Siltstone Resources, L.L.C. v. Ohio Pub. Works Comm. (Slip Opinion)

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Siltstone Resources, L.L.C. v. Ohio Pub. Works Comm., Slip Opinion No. 2022-Ohio-483.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO. 2022-OHIO-483SILTSTONE RESOURCES , L.L.C., ET AL., APPELLANTS, v. OHIO PUBLIC
WORKS COMMISSION, APPELLEE, ET AL.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Siltstone Resources, L.L.C. v. Ohio Pub. Works Comm., Slip
Opinion No. 2022-Ohio-483.]
Property law—Conveyance of oil and gas interests—Ohio Public Works
Commission and Clean Ohio conservation fund, R.C. 164.20 et seq.—Deed
restrictions on use and transfer—Remedies available at law and in equity—
Court of appeals’ judgment affirmed.
(No. 2020-0031—Submitted January 26, 2021—Decided February 23, 2022.)
APPEAL from the Court of Appeals for Belmont County,
No. 18 BE 0042, 2019-Ohio-4916.
__________________
BRUNNER, J., announcing the judgment of the court.
{¶ 1} Appellants, Siltstone Resources, L.L.C. (“Siltstone”), American
Energy-Utica Minerals, L.L.C. (“Utica”), and Eagle Creek Farm Properties, Inc.
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(“Eagle Creek”), appeal a decision of the Seventh District Court of Appeals. 2019-
Ohio-4916, 137 N.E.3d 144, ¶ 46, 54, 73 (7th Dist.). The court of appeals reversed
a decision of the Belmont County Court of Common Pleas and held that amicus
curiae Guernsey County Community Development Corporation (“CDC”) had
violated land-transfer restrictions that were included in a deed under the terms of
CDC’s grant agreement with appellee, Ohio Public Works Commission
(“OPWC”). Id.; see Belmont C.P. No. 17 CV 128, 2018 WL 11188473 (July 20,
2018). The appellate court also found that OPWC was entitled to seek remedies in
equity to conserve the land at issue. 2019-Ohio-4916 at ¶ 70-73.
{¶ 2} This court accepted jurisdiction and heard the parties’ arguments on
appeal along with supporting arguments of amici curiae, CDC, Gulfport Energy
Corporation (“Gulfport”), Axebridge Energy, L.L.C., and Whispering Pines, L.L.C.
Because we find that the restriction on transferability in the deed is valid, being
reasonable and serving a charitable or public purpose, CDC’s transfer of mineral
interests to appellants as successors in interest was a violation of the deed
restrictions. Accordingly, the state is entitled to relief as contemplated in the
agreement between OPWC and CDC and we affirm the judgment of the Seventh
District Court of Appeals.
I. Facts and Procedural History
{¶ 3} In 2000, Ohio voters approved a constitutional amendment giving
local communities a means to conserve and revitalize natural areas, open spaces,
and lands devoted to agriculture. See Ohio Constitution, Article VIII, Section 2o.
This new provision of the state constitution created a tax-exempt bond fund for
making grants to political subdivisions and nonprofit organizations to revitalize and
preserve natural spaces. Ohio voters adopted the following constitutional language
describing the types of purposes the new bond fund would support:
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(1) Conservation purposes, meaning conservation and
preservation of natural areas, open spaces, and farmlands and other
lands devoted to agriculture, including by acquiring land or interests
therein; provision of state and local park and recreation facilities,
and other actions that permit and enhance the availability, public
use, and enjoyment of natural areas and open spaces in Ohio; and
land, forest, water, and other natural resource management projects;
(2) Revitalization purposes, meaning providing for and
enabling the environmentally safe and productive development and
use or reuse of publicly and privately owned lands, including those
within urban areas, by the remediation or clean up, or planning and
assessment for remediation or clean up, of contamination, or
addressing, by clearance, land acquisition or assembly,
infrastructure, or otherwise, that or other property conditions or
circumstances that may be deleterious to the public health and safety
and the environment and water and other natural resources, or that
preclude or inhibit environmentally sound or economic use or reuse
of the property.
Ohio Constitution, Article VIII, Section 2o(A).
{¶ 4} Following voter approval of the constitutional amendment, the Ohio
General Assembly adopted legislation to implement it, creating the Clean Ohio
Conservation Fund, administered by OPWC. See R.C. 164.27(A). According to
the legislation, OPWC’s director is authorized to establish policies that encourage
the “long-term ownership, or long-term control” of properties that are the subject
of projects approved for funding through the Clean Ohio Conservation Fund. R.C.
164.26(A).
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{¶ 5} In 2005, CDC, a nonprofit organization, applied for a Clean Ohio
Conservation Fund grant. As part of its Leatherwood Creek Riparian Project grant
application, CDC proposed to purchase a 228.485-acre property in Belmont
County. CDC proposed to use the property to create a “green corridor” connecting
several natural areas along Leatherwood Creek in Belmont and Guernsey counties.
{¶ 6} OPWC approved the project and in April 2006, the parties executed a
17-page grant agreement. The grant agreement described the project purpose, how
CDC was to purchase the property, and the terms and conditions of funding through
OPWC, including perpetual deed restrictions that were to be included in the
recorded deed to the property. In 2007, CDC purchased the property and the deed
was recorded in Belmont County.
{¶ 7} CDC’s deed for the property included two essential restrictions. The
first is a restriction on the use and development of the property, the “use
restriction.”
1. Use and Development Restrictions. Declarant [CDC]
hereby agrees, for itself and its successors and assigns as owners of
the Property, which Property shall be subject to the following: This
property will not be developed in any manner that conflicts with
the use of the Premises as a green space park area that protects
the historical significance of this particular parcel. Only current
structures will be maintained and no new structures will be built
on the Premises.
(Boldface and underlining sic.)
{¶ 8} The second is a restriction requiring continued ownership and control,
the “transfer restriction.”
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4. Restriction on transfer of the Property. Grantee
acknowledges that the Grant is specific to Grantee and that OPWC’s
approval of Grantee’s application for the Grant was made in reliance
on Grantee’s continued ownership and control of the Property.
Accordingly, Grantee shall not voluntarily or involuntarily sell,
assign, transfer, lease, exchange, convey or otherwise encumber the
Property without the prior written consent of OPWC, which consent
may be withheld in its sole and absolute discretion.
(Underlining sic.)
{¶ 9} Following the acquisition of the property by CDC, there were a
number of assignments and transfers of the subsurface mineral rights involving
different entities. In 2011, CDC entered into an oil and gas lease of the property
with Patriot Land Company, L.L.C. (“Patriot”) that provided CDC with a 14
percent royalty interest in the resulting production revenues. In 2012, Patriot
assigned its lease to Gulfport, and in 2013, CDC sold 186.9189 acres of the
subsurface mineral rights in the property to Siltstone for $3,884,180. Siltstone was
thereafter entitled to collect the 14 percent royalty interest previously paid to CDC
under the Patriot/Gulfport lease, the royalty interest having transferred to Siltstone
as a result of its mineral-rights purchase from CDC.
{¶ 10} Even though it acquired the property with Clean Ohio grant funds
and subject to the grant agreement, CDC did not inform or request permission from
OPWC when it made its various transfers of the property’s subsurface mineral
rights. CDC held the opinion that a change in the use or ownership of the property’s
subsurface mineral rights did not affect the use of the property as a green space and
therefore did not have an impact on or violate the deed restrictions that attached to
the property as a result of CDC’s grant agreement with OPWC. CDC also held the
opinion that the property’s subsurface mineral rights were severable from the
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property’s surface rights and that CDC also was free to transfer or lease those rights
without violating the transfer restrictions in the property’s deed.
{¶ 11} The parties do not contest that in 2015, assignee Gulfport suspended
its mineral royalty payments apparently after concerns were raised that CDC may
have been restricted by the deed from transferring the subsurface mineral rights.
Thereafter, Siltstone filed suit in the Belmont County Court of Common Pleas for
declaratory judgment and breach-of-contract claims against CDC and sought to
quiet title to its ownership of the mineral rights in the subsurface of the property.
Siltstone’s original complaint named as defendants OPWC, CDC, and assignee
Gulfport. OPWC counter- and cross-claimed, seeking an injunction against the
subsurface mining activities and nullification of the subsurface leases and transfers
as violating the deed restrictions required by the terms of the grant agreement
between CDC and OPWC. Siltstone moved to dismiss OPWC’s counter- and cross-
claims. The trial court sustained that motion in part and thereby denied OPWC its
requested injunction. The trial court concluded that “R.C. 164.26(A) bars OPWC
from seeking injunctive or other non-monetary relief in this case.” Belmont C.P.
No. 17 CV 128, 2017 WL 11557569, *1 (Dec. 18, 2017).
