Miller v. Cloud

• Citation: 76 N.E.3d 297,2016 Ohio 5390
• Decision Date: 22 July 2016
• Docket Number: No. 15 CO 0018.,15 CO 0018.
• Parties: Martin E. MILLER, et al., Plaintiffs–Appellees, Cross–Appellants, v. Sharron L. CLOUD, et al., Defendants–Appellants, Cross–Appellees.
• Court: D.C. Court of Appeals

76 N.E.3d 297
2016 Ohio 5390

Martin E. MILLER, et al., Plaintiffs–Appellees, Cross–Appellants,
v.
Sharron L. CLOUD, et al., Defendants–Appellants, Cross–Appellees.

No. 15 CO 0018.

Court of Appeals of Ohio, Seventh District, Columbiana County.

July 22, 2016.

76 N.E.3d 301

David Tobin, East Liverpool, OH, for Plaintiff–Appellee.

David A. Detec, Thomas F. Hull II, Manchester Newman & Bennett, Youngstown, OH, for Defendant–Appellant.

GENE DONOFRIO, P.J., CAROL ANN ROBB, J., and MARY DeGENARO, J.

OPINION

ROBB, J.

{¶ 1} Defendants–Appellants/Cross–Appellees Sharron Cloud (Cloud) and Plaintiffs–Appellees/Cross–Appellants Martin and Susan Miller (Millers) appeal the Columbiana County Common Pleas Court's decision to grant summary judgment in part to Cloud and in part to the Millers. This case involves the conveyance of real property to the Millers in 1995 and whether or not that conveyance included the oil and gas mineral interests. In 1995, the Millers received a deed to the property containing the words "SURFACE ONLY." They sought reformation of the deed and argued the conveyance included the oil and gas mineral estate that had not been previously reserved. The trial court granted the request to reform the deed. Prior to the litigation, Cloud signed an oil and gas lease with Defendant Chesapeake Exploration, received a signing bonus, and spent nearly the entire signing bonus. During pendency of the litigation, royalties from the oil and gas lease were placed into an escrow account. The Millers sought both the royalties and signing bonus. The trial court determined the Millers were entitled to the royalties, but not the signing bonus. Cloud appeals the trial court's decision to reform the deed and the decision to pay royalties earned during the pendency of the litigation to the Millers. The Millers appeal the trial court's decision permitting Cloud to retain the signing bonus.

{¶ 2} Multiple issues are raised in this appeal, including whether the statute of limitations has run, whether reformation is available as a remedy, whether Cloud is entitled to royalties, and whether the Millers are entitled to the signing bonus.

Statement of the Facts and Case

{¶ 3} In May 1995 Linda A. Cloud died. She was married to Thomas J. Cloud and owned approximately 22 acres, which included a bungalow home, located at 34224 Lisbon–Dugannon Road in Lisbon, Ohio. In October 1995, the property sold at auction to the Millers for $28,000.00, which was close to its appraised value of $30,0000.00. The executor of the estate was Attorney Robert C. Roberts.

{¶ 4} The purchase contract from the auction contained a notation, "This transaction, pending completion of title guaranty, status of mineral right can not [sic] be guaranteed." The purchase contract was signed by the Millers. After the title search was performed by McMillan Abstract Company Agency, Inc., an agent for Chicago Title, the title insurance company would only guarantee the surface. The title guarantee commitment contained a description of the property to which McMillan Abstract added the words "SURFACE ONLY " on the top and bottom of the page containing the legal description. The Executor's deed, likewise,

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stated "SURFACE ONLY " following the legal description of the property conveyed.

{¶ 5} Approximately one month after Linda's death, Thomas remarried; his new wife was Sharron Cloud. Thomas died intestate in September 1998 in South Carolina.

{¶ 6} In 2011 Chesapeake Exploration signed an oil and gas lease with the Millers. 8/27/14 Martin Miller Affidavit. However, shortly after signing the lease, Chesapeake rejected the lease claiming the Millers did not own the mineral rights. 8/27/14 Martin Miller Affidavit. Chesapeake determined Linda Cloud's interest in the mineral rights passed to her husband Thomas Cloud because those interests were not sold at the auction. Therefore, it concluded that upon his death the interests passed to his second wife, Sharron Cloud. Chesapeake signed a lease with Sharron Cloud in 2012 and paid her $103,410.00 as a signing bonus. 2/18/12 Lease.

