Cadle v. D'Amico , 2016 Ohio 4747 ( 2016 )

[Cite as Cadle v. D'Amico, 2016-Ohio-4747.]
STATE OF OHIO, MAHONING COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
MELVIN E. AND INA N. CADLE, ) CASE NO. 15 MA 0136
)
PLAINTIFFS-APPELLANTS, )
)
VS. ) OPINION
)
PAMELA G. D'AMICO, INDIVIDUALLY )
AND AS TRUSTEE OF THE )
TESTAMENTARY TRUSTS OF THE )
WILL AND TESTAMENT OF PAUL J. )
SUDIMAK, DECEASED, et al., )
)
DEFENDANTS-APPELLEES. )
CHARACTER OF PROCEEDINGS: Civil Appeal from the Court of Common
Pleas Probate Division of Mahoning
County, Ohio
Case No. 2013 CI 0006
JUDGMENT: Affirmed.
JUDGES:
Hon. Carol Ann Robb
Hon. Gene Donofrio
Hon. Cheryl L. Waite
Dated: June 27, 2016
[Cite as Cadle v. D'Amico, 2016-Ohio-4747.]
APPEARANCES:
For Plaintiffs-Appellants: Atty. Eric C. Johnson
12 West Main Street
Canfield, Ohio 44406
Atty. David S. Barbee
Roth, Blair, Roberts, Strasfeld &
Lodge
100 East Federal Street, Suite 600
Youngstown, Ohio 44503
For Defendants-Appellees: Thomas G. Carey, Jr.
Harrington, Hoppe & Mitchell, Ltd.
108 Main Avenue S.W., Suite 500
Warren, Ohio 44481
[Cite as Cadle v. D'Amico, 2016-Ohio-4747.]
ROBB, J.
{¶1} Plaintiffs-Appellants Melvin and Ina Cadle appeal the decision of
Mahoning County Probate Court declaring the October 28, 2008 “Assignment of Oil
and Gas Lease” only assigns royalty rights and right to free gas for the residence
associated with Sudimak No. 2 and Sudimak No. 3 wells. Appellants disagree with
the trial court’s conclusion and argue the assignment conveys all rights related to the
October 28, 2008 lease, not just royalty rights to Sudimak No. 2 and Sudimak No. 3
wells. They contend any confusion or uncertainty as to the meaning of the
assignment should be construed against Defendants-Appellees Pamela D’Amico,
individually and as trustee of the testamentary trust of the last will and testament of
Paul J. Sudimak, Barbara Gettman, Stephen H. Sudimak, Noreen Sudimak, Ellen
Borchers, Anita Bell, and Petrine M. Lucarell.
{¶2} The issue before this court is what rights were granted to Appellants
under the assignment. For the reasons expressed below, the probate court’s
decision was correct. The assignment only granted royalty rights to Sudimak No. 2
and Sudimak No. 3 wells along with right to free gas from those wells; it did not grant
all rights and interests under the lease.
Statement of the Case
{¶3} In 1961, Joseph Kutsko, who owned approximately 168 acres north and
south of Blott Road in North Jackson Township, Mahoning County, Ohio, entered into
a lease (referred to as the “Kutsko Lease”) with East Ohio Gas Company. The
Kutsko Lease contained broad language; it allowed for “drilling, operating for,
producing and removing oil and gas and all other constituents thereof, and of
injecting, storing and holding in storage, and removing gas of any kind (sometimes
herein referred to as gas storage purpose), including gas lying thereunder, by
pumping through wells or other means, into, in and from any sands, strata or
formations lying thereunder, regardless of the source of such gas or the location of
the wells or other means of so doing, and of placing tanks, equipment and structure
thereon to procure and operate for the said products, and of laying pipe lines
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thereover to transport the same and for gas storage purposes on other lands” on the
168 acres.
{¶4} Paul J. Sudimak became owner of 90 acres of the original Kutsko
property. Paul J. Sudimak not only acquired the surface rights, but he also acquired
the mineral rights. Thus, he became the lessor under the Kutsko Lease.
{¶5} Paul J. Sudimak’s 90 acres were split by Blott Road. Seventy acres
were situated north of Blott Road and the remaining twenty acres were south of Blott
Road. In the early 1970s two shallow wells were drilled on the property north of Blott
Road. These wells were known as Sudimak No. 2 and Sudimak No. 3. Paul J.