{¶ 12} Later, dispositive motions were filed in the trial court, after
additional oil and gas companies and interest-holders had been joined as parties to
the litigation. OPWC moved for partial summary judgment, asking the court to
declare as a matter of law that the use and transfer restrictions contained in the deed
applied to both the surface and the subsurface of the property, integrated as one.
Additional motions for summary judgment were filed by other parties. The trial
court heard oral arguments on the dispositive motions and issued a decision denying
OPWC summary judgment on the legal issues relating to use and transfer and
declaring valid the leases and transfers of the mineral rights of the property.
{¶ 13} OPWC appealed the trial court’s judgment that the deed restrictions
did not apply to the subsurface of the property and the earlier holding of the trial
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court denying OPWC’s prayer for an injunction. The Seventh District reversed; it
reasoned that the use restriction applies to disturbances of only the surface of the
property but that the transfer restriction applies to both the surface and subsurface
rights of the property. 2019-Ohio-4916, 137 N.E.3d 144, at ¶ 46, 54. The Seventh
District held that CDC violated the transfer restrictions, and it further held that
OPWC had the authority to seek equitable remedies. Id. at ¶ 54, 71.
{¶ 14} We affirm.
II. Analysis
A. Enforceability of the Use Restriction
{¶ 15} Appellants, amicus curiae CDC, and other amici have abandoned the
argument that the enforceability of deed restrictions on use is dependent on whether
the use is of the property’s surface or subsurface. Appellants argued to the court of
appeals that the surface of the property has not been disturbed or affected by wells
that were accessed laterally, with no surface structures having been built on the
surface of the property, and with no water or soil displacement or contamination
having occurred on the surface of the property. Appellants argued to the court of
appeals that this supports the factual finding by the trial court that no violation of
the use restriction had occurred as a result of the subsurface activity. The appellate
court agreed. Id. at ¶ 46. Accordingly, no party to this appeal seeks reversal of that
holding. However, because this court reviews legal issues de novo, we are not
constrained to accept the appellate court’s legal analysis of whether CDC and other
interest holders violated the deed’s use restriction. Nationwide Mut. Fire Ins. Co.
v. Guman Bros. Farm, 73 Ohio St.3d 107, 108, 652 N.E.2d 684 (1995) (“Unlike
determinations of fact which are given great deference, questions of law are
reviewed by a court de novo”).
{¶ 16} The appellate court held that the terms “property” and “premises” in
the property’s deed have the same meaning and that the deed conveyed both the
surface and subsurface of the property. 2019-Ohio-4916, 137 N.E.3d 144, at ¶ 37.
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The appellate court limited the terms “property” and “premises” to apply to only
the surface when used in conjunction with the term “green space park area.” Id. at
¶ 37, 43. The appellate court held that the language in the deed, “This property will
not be developed in any manner that conflicts with the use of the Premises as a
green space park area,” applied only to the surface of the land and not to the
subsurface, id. at ¶ 41, while apparently taking notice that subsurface mining
generally includes some surface activities, see id. at ¶ 44. Because the trial court
dismissed OPWC’s action short of a trial after denying OPWC summary judgment
on legal issues, this fact was not actually established nor subject to judicial notice.
{¶ 17} Facts subject to judicial notice are “not subject to reasonable
dispute” and are “capable of accurate and ready determination by resort to sources
whose accuracy cannot reasonably be questioned.” Evid.R. 201(B); Wiseman v.
Cambria Prods. Co., 61 Ohio App.3d 294, 300, 572 N.E.2d 759 (4th Dist.1989).
There is not enough evidence in the record to support the appellate court taking
judicial notice that subsurface mining generally includes some surface activities. It
cannot be discerned from the record stipulations made before the trial court what
the subsurface use entailed or how it affected the property’s surface and green-
space use.
{¶ 18} In fact, our recent caselaw eliminates the need for taking judicial
notice such as the appellate court did:
In describing the property interest created by an oil and gas
lease, we have acknowledged that the lease affects the possession
and custody of both the mineral and surface estates. [Chesapeake
Exploration, L.L.C. v. Buell, 144 Ohio St.3d 490, 2015-Ohio-4551,
45 N.E.3d 185,] ¶ 60. During the term of the lease, “the lessor
effectively relinquishes his or her ownership interest in the oil and
gas underlying the property in favor of the lessee’s exclusive right
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to those resources.” Id. at ¶ 62. The lessee also enjoys reasonable
use of the surface estate to accomplish the purposes of the lease. Id.
at ¶ 60.
Browne v. Artex Oil Co., 158 Ohio St.3d 398, 2019-Ohio-4809, 144 N.E.3d 378,
¶ 23.
{¶ 19} The appellate court in this case found that it was conceivable that
subsurface activities might affect the property’s intended use as a green space. One
day after the court of appeals’ decision was issued, this court decided Browne, in
which we acknowledged that an oil and gas lease affects both the mineral and
surface estates. Id. Further, the appellate court’s holding that the use restriction in
the property’s deed did not apply to the subsurface of the property, in the absence
of trial-court factual findings about the impact that leasing the mineral rights had
on green-space use, was not an application of law based on facts.
{¶ 20} Browne negates a bifurcated analysis of the property’s use separating
surface from subsurface and thereby necessitates an integrated analysis of the use
of the deeded land. For the purpose of determining whether the use of the property
as a green-space park area, as CDC and OPWC intended and agreed, was violated
by the lease of the subsurface mineral rights, the trial and appellate courts should
have examined whether any use of the property other than as a green space park
area would be acceptable under the terms of the deed restriction.
{¶ 21} To be clear, in the absence of trial-court findings about the impact
that the subsequent leases, assignments, and purchases of subsurface mineral rights
had on the use of the property as a green space, this opinion declines to adopt any
generalized finding that a use restriction such as this one applies or does not apply
to subsurface activities. This opinion also declines to find that legal analyses of use
and transfer restrictions must always be done separately.
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B. Enforceability of the Transfer Restriction
{¶ 22} In general, deed restrictions or agreements that impose restrictions
on real property may impede a property’s transferability. See First Fed. S. & L.
Assn. of Toledo v. Perry’s Landing, Inc., 11 Ohio App.3d 135, 141-42, 463 N.E.2d
636 (6th Dist.1983) (analyzing a clause in a mortgage agreement). We also
recognize that some use restrictions may by their nature limit marketability and
inherently affect future transfers. Were this court to require or establish separate
analyses for use and transfer restrictions, we may in some situations create
distinctions without a difference and in others, impose conflicting results when
applied to both in the same or related transactions. Again, when analyzing the
appellate decision in this case, the question to be decided is simply whether a
transfer or agreement effecting or affecting a transfer of interest in the property
conflicts with the property’s agreed use and operation as a green-space park area.
See Ohio Const. Article VIII, Section 2o; R.C. 164.22. And while the caselaw
contains threads specific to the nuances of differing types of restrictions, we find
that the property-law principles over time are sufficiently woven to create a sturdy
fabric that at this time needs no additional support, repair, or bolstering from new
theories or tests molded from the facts of this particular situation.
{¶ 23} Appellants argue that for a restriction on transfer to be enforceable
as to any part of the property, or even at all, the legislature must create and authorize
“such restraint on alienation in a statute by express terms or unmistakable
implication.” Appellants seek legal clarity on this issue, urging that transfer
restrictions and essentially all deed restrictions on transferability are inherently void
as against public policy, unless they are specifically legislated. Restraints on the
use and transferability of real property are subject to significant scrutiny as they
may violate public policy encouraging the free use, enjoyment, and transfer of real
property. Yet, this court has time and again recognized and respected the
fundamental rights of parties to contract freely with the expectation that the terms
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of their agreement will be enforced. See Wildcat Drilling, L.L.C. v. Discovery Oil
& Gas, L.L.C., 164 Ohio St.3d 480, 2020-Ohio-6821, 173 N.E.3d 1156, ¶ 16.
{¶ 24} In balancing these important and sometimes competing public-
policy interests, legal jurisprudence has generally threaded the needle toward
keeping the agreement of the parties stitched together when deed restrictions are
unambiguous and reasonable and has required that both the terms of a restrictive
covenant and the intent of the parties in rendering the covenant as clearly expressed
in its restrictive language be upheld. See Cleveland Baptist Assn. v. Scovil, 107
Ohio St. 67, 72, 140 N.E. 647 (1923); DeRosa v. Parker, 197 Ohio App.3d 332,
2011-Ohio-6024, 967 N.E.2d 767, ¶ 9-10, 12 (7th Dist.); Head v. Evans, 1st Dist.
Hamilton No. C-790831, 1981 WL 9628, *3 (Feb. 11, 1981).
