PATRICIA CAROL SMITH, et al., Plaintiffs-Appellants, v. COLLECTORS TRIANGLE, LTD., et al., Defendants-Appellees.
Case No. 19 HA 0010
IN THE COURT OF APPEALS OF OHIO SEVENTH APPELLATE DISTRICT HARRISON COUNTY
September 28, 2020
2020-Ohio-4823
BEFORE: Cheryl L. Waite, Gene Donofrio, David A. D’Apolito, Judges.
Civil Appeal from the Court of Common Pleas of Harrison County, Ohio Case No. CVH-2019-0039
JUDGMENT: Reversed and Remanded.
Atty. Sara E. Fanning, Roetzel & Andress, LPA, 41 South High Street, Huntington Center, 21st Floor, Columbus, Ohio 43215 and Atty. Richard S. Mitchell, Roetzel & Andress, LPA, 1375 East Ninth Street, One Cleveland Center, 10th Floor, Cleveland, Ohio 44114 and Atty. David J. Wigham and Atty. Emily K. Anglewicz, Roetzel & Andress, LPA, 222 South Main Street, Suite 400, Akron, Ohio 44308, for Plaintiffs-Appellants
Atty. Nathan D. Vaughn and Atty. Giuseppe Ionno, Kimble Company, 3596 S.R. 39 NW, Dover, Ohio 44622, for Defendants-Appellees ESK ORI, LLC, GDK ORI, LLC, GWK ORI, LLC, JEM ORI, LLC, KBK ORI, LLC, and RHDK Oil & Gas, LLC.
Atty. Kevin Colosimo, Atty. Christopher Rogers, and Atty. Daniel P. Craig, Frost Brown Todd, LLC, Union Trust Building, 501 Grant street, Suite 800, Pittsburgh, Pennsylvania 15219, for Defendant-Appellee Ascent Resources-Utica, LLC.
Dated: September 28, 2020
WAITE, P.J.
{¶1} Appellants Patricia Carol Smith, Catherine Finney, Agnes Worrell, and Doug Worrell appeal аn August 27, 2019 Harrison County Court of Common Pleas judgment entry which granted a
{¶2} The instant action involves property that was initially owned by Ross Harris. The property includes two tracts of land: 103.75 acres and 63.7 acres. It appears that this appeal involves only the 63.7 acre tract. On February 2, 1984, Harris entered into an oil and gas lease with Floyd Kimble. Kimble drilled a well referred to as the “Harris Well” which began producing in 1987. In addition to the royalties associated with the well, Kimble agreed to provide the Harris house with free gas.
{¶3} On January 21, 1988, Harris died intestate and his estate was divided equally between his two children, Catherine Finney and Mildred I. Worrell. According to Appellants, the parties orally agreed that Mildred and her husband, Adrian, would receive the oil and gas royalties from the 63.7 acre tract. It is unclear whether there was any agreement as to the remaining 103.75 acre tract.
{¶4} On November 24, 1992, Mildred and Adrian conveyed their one-half interest in the property to their three children (Robert, Ross, and Patricia) in equal shares, retaining a life estate in a one-acre residence located on the 63.7 acre property. After these conveyances, Catherine owned a one-half interest in the property, Robert Worrell owned a one-sixth interest, Ross Worrell owned a one-sixth interest, and Patricia Smith owned a one-sixth interest.
{¶5} Sometime in 1997 a dispute arose between Catherine and the Worrell children regarding who was responsible for the farming and maintenance of the property. The dispute led to a partition complaint filed on November 26, 1997.
1997 Partition Action
{¶7} The court ultimately determined that the property could not be fairly divided and ordered a sale of the property. On May 14, 1998, a Sheriff‘s Deed pertaining to the 63.7 acre tract was executed. Despite the fact that default had beеn entered against Mildred and Adrian, the deed provided, in relevant part:
EXCEPTING AND RESERVING UNTO Adrian Worrell and Mildred I. Worrell a life estate in the residence situate on the above described premises, being the tract consisting of 63 acres, 2 rods, and 37 perches, an unsurveyed one (1) acre square surrounding the said residence, and ingress to and egress from the said residence for and during the natural lifetimes of Adrian Worrell and Mildred I. Worrell.
