Mountaineer Minerals, LLC v. Antero Resources Corporation

Filing 76

MEMORANDUM OPINION AND ORDER GRANTING AS FRAMED PLAINTIFFS MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANTS MOTION FOR SUMMARY JUDGMENT: The plaintiffs motion for summary judgment 52 is GRANTED AS FRAMED and the defendants motion for summary jud gment 54 is DENIED. The plaintiffs Motion to Amend Complaint to Add Defendants 23 and the defendants Motion to CompelJoinder of Perkins 24 are DENIED AS MOOT. ORDERED that this civil action be DISMISSED and STRICKEN from the active docket of this Court. The Clerk is DIRECTED to enter judgment on this matter. Signed by Senior Judge Frederick P. Stamp, Jr on 8/10/17. (jss)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MOUNTAINEER MINERALS, LLC,
Plaintiff,
v.

Civil Action No. 1:16CV28
(STAMP)

ANTERO RESOURCES CORPORATION,
a Delaware corporation formerly known as
ANTERO RESOURCES APPALACHIAN CORPORATION,
Defendant.
MEMORANDUM OPINION AND ORDER
GRANTING AS FRAMED PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
AND DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
I.

Background

The plaintiff originally filed this civil action in the
Circuit Court of Ritchie County, West Virginia.

Thereafter, the

defendant removed the action to this Court based on diversity
jurisdiction.

The plaintiff is Mountaineer Minerals, LLC, which

alleges that it is the rightful owner of the Oil and Gas Marcellus
Leasehold Rights (the “Marcellus Rights”), which arise from an oil
and gas lease (the “Collins Lease”) dated June 11, 1919.

The

Collins Lease was recorded in Ritchie County, West Virginia, and
executed by William J. Collins and Sarah Collins to E.D. Willis.
The

defendant

is

Antero

Resources

Corporation,

a

Delaware

corporation that engages in the drilling and production of oil and
gas wells in West Virginia and other states.

The plaintiff claims

that the defendant was not a bona fide purchaser of the Marcellus
Rights because the defendant had actual notice of the ownership

claim of Perkins Oil and Gas, Inc. (“Perkins”), the plaintiff’s
predecessor in interest to those rights.
The complaint alleges that the dispute over ownership of the
Marcellus Rights goes back to the July 20, 1985 assignment of the
Collins Lease by Crude Oil and Gas, Inc. (“Crude”) to Monongahela
Leasing, Inc.

That assignment was recorded in Doddridge County,

West Virginia, on July 31, 1985, but not recorded in Ritchie
County, West Virginia, until August 2, 2013.

Then, on October 3,

1986, Monongahela Leasing assigned the Collins Lease to P. D. Farr,
II.

That assignment was recorded in Ritchie County on October 7,

1986.

On August 30, 1996, P. D. Farr, II assigned the Collins

Lease to Ritchie Petroleum Corporation.

That assignment was

recorded on September 6, 1996 in Ritchie County. On July 19, 2004,
Ritchie Petroleum assigned the Collins Lease to Perkins.
assignment was recorded in Ritchie County on July 21, 2004.

That
On

October 29, 2015, the plaintiff acquired an assignment from Perkins
to the portion of the Collins Lease known as the Marcellus Rights.
Thus, the only assignment of the Collins Lease not recorded in
Ritchie County was the 1985 assignment from Crude to Monongahela
Leasing.
The complaint then alleges that Crude assigned the Collins
Lease a second time on December 18, 2012.

Their first assignment

of the Collins Lease was to Monongahela Leasing in 1985, and this
second assignment of the same lease was to Clarence E. Sigley, Sr.

2

The complaint notes that Mr. Sigley notarized the signature for
both parties when Crude first assigned the Collins Lease to
Monongahela Leasing.
Sigley

acquired

the

The complaint states that, on the day Mr.
Collins

Lease,

December

18,

2012,

he

immediately assigned his rights in the Collins Lease to the
defendant.