{¶ 25} Courts have often also evaluated the purpose and the duration of a
restriction with a view toward its reasonableness and whether it violates public
policy, finding that indefinite and absolute restraints on transferability are void
when there is no linkage between the purpose of the restraint and an indefinite
duration. See Raisch v. Schuster, 47 Ohio App.2d 98, 101, 352 N.E.2d 657 (1st
Dist.1975). In probate law, a testator’s devise of real property that contains
restrictions on its future sale has been held void. See Anderson v. Cary, 36 Ohio
St. 506 (1881). Cases cited by appellants and amici attempt to limit dead-hand
control of property and are distinguishable from cases in which the restrictions are
for some designated purpose or by agreement, including when the testamentary
transfer of real property is charitable in nature. See, e.g., Bragdon v. Carter, 4th
Dist. Scioto No. 17CA3791, 2017-Ohio-8257, ¶ 2, 11-12, 14 (adhering to Anderson
and finding that a restriction on sale of property so “ ‘that [the testator’s] children
and their heirs shall always have a place to live’ ” was void). But see First Fed. S.
& L., 11 Ohio App.3d at 141-142, 463 N.E.2d 636 (noting the tension between
freedom of alienation and freedom of contract but holding that no restraint on
alienation existed); Ohio Soc. for Crippled Children & Adults, Inc. v. McElroy, 175
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Ohio St. 49, 52-53, 191 N.E.2d 543 (1963) (upholding testator’s devise of his
property to a charitable organization for a charitable purpose with the condition that
said property was “ ‘not to be sold or leased’ ” by the charitable organization).
{¶ 26} We hold that these principles governing restraints on real property,
and any exceptions to those principles, are workable, valid, and enforceable here.
CDC contracted with OPWC for quasi-public funding to acquire the property for
the Leatherwood Creek Riparian Project. CDC accepted the grant and executed the
deed as it had agreed with OPWC in the grant agreement with full knowledge of
OPWC’s terms and restrictions. There is no ambiguity in the documents about
either the terms of the restrictions or the parties’ intent in agreeing to them.
Moreover, the grant documents, including the application and project description,
all public records, provide further explanation of the purpose of and need for the
agreed restrictions. It is clear that OPWC and CDC contracted for clearly stated
restraints on real-property use and transfer, which are reasonable in light of the
project purpose. See Raisch at 101.
{¶ 27} And while the duration of the deed restrictions is indefinite, the
restraints are not absolute. The indefinite duration recognizes the public purpose
of land conservation and preservation. Yet, the transfer clause is not so restrictive;
transfers can occur with OPWC permission. The “Perpetual Restrictions” clause
in the deed implies that modifications of the project are possible with the consent
of OPWC:
2. Perpetual Restrictions. The restrictions set forth in this
deed shall be perpetual and shall run with the land for the benefit of,
and shall be enforceable by, Ohio Public Works Commission
(OPWC). This deed and the covenants and restrictions set forth
herein shall not be amended, released, extinguished or otherwise
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modified without the prior written consent of OPWC, which consent
may be withheld in its sole and absolute discretion.
(Underlining sic.)
{¶ 28} Thus, by the terms of the deed, CDC may seek permission from
OPWC to transfer or lease the green-space property, and CDC could presumably
request to modify the project in the event of a conflict with the use of the property
as a green-space area.
{¶ 29} Moreover, because this particular transfer of property involves the
transfer of land for a charitable or public purpose, the conventional rules against
restraints are subject to exceptions. This court has held that there are distinct
exceptions to the rule against restraints on alienation in cases of charitable or public
purposes. See Ohio Soc. for Crippled Children & Adults, 175 Ohio St. at 52-54,
191 N.E.2d 543. In Ohio Soc. for Crippled Children & Adults, we reaffirmed that
“ ‘charities form an exceptional class in reference to the rule against restraints of
alienation,’ ” because “ ‘a normal characteristic of property devoted to charitable
purposes [is] that it is inalienable.’ ” Id. at 53, quoting Dickenson v. Anna, 310 Ill.
222, 230-231, 141 N.E. 754 (1923). And generally, transfer of property for
conservation purposes requires or involves perpetuity. See 26 U.S.C. 170(h)
(requiring that a “conservation purpose [be] protected in perpetuity” in order to
qualify as a “qualified conservation contribution” of land under the Internal
Revenue Code); see also R.C. 5301.85 and 5301.89(A) (specifying that an
environmental covenant runs with the land and is perpetual unless subject to an
exception).
{¶ 30} Thus, in applying caselaw that has addressed a variety of situations
over time, we find that it is appropriate to recognize the state’s interest in
encouraging charitable giving and in instilling confidence in charitable grantors that
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their purpose for giving will be observed and preserved with integrity over time.
Gearhart v. Richardson, 109 Ohio St. 418, 431-432, 434-435, 142 N.E. 890 (1924).
{¶ 31} Appellants argue that R.C. 164.26, which authorizes OPWC to
administer the Clean Ohio grant program, does not specifically or impliedly confer
the authority to restrict alienability of property. Appellants meld a variety of cases
involving zoning ordinances, statutes of a penal nature, and other state-sanctioned
restrictions on use or transfer of land to support their theory. Appellants also cite
the holding in Hamilton v. Link-Hellmuth, Inc., that “any such statutory restriction
[on alienation] must be specifically stated and not implied.” 104 Ohio App. 1, 8,
146 N.E.2d 615 (2d Dist.1957). The Second District noted in that case that if the
statute in question were found to be ambiguous (which it was not), they would have
been obligated to construe any doubt in favor of alienability. Id.{¶ 32} Neither Hamilton nor any of the other cases cited by appellants apply
here. R.C. 164.26 is not a zoning ordinance or a statute of penal nature; it does not
create or impede any rights with respect to property owners. R.C. 164.26 is an
authorizing statute that instructs OPWC to create policies consistent with
administering the grant program envisioned by voters when they adopted the
program by amending the state’s constitution. The restrictions in the deed before
us are the mechanism to ensure that the Leatherwood Creek Riparian Project
reaches fruition and fulfills its purpose. Nothing was unilaterally imposed upon
CDC, and if CDC did not wish to abide by the terms of the grant and thereby the
deed restrictions for the property purchased with grant funding, it could have sought
funding for this project elsewhere.
{¶ 33} Amici Gulfport, Axebridge Energy, and Whispering Pines urge us
to find that the deed restrictions violate public policy in so far as they impede oil
and gas development, citing this court’s opinion in Newbury Twp. Bd. of Trustees
v. Lomak Petroleum, 62 Ohio St.3d 387, 583 N.E.2d 302 (1992). In Newbury, we
recognized that it is the public policy of Ohio to encourage oil and gas production
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in a manner consistent with the health, safety, and welfare of the citizens of Ohio.
Id. at 389. We applied that public policy in the context of reviewing a local zoning
ordinance regulating oil and gas exploration, holding the ordinance to be preempted
by former R.C. 1509.39. Id. at 389-392. The issue of preemption is not before us,
and as we noted, the authorizing statute in question, R.C. 164.26, is not a zoning
ordinance and does not create or impede any particular rights in property owners.
{¶ 34} There is, therefore, no need to establish a new test to determine the
enforceability of the deed restrictions on transfer in cases such as this. We cannot
say, as the dissent would seem to have it, that the law requires that all restraints on
alienation are invalid. The general rule may favor alienability, but no rule, statute,
or other authority supports a complete ban on transfer restrictions. 61 American
Jurisprudence 2d, Perpetuities and Restraints on Alienation, Sections 90-91 (2021).
The transfer restriction in this case is sufficiently supported by the public-policy
purpose authorized by the Ohio Constitution in Article VIII, Section 3, and
moreover, was contracted for by the parties for that specific public purpose.
{¶ 35} It has been said, especially regarding questions involving
environmental law, that judges
can bring integrity and certainty to the process of environmental
protection, and help to ensure environmental responsibility and
accountability within the government and the private sector. * * *
***
*** The voice of the judge should represent reason,
impartiality, and understanding of all the interests at stake. A
judge’s serious response to a given case helps to shape and reinforce
a society’s view of the seriousness of the problem represented by
that case.
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Christopher G. Weeramantry, Judicial Handbook on Environmental Law,
Introduction XXI (United Nations Environment Programme) (June 30, 2004),
available at www.elaw.org/content/unep-judicial-handbook-environmental-law
(accessed Dec. 1, 2021) [https://perma.cc/NB6N-YJGT]. Because the transfer
restriction here applied to the entire property and is enforceable as a valid restraint
on alienability, we hold that CDC violated the restriction when it leased and
transferred the mineral rights.
C. Remedies
{¶ 36} Long-term ownership and control of property acquired with grant
funds is a central objective of the Clean Ohio program, as established by the
language of R.C. 164.26:
(A) The director of the Ohio public works commission shall
establish policies related to the need for long-term ownership, or
long-term control through a lease or the purchase of an easement, of
real property that is the subject of an application for a grant under
sections 164.20 to 164.27 of the Revised Code and establish
requirements for documentation to be submitted by grant applicants
that is necessary for the proper administration of this division.
{¶ 37} The transfer restriction written into the CDC deed is consistent with
R.C. 164.26.
