Reynolds v. Ascent Resources - Marcellus, LLC.

Filing 43

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES MOTIONS FOR SUMMARY JUDGMENT DKT. NOS. 30 ; 31 . Court DENIES both Reynoldss and Ascents motions for summary judgment (Dkt. Nos. 30; 31). Signed by District Judge Irene M. Keeley on 5/11/2017. (Copy counsel of record)(jmm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

DONALD R. REYNOLDS,
Plaintiff,
v.

//

CIVIL ACTION NO. 1:16CV77
(Judge Keeley)

ASCENT RESOURCES — MARCELLUS, LLC,

Defendant.

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
On

March

28,

2016,

the

plaintiff,

Donald

R.

Reynolds

(“Reynolds”), filed this action in the Circuit Court of Harrison
County, West Virginia. On May 2, 2016, the defendant, Ascent
Resources - Marcellus, LLC (“Ascent”), removed the case to this
Court based on diversity (Dkt. No. 1). The parties have filed
competing motions for summary judgment that are fully briefed and
ripe for review. For the following reasons, the Court DENIES the
motions (Dkt. Nos. 30; 31).
I. BACKGROUND
A.

Factual Background
Many of the facts in this case are not in dispute. Reynolds

resides in Jane Lew, Harrison County, West Virginia (Dkt. No. 30-4
at 1). In April 2015, W. Travis McBain (“McBain”), an Ascent
representative, contacted Reynolds regarding Ascent’s interest in

REYNOLDS v. ASCENT RESOURCES — MARCELLUS, LLC

1:16CV77

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
leasing certain of his oil and gas interests (Dkt. No. 12 at 1; 304 at 1). Ultimately, Reynolds agreed to lease Ascent his interest
in oil and gas underlying a 561.61-acre tract known as the Milton
Underwood No. 2 Farm, McClellan District, Doddridge County, West
Virginia (“Milton tract”) (Dkt. No. 30-4 at 1).1
Ascent prepared and provided a number of documents, dated June
8, 2015, including: 1) the Paid-Up Oil and Gas Lease (“Lease”), 2)
the Memorandum of Oil and Gas Lease, and 3) the Order of Payment
(collectively, the “Lease documents”) (Dkt. No. 21 at 2). The PaidUp Oil and Gas Lease provides in relevant part as follows:
LEASING CLAUSE. Lessor hereby grants, leases, and lets
exclusively to Lessee all the oil and gas . . . and their
liquid or gaseous constituents, whether hydrocarbon or
non-hydrocarbon, underlying the land herein leased
. . . .
. . . .
(H) TITLE: If Lessee receives evidence that Lessor does
not have title to all or any part of the rights herein
leased, Lessee may immediately withhold payments that
would be otherwise due and payable hereunder to Lessor
until the adverse claim is fully resolved.2 Lessor

1

The parties dispute whether Reynolds or McBain first
suggested that Ascent lease Reynolds’s interest in the Milton tract
(Dkt. Nos. 15 at 1; 21 at 1-2), but this fact is not material to
the Court’s ruling.
2

Reynolds argues that this clause is “at a minimum,
ambiguous,” and should be interpreted to mean that Ascent can
withhold payment only if he does not own the Subject Interest (Dkt.
2

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
represents and warrants that there is no existing oil and
gas lease which is presently in effect covering the
Leasehold.
TITLE AND INTERESTS. Lessor hereby warrants generally and
agrees to defend title to the Leasehold and covenants
that Lessee shall have quiet enjoyment hereunder and
shall have benefit of the doctrine of after acquired
title.
. . . .
ENTIRE CONTRACT. The entire agreement between Lessor and
Lessee is embodied herein and in the associated Order of
Payment (if any).
(Dkt. No. 32-1 at 1-5). The associated Order of Payment includes
the following agreements:
Ascent Resources - Marcellus, LLC will tender payment to
the Lessor identified in the Paid Up Lease (“Lease”) as
indicated herein by check within 45 days of its receipt
of the original of this Order of Payment and the executed
Lease. Payment is conditioned upon title to the property
interests leased being confirmed satisfactorily to Ascent
Resources - Marcellus, LLC, in its sole discretion. . . .
If Lessor owns more or less than the net interest defined
herein, Ascent Resources - Marcellus, LLC may, without
immediate notice to Lessor, increase or reduce the
consideration payable hereunder proportionate to the
actual interest owned by Lessor.