Sudimak received royalties from these wells; Sudimak No. 3 supplied free gas to a
house located on the property.
{¶6} Paul J. Sudimak died in the mid-1980s. His will named Pamela
D’Amico, his niece, executor. The will created three trusts – one for his son Robert,
one for his son Paul, and one for his brother and sister-in-law Robert and Barbara
Sudimak. D’Amico is the daughter of Robert and Barbara Sudimak.
{¶7} In the mid to late 1980s the estate sold the surface rights to the 90
acres in two separate transactions to individuals who are not parties to this action. It
retained all the mineral rights to the 90 acres.
{¶8} Appellants acquired 20 acres south of Blott Road in 1986. Appellants
acquired the 70 acres north of Blott Road in 2012.
{¶9} In 2008, Mr. Cadle approached Mrs. D’Amico, about either purchasing
mineral interests or interests in the two wells; the parties dispute what their
conversation was about. The parties negotiated and executed the October 28, 2008
assignment of lease. Appellants paid $2,250.00 and assignor, “Pamela G. D’Amico,
trustee for the Paul Sudimak Trust” assigned its “interest in certain Oil & Gas Lease
for the ‘Sudimak #2 and #3 Well.’” 10/28/08 Lease.
{¶10} Concerns about the 2008 Assignment arose shortly after acquisition of
the 70 acres. The oil and gas environment in Ohio had changed and deep well
drilling was occurring. At some point in time, CNX Gas Company, LLC, sometimes
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referred to as Consol, became the lessee on the Kutsko Lease. Two deep wells
were drilled on the 90 acres.
{¶11} Allegedly, the initial concerns about the 2008 Assignment were that the
Assignment only referenced one of the Sudimak trusts and what it actually granted to
Appellants.
{¶12} Appellants filed a complaint and later amended complaints against
Pamela D’Amico, individually and as trustee of the testamentary trusts of the will and
estate of Paul J. Sudimak, Barbara Gettman, Stephen H. Sudimak, Noreen Sudimak,
Ellen Borchers, Anita Bell, Petrine M. Lucarell, Jack Shaffer1, Robert Sudimak, and
CNX Gas Company seeking reformation and declaratory judgment. 2/21/13
Complaint; 7/24/13 First Amended Complaint; 1/9/14 Second Amended Complaint.
{¶13} Appellants sought reformation of the assignment because the
assignment failed to correctly identify assignor. It stated assignor was “Pamela G.
D’Amico, Trustee of the Paul Sudimak Trust;” however, that trust did not exist.
D’Amico was the trustee for three separate trusts under the last will and testament of
Paul J. Sudimak. Appellants asked for the Assignment to be reformed to indicate the
assignor was D’Amico, trustee of the three separate trusts.
{¶14} The probate court granted the request. 7/29/15 J.E. Neither party finds
fault with the probate court’s decision to reform the Assignment to correct the name
of the assignor.
{¶15} Appellants also sought a declaratory judgment. Appellants asserted the
Assignment assigned them the right to receive royalties from the entire Kutsko
Lease. At the time the suit was filed, Appellants were receiving the royalties from the
shallow wells, Sudimak No. 2 and Sudimak No. 3. Appellants wanted a declaratory
judgment indicating they were entitled to the royalties for any other wells drilled on
the 90 acres that was subject to the Kutsko Lease. In the alternative, they asked the
probate court to reform the assignment to indicate it conveyed all oil and gas rights
1Separate issues were raised regarding Schaffer. The probate court rendered a ruling on
those issues. This appeal does not address those issues and no appeal concerning the probate
court’s judgment on those issues has been filed.
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previously held by the trust with respect to the Kutsko Lease. Appellants contended
reformation was available because it was a mutual mistake that the Assignment did
not effectively convey all rights held by the trustee under the Kutsko Lease.
{¶16} Appellees answered and asserted the Assignment only assigned
royalties and interests associated with the Sudimak No. 2 and Sudimak No. 3 wells.
The Assignment did not grant Appellants interest and/or royalties associated with the
entire Kutsko Lease.
{¶17} CNX answered and filed Counterclaim/Crossclaim for Interpleader.
CNX indicated it had no interest in royalties other than the proper identity of the
appropriate payee under the Kutsko Lease. 6/24/13 Interpleader.
