Galambos v. Estep

[Cite as Galambos v. Estep, 2016-Ohio-5615.]

COURT OF APPEALS
TUSCARAWAS COUNTY, OHIO
FIFTH APPELLATE DISTRICT

DARREN J. GALAMBOS, ET AL. : JUDGES:
: Hon. Sheila G. Farmer, P.J.
Plaintiffs-Appellants : Hon. W. Scott Gwin, J.
: Hon. William B. Hoffman, J.
-vs- :
:
DEBRA J. ESTEP, ET AL. : Case No. 2016 AP 01 0004
:
Defendants-Appellees : OPINION

CHARACTER OF PROCEEDING: Appeal from the Court of Common
Pleas, Case No. 2014 CV 07 0443

JUDGMENT: Reversed and Remanded

DATE OF JUDGMENT: August 23, 2016

APPEARANCES

For Plaintiffs-Appellants For Defendants-Appellees

OWEN J. RARRIC DAVID K. SCHAFFNER
GREGORY W. WATTS 132 Fair Avenue, NW
4775 Munson Street, NW New Philadelphia, OH 44663
P.O. Box 36963
Canton, OH 44735-6963 JUDE B. STREB
200 Market Avenue North, Suite 300
P.O. Box 24213
Canton, OH 44701-4213
Tuscarawas County, Case No. 2016 AP 01 0004 2

Farmer, P.J.

{¶1} On August 21, 1976, Glen and Vivian McCarty entered into an oil and gas

lease with MB Oil & Gas as lessee covering fifty-three acres of their property. The

lease was recorded on or about September 28, 1976. This tract contained a dwelling

house.

{¶2} On October 26, 1976, the McCartys entered into an oil and gas lease with

The Belden Brick Company as lessee covering twenty-nine acres of their property. The

lease was recorded on or about October 26, 1976. This tract did not contain a dwelling

house.

{¶3} On October 27, 1977, an amended consolidation of oil and gas leases

was recorded to consolidate portions of the two leases to form the Hall & McCartney

Unit Well No. 1. A well was drilled in March 1977 on the twenty-nine acre tract.

{¶4} In 1992, the McCartys sold their fifty-three acre tract and their dwelling

house to Denver Turner. The deed reserved all oil and gas rights on the property to the

McCartys, but conveyed to Mr. Turner the right to receive free gas (200 mcf) from the

gas well located on the twenty-nine acre tract, subject to Mr. Turner paying for any

overages.

{¶5} The twenty-nine acre tract the well was on was eventually conveyed in

March/April 2008 to appellee, Debra Estep, nka Adkins, the McCarty's daughter. The

fifty-three acre tract with the dwelling house was eventually conveyed in March 2014 to

appellants, Darren and Janna Galambros. On March 31, 2014, appellee shut off the

gas flowing to the dwelling house located on the fifty-three acre tract owned by

appellants. As a result, appellants had to convert their home to propane gas.
Tuscarawas County, Case No. 2016 AP 01 0004 3

{¶6} On July 24, 2014, appellants filed a complaint against appellee and The

Belden Brick Company, claiming four causes of action. Count One sought a declaration

that they were entitled to 200 mcf of free gas each year produced by the well and

appellee was not entitled to use gas from the well; Count Two alleged tortuous

interference with contract; Count Three alleged conversion; and Count Four alleged

unjust enrichment.

{¶7} On May 22, 2015, appellants filed a motion for partial summary judgment,

seeking judgment on Count One. On June 5, 2015, appellee filed a cross-motion for

summary judgment. Each party claimed genuine issues of matter fact did not exist

regarding who was the rightful owner of the free gas. By judgment entry filed

September 18, 2015, the trial court denied the motions.

{¶8} On October 26, 2015, the parties filed a stipulation wherein The Belden

Brick Company agreed to accept the trial court's decision as to who holds the rights to

the free gas. On same date, the parties filed joint stipulations, outlining the various

conveyances and oil and gas leases over the years with attached exhibits.

