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Valentine v Sugar Rock, Inc.

Case No. 12-2273 (C.A. 4, Mar. 12, 2014)

Availing ourselves of the privilege afforded by the State of West Virginia through the Uniform Certification of Questions of Law Act, West Virginia Code sections 51-1A-1 through 51-1A-13, we hereby request that the Supreme Court of Appeals of West Virginia exercise its discretion to answer the following certified question of law:

Whether the proponent of his own working interest in a mineral lease may prove his entitlement thereto and enforce his rights thereunder by demonstrating his inclusion within a mining partnership or partnership in mining, without resort to proof that the lease interest has been conveyed to him by deed or will or otherwise in strict conformance with the Statute of Frauds.


We perceive that the answer to the foregoing question of West Virginia law may be determinative of the cause now pending before us. Moreover, it appears that the decisions of the Supreme Court of Appeals of West Virginia provide no controlling precedent dispositive of the question. To fully illustrate the nature of the controversy out of which the question arises, we next recite the relevant facts.

I.



A.



Clifton G. Valentine filed this diversity action on November 8, 2010, in the Northern District of West Virginia, alleging that he is the owner of certain fractional working interests in four Ritchie County mining partnerships: Cuthright Oil & Gas Co. (stated working interest of 3/32), Iams Gas Co. (2/32), Iams Oil Co. (5/32), and Keith Gas Co. (1/32). Three wells produce oil and gas on Cuthright’s leasehold, with single wells in production for each of the other three partnerships on their respective, discrete leaseholds.

Named as defendants in Valentine’s lawsuit are Sugar Rock, Inc., which is the operator of the wells, and two of its officers, Gerald D. Hall and Teresa D. Hall (collectively, “Sugar Rock”). Valentine demands an accounting and seeks compensatory and punitive damages, together with reimbursement of his attorney fees and litigation costs. On January 13, 2011, Sugar Rock answered the complaint and filed a counterclaim “in excess of $14,191.00,” representing the cumulative operating expenses attributable to Valentine’s asserted working interests in the six wells. See J.A. 27.
 

 

Judge(s): Robert King
Jurisdiction: U.S. Court of Appeals, Fourth Circuit
Related Categories: Contracts , Property
 
Circuit Court Judge(s)
Henry Floyd
Roger Gregory
Robert King

 
Trial Court Judge(s)
Irene Keeley

 
Appellant Lawyer(s) Appellant Law Firm(s)
Daniel Corcoran Theisen Brock LPA
James Huggins Theisen Brock LPA

 
Appellee Lawyer(s) Appellee Law Firm(s)
Henry Lawrence, IV Steptoe & Johnson PLLC
William O'Brien Steptoe & Johnson PLLC
Amy Smith Steptoe & Johnson PLLC

 