Both the assignment to and the assignment from Mr.

Sigley were recorded in Ritchie County.
Lastly, the complaint alleges that, on August 12, 2012, four
months

before

the

defendant

acquired

its

assignment,

the

defendant’s Administrative and Legal Manager, J. Kevin Ellis, sent
an email acknowledging that Perkins was the rightful owner of the
Collins Lease.

For those reasons, the plaintiff claims that, on

the date the defendant acquired its assignment, the defendant had
actual notice that Perkins, not Crude, was the rightful owner of
the Collins Lease.

Thus, the plaintiff states that the defendant

cannot be afforded bona fide purchaser protection under West
Virginia law.
At issue in this memorandum opinion are the parties’ cross
motions for summary judgment.

ECF Nos. 52 and 54.

After filing

the cross motions for summary judgment and all responses and
replies, the parties submitted to the Court a stipulation of
undisputed facts regarding the chain of title of the Collins Lease.
ECF No. 70.

In the stipulation, the parties indicate their

agreement to the chain of title beginning with the 1919 lease from

3

William J. Collins and Sarah Collins to E.D. Willis and up to the
1979 assignment of the Collins Lease by Consumers Gas Utility
Company to W.C.P. Partnership.

That last assignment agreed to in

the stipulation was recorded on September 22, 1982, in Ritchie
County, West Virginia.
For the reasons set forth below, the plaintiff’s motion for
summary judgment is granted as framed and the defendant’s motion
for summary judgment is denied.
II.

Cross Motions for Summary Judgment

The parties have now filed cross motions for summary judgment,
which are discussed in turn below.

Both parties filed responses

and replies to the respective motions for summary judgment.
A.

Plaintiff’s Motion for Summary Judgment
The plaintiff’s motion alleges that, around April 2011, the

defendant initiated negotiations with Perkins to purchase the
Marcellus Rights in the Collins Lease, and that Perkins continued
those negotiations with the defendant in good faith for a period of
two years. A purchase sale agreement was finalized and executed by
the parties on February 11, 2013, in which the defendant would
purchase the Marcellus Rights from Perkins for $2,785,000.00.

The

plaintiff then alleges that well into the negotiation process, in
December 2012, the defendant “arranged a plot” to purchase the
entire Collins Lease from Crude for $867,000.00.
alleges

that

the

defendant,

in

4

arranging

this

The plaintiff
transaction,

contacted Mr. Sigley, a third party, to acquire an assignment from
Crude.

Mr. Sigley was then to assign the lease to the defendant.

The plaintiff alleges that the defendant financed this transaction
by paying Mr. Sigley $500.00 per acre and paying Crude $1,000.00
per acre.
The plaintiff also alleges that the same representative for
the defendant, Mr. Ellis, negotiated both the transaction between
the defendant and Perkins and between the defendant and Crude. The
plaintiff then alleges that Mr. Ellis continued negotiations with
Perkins even after purchasing the assignment from Crude and, on
February 11, 2013, signed the contract with Perkins in bad faith.
The plaintiff states that, at the time the contract was executed,
the defendant had neither informed Perkins that it had purchased an
assignment from Mr. Sigley nor had recorded the assignment.

Thus,

the plaintiff claims that Perkins had no actual, constructive, or
inquiry

notice

that

the

defendant

was

claiming

an

ownership

interest in the Marcellus Rights at the time Perkins entered into
the contract with the defendant.

The plaintiff then contends that

the defendant did not provide Perkins with a defect notice until
March 22, 2013, the day after the defendant recorded its assignment
from Mr. Sigley.

In accordance with the defect cure procedure

outlined in their February 11, 2013 contract, Perkins cured the
defect in the chain of title by recording the assignment from Crude
to

Monongahela

Leasing

in

Ritchie

5

County.

