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Print articleYours, Mine or Ours? Morgan Clarifies Surface Versus Mineral Ownership in W.Va.
June, 2013 - Joseph V. Schaeffer
On June 13, 2013, the West Virginia Supreme Court of Appeals (WVSCA) issued its decision in Faith United Methodist Church & Cemetery of Terra Alta, et al. v. Morgan, No. 12-0080, setting forth a clear definition of the term “surface” when used in deeds and other instruments of conveyance. This definition will weigh importantly on the state's shale gas industry.
At issue in Morgan was the meaning of “surface” in deeds conveying interests in 225 acres of property in Preston County, West Virginia. The 225-acre tract was originally acquired in 1863 by Calvin Forman. Upon his death, the property was divided equally and distributed among his seven children. By 1902, Walter Forman, Calvin’s son, had acquired five of his siblings’ shares of the property, making him the owner of six of the seven shares of the 225-acre tract. That same year, Walter and his sister Florence, owner of the single remaining share, conveyed by deed all the coal upon and under the tract. Finally, in 1907, Florence conveyed to Walter her “one-seventh undivided interest in the surface only (the coal and mining privileges having previously been sold).” The petitioners in Morgan were two churches that succeeded to Florence’s interest in the 225-acre tract; the respondent Marvin Morgan purchased Walter’s interest in 1967.
Almost 45 years after acquiring the 225-acre tract, Morgan filed a declaratory judgment action in the Circuit Court of Preston County requesting the court find he is sole owner of all oil and gas under the tract. The defendant churches responded that Florence’s 1907 deed explicitly conveyed only the surface rights; therefore, they retained a 1/7 undivided interest in the underlying oil and gas.
Although a deed conveying “the surface only” might seem to clearly foreclose Morgan’s argument, the issue was complicated by a 1923 WVSCA decision – Ramage v. South Penn Oil, 94 W.Va. 81, 118 S.E. 162. In Ramage, the court held that the term “surface,” when used in an instrument of conveyance, was ambiguous and always subject to information not included in the written document. Applying Ramage, the Preston County Circuit Court found that the deeds solely referenced conveyances of coal, and Florence and her successors had not acted as if they retained ownership of the oil and gas estate. The Preston County Circuit Court held that Morgan was the sole owner of the oil and gas under the 225-acre tract. The churches appealed.
On appeal, the WVSCA reversed Ramage and established a new rule for interpretation of “surface”:
[t]he word ‘surface,’ when used in an instrument of conveyance, generally means
the exposed area of land, improvements on the land, and any part of the underground
actually used by a surface owner as an adjunct to surface use (for example, medium
for the roots of growing plants, groundwater, water wells, roads, basements or
construction footings).
In doing so, the WVSCA traced the historical use of the word in instruments of conveyance and noted the disputes between surface and mineral owners first began with the development of minerals in the 19th century. When asked to define “surface,” the early courts emphasized the land’s ability to be used for agricultural purposes and thus defined the term in reference to the land used for plowing and grazing. However, as the Industrial Revolution took hold, courts began to define surface more broadly to encompass not just the actual top of the ground, but also the earth substructure (e.g., rocks and clays). TheRamage court found this inconsistency caused the term “surface” to be ambiguous. Nevertheless, over the years, courts began to coalesce into a common definition of “surface” that was very similar to the new definition set forth in the Morgan decision.
Perhaps conscious of the potential effects of its decision on booming West Virginia’s booming oil and gas industry, the WVSCA issued a detailed, 45-page opinion, which begins by noting that Ramage was itself a departure from the 1902 case of Williams v. South Penn Oil Co., 52 W.Va. 181, 43 S.E. 214. The Williams court held that “surface” is of a “definite and certain meaning.” Ramage was also a 3-2 decision, with the two dissenters strenuously objecting to the majority’s departure from the plain meaning of “surface.” Furthermore, commentators have criticized Ramage’s reasoning over the years. And when other jurisdictions have had the opportunity to apply Ramage, they have failed to do so. In fact, the WVSCA noted that it also has failed to do so – despite having three opportunities since 1923.
Having thus identified Ramage’s lack of acceptance, the WVSCA decision set forth two reasons, both of which are set in public policy, why it found Ramage must be overruled:
In setting a definition for the term “surface”, the WVSCA has returned certainty to thousands of deeds and prevented a morass of costly and unproductive litigation. Simply, the Morgan decision prevents surface owners from creatively using the Ramage interpretation of “surface” to co-opt mineral estates outside the intent of the parties.
