Marketable Title Act and Dormant Minerals Act Afford Separate Paths to Extinguish Mineral Rights

A recent decision by Ohio’s Fifth District Court of Appeals upheld a Trial Court decision, finding that the Marketable Title Act (“MTA”) was applicable to severed oil and gas rights and that the Appellants’ interests had been extinguished by operation of law based upon the MTA.  See Cain v. Horn, 2020-Ohio-3171.

The dispute in Cain arose from disputed ownership of oil and gas rights related to approximately 110 acres of real property.   On December 27, 1926, Clara Burrett and Claude Burrett transferred their interest in fifty (50) acres of the property at issue to Viola Romans via a Warranty Deed (the “Warranty Deed”), which was recorded on February 24, 1927.   The Warranty Deed specifically reserved a one-half interest in the Burretts in all of the oil and gas underlying the fifty acre tract (“Burrett Reservation”).

Appellees obtained ownership of the property by virtue of two survivorship warranty deeds, recorded in 2002 and 2003.  Appellees initially filed an action to quiet title under the DMA and were unsuccessful upon the Appellants’ filing of a Claim to Preserve Mineral Interests pursuant to R.C. 5301.56.   Subsequently, Appellees filed a new action against Appellants seeking to quiet title to the oil and gas rights under the MTA.

The Trial Court found in favor of the Appellees and ruled that the Burrett Reservation was automatically extinguished by the MTA because that interest was not reflected in an instrument after the root of title under the MTA.  The Fifth District upheld the Trial Court’s decision and further held that the MTA and DMA are separate and distinct statutes, and that a determination under one is not dispositive of the other.

Cain provides a useful reminder of two of the separate and distinct ways in which mineral interests can be extinguished and the differences between them.

Click here to learn how Sikora Law can help Title Insurance Companies streamline their legal needs.

Failure to Strictly Comply with Cognovit Note Language Renders Provision Useless

Ohio’s Eighth District Court of Appeals recently mandated strict compliance with cognovit judgment language in order to enforce a cognovit note.  In 2017, L&M Estates, L.L.C. (“L&M”) executed a Cognovit Note in favor of Ace Property Group of Ohio, L.L.C. (“Ace Property”).  The Note stemmed from a commercial loan that L&M received from Ace Property (the “Note”).  As part of the commercial loan transaction, a principal of L&M, Lisa Cochran (“Cochran”), executed a personal guaranty (the “Guaranty”). After the borrower failed to timely make required payments on the Note, Ace Property obtained cognovit judgments against L&M under the Note and against Cochran under the Guaranty.  Cochran appealed on the basis that the Guaranty did not contain the required language under Ohio law to obtain a cognovit judgment.

On appeal, the Eighth District Court of Appeals overturned the trial court’s decision.  The Court of Appeals held that cognovit provisions must strictly comply with Ohio law in order to be enforceable.

The Ace Property case is a helpful reminder to commercial real estate professionals to make sure cognovits provisions strictly comply with the requirements of Ohio law if enforcing it is important to you.

Click here to learn how Sikora Law can help CRE Developers & Owners streamline their legal needs.

Appellate Victory in Title Coverage and Closing Protection Coverage Case

Sikora Law obtained its 31st appellate victory (now on 24 different real estate subjects) in an Opinion affirming a Jury Trial verdict in favor of a major title insurance underwriter.  Johnson v. U.S. Title Agency, Inc., 2020-Ohio-4056.   Plaintiff asserted claims for breach of contract and bad faith stemming from mechanic’s liens that were recorded after the issuance of an Owner’s Policy of Title Insurance and also asserted a claim for breach of the Closing Protection Letter.   After a nine-day Jury Trial, the jury specifically found that the underwriter had not breached the terms of the Policy or Closing Protection Letter, and entered a defense verdict on all claims.

In a 44-page Opinion, the 8th District Court of Appeals unanimously affirmed, specifically rejecting each of the Plaintiff’s assignments of error, and affirming that, based on the evidence presented at Trial, the mechanic’s liens at issue were not covered matters under the Owner’s Policy because those liens arose after the Owner’s Policy was issued.  Plaintiff’s transactional counsel claimed to have given vague, oral closing instructions to the closing agent, which testimony Plaintiff then used to argue that Plaintiff should be considered a third-party beneficiary of the lender’s closing instructions.   That important subject became the main issue at Trial, and Plaintiff was defeated on that point – both at Trial and on Appeal.

To review the Johnson v. U.S. Title Opinion, click here.

Click here to learn how Sikora Law can help Title Insurance Companies streamline their legal needs.

Court Orders Eviction Despite Arguments Raised by Tenant

Commercial lease disputes continue to rise.  Meanwhile, the Eighth District Court of Appeals recently held that a landlord may evict a tenant for nonpayment of rent, even when a tenant has made a claim against the landlord for failure to make repairs and where the tenant unilaterally deposited its rent with the court.  In Di Fiore v. Booker, the tenant challenged the Trial Court’s judgment for restitution that was granted to a landlord in a forcible entry and detainer action.

The dispute in the Di Fiore case started in early 2018, when the tenant filed an action against the landlord over financial responsibility for certain repairs to the premises and water and sewer bills (“2018 Case”). After the Trial Court issued the preliminary injunction, the landlord served a three-day notice for failure to pay rent on January 4, 2019, based upon rent that was due on January 1, 2019.   The tenant began to tender its monthly rent payments to the Trial Court on March 1, 2019.

The landlord then filed an eviction action (“2019 Case”), at which point the Trial Court denied the tenant’s request for injunctive relief, consolidated the 2018 Case with the 2019 Case, and ordered that the consolidated case move forward.  Ultimately, the Trial Court ordered eviction of the tenant due to nonpayment of rent and rejected the retaliation argument asserted by the tenant on the basis that a retaliation claim cannot prevail when the tenant is in default of its rental obligations.  The Court of Appeals concluded that the lease provided for monthly rent payments to the landlord, there was no court order that allowed the tenant to tender its rent payments to the Trial Court, and therefore the tenant could not avoid eviction.

As more and more tenant default and lease disputes occur as a result of the Covid-19 pandemic and associated economic distress, Di Fiore is a reminder that lease obligations must generally be strictly complied with, unless there is a court order to the contrary, and that a retaliatory eviction claim should not succeed when the tenant is default due to non-payment of rent.

Click here to learn how Sikora Law can help CRE Developers & Owners streamline their legal needs.

Disputes Between Landlords and Tenants Heating Up

As the COVID-19 pandemic continues to take its toll on the economy, especially the retail, restaurant, and hospitality sectors, more and more tenants have stopped paying rent, forcing landlords to take more aggressive action to obtain payment.  Contention between landlords and tenants in the retail sector has really intensified.  In one day alone, the entity that owns Easton Town Center in Columbus filed a dozen separate lawsuits against tenants, nearly all of which are well-recognized name brand national retailers.  The following day, Abercrombie & Fitch Stores, Inc. filed suit in Franklin County Common Pleas Court against all of its Simon Group landlord entities, 69 Simon Group landlord defendants in total, asserting that Abercrombie paid April and May rent “under protest,” and asking the Court to order that those rent payments be refunded.

As the economy struggles to reopen in its entirety, certain sectors will continue to suffer financially, increasing the stress on the commercial real estate system, and leading to more disputes.  Our commercial real estate developer and owner Clients are selectively having us play a greater role, generally with helping them obtain payment in their most severe situations, although the threshold for severity seems to be lower and interest that landlords have in taking action now is greater than it has been over the past several months.

Click here to learn how Sikora Law can help CRE Developers & Owners streamline their legal needs.