Peppertree Farms, L.L.C. v. Thonen , 2022 Ohio 396 ( 2022 )

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Peppertree Farms, L.L.C. v. Thonen, Slip Opinion No. 2022-Ohio-396.]
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promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
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SLIP OPINION NO. 2022-OHIO-396PEPPERTREE FARMS, L.L.C., ET AL., APPELLEES, v. THONEN ET AL.,
APPELLANTS.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Peppertree Farms, L.L.C. v. Thonen, Slip Opinion No.
2022-Ohio-396.]
Property law—Conveyance of oil and gas interests—Dormant Mineral Act, R.C.
5301.56—Marketable Title Act, R.C. 5301.47 et seq.—Recorded title
transactions—Under common law applicable to quiet-title action,
conveyance of real property had to include words of inheritance for grantor
to pass on, or to retain part of, a fee-simple absolute interest in the land—
If conveyance did not include words of inheritance, then grantee received,
or grantor retained, only a life estate in the land—Marketable Title Act and
Dormant Mineral Act provide independent, alternative statutory
mechanisms that may be used to reunite severed mineral interests with the
surface property subject to those interests—A will that does not distribute
the decedent’s oil and gas rights does not affect title and is not a recorded
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title transaction that prevents those rights from being extinguished by the
Marketable Title Act—Court of appeals’ judgment affirmed.
(No. 2020-0814—Submitted October 6, 2021—Decided February 15, 2022.)
APPEAL from the Court of Appeals for Stark County,
No. 2019CA00161, 2020-Ohio-3043.
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KENNEDY, J.
{¶ 1} This discretionary appeal from a judgment of the Fifth District Court
of Appeals presents three issues. First, we consider whether Ohio’s Dormant
Mineral Act, R.C. 5301.56, supersedes Ohio’s Marketable Title Act, R.C. 5301.47
et seq., and provides the exclusive mechanism for reuniting a surface estate with its
severed mineral interest. Second, we address whether a deed in which the grantor
retained an interest in the oil and gas rights to the property kept only a life estate in
that interest because the deed did not include language stating that the grantor’s
interest was inheritable. And third, we consider whether the recording of a
decedent’s will that does not distribute the decedent’s oil and gas rights is sufficient
to prevent those rights from being extinguished by the Marketable Title Act.
{¶ 2} The first issue is controlled by this court’s recent decision in West v.
Bode, 162 Ohio St.3d 293, 2020-Ohio-5473, 165 N.E.3d 298, ¶ 2. The West court
held that the Dormant Mineral Act and the Marketable Title Act provide alternative,
independent mechanisms to reunite a surface estate with its severed mineral
interest.
{¶ 3} Our resolution of the second issue is informed by our decision in
Peppertree Farms v. Thonen, ___ Ohio St.3d ___, 2022-Ohio-395, ___ N.E.3d ___
(“Peppertree Farms I”), which we also decide today. In that case, we recognized
that prior to the General Assembly’s abrogation of the common-law rule in 1925,
the common law distinguished between a reservation of a property interest in a
conveyance and an exception to a conveyance of property. Id. at ¶ 2. Because a
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reservation created a new property right for the grantor that had not already been
owned by the grantor in fee simple absolute before the conveyance, words of
inheritance were required for the grantor to retain more than a life estate in the
interest. Id. In contrast, when the grantor withheld an existing fee-simple property
right from the conveyance, the deed contained an exception. Id. And because the
grantor had already held more than a life estate in the property, words of inheritance
were not necessary to make the excepted property inheritable. Id.
{¶ 4} The Fifth District concluded that the oil and gas interest at issue in
this case was created by a reservation and that in the absence of words of
inheritance, it was a life estate that had expired. 2020-Ohio-3043, ¶ 42. We
disagree. The oil and gas interest was in existence and owned in fee simple by the
grantor at the time of the conveyance, and the grantor excepted the oil and gas
interest from the transaction. Words of inheritance were not necessary to create a
right of inheritance that already belonged to the grantor.
