Statoil USA Onshore Properties v. Pine Resources, LLC

Filing

UNPUBLISHED PER CURIAM OPINION filed. Originating case number: 2:14-cv-21169 Copies to all parties and the district court/agency. [1000005228].. [15-2099]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 15-2099

STATOIL USA ONSHORE PROPERTIES INC.,
Plaintiff - Appellee,
v.
PINE RESOURCES, LLC,
Defendant - Appellant.

Appeal from the United States District Court for the Southern
District of West Virginia, at Charleston.
Irene C. Berger,
District Judge. (2:14-cv-21169)

Argued:

October 26, 2016

Decided:

January 18, 2017

Before MOTZ, TRAXLER, and FLOYD, Circuit Judges.

Vacated and remanded by unpublished per curiam opinion.

ARGUED: David Allen Barnette, JACKSON KELLY, PLLC, Charleston,
West Virginia, for Appellant.
Constance Hankins Pfeiffer, BECK
REDDEN LLP, Houston, Texas, for Appellee.
ON BRIEF: Vivian H.
Basdekis, JACKSON KELLY, PLLC, Charleston, West Virginia, for
Appellant.
Fields Alexander, Joel T. Towner, BECK REDDEN LLP,
Houston, Texas; Bridget Furbee, Bridgeport, West Virginia, John
J. Meadows, STEPTOE & JOHNSON PLLC, Charleston, West Virginia,
for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:
In

2008,

certain

Appellant

mineral

(“PetroEdge”),

rights

pursuant

Pine
to
to

agreement (the “Pine PSA”).
rights

to

Appellee

Resources,

non-party
the

terms

LLC

(“Pine”),

PetroEdge
of

a

Energy,

purchase

and

sold
LLC
sale

In 2012, PetroEdge sold its mineral

Statoil

USA

Onshore

Properties,

Inc.

(“Statoil”), pursuant to the terms of a second purchase and sale
agreement (the “Statoil PSA”).
In 2014, Statoil sought a declaratory judgment that it was
not in breach of the Pine PSA, and had no obligations under that
agreement to Pine other than to pay certain royalty interests.
Pine filed a breach of contract counterclaim, seeking damages
for

Statoil’s

alleged

nonperformance

of

spudding

outlined in Section 5.7(b) of the Pine PSA.

obligations

The parties filed

cross-motions for summary judgment.
The district court granted summary judgment to Statoil, and
denied Pine’s motion for summary judgment on its counterclaim.
The court held that, under the unambiguous language of the Pine
PSA, the agreement’s spudding obligations extended only to the
“Purchaser,” which the court read to mean PetroEdge alone.
This

holding,

however,

renders

effectively

meaningless

successors and assigns provision in the Pine PSA.

a

It is our

duty to read a contract as a whole, giving meaning to every
provision whenever possible.

Because the district court failed
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to properly do so, we vacate its judgment and remand for further
proceedings.

I.
A.
In

2001,

Pine

acquired

mineral

interests

in

a

565-acre

tract of land in Barbour County, West Virginia (the “Property”).
In 2008, at a price of $479,876, and pursuant to the terms of
the

Pine

PSA,

non-party

PetroEdge

purchased

from

Pine

the

Marcellus Mineral Rights on the Property. 1
The Pine PSA--drafted by PetroEdge--contains the following
relevant provisions:
•

Introduction: The Pine PSA states in its introductory
paragraph that it is an agreement “by and between Pine
Resources Inc., a West Virginia corporation (‘Seller’),
and PetroEdge Energy LLC, a Delaware limited liability
company (‘Purchaser’).”

J.A. 49.

provides

that

and

referred

to

“Seller
herein

Purchaser

together

individually as a ‘Party’.”

1

The Pine PSA further

as

the

are

sometimes

‘Parties’

and

Id.

The Marcellus Mineral Rights include, inter alia,
hydrocarbon mineral interests of “those subsurface depths from
the base of the Elk formation to the base of (and including) the
Onondaga formation.” J.A. 50.

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•

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Article

5:

Article

5

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outlines

the

covenants

of

the

parties, and centers on their mineral production plans.
Section 5.5 calls for quarterly meetings by the “Parties”
to

discuss

drilling

plans

and

operations.

J.A.

56.

Section 5.6 enjoins cooperation between the “Parties” in
the

event

of

parallel

drilling

or

operations.

Id.

Section 5.7(a) requires “Purchaser [to] apply for a meter
tap

on

a

gas

transmission

executing the Pine PSA.

line”

within

J.A. 56–57.

60

days

of

Section 5.7(b)

provides that the “Purchaser shall spud not less than one
(1) well on the Contract Area” within a year of the
installation of the meter tap; it further provides that
the “Purchaser” shall have spudded at least three wells
within five years of the meter tap’s installation.
57. 2

J.A.