{¶9} A bench trial was held on October 27, 2015. By judgment entry filed

December 11, 2015, the trial court found in favor of appellee, finding appellee was

entitled to the free gas allowance, as the free gas allowance pertained to the dwelling

house on the leased premises, the twenty-nine acre tract owned by appellee. The trial

court found the free gas allowance was not a covenant running with the fifty-three acre

tract owned by appellants. The trial court dismissed the complaint with prejudice.

{¶10} Appellants filed an appeal and this matter is now before this court for

consideration. Assignments of error are as follows:
Tuscarawas County, Case No. 2016 AP 01 0004 4

I

{¶11} "THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT HELD

THE PLAIN UNAMBIGUOUS LANGUAGE OF THE MCCARTY-TURNER DEED WAS

NOT SUFFICIENT TO CONVEY THE FREE GAS ALLOWANCE FROM THE BELDEN

BRICK LEASE TO APPELLANTS' PREDECESSORS-IN-TITLE."

II

{¶12} "THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT HELD

THE TRANSFER OF FREE GAS RIGHTS IN THE MCCARTY-TURNER DEED FROM

THE BELDEN BRICK LEASE WAS PERSONAL TO DENVER TURNER."

III

{¶13} "THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT HELD

THE COVENANT FOR FREE GAS UNDER THE BELDEN BRICK LEASE RAN WITH

APPELLEE'S PROPERTY IN DIRECT CONTRAVENTION OF THE EXPRESS

CONVEYANCE OF THAT RIGHT IN THE MCCARTY-TURNER DEED."

I, II

{¶14} Appellants claim the trial court erred in finding the language of the

McCarty-Turner deed did not convey the free gas allowance to their predecessors-in-

title, and the granting of the right to free gas was personal to Mr. Turner alone. We

agree.

{¶15} The issues herein require a review of the deeds and the oil and gas leases

as a matter of law; therefore, our standard of review is de novo. Saunders v.

Mortensen, 101 Ohio St.3d 86, 2004-Ohio-24. Under a de novo review, an appellate

court may interpret the language of the written instruments, substituting its interpretation
Tuscarawas County, Case No. 2016 AP 01 0004 5

for that of the trial court. Children's Medical Center v. Ward, 87 Ohio App.3d 504 (2nd

Dist.1993). Written instruments "are to be interpreted so as to carry out the intent of the

parties, as that intent is evidenced by the contractual language." Skivolocki v. East

Ohio Gas Co., 38 Ohio St.2d 244 (1974), paragraph one of the syllabus. "The principles

of deed construction dictate that a court presumes that a deed expresses the intentions

of the grantor and grantee at the time of execution.***A court cannot interpret the

parties' intent in a manner contrary to the clear, unambiguous language of the deed.***"

American Energy Corp. v. Datkuliak, 174 Oho App.3d 398, 2007-Ohio-7199, ¶ 50. As

explained by the Supreme Court of Ohio in Pure Oil Co. v. Kindall, 116 Ohio 188, 202-

203:

It is, of course, the general rule in the construction of deeds, that in

case of ambiguity the instrument must be construed most strongly against

the grantor and in favor of the grantee. 2 Tiffany on Real Property (2d

Ed.) 437:

'The courts, in connection with the construction of written

conveyances, as of other instruments, have asserted some general rules

of construction, to aid in ascertaining the intention of the parties thereto.

'In case of doubt, it is said, the conveyance is to be construed most

strongly as against the grantor, or in favor of the grantee on the theory, it

seems, that the words used are to be regarded as the words of the grantor

rather than of the grantee. Applying this rule, an exception or reservation
Tuscarawas County, Case No. 2016 AP 01 0004 6

in a conveyance is construed in favor of the grantee rather than of the

grantor.'

