Trans Energy, Inc. v. EQT Production Company

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 12-2553

TRANS ENERGY, INC., a Nevada Corporation; REPUBLIC PARTNERS
VI, LP, a Texas limited partnership; REPUBLIC ENERGY
VENTURES, LLC, a Delaware Limited Liability Company; PRIMA
OIL COMPANY, INC., a Delaware Corporation,

Plaintiffs - Appellees,

v.

EQT PRODUCTION COMPANY, a Pennsylvania Corporation,

Defendant - Appellant.

Appeal from the United States District Court for the Northern
District of West Virginia, at Clarksburg. Frederick P. Stamp,
Jr., Senior District Judge. (1:11-cv-00075-FPS-JES)

Argued: December 12, 2013 Decided: February 25, 2014

Before WILKINSON and GREGORY, Circuit Judges, and John A.
GIBNEY, Jr., United States District Judge for the Eastern
District of Virginia, sitting by designation.

Affirmed in part and vacated in part by published opinion.
Judge Gregory wrote the opinion, in which Judge Wilkinson and
Judge Gibney joined.

ARGUED: W. Henry Lawrence, IV, STEPTOE & JOHNSON, PLLC,
Bridgeport, West Virginia, for Appellant. James C. Ho, GIBSON,
DUNN & CRUTCHER, LLP, Dallas, Texas; Stuart A. McMillan, BOWLES
RICE LLP, Charleston, West Virginia, for Appellees. ON BRIEF:
Amy Marie Smith, Bridgeport, West Virginia, John Joseph Meadows,
STEPTOE & JOHNSON, PLLC, Charleston, West Virginia, for
Appellant. James E. Scott, BOWLES RICE LLP, Charleston, West
Virginia; Ashley E. Johnson, GIBSON, DUNN & CRUTCHER LLP,
Dallas, Texas, for Appellees.

2
GREGORY, Circuit Judge:

This appeal arises from an action to quiet title. The

parties make competing claims of ownership to the gas rights

underlying a 3,800 acre plot of land located in northern West

Virginia known as Blackshere. The parties filed cross-motions

for summary judgment, and the district court ruled in favor of

the plaintiffs. The defendant, EQT Production Company (“EPC”),

appealed the district court’s decision on the merits, as well as

several of its procedural rulings. EPC also makes a new

argument on appeal, challenging whether subject matter

jurisdiction existed in the district court.

Finding no error in any of the district court’s decisions,

we affirm the judgment as to three of the four plaintiffs.

However, in order to retain jurisdiction, we exercise our

authority to dismiss plaintiff Republic Energy Ventures, LLC

(“REV”) from the case, and we vacate the judgment with respect

to that party.

I.

In 1892, John Blackshere and South Penn Oil Company (“South

Penn”), which would later become Pennzoil Products Company

(“Pennzoil”), entered into an oil and gas lease covering the

Blackshere property (the “Blackshere Lease” or “Lease”). The

transfer was recorded with the Wetzel County Clerk. In 1901 and

3
1902, South Penn entered into two indenture agreements with

Carnegie Natural Gas Company and Hope Natural Gas Company

(“Hope”). The indentures purported to sever South Penn’s gas

rights from its oil rights and allocate the gas rights to

Carnegie and Hope. 1 It is undisputed that these indentures were

never recorded.

In 1965, Hope conveyed all of its interests and rights to

any property in Wetzel County to Consolidated Gas Supply

Corporation (“Consolidated Gas”). The transfer, which was

recorded, did not reference the Blackshere Lease. Consolidated

Gas is a predecessor in title to EPC. 2 As a result, the parties

agree that EPC’s alleged interest in Blackshere’s gas rights

derives from any right in the property that Hope transferred to

Consolidated Gas by way of this 1965 conveyance.

On October 15, 1996, Pennzoil assigned its rights in the

Blackshere Lease to Cobham Gas Industries, Inc. (“Cobham”)

through an assignment and bill of sale (the “Assignment”). The

Assignment was recorded through a memorandum of assignment (the

“Memorandum”) filed with the Wetzel County Clerk.