{¶ 5} The third issue requires us to apply the Marketable Title Act, which
provides that an unbroken chain of title to land for a period of 40 years establishes
marketable record title to the land and generally extinguishes property interests that
predate the landowner’s root of title. R.C. 5301.47(A) and 5301.48. However,
marketable record title is subject to any interest arising out of a title transaction that
was recorded within 40 years after the effective date of the root of title, R.C.
5301.49(D), and a “title transaction” includes transactions that affect title to an
interest in land by will or inheritance, R.C. 5301.47(F).
{¶ 6} The court of appeals correctly held that a recorded will that does not
affect title to an interest in land is not a recorded title transaction under R.C.
5301.47(F) and cannot be an exception to the Marketable Title Act under R.C.
5301.49. 2020-Ohio-3043, at ¶ 56-57. A will that distributes the decedent’s oil
and gas rights affects title to an interest in land. And when oil and gas rights pass
through intestacy, a title transaction also occurs. But in this case, the recorded will
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did not transfer, encumber, or otherwise affect title to the oil and gas rights, and the
inheritance of those rights was not recorded and does not appear in the chain of
title. For these reasons, neither the recording of the will nor the inheritance is a
recorded title transaction preventing the oil and gas rights from being extinguished
by the Marketable Title Act.
{¶ 7} We therefore affirm the judgment of the Fifth District.
Facts and Procedural History
{¶ 8} In April 1916, W.T. and Katherine Fleahman conveyed two tracts of
land in Monroe County to W.A. Gillespie. The first tract contained approximately
80 acres and the second tract contained approximately 5 acres. The deed stated,
“Grantor W.T. Fleahman excepts and reserves from this deed the one half of the
royalty of the oil and gas under the above described real estate.”
{¶ 9} Although the transfer is not documented in the record before this
court, it is not disputed that Mary Fleahman acquired W.A. Gillespie’s interest
through a subsequent conveyance. In a deed executed in September 1920 and
recorded in April 1921, Mary Fleahman conveyed the two tracts of land to H.J.
Jones. The deed stated that “the 3/4 of oil Royalty and one half of the gas is hereby
reserved and is not made a part of this transfer.” In February 1921, Jones conveyed
the property to James Foughty. The deed, which was recorded in April 1921,
included the following language: “All the oil and gas underlying the above
described premises is hereby reserved and is not made a part of this transfer.” In
September 1921, Jones conveyed “the one half part of his one fourth royalty of all
the oil and gas” to S.E. Headley. What remained with Jones is called the “Jones
Interest.”
{¶ 10} Jones died intestate in January 1932. Earl S. Ward, the administrator
of his estate, sold the Jones Interest to Beatrice J. Pfalzgraf and Irene Jones in
August 1936. In March 1943, Pfalzgraf conveyed her one-half share of the Jones
Interest to Ward. Ward died testate in March 1972, and his handwritten will was
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filed in the Monroe County probate court in April 1972. Because the will did not
include a specific devise that disposed of his share of the Jones Interest and did not
contain a residuary clause, the Jones Interest passed to Ward’s heirs as if he had
died intestate. See R.C. 2105.06. In August 2017, Stacey L. Lucas recorded an
“Affidavit of Claim to Preserve a Mineral Interest” for the Jones Interest.
{¶ 11} Appellee Peppertree Farms, L.L.C., owns 78.668 acres of the land
that was previously owned by Jones. Appellees Jay and Amy Moore own an
additional 5.009 acres of the land that was previously owned by Jones.
