The United States Court of Appeals for the Fourth Circuit has certified a complex question which intertwines issues about partnership interests in oil and gas wells, the Statute of Frauds, the common law "mining partnership," and the West Virginia Revised Uniform Partnership Act (W.Va.Code § 47B-1-1 et seq.). At its heart, the question asks us to differentiate between a partner in an ordinary, general partnership that has as its principal business mining or operating oil and gas wells, and a partner in a common law "mining partnership." While the two phrases sound the same, they are radically different forms of partnerships.
The case below involves oil and gas wells owned and operated by four partnerships. The partnerships also own real property: mineral interests in the form of leases to extract oil and gas from real estate. The plaintiff contends that he is a partner of each of these partnerships. The partners themselves do not own any part of the mineral interests. Nevertheless, another partner contends that the plaintiff should be excluded from the partnerships because he cannot produce a written instrument that meets with the Statute of Frauds showing he is a partner in the real-estate-owning partnerships.
The certified question from the federal court essentially has two parts. First, if a
The second part of the question is this: if a partnership is a general partnership (as defined in and governed by the West Virginia Revised Uniform Partnership Act), and the partnership owns leases to extract oil and gas from real property, then does the Statute of Frauds require a person to produce a written instrument to prove he/she is a partner in the general partnership? We answer this part of the question "no." Under the Revised Uniform Partnership Act, W.Va.Code § 47B-2-3 , general partnership property belongs solely to the partnership and not to the partners. A person does not need a deed, will or other written instrument to establish a partnership stake in the general partnership, even if the general partnership owns an interest in real property.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff-below Clifton G. Valentine alleges that, since the 1950s, he has owned a partnership interest in partnerships that operate six oil and gas wells in Ritchie County, West Virginia. The wells are on four separate tracts of land, and are owned and operated by four separate partnerships: Cutright Oil & Gas Co.;
For about forty years, Valentine received payments from the four partnerships reflecting his share of the net profits generated by the well operations. Those payments stopped in 1999, however, when Frank Deem's son and successor in interest, William "W.A." Deem, sold the majority interest in the partnerships to the defendant below, Sugar Rock, Inc.
After Sugar Rock became managing partner of the four partnerships and simultaneously became the operator of the six wells, the wells allegedly began to operate at a net annual loss. Sugar Rock annually delivered partnership tax documents
A. Proceedings before the U.S. District Court
On November 8, 2010, Valentine filed a diversity action against Sugar Rock
The parties engaged in discovery in the district court after which Sugar Rock moved for summary judgment. In its motion, Sugar Rock characterized the four partnerships as "mining partnerships," which arise when the co-owners or co-lessees of an interest in land cooperate in extracting oil, gas, or other minerals from the land. See, e.g., Syllabus Point 1, Childers v. Neely, 47 W.Va. 70, 34 S.E. 828 (1899) ("Where tenants in common or joint tenants of an oil lease or mine unite and co-operate in working it, they constitute a mining partnership."). Sugar Rock asserted it was entitled to summary judgment because Valentine could produce no written instrument creating his partnership interest in the four "mining partnerships" that own and operate the oil and gas wells.
In support of its motion for summary judgment, Sugar Rock argued that the creation of the four leaseholds conveyed interests in real property. See Syllabus Point 1, in part, McCullough Oil, Inc. v. Rezek, 176 W.Va. 638, 346 S.E.2d 788 (1986) ("An oil and gas lease (or other mineral lease) is both a conveyance and a contract."). Further, Sugar Rock argued that any subsequent assignment of a partnership interest in the oil and gas leases similarly conveyed interests in real property. Working from the premise that the partnership interests in the four leases claimed by Valentine are interests in real property, Sugar Rock maintained that their purported transfer could only be effected by a writing contemplated by the West Virginia Statute of Frauds, W.Va.Code § 36-1-1 . Thus, Sugar Rock reasoned, Valentine's lack of a written deed or will evidencing his ownership of the partnership interests in question doomed his claim.