Section 5.8 discusses the scenario where a party

abandons a well and the non-abandoning party gets the
right to take over its operation.

Id.

Section 5.9(a)

discusses Pine’s 18% retained overriding royalty interest
on

hydrocarbons

Rights.

J.A.

produced
57-58.

from

Section

the

Marcellus

5.9(b)

Mineral

establishes

an

arbitration procedure for disputes between the “Seller”

2

After multiple delays and a purchased extension, PetroEdge
drilled one well, the Bumgardner 5-2H, in December 2011.

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and the “Purchaser” over the occurrence of a “Production
Termination Event.”
•

J.A. 58.

Article 7: Article 7 is the Pine PSA’s “Indemnification;
Limitations” section.

J.A. 60-62.

As relevant here,

Section 7.2(a), provides as follows:
[1] The representations and warranties of the
Parties in Articles 3 (except Section 3.7) and 4
and the covenants and agreements of the Parties
in Article 6 [sic] (except Sections 5.4 through
5.9) shall survive the Execution Date for a
period
of
two
(2)
years.
[2]
The
representations,
warranties,
covenants
and
agreements of Seller in Sections 3.7 and 5.4
shall survive until the close of business 30 days
after the expiration of the applicable statutes
of limitation (including any extensions thereof)
provided that any proceeding or indemnification
claim pending on the date of any such termination
shall survive until the final resolution thereof.
[3] The remainder of this Agreement shall survive
the Execution Date so long as Purchaser holds any
interest in the Mineral Rights. Representations,
warranties, covenants and agreements shall be of
no further force and effect after the date of
their expiration, provided that there shall be no
termination of any bona fide claim asserted
pursuant to this Agreement with respect to such a
representation, warranty, covenant or agreement
prior to its expiration date.
J.A. 61.
•

Article 8: Article 8 contains the remaining miscellaneous
provisions.

Section 8.5 instructs that the Pine PSA is

to be construed in accordance with West Virginia law.
J.A. 63.

Section 8.8 contains a successors and assigns

provision, which in relevant part provides that “this

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Agreement shall be binding upon and inure to the benefit
of the Parties hereto and their respective successors and
assigns.”
•

Id.

Deed: Pine’s deed to PetroEdge (the “Deed”) granting the
latter

the

Marcellus

Mineral

attached to the Pine PSA.
were

expressly

Rights

of

the

incorporated

Deed

an

exhibit

(All exhibits to the Pina PSA
under

integration clause of the Pine PSA.
III

is

provides

Section

8.9,

J.A. 63.)

that,

the

Article

“[n]otwithstanding

anything to the contrary,” Pine reserves an 18% retained
overriding royalty interest on hydrocarbons produced from
the Marcellus Mineral Rights.

J.A. 68.

Article III adds

that if there is a dispute regarding the occurrence of
“Production Termination Events,” it shall be settled in
accordance with Section 5.9(b) of the Pine PSA.

Id.

B.
By written assignment in 2012, PetroEdge sold its interest
in the Marcellus Mineral Rights to Statoil.

That assignment

agreement

the

is

subject

to

and

incorporates

terms

and

conditions of a purchase and sale agreement--the Statoil PSA-dated October 12, 2012, between Statoil and PetroEdge.
Section 10.1(a) of the Statoil PSA provides that Statoil
shall assume responsibility for the “performance of all express
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and implied obligations” arising from “instruments in the chain
of title to the Assets, the Leases, the Contracts and all other
orders,

contracts

subject,

and

including

royalties[.]”

agreements

the

payment

J.A. 450.

of

to

which

the

royalties

Assets

and

are

overriding

The Statoil PSA lists the Pine PSA as

a “Contract[] included in the Assets” that were sold by the
Statoil

PSA.

J.A.

447,

453.

The

Statoil

PSA

further

acknowledges that the obligation to drill “at least two (2)”
wells

(in

addition

to

the

Bumgardner

5-2H

well)

is

unfulfilled drilling obligation dictated by the Pine PSA.

an
J.A.

449, 451.
By

letter

transaction
notified

dated

December

contemplated

Pine

of

its

by

19,

the

2012--one

Statoil

assignment

to

PSA

day

after

the

closed--PetroEdge

Statoil.

The

letter

specifically noted that “Statoil is now the Purchaser under the
[Pine] PSA.”

J.A.

459.

The letter made no reference to the

possibility that the duties of PetroEdge would not pass on to
its assign Statoil.
After the assignment, Pine sought performance by Statoil on
the Pine PSA.

It is undisputed that Pine reached out multiple

times to Statoil to schedule quarterly meetings with it, and
that at least one such meeting took place.

