H. B. 3174
(By Delegates Frederick, Long, Kominar and Caruth)
[Introduced February 21, 2003; referred to the
Committee on the Judiciary.]
A BILL to amend chapter fifty-five of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article twelve-b, relating
to creating the "West Virginia Joint Coal Owners Trust and
Conservation Act."
Be it enacted by the Legislature of West Virginia:
That chapter fifty-five of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by adding
thereto a new article, designated article twelve-b, to read as
follows:
ARTICLE 12B. WEST VIRGINIA JOINT COAL OWNERS TRUST AND
CONSERVATION ACT.
§55-12B-1. Findings and purpose.
(a) The Legislature finds that the ownership of many tracts of
coal in West Virginia are divided into fractional interests among several owners who are commonly known as joint-owners or cotenants;
that such fractional coal interests are frequently small, and the
problems encountered in leasing and producing such coal is of such
cost and complexity, so as to discourage the owners of small
fractional coal interests from participating with the other joint
owners in the leasing of their coal interests for purposes of
production; that the failure to develop coal in a timely and
efficient manner can result in the diminution of its value due to
the isolation or bypassing of the coal by adjacent mining; that
such circumstances can deprive both the state and joint coal owners
of the benefits of such coal ownership; that the alternative remedy
of petitioning the circuit courts to partition a coal tract among
the joint owners is expensive, protracted and frequently
impractical due to uncertainties about the actual value and
distribution of coal in a given tract; and that it is reasonable
and necessary for the welfare of the state and its many
joint-owners of coal to establish an efficient and practical
judicial procedure by which all of these joint owners may seek a
just, fair and equitable remedy for the enjoyment and conservation
of their coal resources. In recognition of the fact that the
estate of a joint owner in coal can be enjoyed only by mining,
removing, and selling the coal, and that the mining, constitutes
the use and not the destruction of the common estate, the purpose
of this article is to clarify the rights of joint owners of coal in this state, to promote and preserve the value of coal reserves in
the state, and to maximize the recovery of coal through the orderly
and efficient development of coal reserves for the benefit of all
joint owners in a fair and equitable manner.
(b) The purpose of this article is to create a judicial
procedure by which the joint owners of a given tract of coal may
seek a remedy for the circumstances described in subsection (a) of
this section by petitioning the circuit court to review a proposed
coal lease or appoint a court-supervised trustee to negotiate,
execute, deliver or administer a coal lease; to promote and protect
the value of the coal reserves; to protect the value of the joint
owners' interests; and to maximize the conservation and recovery of
coal through the orderly and efficient development of coal reserves
for the mutual benefit of all joint owners thereof and the state in
a just, fair and equitable manner.
§55-12B-2. Definitions.
As used in this article:
(a) "Joint owner" or "cotenant" means a person or entity that
is a joint tenant, a tenant in common, or a tenant by the entirety
whether the title is derived by purchase, gifts, legacy, descent,
operation of law or from any other source.
(b) "Coal owners" or "owners" means one or more persons or
entities vested with a partial, undivided estate or other freehold
interest in any coal estate, but does not include a person or entity with a leasehold or any lesser estate.
(c) "Lease" means any instrument which vests, conveys, or
creates in one or more lessees a leasehold estate for the purposes
of exploration, evaluation, development, production or removal of
coal and any reasonable and necessary activities related thereto,
including, but not limited to, an amendment, assignment,
confirmation or restatement of an existing lease.
(d) "Administer" or "administration" means the power of a
trustee appointed to this article, but only to the extent
authorized by the court, to do all acts reasonable and necessary
for the benefit, and on behalf of, the joint owners, under the
provisions of any coal lease executed pursuant to this article
including, but not limited to, review and monitoring of coal
production plans, operations and reclamation, auditing coal
production and royalty payments, and bringing a civil action on any
claim or cause of action arising under the lease.
§55-12B-3. Venue.
Proceedings under this article must be brought in the circuit
court of the county in which the coal tract or tracts sought to be
affected, or the major portion thereof, are located.
§55-12B-4. Persons who may initiate proceedings; creation of
trust; appointment of trustee; other relief;
appointment of guardian ad litem; rights of surface
owners preserved.
(a) If the title to one or more coal tracts is owned or
controlled by two or more joint owners, then proceedings for the
creation of a trust, the appointment of a trustee, and the relief
authorized under this article, may be instituted upon petition to
the circuit court by any person or persons: (1) Vested with an
undivided fee simple interest in the coal sought to be developed;
or (2) vested with a leasehold estate in an undivided interest in
the coal sought to be developed by one; or more petitioners, where
the undivided interest or interests represented or to petition
comprise a majority of the ownership or control.