{¶16} Appellants argue the McCarty-Turner deed conveyed not only the surface

rights including the dwelling house on the fifty-three acre tract, but also the right to free

gas from the Belden Brick oil and gas lease on the twenty-nine acre tract owned by

appellee.

{¶17} Appellee argues the conveyance of free gas to Mr. Turner was limited to

him alone. Despite the personal conveyance, it is appellee's position that the Belden

Brick lease is limited to the twenty-nine acre tract upon which it was granted. Therefore,

appellants' tract, which is segregated from the whole and does not include the Belden

Brick lease, is not entitled to the free gas.

{¶18} As set forth above, the McCartys entered into an oil and gas lease with

MB Oil & Gas as lessee covering fifty-three acres of their property in August 1976. In

October 1976, the McCartys entered into an oil and gas lease with The Belden Brick

Company as lessee covering twenty-nine acres of their property. In October 1977, an

amended consolidation of oil and gas leases was recorded to consolidate portions of

the two leases to form the Hall & McCartney Unit Well No. 1. A well was drilled in

March 1977 on the twenty-nine acre tract.

{¶19} In 1992, the McCartys sold their fifty-three acre tract and their dwelling

house to Mr. Turner. This tract was subject to the MB lease.

{¶20} In 2008, the McCarty's sold their twenty-nine acre tract to appellee. This

tract did not contain a dwelling house and was subject to the Belden Brick lease.
Tuscarawas County, Case No. 2016 AP 01 0004 7

{¶21} The fifty-three acre tract and the dwelling house was eventually conveyed

to appellants in March 2014.

{¶22} At issue is the scope of the Belden Brick lease and the grant of free gas

contained in the McCarty-Turner deed. The Belden Brick lease recorded on October

26, 1976, contained the following provision:

8. The Lessor may lay a pipe line to any one gas well on the

premises, whether a producing well or a well used for gas storage

purposes, and take gas produced from said well for domestic use in one

dwelling house on the leased premises, at Lessor's own risk, subject to

the use and the right of abandonment of the well by the Lessee. The first

two hundred thousand cubic feet of gas taken each year shall be free of

cost, but all gas in excess of two hundred thousand cubic feet of gas taken

in each year shall be paid for at the last published rates of the gas utility in

the town or area nearest to the leased premises. Lessor to lay and

maintain the pipe line and furnish regulators and other necessary

equipment at Lessor's expense. This privilege is upon the condition

precedent that the Lessor shall subscribe to and be bound by the

reasonable rules and regulations of the Lessee relating to the use of free

gas, and shall maintain the said pipe line, regulators and equipment in

good repair and free of all gas leaks and operate the same so as not to

cause waste or unnecessary leaks of gas. If the Lessor shall take excess

gas as aforesaid in any year and fail to pay for the same, the Lessee may
Tuscarawas County, Case No. 2016 AP 01 0004 8

deduct payment for such excess gas from any rentals or royalties accruing

to the Lessor thereunder.

{¶23} Contained within this provision are two clauses specific to this case: 1)

"take gas produced for said well for domestic use in one dwelling house on the leased

premises" and 2) "[i]f the Lessor shall take excess gas as aforesaid in any year and fail

to pay for the same, the Lessee may deduct payment for such excess gas from any

rentals or royalties accruing to the Lessor thereunder."

{¶24} Appellants' dwelling is not located on the twenty-nine acre tract identified

in the Belden Brick lease. However, we note in October 1977, prior to the McCarty-

Turner conveyance, an amended consolidation of oil and gas leases was recorded to

consolidate portions of the MB lease and the Belden Brick lease to form the Hall &

McCartney Unit Well No. 1. We conclude the fact that the Belden Brick lease did not

originally vest with the tract owned by appellants has no bearing on the issues given the

consolidation of the oil and gas leases. Notwithstanding, at the time of the Belden Brick

lease, the twenty-nine acre tract did not contain a dwelling house. The tract did not

contain a dwelling house until some time after appellee acquired the property in 2008,

well after the free gas allowance had been conveyed via deeds by appellant's

predecessors-in-title.