To date, however, no

well drilling beyond the Bumgardner 5-2H has occurred on the
Property.
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C.
In 2014, Statoil sought a declaratory judgment confirming
that--except

for

a

duty

to

pay

royalty

interests

upon

production--its duties under the Pine PSA were expired, and it
was thus not in breach of the Pine PSA and owed no duties to
Pine

beyond

making

royalty

interest

payments.

Pine

filed

a

breach of contract counterclaim, seeking damages for Statoil’s
alleged nonperformance under Section 5.7(b) of the Pine PSA.
The parties filed cross-motions for summary judgment.
The district court granted summary judgment to Statoil, and
denied Pine’s motion for summary judgment on its counterclaim.
Statoil USA Onshore Prop. Inc. v. Pine Res., LLC, No. 2:14-cv021169, 2015 WL 5304295 (S.D. W.Va. Sept. 9, 2015).
reasoned

that

because

the

introductory

The court

paragraph

designated

PetroEdge as the “Purchaser,” and Section 5.7(b) only applied to
the

“Purchaser,”

Section

5.7(b)

unambiguously

PetroEdge alone and not to its assign Statoil.

applied

Id. at *5.

to
The

court further held that by force of Section 7.2(a)’s residual
clause,

Section

“Purchaser,”

no

Mineral Rights.

5.7(b)
longer
Id.

terminated

held

any

when

interest

PetroEdge,
in

the

as

Marcellus

The court rejected the notion that the

successors and assigns provision in Section 8.8 modified the
definition of the term “Purchaser” anywhere in the Pine PSA.
Id.

This appeal followed.
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II.
We review a district court’s disposition of cross-motions
for summary judgment de novo.

Libertarian Party of Va. v. Judd,

718 F.3d 308, 312 (4th Cir. 2013).

“We view the facts and

inferences arising therefrom in the light most favorable to the
non-moving party to determine whether there exists any genuine
dispute of material fact or whether the movant is entitled to
judgment as a matter of law.”

Pender v. Bank of Am. Corp., 788

F.3d 354, 361 (4th Cir. 2015).
We also review de novo a district court’s decision on an
issue of contract interpretation.

FindWhere Holdings, Inc. v.

Sys. Env’t Optimization, LLC, 626 F.3d 752, 755 (4th Cir. 2010).
“The interpretation of a written contract is a question of law
that turns upon a reading of the document itself, and a district
court is in no better position than an appellate court to decide
such an issue.”

Seabulk Offshore v. Am. Home Assurance, 377

F.3d 408, 418 (4th Cir. 2004).

III.
In our view, the district court read the successors and
assigns provision in Section 8.8 too narrowly.

That provision

extends the contractual rights and duties of Pine and PetroEdge
to their respective successors and assigns, in a contract whose
provisions

only

speak

about

the
9

rights

and

duties

of

the

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“Seller,” the “Purchaser,” and the “Parties.”

Thus, if Section

8.8 is to have any meaning, it must have the effect of extending
the application of the rights and duties provisions of the Pine
PSA

from

beyond

Pine

and

PetroEdge,

and

to

the

parties’

respective successors and assigns in their stead (unless context
dictates otherwise).
We read Section 8.8 to have such an effect, and therefore
hold that the spudding obligations that Section 5.7(b) places on
the

“Purchaser”

extend

PetroEdge’s stead.
in

Section

to

PetroEdge’s

assign

Statoil

in

However, the meaning of the term “Purchaser”

7.2(a)’s

residual

clause

is

a

more

difficult

question, because its context prevents us from concluding that
the term unambiguously encompasses PetroEdge, and in its place
its

successors

7.2(a)’s

and

residual

assigns.
clause

is

We

instead

ambiguous,

hold
but

that

that

Section

extrinsic

evidence clarifies that “Purchaser” in Section 7.2(a)’s residual
clause is intended to encompass PetroEdge’s assign Statoil.

As

such, the district court’s conclusions that Section 5.7(b) is
inapplicable to Statoil and also terminated by Section 7.2(a)
are both erroneous.

A.
The

Pine

PSA

provides--and

no

party

disputes--that

the

agreement is to be construed in accordance with West Virginia
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law.

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Under West Virginia law, “the function of a court is to

ascertain the intent of the parties as expressed in the language
used by them” in their contract.

Zimmerer v. Romano, 679 S.E.2d

601, 610 (W. Va. 2009) (per curiam) (internal quotation marks
omitted).

In performing this task, courts must read contracts

“as a whole, taking and considering all the parts together[.]”
Id. (internal quotation marks omitted).
Moreover, “specific words or clauses of an agreement are
not to be treated as meaningless, or to be discarded, if any
reasonable meaning can be given them consistent with the whole
contract.”

Dunbar Fraternal Order of Police, Lodge No. 119 v.

City of Dunbar, 624 S.E.2d 586, 591 (W. Va. 2005) (per curiam)
(internal quotation marks omitted).