No. 34 at 7). This interpretation, however, ignores the fact that
the Lease purports to include an exclusive lease of the oil and gas
underlying the Subject Interest (Dkt. No. 32-1 at 1). If an
existing lease encumbered the Subject Interest, then Reynolds did
not have the title necessary to convey as “part of the rights . .
. leased” the exclusive right to the oil and gas underlying the
Subject Interest. See St. Luke’s United Methodist Church v. CNG
Development Co., 663 S.E.2d 639, 641 n.6 (W. Va. 2008).
3

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
. . . If the Lease has not been surrendered or payment
made by the specified due date, then Lessor shall notify
Lessee in writing and Lessee shall have 30 days from
receipt of such written notice to make payment or
surrender the lease without any liability.
. . . Lessor agrees that payment made hereunder is final
and will not seek to amend or modify the payment, or seek
additional consideration based upon any differing terms
which Ascent Resources - Marcellus, LLC has or will
negotiate with any other lessor/oil and gas owner.
Id. at 13.
In total, the Lease encompassed Reynolds’s interest in eight
parcels, including his interest in a certain 90.83-acre tract (“the
Subject Interest”).3 Id. at 12. Pursuant to the terms in the Order
of Payment, Ascent agreed to pay Reynolds a signing bonus of $4,100
per net acre, totaling $367,775.237 (Dkt. Nos 30-5; 32-1 at 13).
Reynolds executed the Lease documents on October 9, 2015, and
returned them to Ascent (Dkt. Nos. 30-2 at 2; 30-4 at 2).
Shortly

thereafter,

in

late

October

2015,

McBain

called

Reynolds to inform him that Ascent had decided not to fund the
lease for the Subject Interest because the West Virginia Department
of Environmental Protection (“DEP”) “website indicated that a
producing well was located on the parcel and for that reason the

3

The Subject Interest is identified as Milton Underwood Farm,
McClellan District, Doddridge County, West Virginia, Assessor
District and Tax Map and Parcel Number 05-11-024.
4

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
parcel was subject to an existing oil and gas lease” (Dkt. No. 154). On October 28, 2015, Ascent issued a check to Reynolds in the
amount of $267,956.34, which reflected that payment had been
withheld

for

the

Subject

Interest

(Dkt.

Nos.

30-5;

32-14).4

Reynolds received the check on October 30, 2015, and signed the
lease obligation deposit receipt on November 2, 2015 (Dkt. Nos. 304 at 2; 32-13). He then cashed and deposited the check (Dkt. No.
32-4 at 5).
Then, on November 9, 2015, Reynolds sent a letter to Ascent
demanding that it execute and record a partial release of the Lease
to reflect the fact that it had “failed to make payment” for the
Subject Interest (Dkt. Nos. 30-4 at 4). Prior to receiving this
demand letter on November 16, 2015, id. at 5, Ascent had recorded
the Memorandum of Oil and Gas Lease (“Memorandum”) in the Office of
the Clerk of the Commission of Doddridge County, West Virginia, on
November 12, 2016 (Dkt. Nos. 30-2 at 4; 32-12 at 4). The Memorandum
was “made and filed for the purpose of giving third parties notice
of the existence of the Lease,” but was “not intended as an
amendment of the terms and conditions of the Lease” (Dkt. 32-12 at

4

Reynolds contends that he did not know Ascent had decided
not to lease the Subject Interest until he received this check
(Dkt. No. 34-1 at 4).
5