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Click the maroon box above for a formatted PDF of the decision.
15 otherwise, a relationship of trust and confidence is thereby granted sugar rock’s motion and entered summary judgment on its in lantz, one of two participants in an alleged mining next recite the relevant facts. that any subsequent assignment by the lessee of a portion of its obligations for want of a conforming writing would have served element. see valentine v. sugar rock, inc., no. 1:10-cv-00193, and correspondence between the parties, buttressed by the use of 2 12 on appeal that the court should have granted his dismissal 2001, sugar rock filed suit in state court against valentine to whether the proponent of his own working interest in a record.2 the parties engaged in discovery in the district court, mining,” that is, the formation of an ordinary partnership that 10 the majority interest in the partnerships to sugar rock. after additional, non-diverse plaintiffs involved in the ritchie that the evidence left “no room for doubt” that the purported through some writing other than a deed or will, or, indeed, potentially distinguishes this matter from lantz is deemed to be pursuant to 12 u.s.c. § 1291. dispute. the court ruled that — in the absence of any evidence summary judgment, and it granted the plaintiffs’ motion for virginia exercise its discretion to answer the following j.a. 777; see also drake v. o’brien, 130 s.e. 276, 280 (w. va. citations herein to “j.a. ___” refer to the contents of happens to have as its primary purpose the exploitation of in the meantime, by its memorandum order of july 19, 2013 tumlin, 81 s.e. 820 (w. va. 1914), as more helpful to its the tenants in common of a mine who work it together and divide destroyed, or consumed, except for domestic use, shall through no writing at all. see washburn order 5 (recognizing consideration of sugar rock’s motion for summary judgment — to expenses attributable to valentine’s asserted working interests dismissed in 2004 for failure to prosecute. 424 2nd street 400 white oaks boulevard (the “opinion”), determined that valentine’s assertion of an settle accounts. the defendant demurred on the grounds that 1. was unable to produce a writing in conformance with the statute marks omitted). in such instances, “the partnership relation certified question of law: the partnership name on financial records and on contracts subject lease. 6 alleging that he is the owner of certain fractional working to the contrary — ownership had been sufficiently demonstrated frauds. iii. under operation of law, and thus an indirect ownership interest for the plaintiff-appellant: for the defendants-appellees: reminded us in denny v. seaboard lacquer, inc., 487 f.2d 485, otherwise in strict conformance with the statute of of west virginia. judge king prepared the order, in which judge the indebtedness of the partnership. in order to prevail, then, from frank “f.a.” deem, the original owner of the leaseholds, in action in state court against the defendants herein by nine plaintiff’s name appeared on the property deed. the supreme civil case may satisfy the requirement of a memorandum” from the necessity of producing evidence to establish the (the “washburn order”), the state circuit court denied the partnership brought a bill in equity to dissolve the entity and partnerships. see washburn v. sugar rock, inc., no. 11-c-61 during the pendency of this appeal, on april 8, 2013, argued: december 10, 2013 decided: march 12, 2014 internal quotation marks omitted). from childers and the 3 of the above-described aspect of valentine’s appeal removes any instance, the district court’s opinion and the washburn order by a writing contemplated by the west virginia statute of 4 this order of certification. evidence to which the court referred consisted of interactions court of appeals affirmed, in pertinent part, the circuit there was no written partnership agreement and that only the mineral lease may prove his entitlement thereto and of his own working interest in a mineral lease may prove his minerals. such an approach could help to explain the result in (instructing that, “[u]nder texas law, a conveyance of a working duty to decide diversity actions through the faithful presented with the opportunity to consider the import and distribution of proceeds was “neither a deed nor a will” established, and that as between them in the conduct of the application of state law, as we discern it to the best of our therein, and subsequently assigning those interests. see id. at 2012 wl 4320850 (n.d. w. va. sept. 18, 2012). in childers, valentine’s assertions of error in this regard, and, with or any part of the corpus of the estate may be taken, that the state’s supreme court of appeals ought to be afforded published record. the particular facts underlying the case at bar are represented by counsel, whose names and addresses are the leases; he maintained that his working interest instead derived indirectly from his proportional participation in the the same precepts of west virginia law to the identical ritchie irreconcilable outcomes though both courts have sought to apply the plaintiffs were partners in the mining partnerships and in mining, without resort to proof that the lease the putative class action in ritchie county. valentine contends the district court in the case at bar was likewise been directly conveyed by deed or will any property interest in partnership to possess an ownership interest in the land or resolution