Additionally, West Virginia

courts “will not interpret a contract in a manner that creates
an absurd result.”
Generally,
the

intent

of

Id.

“[a]
the

valid

parties

written
in

instrument

plain

and

which

expresses

unambiguous

language

. . . will be applied and enforced according to such intent.”
Arnold v. Palmer, 686 S.E.2d 725, 733 (W. Va. 2009) (internal
quotation

marks

omitted).

“Extrinsic

evidence

will

not

be

admitted to explain or alter the terms of a written contract
which is clear and unambiguous.”

Faith United Methodist Church

& Cemetery of Terra Alta v. Morgan, 745 S.E.2d 461, 481 (W. Va.
2013) (internal quotation marks omitted).
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By contrast, language is ambiguous when it is “reasonably
susceptible of two different meanings,” or is of “such doubtful
meaning that reasonable minds might be uncertain or disagree as
to its meaning.”
633

S.E.2d

22,

omitted).

Estate of Tawney v. Columbia Nat. Res., LLC,
28

“The

(W.

Va.

question

2006)
as

(internal

to

quotation

whether

a

marks

contract

is

ambiguous is a question of law to be determined by the court.”
Fraternal Order of Police v. City of Fairmont, 468 S.E.2d 712,
717–18 (W. Va. 1996) (internal quotation marks omitted).
contract

language

consulted

to

aid

is
in

ambiguous,
its

extrinsic

construction.

evidence

Yoho

v.

Where
may

be

Borg-Warner

Chems., 406 S.E.2d 696, 697 (W. Va. 1991) (per curiam).

B.
The

introductory

paragraph

identifies

PetroEdge

as

the

“Purchaser” under the Pine PSA, and Section 5.7(b) of the Pine
PSA imposes a spudding obligation on the “Purchaser.”

Based on

these points, the district court concluded that the spudding
obligation of Section 5.7(b) extends to PetroEdge alone, and not
to its assign Statoil.
We disagree with this conclusion, in light of Section 8.8
of the Pine PSA, which contains the agreement’s successors and
assigns

provision.

Section

8.8

provides

that

the

Pine

PSA

“shall be binding upon and inure to the benefit of the Parties
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hereto and their respective successors and assigns.”

J.A. 63.

We read Section 8.8 to extend the application of the rights and
duties

provisions

otherwise--from

of

the

beyond

Pine

Pine

PSA--unless

and

context

PetroEdge,

and

respective successors and assigns in their stead. 3

dictates
to

their

Thus, reading

the Pine PSA “as a whole,” Zimmerer, 679 S.E.2d at 610, we hold
that

the

spudding

obligation

of

Section

5.7(b)

extends

to

Statoil, in its capacity as PetroEdge’s assign.
The district court rejected this reading of Section 8.8,
concluding that “Section 8.8 does not modify the remainder of
the contract; it simply provides that successors and assigns are
to be bound by the contract terms.”
at *5.

Those two conclusions, however, are inconsistent with

one another.
for

Statoil, 2015 WL 5304295,

and

The Pine PSA is structured in terms of benefits

burdens

to

the

“Purchaser,”

the

“Seller,”

and

the

“Parties;” thus, if those terms are not broadened to include
those

parties’

sense

to

say

successors
that

such

and
a

assigns,

contract

3

then

binds

it

and

makes

little

benefits

those

In contrast, provisions of the Pine PSA that discuss the
parties as parties, rather than as promisors and promisees under
the agreement, are sensibly read to exclude the parties’
successors and assigns.
See J.A. 49 (the introductory
paragraph); see also J.A. 51 (Section 3.1-describing the
“Seller” as a West Virginia corporation) J.A. 54 (Section 4.1describing the “Buyer” as a Delaware limited liability company);
J.A. 62 (Section 8.2-listing the addresses of “Seller” Pine and
“Purchaser” PetroEdge); J.A. 65-66 (signature page for the
“Seller” and the “Purchaser”).

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parties’ successors and assigns.

See J.A. 57 (Section 5.7(b)-

imposing a spudding obligation on the “Purchaser”); see also
J.A. 56 (Section 5.4-allocating tax responsibilities between the
“Seller”

and

quarterly

the

meetings

“Purchaser”);
for

the

id.

(Section

“Parties”).

5.5-outlining

Indeed,

by

reading

Section 8.8 to bind successors and assigns to a contract that
does not speak to them, the district court in effect “treated
[Section 8.8] as meaningless.”

Dunbar, 624 S.E.2d at 591.

As

such, the more natural reading of “Purchaser” in the rights and
duties provisions of the Pine PSA--in light of Section 8.8--is a
reading that generally encompasses PetroEdge, and in its place
its successors and assigns.
Furthermore, the Deed granted by Pine to PetroEdge, which
was attached to and expressly made part of the Pine PSA, makes
sense only if the term “Purchaser” in the Pine PSA is generally
not

limited

to

PetroEdge

alone.