Nonetheless,

the

plaintiff contends that the defendant still refused to accept the
legitimacy of the curative documents and continues to assert
ownership of the Collins Lease.

Lastly, the plaintiff claims that

the defendant has resorted to self help by drilling at least ten
horizontal wells on the Collins Lease.
Accordingly,

the

plaintiff’s

motion

argues

that

(1)

the

defendant had inquiry notice and is not a bona fide purchaser, (2)
the defendant breached its February 11, 2013 contract with Perkins,
and (3) the defendant has engaged in unfair dealing in negotiations
for the purchase of the Marcellus Rights.

In response, the

defendant alleges that the plaintiff never pled claims asserting
breach of contract or unfair dealing.
B.

Defendant’s Motion for Summary Judgment
The defendant’s motion for summary judgment argues that the

plaintiff is not entitled to declaratory judgment because it paid
no consideration for and, thus, has an insufficient interest in the
Marcellus Rights to the Collins Lease.

The defendant notes that,

by contract, the plaintiff is not obligated to pay Perkins for the
Marcellus Rights unless a court determines that the plaintiff is
the rightful owner of the Collins Lease.
The defendant also argues that it nonetheless holds a superior
title by virtue of its unbroken, recorded chain of title.

The

defendant claims that, as part of its due diligence in December
2012, Mr. Ellis obtained an ownership report on the Collins Lease

6

showing that Crude owned the formation relevant to the defendant’s
interest in the Collins Lease, not Perkins.

The December 2012

ownership report identified Crude as the owner below the Fifth Sand
formation of the Collins Lease, which included the Marcellus
formation that is thousands of feet below the Fifth Sand formation.
The December 2012 ownership report identified Perkins as owning
only the leasehold rights through the Fifth Sand formation, and not
the Marcellus Rights below.

The defendant further asserts that

Perkins did not provide to the defendant (1) the 1985 assignment
from Crude to Monongahela Leasing, which was only recorded in
Doddridge County at the time of the defendant’s due diligence or
(2) the 1986 assignment from Monongahela Leasing to P. D. Farr, II.
The defendant states that it did not obtain a copy of the 1985
assignment to Monongahela Leasing until the defendant sent a defect
notice to Perkins.

The defendant also states that Perkins did not

record that assignment until after the defendant sent its defect
notice, and that Mr. Sigley went to the Ritchie County courthouse
to check that the Collins Lease was still in Crude’s name before
purchasing the Marcellus Rights from Crude.

Thus, the defendant

asserts that it had no reason to question the unbroken, recorded
chain of title showing Crude with the leasehold rights below the
Fifth Sand formation, which includes the Marcellus Rights.

The

defendant claims that Perkins’s purported interest was explained by

7

the record title showing it with only the leasehold rights through
the Fifth Sand formation.
III.

Applicable Law

Under Rule 56(c) of the Federal Rules of Civil Procedure,
A party asserting that a fact cannot be or is genuinely
disputed must support the assertion by:
(A) citing to particular parts of materials in the
record, including depositions, documents, electronically
stored
information,
affidavits
or
declarations,
stipulations . . . admissions, interrogatory answers, or
other materials; or
(B) showing that the materials cited do not
establish the absence or presence of a genuine dispute,
or that an adverse party cannot produce admissible
evidence to support the fact.
Fed. R. Civ. P. 56(c).

The party seeking summary judgment bears

the initial burden of showing the absence of any genuine issues of
material fact.
(1986).

See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23

“The burden then shifts to the nonmoving party to come

forward with facts sufficient to create a triable issue of fact.”
Temkin v. Frederick County Comm’rs, 945 F.2d 716, 718 (4th Cir.
1991), cert. denied, 502 U.S. 1095 (1992) (citing Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)). However, as the
United States Supreme Court noted in Anderson, “Rule 56(e) itself
provides that a party opposing a properly supported motion for
summary judgment may not rest upon the mere allegations or denials
of his pleading, but . . . must set forth specific facts showing
that there is a genuine issue for trial.”
256.

