Opinion
2022-L-082
07-31-2023
STONE COLLECTOR, INC., Plaintiff-Appellant, v. NORTHEAST OHIO NATURAL GAS CORP., Defendant-Appellee.
Joseph E. Altomare, (For Plaintiff-Appellant). John P. Archer and Alexander M. Welsh, Kohrman Jackson & Krantz LLP, One Cleveland Center, (For Defendant-Appellee).
Civil Appeal from the Court of Common Pleas Trial Court No. 2020 CV 000798
Judgment: Affirmed
Joseph E. Altomare, (For Plaintiff-Appellant).
John P. Archer and Alexander M. Welsh, Kohrman Jackson & Krantz LLP, One Cleveland Center, (For Defendant-Appellee).
OPINION
MATT LYNCH, J.
{¶1} Plaintiff-appellant, Stone Collector, Inc., appeals from the judgment of the Lake County Court of Common Pleas, granting summary judgment in favor of defendant-appellee, Northeast Ohio Natural Gas Corp. (NEO). For the following reasons, we affirm the judgment of the lower court.
{¶2} On June 25, 2020, Stone Collector filed a Complaint against NEO, amended on July 22, 2020. The Amended Complaint alleged that NEO utilized and maintained pipelines for the transport of natural gas on property owned by Stone Collector without legal authority to do so. It raised claims for Trespass, Ejectment, and Quiet Title, requesting that NEO be ordered to cease its use of and remove the pipelines and pay damages.
{¶3} NEO filed an Answer and Counterclaim on August 5, 2020. It requested a declaratory judgment declaring that it may continue lawful operation of the pipeline. It asserted that it possessed a valid easement, purchased through receivership proceedings, allowing it to operate the pipeline on Stone Collector's property.
{¶4} Stone Collector filed a motion for partial summary judgment on March 8, 2021, arguing NEO did not have a valid easement. The trial court denied the motion.
{¶5} NEO filed a Motion for Summary Judgment on April 22, 2022, advancing its argument that it was permitted to operate the pipeline since it legally acquired the pipeline and easement necessary for its operation when it purchased such assets from Orwell Trumbull Pipeline Co., LLC, (OTP) through the receivership sale. It contended that there was an implied easement granted by the owner, Richard M. Osborne, to OTP and that Stone Collector was aware of such easement. Stone Collector filed a response in which it argued that NEO's easement was invalid since the owner whose assets had been sold in the receivership, OTP, did not have a valid easement and thus, it could not be reached by the receiver.
{¶6} The following evidence was presented through the summary judgment motions:
{¶7} Jeremy Osborne testified that he owns and is the sole member of Stone Collector, a trucking company. The pipeline at issue in the present matter runs across Stone Collector's property. Jeremy Osborne purchased this property from his brother, Richard Osborne, on November 16, 2018. On May 21, 2020, Jeremy Osborne, by quit claim deed, assigned the property to Stone Collector. Pursuant to his testimony, he had visited the property a couple of times prior to purchasing it and the pipeline was visible on the northern part of the property when he inspected it. He also testified that he believed that markers around the pipeline, which state "Warning Gas Pipeline," were there since the time of his purchase.
{¶8} Records presented regarding the foregoing property demonstrated its history prior to the sale to Jeremy Osborne. 8667 East Avenue LLC sold the property to Jeremy Osborne on November 16, 2018, through a warranty deed, signed by Richard Osborne as its authorized representative. 8667 East Avenue LLC purchased the property by Sheriff's Deed dated December 15, 2014, following proceedings against Nathan Properties LLC by the Lake County Treasurer. Richard Osborne was the managing member of Nathan Properties. Nathan purchased the property from Heisley-Hopkins, Inc., of which Richard Osborne was president, on December 29, 2011. Heisley-Hopkins purchased the Property from McKay Real Estate Corporation by Quit Claim Deed on July 14, 2011. Richard Osborne was the President of McKay. McKay purchased the property from Osair, Inc. by Quit-Claim Deed dated June 25, 2010. Richard Osborne was the President of Osair. Osair purchased the Property from Kenneth Lynch by Quit Claim Deed dated April 18, 2000. At all times between April 2000 and November 2018, the Property was under the ownership of Richard Osborne and the companies for which he was president/managing member. Richard Osborne executed the quit claim deeds in these sales.
The record is somewhat unclear here as NEO indicates that the sheriff's deed involved a sale of property from Wilson Land Properties but the deed indicates the prior owner was Nathan Properties. Wilson Land Properties had purchased the property from Nathan Properties by quit claim deed dated January 16, 2014.
{¶9} In regard to the pipeline at issue, the Orwell Trumbull Pipeline System, which is 137 miles long and provides natural gas to properties across Northeast Ohio, it was constructed by OTP in the mid-2000s and continued to be operated by that company until 2019. Jessica Carothers, Account Manager for OTP, stated that OTP was majority owned by Richard M. Osborne as Trustee of the Richard Osborne Trust. Osborne was the Chairman and CEO of OTP and copies of OTP's operating agreement indicated Richard M. Osborne, Trustee, owned 85.93% of OTP. According to Carothers, OTP operated the Pipeline "through properties owned by Richard M. Osborne, Sr.'s various holding companies * * * with Richard M. Osborne Sr.'s knowledge." She maintained that OTP operated the pipeline until a court appointed receiver took possession of it in connection with a receivership in Richard M. Osborne, et al., v. Park View National Savings Bank in Cuyahoga County Court of Common Pleas Case No. CV 14-822810.