To

elaborate,

the

Deed’s

Article III outlines an overriding royalty interest due to Pine
--an interest that even Statoil concedes it will be responsible
for paying Pine whenever mineral production takes place.

See

Appellee’s Br. 17; see also J.A. 386 (establishing a royalty
interest scheme “[n]otwithstanding anything to the contrary”).
Article

III,

in

royalty

dispute

turn,

instructs

arises,

that

that

dispute

if

a

will

certain
be

accordance with Section 5.9(b) of the [Pine PSA].”
14

type

of

“settled

in

J.A. 386.

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5.9(b),

however,

Pg: 15 of 27

speaks

in

terms

of

“Seller”

and

“Purchaser”--meaning that if Section 5.9(b) is to be of any use
in

resolving

a

Statoil-Pine

dispute,

the

term

“Purchaser”

therein will have to be read to include PetroEdge’s assigns.
This reading avoids the “absurd result” of a senseless Article
III in the Deed.
Moreover,

Dunbar, 624 S.E.2d at 591.
a

broad

reading

of

the

term

“Purchaser”

is

consistent with the Pine PSA’s apparent objective of promoting
mineral production.

In addition to spudding obligations, the

Pine PSA’s Article 5 sets forth meetings to discuss drilling
plans, cooperation details in the event of parallel drilling or
well

maintenance

operations,

abandonment

and

restoration

procedures in the event that a well ceases to produce, and a
mineral

royalty

compensation

structure.

This

elaborate

production scheme would be frustrated if PetroEdge could simply
assign its interest to a party that would in no way be subject
to

the

scheme.

Admittedly,

a

contract

need

not

pursue

its

objectives at all costs, and so the Pine PSA’s use of the term
“Purchaser”

could

be

conceived

as

a

limitation

agreement’s effort to promote mineral production.

on

the

Nonetheless,

in light of Section 8.8’s directive, we are satisfied reading
the

term

“Purchaser”

to

be

consistent

limitation on, the Pine PSA’s objectives.

15

with,

rather

than

a

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Our approach is also consistent with relevant federal and
state

authorities

within

this

Circuit.

Those

authorities

confirm the general rule that a successors and assigns provision
places a successor or assign in the shoes of its predecessor or
assignor with respect to the rights and duties given to the
latter under the relevant contract.

See, e.g., Horvath v. Bank

of N.Y., N.A., 641 F.3d 617 (4th Cir. 2011) (applying Virginia
law); Cotiga Dev. Co. v. United Fuel Gas Co., 128 S.E.2d 626 (W.
Va. 1962); see also Cook v. E. Gas & Fuel Assocs., 39 S.E.2d
321, 326-27 (W. Va. 1946) (“Ordinarily the assignee acquires no
greater right than that possessed by his assignor, and he stands
in his shoes.”).
Cotiga, a decision from the Supreme Court of Appeals of
West

Virginia,

is

instructive.

There,

“Cotiga,

as

lessor,

entered into an oil and gas lease with [Woods Oil], as lessee.”
Cotiga, 128 S.E.2d at 630.

The court in Cotiga quoted three

obligations that the lease agreement imposed on lessee Woods
Oil, and all three did so using only the term “Lessee” (i.e.,
not “Lessee, its successors and assigns”).

Id. at 630-31.

The

lease agreement, however, contained the following successors and
assigns

provision:

“All

the

terms,

grants,

conditions

and

provisions of this lease shall extend to and be binding upon the
successors

and

assigns

of

the

parties

(emphasis added in Cotiga).
16

hereto.”

Id.

at

633

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One day after the lease was signed, Woods Oil assigned the
lease to United Fuel.

Id. at 630.

Relying on the successors

and assigns provision, the court in Cotiga had no difficulty
holding assign United Fuel responsible for the above-described
obligations
imposed

that

only

the

on

the

lease

agreement

“Lessee.”

“As

by
a

its

literal
of

result

terms
lease

the

assignment,” the court observed, “United Fuel succeeded to only
such rights as accrued to Woods Oil by the terms of the lease
and thereby became burdened by all restrictions and obligations
thereby

imposed

upon

Woods

Oil.

.

.

.

To

all

intents

and

purposes, United Fuel became the lessee in the place and stead
of Woods Oil[.]”
the

Supreme

practical

Id. at 633–34.

Court

of

approach

Appeals

with

In reaching this conclusion,

of

respect

West
to

Virginia

adhered

successors

and

to

a

assigns

provisions, which we adhere to in this case as well.
Notably,
approach

in

this
Horvath.