In response, Valentine asserted to the district court that Sugar Rock's arguments failed to distinguish between "a direct ownership interest in real estate and an ownership interest in a partnership." West Virginia's common law and statutes permit a partnership agreement to be written, oral, or implied from the conduct and dealings of the partnership's members. See Syllabus Point 2, Duffield v. Reed, 84 W.Va. 284, 99 S.E. 481 (1919) ("A partnership, as to the parties thereto, springs from their intention, which need not be expressed in writing, but may be by oral agreement, or may be implied from their conduct and dealings with one another."); W.Va.Code § 47B-1-1(8)  ("`Partnership agreement' means the agreement, whether written, oral or implied, among the partners concerning the partnership, including amendments to the partnership agreement."). Valentine contended that he did not purchase a direct ownership interest in real estate, but rather that he purchased an ownership interest in four partnerships, and it was the partnerships that owned the real estate interests. Valentine asserted there was substantial evidence to support a finding he was a partner in each of the four partnerships, and was therefore entitled to share in the profits generated by the leases owned by the partnerships.
In an order dated September 18, 2012, the district court granted summary judgment to Sugar Rock and dismissed Valentine's claims with prejudice.
Valentine timely appealed the district court's order to the United States Court of Appeals for the Fourth Circuit.
B. Washburn v. Sugar Rock
During the pendency of his appeal, Valentine notified the Court of Appeals of the existence of a similar lawsuit in the Circuit Court of Ritchie County styled Washburn v. Sugar Rock.
The state circuit court in Washburn relied on evidence and legal arguments comparable to those presented to the federal district court by Valentine.
C. Proceedings before the U.S. Court of Appeals
Writing for the U.S. Court of Appeals, Judge King perceived the conflict between the decisions of the federal district court and the state circuit court as a "chicken-or-the-egg conundrum." Valentine v. Sugar Rock, Inc., 745 F.3d 729, 734 (4th Cir.2014). The federal district court had ruled that "the absence of a preexisting property interest documented by deed or will forecloses, ab initio, the creation of a `mining partnership[.]'" Id. Judge King wisely observed, however, that the federal district court had failed to consider whether West Virginia law recognized "a `partnership in mining,' that is, the formation of an ordinary partnership that happens to have as its primary purpose the exploitation of minerals." Id.
Judge King was rightly troubled that the federal district court and the state circuit court had applied similar precepts of West Virginia law to the identical Ritchie County properties, and yet had reached manifestly irreconcilable outcomes. 745 F.3d at 735 n. 3. Further, he could not discern a clear, concise, or cogent controlling precedent in the decisions of this Court that would be dispositive of the question of which court's interpretation of the law was correct.
Because of the vagaries of West Virginia law on this issue, on March 12, 2014, the U.S. Court of Appeals decided to certify the following question to this Court:
745 F.3d at 735. We agreed to review the question.
STANDARD OF REVIEW
When considering an order certifying a question from a federal court, we give
In its brief to this Court, Sugar Rock argues that this Court is constrained to consider only those facts contained in the certification order from the Court of Appeals. Sugar Rock contends that this Court cannot consider any other facts of record. As its only authority, Sugar Rock cites to a footnote which states, "This Court is bound by the facts contained in the district court's certification order." L.H. Jones Equipment Co. v. Swenson Spreader LLC, 224 W.Va. 570, 573 n. 3, 687 S.E.2d 353, 356 n. 3 (2009). This Court has consistently held, however, that "language in a footnote generally should be considered obiter dicta" and that if this Court is to create a new point of law, it will do "so in a syllabus point and not in a footnote." State ex rel. Med. Assurance of West Virginia, Inc. v. Recht, 213 W.Va. 457, 471, 583 S.E.2d 80, 94 (2003).
Still, Sugar Rock repeatedly cites the lone footnote in L.H. Jones Equipment. Sugar Rock insists that Valentine's brief "should be stricken by this Court" because it does not parrot the federal court's recitation of facts, but rather asserts facts taken from the record presented to the federal court. However, the language of the Uniform Certification of Questions of Law Act compels us to reject Sugar Rock's interpretation of our authority to review certified questions and to disavow and renounce our footnoted statement in L.H. Jones Equipment.