(b) The circuit court of the county in which the coal tract or
tracts, or the major portion thereof, are located has the power to:
(1) Declare a trust in the coal interests and fix and thereafter
modify the duration thereof; (2) to appoint a trustee who shall act
in a fiduciary capacity on behalf of all joint owners vested with
the coal interests; (3) appoint a guardian ad litem to represent
the interests of any minors, incompetents, incarcerated persons who
have no guardians and for any unknown or missing owner or
abandoning owner and their unknown heirs, successors and assigns
not known to be alive; (4) authorize the trustee to negotiate,
execute, deliver, and administer a valid lease for those coal
interests on behalf of all the joint owners upon the terms and
conditions approved by the circuit court pursuant to this article;
and (5) upon the motion of the trustee, or as directed by the court, to empower the trustee to retain engineers, geologists or
other professionals to assist the trustee in the discharge of his
or her duties pursuant to this article.
(c) This article affects only coal owners, as defined in
section three-c of this article, and does not affect the rights of
surface owners, except to the extent that they may also be owners
of the underlying coal. A petition may not be authorized under
this article for the mining and removal of coal by the surface
method mining unless all of the owners of the surface consent to
the mining and removal of coal by the surface method of mining.
The existing surface rights of any owners of a surface estate shall
not be affected, diminished or impaired by any provision of, or any
relief granted, pursuant to this article: Provided, That this
subsection does not affect or impair any relief which may be
granted pursuant to article twelve-a, chapter fifty-five of this
code regarding an abandoning, unknown or missing coal owner.
§55-12B-5. Procedure; required parties; notice; qualifications,
compensation and costs of the trustee and guardian
ad litem; fiduciary duties of trustee; successor
trustee; other remedies.
(a) The plaintiff or plaintiffs in a proceeding under this
article shall join as the defendant or defendants all other persons
having a legal interest in the coal purposed to be leased including
all joint owners and also all persons in being who have a present, contingent or future interest in said coal of which the plaintiffs
have actual or constructive notice.
(b) If in any action under this article there may be joint
owners who are abandoning, unknown or missing owners, as defined in
section two, article twelve-a, chapter fifty-five of this code,
then these persons must be made defendants to an action under this
article, and provided notice thereof in the same manner, with the
same effect, and subject to the same relief as provided in section
five, article twelve-a, chapter fifty-five of this code. An action
filed under this article may be joined with an action under article
twelve-a, chapter fifty-five of this code.
(c) A verified petition must be filed specifically setting
forth the following:
(1) That the plaintiff or plaintiffs desire to negotiate,
execute, deliver or administer a coal lease granting one or more
lessees the right to explore for, develop, produce or remove coal
from the subject coal tracts and any other reasonable and necessary
activities related thereto;
(2) The legal description of the coal tract or tracts and the
property interest of the plaintiff or plaintiff therein;
(3) The apparent interest of the defendant or defendants in
the said coal tract or tracts;
(4) The coal lease proposed by the plaintiffs, if any, which
shall be attached as an exhibit to the petition;
(5) That the plaintiff or plaintiffs desire to lease
defendants' coal for purposes of removal and production thereof and
request that the court:
(A) Review a lease proposed by plaintiffs to determine whether
it is fair and equitable to all joint owners pursuant to the
provisions of this section, and thereafter, appoint a trustee to
execute, deliver or administer the lease; or
(B) Appoint a trustee for the purposes of soliciting and
negotiating with potential lessees, that upon completion of
negotiations, that the trustee file with the court and serve upon
the parties a report of his or her activities, factual findings and
recommendations and a proposed lease, that the court thereafter
conduct a hearing upon the said report and proposed lease to
determine whether it is fair and equitable to all the joint owners
pursuant to the provisions of this section and, upon the court's
finding that it is fair and equitable, thereafter authorize the
trustee to execute, deliver or administer the lease.
(d) Any person appointed as a trustee or guardian ad litem
pursuant to this article must be an active member in good standing
of the West Virginia state bar and be experienced in the
transactional and commercial practices of coal leasing and
production. The court shall determine a reasonable fee to be paid
to the trustee and any guardian ad litem and may approve
reimbursement of their reasonable and necessary costs. The fees and costs must be paid by the plaintiff or plaintiffs pursuant to
section seven of this article.
(e) A trustee appointed pursuant to this article has a
fiduciary duty to the joint owners. The trustee's duty of loyalty
and duty of impartiality to the joint owners is the same as that
set forth in the uniform prudent investor act at sections five and
six, article six-c, chapter forty-four of this code. The standard
of care applicable to the trustee's administration of a lease is
the prudent investor rule as set forth in the uniform prudent
investor act at section two, article six-c, chapter forty-four of
this code.