{¶ 12} Peppertree Farms brought this action to quiet title in the Stark
County Common Pleas Court against numerous potential claimants to the oil and
gas under its property, including appellants, Cheryl Bilby, Dwight Sowle, Kris
Pfalzgraf, Karigan Bea Pfalzgraf, Kansas Lee Pfalzgraf, Shirley M. Pfalzgraf,
Stacey L. Lucas, Jeremy Stimpert, Angie Pfalzgraf Stimpert, Jennifer Stimpert
Burkhart, Donna Sims, Aaron Lucas, Robbie Lucas, Roger William Erwin, and
Brian Matthew Erwin, who refer to themselves collectively as “the Jones
Defendants,” as we do herein. Relevant here, Peppertree Farms sought a
declaration that the Jones Interest was only a life estate that terminated on Jones’s
death. It also requested a declaration that the Jones Defendants’ interests were
extinguished by the Marketable Title Act. Jay and Amy Moore were added as
plaintiffs. The Jones Defendants brought counterclaims against Jay and Amy
Moore to quiet title in the Jones Defendants’ favor and for a declaratory judgment
that the Jones Interest had not expired or been abandoned.
{¶ 13} The trial court entered summary judgment in favor of Peppertree
Farms and Jay and Amy Moore, determining that the Jones Interest was a
reservation that retained only a life estate because the deed did not include words
of inheritance. It also determined that the Dormant Mineral Act did not supersede
the Marketable Title Act and that the Jones Interest would have been extinguished
by the Marketable Title Act if it were not a life estate.
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{¶ 14} The Fifth District affirmed, agreeing with the trial court that the
Jones Interest created new property rights and was therefore a reservation by which
Jones had retained only a life estate because the conveyance did not include words
of inheritance. 2020-Ohio-3043, at ¶ 42. The court of appeals held that the
Dormant Mineral Act did not supersede the Marketable Title Act, id. at ¶ 47-48,
and that Ward’s will was not a recorded title transaction that would have prevented
the Jones Defendants’ interest from being extinguished by the Marketable Title Act,
id. at ¶ 57-58.
{¶ 15} We accepted the Jones Defendants’ discretionary appeal to review
three propositions of law:
1. The Dormant Mineral Act, R.C. 5301.56, is the specific
provision of the Marketable Title Act, R.C. 5301.47 et seq., with
respect to the transfer of severed oil and gas interests to a surface
owner and its provisions prevail over the general provisions which
are inapplicable.
2. A grantor’s severance of an oil and gas interest in an
instrument conveying real property merely retains the grantor’s
preexisting interest in the land.
3. The filing of a severed mineral interest owner’s will in
the probate court where the property is situated constitutes a title
transaction under the Marketable Title Act even if the will does not
specifically devise the interest or contain a residuary clause because
the plain language of R.C. 5301.47(F), broadly defines title
transaction as “any transaction affecting title to any interest in land,
including title by will or descent.”
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See 160 Ohio St.3d 1407, 2020-Ohio-4574, 153 N.E.3d 105; 160 Ohio St.3d 1462,
2020-Ohio-5332, 157 N.E.3d 798.
{¶ 16} Because this court’s decision in West, 162 Ohio St.3d 293, 2020-
Ohio-5473, 165 N.E.3d 298, at ¶ 2, resolves the Jones Defendants’ first proposition
of law, we address only the issues presented in proposition of law Nos. 2 and 3.
Law and Analysis
The Jones Interest
{¶ 17} Before the General Assembly abrogated the common-law rule in
1925, a grantor could convey a fee-simple absolute interest in real property only by
including words of inheritance in the deed. See Peppertree Farms I, ___ Ohio St.3d
___, 2022-Ohio-395, ___ N.E.3d ___, at ¶ 2; see also G.C. 8510-1, 86 Ohio Laws
18 (1925). Otherwise, the grantee received a life estate that reverted to the grantor
upon the grantee’s death. Peppertree Farms I at ¶ 2.
{¶ 18} Additional considerations arose when the grantor sought to retain an
interest in the property being conveyed. As we explained in Peppertree Farms I,
[t]he common-law courts * * * recognized a distinction between a
reservation of a property interest and an exception to the conveyance
of property. A reservation created a new property right for the
grantor, and because that new interest had not been owned by the
grantor in fee simple absolute before the conveyance, words of
inheritance were required to make it inheritable. In contrast, an
exception to the conveyance withheld from the transfer an existing
fee-simple property right owned by the grantor. Because property
owned in fee simple absolute was already inheritable, the grantor
did not have to include words of inheritance to retain more than a
life estate in the excepted interest.