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
1). As it is included in the Lease, the Memorandum includes the
Subject Interest. Id. at 4.
When Ascent did not respond to his first demand, Reynolds, by
counsel, sent another letter to Ascent on February 4, 2016 (Dkt.
Nos. 30-4 at 2; 30-6). Rather than again request a release, this
second

letter

demanded

that,

because

the

recorded

Memorandum

reflected that Ascent had a leasehold in the Subject Interest,
Ascent tender within 21 days “the agreed upon bonus compensation
remaining to be paid in the amount of $99,818.93" (Dkt. No. 30-6 at
1). Thereafter, on March 3, 2016, Ascent recorded a Partial Release
of Oil and Gas Lease, which canceled the Lease in regard to the
Subject Interest (Dkt. No. 4-1). Between receiving the $267,956.34
check and the release of the Subject Interest, Reynolds did not
take any steps to cure title or hire anyone to investigate the
title and leasehold (Dkt. No. 34-1 at 4). Further, he has not
“taken any steps to lease [the Subject Interest] to anyone else”
(Dkt. No. 32-4 at 6).
B.

Procedural Background
After Reynolds filed this action in the Circuit Court of

Harrison County, West Virginia, claiming that Ascent had breached
the parties’ contract (Dkt. No. 1-1), Ascent removed the case to
this Court and filed a motion to dismiss the complaint for failure
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
to state a claim (Dkt. Nos. 1; 3). Reynolds responded to the motion
on June 1, 2016, and also filed a request for judgment on the
pleadings (Dkt. No. 6).
At a scheduling conference on July 5, 2016, the Court held
Ascent’s motion to dismiss in abeyance and ordered Reynolds to file
an amended complaint by July 15, 2016 (Dkt. No. 12). After Reynolds
filed his amended complaint (Dkt. No. 15), the parties filed
supplemental briefs on Ascent’s pending motion to dismiss (Dkt.
Nos. 16; 17). The Court denied the motion on September 30, 2016
(Dkt. No. 19), following which the parties engaged in discovery,
and then filed cross motions for summary judgment.
II. STANDARD OF REVIEW
Summary
documents,

judgment

is

electronically

declarations,

stipulations

appropriate

where

the

stored

information,

.

,

.

.

admissions,

“depositions,
affidavits

or

interrogatory

answers, or other materials” establish that “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a), (c)(1)(A).
When ruling on a motion for summary judgment, the Court reviews all
the evidence “in the light most favorable” to the nonmoving party.
Providence Square Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846,
850 (4th Cir. 2000). The Court must avoid weighing the evidence or
7

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
determining

its

truth

and

limit

its

inquiry

solely

to

a

determination of whether genuine issues of triable fact exist.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
The moving party bears the initial burden of informing the
Court

of

the

basis

for

the

motion

and

of

establishing

the

nonexistence of genuine issues of fact. Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Once the moving party has made the
necessary showing, the non-moving party “must set forth specific
facts showing that there is a genuine issue for trial.” Anderson,
477 U.S. at 256 (internal quotation marks and citation omitted).
The “mere existence of a scintilla of evidence” favoring the nonmoving party will not prevent the entry of summary judgment; the
evidence

must

be

such

that

a

rational

trier

of

fact

could

reasonably find for the nonmoving party. Id. at 248–52.
III. APPLICABLE LAW
“A federal court exercising diversity jurisdiction is obliged
to apply the substantive law of the state in which it sits.” Volvo
Const. Equip. N. Am. v. CLM Equip. Co., Inc., 386 F.3d 581, 599-600
(4th Cir. 2004) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79
(1938)). In West Virginia, “[a] claim for breach of contract
requires proof of the formation of a contract, a breach of the
terms of that contract, and resulting damages.” Sneberger v.
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
Morrison, 776 S.E.2d 156, 171 (W. Va. 2015) (citing Syl. Pt. 1,
State ex rel. Thornhill Group, Inc. v. King, 759 S.E.2d 795 (W. Va.
2014)). In addition, the plaintiff must “show that he has complied
with the contract himself, . . . and, if the evidence shows that he
has not complied with the terms of the contract, and has not been
prevented or relieved therefrom as aforesaid, he will be denied a
recovery from the breach of same.” Charleston Nat’l Bank v. Sims,
70 S.E.2d 809, 813 (W. Va. 1952) (quoting Jones v. Kessler, 126
S.E. 344 (W. Va. 1925)).
Therefore, in order to prevail on his motion for summary
judgment, Reynolds must establish the following four elements:
“[T]he existence of a valid, enforceable contract; that [he] has
performed