{¶18} In December 2013, an agreement was reached between Appellants,
Appellees, and CNX, and was memorialized in an agreed judgment entry. It was
agreed CNX would “place into suspense any royalties or other payments that come
due under the Lease. At the conclusion of the litigation, [CNX] will pay those
royalties to the party that is determined to be the rightful successor-in-interest as
lessor of the Kutsko Lease.” 12/26/13 J.E.
{¶19} The case proceeded to trial. The primary issue was what did the
language of the Assignment mean. Following trial, the probate court held:
The “Assignment of Oil and Gas Lease” recorded on October 28, 2008
in O.R. Book 5779, Page 1828 of Mahoning County, Ohio Recorder’s
Office only assigns royalty rights and rights to free gas to the residence
associated with Sudimak No. 2 and Sudimak No. 3 wells also referred
to as Sudimak #2 and Sudimak #3. All other mineral rights remain
under the control of Pamela G. D’Amico, Trustee of the Robert E.
Sudimak and Barbara Sudimak Trust.
(Emphasis in original.) 7/29/15 J.E.
{¶20} Appellants timely appealed that decision.
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Assignment of Error
“The trial court erred by holding that the lease rights assigned to the
Appellants were limited to royalties produced from only the Sudimak #2 and #3 oil
and gas wells.”
{¶21} The issue in this case is what interest does the October 28, 2008
“Assignment of Oil & Gas Lease” assign to Appellants. The Assignment is a contract
and thus, the principles of contract interpretation apply.
{¶22} When reviewing a contract, the court's primary role is to ascertain and
give effect to the intent of the parties. Hamilton Ins. Serv., Inc. v. Nationwide Ins.
Cos., 86 Ohio St.3d 270, 273, 714 N.E.2d 898 (1999). A contract that is, by its terms,
clear and unambiguous requires no interpretation or construction and will be given
the effect called for by the plain language of the contract. Aultman Hosp. Assn. v.
Community Mut. Ins. Co., 46 Ohio St.3d 51, 53, 544 N.E.2d 920 (1989). Review of
an unambiguous written agreement is a matter of law for the court, which an
appellate court reviews de novo. Savoy Hosp., L.L.C. v. 5839 Monore St. Assocs.,
L.L.C., 6th Dist. No. L-14-1144, 2015-Ohio-4879, ¶ 30.
{¶23} If the language of the contract is ambiguous, the intent of the parties
becomes a question of fact. Id. at ¶ 31, citing Beverly v. Parilla, 165 Ohio App.3d
802, 808, 2006-Ohio-1286, 848 N.E.2d 881, ¶ 26 (7th Dist.). Appellate courts will not
reverse a factual finding of the trial court as long as it is supported by some
competent, credible evidence. C.E. Morris Co. v. Foley Constr. Co., 54 Ohio St.2d
279, 376 N.E.2d 578 (1978), syllabus.
{¶24} A contract is considered ambiguous if the language is “unclear,
indefinite, and reasonably subject to dual interpretations or is of such doubtful
meaning that reasonable minds could disagree as to its meaning.” Beverly at ¶ 24. If
an ambiguity exists, courts are permitted to consider extrinsic evidence to determine
the parties’ intent. Wells Fargo Bank, N.A. v. TIC Acropolis, L.L.C., 2d Dist. No.
2015-CA-32, 2016-Ohio-142, ¶ 47. Extrinsic evidence includes the circumstances
surrounding the parties at the time the contract was made and the objectives they
intended to accomplish by entering the contract. Oryann, Ltd. v. SL & MB, L.L.C.,
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11th Dist. No. 2014-L-119, 2015-Ohio-5461, ¶ 26. This includes consideration of the
parties' negotiations. Id., citing Pharmacia Hepar, Inc. v. Franklin, 111 Ohio App.3d
468, 475, 676 N.E.2d 587 (12th Dist.1996). If the parties’ intent cannot be
determined from consideration of extrinsic evidence, then the contract must be
construed against the drafter. Cocca Dev. Ltd. v. Mahoning Cty. Bd. of Commrs., 7th
Dist. No. 12 MA 155, 2013-Ohio-4133, ¶ 10; Michael A. Gerard, Inc. v. Haffke, 8th
Dist. No. 98488, 2013-Ohio-168, ¶ 14.
{¶25} With those principles in mind, we turn our attention to the language of
the Assignment and the probate court’s decision.