solely the question that we certify today, thereby process is nonetheless reasonable and appropriate. in that partnership in mining, without resort to proof that the lease enforce his rights thereunder by demonstrating his named as defendants in valentine’s lawsuit are sugar rock, inclusion within a mining partnership or partnership the joint appendix filed by the parties to the appeal underlying railroad co. v. tompkins, 304 u.s. 64 (1938), impose upon us the applicability of lantz. the court concluded that lantz of his attorney fees and litigation costs. on january 13, 2011, in amounts reflected on the tax documents (irs schedule k-1 to in strict conformance with the statute of frauds. we accordance with west virginia law, the creation of the four marietta, oh 45750 bridgeport, wv 26330 in the six wells. see j.a. 27.1 of implementing equitable remedies such as dissolution and continues on the upswing in west virginia, we are of the opinion individuals to form a common law mining partnership” (citation after which sugar rock moved for summary judgment on the ground (n.d. 1984) (explaining that “[t]he interest acquired by the 10-12. the affidavits additionally incorporated the schedule k- district judge. (1:10-cv-00193-imk) 12, 2012. we possess jurisdiction over valentine’s appeal judgment regarding their claims to the working interests in argued: james scott huggins, theisen brock, lpa, marietta, ohio, the district court, by its memorandum opinion and order county properties. as our distinguished colleague judge widener profit, by associating themselves together as partners or johnson pllc, bridgeport, west virginia, for appellees. the entirety of the supporting evidence, it can hardly be said properly documented share of the subject property prior to joint entered by the circuit court of ritchie county manifest this court, in all or in part, as requested by the supreme court more than five years, in lands, or any other interest the purpose of the statute of frauds, which is “to prevent the learned legal literature, the district court distilled three that its chicken-or-the-egg conundrum might be avoided if west district of west virginia, at clarksburg. irene m. keeley, valentine maintains that he purchased the working interests subject leases. see opinion 13, 20-21. the court consequently admitted fact.” lawyer disciplinary bd. v. morgan, 717 s.e.2d this court transmit to the supreme court of appeals of west interest in the same real estate was undocumented — liable for acknowledge that the supreme court of appeals of west virginia 16 such declaration being vigorously opposed by the owner of a “mining partnership” of the sort valentine posits, may be clifton g. valentine filed this diversity action on forward in addition the original or copies of the record before virginia law were construed to recognize a “partnership in may reformulate the question. all of the parties in this matter persuaded by lantz, the circuit court of ritchie county in quotation marks omitted); see also timberlake v. heflin, 379 the opportunity to resolve it. accordingly, pursuant to the privilege made available under precedent dispositive of the question. to fully illustrate the that valentine could produce no written instrument conveying him frauds: according to valentine, be established in strict conformance leaseholds transferred interests in real property. see j.a. 127 november 8, 2010, in the northern district of west virginia, bridgeport, west virginia, for appellees. on brief: daniel interest of each, the profit and loss.” childers v. neely, 34 13, we hereby request that the supreme court of appeals of west excess of $14,191.00,” representing the cumulative operating lease being exploited, but also observed the opinion’s silence order of certification; and (3) that the clerk of this court i. persuade us that we may appropriately certify the question we share of the deficiencies, but he refused to remit payment. in appeals has explained, “is a judicial admission. as such, it is applying illinois law). given that the working interests form 1065) that each partnership has continued to deliver or term therein of any duration under which the whole supreme court of appeals of west virginia interest has been conveyed to him by deed or will or 1s that sugar rock had, from 1999 through 2011, delivered each stores co., inc. v. recht, 740 s.e.2d 59, 64 (w. va. 2013) 8 operations. those payments stopped in 1999, however, when frank conveying shares in a gas well enterprise and providing for the arbaugh v. raines, 184 s.e.2d 620, 623 (w. va. 1971), which held individual mining partners”). the circuit court instead ability. the parties before us on appeal, as well as the 9 working interests, which in turn precluded him from the late 1950s. for about forty years, valentine received his non-controlling, advisory answer”). proportionate share of the net proceeds generated by the well formed “where tenants in common of mines or oil leases . . . property interest. a stipulation, as the supreme court of king, circuit judge: each working interest to which he is entitled need not, the district court’s summary judgment order in favor of 3 binding in every sense, preventing the party who makes it from are satisfied to grant valentine’s motion to supplement the demonstrating his inclusion within a mining partnership or moran, 662 s.e.2d 711, 719 (w. va. 2008) (citations and internal partnership had in fact existed. lantz, 81 s.e. at 820. the pleadings. the circuit court perceived that the result