under

the

contract;

that

[Ascent]

has

breached

or

violated its duties or obligations under the contract; and that
[Reynolds] has been injured as a result.” See Exec. Risk Indem.,
Inc. v. Charleston Area Med. Ctr., Inc., 681 F. Supp. 2d 694, 714
(S.D.W. Va. 2009) (citing 23 Williston on Contracts § 63:1 (Richard
A. Lord, ed., 4th ed. West 2009)). In order for it to prevail on
its motion for summary judgment, Ascent must establish the inverse
of at least one of these four elements.
When the existence of a written contract is not in dispute,
“[i]t is the province of the Court, and not of the jury, to
9

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
interpret” the contract. Syl. Pt. 1, Toppings v. Rainbow Homes,
Inc., 490 S.E.2d 817 (W. Va. 1997). “A valid written instrument
which expresses the intent of the parties in plain and unambiguous
language is not subject to judicial construction or interpretation
but will be applied and enforced according to such intent.” Syl.
Pt.

2,

id.

“A

contract

is

ambiguous

when

it

is

reasonably

susceptible to more than one meaning in light of the surrounding
circumstances

and

after

applying

the

established

rules

of

construction.” Williams v. Precision Coil, Inc., 459 S.E.2d 329,
342 n.23 (W. Va. 1995). “The general rule as to oil and gas leases
is that such contracts will generally be liberally construed in
favor of the lessor, and strictly as against the lessee.” Syl. Pt.
5, Energy Dev. Corp. v. Moss, 591 S.E.2d 135 (W. Va. 2003).
IV. DISCUSSION
The parties do not dispute that the Lease documents comprise
a valid, enforceable contract (Dkt. Nos. 30 at 5; 32 at 11).5 After
considering the parties’ arguments and evidentiary submissions,
however,

the

Court

concludes

that

material

facts

regarding

Reynolds’s performance and Ascent’s alleged breach of contract are

5

As the Lease provides, the parties’ agreement includes both
the Lease and the Order of Payment (Dkt. No. 32-1 at 5).
10

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
in dispute, and therefore DENIES the parties’ motions for summary

judgment (Dkt. Nos. 30; 31).
A.

Reynolds’s Performance
The

parties

dispute

whether

Reynolds

complied

with

his

contractual obligations, which are unambiguously outlined in the
Lease. Reynolds agreed to an exclusive lease of the Subject
Interest: “Lessor hereby grants, leases, and lets exclusively to
Lessee all the oil and gas . . . underlying the land . . .” (Dkt.
No. 32-1 at 1) (emphasis added). He expressly “warrant[ed] that
there [was] no existing oil and gas lease . . . in effect covering
the Leasehold,” and he also provided covenants of general warranty
and quiet enjoyment. Id. at 3-4.
The plain meaning of the term “exclusive” indicates that the
holder of an exclusive lease must have the right to exclude others
from the leasehold estate. See Webster’s Third New International
Dictionary

793

(unabridged

ed.

2002);

Exclusive,

Black’s

Law

Dictionary (10th ed. 2014) (“Limited to a particular person, group,
entity, or thing <exclusive right>.”). An owner has “insufficient
title and right” to lease his oil and gas if there is a “valid and
subsisting” lease in effect. See Shearer v. Allegheny Land &
Mineral Co., 165 S.E.2d 369, 373, 375 (W. Va. 1968). Such a
secondary lessee cannot drill while a valid lease is still in
11