4. Restriction on transfer of the Property. Grantee acknowledges
that the Grant is specific to Grantee and that OPWC’s approval of Grantee’s
application for the Grant was made in reliance on Grantee’s continued
ownership and control of the Property. Accordingly, Grantee shall not
voluntarily or involuntarily sell, assign, transfer, lease, exchange, convey or
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otherwise encumber the Property without the prior written consent of
OPWC, which consent may be withheld in its sole and absolute discretion.
(Underlining sic.)
{¶ 38} Moreover, the very definitions of the words used in the constitutional
amendment, “conservation” and “preservation”—which are synonyms—express
endeavors that imply restraint. “Conservation” is defined as “planned management
of a natural resource to prevent exploitation, destruction, or neglect.” Merriam-
Webster’s Collegiate Dictionary 265 (11th Ed.2020). “Preservation” is the noun
form of the word “preserve,” which means “to keep safe from injury, harm, or
destruction.” Id. at 982.
{¶ 39} Moreover, in construing constitutional text ratified by direct vote,
we must “ ‘ascertain and give effect to’ ” the intent of the voters. Centerville v.
Knab, 162 Ohio St.3d 623, 2020-Ohio-5219, 166 N.E.3d 1167, ¶ 22, quoting State
ex rel. Sylvania Home Tel. Co. v. Richards, 94 Ohio St. 287, 294, 114 N.E. 263(1916). In doing so, we may look to the purpose of the amendment and the history
of its adoption “in determining the meaning of the language used.” Id. The
language of R.C. 164.26 is inextricably connected to the constitutional text that was
ratified by direct vote, and we must therefore “consider how the [enabling]
language would have been understood by the voters who adopted the amendment.”
Centerville at ¶ 22, citing Castleberry v. Evatt, 147 Ohio St. 30, 33, 67 N.E.2d 861(1946).
{¶ 40} It is unlikely that voters approved the constitutional amendment
creating the program intending that a grant recipient could stray from the project
purpose of conservation or preservation, develop or use the acquired property in a
manner inconsistent with the project purpose, or simply relinquish control of the
project property. If that were the case, the Clean Ohio fund would be reduced to
nothing more than a financing program not tied to conservation or preservation at
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all—and not what the people of Ohio intended when they voted for it. In situations
in which the language of a constitutional amendment is unclear or doubtful in
meaning, the court may “review the history of the amendment and the
circumstances surrounding its adoption, the reason and necessity of the amendment,
the goal the amendment seeks to achieve, and the remedy it seeks to provide.”
Centerville at ¶ 22. Here, while there does not appear to be a question of ambiguity,
we discern that the voters of Ohio by their ratified constitutional amendment
created a tool for local communities to acquire and set aside lands for the specific
purpose of conservation.
{¶ 41} While we do not categorically say that Clean Ohio Conservation
Fund properties are inherently incompatible with mineral extraction, we recognize
that OPWC is tasked with ensuring that lands acquired with Clean Ohio funds are
preserved and revitalized—that they are protected from injury, harm, or
destruction. See R.C. 164.22; Merriam-Webster’s at 982. When CDC began using
and developing the property acquired for the Leatherwood Creek Riparian Project
in a manner that OPWC perceived as inconsistent with the project and contrary to
long-term ownership and control, OPWC sought to protect the land as a green
space. OPWC asked the trial court for injunctive relief. It sought to halt mining
activities by unanticipated third parties, to void CDC’s transactions with the oil and
gas companies, to restore full ownership of the property to CDC, and to require
CDC to comply with the terms of the agreement.
{¶ 42} We do not interpret the state constitutional provision underpinning
R.C. 164.26 as limiting OPWC to liquidated damages, as the trial court found and
as argued by appellants. Instead, a plain reading of the statute shows that R.C.
164.26(A) requires OPWC to maintain program policies that “provide for proper
liquidated damages and grant repayment for entities that fail to comply with the
long-term ownership or control requirements established under this division.”
(Emphasis added.) Appellants argue that some sort of monetary relief is the only
18
January Term, 2022
remedy given to OPWC in seeking relief and that an injunction is therefore not an
available remedy. OPWC counters that nothing in R.C. 164.26 limits its remedies
exclusively to liquidated damages and that to do so would run counter to the
purpose of the Clean Ohio Fund program, essentially allowing disingenuous
recipients to “buy their way out” of long-term stewardship.
{¶ 43} We agree. Written into the deed restrictions is an “Enforcement”
clause:
3. Enforcement. If Grantee, or its successors or assigns as
owner of the Property, should fail to observe the covenants and
restrictions set forth herein, the Grantee or its successors or assigns,
as the case may be, shall pay to OPWC upon demand, as liquidated
damages, an amount equal to the greater of (a) two hundred percent
(200%) of the amount of the Grant received by Grantee, together
with interest accruing at the rate of six percent (6%) per annum from
the date of Grantee’s receipt of the Grant, or (b) two hundred percent
(200%) of the fair market value of the Property as of the date or
demand by OPWC. Grantee acknowledges that such sum is not
intended as, and shall not be deemed, a penalty, but is intended to
compensate for damages suffered in the event a breach or violation
of the covenants and restrictions set forth herein, the determination
of which is not readily ascertainable.
OPWC shall have the right to enforce by any proceedings at
law or in equity, all restrictions, conditions and covenants set forth
herein. Failure by OPWC to proceed with such enforcement shall in
no event be deemed a waiver of the right to enforce at a later date
the original violation or a subsequent violation.
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(Underlining sic.) This clause provides that when a grantee fails to observe the
restrictions in the deed, the grantee shall be obligated to pay liquidated damages.
Specifically, liquidated damages are set at the greater of 200 percent of the amount
of the grant plus interest or 200 percent of the fair market value of the property.1
Yet, the enforcement clause also specifically provides that OPWC may enforce the
deed restrictions “by any proceedings at law or in equity.”
{¶ 44} Also, nothing in R.C. 164.26 prohibits OPWC from seeking
equitable relief against a grantee alleged to have violated the grant agreement. Even
though the General Assembly legislated that OPWC policies must include grant
repayment and liquidated damages as a condition of breach, that requirement does
not foreclose other remedies. Specifically, R.C. 164.26 refers to these damage
requirements in cases in which grantees “fail to comply with the long-term
ownership or control requirements” that are required in that section. But damages
are not the only remedy available to OPWC under the Clean Ohio program under
both the agreement between OPWC and CDC and in a public-policy analysis on
the alienability of land.
{¶ 45} Long-term ownership and control is a predominant objective in the
Clean Ohio program. The objectives of operating the program are based in
conservation and preservation, entailing more than simply holding property and
allowing others with no privity with the granting entity to use it on behalf of
Ohioans. R.C. 164.22 specifically authorizes OPWC (and district natural-
resources-assistance councils) to acquire open spaces and protect watersheds,
including specifically through the “acquisition of easements.” R.C. 164.22(A) and
(B). In doing this, OPWC’s director has the specific authority to
1. Siltstone and American Energy-Utica Minerals acknowledge that 200 percent of the fair market
value of the property would likely be the applicable number here, since Siltstone paid $3,707,162.54
for approximately 6/7ths of the mineral rights to the property in 2013 and that number far exceeds
200 percent of the $430,200 grant amount.
20
January Term, 2022
(4) [a]dopt rules establishing the procedures for making
applications, reviewing, approving, and rejecting projects for which
assistance is authorized under [R.C. Chapter 164], and any other
rules needed to implement the provisions of [R.C. Chapter 164].
***
***
[and] (9) [d]o all other acts, enter into contracts, and execute
all instruments necessary or appropriate to carry out [R.C. Chapter
164].
R.C. 164.05(A).
{¶ 46} There is no indication that the General Assembly, in giving OPWC
the foregoing authority—to acquire easements, enter into contracts, execute
instruments, adopt necessary rules, and “[d]o all other acts”—intended for OPWC’s
exclusive remedy on behalf of Ohioans to be liquidated damages and grant
repayment in all situations. The General Assembly apparently deemed these
specific remedies important, but there is no express or implied language leading to
the inference that the General Assembly intended to prohibit OPWC, as the agency
responsible for executing the will of the voters, from availing itself on behalf of the
people of longstanding, common-law remedies associated with contracts,
easements, and executed instruments. See Salem Iron Co. v. Hyland, 74 Ohio St.
160, 77 N.E. 751 (1906) (discussing the purpose of courts of equity); Brown v.
Huber, 80 Ohio St. 183, 88 N.E. 322 (1909) (granting enforcement of deed
restrictions through injunctive relief); Ciski v. Wentworth, 122 Ohio St. 487, 172
N.E. 276 (1930) (affirming injunctive relief to protect an implied easement);
Sternberg v. Kent State Univ. Bd. of Trustees, 37 Ohio St.2d 115, 308 N.E.2d 457(1974) (noting that specific performance of contracts is an equitable remedy).
