Beyond Usque ad Coelum et ad Inferos: Determining land ownership in West Virginia following Faith United Methodist v. Morgan

Author: Bradley Dunkle, Associate Member, University of Cincinnati Law Review

In June, the Supreme Court of Appeals of West Virginia decided Faith United Methodist Church v. Morgan, ruling that the word “surface,” when used in a land conveyance involving a “split estate,” is not presumed ambiguous, and does have a definite and certain meaning.  This ruling ended 90 years of conflicting methods for West Virginia courts evaluating “surface only” transfers by directly overruling Ramage v. South Penn Oil Co. and leaving the Williams v. South Penn Oil Co. standard as the sole method for interpretation.[1]  The holding in Faith United Methodist provides a definition of “surface” for judges, but does not adequately resolve the issue of determining the intent of the conveyance.

Background

The West Virginia state legislature adopted the Horizontal Well Act as a way to regulate the expanding natural gas industry and provide guidance for property owners and developers alike.[2]  Although the Act provides causes of action and regulatory protections for property owners, many property owners still have issues because they do not hold their property in fee simple absolute.

Generally, a landowner holding a fee simple absolute owns their land from the heavens to the center of the earth. However, in the case of a “split estate,” the fee simple absolute is split, with one party retaining “surface only” rights while another owns mineral or some other subterranean rights.[3]   In some places, this law of property is easily applied; however, in many mineral-rich and natural-resource-rich states across the country, the existence of “split estates,” where some underground rights have been transferred to another party, complicates this property rule.

Defining “Surface”

In Faith United Methodist, the West Virginia Supreme Court was faced with defining “surface only” in a land conveyance.[4]  In 1907, a deed conveyed “the surface only” land because the coal and mining rights had been conveyed previously. Many “split estate” conveyances occurred in the distant past, sometimes decades or centuries earlier.[5]  The question presented was whether this statement meant that residual rights were retained by the conveyer for the other subterranean minerals and resources, as the plaintiffs contended, or, as the defendants claimed, that all remaining interests in the land were conveyed.[6]   This case illustrates a common theme faced in surface rights cases examined by the Supreme Court of Appeals of West Virginia: many conveyances fail to clearly indicate the extent of the transfer; often the full subterranean rights are not clearly transferred or retained, and other disputes arise in the future.

Two methods for determining the meaning of “surface only” were used interchangeably in West Virginia courts prior to Faith United Methodist: the Williams view and the Ramage view.[7] The Williams definition, adopted in 1902, stated that “surface only” had a “definite and certain meaning.”[8] Under Williams, “surface only” meant “only that portion of the land which is or may be used for agricultural purposes.[9]  However, in 1923, the court adopted the Ramage view, stating that ambiguity always exists with the use of “surface.”[10]  According to the Ramage court, the word “surface” in a conveyance is always subject to the intent of the parties; therefore, the term could never carry a definition capable of universal application.[11]

The Faith United Methodist court overruled Ramage, seeking to establish uniformity in drafting and hoping to confine future conveyances to the “four corners” of the document as much as possible.  In doing so, it accepted the basic principle set forth in Williams, but tweaked the standard slightly.  The court held that “surface” in a conveyance means, “the exposed area of land, improvements on the land, and any part of the underground actually used by a surface owner as an adjunct to surface use (for example, medium for the roots of growing plants, groundwater, water wells, roads, basements, or construction footings).”[12]

The implications of this decision will likely extend well beyond future conveyances, as more landowners explore their rights and gas developers continue to seek contracts for drilling rights.  A belief exists that the extraction of natural gas from Marcellus Shale is still in its infancy. With this in mind, deeds with ambiguous conveyances from many years ago will continue to be challenged.[13]  The court’s ruling in Faith United Methodist will certainly provide some clarity in interpreting what has been conveyed in many land deeds involving “split estates.”

Problems with the Faith United Methodist Definition

The Supreme Court of Appeals of West Virginia overruled Ramage and redefined Williams to provide much needed guidance to lower court judges deciding property disputes  as the number of such disputes will no doubt increase due to the expansion of horizontal drilling.  However, without the flexibility provided by Ramage, many landowners might not be able to profit from the expansion of natural gas mining.   Ramage allowed a court to immediately place itself in the position of the parties to determine the intent of the conveyance. [14] Faith United Methodist ignores the intent of the parties, many of which conveyed “surface” rights before the new definition came into being.

The court in Faith United Methodist stated that the Ramage holding needed to be overruled primarily because it violated to fundamental public policy concerns: 1) without a definite definition of “surface” drafting land conveyances was especially complicated; and 2) the holding went against the intention of the parties by looking beyond the “four corners” of the conveyance.  The court emphasized the criticisms of Ramage in law review articles, and the instances in which the West Virginia Supreme Court and courts around the nation ignored the ruling. [15]  However, the court’s issues with Ramage are not resolved by the ruling in Faith United Methodist, and the concerns of the court about Ramage are not as damaging as they might first seem.

First, the definition of “surface” will likely change again in future as the shale industry continues to expand.  Williams provided a definition of “surface.” This definition failed to last as developments in construction techniques and public opinion changed.  In Faith United, the court developed a new definition of “surface” in order to better serve modern conveyances.  Chances are that this definition will have to be changed again in order to serve future meanings of “surface.” Second, by directly overruling Ramage, the court failed to recognize that some conveyances may have been created with the understanding that the Ramage approach would be controlling.  Drafters may have intended conveyances to be governed by Ramage, and the court’s ruling in Faith United failed to allow for this possibility.

The court also failed to acknowledge the advantages of Ramage in defining conveyances that are often complex but involve less sophisticated parties.  A number of gas leases and other conveyances involve, and will likely continue to involve, an unequal balance of power. Individuals conveying their property may not fully understand the extent of their conveyance. A conveyance of a property’s “coal rights” does not define what party retains the other mineral rights with the property.[16]  Using the Ramage approach allowed a judge to more accurately ascertain the intent of the parties in determining the meaning of other ambiguous terms of the contract.

Conclusion

The court’s ruling in Faith United Methodist was meant to simplify the interpretation of land conveyances and followed one of the most basic principles in contract law: the Parol Evidence Rule.[17]  However, because of an un equal balance of power in these kinds of conveyances, many contracts fail to show the intent of the parties through the “four corners” of the documents, and many more are so many years old that the conveying parties could have never imagined the land’s present value.  The court’s ruling in Faith United Methodist will greatly limit the leeway of trial judges to interpret the intent of parties who convey “surface” rights.  With the expansion of shale gas drilling in West Virginia, this could mean many landowners could miss out on the full value of their property because they unintentionally conveyed those rights.