“The

inquiry

performed

is

8

the

Anderson, 477 U.S. at
threshold

inquiry

of

determining whether there is the need for a trial—whether, in other
words, there are any genuine factual issues that properly can be
resolved only by a finder of fact because they may reasonably be
resolved

in

favor

of

either

party.”

Id.

at

250;

see

also

Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979)
(“Summary judgment ‘should be granted only in those cases where it
is perfectly clear that no issue of fact is involved and inquiry
into the facts is not desirable to clarify the application of the
law.’” (citing Stevens v. Howard D. Johnson Co., 181 F.2d 390, 394
(4th Cir. 1950))).
In Celotex, the Supreme Court stated that “the plain language
of Rule 56(c) mandates the entry of summary judgment, after
adequate time for discovery and upon motion, against a party who
fails to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party
will bear the burden of proof at trial.”

Celotex, 477 U.S. at 322.

In reviewing the supported underlying facts, all inferences must be
viewed in the light most favorable to the party opposing the
motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986).
IV.

Discussion

For the following reasons, this Court grants as framed the
plaintiff’s motion for summary judgment and denies the defendant’s
motion for summary judgment.

9

A.

The Defendant Had Inquiry Notice of Perkins’s Ownership Claim

to the Marcellus Rights
“A bona fide purchaser of land is one who purchases for a
valuable consideration, paid or parted with, without notice of any
suspicious circumstances to put him upon inquiry.”

Stickley v.

Thorn, 106 S.E. 240, 242 (W. Va. 1921) (citing Carpenter Paper Co.
v. Wilcox, 70 N.W. 228 (Neb. 1897)); see also Wolfe v. Alpizar, 637
S.E.2d 623, 628 (W. Va. 2006) (“A bona fide purchaser is one who
actually purchases in good faith.” (quoting Subcarrier Commc’ns,
Inc. v. Nield, 624 S.E.2d 729, 737 (W. Va. 2005))).

“Whatever is

sufficient to direct the attention of a purchaser to prior rights
and equities of third parties, so as to put him on inquiry into
ascertaining their nature, will operate as notice.”

Pocahontas

Tanning Co. v. St. Lawrence Boom and Mfg. Co., 60 S.E. 890 (W. Va.
1908).

Notice

diligence”

such

is

imputed

as

“a

where

reasonably

“the

exercise

careful

of

inspection

ordinary
of

the

premises” would have alerted the purchaser of a competing interest.
Fanti v. Welsh, 161 S.E.2d 501, 505 (W. Va. 1968).

For instance,

“[w]hen a prospective buyer has reasonable grounds to believe that
property may have been conveyed in an instrument not of record, he
is obliged to use reasonable diligence to determine whether such
previous conveyance exists.” Eagle Gas Co. v. Doran Assocs., Inc.,
387 S.E.2d 99, 102 (W. Va. 1989).

10

“[T]he burden of proving notice

to a purchaser for value is upon him who alleges it.”

Alexander v.

Andrews, 64 S.E.2d 487, 491 (W. Va. 1951).
The defendant relies heavily on Trans Energy, Inc. v. EQT
Production Company, 743 F.3d 895 (4th Cir. 2014), in which the
United States Court of Appeals for the Fourth Circuit upheld this
Court’s holding that one of the plaintiffs, Prima Oil Company, was
a bona fide purchaser and had superior title to the oil and gas
lease “by virtue of its unbroken, recorded chain of title.”
F.3d at 907.

743

The Fourth Circuit “deem[ed] [the] non-specific

references to contractual obligations insufficient to cause a
reasonable buyer to conduct a further investigation outside the
record.”

Id. at 906.