The Uniform Certification of Questions of Law Act, W.Va.Code § 51-1A-6(a)(2)  requires a certification order from a federal court or other state appellate court to contain "[t]he facts relevant to the question [of law to be answered], showing fully the nature of the controversy out of which the question arose." The purpose of this requirement is that the certifying court sends only one document to this Court for review: the certification order. No briefs of the parties, no appendix, and no matters of record accompany the certification order. This Court must, therefore, "assume that the findings of fact by the certifying court are correct." Barefield v. DPIC Companies, Inc., 215 W.Va. 544, 550, 600 S.E.2d 256, 262 (2004). The only way this Court can fairly assess whether to accept the question for our discretionary review, or to reject it, is to weigh the question in light of the facts presented in the certification order. That is why the certification order must contain a statement of relevant facts.
Nevertheless, once this Court accepts the certified question for review, we may consider any papers or exhibits filed in the certifying tribunal. This is because the Uniform Certification of Questions of Law Act allows this Court to "require the certifying court to deliver its record, or any portion of the record" to this Court. W.Va.Code § 51-1A-5 . Further, the Act provides that proceedings for review of a certified question are controlled "by the rules and statutes of this State governing briefs, arguments and other appellate procedures." W.Va.Code § 51-1A-8 . Our Rules of Appellate Procedure , specifically Rule 17(a)(4), says that "parties to a certified question case must file ... a joint appendix" containing relevant parts of the record that will assist this Court with a full understanding of the issues. And as a final stopgap measure, Rule 6(a) of the Rules of Appellate Procedure permits this Court to obtain and consider "portions of the record other than those provided by the parties."
Reading the Uniform Certification of Questions of Law Act and our Rules of Appellate Procedure together, it is plain that
The question certified by the federal court implicates one of West Virginia's statutes of frauds, W.Va.Code § 36-1-1 , which "requires the creation and the conveyance of specified estates and interests in land to be by deed or will." Cottrell v. Nurnberger, 131 W.Va. 391, 411, 47 S.E.2d 454, 464 (1948). W.Va.Code § 36-1-1 states:
We have interpreted the "deed or will" language in W.Va.Code § 36-1-1 to require a writing with "words of transfer or conveyance" of an interest in an estate. Arbaugh v. Raines, 155 W.Va. 409, 413, 184 S.E.2d 620, 623 (1971). See also, Uhl v. Ohio River R. Co., 51 W.Va. 106, 114-15, 41 S.E. 340, 344 (1902) ("[D]eeds generally require the word `grant,' or the words `bargain and sell,' or some technical word suitable to the character of the conveyance; such is formal conveyancing; but the word `convey' is now held to be equivalent to the word `grant,' even at common law ... [A]ny word to show intention will do."); Lockhart v. United Fuel Gas Co., 105 W.Va. 69, 72, 141 S.E. 521, 522 (1928) ("[D]eeds generally require the word `grant' or some technical words suitable to the character of the conveyance.").
In this case, there are four tracts of land. The parties agree that at some point, the owners of those four tracts signed writings granting the four partnerships a right to drill for, take, and sell for commercial use oil and gas.
The dispute in this case is over the ownership rights of one of the people who purchased and held a stake in the partnerships that own the leases and operate the wells. The documents and testimony of record suggest that Valentine was, in some manner, a partner in the four partnerships. The question certified by the federal Court of Appeals essentially asks this: is Valentine required to produce a deed, will, or other granting document conforming to the Statute of Frauds to establish that he is a partner in each partnership? The answer is two-fold, and lies in determining whether he is a partner in a common-law mining partnership, or a partner in an ordinary, general partnership that engaged in mining.
As we discuss below, the real property of a mining partnership belongs to the individual members of the mining partnership. Hence, each member of a mining partnership must prove their inclusion in the partnership by establishing ownership of an interest in the
Conversely, under the West Virginia Revised Uniform Partnership Act, the real property owned by a general partnership that is engaged in extracting minerals belongs to the partnership and not its partners. Any property given to or acquired by a partnership belongs to the partnership and not to the partners individually. Hence, the partners of a general partnership may prove their inclusion in the partnership, and thereby prove their interest in the partnership's property, by relying on any evidence that tends to show the partners intended to associate and carry on as co-owners some trade, occupation, or profession. The Statute of Frauds simply does not apply between partners of a general partnership. The members of a general partnership are not required to have a writing conforming with the Statute of Frauds conveying to the partners a stake in the partnership, even if the partnership itself owns an interest in real property.