1
Under the agreements, Hope received the rights to the vast
majority of the property, some 3,550 acres.
2
Consolidated Gas, after a series of name changes, conveyed
its interests to Eastern States Oil and Gas, Inc. in 1995.
Eastern States eventually became EPC.

4
 On November 5, 2004, Cobham conveyed its interest in the

property (the “2004 Assignment”) to plaintiff Prima Oil Company,

Inc. (“Prima”) by way of a recorded transfer (the “2004

Confirmatory Assignment”). Prima is a wholly-owned subsidiary

of plaintiff Trans Energy, Inc. (“Trans Energy”). After the

2004 Assignment, Trans Energy assigned half of its portion of

the leasehold interest to plaintiff Republic Partners VI, LP

(“Republic Partners”). REV’s interest in the matter derives

from an overriding royalty interest in whatever production

Republic Partners obtains from the lease.

In 2011, Trans Energy was granted a permit by the West

Virginia Department of Environmental Protection to drill a new

gas well on the property. Prior to drilling the new well, Prima

discovered EPC’s alleged interest in the Lease resulting from

the unrecorded Hope indenture. The plaintiffs then filed this

action, seeking to quiet title to the Blackshere Lease and

requesting declarations that they have rightful title to the gas

rights underlying the property, and that Prima was a bona fide

purchaser for value (“BFP”) with no actual or constructive

knowledge of a competing interest in the property when it

acquired Cobham’s interest in 2004.

EPC answered and filed several counterclaims seeking a

declaration that it held superior title to Blackshere’s gas

5
rights, as well as tort claims for trespass, conversion, and

waste. 3

After significant discovery was undertaken by both sides,

EPC filed a motion for an extension of time to complete

discovery and to defer consideration of the plaintiffs’

anticipated motion for summary judgment. The parties then filed

cross-motions for summary judgment. The plaintiffs also filed a

motion in limine to exclude evidence of punitive damages.

On October 22, 2012, the district court informed the

parties by letter of its tentative rulings. The district court

stated its intention to (1) grant the plaintiffs’ motion for

summary judgment; (2) deny the defendant’s motion for summary

judgment; (3) deny the defendant’s motion for an extension of

time to complete discovery and to defer consideration of the

plaintiffs’ summary judgment motion; and (4) grant the

plaintiffs’ motion in limine to exclude evidence of punitive

damages. The court also advised the parties not to file any

further motions or pleadings with respect to the rulings

contained in the letter.

3
The plaintiffs then filed an amended complaint raising the
same tort claims and seeking compensatory damages but later
withdrew these claims.

6
 The next day, EPC filed a motion for leave to file a

supplemental memorandum in support of its summary judgment

motion and against the plaintiffs’ summary judgment motion.

On November 26, 2012, the district court entered two

memorandum opinions in accordance with its tentative letter

rulings. In a thorough, well-reasoned opinion, the court

granted the plaintiffs’ motion for summary judgment, denied the

defendant’s motion for summary judgment, and denied the

defendant’s motion for leave to supplement the record. The

second opinion denied EPC’s motion for an extension of time to

complete discovery and to defer consideration of the summary

judgment motions, and granted the plaintiffs’ motion to exclude

punitive damages evidence. The court then entered final

judgment in favor of the plaintiffs, and this appeal followed.

II.

A.

Although not raised below, EPC challenges on appeal whether

the district court had subject matter jurisdiction over the

case. Whether subject matter jurisdiction exists is a question

of law that we review de novo. In re Kirkland, 600 F.3d 310,

314 (4th Cir. 2010). The plaintiffs relied on diversity of

citizenship in filing the case in federal court. See 28 U.S.C.