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{¶ 47} We hold that the language and authority in R.C. 164.26 is clear and
does not forbid OPWC from seeking remedies at law and in equity, as is provided
for in the agreement between CDC and OPWC. Despite the efforts exerted by
appellants in arguing the intent of the General Assembly and the extent of OPWC’s
authority, we find the statutory scheme implementing Article III, Section 2o of the
Ohio Constitution to be unambiguous. “ ‘An unambiguous statute is to be applied,
not interpreted.’ ” State ex rel. Brown v. Dayton Malleable, Inc., 1 Ohio St.3d 151,
155, 438 N.E.2d 120, (1982), quoting Sears v. Weimer, 143 Ohio St. 312, 55 N.E.2d
413 (1944), paragraph five of the syllabus. Thus, there is no need to interpret what
is clear in the statute.
III. Conclusion
{¶ 48} For the reasons set forth above in Parts I, II.B., and II.C., the
judgment of the court of appeals is affirmed.
Judgment affirmed.
O’CONNOR, C.J., and STEWART, J., concur.
DONNELLY, J., concurs, with an opinion.
DEWINE, J., dissents, with an opinion joined by KENNEDY and FISCHER, JJ.
_________________
DONNELLY, J., concurring.
{¶ 49} I concur in the majority’s judgment, and I join the lead opinion as to
its holdings that (1) the Guernsey County Community Development Corporation
(“CDC”) violated enforceable land-transfer restrictions that were included in a deed
and thus violated the terms of CDC’s grant agreement with appellee, Ohio Public
Works Commission (“OPWC”) and (2) OPWC was entitled to seek remedies at law
and in equity to conserve the land for its intended purpose. I do not join Part II.A.
of the lead opinion regarding the enforceability of the deed restrictions on the use
of the property’s surface or subsurface, because that issue was not raised by the
parties and is not necessary to the decision in this case.
22
January Term, 2022
_________________
DEWINE, J., dissenting.
{¶ 50} We need only answer a single question to resolve this appeal: is the
Transfer Restriction contained in The Guernsey County Community Development
Corporation’s deed an invalid restraint on alienation? Under our established
precedent, the answer is plainly yes. And under the so-called modern
reasonableness test applied by other courts, the answer is also yes. Because the
validity of the Transfer Restriction is the only matter in front of us, that should end
this case.
{¶ 51} The lead opinion, though, goes off the rails. It first decides to take
up a question that is not in front of us: whether there has been a violation of a
separate deed restriction limiting the use of the land to green space. It finds a
violation of this Use Restriction, despite the un-appealed court of appeals’ decision
to the contrary. Then, disregarding centuries of caselaw, the lead opinion decides
that use restrictions and transfer restrictions should be judged under the same legal
standards. Finally, it applies caselaw applicable to use restrictions to the Transfer
Restriction, and largely through this misapplication of precedent, declares the
Transfer Restriction valid.
{¶ 52} I would stick to established legal principles and decide the appeal
that is in front of us. Because the Transfer Restriction is an unreasonable restraint
on alienation, it is invalid. As a consequence, I would reinstate the judgment of the
trial court.
I. The issue before us: is the Transfer Restriction enforceable?
{¶ 53} In 2006 the Development Corporation purchased approximately 200
acres of land (“the property”) using grant money from the Ohio Public Works
Commission. As part of the deal, the Development Corporation agreed to include
two different types of restrictions in the deed.
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{¶ 54} The deed’s Use Restriction prohibits development of the property
“in any manner that conflicts with the use of the Premises as a green space park
area that protects the historical significance of [the property].” The Transfer
Restriction provides that the Development Corporation “shall not voluntarily or
involuntarily sell, assign, transfer, lease, exchange, convey or otherwise encumber
the property without the prior written consent of the Commission, which consent
may be withheld in its sole and absolute discretion.” The provision recites that the
grant of Clean Ohio funds is specific to the Development Corporation and was
made in reliance on the Development Corporation’s continued ownership of the
property.
{¶ 55} In addition, the deed contains an enforcement provision that
authorizes liquidated damages of double the grant amount for violation of the deed
provisions. The enforcement provision further states that the Public Works
Commission has the right to enforce the restrictions “by any proceedings at law or
in equity.”
{¶ 56} The Development Corporation subsequently transferred and leased
its underground mineral rights to several parties without receiving the Public Works
Commission’s prior written consent. Some of these parties transferred or leased
these subsurface rights to other parties. This state of affairs ultimately led to the
instant litigation. One of the parties that received subsurface rights from the
Development Corporation sought a declaratory judgment that there was no
violation of the Use and Transfer Restrictions. The Public Works Commission filed
a counterclaim, seeking a declaration that there was a violation of both restrictions.
The Public Works Commission asked the court to declare all the transfers of the
subsurface rights invalid and grant both injunctive relief and liquidated damages.
{¶ 57} The trial court found no basis to declare the transfers invalid.
“Because green space is not underground” and because the Public Works
Commission had not contended that there had been mining activities that disturbed
24
January Term, 2022
the surface, the trial court found that the Use Restriction had not been violated. The
court determined that the Transfer Restriction constituted an unreasonable restraint
on alienation and was therefore unenforceable. As a result, the court entered a final
judgment that quieted title in favor of the parties with an interest in the subsurface
mineral rights.2
{¶ 58} The court of appeals affirmed the trial court’s judgment as to the Use
Restriction, but it reversed as to the Transfer Restriction. It found that the Transfer
Restriction was enforceable, that the Development Corporation had violated the
Transfer Restriction by conveying the subsurface mineral rights, and that both
equitable relief and damages were authorized by the deed. 2019-Ohio-4916, 137
N.E.3d 144 (7th Dist.), ¶ 46; see id. at ¶ 53-54, 71. The court of appeals remanded
to the trial court “to determine the proper equitable relief and/or the amount of
liquidated damages.” Id. at ¶ 73.
{¶ 59} The subsurface-interest holders appealed to this court, contending
that the court of appeals had erred in finding the Transfer Restriction enforceable
and allowing for an award of equitable relief. The Public Works Commission did
not file a cross-appeal, and thus has not challenged the judgments of the trial court
and the court of appeals that there has been no violation of the Use Restriction.
II. The Transfer Restriction is invalid
{¶ 60} The threshold question in this case is whether the Transfer
Restriction is enforceable. And despite the impression one might get from the lead
opinion, that question is easily answered. Under our existing caselaw, the Transfer
Restriction is invalid because it is an absolute restraint on alienation of a fee-simple
2. Siltstone Resources, L.L.C., initiated the action and through cross-claims and counter-claims, a
variety of other parties claiming an interest in the subsurface mineral rights were brought into the
litigation. There are three appellants before us, Siltstone Resources, Eagle Creek Farm Properties,
Inc., and American Energy-Utica Minerals, L.L.C.
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estate. And even if we apply the so-called modern approach, the Transfer
Restriction is invalid because it is unreasonable.
A. Ohio has long followed the common-law rule prohibiting absolute
restraints on alienation
{¶ 61} The Transfer Restriction prevents any transfer of the property
without the consent of the Public Works Commission. The restriction is absolute.
It is unlimited in time and scope. And it applies to and all future transferees. As a
first-year law student could tell you, such restrictions have historically been
considered invalid. See Dukeminier & Krier, Property, 379 (1981) (“An absolute
* * * restraint upon a legal fee simple is almost always held void”).
{¶ 62} The prohibition on restraints on alienation dates back to the days of
King Edward I and the issuance of the statute Quia Emptores in 1290, stripping
feudal lords of the power to block alienations by their tenants. Id. at 358, 378. At
common law, absolute restraints on alienation of fee-simple lands were strictly
prohibited as “ ‘repugnant to the fee.’ ” Joseph William Singer, The Rule of Reason
in Property Law, 46 U.C.Davis L.Rev. 1369, 1410 (2013), quoting Northwest Real
Estate Co. v. Serio, 156 Md. 229, 144 A. 245, 246 (1929). Because the power of
alienation is an essential characteristic of an estate in fee simple, any attempt to
restrain that power was considered void. Such restraints were considered
economically destabilizing, preventing land from flowing freely in commerce and
being put to its highest and best use. See Dukeminier & Krier at 192.
{¶ 63} Ohio, like most states, has long followed the common-law rule. See
Hobbs v. Smith, 15 Ohio St. 419, 425-427 (1864); Anderson v. Cary, 36 Ohio St.
