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Hannover Resources, LLC v. LML Properties, LLC, et al.

Hannover Resources, LLC v. LML Properties, LLC, et al.

Case No. 
17-1089
Type of Proceeding: 
Appeal from the Circuit Court of Boone County (Judge Thompson)
Issues: 

Whether the trial court erred when it refused to enforce a mechanics lien against landowners who had entered into a lease agreement to permit coal mining where the mining company had failed to pay a company it hired to perform work under that agreement?

Background: 

Petitioner sought to enforce a mechanics and/or laborers lien in excess of $4.7 million dollars against a fee estate located in Boone County.  Respondents are the owners of the land/mineral interest at issue. 

Here are the background facts.  WWMV obtained a sublease permitting it to mine coal from the subject land.   Petitioner, Hannover, was contracted to provide mining services to WWMV.   Hannover invoiced WWMV for its services from January, 2014 until September, 2014, but did not receive payment.   Hannover, however, continued to provide services and its invoices ultimately totaled more than $4.7 million.  To secure its money, Hannover sought the protections of W.Va. Code 38-2-1, -2 and -21, claiming mechanics and laborers liens against the actual properties where the coal it mined came from.   The trial court found as a matter of law that Hannover did not have any contracts and/or relationship with the actual mineral interest owners such that a lien could be properly asserted.  Therefore, summary judgment was granted to the interest holders. 

Positions of the Parties: 

Petitioners:

Hannover attacks the manner in which the trial court considered the relationship between it, WWMV and the interest holders.  Hannover likens the situation to one in which WWMV was a general contractor which was required to mine coal under the applicable agreements.  It retained Hanover as a sub-contractor to perform the contract work.  As such, it believes that the general contractor/sub-contractor relationship creates the necessary connection and relationship with the landowners so that Hannover, as a sub-contractor, should be covered by the protections of the lien statutes.  Hannover believes that the trial court’s ruling should be reversed and that judgment should be entered in its favor.

Respondents:

Respondents agree with the trial court’s analysis of the issues and the relationship which existed between the parties.  They argue that a mineral lessee, such as WWMV, is not in a contractual relationship with the landowners such that a lien could be asserted.  That is, primarily, because the lease arrangement did not require WWMV to mine any coal or to do any act but did require it to pay royalties to the landowners if mining did occur.  The lease never required the interest holders to pay anything to WWMV or any entity it might contract with.   As such, the fundamental elements necessary to support application of the mechanics lien are missing.   Additionally, it is argued, as noted by the court below, that Hannover did not actually add any value to the subject property by its work.

Probable Impact: 

While this case could rise and fall on the language of the specific lease and sublease agreements at issue, there could be a significant impact on landowners throughout the state.  This case presents issues that reach into in the oil and gas realm as many thousands of West Virginia land owners have entered into oil and gas lease agreements allowing mineral companies to drill and operate gas wells.  Many, if not most, of those companies contract with other entities to provide parts of the drilling and construction process.   While many language of many leases include express indemnification clauses, many do not.  The question boils down to this:  Should everyday West Virginia landowners be subject to millions of dollars in liens clouding the title to their property because an oil and gas operator had not paid a bill?   The ruling by the Boone County court seems to strike the right balance.  It will be interesting to see where the new Supreme Court lands on this important issue.

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