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Western Diamond LLC v. Barnes

United States District Court, Sixth Circuit

January 28, 2014

WESTERN DIAMOND LLC, a Nevada Limited liability company, Plaintiff,


JOSEPH H. McKINLEY, Jr., District Judge.

This matter is before the Court on Plaintiff Western Diamond LLC's Motion for Summary Judgment [DN 62]. Fully briefed, this matter is ripe for decision.


This case arises out a dispute over mining rights for a 400-acre piece of real property ("Barnes Property") located in Ohio, Kentucky. On April 21, 1970, Dr. Malcolm L. Barnes, Marshall Barnes, and Anne B. Barnes, conveyed by deed to Peabody Coal Company ("Peabody Deed") the coal and also the rights of "using the surface... for the purpose of mining any or all of said coal by the strip mining method, together with the rights and privileges to use so much of said surface as may be necessary...." [Deed from Barnes to Peabody, DN 62-2, at 2]. On the same day, Peabody sent Dr. Barnes a letter ("Letter Agreement") "for the purpose of confirming and clarifying our agreement in regard to the exercise of the mining rights acquired by the deed of conveyance." [Letter Agreement, DN 66-3, at 2]. The Letter Agreement stated, among other things, that mining operations on the property would cease after ten years and that Peabody would compensate the Barnes family up to $10, 000 for damage done to a silo located near the mining operations. However, unlike the Peabody Deed, the Letter Agreement was never recorded.

In 1978, Defendants Malcolm S. J. Barnes and Shirley Barnes acquired title to the Barnes Property ("M. Barnes" and "S. Barnes"). Afterward, M. Barnes and S. Barnes mortgaged the land on multiple occasions and constructed barns, a residential home, and other structures on it. In 2009, M. Barnes and S. Barnes conveyed a portion of the property to Defendants Joseph H. R. Barnes and Carrie B. Barnes ("J. Barnes" and "C. Barnes"). J. Barnes and C. Barnes then took out a loan to construct a house on their portion of the property.

On September 19, 2006, Plaintiff Western Diamond, a real estate holding company for Armstrong Coal Company, acquired all the rights granted under the Peabody Deed from a large purchase of mining rights in Ohio County from Central States Coal Reserves of Kentucky, LLC ("CSCR") and Beaver Dam Coal Company ("BDCC").[1] In 2007 Armstrong hired Dennie Grider as a land manager in order to begin to review all the properties acquired by Western Diamond. After a brief examination of the Peabody Deed covering the Barnes's property and a discussion with David Cobb, Armstrong's Executive Vice President of Development, Grider contacted M. Barnes and S. Barnes in 2009 about the possibility of leasing or purchasing the Barnes Property. Although initial discussions between Grider and Defendants centered on leasing or purchasing terms, the parties ultimately agreed to allow Armstrong to drill on the property in order to determine what coal was actually available for mining. From April 2010 to October 2010, Armstrong drilled on the property, kept drill logs, and consulted with M. Barnes and J. Barnes. The parties never reached an agreement concerning the possibility of leasing or purchasing the Barnes Property even after completion of the drilling in October of 2010.

Following the completion of drilling, Grider conducted more research into the deed between Peabody and Barnes, and he determined that the Peabody Deed would allow Armstrong Coal to mine without having to purchase or lease the property from the Defendants. He said that he came to this conclusion after consulting with a local attorney who checked the mineral title. Grider then contacted Defendants, which resulted in two subsequent meetings in late July and early August of 2011 about the meaning of the deed. During the course of the two meetings, Grider informed Defendants that Plaintiff retained surface mining rights based on the original Peabody deed. On August 18, 2011, Cobb sent M. Barnes a letter fully articulating Armstrong Coal's right to mine the property pursuant to the recorded Peabody Deed.

At some point in September of 2011, Cobb and Grider went to discuss with M. Barnes, S. Barnes, and J. Barnes the mining of the property. It is at this meeting that members of the Barnes family first produced the Letter Agreement to Cobb and Grider. The parties dispute whether Cobb or Grider knew about the existence of the Letter Agreement prior to that meeting. Cobb stated that he was unsure if he had ever seen the Letter Agreement, but he thought that he had previously heard about the document. According to Grider, he had never seen the Letter Agreement prior to meeting with Defendant in 2011, but he had a document in his possession that discussed a $10, 000 damage cap for a silo on the Barnes Property.

On February 21, 2012, Plaintiff filed a complaint seeking declaratory judgment that it was a bona fide purchaser of the property without notice. Defendants answered Plaintiff's Complaint by raising affirmative defenses of estoppel and adverse possession. Additionally, Defendants filed a counterclaim asserting claims of fraud and collusion as well as claims of equitable estoppel and adverse possession. The Court dismissed the fraud and collusion claim but determined the adverse possession and equitable estoppel claim could be maintained as freestanding claims.


Before the Court may grant a motion for summary judgment, it must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of specifying the basis for its motion and identifying that portion of the record that demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986). Once the moving party satisfies this burden, the non-moving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48 (1986).

Although the Court must review the evidence in the light most favorable to the nonmoving party, the non-moving party must do more than merely show that there is some "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586 (1986). Instead, the Federal Rules of Civil Procedure require the nonmoving party to present specific facts showing that a genuine factual issue exists by "citing to particular parts of materials in the record" or by "showing that the materials cited do not establish the absence... of a genuine dispute[.]" Fed.R.Civ.P. 56(c)(1). "The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson , 477 U.S. at 252. It is against this standard the Court reviews the following facts.


A. Declaratory ...

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