FURTHER EXCEPTING AND RESERVING unto Adrian Worrell and Mildred I. Worrell the right to receive all royalties payable under a certain oil and gas lease and any extension or modification thereof, said lease being recorded in Lease Volume 69, Page 79, Records of Harrison County, Ohio.
FURTHER EXCEPTING AND RESERVING unto Adrian Worrell and Mildred I. Worrell the right to receive such gas as produced by the existing well free of charge for use at their residence.
(6/13/19 Motion to Dismiss, Exh. A.)
{¶8} The 63.7 acre property was sold to Appellee Collector‘s Trianglе in accordance with the Sheriff‘s Deed, and the deed was recorded by Appellee.
2006 General Warranty Deed
{¶9} On March 4, 2005, Mildred died. Shortly thereafter, Adrian moved into an assisted living facility. Collector‘s Triangle approached Patricia Worrell and inquired whether the family would consider terminating Adrian‘s life estate in the one-acre property. On March 24, 2006, the life estate was terminated through a general warranty deed. In relevant part, the deed stated:
KNOW ALL MEN BY THESE PRESENTS, Adrian Wоrrell, an unmarried person, (the “Grantor“), for valuable consideration paid, grants, with general warranty covenants, to Collector‘s Triangle, Ltd., an Ohio limited liability company, whose tax mailing address is P.O. Box 473, Sugarcreek, Ohio 44681 (the “Grantee“), all of his interest in the real property described on Exhibit A (the “Property“), being an estate for life in the residence located on the Property as set forth in a certain Sheriff‘s Deed in Partition recorded in Official Record Volume 52, Page 163.
* * *
The Property is conveyed subject to, and there are excepted from the general warranty covenants, the following:
1. All easements, leases, covenants, conditions and restrictions of record
* * *
GRANTOR ALSO CONVEYS TO GRANTEE, ITS SUCCESSORS AND ASSIGNS, ALL OF GRANTOR‘S RIGHT TO RECEIVE ROYALTIES AND FREE GAS IN CONNECTION WITH A CERTAIN OIL AND GAS WELL LOCATED ON THE PROPERTY AND DRILLED PURSUANT TO THE LEASE RECORDED IN LEASE VOLUME 69, PAGE 79, IN THE RECORDER‘S OFFICE, HARRISON COUNTY, OHIO.
{¶10} Sometime thereafter, Ascent began horizontal drilling, which resulted in new production. Ascent paid royalties resulting from the new drilling to Collector‘s Triangle, and not to Appellants, which led to the instant action.
2019 Complaint
{¶11} On May 13, 2019, Appellants filed a complaint against Doug Worrell, Agnes Worrell, Collector‘s Triangle, ESK ORI LLC, GDK ORI LLC, KBK ORI LLC, JEM ORI LLC, RHDK Oil and Gas LLC, and Ascent Resources - Utica LLC. The complaint sought the following: a declaratory judgment that Appellants own the royalty interests at issue and are entitled to receive those royalties; quiet title; breach of contract (solely against Ascent); and conversion and accounting (solely against Ascent.) On June 3, 2010, an answer was filed on behаlf of all defendants except Collector‘s Triangle.
{¶13} On June 26, 2019, Appellants filed an amended complaint. The amended complaint contained additional facts surrounding the oral agreement as to a division of royalties between Mildred and Patricia, but did not add any new legal claims.
{¶14} On August 27, 2019, the trial court granted Ascent‘s
Civ.R. 12(B)(6)
{¶15} This action was dismissed pursuant to
{¶16} When reviewing a
{¶17} A
ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED BY DISMISSING APPELLANTS’ FIRST AMENDED COMPLAINT FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF MAY BE GRANTED.
{¶18} Appellants contend that Appellees’ arguments regarding the Sheriff‘s Deed are improper as they attempt to attack the earlier partition order. As the Sherriff‘s Deed was accepted by the trial court at the time, they argue that it inherently became part of the court‘s order. Because Appellees not only had notice of the existence and contents of the Sherriff‘s Deed but possessed and recorded the deed without ever attempting to attack its provisions, any argument pertaining to the validity of the Sheriff‘s Deed constitutes an improper collateral attack on the trial court‘s order.