{¶ 7} The Millers filed suit for declaratory judgment, quiet title, injunction, and sale of real estate against Cloud, Chesapeake Exploration, CHK Utica LLC, Total E & P USA, Inc., Dale Pennsylvania Royalty LP, and Jamestown Resources LLC in September 2013.

{¶ 8} Cloud answered with affirmative defenses in October 2013.

{¶ 9} In January 2014, the parties excused Defendants Chesapeake Exploration LLC, CHK Utica LLC, Total E & P USA, Inc., Dale Pennsylvania Royalty LP, and Jamestown Resources LLC (Lessee Defendants) from any further appearance in the suit. 1/23/14 Agreed Judgment Entry. Those defendants, however, were still subject to discovery as needed by the remaining parties. 1/23/14 Agreed Judgment Entry. The Millers and Cloud agreed the outcome of the lawsuit would not affect Lessee Defendants interest in exploring, drilling, or producing oil and gas from the property so long as the same was done in keeping with terms of the lease. 1/23/14 Agreed Judgment Entry. Lessee Defendants agreed they would not pay any royalties to either the Millers or Cloud pending the resolution of the lawsuit and agreed to abide by the result of the lawsuit. 1/23/14 Agreed Judgment Entry.

{¶ 10} Following discovery, the Millers filed a motion for summary judgment. They argued the auction was an absolute auction, and all of Linda Cloud's interest was sold. They contended the "SURFACE ONLY " notation referred only to what the title company was insuring; it was not an indication the surface was only conveyed and the estate of Linda Cloud was retaining the mineral interest. Therefore, they contended reformation was permitted. They also argued they were entitled to the signing bonus and royalties from the already producing wells. 8/27/14 Summary Judgment Motion.

{¶ 11} Cloud filed a motion for summary judgment and a motion in opposition to the Millers' motion for summary judgment. 9/2/14 Motion for Summary Judgment; 9/15/14 Opposition Motion. Cloud asserted the statute of limitations had run on the reformation/quiet title claim and merger of the contract and deed applied. She argued the Millers' claims were barred by laches and equitable estoppel.

{¶ 12} The trial court granted partial summary for the Millers. 10/7/14 J.E. It found that while the statute of limitations set forth in R.C. 2305.06 and 2305.14 had run, R.C. 2305.22 provided an applicable exception. Thus, it determined remedial, ministerial correction in defective deeds may be made at any time. It found laches and equitable principles were not applicable. It also determined merger by deed was not applicable because Cloud did not

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have the rights of a bona fide purchaser except to the extent that her predecessor in title had such rights. Accordingly, it granted summary judgment on the reformation request and reformed the deed to exclude the "SURFACE ONLY " words. As to the signing bonus and royalties, the trial court denied the motion for summary judgment finding genuine issues of material fact remained. It further found the Millers had not demonstrated as a matter of law that they were the owners of the minerals at issue. Thus, the trial court refused to hold that they were legal owners of the minerals. 10/7/14 J.E.

{¶ 13} One month later, the parties entered into an Agreed Judgment Entry. Cloud agreed to preserve the funds she still had from the signing bonus and any royalties. This amounted to approximately $33,000.00, which was put into escrow. The remainder of the signing bonus she had already spent on purchasing a van and a home. 11/13/14 Agreed Judgment Entry.

{¶ 14} In April 2015, Cloud filed a motion for summary judgment on the signing bonus and royalty issue. 4/10/15 Motion. She asserted she was not a wrongdoer and should be entitled to the money.

{¶ 15} That same day, the Millers filed a motion for summary judgment asserting that either Chesapeake or Cloud was responsible for paying them the bonus. 4/10/15 Motion. They also claimed they were entitled to the royalties since they are the owners of the oil and gas mineral interests. 4/10/15 Motion.

{¶ 16} Chesapeake filed a motion in opposition to the Millers' motion for summary judgment. It asserted there was no claim in the complaint against it for disgorgement. Alternatively, it argued the stipulation that was agreed upon by all parties indicated Chesapeake's interests were unaffected by the reformation of the deed. This meant Chesapeake was not required to pay a second bonus for its alleged mistake. 4/24/15 Chesapeake Motion.

{¶ 17} After considering the motions, the trial court granted summary judgment in part to the Millers and in part to Cloud. 6/2/15 J.E. As to the signing bonus, it determined Cloud was not a wrongdoer, and as such, disgorgement against her was improper. It further found the Millers could not seek the signing bonus from Chesapeake because the relief was not requested in the compliant. As to the royalties, the trial court ruled in the Millers' favor. The royalty payment was deemed to be a valuable, separate right in the "bundle of interests" and was derived from the production of...