§ 1332(a)(1). The case was originally filed against EQT

7
Corporation. 4 By mutual agreement of the parties, EQT

Corporation was substituted as a defendant by EPC, a

Pennsylvania company. It is undisputed that Trans Energy is a

Nevada Corporation and Prima is a Delaware Corporation. The

complaint identified Republic Partners as a citizen of Texas and

REV as a citizen of Delaware, thereby establishing complete

diversity. However, the plaintiffs now acknowledge that they

improperly alleged the citizenship of Republic Partners and REV

by referring only to the states in which those entities are

organized and do business. See Carden v. Arkoma Assocs., 494

U.S. 185, 195 (1990) (partnerships have citizenship of their

partners); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d

114, 120 (4th Cir. 2004) (limited liability companies have

citizenship of their members).

A federal statute allows for the curing of jurisdictional

pleading defects on appeal. See 28 U.S.C. § 1653 (“Defective

allegations of jurisdiction may be amended, upon terms, in the

trial or appellate courts.”). In accordance with this, the

plaintiffs filed a motion to supplement the record with an

affidavit attesting to the Texas citizenship of each member of

Republic Partners. At oral argument, EPC conceded the accuracy

4
EQT Corporation is not to be confused with EQT Production,
the current defendant and to whom we refer as “EPC” throughout.

8
of this information. Accordingly, we grant the plaintiffs’

motion to supplement the record, and we find no jurisdictional

defect with respect to Republic Partners.

As to REV, the plaintiffs now concede that it includes

members who are citizens of Pennsylvania, the same as EPC. To

keep diversity of citizenship intact, the plaintiffs propose to

have REV dismissed as a party under Federal Rule of Civil

Procedure 21. See Newman-Green, Inc. v. Alfonzo-Larrain, 490

U.S. 826, 836 (1989) (holding that the courts of appeals have

the authority to dismiss a dispensable nondiverse party by

virtue of Rule 21). EPC argues, however, that REV is an

indispensable party under Rule 19 and cannot be dismissed.

Under Rule 19(b), when joinder of parties is not feasible

because of, among other things, nondiversity, a court must

decide whether “‘the action should proceed among the parties

before it, or should be dismissed’ because the absent party is

indispensable.” Yashenko v. Harrah’s NC Casino Co., LLC, 446

F.3d 541, 552 (4th Cir. 2006) (quoting Fed. R. Civ. P. 19(b)).

In making this determination, a court must evaluate:

first, to what extent a judgment rendered in the
person’s absence might be prejudicial to the person or
those already parties; second, the extent to which, by
protective provisions in the judgment, by the shaping
of relief, or other measures, the prejudice can be
lessened or avoided; third, whether a judgment
rendered in the person’s absence will be adequate;
fourth, whether the plaintiff will have an adequate
remedy if the action is dismissed for nonjoinder.

9
Id.

As an initial matter, we have previously admonished that

“[d]ismissal of a case is a drastic remedy, . . . which should

be employed only sparingly.” Teamsters Local Union No. 171 v.

Keal Driveaway Co., 173 F.3d 915, 918 (4th Cir. 1999). Further,

the Supreme Court has stated that, “[o]nce a diversity case has

been tried in federal court, . . . considerations of finality,

efficiency, and economy become overwhelming.” Caterpillar, Inc.

v. Lewis, 519 U.S. 61, 75 (1996). Both directives strongly

caution against dismissing the case, which involved extensive

discovery and was pending before the district court for over a

year and a half.

As mentioned, REV’s stake in the matter results from its

royalty interest in whatever production Republic Partners

obtains from the lease. REV is seeking to be dismissed from the

case, assured that its interests will be adequately represented

by the remaining plaintiffs, all of whom are related entities

seeking the same result. EPC, on the other hand, argues that

regardless of whether REV’s interests are protected, Rule 19(b)

concerns the interests of all the parties, not merely those of

the party proposed to be dismissed. See F. Rule Civ. P. 19(b)

(asking “to what extent a judgment rendered in the person’s

absence might be prejudicial to the person or those already

parties”) (emphasis added). In its answer to the complaint, EPC

10
asserted several counterclaims that included REV as a defendant.