Court

recently

In

that

followed

case,

a

this

borrower

practical

argued

that

because a deed of trust defined the term “Lender” as company
“AWL,” a deed provision that vested foreclosure powers in the
“Lender”

empowered

AWL

alone

to

foreclose--and

subsequent purchasers of the deed of trust.
at 624–25.
reasons:

not

any

Horvath, 641 F.3d

This Court rejected that narrow reading for several
it

would

bring

about

the

“absurd

result”

of

a

subsequent purchaser “paying for a worthless document” that the
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purchaser would have “no power to administer or enforce;” it
would contradict a provision stating that “[t]he covenants and
agreements

of

this

Security

Instrument

shall

bind . . . and

benefit the successors and assigns of Lender;” and it would go
against

“good

interest

in

sense,”

the

because

deed

of

“[i]f

trust,

‘Lender’ in any meaningful sense.”

were

to

would

it

AWL

sell

no

longer

be

its
the

Id. at 625 (emphasis added

in Horvath); see also id. (citing with approval the maxim that
contracts must be construed “as a whole”).

Instead, this Court

broadly construed the term “‘Lender’ as applying not only to AWL
but to any subsequent purchaser of the deed of trust.”
For

similar

reasons,

a

broad

construction

Id.

of

the

term

“Purchaser”--one encompassing PetroEdge, and in its place its
successors
5.7(b)
Section

of

and
the

8.8’s

assigns--is
Pine

PSA.

successors

likewise
Such
and

a

appropriate

construction

assigns

for

Section

complies

provision,

avoids

with
the

absurd result of a senseless Pine PSA and Deed, and respects the
reality

that

PetroEdge

is

no

longer

the

“Purchaser”

in

any

meaningful sense for purposes of the Pine PSA or the achievement
of

the

agreement’s

objectives.

conclusion, the district court erred.

18

In

reaching

a

contrary

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C.
Having decided that Section 5.7(b) applies to PetroEdge’s
assign
retains

Statoil,
any

we

force

must
or

next

decide

effect.

whether

Section

that

7.2(a)

provision

contains

two

clauses that set deadlines for certain provisions of the Pine
PSA, with the first one expressly excepting Sections 5.4 through
5.9 from its scope.

Additionally, Section 7.2(a) contains a

residual clause, which provides, “The remainder of [the Pine
PSA] shall survive the Execution Date so long as Purchaser holds
any interest in the [Marcellus] Mineral Rights.”

J.A. 61.

We

hold that the residual clause applies to Section 5.7(b).

We

also hold that the residual clause is ambiguous as to whether
Section 5.7(b) survives so long as PetroEdge alone holds any
interest in the Marcellus Mineral Rights, or so long as any such
interest is held by PetroEdge, its successors or assigns.

The

subsequent conduct of Pine and PetroEdge nonetheless clarifies
that the latter reading is the correct one.

1.
Before exploring the meaning of Section 7.2(a)’s residual
clause, we must address whether that clause even governs Section
5.7(b).

Section

5.7(b)

is

not

governed

by

Section

7.2(a)’s

second clause, and it is specifically excepted from the scope of
Section 7.2(a)’s first clause.

Because Section 5.7(b) is not
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governed by either clause, it is sensible to place it within the
scope of Section 7.2(a)’s residual clause (which governs the
“remainder” of the Pine PSA).
Pine resists this conclusion.
Section
cannot

7.2(a)’s
govern

residual

Section

clause

5.7(b),

According to Pine, because
is

which

a
is

general

catch-all,

specifically

from the scope of Section 7.2(a)’s first clause.

it

excepted

Pine supports

this argument with a reference to the interpretive principle
that

general

language

must

usually

yield

to

more

specific

language when the two conflict.
Unfortunately for Pine, its reliance on this principle is
misplaced.
specific

In

this

exception

in

case,

there

Section

is

no

7.2(a)’s

conflict
first

between

clause

general language in Section 7.2(a)’s residual clause.

and

the
the

Rather,

the latter clause simply picks up, inter alia, the provisions
specifically dropped out of the former clause. 4

Thus, we have no

difficulty reading Section 7.2(a)’s residual clause to govern
Section 5.7(b).

4

Cf. Shannondale, Inc. v. Jefferson Cty. Planning & Zoning
Comm’n, 485 S.E.2d 438, 498 (W. Va. 1997) (per curiam)
(rejecting the argument that a general ordinance provision was
superseded by a specific ordinance provision, because the two
could be reconciled).

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2.
Having arrived at this determination, we now turn to the
issue of how Section 7.2(a)’s residual clause impacts Section
5.7(b)

following

PetroEdge’s

assignment

to

Statoil.

