Schepke v. Department of Natural Resources

186 Mich. App. 532 (1990) 464 N.W.2d 713

SCHEPKE
v.
DEPARTMENT OF NATURAL RESOURCES

Docket No. 120204.

Michigan Court of Appeals.

Decided August 21, 1990. Approved for publication November 19, 1990, at 9:04 A.M.

Wenzel, Papp & Yahne (by Karen Jo Wenzel), for plaintiff.

Frank J. Kelley, Attorney General, Gay Secor Hardy, Solicitor General, and Thomas J. Emery and Kevin T. Smith, Assistant Attorneys General, for the defendant.

Before: BRENNAN, P.J., and MacKENZIE and WEAVER, JJ.

PER CURIAM.

The Michigan Department of Natural Resources appeals as of right the August 7, 1989, order of the Presque Isle Circuit Court granting summary disposition in favor of Gerard W. Schepke. The court ruled that Schepke, as a matter of law, was the lawful owner of certain property and that the DNR had no valid interest in or claim to the mineral rights of the property. We reverse and remand.

In 1911, the state sold the property in issue, reserving the mineral rights. In 1915, an "attested correct copy" of the deed was recorded, which did not contain a reservation of the state's mineral rights. In 1931 and 1932, the property was returned to the state for nonpayment of taxes. The state sold the property again in 1933, and no mention was made of mineral rights. In 1968, the DNR recorded a lease of oil and gas rights on the property. Later that year the lessee recorded an assignment of fifty percent of its interest. In 1980, the lease interest was released to the state, and the release was recorded. On June 11, 1987, Schepke obtained title to the property and recorded his interest on June 19, 1987.

On June 9, 1988, Schepke brought this action, seeking a declaration that he was the owner of the property and that the DNR had no valid interest in the property's mineral rights. The DNR moved for summary disposition, alleging that there was no issue of material fact, but that only a question of law existed. The parties filed a stipulation of facts and exhibits, and Schepke moved for summary disposition.

In its opinion, the trial court held that Schepke had constructive notice of the possible rights of a third party (the state) and that Schepke was not protected by the recording act. The court also determined that a merger of the title to the mineral and surface rights had not occurred when the state took possession of the property in 1931 and 1932. The court then ruled that the state was estopped from claiming title to the mineral rights on a theory of equitable estoppel, finding that the state had represented that it held no interest and that Schepke had justifiably relied on this representation to his prejudice.

A motion for summary disposition under MCR 2.116(C)(10) tests the factual sufficiency of a party's claim. The court must give the benefit of any reasonable doubt to the party opposing the motion and grant the motion only if it is impossible for the claim to be supported at trial because of a deficiency which cannot be overcome. Brackens v Detroit Osteopathic Hospital, 174 Mich. App. 290; 435 NW2d 472 (1989), lv den 433 Mich. 857 (1989).

We have before us only the issue of equitable estoppel. Specifically, the question is whether the State of Michigan is estopped from claiming title to mineral rights in plaintiff's property where no reservation of these rights to the state was recorded, but a lease of mineral rights from the state to a third party was recorded.

The trial judge found that the DNR was estopped from claiming title to the mineral rights because the state had represented though the 1915 deed that it held no such interest.

The doctrine of equitable estoppel rests on broad principles of justice. It is applicable both to actions of law and equity. In re Prichard Estate, 169 Mich. App. 140; 425 NW2d 744 (1988), lv den 431 Mich. 908 (1988). Estoppel arises where a party, by representations, admissions, or silence, intentionally or negligently induces another party to believe certain facts. The other party must not only have justifiably relied on this belief, but also must be prejudiced if the first party is permitted to deny the facts upon which the second party relied. Southeastern Oakland Co Incinerator Authority v Dep't of Natural Resources, 176 Mich. App. 434; 440 NW2d 649 (1989).

The DNR argues that Schepke could not have justifiably relied on the 1915 deeds, because research of the tract index would reveal the recorded mineral leases. It claims that the presence of those leases gave notice to Schepke that the state was asserting rights to the subject property.

Notice is whatever is sufficient to direct attention of the purchaser of realty to prior rights or equities of a third party and to enable him to ascertain their nature by inquiry. Notice need only be of the possibility of the rights of another, not positive knowledge of those rights. Notice must be of such facts that would lead any honest man, using ordinary caution, to make further inquiries in the possible rights of another in the property. Kastle v Clemons, 330 Mich. 28; 46 NW2d 450 (1951).

We find that the lease, the lease assignment, and the discharge of the lease, all recorded, constituted sufficient notice to lead a person to make further inquiries regarding the possible rights of the state in the subject property. Thus, Schepke could not have justifiably relied on the absence of a recorded reservation of rights. Southeastern Oakland Co Incinerator Authority, supra.

Since we would have reached a different result had we occupied the trial court's position, we reverse the order below granting Schepke summary disposition. In re Prichard Estate, supra.

We reverse and remand for further proceedings consistent with this opinion.