It argues that it is entitled to have REV remain as a possible

defendant for its counterclaims should this Court reverse the

overall merits determination of the district court. Given our

decision, explained below, to affirm the district court’s ruling

in favor of the plaintiffs, this argument is functionally moot.

In any event, we note that the defendant has failed to show – or

even suggest – a single, tangible way in which it will be harmed

by REV’s absence. See Dore Energy Corp. v. Prospective Inv. &

Trading Co. Ltd., 570 F.3d 219, 232 (5th Cir. 2009) (“The

factors under Rule 19(b) are concerned with whether actual harm

to anyone’s interest will occur if the case proceeds absent

certain parties.”) (emphasis added). Instead, EPC merely states

generally that it has a right to have REV remain as a party

without addressing why the 19(b) factors weigh in favor of a

finding of indispensability. Having reviewed the parties’

arguments and the record, we are satisfied that there is no

reason to believe that any party will be harmed by REV’s

absence, or that the plaintiffs received an improper “tactical

advantage” by including REV as a party. See Parker v. Centre

Group Ltd. P’ship, 70 F.3d 1262 (4th Cir. 1995) (unpublished

table decision). Additionally, to the extent EPC is concerned

about not being sued in a separate state action filed by REV,

the plaintiffs have asked that REV be dismissed with prejudice.

11
Given these considerations, we deem this an appropriate case in

which to exercise our power under Rule 21 to dismiss REV from

the suit and preserve diversity among the remaining parties.

B.

Turning to the merits of the case, EPC raises three main

issues. First, it argues that the 1996 transfer from Pennzoil

to Cobham conveyed only the oil rights to the Blackshere Lease

and not the gas rights. Second, EPC contends that the district

court lacked a factual basis on which to find that Prima

received title to the lease by virtue of the 2004 Confirmatory

Assignment. Third, EPC argues that Prima had notice of its

competing claim at the time of the 2004 Assignment and was

therefore not a BFP. We address each issue in turn, utilizing a

de novo standard of review. Glynn v. EDO Corp., 710 F.3d 209,

213 (4th Cir. 2013) (“We review a district court’s grant of a

motion for summary judgment de novo, applying the same legal

standards as the district court.”).

1.

The defendant first argues that the language of the

Memorandum did not convey the gas rights to the Blackshere

Lease. Basic principles of West Virginia property law guide our

analysis on this issue. “A valid written instrument which

expresses the intent of the parties in plain and unambiguous

language is not subject to judicial construction or

12
interpretation but will be applied and enforced according to

such intent.” Syl. pt. 4, Zimmerer v. Romano, 679 S.E. 2d 601

(W. Va. 2009). “In construing a deed, will, or other written

instrument, it is the duty of the court to construe it as a

whole, taking and considering all the parts together, and giving

effect to the intention of the parties wherever that is

reasonably clear and free from doubt . . . .” Syl. pt. 1, Maddy

v. Maddy, 105 S.E. 803 (W. Va. 1921).

The Memorandum states that Pennzoil, through the

Assignment, “did bargain, sell, transfer, assign and convey unto

[Cobham], all right, title and interest it may have in and to

certain oil and gas leases and 88 wells more particularly

described on EXHIBIT ‘A’ and EXHIBIT ‘B’, attached [t]hereto and

made a part [t]hereof.” Exhibit A is a list of leases

associated with the conveyance, including the Blackshere Lease.

Exhibit B lists both the leases and wells being transferred as

part of the sale. Exhibit B includes a “rights” column for each

of the wells, under which is indicated “oil,” “gas,” or “oil and

gas.” The rights columns for all the Blackshere Lease wells

indicate “oil.” EPC contends that Exhibit B lists not only the

wells being transferred but also the ownership rights of each

lease associated with those wells. Thus, because “oil” is the

only right associated with the Blackshere Lease wells, the

13
conveyance must have been intended to transfer only the oil

rights to Cobham.