At issue in Morgan was the meaning of “surface” in deeds conveying interests in 225 acres of property in Preston County, West Virginia. The 225-acre tract was originally acquired in 1863 by Calvin Forman. Upon his death, the property was divided equally and distributed among his seven children. By 1902, Walter Forman, Calvin’s son, had acquired five of his siblings’ shares of the property, making him the owner of six of the seven shares of the 225-acre tract. That same year, Walter and his sister Florence, owner of the single remaining share, conveyed by deed all the coal upon and under the tract. Finally, in 1907, Florence conveyed to Walter her “one-seventh undivided interest in the surface only (the coal and mining privileges having previously been sold).” The petitioners in Morgan were two churches that succeeded to Florence’s interest in the 225-acre tract; the respondent Marvin Morgan purchased Walter’s interest in 1967.
Almost 45 years after acquiring the 225-acre tract, Morgan filed a declaratory judgment action in the Circuit Court of Preston County requesting the court find he is sole owner of all oil and gas under the tract. The defendant churches responded that Florence’s 1907 deed explicitly conveyed only the surface rights; therefore, they retained a 1/7 undivided interest in the underlying oil and gas.
Although a deed conveying “the surface only” might seem to clearly foreclose Morgan’s argument, the issue was complicated by a 1923 WVSCA decision – Ramage v. South Penn Oil, 94 W.Va. 81, 118 S.E. 162. In Ramage, the court held that the term “surface,” when used in an instrument of conveyance, was ambiguous and always subject to information not included in the written document. Applying Ramage, the Preston County Circuit Court found that the deeds solely referenced conveyances of coal, and Florence and her successors had not acted as if they retained ownership of the oil and gas estate. The Preston County Circuit Court held that Morgan was the sole owner of the oil and gas under the 225-acre tract. The churches appealed.
On appeal, the WVSCA reversed Ramage and established a new rule for interpretation of “surface”:
[t]he word ‘surface,’ when used in an instrument of conveyance, generally means
the exposed area of land, improvements on the land, and any part of the underground
actually used by a surface owner as an adjunct to surface use (for example, medium
for the roots of growing plants, groundwater, water wells, roads, basements or
construction footings).
In doing so, the WVSCA traced the historical use of the word in instruments of conveyance and noted the disputes between surface and mineral owners first began with the development of minerals in the 19th century. When asked to define “surface,” the early courts emphasized the land’s ability to be used for agricultural purposes and thus defined the term in reference to the land used for plowing and grazing. However, as the Industrial Revolution took hold, courts began to define surface more broadly to encompass not just the actual top of the ground, but also the earth substructure (e.g., rocks and clays). TheRamage court found this inconsistency caused the term “surface” to be ambiguous. Nevertheless, over the years, courts began to coalesce into a common definition of “surface” that was very similar to the new definition set forth in the Morgan decision.
Perhaps conscious of the potential effects of its decision on booming West Virginia’s booming oil and gas industry, the WVSCA issued a detailed, 45-page opinion, which begins by noting that Ramage was itself a departure from the 1902 case of Williams v. South Penn Oil Co., 52 W.Va. 181, 43 S.E. 214. The Williams court held that “surface” is of a “definite and certain meaning.” Ramage was also a 3-2 decision, with the two dissenters strenuously objecting to the majority’s departure from the plain meaning of “surface.” Furthermore, commentators have criticized Ramage’s reasoning over the years. And when other jurisdictions have had the opportunity to apply Ramage, they have failed to do so. In fact, the WVSCA noted that it also has failed to do so – despite having three opportunities since 1923.
Having thus identified Ramage’s lack of acceptance, the WVSCA decision set forth two reasons, both of which are set in public policy, why it found Ramage must be overruled:
- Courts and practitioners seek definite meaning in terms when drafting deeds and other instruments of conveyance.
- Courts wish to reach the result intended by the parties rather than attempt to divine their intent.
In setting a definition for the term “surface”, the WVSCA has returned certainty to thousands of deeds and prevented a morass of costly and unproductive litigation. Simply, the Morgan decision prevents surface owners from creatively using the Ramage interpretation of “surface” to co-opt mineral estates outside the intent of the parties.