If

the

residual clause carries a terminating effect when PetroEdge, as
“Purchaser,”

ceases

to

have

any

interest

in

the

Marcellus

Mineral Rights, then PetroEdge’s assignment would give rise to a
termination of Section 5.7(b); if the residual clause carries a
preservation effect so long as PetroEdge, or its successors and
assigns,

has

interest

in

the

Marcellus

Mineral

Rights,

then

Section 5.7(b) is preserved even after PetroEdge’s assignment.
We acknowledge that there are persuasive arguments on both sides
of this issue.
According to Statoil, when the residual clause instructs
that it preserves the provisions within its scope “so long as
Purchaser holds any interest in the [Marcellus] Mineral Rights,”
J.A. 61, the clause sets as a deadline the date that PetroEdge
ceases

to

hold

references

any

the

mineral

introductory

interests.

For

paragraph’s

support,

Statoil

identification

of

PetroEdge as the Pine PSA “Purchaser.”
Statoil rejects the notion that the term “Purchaser” in
Section

7.2(a)’s

successors
deadline

and
that

residual

assigns,
the

clause

because

residual

can
under

clause
21

include
such

purports

a
to

PetroEdge’s
reading
set

the

becomes

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illusory.

Filed: 01/18/2017

They

argue

that

if

Pg: 22 of 27

“Purchaser”

in

Section

7.2(a)

includes successors and assigns, then none of the provisions to
which the residual clause is applicable will ever expire and
will last into perpetuity.
Meanwhile,
reading

of

there

the

are

also

residual

arguments

clause--one

favoring
that

a

broader

preserves

the

provisions within its scope so long as PetroEdge, or in its
place

its

successors

or

assigns,

Marcellus Mineral Rights.
only

to

“Purchaser,”

to

holds

any

interest

in

the

Although the residual clause refers
the

extent

that

the

residual

clause

shapes the rights and duties of the parties, Section 8.8 seems
to

broaden

“Purchaser”

to

include

PetroEdge’s

successors

and

assigns.
This broad construction may impair the residual clause’s
utility as a deadline clause, but, one may argue, there is no
need for the residual clause to serve such a function.

Whereas

Section 7.2(a)’s first two clauses set specific deadlines for
the provisions they govern, its residual clause could be read as
a clause intended to attach a longer effect to the provisions it
governs.

Although

this

reading

would

allow

PetroEdge’s

successor or assign to participate in the Pine PSA’s mineral
production scheme in PetroEdge’s place, there is no indication
in the Pine PSA that PetroEdge was irreplaceable in this scheme.

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In our view, both sides present reasonable constructions of
Section 7.2(a)’s residual clause.

“The meaning of a word is to

be considered in the context in which it is employed.”
Johnson,

Simmerman

&

Broughton,

L.C.,

576

S.E.2d

Legg v.
532,

537

(W. Va. 2002) (per curiam) (internal quotation marks omitted);
see

also

Torres

v.

Lynch,

136

S.

Ct.

1619,

1625

(2016)

(explaining that “many words” can “take[] on different meanings
in

different

conjunction

contexts”).
with

Although

Section

the

term

“Purchaser”--in

8.8--unambiguously

encompasses

PetroEdge’s successors and assigns in the context of rights and
duties provisions, it is difficult to conclude that such a broad
construction

is

unambiguously

proper

in

the

residual clause of a limitations provision.

context

of

a

On the other hand,

in light of the traditional rule that an assign stands in the
shoes

of

the

assignor,

the

residual

clause

is

inadequate

to

indicate a clear intent by the parties to in large part depart
from this rule. 5

Because the term “Purchaser” is “reasonably

susceptible of two different meanings,” we hold that the term is
ambiguous in Section 7.2(a).

Tawney, 633 S.E.2d at 28.

5

Cf. Tawney, 633 S.E.2d at 28 (finding an ambiguity where,
“in light of [West Virginia’s] traditional rule that lessors are
to receive a royalty of the sale price of gas, the general
language at issue simply [was] inadequate to indicate an intent
by the parties to agree to a contrary rule”).

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Having identified an ambiguity in Section 7.2(a)’s residual
clause, we now resort to extrinsic evidence for clarification.
Yoho, 406 S.E.2d at 697.

In this case, we are guided by the

“practical construction given to the contract by the parties
themselves . . . subsequent[]”

to

its

execution.

Kelley,

Gidley, Blair & Wolfe, Inc. v. City of Parkersburg, 438 S.E.2d
586, 589 (W. Va. 1993) (per curiam) (internal quotation marks
omitted).

As “Lord Sugden once said: ‘Tell me what the parties

have done under a contract and I will tell you what the contract
means.’”