{¶26} The Assignment is titled, “Assignment of Oil & Gas Lease.” It provides,
in pertinent part, “Assignor [executor of the trusts] * * * hereby assign and transfer
unto MELVIN E. CADLE and INA M. CADLE, * * * Assignor’s interest in certain Oil &
Gas Lease for the ‘Sudimak #2 and #3 Well’ located upon real property situated in
the Township of Jackson, County of Mahoning and State of Ohio.” (Emphasis in
original.) 10/28/08 Assignment.
{¶27} The probate court found this Assignment only assigned royalty rights
and right to free gas for the residence associated with the Sudimak No. 2 and
Sudimak No. 3 wells. 7/29/15 J.E.
{¶28} Appellants disagree with the probate court’s decision. They assert the
reference to Sudimak No. 2 and No. 3 wells was not for purposes of any limitation,
but rather was to identify which oil and gas lease was connected to the assignment.
According to Appellants, the language employed does not clearly limit the
assignment to only royalty interests in Sudimak No. 2 and Sudimak No. 3 wells. They
provided this court with an example of a clear assignment that would have only
assigned royalty interests in the Sudimak No. 2 and Sudimak No. 3 wells.
Consequently, Appellants contend the language of the Assignment is ambiguous and
the Assignment must be construed against the drafter, i.e. Appellees.
{¶29} Appellees assert the trial court’s finding is correct. D’Amico only
intended to convey royalty rights and not the full mineral rights. They contend her
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testimony supports such position and there is no countervailing testimony from
Appellants.
{¶30} The reason the parties are now disputing the language of the
Assignment is a deep well was drilled on the 90 acres under the Kutsko Lease, and
each party wants to collect the royalties from the deep well. Thus, simply put, the
issue in this case is whether the Assignment is limited to the royalties from the
Sudimak No. 2 and No. 3 wells, or are Appellants entitled to the royalties from any
drilling on the 90 acres under the Kutsko Lease.
{¶31} The language of the assignment does not identify the lease it is
referencing by the date it was signed, by attaching the lease, or by referring to it as
the Kutsko Lease. Rather, Appellants are correct that the Assignment identifies the
lease by referencing the Sudimak No. 2 and Sudimak No. 3 wells. Thus, the
language “interest in certain Oil & Gas Lease for the ’Sudimak #2 and #3 Well’” is an
identifying phrase. However, an identifying phrase may also be a limitation.
{¶32} The probate court did not expressly render a holding as to whether the
Assignment was unambiguous or ambiguous. However, the trial court considered
extrinsic evidence, which indicates it found the language was ambiguous and
susceptible to more than one interpretation.
{¶33} Appellants assert that since the trial court found the Assignment was
ambiguous, the Assignment must be construed against the drafter, Appellees, and
accordingly they would be entitled to judgment in their favor. We disagree with such
a proposition. Construing a contract against the drafter is a secondary rule of
contract construction, and is applicable when the primary rules of contract
construction, i.e. plain language of the document and extrinsic evidence, in that
order, fail to clarify the meaning of the contract. Carow v. Girton, 4th Dist. No.
13CA13, 2014-Ohio-570, ¶ 15; Michael A. Gerard, Inc., 2013-Ohio-168, ¶ 14, citing
Malcuit v. Equity Oil & Gas Funds, Inc., 81 Ohio App.3d 236, 240, 610 N.E.2d 1044(9th Dist.1992); In re Estate of Taris, 10th Dist. No. 04AP-1264, 2005-Ohio-1516, ¶
33 (“However, when parol evidence cannot elucidate the parties' intent, a court must
apply the secondary rule of contract construction whereby the ambiguous language is
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strictly construed against the drafter.”); Moyer v. Brown, 11th Dist. No. 2001-T-0126,
2002-Ohio-4517, ¶ 22 (same); S. Towne Centre, Inc. v. Burlington Coat Factory
Warehouse of Dayton, Inc., 2d Dist. No. 14953, 1995 WL 628024, (Oct. 25, 1995);
Cline v. Rose, 96 Ohio App.3d 611, 615 (3d Dist.1994) (same). Accordingly, the trial
court acted properly when it considered extrinsic evidence.
