. at 343. Dougan’s discussion of

temporary and permanent injuries is explicitly grounded in the context of “damage

actions from flooding caused by construction.” Id. at 344. Accordingly, it has no

application to Cline’s claims for fraud and intentional infliction of emotional

distress.

       W e agree with the district court’s conclusion that Cline’s claims for fraud

and intentional infliction of emotional distress accrued more than two years before

Cline filed suit against Southern Star. Cline’s argument to the contrary is w holly

unpersuasive. This court therefore concludes these tort claims are barred by the

applicable statute of limitations.

       Because both Cline’s breach of contract claim and his fraud and intentional

infliction of emotional distress claims are barred by the applicable statute of

limitations, it is unnecessary to address the merits of those claims. Similarly,

because Cline’s forfeiture argument concerns only the measure of damages owed

                                         -13-
him for breach of contract, and because Cline’s breach of contract claim is barred

by the statute of limitations, it is unnecessary to address the merits of Cline’s

forfeiture argument.

      B. Conversion Claim

      In addition to his other tort claims, Cline argues Southern Star and its

predecessors committed the tort of conversion. Southern Star conceded at oral

argument that Cline’s conversion claim was not barred by the statute of

limitations. W e therefore address the merits of Cline’s conversion claim to

determine whether the district court properly granted summary judgment to

Southern Star.

      Under Kansas law, “[c]onversion is the unauthorized assumption or exercise

of the right of ownership over goods or personal chattels belonging to another to

the exclusion of the other’s rights.” Bomhoff v. Nelnet Loan Servs., Inc., 109 P.3d

1241, 1246 (Kan. 2005). In his complaint and in the pretrial order, Cline claimed

his property had produced natural gas in the past, and continued to produce natural

gas. He asserted Southern Star comingled its injected natural gas with the native

natural gas produced on his property and converted his native gas to its own use.

In its M otion for Summary Judgment, Southern Star alleged there was no evidence

to support Cline’s conversion claim. After reviewing Cline’s conversion claim,

the district court concluded Cline’s allegations w ere not supported by evidence in

the record, and granted summary judgment to Southern Star. On appeal, Cline

                                          -14-
reasserts his argument that Southern Star committed the tort of conversion because

it exerted control over his land and mineral rights outside the boundaries of its

leasehold.

      “To withstand summary judgment, the nonmoving party must come forward

with specific facts showing that there is a genuine issue for trial.” L&M Enters. v.

BEI Sensors & Sys. Co., 231 F.3d 1284, 1287 (10th Cir. 2000) (quotations

omitted). “Unsupported conclusory allegations . . . do not create a genuine issue

of fact” sufficient to survive summary judgment. Id. In the instant case, there is

no evidence in the record to suggest Cline’s land has produced native gas or that

such gas— if it has been produced— has comingled with Southern Star’s injected

gas. Instead, the record reveals that, in signing the gas storage contract, Cline’s

predecessors stipulated there was no gas underlying the property at the time the

contract was signed. M oreover, Cline’s own expert witness indicated he was not

aware of any gas production on Cline’s property, and that if native gas exists on

Cline’s property, it is not comingled with the gas Southern Star has stored there.

In short, the record is wholly devoid of support for Cline’s conversion claim.

Because Cline did not satisfy his burden to come forward with specific facts

showing there is a genuine issue for trial, we conclude the district court did not err

when it granted Southern Star’s motion for summary judgment on this issue.

      C. Quiet Title

                                          -15-
         In its M emorandum and Order on the parties’ Rule 59(e) motions, the

district court held Southern Star was entitled to an order quieting title

         to all natural gas injected into the Storage Zone by Southern Star, to
         any other natural gas, oil or other minerals under the Subject Property
         (other than a potential royalty interest in minerals that might be
         produced in the future by Southern Star, if any, from greater than
         twenty feet (20’) below the top of the M ississippi Lime) and to any
         wells, pipelines or other property that Southern Star has placed on the
         Subject Property.

App. at 720. On appeal, Cline contends the district court’s quiet title holding was

erroneous. Cline raises three arguments in support of this contention.

         First, Cline argues the district court erred in issuing its quiet title order

because it incorrectly determined the gas storage contract allowed Southern Star

and its predecessors to charge Cline a connection fee or deposit before providing

him with free gas. The validity of Southern Star’s connection fee or deposit

requirement would be relevant if the question at issue was whether Cline had done

all that was necessary to receive free gas under the gas storage contract. The

validity of Southern Star’s connection fee or deposit requirement has no bearing,

however, on ownership interest in the oil, gas, and other minerals underlying

Cline’s property and therefore has no bearing on the district court’s quiet title

order.

         Second, Cline claims the district court failed to comport with applicable

Kansas law when it concluded the gas storage contract granted Southern Star the

exclusive right to produce oil, gas, and other minerals from Cline’s property.

                                             -16-
Cline asserts that under Kansas law, Southern Star’s rights to store gas do not

restrict his ability to produce oil and gas outside the boundaries of the storage

lease. The district court decision upon which C line bases his argument, however,

was reversed by this court on appeal. 2 Cline’s assertion is therefore entirely

unpersuasive.

      Third, Cline argues the district court erred by using a lease term related to

royalties from gas production when interpreting the terms of the gas storage lease.

Cline fails to explain how the district court committed the purported error and fails

to explain the significance, if any, of the purported error. Because Cline failed to

explain the substance of his argument, w e will afford it no further consideration.

See Am. Airlines v. Christensen, 967 F.2d 410, 415 n.8 (10th Cir. 1992) (noting

that a party must advance a “reasoned argument as to the grounds for the appeal”).

      After review ing the terms of the gas storage contract, this court agrees w ith

the district court’s characterization of the ownership interests at issue: Southern

      2
        Cline cites to the district court’s decision in Reese Exploration, Inc. v.
Williams Natural Gas Co., 768 F. Supp. 1416 (D . Kan. 1991). Reese is somewhat
analogous to the instant case; it concerned a defendant’s right to store gas and a
plaintiff’s right to produce oil from the same property. Id. at 1423. The district
court in Reese concluded the plaintiff and defendant had co-existing rights,
neither of which was superior to the other. Id. This court, however, reversed the
district court’s decision on appeal. See Reese Exploration, Inc. v. Williams
Natural Gas Co., 983 F.2d 1514, 1524 (10th Cir. 1993). W e held the parties’
rights w ere not coequal; instead, the plaintiff’s right to produce oil was subject to
the defendant’s right to store gas. Id. at 1522. Therefore, to the extent the
district court’s decision in Reese supported Cline’s quiet title claim, that support
was nullified by this court’s decision on appeal.

                                          -17-
Star has “the exclusive right to produce oil, gas and other minerals underneath

[Cline’s] property,” and Cline retains “royalty interests in those formations outside

the formations leased to [Southern Star] for gas storage.” App. at 720. Cline’s

arguments to the contrary are unpersuasive or without merit. W e therefore

conclude the district court did not err when it ordered that title be quieted in

Southern Star’s favor.

IV. Conclusion

      For the foregoing reasons, this court affirm s the decision of the United

States District Court for the D istrict of K ansas.

                                         ENTERED FOR THE COURT

                                         M ichael R. M urphy
                                         Circuit Judge

                                           -18-