Watson v. Buckhannon River Coal Co., 120 S.E. 390, 394

(W. Va. 1923).
PetroEdge’s
carrying

no

assignment.

conduct

provision

shows
that

that

it

read

terminates

the

Section

Pine

PSA

5.7(b)

as

upon

In its post-assignment letter to Pine, PetroEdge

noted that Statoil was now the “Purchaser” under the Pine PSA,
but made no suggestion that Section 7.2(a)’s residual clause
freed Statoil of any of PetroEdge’s duties under the agreement.
On

the

contrary,

communicated
PetroEdge’s
Statoil

was

to

in

the

Statoil

duties.
taking

Statoil
that

PSA,

the

The

Statoil

the

assigned

PetroEdge

latter

PSA

was

expressly

assets

expressly
acquiring
noted

subject

to

that
the

obligations arising from the Pine PSA, and it specifically cited

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the “unfulfilled drilling obligations,” J.A. 449, of “two (2)
additional wells,” J.A. 451, as arising from the Pine PSA. 6
Pine’s conduct is likewise consistent with a broad reading
of

Section

7.2(a)’s

residual

clause.

Following

PetroEdge’s

assignment, Pine sought Statoil’s performance under the Pine PSA
(and under Section 5.7(b) in particular) through multiple reachout efforts and litigation with Statoil.

This conduct comports

with the notion that Section 7.2(a) did not, post-assignment,
terminate Section 5.7(b).
In light of this conduct by Pine and PetroEdge, we conclude
that Section 7.2(a)’s residual clause was intended to preserve
the provisions within its scope so long as PetroEdge--or its
successors or assigns--possessed any interest in the Marcellus
Mineral Rights.
assign,

Because Statoil, in its capacity as PetroEdge’s

possesses

obligations

of

such

Section

interest,
5.7(b)

we

retain

6

hold

that

force

and

the

spudding

continue

to

Statoil insists that, through this language, PetroEdge was
simply citing its own drilling obligations under the Pine PSA.
We disagree.
If PetroEdge truly believed that its drilling
obligations were not being passed down to Statoil, then
presumably PetroEdge would have either omitted reference to
those obligations altogether, or would have at least appended to
its citation of those obligations in the Statoil PSA the crucial
detail that those obligations were not being passed down to
Statoil.
PetroEdge did not do so, and so we reject Statoil’s
creative reasoning.

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govern Statoil.

Pg: 26 of 27

Again, we reject the district court’s contrary

conclusions. 7

IV.
Statoil presents an alternative ground for affirming the
district court’s decision to rule against Pine on its breach of
contract

counterclaim.

Statoil

asserts

that

even

if

it

was

obligated to spud, its failure to do so caused Pine no injury,
because
that

spudding

would

is

not

only

a

preliminary

necessarily

lead

to

development
the

hydrocarbons and resulting royalty payments.

procedure

production

of

Pine, meanwhile,

contends that Statoil understates both the requirements of the
spudding obligation, and the extent to which non-compliance with
those

requirements

impaired

Pine’s

prospects

of

ultimately

receiving royalty payments.

7

Although we rule in favor of Pine, we do so without
reliance on the contra proferentem rule that Pine urges upon us.
That rule dictates that residual ambiguity be construed against
drafter PetroEdge and in Pine’s favor, Evans v. Bayles, 787
S.E.2d 540, 541 n.1 (W. Va. 2016); however, in this case
PetroEdge and Pine do not disagree on the definition of
“Purchaser.” We acknowledge Pine’s citation to cases suggesting
that contra proferentem applies even to assigns, see Appellant’s
Br. at 56-57, but note that those cases do not deal with a
scenario where the assign’s construction conflicts with the
construction shared by both the drafter-assignor and the nondrafting party.
This case presents such a scenario, and so in
light of our ability to resolve this case otherwise, we do not
rely on contra proferentem.

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We

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acknowledge

our

Pg: 27 of 27

discretion

to

affirm

on

any

ground

supported by the record, even if it was never relied upon by the
district court.

See Drager v. PLIVA USA, Inc., 741 F.3d 470,

474 (4th Cir. 2014).

Nonetheless, we decline to engage in a

complex injury analysis here based on short passages from the
parties’ briefs.

Instead, we leave the issue of injury for the

district court to address on remand in the first instance.

See

Singleton v. Wulff, 428 U.S. 106, 120 (1976) (“It is the general
rule,

of

course,

that

a

federal

appellate

court

does

not

consider an issue not passed upon below.”); Goldfarb v. Mayor &
City Council of Baltimore, 791 F.3d 500, 515 (4th Cir. 2015)
(“The district court is in a better position to consider the
parties’ arguments in the first instance, which can be presented
at

length

rather

than

being

discussed

in

appellate

briefs

centered on the issues the district court did decide.”).

V.
For the foregoing reasons, we vacate the judgment of the
district court.

We remand this case with instructions to the

district court to grant summary judgment in favor of Pine on
Statoil’s declaratory judgment claims, and to consider in the
first

instance

Statoil’s

injury

argument

in

connection

with

Pine’s breach of contract counterclaim.
VACATED AND REMANDED
27