506 (1881), paragraph three of the syllabus. As we explained over a century ago,
“it is of the very essence of an estate in fee simple absolute, that the owner * * *
may alien[ate] it * * * at any and all times.” Anderson at 515. Thus, “any attempt
to evade or eliminate this element from a fee simple estate, either by deed or by
will, must be declared void and of no force.” Id.26
January Term, 2022
{¶ 64} Not only has this rule long been around, it has also been consistently
followed by Ohio courts. E.g., Bragdon v. Carter, 4th Dist. Scioto No. 17CA3791,
2017-Ohio-8257, ¶ 11, quoting Margolis v. Pagano, 39 Ohio Misc.2d 1, 3, 528
N.E.2d 1331 (C.P.1986) (“ ‘The case law of Ohio holds that any attempt by a
testator to restrain alienation on a grant of fee simple must be declared void’ ”);
Foureman v. Foureman, 79 Ohio App. 351, 354, 70 N.E.2d 780 (2d Dist.1946);
Durbin v. Durbin, 106 Ohio App. 155, 159, 153 N.E.2d 706 (3d Dist.1957);
Murdock v. Lord, 14 Ohio N.P.(N.S.) 156, 31 Ohio Dec. 593, 602 (C.P.1913);
Neidler v. Donaldson, 9 Ohio Misc. 208, 212-213, 224 N.E.2d 404 (P.C.1967). As
one Ohio treatise puts it, “[s]ince an estate in fee simple implies the entire property
in realty, the power of alienation is necessarily and inseparably incidental to it, and
an unlimited, conditional restraint of alienation attached to such an estate is void.”
41 Ohio Jurisprudence 3d, Estates, Powers, and Restraints on Alienation, Section
216 (2021). Ohio’s rule is consistent with the traditional rule of other states. E.g.,
Serio, 156 Md. at 233-234, 144 A. 245.
{¶ 65} “ ‘[T]he rules against restraints on alienation are designed to prevent
at least five social “evils”: (a) obstruction of commerce and productivity; (b)
concentration of wealth; (c) survival of the least fit; (d) abuse of creditors; and (e)
dead hand control.’ ” Neidler at 212, quoting Herbert A. Bernhard, The Minority
Doctrine Concerning Direct Restraints on Alienation, 57 Mich.L.Rev. 1173, 1180
(1959).
{¶ 66} The rule is not without exceptions. In Ohio Soc. for Crippled
Children & Adults, Inc. v. McElroy, 175 Ohio St. 49, 52, 191 N.E.2d 543 (1963),
we acknowledged the general rule that “where land is devised upon condition that
the devisee shall not sell it, such a restraint is void as repugnant to the devise and
contrary to public policy.” But we also recognized that in certain situations a
grantor might restrict the alienation of property placed in a charitable trust. We
premised our decision on the public interest “in encouraging the creation and the
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SUPREME COURT OF OHIO
continuation of trusts for charitable or public purposes,” as well as “the power of a
court of equity to authorize a prohibited sale where necessary * * *, thereby
preventing the trust property from being completely inalienable.” Id. at 52-53.
{¶ 67} The Public Works Commission argues that we should make a similar
exception here. But this case does not involve a charitable trust and none of the
special rules allowing a court to authorize a sale in contravention of the deed’s
terms apply. Thus, under the long-followed rules of this state, the Transfer
Restriction is void.
B. Under the modern reasonableness approach, the Transfer Restriction is
invalid
{¶ 68} Outside of the charitable trust context, this court has never before
given effect to an absolute restraint on alienation of a fee simple. The traditional
rule followed in Ohio and most jurisdictions was that restraints on alienation of fee-
simple interests were presumptively void, whereas restraints on life estates and
leaseholds were presumptively valid. Singer, 46 U.C.Davis L.Rev. at 1410; Meier
& Ryan, Aggregate Alienability, 60 Vill.L.Rev. 1013, 1015 (2015). Other states,
however, have moved away from blanket prohibitions on alienation restrictions and
adopted a general reasonableness test. See, e.g., Gale v. York Ctr. Community
Coop., Inc., 21 Ill.2d 86, 92-93, 171 N.E.2d 30 (1960).
{¶ 69} This reasonableness approach reflects an attempt to reconcile the
traditional interests in favor of alienability of property with notions of freedom of
contract. The approach is adopted by all three Restatements of Property. Most
recently, the Third Restatement of Property has set forth a balancing test that
weighs “the utility of the restraint against the injurious consequences of enforcing
the restraint.” 1 Restatement of the Law 3d, Property, Servitudes, Section 3.4
(2000). If the injurious consequences outweigh the restraint’s utility, then the
restraint is unreasonable and invalid. See id. Under this test, the restraint is
examined “in the light of all the circumstances to determine whether the objective
28
January Term, 2022
sought to be accomplished by the restraint is worth attaining at the cost of
interfering with the freedom of alienation.” 1 Restatement 3d, Section 3.4,
Reporter’s Note.
{¶ 70} Applying this reasonableness test gets us to the same place as Ohio’s
traditional common-law rule. The Transfer Restriction is invalid as unreasonable
because it constitutes a direct and absolute restraint on alienation with little
corresponding benefit.
1. The injurious consequences of the restraint
{¶ 71} Under the reasonableness approach, the injurious consequences of a
restraint are measured based on the form and degree of the restraint and the type of
estate subjected to the restraint. See 10 Powell, Real Property, Section 77.01
(2021); see also 1 Restatement 3d, Section 3.4, Comment c. The harmful effects
that occur as an incident of inalienability “include impediments to the operation of
a free market in land, limiting the prospects for improvement, development, and
redevelopment of land, and limiting the mobility of landowners and would-be
purchasers.” 1 Restatement 3d, Section 3.4, Comment c.
a. The form of the restraint
{¶ 72} Transfer restraints generally come in one of three forms: disabling
restraints, forfeiture restraints, and promissory restraints. 10 Powell, Real
Property, Section 77.01; 4 Restatement of the Law, Property, Section 404 (1944).
These three types of restraints can be distinguished based on the results of their
violation. Meier & Ryan, Aggregate Alienability, 60 Vill.L.Rev. at 1035. A
disabling restraint attempts to prohibit or invalidate transfers by declaring any
transfer to be void. Id. A forfeiture restraint causes property to be forfeited to the
original grantor or a third party if the grantee tries to subsequently transfer the
property in violation of the restraint. Id. With a promissory restraint, a grantee
promises not to transfer his interest and is liable in contract through damages or an
injunction. 10 Powell, Real Property, Section 77.01.
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SUPREME COURT OF OHIO
{¶ 73} At first blush, the Transfer Restriction looks to be a promissory
restraint. See id.; see also Meier & Ryan, Aggregate Alienability, 60 Vill.L.Rev. at
1035. The Development Corporation promises that it will not transfer the property
and subjects itself to liquidated damages for violation of the deed restrictions.
According to the lead opinion, though, the Public Works Commission’s remedies
are not limited to damages but may also include equitable relief, presumably
including voiding the transfer. See lead opinion at ¶ 13. Under that view, the
Transfer Restriction operates like a disabling restraint preventing any transfer of
the property without the Public Works Commission’s consent. See 1 Restatement
of the Law 2d, Property, Donative Transfers, Section 4.3, Comment a (1983). The
only difference is that in the case of a disabling restraint an attempted transfer is
automatically invalid, while in the case of a promissory restraint someone else
decides whether the transfer is to be repudiated. Id.{¶ 74} Disabling restraints are almost always invalid because of their harsh
effect of making a piece of property unmarketable. Meier & Ryan, The Validity of
Restraints on Alienation in an Oil and Gas Lease, 64 Buffalo L.Rev. 305, 342
(2016); see also 4 Restatement 1st, Section 405 (“Disabling restraints, other than
those imposed on equitable interests under a trust, are invalid”). Promissory
restraints are generally subject to the same standards as forfeiture restraints and are
only upheld if found to be reasonable. See 1 Restatement 2d, Sections 4.2 and 4.3.
{¶ 75} In considering the form of the restraint, the law also draws a
distinction between direct and indirect restraints on alienation. A direct restraint is
one that imposes express limitations on the ability to convey property by deed, will,
contract, or other legal document. 1 Restatement 3d, Section 3.4, Comment b. An
indirect restraint is one that does not directly inhibit the transfer of property but that
may affect its value or limit the number of potential transferees. Id. An example
of an indirect restraint is a provision in a deed requiring a transferee to pay a penalty
if he transfers the property to someone else. See id.30
January Term, 2022
{¶ 76} Here the restraint is a direct restraint. The deed flatly prohibits any
transfer without the Public Work’s Commission’s consent. Because direct
restraints “clearly interfere with the process of conveying land and have long been
subjected to common-law controls,” they must satisfy a more stringent test than
indirect restraints. Id. While the justification for an indirect restraint need only be
rational, a direct restraint must satisfy the reasonableness test. Compare id., Section
3.4 with id., Section 3.5.
b. The degree of the restraint
{¶ 77} The law distinguishes between absolute and partial restrictions on
alienation. An absolute restraint on alienation prohibits all transfers, without
qualification. In contrast, a partial restraint will be qualified in some way. A partial
restraint might prohibit alienation for only a certain time period, or to only a certain
group of people, or by limiting the manner of transfer. 10 Powell, Real Property,
Section 77.01. Whether a restraint is absolute or partial matters, because any
increase in the degree of the restraint coincides with a decrease in a property’s
mobility and marketability.
