Supreme Court reverses McDowell Co. decision in favor of Cabot Oil & Gas

CHARLESTON – The state Supreme Court has reversed a McDowell County decision that granted summary judgment to Cabot Oil & Gas Corp. in a dispute over promises it made to two landowners.

On Sept. 26, the court reversed and remanded the decision of McDowell Circuit Court Judge Booker T. Stephens in a lawsuit brought by Arthur and Virginia Thornsbury. The Thornsburys alleged Cabot Oil & Gas built a longer road and never stacked the timber required by a 2006 agreement.

Cabot Oil & Gas said the 2006 agreement was not binding because of a 1949 lease that granted it the right to engage in mineral development.

“The Thornsburys’ best argument for why the circuit court erred in granting summary judgment is that a party’s contractual obligations cannot be ‘pre-empted’ by an exculpatory clause in a deed between different parties executed seven decades before the contract,” the per curiam opinion says.

“(T)he Thornsburys should be allowed to prove that Cabot breached the provisions of the 2006 agreement, and that Cabot may be liable for damages arising from this breach.”

The Thornsburys purchased a 30-acre tract of land in McDowell County in 2001. Five years, later, Cabot approached them, seeking permission to build a road so it could install a natural gas well.

A hand-written notation in the otherwise typed agreement says the road would be only 200 feet long. Cabot also agreed that it would stack all timber 10 inches and larger while building the road.

The Thornsburys were paid $500.

The lawsuit alleges the road that was eventually constructed was 1,300 feet long and Cabot failed to stack any timber. A lawsuit was filed on Oct. 10, 2008, alleging Cabot had breached the 2006 contract.

Cabot said it only entered into the agreement “out of an abundance of caution,” and that it was pre-empted by the 1949 agreement.

“The Thornsburys do not assert in their complaint causes of action for violations of the common law or of the Oil and Gas Production Compensation Act,” the opinion says.

“As the Thornsburys’ case is pled in their complaint, they have only fairly asserted one claim: for breach of the 2006 right-of-way contract.

“That contract pertains to Cabot’s promise to build a road only 200 feet in length, the location of the road, and Cabot’s promise to stack certain timber. Genuine issues of material fact were established on whether Cabot breached the contract, and it was error for the circuit court to have granted summary judgment on this question.”

Chief Justice Brent Benjamin and Justice Allen Loughry both concurred in part and dissented in part.

Loughry filed his opinion the same day the per curiam decision was issued. It says the majority has misconstrued the 2006 agreement.

“Cabot, as lessee of the minerals underlying the Thornsburys’ property, has the right to enter the property and do what is reasonably necessary to extract the minerals, which includes the right to construct a road to its drilling site,” Loughry wrote.

“Therefore, Cabot did not need to obtain permission from the Thornsburys to build a road in order to exercise its mineral rights and, in fact, it did not do so.”

Instead, it approached the Thornsburys and the owners of the adjacent property over the right-of-way because it was uncertain as to the boundary lines of the properties, Loughry said.

Loughry wrote there is no basis to reverse Stephens’ decision, but he did agree with the majority that there are genuine issues of material fact as to the Thornsburys’ claim that the company did not stack the timber it promised.

Loughry said he would have only reversed Stephens’ decision on the timber issue.

From the West Virginia Record: Reach John O’Brien at jobrienwv@gmail.com.