We disagree with this reading, and instead adopt the

district court’s conclusion that the Memorandum unambiguously

establishes that Pennzoil transferred both oil and gas rights to

the oil and gas leases listed in Exhibit A, and that Exhibit B

simply lists the wells being transferred and the rights utilized

by those wells. First, the granting language of the memorandum

plainly states that the leases being transferred were “oil and

gas leases.” (emphasis added). There is no indication that any

of the leases were simply oil leases or simply gas leases.

Exhibit A lists the entire Blackshere Lease, as conveyed by John

Blackshere to South Penn in 1892. Nothing in the granting

language of the Memorandum or the list of leases in Exhibit A

indicates that the oil and gas rights were severed at any point.

Second, the Memorandum states that Pennzoil conveyed all of

its interest in and to “certain oil and gas leases and 88 wells

. . . .” (emphasis added). This indicates the transfer of two

distinct types of Pennzoil property: leases and wells. Exhibit

A, which does not include reference to any wells, is clearly a

list of the leases being transferred. Exhibit B, on the other

hand, offers particularized descriptions of each of the wells

and is properly understood as a list of the wells being

transferred and the type of production associated with each

14
well. The fact that some wells produced only oil in no way

limits the rights included in the leases. Moreover, the

defendant’s position requires reading Exhibit B in isolation and

ignoring the remaining language in the Memorandum and Exhibit A.

When, as it must be, the instrument is “construe[d] . . . as a

whole, taking and considering all the parts together,” Syl. pt.

1, Maddy, 105 S.E. at 803, it is clear that Pennzoil transferred

to Cobham all of its rights in a series of oil and gas leases,

as listed in Exhibit A – including the unsevered 1892 Blackshere

Lease – as well as its rights to the accompanying wells, as

listed in Exhibit B. We therefore affirm the district court’s

decision that the Memorandum unambiguously conveyed to Cobham

the gas rights in the Blackshere Lease.

2.

EPC next contends that because the plaintiffs failed to

offer the 2004 Confirmatory Assignment into the record the

district court lacked a factual basis on which to find that

Prima ever received title to the Blackshere Lease. As noted,

the 2004 Confirmatory Assignment recorded the sale of Cobham’s

interest in the Lease to Prima. In the proceedings below, the

plaintiffs purported to attach this document to their motion for

summary judgment; however, it is now apparent that they

mistakenly attached a different, unrelated instrument. EPC

avers that, without the 2004 Confirmatory Assignment, the

15
district court simply had no evidentiary basis for concluding

that Prima held an unbroken, recorded chain of title to the

Blackshere Lease.

This argument is easily rejected. EPC’s own expert

mentioned the 2004 Assignment in testifying that the plaintiffs

held an unbroken chain of title going back to the original 1892

lease. The witness, Arnold Schulberg, testified:

Q. And we were talking about what the record chain of
title shows regarding ownership of the Blackshere
lease and we were dealing with –- I think we got up
to Cobham; is that correct?
A. Yes.
Q. And what was your understanding after the Cobham?
A. We have an assignment from Cobham Gas Industries,
Inc., to Prima Oil Company, Inc.
Q. And do you know the date of that?
A. It’s, apparently, November 5th, 2004.
. . .
Q. Okay. Is it fair to say that based just on the
record title, that there is a chain directly from
the original lessor to Prima Oil?
A. Yes. There’s a chain.
Q. Based on the record?
A. Yes.

The plaintiffs’ expert also testified to the same effect,

stating that Prima held record title to the Blackshere Lease.

Additionally, the plaintiffs offered into evidence a written

description of Prima’s complete chain of title that specifically

referenced the 2004 Assignment. Clearly then, the evidence

provided an adequate basis for the district court’s conclusion

16
that Cobham conveyed to Prima its interest in the Lease via the

2004 Assignment. The defendant has not directly challenged the

validity of the evidence regarding the 2004 Assignment, and

instead merely relies on a clerical error of the plaintiffs in

attaching the wrong document to their motion. Considering the

actual evidence that made it into the record, which is clear, we

reject EPC’s argument on this point.