in lantz sugar rock became the operator and managing partner of the internal quotation marks omitted)). assertions could not be corroborated by deed or will. valentine valentine could not properly evidence receipt of the disputed was consistent with west virginia authorities permitting respect to the dismissal issue, adopt the analysis set forth by supporting the lantz decision. in that dispute, the real estate (2/32), iams oil co. (5/32), and keith gas co. (1/32). three of frauds. the district court concluded, therefore, that defendant’s invocation of the statute of frauds in defense, w. va. code § 36-1-1. thus, sugar rock reasoned, valentine’s s.e. 828, 829 (w. va. 1899) (citation and internal quotation theisen brock, lpa steptoe & johnson, pllc virginia for an advisory opinion. see state ex rel. advance asserted by valentine are real property interests, sugar rock virginia, under the official seal of this court, a copy of this the court, the plaintiffs were entitled to partial summary importance of the question and the significant likelihood that defendants – appellees. ownership of the working interests in dispute. in support of form a mining partnership: “what is required, however, is an 14 ensuring that we do not ask the supreme court of appeals of west analysis. opinion 21 (recognizing that “there is, manifestly, no dispute in the four oil and gas leases. id. the specific portion of inc., which is the operator of the wells, and two of its partnership, which owns the leases. though the district court we perceive that the answer to the foregoing question of west demonstrating the requisite ownership interest in any of the interest and is an interest in real property” (citation and lands or leases constituting a property interest; (2) joint establishing each partnership, detailing the various interests the profits in proportion to their several interests”). ii. a mining partnership must be titled in the name of each of the maintained that their purported transfer could only be effected west virginia law as described above, we hereby order: (1) that threshold, in that he had not satisfied the first essential question of west virginia law to be this: whether the proponent indicated that the absence of a preexisting property interest interest in oil and gas is a real property interest”); fry v. before us. moreover, it appears that the decisions of the true enough, valentine abandoned all pretense that he had acknowledged that childers requires each partner in a mining officers, gerald d. hall and teresa d. hall (collectively, partners or to share profits and loss.” id. (citation and await developments in the state court proceedings. we reject working interests. j.a. 307. valentine contended instead that breezevale ltd., 82 s.w.3d 429, 436 (tex. app. 2002) working interest in an oil and gas lease similarly conveys an essential elements of a mining partnership: (1) co-ownership of omitted)). according to the court, however, lantz cannot be mining partnership may arise through words and by conduct. see effective upon notification by ordinary means from the clerk of 2 owner of record sued to hold his partner — whose alleged the question set forth herein be certified to the supreme court 788 (w. va. 1986)); cf. miller v. schwartz, 354 n.w.2d 685, 689 lantz, where a partnership was deemed to exist notwithstanding of a “mining partnership,” it did not consider the possibility evidencing a contract for the sale or lease of land). farm bureau oil co., 119 n.e.2d 749, 750 (ill. 1954) (same, no. 12-2273 interests in four ritchie county mining partnerships: cuthright valentine filed a contested motion to supplement the record with annually to valentine. sugar rock billed valentine for his 5 sugar rock, entered in september 2012, concomitantly denied compensatory and punitive damages, together with reimbursement instructing that “where persons engage in a joint enterprise for supreme court of appeals of west virginia provide no controlling james scott hughes w. henry lawrence, iv undertaken. see id. at 820-21. the court rejected the for the fourth circuit 898, 906 (w. va. 2011) (citation and internal quotation marks owned the claimed working interests, notwithstanding that such a. that a written agreement between the lessee and investors application.” id. at 821 (citations omitted). is yet pending. see fed. r. app. p. 28(j). inasmuch as the question certified valentine’s motion to voluntarily dismiss his complaint without behalf. valentine timely appealed by notice filed on october by the plaintiffs’ affidavits, appended with documents of record lessee under an ordinary oil and gas lease is known as a working will likely be useful in understanding the washburn order, we washburn denied sugar rock’s motion for judgment on the alternative basis to disturb the judgment below and leaves for b. the plaintiff was constrained to stipulate to the defendant’s entitlement thereto and enforce his rights thereunder by interest in the sugar rock mining partnerships failed at the motion or, failing that, stayed further action — including in considering the motions before it, the circuit court court’s entry of judgment in favor of the plaintiff, concluding his ownership interest in realty not evidenced by deed or will, order of certification to the typical situation, in that the plaintiff urges a declaration of other purported owners of working interests in the four mining question of west virginia law properly decided. in view of the v. nature of the controversy out of which the question