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
effect, but must first defeat the original lease. St. Luke’s United
Methodist Church v. CNG Development Co., 663 S.E.2d 639, 641 n.6
(W. Va. 2008).
“A covenant of general warranty of title is merely a covenant
to warrant and defend the title against the claims of all persons
whatsoever. It is not broken until there is an eviction of the
vendee from the property, or equivalent disturbance, by title
paramount.” Booker T. Washington Const. & Design Co. v. Huntington
Urban Renewal Authority, 383 S.E.2d 41, 44 (W. Va. 1989) (quoting
McKinley Land Co. v. Maynor, 85 S.E. 79, 80 (W. Va. 1915)); see
also W. Va. Code § 36-4-2. The general warranty of title is thus a
future covenant, and it is only breached at the time of conveyance
if “there is paramount title in one who is in possession of the
property.” “In such a case, the possession by a person with
paramount

title

operates

as

an

eviction

eo

instanti,”

which

immediately necessitates defending one’s title. Id. n.8 (citing Rex
v. Creel, 22 W. Va. 373, 374-75 (1883)). “[T]he covenant of
warranty is considered the equivalent of the covenant for quiet
enjoyment.” Id. at 43 n.7; accord Bitting v. Gray, 897 A.2d 25, 35
(R.I. 2006).6

6

In West Virginia, the covenant of quiet enjoyment also
exists by both statute and the common law. W. Va. Code § 36-4-14;
12

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
While Ascent has submitted enough evidence to preclude a
genuine dispute that the Subject Interest is host to a producing
oil and gas well, neither party has established whether the
production is by virtue of paramount title. Because this question
of fact is material to the parties’ respective obligations under
the Lease, neither is entitled to judgment as a matter of law
regarding Reynolds’s performance under the contract.
1.

Reynolds’s Argument

Reynolds argues that he fulfilled his obligation to deliver
exclusive title and that nothing precluded Ascent “from developing
and lucratively monetizing this leasehold estate” (Dkt. No. 36 at
3). He further argues that he “performed all obligations required
when he executed the lease documents as presented to him by the
Defendant Ascent and returned them” (Dkt. No. 30 at 8). Reynolds
did not submit any evidence in support of these arguments.
In addition, Reynolds’s own statements under oath during his
deposition on December 20, 2016, call into question whether he has
a good faith basis to argue that he provided exclusive title. When
asked whether he had “ever leased a tract . . . that already had an
existing leasehold on it,” Reynolds responded that “[a]pparently

Syl. Pt. 1, Headley v. Hoopengarner, 55 S.E. 744 (W. Va. 1906);
Syl. Pt. 2, Knotts v. McGregor, 35 S.E. 899 (W. Va. 1900).
13

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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
it’s happened on this tract” (Dkt. No. 32-4 at 3-4). Tellingly,
Reynolds also testified that, at the time he acquired the Subject
Interest, he did not investigate its leasehold status. Id. at 1-2.
Moreover, Reynolds made no attempt to cure title or investigate the
state of the leasehold prior to Ascent’s release of the Subject
Interest on March 3, 2016 (Dkt. No. 34-1 at 4).
2.

Ascent’s Arguments

Although the undisputed evidence establishes that a producing
well was located on the Subject Interest at the time that Reynolds
executed the Lease documents, Ascent has not established that
Reynolds breached the parties’ agreement as a result.
As McBain outlined in his March 2016 letter to Reynolds, “the
DEP website indicated that a producing well was located on the
parcel” (Dkt. No. 15-4). According to the DEP website, since at
least 2011, Commonwealth Energy, Inc. (“Commonwealth”), has been
producing 5,000 cubic feet of gas per month from a functioning well
located by Ascent’s expert on the Subject Interest (Dkt. No. 32-2
at

