Talmage v. Bradley

• Decision Date: 28 January 2022
• Docket Number: 2:17-cv-544
• Parties: RALPH W. TALMAGE, as TRUSTEE OF RALPH W. TALMAGE TRUST, et al., Plaintiffs, v. JACQUELINE M. BRADLEY, et al., Defendants/Third-Party Plaintiffs, v. NORTHWOOD ENERGY CORPORATION, Third-Party Defendant.
• Court: U.S. District Court — Southern District of Ohio

RALPH W. TALMAGE, as TRUSTEE OF RALPH W. TALMAGE TRUST, et al., Plaintiffs, v. JACQUELINE M. BRADLEY, et al., Defendants/Third-Party Plaintiffs, v. NORTHWOOD ENERGY CORPORATION, Third-Party Defendant.

No. 2:17-cv-544

United States District Court, S.D. Ohio, Eastern Division

January 28, 2022

Elizabeth A. Preston Deavers, Magistrate Judge.

BENCH OPINION AND ORDER OF JUDGMENT NUNC PRO TUNC

SARAH D. MORRISON, UNITED STATES DISTRICT JUDGE.

Ralph W. Talmage (as Trustee of the Ralph W. Talmage Trust) and David E. Haid (as Trustee of the David E. Haid Trust) first brought suit against Jacqueline M. Bradley and the Estate of Ralph L. Bradley (together, the “Bradley Parties”), Gulfport Energy Corporation, and Antero Resources Corporation on June 22, 2017.^[1] (ECF No. 1.) The Bradley Parties subsequently filed Counterclaims against Messrs. Talmage and Haid, a Third-Party Complaint joining Third-Party Defendant Northwood Energy Corporation (together with Messrs. Talmage and Haid, the “Northwood Parties”), and Crossclaims against Gulfport and Antero. (ECF No. 33.)

On March 26, 2019, this Court denied the Northwood Parties' motion for partial summary judgment and granted in part and denied in part the Bradley Parties'. (Summ. J. Order, ECF No. 69. Reported as Talmage v. Bradley, 377 F.Supp.3d 799 (S.D. Ohio 2019) (Smith, J.).) The case proceeded to a bench trial in September 2021 on liability for all remaining claims, with damages to be considered at a later date. (See ECF Nos. 174, 175.) Post-trial briefs have been submitted by Gulfport (ECF No. 181), the Northwood Parties (ECF Nos. 182, 185) and the Bradley Parties (ECF Nos. 183, 184). Upon review of such filings, and pursuant to Federal Rule of Civil Procedure 52(a), the Court now issues the following findings of fact and conclusions of law.

I. FINDINGS OF FACT^[2]

A. The Parties

Messrs. Talmage and Haid own Northwood, an oil and gas producer. (Jt. Stip. ¶ 1, ECF No. 136.) They are also trustees of the revocable trusts bearing their respective names. (Id., ¶¶ 2, 3.) Mrs. Bradley is the widow of Ralph Bradley and the executor of his estate. (Id., ¶¶ 4-5.) Before his death, Mr. Bradley was an owner and executive of Eastern States Oil & Gas, Inc., also an oil and gas producer. (Id., ¶ 6.) Gulfport and Antero are in the same line of business. (See id., ¶¶ 23-25.)

The story that brings these parties together spans nearly two dozen years, and stems from a mistake that went unnoticed for many of them.

B. TransAtlantic assigned the Leases to Eastern in April 1994.

On April 21, 1994, a family of companies known as TransAtlantic assigned, in whole or in part, their right, title, and interest in certain oil and gas leases and related wells to Eastern (the “TransAtlantic-Eastern Assignment”). (Id., ¶ 7. See also Exs. J-1-J-3.) The leases subject to the TransAtlantic-Eastern Assignment are identified on Exhibit B thereto (the “Leases”), which lists the lessor, lessee, field, section, township, and county for each. (See, e.g., Ex. J-1, BRADLEY0000008-12.) The Leases cover land in Eastern Ohio, spanning Noble, Monroe, and Belmont Counties. (Id. See also Jt. Stip., ¶ 8.) The TransAtlantic-Eastern Assignment was recorded in all three of those counties. (Jt. Stip., ¶¶ 9-11. See also Ex. J-1-J-3.)

C. Eastern intended to assign Mr. Bradley an overriding royalty interest in the Leases in December 1994.

Eastern subsequently assigned to Mr. Bradley an overriding royalty interest in certain new wells drilled onto land covered by the Leases (the “Bradley Override”):

WHEREAS, [Eastern] (“Assignor”), acquired certain oil and gas properties, including certain oil and gas wells and certain oil and gas leases, pursuant to an Assignment and Bill of Sale dated April 21, 1994 and recorded in Volume 5, Page 947 of the Official Records of Monroe County, Ohio, and Volume 108, Page 278 of the Lease Records of Belmont County, Ohio, collectively called the “Assignment”[]. The oil and gas wells existing as of the date of the Assignment are more particularly described in Exhibit A-1 of the Assignment (the “Wells”), and the oil and gas leases are more particularly described on Exhibit B of the Assignment (the “Leases”), which documents are incorporated herein by reference;

WHEREAS, Assignor desires to assign an overriding royalty interest to Ralph L. Bradley, subject to the terms and conditions set out hereinafter.

NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, [Eastern] hereby does GRANT, BARGAIN, SELL, ASSIGN, TRANSFER AND CONVEY, subject to all of the provisions set out hereinafter, without warranty of title, either express or implied, unto RALPH L. BRADLEY (“Assignee”) an overriding royalty interest of five percent (5%) of 8/8ths (the “ORRI”) in and to all of the acreage subject the Leases and in and to all oil and gas produced from, or allocated to, said Leases, SAVE AND EXCEPT the following:

1. It is expressly understood that all of the producing Wells conveyed by the Assignment - which is all of the Wells save and except the non-producing Baker #2 Well, Well ID WOM 12356 - are expressly excepted from this assignment of ORRI, it being the intention of the parties hereto that the ORRI provided for herein shall NOT apply to the producing wells acquired by Assignor under the Assignment, but shall apply to non-producing wells and future wells, subject to paragraph 2 below.

2. The ORRI shall NOT apply to the first well drilled by Assignor offsetting each of the producing Wells. By “offsetting”, it is meant a well which is drilled to the same geologic formation as the subject Well.

3. In the event Assignor exercises the pooling rights (if any) contained in the Leases, the ORRI assigned herein shall be unitized and paid on a unitized basis.

4. In the event the leasehold estate of any of the Leases is less than 100%, the ORRI shall be proportionately reduced. In addition, in the event the working interest in the Leases assigned to Assignor by virtue of the Assignment is less than 100%, the ORRI shall be proportionately reduced. It is expressly understood, however, that any future assignments of working interest(s) by Assignor shall be made subject to the ORRI.

This assignment is made subject to all of the terms and the express and implied covenants and conditions of the Leases.

EXECUTED this 19^th day of December, 1994, and effective as of the date of first production of any well to which this overriding royalty interest applies.

(Exs. J4-J-5.) Although the face of the Bradley Override does not mention Noble County, Exhibit B includes Noble County leases. (Id.) Once executed, the Bradley Override was recorded in Belmont and Monroe Counties. (Jt. Stip., ¶¶ 13-14.) It was not recorded in Noble County. (Id., ¶ 15.)

The Bradley Override was drafted by Eastern's then-General Counsel, Barbara J. Bordelon. (See id. See also Ex. J-21, ¶ 2; Bordelon Dep., 68:17-25, ECF No. 171.) According to Ms. Bordelon, Eastern “always made assignments of overrides to [Mr. Bradley] on all the properties . . . [I]t was a standing policy by the time [she] got [to Eastern] to assign overrides to [Mr. Bradley] on all properties.” (Bordelon Dep., 92:3-10.) She attributes the failure to reference Noble County on the face of the Bradley Override, and the subsequent failure to record the Bradley Override in Noble County, to “a mistake in drafting” and “a clerical error.” (Id., 95:8-96:12.) Ms. Bordelon maintains, however, that the Bradley Override “should have been recorded in Noble” County. (Id., 95:17. See also Ex. J-21.)

D. Eastern's interest in the Leases was assigned to NCL in May 2005.

Over the next decade, Eastern's interest in the Leases, as originally acquired from TransAtlantic, bounced among related corporate entities. First, on April 26, 2000, Eastern changed its name to Equitable Production - Eastern States, Inc. (Ex. J-58.)

About one year later, Equitable Production - Eastern States, Inc. merged with and into Equitable Production Company. (Ex. J-59.)

Equitable then conveyed its interest in the Leases to NCL Appalachian Partners LP in a two-step transaction. First, via three instruments titled Assignment, Bill of Sale and Conveyance and dated May 17, 2005, Equitable assigned its interest in the Leases to “two newly-created, wholly owned subsidiaries, ” AB Production LLC and AB Production II LLC (the “Equitable-AB Assignment”). (Exs. J-6-J-8. See also ECF No. 183, 5.) Each instrument conveyed interests held in a single county-Noble, Belmont, or Monroe-and was recorded in that county. (Exs. J-6-J-8.) The Equitable-AB Assignment

grant[s], bargain[s], sell[s], convey[s] and assign[s] unto AB [and AB II] all of Equitable's right, title and interest, to the extent of its interest . . . in and to the oil, gas and/or mineral leases, royalty interests and overriding royalty interests and deeds described on Exhibit A [thereto], together with all rights, title and interests in and to any other oil, gas and/or mineral leases, royalty interests and overriding royalty interests and deeds located in the counties of the State of Ohio described in Exhibit A[.]

(Id.) It also provides that AB and AB II

accept the assignment and transfer of the Properties, [including the interests described above, ] and expressly assume any and all covenants, agreements, duties, responsibilities, obligations and liabilities arising from and after [January 1, 2005, ] with respect to or in connection with the Properties.

(Id.) Neither the Equitable-AB Assignment, nor any of its exhibits, discuss or identify the Bradley Override. (Id.)

To complete the transaction, AB and AB II merged with and into NCL on May 31, 2005. (Exs....