VALENTINE v. SUGAR ROCK, INC., NO. 12-2273

Decided: April 2, 2015

The Fourth Circuit held, adopting the answers to certified questions to the Supreme Court of Appeals of West Virginia, that a person owning an interest in a West Virginia common law “mining partnership” must prove such partnership with a deed, will, or other written acquaintance and that a general partnership owning leases to extract oil and gas from real property need not be evidenced by a written instrument for a person to prove he/she is a partner of that general partnership. In so holding, the court affirmed the district court’s judgment in part, vacated it in part, and remanded it.

This appeal arose out of a mining partnership venture between Valentine and Sugar Rock, Inc., among others, which owned certain mining leases. Valentine filed the suit as a diversity action alleging fractional working interests in mining partnerships and demanding an accounting for the partnership as well as damages. Sugar Rock, Inc. responded to Valentine’s Complaint with a counterclaim for cumulative operating expenses of Valentine’s working interests in the partnerships. The district court granted Sugar Rock, Inc.’s motion for summary judgment on the ground that Valentine could not evidence his co-ownership of leases under certain mining partnerships. Thereafter, Valentine sought to voluntarily dismiss his action against Sugar Rock, Inc. so that he could bring a class action styled Washburn v. Sugar Rock, Inc., which included nine other purported owners of working interests in the mining partnerships. Upon the Washburn plaintiffs’ motion for partial summary judgment, the district court held that the plaintiffs were partners in the mining partnerships regardless of their ability to produce a written instrument evidencing such.

The reasoning that the Supreme Court of Appeals of West Virginia gave in its Order that was adopted by the Fourth Circuit reflected the idea that a mining partnership requires partners to be co-owners of mineral interests, and under the Statute of Frauds, such partnership interest may only be evidenced through a written instrument. On the other hand, a general partnership solely owns leases to extract minerals itself, making it impractical to require a general partner to produce a written instrument of the property interest because a stake in a general partnership need not be proven by a purported partner through a deed, will, or other written instrument under West Virginia Law.

Full Opinion

Kayla M. Porter

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