3.

EPC’s third and final argument is that Prima was not a BFP

in 2004 because it had notice of EPC’s competing claim to

Blackshere’s gas rights. Under West Virginia law, unrecorded

written contracts, such as the 1901 and 1902 indentures that

purported to sever the gas rights underlying the property, are

“as effective as a recorded deed” against purchasers with notice

of the unrecorded transfer. Farrar v. Young, 230 S.E.2d 261,

265 (W. Va. 1976). As a result, even if Prima can demonstrate

record title to the gas rights, EPC might nevertheless have a

claim as the rightful holder of those rights.

Importantly, though, the rule regarding unrecorded

transfers also provides that such transfers are invalid as

against BFPs. See W. Va. Code § 40-1-9. A BFP is “one who

purchases for a valuable consideration, paid or parted with,

without notice of any suspicious circumstances to put him on

inquiry.” Stickley v. Thorn, 106 S.E. 240, 242 (W. Va. 1921).

17
This rule protects good faith purchasers who conduct due

diligence prior to purchasing an interest in real property. See

Gullett v. Burton, 345 S.E.2d 323, 327 (W. Va. 1986). A party

alleging notice to a purchaser must show that the purchaser was

placed on actual or constructive notice of the competing claim

or defect in title. Fanti v. Welsh, 161 S.E.2d 501, 505 (W. Va.

1968). Such knowledge is imputed to the purchaser if it could

have been acquired through “the exercise of ordinary diligence.”

Id. “[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).

EPC asserts a variety of theories under which knowledge of

its competing interest should be imputed to Prima. First, it

contends that language in the Memorandum and the Assignment

ought to have put Prima on notice of a potential competing

claim, thereby triggering a duty to conduct a title search

beyond the record. This is a reference to a form of

constructive notice known as inquiry notice. Inquiry notice

exists “when a prospective buyer has reasonable grounds to

believe that property may have been conveyed in an instrument

not of record . . . .” Eagle Gas Co. v. Doran & Assocs., Inc.,

387 S.E.2d 99, 102 (W. Va. 1989). In such cases, purchasers

must “use reasonable diligence to determine whether such

previous conveyance exists.” Id.

18
 EPC contends that because language within the Memorandum

referenced the Assignment itself, Prima was charged with

inspecting that document as well. West Virginia’s recording

statute requires only the filing of a memorandum noting a

transfer of real property and not the actual assignment itself.

See W. Va. Code § 40-1-8. As such, a memorandum normally

constitutes the complete notice of a transfer and is all that

prospective purchasers need review in order to satisfy due

diligence. However, several West Virginia cases have held that

in certain circumstances, references in the memorandum to a

competing interest may require the purchaser to conduct further

review outside the record. See In re Restaurant Assocs.,

L.L.C., No. 1:06CV53, 2007 WL 951849, at *4 (N.D. W. Va. Mar.

28, 2007) (holding that if there exist “reasonable grounds to

believe th[e] property may have been conveyed in an instrument

not of record” the purchaser “may be charged with searches

beyond the record”) (quoting Eagle Gas Co, 387 S.E.2d at 102);

see also Syl. pt. 1, Pocahontas Tanning Co. v. St. Lawrence Boom

& Mfg. Co., 60 S.E. 890 (W. Va. 1908) (“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.”).

In In re Restaurant, the recording memorandum noted that

the transfer was “subject to any and all exceptions,

19
reservations, restrictions, easements, rights-of-way and

conditions as contained in prior deeds of conveyance in this

chain of title.” 2007 WL 951849, at *4. One of the prior deeds

within the chain of title referenced unrecorded covenants. Id.

The court reasoned that the purchasers should have inquired

further about the unrecorded deeds, given that the record

specifically mentioned their existence. Id. at *5.