{¶20} Again, this matter was dismissed as a result of a
{¶21} This matter is governed by
{¶23} Appellee Collector‘s Triangle does not dispute that it was Appellants who received the royalties from the time the Sheriff‘s Deed was executed until the dispute over payment of royalties following the execution of the General Warranty Deed terminating Adrian‘s life estate. This dispute appears to have begun in 2008. Thus, in addition to having actual knowledge of this reservation through the recorded deed, Collector‘s Triangle knew that Appellants had been receiving any and all royalties. Collector‘s Triangle made no effort whatsoever to dispute the provision nor did it seek to obtain any portion of the royalties.
{¶24} Appellees contend that if an oral agreement existed vesting all royalty payments to Mildred and Adrian, it would be barred by the statute of frauds. The Ohio Supreme Court addressed this issue in Nonamaker v. Amos, 73 Ohio St. 163, 76 N.E. 949 (1905). The Nonamaker Court reviewed whether аn oral agreement regarding royalty interests raises a statute of frauds issue. The Court held that an agreement to increase or decrease a royalty division stemming from an oil lease is not within the statute of frauds because “when the parties entered into the parol contract, * * * they were not contracting for an interest in or concerning real estate, but for a division of personal property in proportions different from those named in the written lease.” Id. at 171.
{¶26} Appellees argue that Mildred and Adrian were strangers to the 1998 Sheriff‘s Deed, meaning they were not a grantor or grantеe in the deed and so, the deed could not reserve interests in their favor.
{¶27} The Stranger Rule was first announced in The Akron Cold Spring Co. v. Ely, 18 Ohio App. 74 (9th Dist.1923). The Ely court stated “a reservation in a deed is ineffectual to create title in a stranger to the conveyance; a reservation is something issuing from or coming out of the thing granted, and must be to the grantor or party executing the conveyance and not to a stranger.” Id. at 80. However, Ely acknowledged an exception existed where an interest was conveyed to a рarty before the deed was executed. Id. at 78-79. In other words, if the grantor conveys an interest to a third party and then executes a deed concerning the property to the grantee, the third party is not a stranger to the deed because the conveyed interest predates the deed.
{¶28} Appellees contend that this case is analogous to In re Allen, 415 B.R. 310 (Bankr. N.D. Ohio 2009). In re Allen involved a conveyance of land to a trust where
{¶29} Because we must accept as true the existence of the oral agreement, we must also deal with the question of whether Appellee waived its rights to attack the 1998 Sheriff‘s Deed. This record establishes that Collector‘s Triangle was indirectly a party to the partition action. While Collector‘s Triangle is not a third-party beneficiary, it was clearly the party who benefitted from the partition and sale. Importantly, Collector‘s Triangle signed the deed and recorded it on June 1, 1998.
{¶30} In Ohio Pyro, Inc. v. Ohio Dept. of Commerce, 115 Ohio St.3d 375, 2007-Ohio-5024, 875 N.E.2d 550, the Ohio Supreme Court held that a prior judgment may only be collaterally attacked if the trial court lacked jurisdiction in the original action or if the judgment was the result of fraud. The Ohio Pyro Court noted that the ability to collaterally attack a judgment is limited and disfavored, because judgments are meant to be final. Id. at ¶ 22, citing Coe v. Erb, 59 Ohio St. 259, 267-268, 52 N.E. 640 (1898).
{¶31} The Court held that “[a]lthough res judicata principles apply only to parties and those in privity with them, the collateral-attack doctrine applies to both parties and
{¶32} In Jefferson, an exception to this principle was announced. Strangers to the court order who, “if the judgment were given full credit and effect, would be prejudiced in regard to some pre-existing right, * * * are permitted to impeach the judgment. Being neither parties to the action, nor entitled to manаge the cause nor appeal from the judgment, they are by law allowed to impeach it whenever it is attempted to be enforced against them so as to effect rights or interests acquired prior to its rendition.” Id. at 113.
{¶33} Appellees were not parties to the partition action in the instant case. Regardless, they are prohibited from attacking the original court order unless they can demonstrate that that they have pre-existing rights that would be prejudiced by enforcement of that order. Collector‘s Triangle arguably may be prejudiced by the inability to receive royalties. However, to the extent they argue entitlement to that right, it did not pre-exist the court‘s partition order in this case. Thus, they cannot collaterally attack the partition order.
