For estate planning purposes, in 2005 Willard and Ruth Liggett put real estate they owned into a revocable trusts with themselves as trustees. In 2008, the Liggetts signed an oil and gas lease in their personal capacity. In 2012, Plaintiffs Willard and Ruth Liggett, co-trustees under 10/10/05 Liggett Trusts, filed a complaint in Tuscarawas County. The Lessee, Chesapeake Exploration, L.L.C., counterclaimed. The case was removed to federal court in Youngstown, Ohio. See Liggett v. Chesapeake Exploration, L.L.C., 2013 U.S. Dist. LEXIS 147392, United States District Court for the Northern District of Ohio, Eastern Division.
The Liggetts claimed the lease was unenforceable because it was signed by them personally, not as trustees, and asked for summary judgment. Chesapeake asked for a declaratory judgment that the lease is valid and enforceable, and filed counterclaims.
On Oct. 11, 2013, Judge Benita Y. Pearson ruled that the lease is valid and enforceable. Chesapeake’s motion for summary judgment for its claims against the Liggetts remain pending for trial. They are:
- breach of warranty of title;
- unjust enrichment (the Liggetts cashed Chesapeake payment checks);
- constructive trust;
- quiet title; and
- frivolous conduct.
The court observed that the Liggetts, in the lease:
“promised that they (1) had title to the property; (2) would defend that title; and (3) would take any reasonable actions necessary to cure any title defects.
Also, “Mr. and Mrs. Liggett did not disclose that they held the property as trustees, despite warranting title otherwise.”
In finding that the lease was valid, and recounting testimony from Liggett depositions, the court noted that the Liggetts:
“(1) believed they had the right, power and ability to [lease the oil and gas mineral interest], (2) intended to do so, and (3) believed that they had.”
Beyond that, the court held that the Liggetts were necessarily acting as agents for the trusts, an undisclosed principal, and the trusts gave them the authority to lease.
In response to the Liggetts’ argument that there was a mutual mistake regarding ownership of the oil and gas, the court found that the Liggetts had superior knowledge and the lessee relied on the Liggetts’ contractual representations.
Citing Hawley v. Ritley, No. 42273, 1981 Ohio App. LEXIS 10500, 1981 WL 4519, at *4 (Ohio App. 8th Dist. Sept. 3, 1981), the court said:
“Reliance upon facts known to be incomplete by the party representing them to be whole does not convert the legal stance from misrepresentation to mutual mistake of fact or unilateral mistake of a variety warranting rescission.”
The plaintiffs, in addition to having a seemingly weak case, did not help themselves. The court noted as a preliminary matter that the Case Management Plan required Chesapeake, before filing a dispositive motion, to submit a written request to the plaintiffs to be dismissed. The plaintiffs were to either agree to the request or give explicit reasons in writing for refusing to do so. Chesapeake made two such requests and the plaintiffs twice refused without responding.
One could speculate that the plaintiffs thought they could get a better deal from a different lessee. Again, technical issues, bad timing or perceived unfairness are not going to win lease challenge cases. There is a maxim in the common law — “the law abhors a forfeiture.”