A. Mining Partnerships
Mining partnerships are creatures of the common law. To understand how mining partnerships operate requires an understanding of why they were created. To understand why they were created requires a basic understanding of the ancient, common law rules surrounding the creation of ordinary, general partnerships.
For the sake of clarity, we will hereafter refer to the ordinary, general partnership as a "general partnership." This will distinguish the rules for common-law, ordinary, general partnerships from the legal precepts of mining partnerships.
Further, this opinion will not attempt to comprehensively discuss the common law rules of general partnerships, for a simple reason: most of those common law rules have been augmented or supplanted by statute. As we discuss in the next section, partnership law in West Virginia is now guided by the Revised Uniform Partnership Act. Hence, much of the following discussion on the common law of general partnerships is purely historical and academic.
A general partnership is an association of two or more persons who agree to carry on as co-owners a trade, occupation, or profession for profit. At common law, we defined a general partnership as:
Syllabus Point 4, Hi Williamson & Co. v. Nigh, 58 W.Va. 629, 53 S.E. 124 (1906).
Hence, under the common law, when a person left a general partnership association the partnership was instantly dissolved and ceased conducting its ordinary business.
By the same token, at common law a stranger to the general partnership (like a bankruptcy trustee) could not join the enterprise without the unanimous assent of all of the partners.
The second rule of general partnerships we should remember is this: at common law, a partnership required some form of contractual agreement between the partners. No formal writing or act was required to create a general partnership, but nonetheless, there must have been some explicit or implicit evidence of a contractual relationship. As we said in Syllabus Point 1 of William Deering & Co. v. Coberly, 44 W.Va. 606, 29 S.E. 512 (1898):
Third and finally, at common law, the mere shared ownership and use of property by two or more individuals (including a joint tenancy, tenancy in common, tenancy by the entireties, etc.) was not enough to create a partnership. One example given by this Court involves personal property: "Where two partners own a chattel, and make a profit by the use of it, they are not partners without some special agreement which makes them so." Childers v. Neely, 47 W.Va. at 72, 34 S.E. at 828 (citation omitted). Another example involves real property: "Two heirs or other co-owners of a farm, jointly farming it for profit, are not partners." Id. Even if the property owners shared the profits from the use of the property, that alone was insufficient to form a partnership.
With these three common law rules for general partnerships in mind, we now consider the common law rules for mining partnerships.
In the mid-to late-1800s, largely in the American West, mining enterprises "were organized and operated before the establishment of any firm governmental authority and long before the widespread application of any body of commercial law." David Sive, 2 Rowley on Partnership 688 (2nd Ed.1960). There is great expense, and great uncertainty, in mining operations, and few individuals "are willing to risk all their means in such undertakings[.]" Skillman v. Lachman, 23 Cal. 198, 206 (1863). Further, much of the expense occurs at the beginning of the enterprise, opening the mine or drilling the well, when the enterprise does not (and may never) produce any income. So, as a general rule, individuals are impelled to associate with others and pool their resources, time and skills to work the mine. Many times, in the 1800s, these individuals tried to work together under the legal framework of a general partnership.
The problem came when one individual died, went bankrupt, or just wanted to sell or convey his interest in the mining operation. "[I]n ordinary partnerships, such sale would dissolve the partnership, and compel a winding up and settlement of the business, which would be most disastrous to a mining enterprise." Id. "Unlike a factory, service profession, or grocery store, an oil well or a coal mine cannot sensibly be shut down and closed each time a joint owner wants to withdraw from the venture.... The capital outlay necessary for most mining ventures is so heavily front-loaded that it is inherently unfair to allow or force the venture's termination before affording [all of the partners] a legitimate opportunity to recoup the investment." Harry L. Mathison, Jr., "Mining Partnerships, a New Perspective on an Old Theory," 2 Journal of Min. Law & Pol. 319, 321 (1987).
Additionally, a creditor or supplier who had "provided materials or services to the mining venture could easily have his legitimate claim defeated if one of the partners withdrew and the mineral property was not liquidated at a price sufficient to satisfy his claim. This scenario would obviously work an injustice on the supplier, but it would also deter creditors from extending credit to mining ventures[.]" Id. at 322.