The Fourth Circuit held that, pursuant to

West Virginia Code § 40-1-9, unrecorded indentures that purported
to sever gas rights from oil rights were invalid as against a bona
fide purchaser. Id. The Fourth Circuit reasoned that “a purchaser
is not punished for failing to conduct due diligence when all
reasonable inquiries would nevertheless have failed to uncover a
competing claim” and that “‘vague rumor or mere surmises are
insufficient in themselves’ to create constructive notice.”

Id.

(quoting Pocahontas Tanning Co., 60 S.E. at 893).
This Court finds that the present case is distinguishable from
Trans Energy by virtue of the defendant’s direct negotiations with
Perkins that provided the defendant with knowledge of suspicious
circumstances and imputed inquiry notice.

11

Unlike in Trans Energy,

reasonable inquiries in this case would have uncovered Perkins’s
competing claim, and constructive notice was created by much more
than “vague rumor or mere surmises.” The defendant’s approximately
two-year long negotiations, beginning in April 2011 (ECF No. 55,
Ex. 4), to purchase various rights in the Collins Lease should have
put the defendant on notice that it needed to ascertain the nature
of Perkins’s rights in the Collins Lease.

The first draft of the

purchase sale agreement, dated March 23, 2011, demonstrates that
the negotiations were for the purchase of the Marcellus Rights,
which are identified by location in that first draft of the
purchase sale agreement.

ECF No. 53, Ex. 2.

A later draft of the

purchase sale agreement, dated June 4, 2012, also explicitly states
that the purchase would include the Marcellus Rights, which are
identified as the formations beginning at the top of the Rinestreet
formation and going through 100 feet below the top of the Onondaga
formation.

ECF No. 53, Ex. 3.

Furthermore, affidavits from Mr. Randy Lancaster, an employee
of Perkins, and Mr. Clay Perkins, Vice President of Operations and
part owner of Perkins, assert that Mr. Lancaster and Mr. Perkins
were engaged in negotiations with Antero to purchase the Marcellus
Rights specifically. ECF No. 53, Exs. 18 and 19. Those affidavits
also state that the defendant never made any inquiry into the
suspicious circumstances surrounding the ownership of the Marcellus
Rights.

Id.

12

Mr.

Lancaster

sent

an

email

to

Mr.

Ellis,

Antero’s

Administrative and Legal Manager, on August 13, 2012, which should
have further prompted the defendant to conduct due diligence beyond
looking at the record title.

The email stated, in relevant part,

as follows:
The Perkins family and I are becoming very concerned
about the lack of communication regarding Antero
activities on our leases . . . . Royalty owners for [the
Collins Lease] have been approached by Antero about
signing a pooling amendment. We don’t understand why
this would be happening at this time, and we are assuming
it is a misunderstanding. I am regularly asked about
this from the Perkins family, and I can only reply that
I left another message and have not heard back from
Antero.
It is becoming difficult to understand.
I
realize this is a busy time for everybody, but I hope we
can get this corrected and begin working together more
productively.
ECF No. 53, Ex. 20.

Importantly, Mr. Lancaster sent this email to

Mr. Ellis over four months before the defendant acquired the
assignment from Mr. Sigley.

And, the next day, Mr. Ellis replied

as follows:
I was made aware recently that our land brokers had sent
out proposed pooling agreements to some of the current
royalty owners on the [Collins Lease] in Ritchie County
that is owned by Perkins. I wanted to let you all know
this was simply an error on the part of our land brokers.
We have spoken with the group who handles the pooling
agreements and they have stopped sending the pooling
agreements out. If, however, you become aware of another
incident where this occurs, please send me an email.
ECF No. 53, Ex. 21.
In addition to the December 2012 ownership report relied upon
by the defendants in determining that Crude owned the Marcellus

13

Rights, the defendants also received an earlier ownership report
prepared on October 29, 2012.

ECF No. 53, Ex. 22.

The earlier

ownership report lists Perkins as the owner of the Marcellus
Rights.

That ownership report indicates that there were Perkins

wells on the Collins Lease going down to 6,000 feet, which is
directly

above

the

Marcellus

formation.