(f) In the event of the death or resignation of the trustee,
or the refusal or inability of the trustee to faithfully discharge
his or her duties pursuant to this article, the court, upon its own
motion or upon the motion of any party, shall appoint a successor
trustee.
(g) The court shall take evidence and hear testimony as to the
allegations and requested relief set forth in the petition and any
responsive pleadings. The court shall consider the quality,
quantity, geological conditions of and the prevailing market for,
the subject coal, and any other factors considered relevant by the
court, in determining whether the financial and nonfinancial terms
and conditions of the proposed lease: (1) Are fair and reasonable
for all the joint owners; (2) are commensurate with similar transactions for the same coal under similar circumstances; and (3)
provide all the joint owners with at least fair market value for
their coal.
(h) If, upon taking evidence and hearing testimony, the court
finds that the requirements of subsection (f) of this section have
been satisfied, the court shall enter an order approving the
proposed coal lease and authorizing the trustee to execute, deliver
or administer the lease. If the court determines that the
requirements of subsection (f) have not been satisfied, the court
may, upon the motion of any party, the trustee, or its own motion,
instruct the trustee to continue negotiations with potential
lessees based on the findings of the court, or dismiss the action.
(i) In any actions under this article, any party or the
trustee may, as additional relief, request that the court determine
and remove any cloud on the title to the coal or other real
property related thereto, or any part thereof, or any estate,
rights or interests therein, to determine questions of title with
respect thereto, and confirm the title to the coal or the right to
mine and remove the coal from any of the lands, pursuant to section
two, article two, chapter fifty-one of this code.
§55-12B-6. Payment; binding effect of lease; subsequent
proceedings; court supervision of trustee;
continuation or termination of trust; enforcement
of lease terms and conditions, actions arising under lease.
Subsequent to the execution and delivery of a coal lease
pursuant to this article:
(a) All moneys due the joint owners under the lease must be
paid by the lessee or lessees directly to the joint owners;
(b) The lease is binding on all joint owners and other persons
named as parties to an action pursuant to this article, all persons
not in being and all other persons with a present, contingent or
future interest in the coal not duly recorded in the office of the
county clerk of the county or counties where the coal tracts are
situated, and of which interests the plaintiffs did not have actual
notice at the time of filing their petition;
(c) The lease is binding upon the lessee or lessees; their
agents, representatives, contractors, successors and assigns, in
the same manner as if all the joint owners had personally executed
and delivered the lease;
(d) Any joint owner or, with leave of the court, the trustee,
may file a civil action to enforce any terms and conditions of a
lease or any claim or cause of action arising thereunder;
(e) The court may, upon motion of any party, the trustee or
its own motion, retain continuing jurisdiction to conduct such
subsequent proceedings or to supervise the trustee and review his
or her administration of the lease, as the court may determine in
its discretion; and
(f) The court may continue or terminate the trust and the
duties of the trustee and any lease so executed shall continue in
full force and effect and be binding upon all the joint owners
after the termination of the trust unless the lease has previously
expired by its own terms.
§55-12B-7. Costs.
All court costs incident to the proceedings authorized under
this article, and the fees and costs incurred by the trustee and
any guardian ad litem, shall be paid by the plaintiff or plaintiffs
on a pro rata basis based on each plaintiffs' ownership interest in
the leased coal: Provided, That in this action, or any subsequent
civil action, the plaintiffs may seek contribution and
reimbursement of fees and costs from the defendants on a pro rata
basis based on each party's ownership interest in the leased coal,
but only to the extent that the defendants actually receive royalty
income or other consideration under the coal lease.
§55-12B-8. Construction.
This article is remedial in nature and must be liberally
construed to effectuate its purposes. Any lease executed and
delivered pursuant to this article conveys good and marketable
title to the lessee of the coal leasehold.
NOTE: The purpose of this bill is to establish a new article
which provides a less complex, more expedient way for a party controlling the majority interest in a coal tract securing a coal
lease to develop and recover the coal. Small tracts of coal can
easily be by-passed where it is too expensive or the delay is too
long to warrant the more complex provisions of §55-12A-1 et seq.
designed for mineral interests owned by missing or unknown owners
or abandoning owners. This new article provides for a
court-appointed trustee who will recommend a coal lease and
administer the lease to assure the proper distribution of coal
royalties to defendant joint owners. Unknown owners will be
represented by a guardian ad litem. The new procedure will promote
and preserve the value of coal reserves in the state and maximize
the recovery of coal through the orderly and efficient development
of coal reserves for the benefit of the state and all joint owners
in a fair and equitable manner.
This article is new; therefore, strike-throughs and
underscoring have been omitted.