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Id. at ¶ 2.
{¶ 19} In Peppertree Farms I, we addressed the deed by which Mary
Fleahman conveyed the two parcels of land to Jones. The deed stated that “the 3/4
of oil Royalty and one half of the gas is hereby reserved and is not made a part of
this transfer.” Id. at ¶ 24. We determined that this language excepted her oil and
gas interest from the conveyance, because at the time of the transaction she owned
an interest in the oil and gas in fee simple. Id. That is, because that interest was
already inheritable, words of inheritance were not required to retain more than a
life estate in it. We also rejected the notion that the exception clause’s use of the
word “royalty” made a difference. First, we noted that deeds sometimes referred
to the mineral interest itself as a “royalty,” id. at ¶ 25, citing 1 Kuntz, A Treatise on
the Law of Oil and Gas, Section 15.4 (2021), and second, we recognized that the
present right to a future royalty is real property and that such an interest was owned
by Mary Fleahman at the time of the conveyance, id. at ¶ 27, citing 3 Kuntz, A
Treatise on the Law of Oil and Gas, Section 38.2.
{¶ 20} Similar to the exception in the deed transferring the property from
Mary Fleahman to Jones, the deed transferring the property from Jones to Doughty
stated that “[a]ll the oil and gas underlying the above described premises is hereby
reserved and is not made a part of this transfer.” (Emphasis added.) Nonetheless,
Peppertree Farms and Jay and Amy Moore contend that this conveyance created
something new—a severed mineral interest with “new fractional ownership of lease
bonus royalties.”
{¶ 21} However, we noted in Peppertree Farms I that an owner “ ‘may
alienate [the] incidents or property rights [of the mineral estate] in whole or in part
[brackets added],’ ” id., ___ Ohio St.3d ___, 2022-Ohio-395, ___ N.E.3d ___, at
¶ 27, quoting 1 Kuntz, A Treatise on the Law of Oil and Gas, Section 15.1,
including by severing a present interest in future royalties, id. The right to bonus
payments is also one of the incidents of ownership of a mineral interest. 1 Kuntz,
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A Treatise on the Law of Oil and Gas, Section 15.1. Professor Eugene Kuntz, the
author of a renowned treatise on the law of oil and gas, has explained that
“[c]onsistent with the situation where there has been an alienation of other incidents
of the full mineral ownership, it would follow that it is possible to create a ‘bonus
interest’ which may or may not be coupled with a power to lease.” Id. at Section
15.5.
{¶ 22} Jones excepted his oil and gas interest from the conveyance of the
surface estate. The oil and gas and his interest in it existed at the time of the
transaction, and he owned that interest in fee simple with rights of inheritance.
Therefore, because the conveyance did not create a new property right that reverted
back from the grantee, words of inheritance were not necessary for Jones to retain
more than a life estate in the share of the oil and gas that he owned.
{¶ 23} For these reasons, the Jones Interest did not expire at the time of
Jones’s death in 1932. Therefore, we turn to the court of appeals’ alternative
holding that the Jones Interest was extinguished by the Marketable Title Act.
The Marketable Title Act
{¶ 24} In 1961, the General Assembly enacted the Marketable Title Act,
R.C. 5301.47 et seq., to extinguish interests and claims in land that existed prior to
the root of title, with “the legislative purpose of simplifying and facilitating land
title transactions by allowing persons to rely on a record chain of title,” R.C.
5301.55. This legislation provides that marketable record title—which is an
unbroken chain of title to an interest in land for 40 years or more, R.C. 5301.48—
“shall be held by its owner and shall be taken by any person dealing with the land
free and clear of all interests, claims, or charges whatsoever, the existence of which
depends upon any act, transaction, event, or omission that occurred prior to the
effective date of the root of title,” R.C. 5301.50. Marketable record title therefore
“operates to extinguish” all other prior interests. R.C. 5301.47(A).