Generally speaking, a "mining partnership is governed by all the rules applicable to ordinary partnerships, except such as flow from [the] fundamental difference[s] in the two associations." Manufacturers Light & Heat Co. v. Tenant, 104 W.Va. 221, 225, 139 S.E. 706, 707 (1927) (citation omitted). The common law rules of mining partnerships evolved out of necessity, "differing from those [rules] regulating ordinary partnerships," to protect individual members of a mining enterprise "and at the same time properly secure the claims of creditors and insure the successful working of the mine." Skillman, 23 Cal. at 206-207.
This Court has defined a mining partnership in this way: "Where tenants in common or joint tenants of an oil lease or mine unite and co-operate in working it, they constitute a mining partnership." Syllabus Point 1, Childers v. Neely, 47 W.Va. at 70, 34 S.E. at 828. A similar definition is found in Syllabus Point 1 of Manufacturers Light & Heat Co. v. Tenant, 104 W.Va. at 221, 139 S.E. at 706: "While co-owners or joint owners of a mining lease, before they operate for oil or gas, are tenants in common or joint tenants, when they unite and co-operate in working the lease, they constitute a mining partnership."
Encompassed under this definition are three characteristics of mining partnerships which differentiate them from general partnerships. The first, and most obvious, difference is the absence of delectus personae. The members of a mining partnership lack any control over the individuals who are associated with the enterprise; "any person may become a member by virtue of an inter vivos conveyance or even inheritance, against the other members' consent." Bob Kiesling, "Mining Partnerships," 12 Baylor L.Rev. 103, 105 (1960). "If death, insolvency, or sale were to close up vast mining enterprises, in which many persons and large interests participate, it would entail disastrous consequences." Childers v. Neely, 47 W.Va. at 74, 34 S.E. at 829.
Second, a mining partnership may form without any express agreement between the members of the association. While a mining partnership "may be the product of a formal agreement," Brimmer, 15 Rocky Mtn. Min. L. Inst. at 4, it can also be created purely by operation of law, inferring a partnership from the conduct of the parties. A mining partnership "arises by operation of law when cotenants of mining lands unite and cooperate for the purpose of extracting minerals, whether coal, oil or gas from the land." Ailes, 41 W.Va. L.Q. at 144. Accord, Wagner Supply Co. v. Bateman, 118 Tex. 498, 505, 18 S.W.2d 1052, 1055 (1929) ("The rule is that a mining partnership arises by operation of law where co-owners work a mine."). "Mere co-working makes them partners, without special contract." Childers v. Neely, 47 W.Va. at 73, 34 S.E. at 829. "In fact, even an express contract provision stipulating that the parties do not intend to form a mining partnership will be held immaterial, if in fact their acts and conduct constitute that relationship as a matter of law." Brimmer, 15 Rocky Mtn. Min. L. Inst. at 4 (citing Meister v. Farrow, 92 P.2d at 760 ("the action of the parties ... creates all of the elements of a mining partnership")).
Finally, and most important to the instant case, is the issue of shared ownership of the real estate being mined. While a common law general partnership cannot arise solely by sharing ownership of property, shared ownership is the keystone of a mining partnership. "It is well settled that a mining partnership cannot exist in the absence of co-ownership of a mineral interest. Some form of concurrent ownership is an indispensable requisite." Brimmer, 15 Rocky Mtn. Min. L. Inst. at 4.
A common law mining partnership cannot exist without there being two or more people sharing ownership of a mineral interest. Some form of concurrent ownership is an indispensable requisite. Whether a fee simple title to an entire tract or a lease of one seam of one mineral below the surface, the members of a mining partnership share ownership of the mineral rights. As we stated in one of our earliest cases defining mining partnerships, "Ownership of shares or interests in the mine is an essential element of a mining partnership." Blackmarr v. Williamson, 57 W.Va. at 253, 50 S.E. at 256. Our other cases similarly have required partners of a mining partnership to have an ownership interest in the minerals. See, Syllabus Point 1, Childers v. Neely, 47 W.Va. at 70, 34 S.E. at 828 ("Where tenants in common
To be clear, however, a mining partnership does not arise simply by reason of two or more people having a cotenancy or co-ownership of an interest in minerals. Instead, a mining partnership "arises only when the co-owners or cotenants unite in working the same for the purpose of extracting mineral therefrom." John P. Gray, "Mining Partnerships," 3 Wis. L.Rev. 13 (1924). "Until the ground is worked ... [t]he owners are merely cotenants and their rights and duties are to be determined as such." Id. at 15. "If two or more owners of a mine unite in working it, without any partnership agreement, the act of working it together creates a mining partnership; and the same is true of two or more holding interests in a lease of mining property." Syllabus Point 1, Kirchner v. Smith, 61 W.Va. 434, 58 S.E. 614 (1907). "Cessation of the firm's business will return the parties to the status of" cotenants or co-owners of the mineral estate. Ailes, 41 W.Va. L.Q. at 146.