Thus,

the

earlier

ownership report showed that Perkins had wells thousands of feet
below the Fifth Sand formation, where the defendants now claim they
believed Perkins’s rights ended and Crude’s rights began.

Yet,

less than two months after receiving the October 29, 2012 ownership
report, the defendant acquired the assignment of the Marcellus
Rights from Crude in December 2012, without ever asking Perkins any
question about its claim to the Marcellus Rights as set forth in
the earlier ownership report.
Mr.

Ellis

even

admitted

in

his

deposition

that

he

had

knowledge of Perkins’s ownership claim to the Marcellus Rights.
ECF No. 53, Exs. 4 and 5.

Specifically, Mr. Ellis responded to

questions about Perkins’s ownership claim to the Marcellus Rights
as follows:
[Question:]
[Perkins] represented they owned the
Marcellus rights specifically, correct?
[Answer:]
They said, “We own the lease,” whatever
that may or may not mean, but I didn’t know. I just knew
that they said, “We have the Collins lease.”
[Question:]
And it was in the Purchase Sale Agreement,
correct?
[Answer:]
Sure.
[Question:]
And the Purchase Sale Agreement only
applied to the Marcellus rights, isn’t that true?
14

[Answer:]
Yes, uh-huh.
[Question:]
So therefore, Perkins claimed that they
owned the Marcellus rights in the Collins lease?
[Answer:]
Sure, they claimed they owned it.
ECF No. 53, Ex. 4.

Mr. Ellis stated in his deposition that the

defendant “[wasn’t] interested in the shallow dimensional producing
formations”

and

that

he

“[couldn’t]

think

of

any”

pooling

modifications that the defendant had ever sent out for shallow
wells.

ECF No. 55, Ex. 4 at 5-6.

Thus, Mr. Ellis should have been

alerted by Mr. Lancaster’s email, which asked why the defendant was
approaching royalty owners about signing a pooling amendment, that
Perkins had a competing interest in the deeper Marcellus Rights.
Combined with the October 29, 2012 ownership report and the
affidavits of Mr. Lancaster and Mr. Perkins, Mr. Ellis’s deposition
demonstrates

that

the

negotiations

between

Perkins

and

the

defendant were directed towards the purchase of the Marcellus
Rights.
The above circumstances are sufficiently suspicious to impute
to the defendant inquiry notice of Perkins’s competing interest in
the Marcellus Rights.

The defendant’s ongoing negotiations with

Perkins to purchase portions of the Collins Lease, including the
Marcellus Rights, should have alerted the defendant to Perkins’s
ownership

claim

to

the

Marcellus

Rights.

And,

given

those

reasonable grounds to believe that the Marcellus Rights may have
been conveyed in an instrument not of record, the defendant was
obliged under West Virginia law to use reasonable diligence to
15

determine whether a previous conveyance existed.

Under these

circumstances, the defendant was not permitted to simply rely on
Crude’s record title without inquiring into Perkins’s competing
claim.
Additionally, this Court finds that the defendant is not a
bona fide purchaser because it did not “actually purchase[] in good
faith.”

Wolfe, 637 S.E.2d at 628 (quoting Subcarrier Commc’ns,

Inc., 624 S.E.2d at 737).

After having already acquired the

Marcellus Rights from Crude on December 18, 2012, the defendant
conducted a meeting with Perkins in January 2013, during which the
defendant removed language from the purchase sale agreement that
would allow either party to opt out of the contract if defected
acreage took the approved acreage total to below eighty percent of
the original stated acreage.

ECF No. 53, Ex. 19.

At that January

2013 meeting, the defendant did not disclose to Perkins that it had
already purchased the Marcellus Rights in December 2012, from Mr.
Sigley.

Id.

The defendant still did not disclose that it had

already purchased the Marcellus Rights from Mr. Sigley when it
executed the final purchase sale agreement with Perkins on February
11, 2013, even though the contract identified Perkins as the owner
of the Marcellus Rights.