1).7

Indeed,

since

1988,

Reynolds

7

has

leased

the

Subject

Reynolds produced no evidence to rebut or dispute these
facts. In fact, he asserted that he “does not know if there is a
producing shallow well upon the oil and gas estate . . . which he
co-owns” (Dkt. No. 34 at 1). He only attempted to discredit
Ascent’s expert by suggesting that he is not qualified to survey
the Subject Interest and locate the well at issue upon it (Dkt. No.
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
Interest no fewer than eight times (Dkt. Nos. 32-5; 32-6; 32-7; 328; 32-9; 32-10; 32-11; 32-12), the most recent lease being to JayBee Production Company with an effective date of June 21, 2010, and
a five-year primary term that expired on June 21, 2015 (Dkt. No.
32-11 at 1).
As a result, Ascent argues that
[t]he undisputed fact of production, coupled with the
numerous leases of record that Plaintiff has executed for
the Subject Property, is irrefutable evidence that
Plaintiff’s leasehold title to the Subject Property is
neither exclusive nor quiet. Rather, Plaintiff’s
leasehold title is clouded because a third-party operator
is producing the Subject Property pursuant to a paramount
leasehold claim and Plaintiff, therefore, is unable to
convey exclusive and quiet title.
(Dkt. No. 32 at 16).
Essentially, Ascent is asking the Court to assume, without any
proof, that Commonwealth is producing oil and gas from the Subject
Interest by virtue of one of the prior leases of record, thus
giving it paramount title. Consistent with this argument, Ascent
asserts that “any evidence of paramount title amounts to a failure
to deliver good title under a covenant of general warranty” (Dkt.
No. 32 at 13 (citing Syl. Pt. 1, Ilsey, 26 S.E. 551)).

34 at 8). The expert’s affidavit and report clearly indicate that
a survey crew was present to conduct the survey (Dkt. No. 32-3 at
3).
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
As discussed earlier, however, the third party possessor must
actually have paramount title at the time of the conveyance in
order to constitute a breach of the covenant of general warranty.
Booker T. Washington, 383 S.E.2d at 44-45. None of the eight leases
submitted

by

Ascent

reflects

that

Commonwealth,

the

reported

operator, is a rightful lessee or assignee of the right to produce
oil and gas from the Subject Interest. Simply put, the mere
existence of prior leases without more does not lead to the
inevitable conclusion that Commonwealth’s possession and production
is

by

virtue

paramount

of

title

paramount
without

title.

evidence.8

The

Court

Therefore,

will

not

Ascent

assume

has

not

established that Reynolds failed to perform his obligations under
the Lease.
B.

Ascent’s Breach
The parties dispute whether Ascent breached the contract when

it failed to tender bonus compensation for the Subject Interest.
Although Reynolds is incorrect that the Subject Interest’s state of

8

The Court acknowledges that, in order to receive a permit to
operate the well, Commonwealth must have provided the lease or
contract that gives it the right to extract from the Subject
Interest. See W. Va. Code § 22-6-8(c). This prerequisite alone,
however, does not establish that Commonwealth, or whatever entity
assigned it the right to operate on the Subject Interest, has
paramount title.
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title is “irrelevant” to the question of breach given his “timely”
demand for a release, there is a genuine dispute concerning whether
Ascent properly exercised its “right to reject problematic acreage”
(Dkt.

No.

32

at

18-20).

Ascent’s

alternative

argument,

that

Reynolds is estopped from seeking full payment because he accepted
partial payment, likewise fails. Id. at 22-24.
1.

Compliance with the Contract

The

Lease

and

Order

of

Payment

plainly

outline

the

circumstances in which payment may be withheld. The Lease provides
that “[i]f Lessee receives evidence that Lessor does not have title
to all or any part of the rights herein leased, Lessee may
immediately withhold payments that would be otherwise due and
payable hereunder to Lessor until the adverse claim is fully
resolved” (Dkt. No. 32-1 at 3). The Order of Payment expressly
states that “[p]ayment is conditioned upon title to the property
interests leased being confirmed satisfactorily to Ascent Resources
- Marcellus, LLC, in its sole discretion.” Id. at 13. It also
provides that “[i]f Lessor owns more or less than the net interest
defined herein, Ascent Resources - Marcellus, LLC, may, without
immediate notice to Lessor, increase or reduce the consideration
payable hereunder proportionate to the actual interest owned by
Lessor.” Id. In order to determine whether title can be “confirmed
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
satisfactorily”

or

whether

Reynolds

owns

“the

net

interest

defined,” it follows that Ascent must have investigated the title
or ownership in a manner that provided a reasonable basis for its
decision here to withhold payment.9
Reynolds’s main argument regarding Ascent’s alleged breach
results from a misreading of the unambiguous language in the Order
of Payment. He argues that, because Ascent did not execute a
partial release of the Subject Interest within 30 days of his
request, he is entitled to the bonus compensation that Ascent
withheld (Dkt. No. 30 at 8-11). Ascent, however, argues that the
plain language of the Order of Payment imposes no such obligation
(Dkt. No. 35 at 10-12). Ascent is correct.
The Order of Payment provides that Ascent will “tender payment
. . . within 45 days” of receiving the Lease documents (Dkt. No.
32-1 at 13). This payment, however, is conditioned on Ascent’s

