MULLINNIX LLC v. HKB Royalty Trust

Rule of Law:

When interpreting mineral deeds, even if facially unambiguous, courts must consider extrinsic evidence of trade usage at the time and place of the deed's execution to ascertain the parties' intent, rather than applying a strict 'plain meaning' based on current understanding. A document not containing words of conveyance and signed only by the grantees does not modify previously conveyed interests nor does it create an estoppel without proof of detrimental reliance by the asserting party.

Facts:

• On October 14, 1944, Jerry Hickman and Effie Hickman conveyed real property in Campbell County to Ed Willard via warranty deed, reserving 'to the grantors one-half of all oil and commercial gravel rights.'
• On May 8, 1947, James and Vida Rothwell conveyed certain property in Campbell County to R.D. and Mary Parnell via warranty deed, reserving 'one half of all the oil rights' in most of the property and 'one fourth of the oil rights' in the remainder.
• In the 1940s in northeastern Wyoming, oil production was the primary consideration, and natural gas was not considered a commercial product due to a lack of pipelines, often being 'flared' as an oil by-product.
• On August 6, 1968, Johny Mullinnix, on behalf of Mullinnix 67 Associates, obtained a mineral deed from the Rothwells for their reserved mineral interests, executing a $24,000 ten-day sight draft subject to title approval.
• After the mineral deed was executed and before the draft was paid, Mullinnix conducted a title search and discovered the Rothwells' reservation of 'oil rights,' which raised concerns about the status of gas rights.
• On August 20, 1968, Mullinnix prepared a 'Declaration of Interest,' which the Parnells (successors to the original grantees) signed after their attorney removed 'other minerals' language, stating the Parnells owned an undivided one-half or one-fourth interest in 'oil, gas, and associated hydrocarbons' in certain properties.
• Witnesses with experience in the minerals industry in Campbell County during the 1940s and 1950s testified that while 'oil rights' might be used colloquially, legal documents of the era specified 'oil and gas' if both were intended, and that a reservation of 'oil rights' alone would not typically include gas.
• An 83-year-old Campbell County rancher testified that landowners in the 1940s understood the scope of their property and were very specific when describing it in formal documents, despite using generic terms in casual conversation.

Procedural Posture:

• On July 20, 2001, Groves filed an action in state district court (trial court) seeking to quiet title to all coal bed methane gas (CBM) underlying the subject real property.
• Hickman filed a counterclaim in district court seeking a declaration that they owned one-half of all the gas, including CBM, based on the reservation of 'oil rights' in the warranty deed.
• The district court granted summary judgment in favor of Groves, ruling that the warranty deed was unambiguous and, as a matter of law, the reservation of 'oil rights' did not include a reservation of gas rights.
• Hickmans appealed the summary judgment to the Wyoming Supreme Court.
• The Wyoming Supreme Court (in Hickman v. Groves, 2003 WY 76) reversed the summary judgment and remanded the case for a trial, finding a question of fact was raised concerning whether 'oil rights' had a particular trade usage at the time the deed was executed.
• On March 14, 2001, Mullinnix LLC filed an action in the state district court for a declaratory judgment and to quiet title to the mineral interests it acquired, particularly seeking a declaration as to its title in the gas estate.
• The district court originally granted summary judgment to Mullinnix in the Mullinnix case, finding the Declaration of Interest had 'achieved its stated intent of clarifying the interests held.'
• After the Wyoming Supreme Court's reversal in the Hickman case, the district court stayed proceedings in the Mullinnix case and subsequently withdrew its summary judgment on the Declaration of Interest.
• In October 2004, the district court consolidated the Mullinnix and Hickman cases for a bench trial.