{¶ 78} The Transfer Restriction is absolute because it prohibits all transfers
to anyone for all time. The lead opinion posits that this Transfer Restriction is not
absolute because transfers can occur with the Public Works Commission’s
permission. Lead opinion at ¶ 26. But it is always the case that an original
transferor who has imposed a restraint may relinquish the restraint or decline to
enforce it.
{¶ 79} Indeed, the Third Restatement flatly says that a consent-to-transfer
requirement, like the one in this case, is “an unreasonable restraint on alienation
unless there is strong justification for the prohibition, and, unless the consent can
be withheld only for reasons directly related to the justification for the restraint.” 1
Restatement 3d, Section 3.4, Comment d. The Comment notes that if the language
of a restriction allows consent to be withheld arbitrarily, as is the case with the
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Transfer Restriction, then the restraint can be reasonable “only if the person
withholding consent is obligated to supply a substitute purchaser for the property.”
Id.c. The type of estate involved
{¶ 80} The third consideration is the type of estate involved. To use the
bundle of sticks analogy, generally the greater the portion of the bundle covered by
the restraint, the greater the restraint’s toll on a property and thus the greater the
restraint’s justifying utility must be. See 1 Restatement 3d, Section 3.4, Comment
c (“Permissible restraints on alienation of leaseholds are often greater than on fee-
simple estates, and greater restraints on alienation of easements, profits, and
covenant benefits are often permitted than on leaseholds”).
{¶ 81} Here, the Transfer Restriction applies to the entirety of a fee-simple
estate. Thus, in this regard, the injurious effects of the restriction are at their most
severe.
2. The utility of the restraint
{¶ 82} The Transfer Restriction is an absolute and direct restraint on
alienation of a fee-simple estate. Although it bears many of the attributes of a
promissory restraint, under the lead opinion’s construction it functions like a
disabling restraint by giving the Public Works Commission unfettered discretion to
void any transfer of the property. In this regard, the Transfer Restriction is on the
most severe (or injurious) end of the spectrum of possible restraints on alienation.
{¶ 83} Under the reasonableness approach, the injurious consequences of
the restraint are to be balanced against the utility of the restraint. 1 Restatement 3d,
Section 3.4. There are a few considerations here that weigh on the side of enforcing
the restraint. For one thing, this case involves an arms-length transaction rather
than a donative transfer. See 61 American Jurisprudence 2d, Perpetuities and
Restraints on Alienation, Section 91 (2021). Thus, many of the traditional concerns
about dead-hand control of property do not apply. In addition, more severe
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restraints on alienation are generally considered justified when land is held for
conservation purposes. 1 Restatement 3d, Section 3.4, Comment c.
{¶ 84} The Public Works Commission primarily rests its case on two
considerations relating to the utility of the Transfer Restriction. First, the Transfer
Restriction is said to protect the public interest in maintaining the property as a
green space. Second, the Transfer Restriction protects the public investment made
through the Clean Ohio Conservation Fund by ensuring that the property remains
in the possession of the original grant recipient.
{¶ 85} The problem, though, is that these interests are already protected by
the Use Restriction. The Use Restriction prohibits the development of the land in
any way that conflicts with use of the land as a “green space” nature conservation,
thus fulfilling that purpose. And the public interest behind the Clean Ohio
Conservation Fund grant is best understood as relating to the manner in which the
property is used, not in ensuring that the property is held by any particular recipient.
{¶ 86} Indeed, the Use Restriction seems a far superior means to protect
these interests than the Transfer Restriction. The Transfer Restriction is perpetual.
The financial circumstances of nonprofit entities, like anyone else, are subject to
change over time. One can imagine circumstances under which the Community
Development Corporation might not be able to maintain the property as green space
and the public interest is better served by allowing the property to be transferred to
an entity better able to maintain it. The Transfer Restriction, however, would
preclude such a transfer absent the Public Works Commission’s consent. The Use
Restriction, on the other hand, protects the property’s use as green space regardless
of who owns the property.
{¶ 87} Thus, if we apply the reasonableness test—assessing the utility of
the restraint against the injurious consequences of enforcing the restraint—the
restraint plainly fails. By the traditional measures, the injurious consequences are
severe: the Transfer Restriction directly and absolutely restricts the alienation of a
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fee-simple estate. And the Transfer Restriction offers very little in the way of
utility: most, if not all, of the purported benefit served by the Transfer Restriction
is already accomplished by the Use Restriction.
{¶ 88} Whether we apply our traditional rule prohibiting absolute restraints
on alienation of a fee-simple estate or adopt the modern reasonableness test, the
result is the same: the Transfer Restriction is invalid. I would reverse the court of
appeals’ decision to the contrary.
III. How does the lead opinion get things so wrong?
{¶ 89} The reader might want to stop right here. What has been said in the
previous section is all that is needed to decide this case. But, if one finds the lead
opinion’s analysis tempting (or is curious how it gets things so wrong), then read
on.
{¶ 90} The lead opinion gets to where it gets through a process that goes
like this. Step one, review and reverse the determination by the trial and appellate
courts that there has been no violation of the Use Restriction, even though that issue
has not been appealed and is not in front of us. Step two, decree that use restrictions
and transfer restrictions are functionally equivalent and subject to the same legal
standards. Step three, cherry pick a handful of cases involving things other than
absolute restraints on alienation; then apply the standards from these cases to find
the Transfer Restriction is valid.
{¶ 91} Every step of this analysis is wrong.
A. Contrary to what the lead opinion says, we don’t ordinarily review issues
not in front of us
{¶ 92} The lead opinion begins by acknowledging that “no party to this
appeal seeks reversal” of the “factual finding by the trial court that no violation of
the use restriction had occurred as a result of the subsurface activity.” Lead opinion
at ¶ 15. But then it says that “because this court reviews legal issues de novo, we
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are not constrained to accept the appellate court’s legal analysis” as to whether there
was a violation of the Use Restriction. Id. at ¶ 15.
{¶ 93} Huh? Of course, we review legal issues de novo. But we only
review issues de novo that have been raised by the parties. The standard of review
for legal issues has nothing to do with the long-established rule that we don’t review
issues that are not in front of us. See, e.g., State v. Quarterman, 140 Ohio St.3d
464, 2014-Ohio-4034, 19 N.E.3d 900, ¶ 20; Household Fin. Corp. v. Porterfield,
24 Ohio St.2d 39, 46, 263 N.E.2d 243 (1970); Stolz v. J & B Steel Erectors, 155
Ohio St.3d 567, 2018-Ohio-5088, 122 N.E.3d 1228, ¶ 11; United States v.
Sineneng-Smith, ___ U.S. ___, 140 S.Ct. 1575, 1579, 206 L.Ed.2d 866 (2020).
{¶ 94} We are often reminded that courts “ ‘do not, or should not, sally forth
each day looking for wrongs to right’ ”; instead, they “ ‘normally decide only
questions presented by the parties.’ ” Sineneng-Smith at ___, 140 S.Ct. at 1579,
quoting United States v. Samuels, 808 F. 2d 1298, 1301 (8th Cir.1987) (Arnold, J.,
concurring in denial of reh’g en banc). This is because “justice is far better served
when it has the benefit of briefing, arguing, and lower court consideration before
making a final determination.” Sizemore v. Smith, 6 Ohio St.3d 330, 333, 453
N.E.2d 632 (1983), fn. 2.
{¶ 95} There is no basis to reconsider the decisions by the trial court and
the court of appeals that there was no violation of the Use Restriction. No party
has challenged that finding. And no adversarial briefing has been presented on that
point. By choosing to reach the issue anyway, the lead opinion strays well beyond
its proper role.
B. Use restrictions and transfer restrictions are not the same
{¶ 96} Things get even wackier. The lead opinion announces that it will
not conduct “separate analyses for use and transfer restrictions.” Lead opinion at
¶ 22. It justifies this decision with a formulation that reads more like a parody of
legal reasoning than actual legal analysis: “while the caselaw contains threads
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specific to the nuances of differing types of restrictions, we find that the property-
law principles over time are sufficiently woven to create a sturdy fabric that at this
time needs no additional support, repair, or bolstering from new theories or tests
molded from the facts of this particular situation.” Id. at ¶ 22.
{¶ 97} Threads of nuance and sturdy fabrics aside, legal authorities are
united in the view that use restrictions and transfer restrictions are different. See,
e.g., 1 Ohio Real Property Law and Practice, Section 10.30 (2021) (“Ohio law
distinguishes between restrictions on alienation of property and restrictions on
use”); 1 Restatement 2d, Section 3.4 (“A restraint on the use that may be made of
transferred property by the transferee is not a restraint on alienation, as that term is
used in this Restatement”); 1 Restatement 2d, Reporter’s Note to Section 3.4 (“The
distinction set forth in this section between use restraints and restraints on alienation
is generally recognized”); 4 Restatement, Property, Part II Introductory Note (“a
use restriction is not violated by the making of a later conveyance and hence is not
a ‘restraint on alienation,’ within the definition of that term as given [in Section 404
of the Restatement].”); Helene S. Shapo, George Gleason Bogert & George Taylor
Bogert, The Law of Trusts and Trustees, Section 220 (2021) (“A use restraint * * *
is not considered a restraint against alienation”).
