Collingwood Appalachian Minerals III, LLC v. Erlewine

248 W.Va. 615

889 S.E.2d 697

COLLINGWOOD APPALACHIAN MINERALS III, LLC, Oxy USA, Inc., Collingwood Appalachian Minerals I, LLC, and Waco Oil & Gas Co., Inc., Defendants Below, Petitioners v. Richard L. ERLEWINE, Plaintiff Below, Respondent

Nos. 22-0139

22-0140

Supreme Court of Appeals of West Virginia.

Submitted: April 18, 2023

Filed: June 15, 2023

Michael C. Cardi, Esq., Jordan C. Maddy, Esq., Bowles Rice LLP, Morgantown, West Virginia, Counsel for Petitioners Collingwood Appalachian Minerals I, LLC and Collingwood Appalachian III, LLC

W. Taylor Frankovitch, Esq., Bowles Rice LLP, Canonsburg, Pennsylvania, Counsel for Petitioner Oxy USA, Inc.

Richard W. Gallagher, Esq., Stephen F. Gandee, Esq., Robinson & McElwee PLLC, Charleston, West Virginia, Counsel for Petitioner Waco Oil & Gas Co., Inc.

Andrew R. Cutright, Esq., Roger L. Cutright, Esq., Cutright Law PLLC, Morgantown, West Virginia, Counsel for Respondent

WALKER, Chief Justice:

Petitioners and Respondent each participated in a tax sale in 1989 after a delinquent taxpayer failed to pay taxes on 135 acres of property ¹ and twenty-five percent of its subjacent oil and gas estate. ² Respondent bought the 135-acre property, and, on the same day, Petitioners bought the twenty-five percent interest in the oil and gas estate. ³ In 1993, Petitioners bought another twenty-five percent interest in the same oil and gas estate after a tax sale resulting from a different taxpayer's tax delinquency. ⁴ Then, almost three decades later, despite purchasing only the 135-acre property in the 1989 tax sale, Respondent sued Petitioners and claimed he owned the fifty percent interest in the oil and gas estate Petitioners purchased at the prior tax sales. Respondent argued that he owned the oil and gas interest Petitioners purchased at the 1989 tax sale because the tax assessor assessed the former, delinquent taxpayer inappropriately. And Respondent contended that he owned the other twenty-five percent interest in the oil and gas estate purchased by Petitioners in 1993 because the delinquent taxpayer had conveyed all of his oil and gas interest years earlier and did not own the oil and gas interest for which his taxes were delinquent. The circuit court granted summary judgment for Respondent.

On appeal, we reverse the circuit court as to Petitioners’ 1991 deed because Respondent, a fellow tax-sale purchaser, lacks grounds under the relevant statute to challenge how the assessor assessed the delinquent taxpayer or the procedure by which the sheriff sold the delinquent tax payer's property interests. And we reverse the circuit court as to Petitioners’ 1995 deed because the delinquent taxpayer clearly owned the twenty-five percent interest in the oil and gas estate for which his taxes were delinquent. We remand with directions that the circuit court enter summary judgment for Petitioners and to restore the parties’ ownership interests to what they bargained for at the tax sales.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 1909, J.E. Huff conveyed a 135-acre tract known as Huff Ridge to James W. Sivert. The deed reserved "one-half of all the oil and gas royalty" to Mr. Huff. So, Mr. Sivert owned the 135-acre property and fifty percent of the oil and gas royalty underlying it. Starting in 1930, the Wetzel County Assessor taxed Mr. Sivert's unsevered oil and gas interests separately from the remaining value of the 135-acre property.

Next, Mr. Sivert conveyed the 135-acre property and twenty-five percent of the oil and gas estate to Joseph and Myrtle Rogers by deed dated September 13, 1944; the deed reserved to Mr. Sivert "one fourth of all the oil and gas royalty." Then the Rogerses conveyed to Osburn Dunham, by deed dated September 8, 1945, the 135-acre property and their twenty-five percent interest in the oil and gas royalty. Mr. Sivert later conveyed "one-fourth of all the oil and gas royalty" to Joseph Palmer by deed dated November 1, 1945. And Mr. Palmer, by deed dated November 4, 1945, conveyed "the undivided 1/4 interest of all the oil and gas royalty" to Mr. Dunham. So, as of November 1945, Mr. Dunham owned the 135-acre property and fifty percent of the oil and gas royalty. ⁵ He continued paying separate tax assessments for the 135-acre property and subjacent oil and gas interest.