We now turn to the question certified by the Court of Appeals, but rephrase the question (pursuant to our authority to do so).
Our thorough examination of the common law leads us to the firm conclusion that each member of a mining partnership must hold an ownership interest in the mineral estate that is being mined. Because a mineral interest is an estate in lands which "may be taken, destroyed, or consumed," any ownership interest in a mineral estate must be created or conveyed by a deed, will, or similar written conveyance under the Statute of Frauds. See Syllabus Point 1, in part, McCullough Oil, Inc. v. Rezek, 176 W.Va. 638, 346 S.E.2d 788 (1986) ("An oil and gas lease (or other mineral lease) is ... a conveyance[.]"); Syllabus Point 2, Lawson v. Kirchner, 50 W.Va. 344, 40 S.E. 344 (1901) ("An oil lease for oil and gas purposes is a conveyance or sale of an interest in land conditional and contingent on the discovery and reduction to possession of the oil or gas.").
We therefore conclude that, for a person to establish an ownership interest in a mining partnership, the Statute of Frauds requires that the person show their interest was created or conveyed by a deed, will, or similar written conveyance. See W.Va.Code § 36-1-1.
B. General Partnerships
The second part of Judge King's "chicken-or-the-egg" certified question essentially asks this: if Valentine is not a member of a mining partnership, but is simply a member of a general partnership that owns and operates oil and gas wells under a mineral lease, then is Valentine required by the Statute of Frauds to produce a written instrument showing he is a partner in the general partnership? The answer is buried in West Virginia's statutes, and is unequivocally "no."
W.Va.Code § 47B-1-1(7) . Likewise, RUPA states that, generally, a partnership is formed in the following way:
W.Va.Code § 47B-2-2(a) .
The West Virginia Legislature adopted RUPA in 1995, and stated that RUPA "governs all partnerships" in existence before, on, or after July 1, 1995. W.Va.Code § 47B-11-4 .
RUPA's "underlying philosophy differs radically" from the common law and prior statutes, "thus laying the foundation for many of its innovative measures." Shoemaker v. Shoemaker, 275 Neb. 112, 125, 745 N.W.2d 299, 309 (2008). Key among these innovative measures is that RUPA adopts
Id., 275 Neb. at 125, 745 N.W.2d at 309-10. A leading treatise on RUPA best summarizes the distinction between the aggregate and entity theories of partnership:
Donn, Revised Uniform Partnership Act, § 201. This new philosophy is bluntly expressed in West Virginia Code § 47B-2-1 : "A partnership is an entity distinct from its partners."
This philosophical distinction is important to understanding property owned by partnerships. Under the entity theory, "Partners are no longer conceived of as co-owners of partnership property. Rather, the partnership entity owns partnership property." Donn, Revised Uniform Partnership Act, § 203. "Even property that is contributed by partners becomes property of the entity rather than property of a cotenancy of the contributing partners." Id.
In light of the entity theory, RUPA provides the following rule for the ownership of property by a partnership:
W.Va.Code § 47B-2-3 . "[I]f property has become partnership property, the individual partners no longer have a direct interest in it." Donn, Revised Uniform Partnership Act, § 204.
In this case, Valentine asserts that he did not purchase a direct ownership interest in real estate. Instead, he argues that Frank "F.A." Deem sold him an ownership interest in four general partnerships, and that it was the general partnerships which owned the real estate interests. Valentine asserts there was substantial evidence to support a finding that he was a member of the four partnerships, that the leases were owned and operated
The Court of Appeals precisely assessed that the question that needed to be resolved was whether Valentine needed a writing conforming to the Statute of Frauds to show his ownership interest in the general partnerships that owned the mineral leases.