{¶ 98} And certainly, the lead opinion won’t find much—if any—company
among other courts that have considered the matter. See, e.g., “Automatic”
Sprinkler Corp. of America v. Kerr, 11th Dist. Lake No. 11-017, 1986 WL 7307, at
*2 (June 30, 1986) (“a restriction on use * * * is not a restraint on alienation. * * *
Ohio law generally adheres to the Restatement distinction between restraints on
alienation and mere restrictions on the use of land”); Seagate Condominium Assn.,
Inc. v. Duffy, 330 So.2d 484, 486 (Fla.App.1976), fn. 2 (“There is a distinction
between restraints on alienation and restraints on use”); Prieskorn v. Maloof, 128
N.M. 226, 1999-NMCA-132, 991 P.2d 511, ¶ 12, quoting 1 Restatement 2d,
Section 3.4 (“ ‘A restraint on the use that may be made of transferred property by
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January Term, 2022
the transferee is not a restraint on alienation’ ”); Carma Developers (California),
Inc. v. Marathon Dev. California, Inc., 2 Cal.4th 342, 369, 6 Cal.Rptr.2d 467, 826
P.2d 710 (1992) (contrasting direct restraints from indirect restraints, “an example
of [which] is a use restriction”); Spanish Oaks, Inc. v. Hy-Vee, Inc., 265 Neb. 133,
138-141, 655 N.W.2d 390 (2003) (discussing the distinction between indirect
restraints—like use restrictions—and direct restraints); Canova Land & Invest. Co.
v. Lynn, 299 Va. 604, 612, 856 S.E.2d 581 (2021) (relying in part on the fact that
the restraint before the court was “a restraint on use, rather than a restraint on
alienation, and is therefore more likely to be reasonable”); Lamar Advertising v.
Larry & Vickie Nicholls, L.L.C., 2009 WY 96, 213 P.3d 641, ¶ 17 (noting that “the
economic principles that make direct restraints on alienation suspect do not apply
in the context of indirect restraints imposed by servitudes”); Mountain Brow Lodge
No. 82, Indep. Order of Odd Fellows v. Toscano, 257 Cal.App.2d 22, 25, 64
Cal.Rptr. 816 (1967) (noting a “sharp distinction * * * between a restriction on land
use and a restriction on alienation”).
{¶ 99} There are, of course, good reasons that everyone else makes a
distinction between use and transfer restrictions. Unlike a use restriction, which
confines only the scope of the land’s marketable uses, a transfer restriction can take
the land entirely out of the market. For this reason, transfer restrictions are more
disfavored in the law and subject to much more exacting scrutiny than use
restrictions. Compare 1 Restatement 3d, Section 3.4 (transfer restrictions that
directly restrain the alienation of property are invalid unless they satisfy a
reasonableness test) with Section 3.5 (use restrictions that only indirectly restrain
alienation will be upheld as long as they are reasonable).
C. The lead opinion relies upon cases that are plainly inapplicable
{¶ 100} The lead opinion’s first two mistakes—reaching the Use
Restriction though it is not in front of us and conflating use and transfer
restrictions—lead to its next. Instead of assessing the Transfer Restriction under
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the standards applicable to restraints of that type, it looks to caselaw assessing use
restrictions.
{¶ 101} For example, the lead opinion claims that our jurisprudence has
“threaded the needle toward keeping the agreement of the parties stitched together
when deed restrictions are unambiguous and reasonable and has required that both
the terms of a restrictive covenant and the intent of the parties in rendering the
covenant as clearly expressed in its restrictive language be upheld.” Lead opinion
at ¶ 24. Apparently this is an overwrought way of saying that we give effect to
negotiated deed restrictions. But in support, the lead opinion cites three cases, all
of which deal with use restrictions, not transfer restrictions. Id. at ¶ 24, citing
Cleveland Baptist Assn. v. Scovil, 107 Ohio St. 67, 72, 140 N.E. 647 (1923)
(restrictive covenant limiting use of the property to a private residence); DeRosa v.
Parker, 197 Ohio App.3d 332, 2011-Ohio-6024, 967 N.E.2d 767, ¶ 9-10, 12 (7th
Dist.) (restrictive covenant prohibiting house trailers from being stored on
property); Head v. Evans, 1st Dist. Hamilton No. C-790831, 1981 WL 9628, *3
(Feb. 11, 1981) (restrictive covenant providing that only one home could be
constructed on tract). Thus, when it comes to absolute restraints on alienation, there
is no support for the lead opinion’s contention that Ohio courts will enforce such
restraints simply because the parties have agreed to them.
{¶ 102} The lead opinion also claims that “the conventional rules against
restraints” do not apply because this case involves a transfer “for a charitable or
public purpose.” Lead opinion at ¶ 29. To support this statement, the lead opinion
cites a solitary case, Ohio Soc. for Crippled Children & Adults, 175 Ohio St. 49,
191 N.E.2d 543. But that case dealt not with a naked “charitable purpose” but with
a charitable trust. And as explained earlier, the court in that case relied on the safety
valve for alienability in charitable trusts by which an equity court may “authorize a
prohibited sale where necessary for the proper accomplishment of the charitable or
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January Term, 2022
public purposes of the trust, thereby preventing the trust property from being
completely inalienable,” id. at 53.
{¶ 103} The lead opinion also says that the restraint is not absolute because
the Public Works Commission may authorize a transfer. It provides no caselaw
supporting this proposition. And for good reason; as I explained above at Section
II.B.1.b, it is widely understood that a consent-to-transfer provision that does not
provide that the consent cannot be arbitrarily withheld does not save such a restraint
from being classified as an absolute restraint on alienation. See 1 Restatement 3d,
Section 3.4, Comment d.
{¶ 104} The bottom line is that the authority relied upon by the lead opinion
in no way supports the result that it reaches. That should come as no surprise. By
reaching issues not before us, and by conflating use and transfer restrictions, the
lead opinion has gone far afield of the proper inquiry in this case.
IV. We should reverse the decision of the court of appeals and reinstate the
judgment of the trial court
{¶ 105} Whether we apply our precedent or the modern reasonableness
approach to restraints on alienation, the result is the same. The Transfer Restriction
is invalid. It is a direct and absolute restraint on alienability of a fee simple absolute,
something that has long been disfavored in this state and across the country. And
it serves little if any offsetting benefit; the purported interests to be attained by the
Transfer Restriction are achieved through the Use Restriction.
{¶ 106} Because the Transfer Restriction is invalid as an unreasonable
restraint on alienation, there is no need to consider whether injunctive relief would
be appropriate for a violation of the Transfer Restriction. I would reverse the
decision of the court of appeals to the extent that it declares the Transfer Restriction
enforceable and reinstate the decision of the trial court. Because the lead opinion
goes in a completely different direction, I dissent.
KENNEDY and FISCHER, JJ., concur in the foregoing opinion.
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SUPREME COURT OF OHIO
_________________
Critchfield, Critchfield & Johnston, Ltd., and Andrew P. Lycans; and
Manmeet S. Walia, for appellant Siltstone Resources, L.L.C.
Frost Brown Todd, L.L.C., Kevin L. Colosimo, Christopher W. Rogers, and
Daniel P. Craig, for appellant American Energy-Utica Minerals, L.L.C.
Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A., Scott M.
Zurakowski, Matthew W. Onest, and William G. Williams, for appellant Eagle
Creek Farm Properties, Inc.
Dave Yost, Attorney General, Benjamin M. Flowers, Solicitor General,
Samuel C. Peterson, Deputy Solicitor General, and James Patterson and Christie
Limbert, Assistant Attorneys General, for appellee.
Bricker & Eckler, L.L.P., Daniel C. Gibson, and Kara H. Herrnstein; and
Zachary M. Simpson, urging reversal for amicus curiae Gulfport Energy
Corporation.
Hanlon, Estadt, McCormick & Schramm Co., L.P.A., Erik A. Schramm Sr.,
and Kyle W. Bickford, urging reversal for amicus curiae Axebridge Energy, L.L.C.
Pelini, Campbell & Williams, L.L.C., Craig G. Pelini, and Paul B. Ricard,
urging reversal for amicus curiae Whispering Pines, L.L.C.
Isaac, Wiles, Burkholder & Teetor, L.L.C., Maribeth Meluch, and Dale D.
Cook, urging reversal for amicus curiae Guernsey County Community
Development Corporation.
_________________
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