Then by deed dated April 22, 1968, Mr. Dunham conveyed to Russell F. Stiles "the same land" the Rogerses conveyed to Mr. Dunham "by deed bearing the date the 8 ^th day of September, 1945 ... [,]" and the deed states, "There is reserved and excepted from this conveyance all exceptions and reservations contained in all prior deeds." The September 8, 1945 deed, which the 1968 deed cross-references states, "This deed is executed subject to the reservation made by James W. [S]ivert and wife, which reads as follows: the said parties of the first part in this deed reserves [sic] one fourth (1/4) of all the oil and gas royalty." After executing the 1968 deed, Mr. Dunham continued paying taxes on his twenty-five percent interest in the oil gas estate, ⁶ Mr. Stiles paid taxes on the 135-acre property and his twenty-five percent interest in the oil and gas estate, and Mr. Stiles collected royalties on only a twenty-five percent interest in the oil and gas estate. Also reflecting the twenty-five percent interest Mr. Dunham retained after the 1968 deed, the 1968 land book contains a handwritten notation replacing Mr. Dunham's "1/2" oil and gas interest with a "1/4" interest.

So, by 1988, Mr. Stiles owned the 135-acre property and twenty-five percent of the subjacent oil and gas estate, and Mr. Dunham owned the other twenty-five percent interest in the oil and gas estate at issue in this case. But that year, Mr. Stiles paid neither the tax on the 135-acre property nor the tax on his twenty-five percent interest in the oil and gas estate, which were separately assessed. So, upon Mr. Stiles's tax delinquency, the sheriff exercised his enforceable lien and sold the 135-acre property and the twenty-five percent interest in the subjacent oil and gas rights separately at a tax sale in 1989. Respondent Richard Erlewine bought the 135-acre property, and Petitioners Trio Petroleum Corporation and Waco Oil & Gas Company bought Mr. Stiles's twenty-five percent interest in the oil and gas estate. ⁷ The Clerk of the Wetzel County Commission conveyed the 135-acre property to Respondent by deed dated April 1, 1991. By separate deed dated April 1, 1991, the same Clerk of the Wetzel County Commission conveyed Mr. Stiles's twenty-five percent interest in the oil and gas estate to Petitioners Trio Petroleum Corporation and Waco Oil & Gas Company. Then in 1992, Mr. Dunham, the owner of the other disputed twenty-five percent interest in the oil and gas estate, failed to pay taxes on his interest. So, the sheriff sold it to Petitioners at a tax sale as well. The Clerk of the Wetzel County Commission conveyed this twenty-five percent interest to them by deed dated April 1, 1995. After the tax sales, Respondent owned the 135-acre property and Petitioners owned fifty percent of the oil and gas estate.

For decades following the tax sales, Respondent paid taxes on the 135-acre property and Petitioners paid taxes on their fifty percent interest in the oil and gas estate underlying it. Even so, on December 17, 2020, Respondent filed a complaint seeking a declaratory judgment that he owned Petitioners’ fifty percent of the oil and gas estate. He alleged that the 1991 Tax Deed that purportedly conveyed the twenty-five percent oil and gas estate to Petitioners was void ab initio because the assessor lacked the authority to separately assess the delinquent taxpayer for the 135-acre property and the unsevered twenty-five percent interest in the oil and gas estate. And Respondent alleged that the 1995 Tax Deed was also void ab initio because Mr. Dunham transferred his full fifty percent interest in the oil and gas estate when he executed the 1968 deed to Mr. Stiles. So, Respondent alleged, the Clerk of the Wetzel County Commission possessed no interest to transfer in the 1995 Tax Deed.

The parties filed cross-motions for summary judgment. After a hearing on the motions, the circuit court found the 1991 and 1995 Tax Deeds void ab initio and granted summary judgment for Respondent. Petitioners raise two assignments of error on appeal, contending: (1) The 1991 Tax Deed conveyed to Petitioners a twenty-five percent interest in the oil and gas estate because the delinquent property owner subjected his entire ownership interest to a tax sale when he paid the taxes on neither the 135-acre property nor the oil and gas estate, and (2) the 1995 Tax Deed conveyed to Petitioners a twenty-five percent interest in the oil and gas estate because Mr. Dunham's 1968 deed to Mr. Stiles conveyed only the twenty-five percent interest in the oil and gas estate that the Rogerses conveyed in the 1945 deed.

II. STANDARD OF REVIEW

Petitioners appeal an order granting declaratory relief to Respondent. We apply a de novo standard of review to declaratory judgment appeals: "A circuit court's entry of a declaratory judgment is reviewed de novo. " ⁸ A de novo review is anew and unqualified. ⁹

III. ANALYSIS

A. 1991 Tax Deed

The circuit court opined that "[t]he threshold issue underlying [the validity of the 1991 Tax Deed] is whether an assessor is permitted to separately assess a sole owner of both the surface estate and the unsevered mineral estate associated with that parcel." But this is not the dispositive issue as to the validity of the 1991 Tax Deed. We have held that an assessor may not separately tax unsevered mineral estates: "In case of two assessments of the same land, under the same claim of title, for any year, one payment of taxes, under either assessment, is all the State can require." ¹⁰ We have also explained that "[a] deed made pursuant to a tax sale under a void assessment is void." ¹¹ Following this rationale, we have voided tax deeds where the...