This case is readily distinguishable from In re Restaurant.

Although the Memorandum mentioned the Assignment, unlike in In

re Restaurant it did not reference other documents containing

information about competing interests. The Memorandum merely

mentions the Assignment in passing, noting that the Assignment

was the actual transfer document. Without more, there was

nothing to raise Prima’s suspicions about a possible competing

claim and give it cause to consult beyond the record.

Accordingly, we agree with the district court that the reference

in the Memorandum would not have placed a reasonably prudent

purchaser on notice of EPC’s competing claim.

Furthermore, even assuming that the language of the

Memorandum created a duty to consult the actual Assignment,

nothing within the Assignment indicated the existence of a

competing ownership claim. The Assignment contains the

following provision: “a portion of [the transferred] Land and

Wells are subject to certain contractual obligations with either

20
CNG Transmission Corporation or CNG Producing Company.” 5

Contrary to EPC’s assertions, this notation is insufficient to

require a purchaser to inquire further about the nature of these

contractual obligations. There is no indication that the term

“contractual obligations” referred to potential ownership

interests in the gas rights to Blackshere, nor does the language

state which of the many leases and wells conveyed along with

Blackshere might have been subject to such obligations. We deem

these non-specific references to contractual obligations

insufficient to cause a reasonable buyer to conduct a further

investigation outside the record. 6

EPC also argues more generally that Prima’s title inquiry

was unreasonably cursory and fell short of due diligence. Prior

to purchasing its interest in the property from Cobham in 2004,

Prima retained attorney Richard Starkey to investigate

Blackshere’s chain of title. Although Mr. Starkey testified

that he conducted only an “abbreviated” review, he did consult

5
CNG Transmission Corporation is a predecessor-in-interest
of EPC.
6
EPC also reiterates its argument, addressed above, that
the “rights” section of Exhibit B, which listed only “oil”
rights for Blackshere’s wells, indicated that the transfer did
not include the gas rights. From this, EPC contends that Prima
was on notice of at least the possibility of a competing claim
and therefore should have engaged in additional inquiry. For
the same reasons explained above, EPC’s argument on this point
is not compelling.

21
the relevant county records to ensure that Cobham had obtained

good title from Pennzoil in 1996. Regardless of the

extensiveness of Mr. Starkey’s review, however, no amount of

searching would have revealed EPC’s competing claim, since it is

undisputed that the 1901 and 1902 indentures were never

recorded. As the district court noted, a purchaser is not

punished for failing to conduct due diligence when all

reasonable inquiries would nevertheless have failed to uncover a

competing claim. 7 That is exactly the situation here, and,

accordingly, knowledge of EPC’s claim cannot be imputed to

Prima.

EPC offers three final arguments for why Prima had notice

of EPC’s competing claim and is not a BFP. First, EPC asserts

that Mr. Starkey was aware of the “legend and lore” among mining

interests in northern West Virginia that gas rights to large

tracts of property had been severed in the early 20th century

and transferred to Hope. 8 This argument has no legal

7
EPC’s argument that had Prima consulted Hope’s chain of
title it would have discovered the 1965 conveyance between Hope
and Consolidated Gas is irrelevant given that the 1965 deed does
not mention the Blackshere Lease.
8
Mr. Starkey’s knowledge may be imputed to Prima. See
Morgan-Gardner Elec. Co. v. Beelick Knob Coal Co., 112 S.E. 587,
591 (W. Va. 1922) (“The law imputes to the principal, and
charges him, with all notice or knowledge relating to the
subject matter of the agency which the agent acquires or obtains
(Continued)
22
significance. See Pocahontas Tanning, Inc., 60 S.E. at 893

(explaining that “vague rumor or mere surmises are insufficient

in themselves” to create constructive notice). While Starkey

admitted having knowledge of these rumors, he testified that in

thirty years of working in the oil and gas industry in the area

he had never seen the alleged severance applied. Such non-

specific conjecture is clearly insufficient to constitute

constructive notice of a competing interest.