{¶25} As to the second cited clause regarding the taking of excess gas, we find

neither appellee nor Belden Brick have made any claim relative to monies owed for

excess gas usage.
Tuscarawas County, Case No. 2016 AP 01 0004 9

{¶26} The April 1992 McCarty-Turner General Warranty Deed included the

following language:

Grantors herein reserve all gas and oil rights on the above property,

excepting that Grantee shall receive the free gas allowance from the

present Belden Brick Company Lease subject to Grantee's obligation to

pay Belden Brick Company for any gas used above the normal lease

allowance.

To Have and to Hold the above granted and bargained premises,

with the appurtenances thereof, unto the said Grantee, his heirs and

assigns forever.

And we, GLEN E. McCARTY and VIVIAN J. McCARTY the said

Grantors, do for ourselves and our heirs, executors and administrators,

covenant with the said Grantee, his heirs and assigns, that at and until the

ensealing of these presents, we are well seized of the above described

premises, as a good and indefeasible estate in FEE SIMPLE, and have

good right to bargain and sell the same in manner and form as above

written, and that the same are free from all incumbrances whatsoever

except for real estate taxes which shall be pro-rated as of the date of

closing and that we will Warrant and Defend said premises, with the

appurtenances thereunto belonging, to the said Grantee, his heirs and

assigns, against all lawful claims and demands whatsoever.
Tuscarawas County, Case No. 2016 AP 01 0004 10

{¶27} We find a reading of the entire granting clause to indicate the grantee, as

well as "his heirs and assigns forever," were granted not only the metes and bounds

description of the tract, but also the specific right to the free gas allowance subject to

the overage provisions of the Belden Brick lease. The deed did not contain any

termination or reversion language regarding the free gas allowance.

{¶28} R.C. 5301.02 governs words necessary to create a fee simple estate and

states the following:

The use of terms of inheritance or succession are not necessary to

create a fee simple estate, and every grant, conveyance, or mortgage of

lands, tenements, or hereditaments shall convey or mortgage the entire

interest which the grantor could lawfully grant, convey, or mortgage,

unless it clearly appears by the deed, mortgage, or instrument that the

grantor intended to convey or mortgage a less estate.

{¶29} A review of the subsequent deeds, Exhibits 5, 6, and 7 attached to the

October 26, 2015 joint stipulations, indicates the continued reservation of oil and gas

rights to the McCartys, however the respective grantor(s) conveyed the right to free gas

usage subject to the McCarty-Turner Deed. None of the deeds contained termination or

reversion language regarding the free gas allowance. The March/April 2008 fiduciary

deed transferring the twenty-nine acre tract to appellee does not include any language

regarding oil and gas leases and/or free gas. Appellants' purchase agreement (Exhibit
Tuscarawas County, Case No. 2016 AP 01 0004 11

8) stated the contract was contingent upon "240,000 CF of free gas no mineral rights

pass. Upon verification of free gas by the well servicer."

{¶30} Upon review, we find the trial court erred in finding the granting of the free

gas allowance was personal to Mr. Turner alone and the conveyance of free gas did not

remain with appellants who were the successors-in- title to the McCarty-Turner deed.

{¶31} Assignment of Errors I and II are granted. The judgment as to Count One

of the complaint is reversed and granted in appellants' favor. The matter is remanded

for further proceedings as to Counts Two, Three, and Four of the complaint.

III

{¶32} Based on our decision in Assignments of Error I and II, this assignment is

moot.
Tuscarawas County, Case No. 2016 AP 01 0004 12

{¶33} The judgment of the Court of Common Pleas of Tuscarawas County, Ohio

is hereby reversed, as Count One of the complaint is granted in appellants' favor, and

the matter is remanded to said court for further proceedings consistent with this opinion.

By Farmer, P.J.

Gwin, J. and

Hoffman, J. concur.

SGF/sg 711