arises, we partial summary judgment. in so ruling, the court declared that sugar rock answered the complaint and filed a counterclaim “in county litigation, are each entitled to have the controlling of no legal significance, our resort to the certification regarded the supreme court’s post-childers opinion in lantz v. and by the parties’ course of conduct. conforming writing indicating the conveyance of the subject their respective, discrete leaseholds. of law act, west virginia code sections 51-1a-1 through 51-1a- of appeals of west virginia for answer; (2) that the clerk of s.e.2d 149, 153 (w. va. 1989) (instructing that “a pleading in a that a written partnership agreement is not required for published order of certification to the supreme court of appeals pleadings and additional materials filed in a putative class of west virginia through the uniform certification of questions provided hereunder. before king, gregory, and floyd, circuit judges. appellant. amy marie smith, william j. o'brien, steptoe & no estate of inheritance or freehold, or for a term of appeal from the united states district court for the northern as to whether such an interest may arise and be evidenced fraudulent enforcement of unmade contracts, not the legitimate authorities [that] come to a party’s attention” while the appeal he possessed “an ownership interest in a partnership” arising its position, sugar rock observed at the outset that, in subsists . . . though there is no express agreement . . . to be transferring to the investors any interest in the minerals in operation thereof; and (3) sharing of profits and losses. see given the plaintiff’s admission in lantz, consistent with settlement. see washburn order 8 (citing, inter alia, brown v. (continued) virginia law may be determinative of the cause now pending 7 in the matter before us, however, we face perhaps a more availing ourselves of the privilege afforded by the state submitted the washburn order in accordance with the rule want of proper documentation evidencing ownership of the working interests in question doomed his claim. see j.a. 128 (citing gray, 70 s.e. 276, 277 (w. va. 1911)). further, according to “sugar rock”). valentine demands an accounting and seeks plaintiff – appellant, year to the plaintiffs. see id. at 12. supported the proposition made apparent in childers that a deem’s son and successor in interest, william “w.a.” deem, sold (cir. ct. ritchie cnty.). valentine’s motion was deferred in light of the foregoing, we identify the controlling 1925) (confirming that “[a] mining partnership exists between the supreme court of appeals of west virginia. be created or conveyed unless by deed or will. pending oral argument. actually engage in working the same, and share, according to the interest in real property. see j.a. 127 (citing 37 c.j.s. defendants’ motions for judgment on the pleadings and for wells in production for each of the other three partnerships on sugar rock, inc.; gerald d. hall; teresa d. hall, interpreted as permitting, in derogation of the statute of development of the minerals in place. by contrast, valentine prejudice, see fed. r. civ. p. 41(a)(2), so that he could join wells produce oil and gas on cuthright’s leasehold, with single we discern, however, another rationale potentially interest in real estate” that might have been transferred via a now confront.3 gregory and judge floyd joined. that one of the partner’s names was nowhere to be found on the united states court of appeals joint or partnership business the statute of frauds has no purport to have.” id. 1 identified by the supreme court of the united states in erie interest has been conveyed to him by deed or will or otherwise place). interest in property, an interest which [valentine] does not next, sugar rock advanced the uncontroversial corollary 13 frauds, the conveyance of the property interest necessary to permitting us to be notified of “pertinent and significant daniel patrick corcoran william james o’brien even if the difference in procedural posture that certified question if, in doing so, [it] would have to render a for appellant. w. henry lawrence, iv, steptoe & johnson pllc, it will recur as oil and gas exploration and development (citing syl. pt. 1, mccullough oil, inc. v. rezek, 346 s.e.2d statute of frauds § 77 (2011)); see also exxon corp. v. of appeals of west virginia, any and all such requests being partnership real estate to be treated as personalty for purposes there was no dispute that the prospective partners each owned a 11 that childers “does not say that the mines, leases, or lands of recover the costs incurred to that point; the action was partnerships, the wells began to operate at a net annual loss, introducing evidence to dispute it, and relieving the opponent state court materials previously offered for our consideration 489 (4th cir. 1973), the principles of federalism first in response, valentine disavowed the “direct ownership patrick corcoran, theisen brock, lpa, marietta, ohio, for omitted). with the statute of frauds, but can be proved by parol evidence that relieving the defendant therein of his partnership enforcement of contracts that were in fact made.” hoover v. (reinforcing court’s determination that it “will not answer a 2. the district court in its unpublished opinion. our disposition clifton g. valentine, documented by deed or will forecloses, ab initio, the creation oil & gas co. (stated working interest of 3/32), iams gas co.


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