Neither of the parties has produced any evidence of partnership agreements for the four partnerships, so their relations are governed by RUPA. Under RUPA, any property given to or acquired by the four partnerships (whether real or personal property) "is property of the partnership[s] and not of the partners individually." W.Va. Code § 47B-2-3. Accordingly, any interest in the mineral estates would be owned by the four partnerships, and not by the individual partners such as Valentine or Sugar Rock. Hence, Valentine need only establish that he is a member of each of the four partnerships, and there is no requirement under the Statute of Frauds that he produce a deed, will, or other written instrument to establish he was granted a partnership interest in the partnership.
To be clear, this was also the rule under the common law. When a partnership owns real estate, it is a well-established rule that the Statute of Frauds could not be applied between partners. As we said in Syllabus Point 2 of Lantz v. Tumlin, 74 W.Va. 196, 81 S.E. 820 (1914),
We therefore conclude that, under RUPA, a partnership interest — regardless of the nature of the partnership's assets — is personal property, not real property. The Statute of Frauds is therefore inapplicable to the relationship between partners, and does not require that a partnership interest in the partnership be proven by a written instrument.
We answer the question posed by the Court of Appeals, as reformulated, in two parts. We conclude that the Statute of Frauds requires the partners of a mining partnership to show their membership through a deed, will, or other written conveyance establishing they are co-owners of the mineral interest being mined. However, because the real property of a general partnership belongs to the partnership entity and not the individual partners, no such writing is required to establish a partnership interest in a general partnership.
Certified Question Answered.
Valentine v. Sugar Rock, Inc., 745 F.3d 729, 734 (4th Cir.2014).
One commentator noted that "the mining partnership resembles the tenancy in common, in that one associate may transfer his interest in the common property, placing the transferee in the same position, in relation to the others, as he himself was before the transfer." Lester C. Hess, "Student Note: Mining Partnerships: Power of One Partner to Bind other Partners in Dealings With Third Persons," 34 W.Va. L.Q. 199, 200 (1927).
Allan Donn, Robert W. Hillman, & Donald J. Weidner, The Revised Uniform Partnership Act, § 202, Official Comments (Thompson Reuters 2014).
Other states also view real estate owned by a partnership as personal property, not subject to the Statute of Frauds, so as to facilitate property division during dissolution. See, e.g., In re Estate of Maggio, 193 Vt. 1, 17, 71 A.3d 1130, 1141 (2012) ("a transfer of a partner's interest in a partnership, including an interest in a partnership that owns real property, is not subject to the Statute of Frauds"); Turley v. Ethington, 213 Ariz. 640, 645-46, 146 P.3d 1282, 1287-88 (Ct. App.2006) ("the statute of frauds has no practical application to agreements governed by the RUPA."); Forward v. Beucler, 702 F.Supp. 582, 585 (E.D.Va.1988) ("[E]nforceability of an oral promise to transfer a limited partnership interest is not barred by the statute of frauds even if the partnership's sole asset is real property.... [P]artnership interests are personalty whatever the nature of the partnership assets."); Beach v. Anderson, 417 N.W.2d 709, 712-13 (Minn.Ct. App.1988) (stipulation to transfer partnership interest was an agreement to transfer personalty and therefore not subject to Statute of Frauds, even though partnership owned real property); Malaty v. Malaty, 95 A.D.3d 961, 962, 944 N.Y.S.2d 591, 593 (2012) ("The statute of frauds does not render void oral joint venture agreements to deal in real property, as the interest of each joint venturer in a joint venture is deemed personalty."); Wirth v. Sierra Cascade, LLC, 234 Or.App. 740, 769, 230 P.3d 29, 45 (2010) (the Statute of Frauds does not apply to agreements to transfer property "from partner to partnership" or "from partner to partner, on behalf of the partnership"); Turley v. Ethington, 213 Ariz. 640, 647, 146 P.3d 1282, 1289 (Ct.App.2006) (because the Revised Uniform Partnership Act allows constructive trusts to be used to remedy breaches of partnership fiduciary duty, court refused "to apply the statute of frauds to contracts for the conveyance of real property between and among partners and partnerships."); Potter v. Homestead Preservation Ass'n, 330 N.C. 569, 577, 412 S.E.2d 1, 6 (1992) ("A partner's interest in partnership assets — including real property — is a personal property interest. As such, it is not subject to the statute of frauds.").