Next, EPC argues that its operation of two gas wells on the

property constituted constructive notice of its claim. Notice

may be established when a reasonable physical inspection of the

premises would have yielded information of a competing claim.

See Bailey v. Banther, 314 S.E.2d 176, 181 (W. Va. 1983).

Representatives from Prima toured the property prior to the 2004

Assignment, spending several days visiting Cobham well sites and

traversing numerous access roads and found no sign of EPC’s two

wells. This is unsurprising given the nature of the property,

which consists of 3,800 acres of heavily forested, undeveloped

land. As such, we agree with the district court that Prima

conducted due diligence in its inspection of the site and that

while acting as such agent and within the scope of his
authority[.]”).

23
EPC’s operation of the two wells did not amount to constructive

notice of its competing claim.

Lastly, EPC argues that Prima purchased its interest at

such a discount that it must have known it was getting something

less than clean title to the entire estate. Prima paid $250,000

and 250,000 shares of Trans Energy stock for rights to the

Lease, which EPC compares with the $6,000,000 Prima later spent

to build a new well on the property. To the extent that

purchase price may be considered in determining BFP status under

West Virginia law, see Wetzel v. Watson, 328 S.E.2d 526, 530 n.

4 (W. Va. 1985) (“[a] valuable consideration, however small, if

bargained for in good faith in the absence of fraud will be

sufficient to sustain a contract”), we again agree with the

district court that unique circumstances in the price and

estimated abundance of natural gas in the region offer a

reasonable explanation for any increased value of the Lease

rights. 9 With this background in mind, we hold that the purchase

price fails to establish constructive notice.

For all these reasons, we affirm the district court’s

decision that Prima was a BFP in 2004 and therefore holds

9
In 2004, the United States Geological Survey estimated
that 1.9 trillion cubic feet of gas existed in Blackshere’s
surrounding region. According to the plaintiffs, a recent
estimate is 141 trillion cubic feet.

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superior title to the Blackshere Lease by virtue of its

unbroken, recorded chain of title.

C.

EPC has also challenged a number of the district court’s

procedural rulings. Specifically, EPC contests the denial of

its motion for an extension of time to complete discovery and

defer consideration of the plaintiffs’ summary judgment motion,

and the denial of its motion for leave to file a supplemental

brief in support of its summary judgment motion and against the

plaintiffs’ summary judgment motion. 10 We review both rulings

for abuse of discretion, reversing only if there is a clear

abuse of discretion or the real possibility that a party was

unfairly prejudiced by the decisions. See Ingle ex rel. Estate

of Ingle v. Yelton, 439 F.3d 191, 195 (4th Cir. 2006); Strag v.

Bd. of Trs., Craven Cmty. Coll., 55 F.3d 943, 954 (4th Cir.

1995). We have reviewed the parties’ arguments and the record

and find that we are in agreement with the decisions of the

district court, as explained in its two opinions on the matters.

See Trans Energy, Inc. v. EQT Prod. Co., No. 1:11cv75, 2012 WL

5906649 (N.D. W. Va. Nov. 26, 2012); Trans Energy, Inc. v. EQT

Prod. Co., No. 1:11cv75, 2012 WL 5906603 (N.D. W. Va. Nov. 26,

10
The defendant also challenges the grant of the
plaintiffs’ motion in limine to exclude any evidence or argument
of punitive damages. In light of our ruling on the merits in
favor of the plaintiffs, we need not consider this issue.

25
2012). Accordingly, we affirm the denial of the defendant’s

motions.

III.

For the foregoing reasons, we affirm the district court’s

grant of summary judgment in favor of Trans Energy, Republic

Partners, and Prima, but vacate the judgment with respect to

REV, whom we dismiss with prejudice. We also affirm the

district court’s challenged procedural rulings.

AFFIRMED IN PART AND
VACATED IN PART

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