{¶34} Additionally, Appellees did not argue at any point during this action that the trial court lacked jurisdiction or that the judgment was рrocured through fraud. Instead, they contend the Sheriff‘s Deed does not form part of the trial court‘s judgment, and even if it is part and parcel of the judgment, it was erroneous, because the sheriff lacked the authority to grant Mildred and Adrian any rights to the royalty interests. Due to the limited nature of the record before us, we are unable to fully determine whether the Sheriff‘s Deed forms part of the trial court‘s order in the partition. On May 7, 1998, the trial court enterеd an order confirming the sale and proceeds which stated, in relevant part, “[t]he
{¶35} From the court‘s language, it appears that all aspects of the sale known by the court were approved at confirmation. However, it is unclear whether the royalty reservation to Mildred and Adrian was known and approved by the trial court at the time it accepted the sale and ordered the Sheriff‘s Deed. The Sheriff‘s Deed was executed one week later on May 14, 1998. Accepting the allegations of the comрlaint as true, it should have been known by the trial court when it approved “all aspects of the sale.” If so, then the royalty reservation is part of the trial court‘s order, which cannot be collaterally attacked.
{¶36} Instead of analyzing critical issues surrounding the execution and recording of the 1998 Sheriff‘s Deed, the trial court focused its analysis on the 2006 General Warranty Deed, finding that it conveyed all royalties to Collector‘s Triangle. Howеver, a review of the 2006 General Warranty Deed reveals that Adrian conveyed less than what was reserved to him in the 1998 Sheriff‘s Deed.
{¶37} In relevant part, the 1998 Sheriff‘s Deed specifically stated:
FURTHER EXCEPTING AND RESERVING unto Adrian Worrell and Mildred I. Worrell the right to receive all royalties payable under a certain oil and gas lease and any extension or modification thereof, said lease being
recorded in Lease Volume 69, Page 79, Records of Harrison County, Ohio. (Emphasis added.)
(6/26/19 Amended Complaint, Exh. 1.) This language clearly reserved all royalty interests in the lease, as well as future modifications and extensions of the lease.
{¶38} In comparison, the 2006 General Warranty Deed stated, in relevant part,
GRANTOR ALSO CONVEYS TO GRANTEE, ITS SUCCESSORS AND ASSIGNS, ALL OF GRANTOR‘S RIGHT TO RECEIVE ROYALTIES AND FREE GAS IN CONNECTION WITH A CERTAIN OIL AND GAS WELL LOCATED ON THE PROPERTY AND DRILLED PURSUANT TO THE LEASE RECORDED IN LEASE VOLUME 69, PAGE 79, IN THE RECORDER‘S OFFICE, HARRISON COUNTY, OHIO. (Emphasis added)
{¶39} The language used in the 2006 General Warranty Deed specifically limited the conveyance to those royalties in connection with the Harris Well. In contrast, the 1998 Sheriff‘s Deed used broad languаge reserving royalties from any well drilled pursuant to the lease. Thus, the plain and unambiguous language of the 2006 General Warranty Deed conveyed only the oil and gas that is produced by the Harris Well, and not the subsequent drilling that is at issue in this action.
{¶40} Although Appellees encourage this Court to construe the 2006 conveyance broadly, the language is clear and unambiguous. The express language of the 1998 Sheriff‘s Deed clearly reserved all royalty rights deriving from the lease and any extension or modification, whereas the 2006 General Warranty Deed conveyed only the oil and gas in connection with the Harris Well, without extension or modification.
{¶42} As such, Appellants’ sole assignment of error has merit and is sustained.
Conclusion
{¶43} Appellаnts argue that the court‘s decision to grant Appellees’
Donofrio, J., concurs.
D‘Apolito, J., concurs.
A certified copy of this opinion and judgment entry shall constitute the mandate in this case pursuant to Rule 27 of the Rules of Appellate Procedure. It is ordered that a certified copy be sent by the clerk to the trial court to carry this judgment into execution.
NOTICE TO COUNSEL
This document constitutes a final judgment entry.