{¶34} In reviewing the extrinsic evidence, we agree with the probate court’s
conclusion that the extrinsic evidence demonstrates it was the parties’ intent to only
assign the royalty rights and right to free gas for the residence associated with the
Sudimak No. 2 and Sudimak No. 3 wells. D’Amico testified that consideration for the
Assignment was predicated on royalties received from the Sudimak No. 2 and
Sudimak No. 3 wells over the 18-month period prior to the execution of the
Assignment. 5/28/15 Tr. 83-84. She indicated she did not initially know how to set
the price, so she researched it. 5/28/15 Tr. 83. Her research indicated it was an 18-
month moving average. 5/28/15 Tr. 83. The probate court indicated both D’Amico
and Cadle acknowledged this was how the price for the Assignment was determined.
7/29/15 J.E.
{¶35} Had the assignment been intended to include additional interests
subject to the Kutsko Lease, the price would have been higher. Appellees owned the
mineral rights to 90 acres subject to the Kutsko Lease; 20 acres were south of Blott
Road and 70 acres were north of Blott Road. Sudimak No. 2 and No. 3 were located
on the 70 acres of land north of Blott Road. At the time of the Assignment, it does
not appear there were any wells, deep or shallow, located on the 20 acres south of
Blott Road. Considering there were another 20 acres of mineral rights owned by
Appellees south of Blott Road subject to the Kutsko Lease, a higher price would have
been computed if Appellees were assigning the mineral interest to the entire 90 acre
tract, rather than just the portion where the Sudimak No. 2 and No. 3 wells were
located. In other words, the price for the mineral interests Appellees owned would
not have been computed solely from the royalties associated with the Sudimak No. 2
and No. 3 wells for the past 18 months if the assignment was intended to cover
royalties for the entire 90 acres.
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{¶36} Furthermore, in all of the transactions the trust entered into, it always
maintained the mineral rights. When the trust sold land, it severed the mineral rights
from the surface rights and only sold the surface rights. 5/28/15 Tr. 54-55, 76-77.
D’Amico testified her uncle told her to retain the mineral interests because you never
knew what they were worth. 5/28/15 Tr. 98. She also indicated when one surface
right purchaser of the property north of Blott Road asked about purchasing the
mineral interests, she told them it would cost them $50,000 more. 5/29/15 Tr. 75-76.
The purchaser was unwilling or unable to pay that much so only the surface interest
was sold. 5/28/15 Tr. 76.
{¶37} The above indicates the executor/trust has always intended to retain
the mineral interest and royalty interest. If the trust was willing to sell the royalty
interest of its entire mineral interest estate, then it would have asked a more
competitive price; not a price based just on an 18 month average for two wells.
{¶38} However, it is acknowledged that following the Assignment, D’Amico
closed the estate and filed a final accounting in mid-January 2008. 5/28/15 Tr. 63.
The final accounting does not list the mineral interest as an asset of the estate.
D’Amico Depo. at 22. She explained the mineral interest was not listed because it
was never listed on any other document, “outside of being part of the property.”
D’Amico Depo. at 23. She was asked, for the time period after the estate was closed
up until now, why she did not file an account with the probate court regarding the
mineral interest. She explained:
Because I did not feel that the mineral rights were part of the, no longer
part of the trust because of the closure of the Trust. There were no
more – there was no more income coming into the Trust; so therefore,
the Trust could be closed.
But the mineral rights were at that point dormant, and they would be
addressed when needed to be addressed.
D’Amico Depo. at 22-23.
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{¶39} Potentially one could argue the closing of the estate may indicate the
trust had assigned its right to the royalties. However, the argument is weak when
considering the evidence above supporting a finding the mineral interests were
retained by the trust. Thus, the mineral interest is still an asset of the estate. The
closure of the estate does not negate that finding. Furthermore, Appellants admit if
drilling stopped and the Kutsko Lease lapsed, the trust could enter into a lease with
another company and receive royalties. By their admission, Appellants’ right to
royalties is solely maintained upon the continual operation of the Kutsko Lease. The
closing of the estate does not support Appellants’ position that the Assignment
transferred all royalty interest under the Kutsko Lease, not just royalty interests to
Sudimak No. 2 and No. 3 wells.
{¶40} Considering all the above, there is competent credible evidence to
support the probate court’s decision that the Assignment only assigned royalty rights
and right to free gas for the residence associated with Sudimak No. 2 and Sudimak
No. 3 wells. The sole assignment of error lacks merit. The probate court’s decision
is affirmed.
Donofrio, P.J., concurs.
Waite, J., concurs.