Id.

Then, on March 22, 2013, Perkins received a defect notice from
the defendant regarding the Marcellus Rights, which was the first
time the defendant had ever alerted Perkins of a potential defect.

16

ECF No. 53, Ex. 14.

The defendant recorded its assignment of the

Marcellus Rights from Mr. Sigley one day prior to providing Perkins
with the defect notice, on March 21, 2013.

ECF No. 53, Ex. 11.

Additionally, the defendant did not stop drilling wells on the
Marcellus Rights after the plaintiff filed this suit against them.
ECF No. 53, Ex. 17.
The Court finds from these circumstances that the defendant
did not actually purchase the Marcellus Rights from Mr. Sigley in
good faith.

Rather, the circumstances suggest that the defendant

took steps to ensure that Perkins did not become aware of a
potential defect in its claim to the Marcellus Rights until after
the February 11, 2013 purchase sale agreement was executed without
the opt-out language.

Accordingly, the defendant was not a bona

fide purchaser of the Marcellus Rights and is not entitled to the
rights and protections of a bona fide purchaser.
B.

A Declaration of the Plaintiff’s Ownership of the Marcellus

Rights Is Proper Under the Federal Declaratory Judgment Act
A claim for declaratory relief originally filed in state court
under

state

law

is

converted

to

a

claim

under

the

federal

Declaratory Judgment Act, 28 U.S.C. § 2201, et seq., upon removal.
See Barber v. Magnum Land Servs., LLC, No. 1:13CV33, 2014 WL
5148575,

at

*8

(N.D.

W.

Va.

Oct.

14,

2014).

Accordingly,

“[f]ederal standards guide the inquiry as to the propriety of
declaratory relief in federal courts.”

17

White v. Nat’l Union Fire

Ins. Co., 913 F.2d 165, 167 (4th Cir. 1990).

In federal courts,

declaratory judgment “is appropriate ‘when the judgment will serve
a useful purpose in clarifying and settling the legal relations in
issue, and . . . when it will terminate and afford relief from the
uncertainty,

insecurity,

and

controversy

giving

rise

to

the

proceeding.’” Centennial Life Ins. Co. v. Poston, 88 F.3d 255, 256
(4th Cir. 1996) (quoting Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d
321, 325 (4th Cir. 1937)).
The Fourth Circuit, in Volvo Construction North America, Inc.
v. CLM Equipment Company, Inc., 386 F.3d 581 (4th Cir. 2004),
identified the three required elements for a declaratory judgment
claim.

Those elements are as follows:

(1) the complaint alleges an ‘actual controversy’ between
the parties ‘of sufficient immediacy and reality to
warrant issuance of a declaratory judgment;’ (2) the
court possesses an independent basis for jurisdiction
over the parties (e.g., federal question or diversity
jurisdiction); and (3) the court does not abuse its
discretion in its exercise of jurisdiction.
Volvo Constr. Equip. N. Am., Inc., 386 F.3d at 592.
The defendant argues that the plaintiff is not entitled to a
declaration under the federal Declaratory Judgment Act because it
paid no consideration for its interest in the Marcellus Rights.
The defendant cites Nationwide Agribusiness Insurance Company v.
Degasperin, No. 1:08CV184, 2011 WL 2728302 (N.D. W. Va. July 12,
2011), in which this Court held in a declaratory judgment action
that a party asserting a derivative interest based on an insurance

18

contract was bound by collateral estoppel because her rights were
coterminous with those of the policyholder.

The defendant points

out that, in Degasperin, this Court relied on Conley v. Spillers,
301 S.E.2d 216 (W. Va. 1983), which held that collateral estoppel
does not require mutuality of parties and may be asserted against
a person in privity to a party of the prior action.

