Ramsey Herndon LLC v. Whiteside
102 N.E.3d 198
| Ill. | 2017Background
- Ramsey Herndon LLC (plaintiff/operator) obtained a working interest in 220 acres under leases with the Jordans and reserved an overriding royalty (an "override") when it assigned 75% of the working interest to third parties.
- In 2009 Ramsey and the third parties executed a recorded assignment conveying “all of [their] right, title and interest in and to the oil, gas and mineral leases… together with a like interest in and to all personal property” to Lisa Whiteside (defendant), with additional clauses about assumption of covenants and that assignee’s interest shall “bear its proportionate share of royalty interests, overriding royalty interests and other payments.”
- After Whiteside produced oil, she did not pay Ramsey royalties; Ramsey sued for breach of contract (Count I) and conversion (Count II). Ramsey did not appeal dismissal of conversion; only breach of contract is at issue here.
- The trial court granted Whiteside’s section 2-615 motion to dismiss, finding Ramsey had conveyed the override; the appellate court reversed as to breach of contract, reading paragraph six to preserve Ramsey’s override while making Whiteside liable to pay a proportional share.
- The Illinois Supreme Court reviewed whether the assignment unambiguously conveyed Ramsey’s override and whether Ramsey stated a claim for breach of contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the assignment conveyed Ramsey’s overriding royalty interest | The paragraph saying assignee must ‘bear its proportionate share of overriding royalty interests’ means Ramsey retained the override and Whiteside merely assumed an obligation to pay | The assignment’s unambiguous general grant of “all right, title and interest” transferred Ramsey’s override to Whiteside (so no payment duty to Ramsey) | The Court held the instrument unambiguously conveyed all of Ramsey’s interest, including the override, so Ramsey failed to state a breach claim |
| Proper interpretive approach for the instrument (contract vs deed; canons) | Instrument should be read as a contract; interpretive rules favoring grantee shouldn’t alter clear language | Even if a deed, when language is unambiguous courts give effect to the text without invoking canons favoring grantee | The Court treated the document on its text; because it is unambiguous, no special rules or rewriting were needed |
| Whether the phrase "assume…rights" can transfer rights | Plaintiff argued “assume” typically applies to duties, so it cannot transfer a right to receive payments | Whiteside argued “assume” can mean to take as one’s right or possession and paragraph six alongside the general grant conveys rights | The Court held “assume” can take “rights” as an object and paragraph six (and the general grant) conveys Ramsey’s rights, including the override |
| Whether reading the assignment to transfer both right and obligation is absurd or surplusage | Ramsey said it would produce the absurdity of transferring both the duty to pay and the right to receive the same payments | Whiteside said the phrase remains meaningful: if assignee bears overrides, but also owns them, no absurdity results and the text is consistent | The Court rejected the absurdity/surplusage argument and read the instrument as conveying both the right and related duties to Whiteside |
Key Cases Cited
- People ex rel. Harris v. Parrish Oil Production, Inc., 249 Ill. App. 3d 664 (1993) (explains operator working interest and landowner royalty interest in oil and gas context)
- Ferris, Thompson & Zweig, Ltd. v. Esposito, 2017 IL 121297 (2017) (motion to dismiss de novo review; pleadings/exhibits considered)
- Kanerva v. Weems, 2014 IL 115811 (2014) (plaintiff must plead facts that, if proven, entitle recovery to survive dismissal)
- Thompson v. Gordon, 241 Ill. 2d 428 (2011) (givе clear contract language its plain meaning)
- Matthews v. Chicago Transit Authority, 2016 IL 117638 (2016) (intent is ascertained from unambiguous contract language)
- Jones v. Johnson, 16 Ill. App. 3d 996 (1974) (deed construed to effectuate parties’ intent; reservations must be explicit)
- Nave v. Bailey, 329 Ill. 235 (1928) (avoid internally inconsistent deed interpretations)
- Law v. Kane, 384 Ill. 591 (1943) (construction to avoid repugnancy in deeds)
- Gelfius v. Chapman, 118 Ill. App. 3d 290 (1983) (rejects reading that would expand a limited reservation beyond its text)