9

Indeed, discretionary power in a contract is subject to the
ever-present duty of good faith and fair dealing. See Evans v.
United Bank, Inc., 775 S.E.2d 500, 508-09 (W. Va. 2015); Stand
Energy Corp. v. Columbia Gas Transmission Corp., 373 F. Supp. 2d
631, 644 (S.D.W. Va. 2005) (observing that West Virginia law
“implies a covenant of good faith and fair dealing in every
contract for purposes of evaluating a party's performance of that
contract”); see also Mezzanotte v. Freeland, 200 S.E.2d 410, 414
(N.C. Ct. App. 1973) (“Where a contract confers on one party a
discretionary power affecting the rights of the other, this
discretion must be exercised in a reasonable manner based upon good
faith and fair play.”).
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1:16CV77

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
confirmation of title and may be lowered if Reynolds owns less than
the net interest defined. Id. If the Lease is not surrendered or
payment made within the 45 days, then Reynolds may demand that
Ascent surrender the lease or make payment, in which case Ascent is
given an additional 30 days to exercise either option without any
liability. Id. Although the amount was lower than the amount
Reynolds believed he was entitled to receive, Ascent tendered
payment within 45 days of receiving the executed Lease documents,
as required by the Order of Payment. Therefore, the remaining time
constraints were not triggered, and Ascent was under no obligation
to respond to Reynolds’s demand for a partial release of the
Subject Interest within 30 days.10
It does not necessarily follow from all of this that the
evidence submitted by Ascent supports the conclusion as a matter of
law that it complied with the contractual terms that permit it to
tender a lower payment. Although the Order of Payment gives Ascent
the right to reduce bonus compensation, the agreement provides that

10

In a related argument, Reynolds takes issue with the fact
that, although Ascent failed to pay him the bonus compensation for
the Subject Interest, it nonetheless recorded the Memorandum that
included it (Dkt. No. 36 at 3). The Lease documents do not preclude
Ascent from doing so, as the parties’ agreement includes the
Subject Interest. Moreover, it is not apparent that Reynolds was
damaged by this recordation, as he made no effort to lease the
Subject Interest prior to Ascent’s release (Dkt. No. 32-4 at 6).
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1:16CV77

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
it may do so if, in its sole discretion, it cannot satisfactorily
confirm title to a particular interest, or if Reynolds “owns more
or less than the net interest defined.” Id. As has already been
discussed, Ascent has not established that production on the
Subject Interest is by virtue of paramount title. Thus, it has not
established

that

Reynolds

did

not

possess

“the

net

interest

defined.” While Ascent at the time based its decision to lower
payment on the DEP’s production data, the parties dispute the
validity of this data. Ascent suggests that it had “the contractual
right to reject acreage as soon as it discover[ed] evidence
indicating possession by a third party,” such as numerous prior
leases as well as evidence of production (Dkt. No. 32 at 19).
Reynolds, on the other hand, argues without citing any authority
that “there is no assurance that a report of production to the WV
DEP for an old well is accurate” (Dkt. Nos. 34 at 8).11
Neither

party

has

presented

evidence

regarding

the

availability or reasonableness of other methods by which Ascent
could have further investigated the state of Reynolds’s title after
discovering that the DEP website reflected production on the
Subject Interest. Based on the parties’ briefing, the Court is

11

The DEP’s data is compiled based on information reported to
it by oil and gas operators (Dkt. No. 32-2 at 2).
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
unable to conclude as a matter of law that no reasonable juror
could find by a preponderance of the evidence that Ascent abused
its discretion to lower payment by failing to conduct sufficient
investigation to confirm Reynolds’s title to the Subject Interest.12
2.