Thus, the

defendant contends that, “because [the plaintiff] has nothing at
stake in this action, the Court should not grant declaratory relief
unless it determines that [Perkins] will be bound by collateral
estoppel

by

virtue

of

the

plaintiff] and [Perkins].”

privity

of

contract

between

[the

ECF No. 55 at 15.

However, in West Virginia, “valuable consideration, in the
sense of the law, may consist either in some right, interest,
profit, or benefit accruing to the one party, or some forbearance,
detriment, loss, or responsibility given, suffered, or undertaken
by the other.”

Tabler v. Hoult, 158 S.E. 782, 782 (W. Va. 1931).

The plaintiff states in its pleadings that it has assumed the risk
and

expense

of

litigating

this

matter

in

exchange

assignment of the Marcellus Rights from Perkins.

for

the

Additionally, at

the pretrial conference held by this Court on May 1, 2017, the
plaintiff explained that it has, in fact, incurred “considerable
expense”

in

bringing

this

civil

action.

Specifically,

the

plaintiff stated that it had incurred “several thousand dollars in
depositions and other expenses, filing fees, [and] costs” and that

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attorney’s fees “are accruing.”

The plaintiff also reiterates in

its pleadings that it is “obligated to pay Perkins the balance of
the assignment price at the conclusion of the litigation.” ECF No.
59 at 5.
The Court finds that the plaintiff has incurred considerable
expense and risk in litigating this matter.

Thus, the Court

concludes that the plaintiff has provided valuable consideration
for the Marcellus Rights and has satisfied the requirements of the
Volvo test.

Accordingly, under the federal Declaratory Judgment

Act, the plaintiff is entitled to a declaration that it is the
rightful owner of the Marcellus Rights.
C.

The Court Cannot Consider the Plaintiff’s Claims for Breach of

Contract and Unfair Dealing Because They Were Not Pled in the
Complaint
“[A plaintiff] may not use summary-judgment briefing to amend
his complaint.” Frazier v. N.C. Dep’t of Transp., No. 4:14-CV-149D, 2016 WL 5416609, at *7 (E.D.N.C. Sept. 26, 2016). Similarly, “a
plaintiff may not amend his complaint through arguments in his
brief in opposition to summary judgment.”

Miller v. Jack, No.

1:06CV64, 2007 WL 2050409, at *4 (N.D. W. Va. July 12, 2007).

The

plaintiff raises its claims of breach of contract and unfair
dealing for the first time in its motion for summary judgment. The
complaint

includes

only

the

claim

for

declaratory

judgment.

Additionally, the plaintiff acknowledged at the pretrial conference

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that there is no claim for breach of contract or unfair dealing in
the complaint and that the suit is “strictly declaratory judgment.”
Thus, the Court will not consider the plaintiff’s claims of breach
of contract and unfair dealing in ruling on the cross motions for
summary judgment.
V.

Conclusion

For the reasons set forth above, the plaintiff’s motion for
summary

judgment

(ECF

No.

52)

is

GRANTED

AS

FRAMED

and

the

defendant’s motion for summary judgment (ECF No. 54) is DENIED.
Thus, the plaintiff’s claim for declaratory judgment is GRANTED and
the Court DECLARES that Mountaineer Minerals, LLC is the rightful
owner of the Oil and Gas Marcellus Leasehold Rights arising from
the Collins Lease.

The Court declines to rule on the breach of

contract and unfair dealing claims asserted in the plaintiff’s
motion for summary judgment because neither claim was asserted in
the complaint.

The plaintiff’s Motion to Amend Complaint to Add

Defendants (ECF No. 23) and the defendant’s Motion to Compel
Joinder of Perkins (ECF No. 24) are DENIED AS MOOT.
It is further ORDERED that this civil action be DISMISSED and
STRICKEN from the active docket of this Court.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein. Pursuant to Federal

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Rule of Civil Procedure 58, the Clerk is DIRECTED to enter judgment
on this matter.
DATED:

August 10, 2017

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

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