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{¶ 25} However, “[s]uch record marketable title shall be subject to * * *
[a]ny interest arising out of a title transaction which has been recorded subsequent
to the effective date of the root of title from which the unbroken chain of title or
record is started.” R.C. 5301.49(D). “ ‘Title transaction’ means any transaction
affecting title to any interest in land, including title by will or descent, title by tax
deed, or by trustee’s, assignee’s, guardian’s, executor’s, administrator’s, or
sheriff’s deed, or decree of any court, as well as warranty deed, quit claim deed, or
mortgage.” R.C. 5301.47(F).
{¶ 26} The will at issue in this case is not a recorded title transaction under
R.C. 5301.49(D). The will did not contain a specific devise of the Jones Interest,
nor did it include a residuary clause distributing the remainder of Ward’s property
to a beneficiary. Therefore, although it was recorded after the effective date of the
root of title, it did not transfer, encumber, or in any way affect title to the Jones
Interest. In contrast, the transfer of the Jones Interest to Ward’s heirs through
intestate succession did affect title to an interest in land and was a title transaction.
But this title transaction was not recorded within 40 years of the effective date of
title. For these reasons, neither Ward’s recorded will nor the unrecorded transfer
of the Jones Interest through intestacy is a recorded title transaction or a saving
event preventing that interest from being extinguished by the Marketable Title Act.
See Corban v. Chesapeake Exploration, L.L.C., 149 Ohio St.3d 512, 2016-Ohio-
5796, 76 N.E.3d 1089, ¶ 39 (“Because a delay rental payment does not affect title
to any interest in land, occurs outside the record chain of title, and is not filed or
recorded in the office of the county recorder, it is neither a title transaction nor a
saving event”).
{¶ 27} The Jones Defendants provide no other argument explaining why
their interests were not extinguished by the Marketable Title Act. The court of
appeals correctly affirmed the summary judgments entered in favor of Peppertree
Farms and Jay and Amy Moore.
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Conclusion
{¶ 28} Prior to March 25, 1925, when a conveyance created new property
rights benefiting the grantor in the transaction, it contained a reservation and words
of inheritance were required to make those new rights inheritable. In contrast, when
the transaction withheld preexisting, inheritable property rights from the
conveyance, it contained an exception to the conveyance and words of inheritance
were not required to retain more than a life estate in the excepted property interest.
{¶ 29} Jones retained his interest in the oil and gas underlying the property
by excepting it from the conveyance of the surface estate. He owned that interest
in fee simple and it was already inheritable before Jones conveyed the surface
estate. The trial court and the appellate court therefore incorrectly concluded that
the Jones Interest was a life estate that expired upon Jones’s death in 1932.
{¶ 30} Nonetheless, the lower courts correctly determined that a recorded
will that does not distribute the decedent’s oil and gas rights does not affect title
and is not a recorded title transaction that prevents those rights from being
extinguished by the Marketable Title Act. For these reasons, the court of appeals
correctly affirmed the summary judgments entered in favor of Peppertree Farms
and Jay and Amy Moore and against the Jones Defendants.
{¶ 31} We therefore affirm the judgment of the Fifth District Court of
Appeals.
Judgment affirmed.
O’CONNOR, C.J., and DEWINE and STEWART, JJ., concur.
DONNELLY, J., dissents, with an opinion joined by FISCHER and BRUNNER,
JJ.
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DONNELLY, J., dissenting.
{¶ 32} This case should be dismissed as having been improvidently
allowed. It does not involve issues of “public or great general interest.” Article
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IV, Section 2(B)(2)(e), Ohio Constitution. It is highly fact-specific and the issues
involved were resolved below. I dissent.
FISCHER and BRUNNER, JJ., concur in the foregoing opinion.
_________________
Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A., Matthew W. Onest,
and Wayne A. Boyer, for appellees.
Roetzel & Andress, L.P.A., Emily K. Anglewicz, David J. Wigham, and
Sara E. Fanning, for appellants.
Emens, Wolper, Jacobs & Jasin Law Firm Co., L.P.A., Cody Smith, and
Sean E. Jacobs, urging affirmance for amici curiae, Gregory A. Goble and Brenda
S. Goble.
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