Final Payment and Estoppel

Ascent also asserts two alternative but related arguments in
an effort to establish that Reynolds has forfeited his right to
argue it breached the parties’ agreement by tendering too low a
payment. These arguments are unconvincing.
First, Ascent argues that, because Reynolds agreed in the
Order of Payment that “payment made hereunder is final” and that he
would not “seek to amend or modify the payment,” its decision to
issue less than the full payment is effectively unassailable (Dkt.
No. 32 at 22-24). If the Court were to accept the argument that
this clause insulates Ascent from liability for any reduction in
bonus compensation without regard for justification, it would
render “meaningless” the other lease provisions that dictate when
Ascent is actually entitled to reduce the payment. Chesapeake
Appalachia, LLC v. Hickman, 781 S.E.2d 198, 213 (W. Va. 2015)

12

The parties both also seek summary judgment on the question
of damages (Dkt. Nos. 30 at 7; 32 at 20-22), but Reynolds's
entitlement to damages is linked to whether Ascent properly
rejected the Subject Interest and withheld bonus compensation.
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1:16CV77

MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
(quoting Syl. Pt. 3, Moore v. Johnson Serv. Co., 219 S.E.2d 315
(1975)). Rather, a “reasonable meaning . . . consistent with the
whole contract” is that Reynolds agreed not to seek amendment or
modification of the negotiated payment, which he also agreed Ascent
had the right to lower under certain enumerated circumstances. Id.
Second, Ascent argues that the doctrine of quasi estoppel
precludes Reynolds from seeking bonus compensation for the Subject
Interest because he accepted the benefit of a lower payment by
cashing the check for $267,956.34 (Dkt. No. 32 at 22-24).13 The
doctrine of quasi estoppel appears to have been mentioned by the
Supreme Court of Appeals of West Virginia just once in a footnote,
where it noted that the doctrine “is said to operate to ‘preclude
[] a party from asserting, to another's disadvantage, a right
inconsistent with a position previously taken by him.’” Petition of
Shiflett, 490 S.E.2d 902, 909 n.26 (W. Va. 1997) (quoting 31 C.J.S.
Estoppel and Waiver § 120, at 543). “The basis of this doctrine is
‘in election, waiver, ratification, affirmance, acquiescence, or
acceptance of benefits.’” Id. As discussed earlier, the Order of
Payment contemplates only that Reynolds would not contest the

13

To the extent Ascent also is asserting equitable estoppel,
it has not offered any evidence that Reynolds made a
misrepresentation upon which it detrimentally relied. Jolynne Corp.
v. Michels, 446 S.E.2d 494, 504 (W. Va. 1994).
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MEMORANDUM OPINION AND ORDER DENYING THE PARTIES’
MOTIONS FOR SUMMARY JUDGMENT [DKT. NOS. 30; 31]
amount of a final payment that complied with the terms of the Lease
documents. There is no evidence that, by accepting partial payment,
Reynolds accepted a benefit contrary to full payment to which he
otherwise contends he is entitled.14
V. CONCLUSION
For the reasons discussed, the Court DENIES both Reynolds’s
and Ascent’s motions for summary judgment (Dkt. Nos. 30; 31).
It is so ORDERED.
The Court directs the Clerk to transmit copies of this Order
to counsel of record.
DATED: May 11, 2017.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE

14

Ascent argues “that one who accepts payment pursuant to a
mineral lease is estopped from challenging the terms therein” (Dkt.
No. 32 at 23). The cases it cites in support of this assertion,
however, demonstrate that such a rule applies to inconsistent
actions not present in this case. Blair v. Dickenson, 54 S.E.2d
828, 848 (W. Va. 1949) (holding that a party who accepted coal
mining royalty payments and permitted expenditures by the lessee
was estopped from later repudiating the subject lease); Headley v.
Hoopengarner, 55 S.E. 744, 745-46 (W. Va. 1906) (estopping
plaintiff from claiming greater rights under his original lease
than those he agreed to in a subsequent royalty division order).
23