{¶10} Ken Oostman, the president of NEO, which provides natural gas service in Northeast Ohio, testified that in October 2019, NEO "purchased the Pipeline and related property rights from a court-appointed receiver by means of the Sale Order and Asset Purchase Agreement," which include easements used by or belonging to OTP and those relating to operating and distributing natural gas. Oostman indicated that the ability to operate the pipeline is necessary to continuing to provide gas service to customers, carry on NEO's business, and is "essential to NEO's uninterrupted operation of the purchased assets as ordered by the Receivership Court."
{¶11} Pursuant to filings in Cuyahoga County Court of Common Pleas Case No. CV 14-822810, a Notice of Sale of the assets of OTP was filed on March 15, 2019. On September 9, 2019, the court issued an Order Granting Receiver's Motion for Approval of Sale. The court found that Park View Federal Savings Bank held a lien against the assets of OTP, that there had been an Asset Purchase Agreement entered and that the sale was approved. Pursuant to the Asset Purchase Agreement, NEO agreed to purchase, for $3,000,000, OTP's rights and interest in "all pipeline owned by Seller, including without limitation all pipeline locations, farm taps, stations, and valves shown on the attached maps and GPS coordinates, as well as real property and easements used in the 'specified business,' which is 'the high-pressure distribution of natural gas.'" The court's order approving the sale states that it "shall be construed and shall constitute for any and all purposes a full and complete general assignment, conveyance, and transfer" of the "Debtor's interests in the Assets, including any and all necessary easements, licenses, leases, rights of way of other agreements reasonably necessary for the effectuation of the Purchased Assets and uninterrupted operation of the Assets."
{¶12} The trial court issued a Judgment Entry on July 29, 2022, granting NEO's Motion for Summary Judgment. It found that there was no genuine issue of material fact and that "NEO has provided evidence showing that it purchased all rights necessary to operate the pipeline at issue in this case, including all easements via a valid and binding Receivership Sale which is a complete defense to Plaintiff's claims" and NEO "has a valid implied easement that it purchased from the aforementioned receivership and is entitled to continue operating the pipeline through Plaintiff's property without further disruption."
It dismissed the claims raised by Stone Collector and found the ruling "disposes of Defendant's Counterclaim in favor of the defendant."
{¶13} Stone Collector timely appeals and raises the following assignments of error:
{¶14} "[1.] The trial court erred in granting summary judgment in favor of NEO based on the erroneous conclusion that the assets of OTP were reachable by the receiver.
{¶15} "[2.] The trial court erred in granting summary judgment in favor of NEO on the basis that RMO owned the Property during which the pipeline was constructed, thereby creating an implied easement as to which the Property was subject.
{¶16} "[3.] The trial court erred in granting summary judgment in favor of NEO because Stone was bona fide purchaser without constructive or actual knowledge of the easement.
{¶17} "[4.] The trial court erred in relying on the validity of the Receiver's Sale as proof that the OTP assets were part of the Debtor's Estate?"
{¶18} "[5.] The trial court erred in granting summary judgment in favor of NEO to the extent it considered relevant NEO's claim of easement by estoppel."
{¶19} Pursuant to Civil Rule 56(C), summary judgment is proper when (1) the evidence shows "that there is no genuine issue as to any material fact" to be litigated, (2) "the moving party is entitled to judgment as a matter of law," and (3) "it appears from the evidence * * * that reasonable minds can come to but one conclusion and that conclusion is adverse to the party against whom the motion for summary judgment is made, that party being entitled to have the evidence * * * construed most strongly in the party's favor."
{¶20} A trial court's decision to grant summary judgment is reviewed by an appellate court under a de novo standard of review. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). "A de novo review requires the appellate court to conduct an independent review of the evidence before the trial court without deference to the trial court's decision." Peer v. Sayers, 11 th Dist. Trumbull No. 2011 -T-0014, 2011 -Ohio-5439, ¶ 27.
{¶21} In the first assignment of error, Stone Collector argues that the receiver sold the easement as an asset of OTP "because he believed OTP was owned by RMO, the Receivership debtor" and that Richard Osborne, individually, was not a member and did not hold an ownership interest. It contends that the trial court erred by treating Osborne individually and Osborne as Trustee as alter egos.
{¶22} Here, NEO purchased the pipeline and accompanying easements through a receivership sale. In Cuyahoga County Court of Common Pleas Case No. CV 14-822810, the court entered judgment against various counterclaim defendants, including the Richard M. Osborne Trust, Richard M. Osborne, and OTP. The court subsequently granted a request to appoint a receiver to sell real and personal property owned by "Richard M. Osborne, * * * the Richard M. Osborne Trust, * * * [and] Orwell-Trumbull Pipeline, Co., LLC." NEO then entered into an Asset Purchase Agreement, approved by the court, to purchase the pipeline owned by OTP as well as real property and easements associated with the "specified business," i.e., "the high-pressure distribution of natural gas."
{¶23} The trial court did not need to, and did not, determine whether Osborne individually and Osborne as Trustee were alter egos. Osborne was not the only debtor in the receivership. A judgment was entered against OTP in the receivership proceedings and the receiver was appointed to sell its property, regardless of whether Osborne individually or as trustee was its owner.
{¶24} To the extent that Stone Collector generally argues that the receiver lacked authority to reach the assets and seeks to essentially invalidate the sale order and the rights conveyed to NEO when it purchased OTP's property for $3,000,000 through a valid sale, we reject this argument. Stone Collector did not seek to challenge the action in the receivership court and has not previously objected to the transport of natural gas across its property via the pipeline for well over a decade. It has been observed that the authority of a receiver cannot be collaterally attacked in another court. Natl. Contracting Group, Ltd. v. P&S Hotel Group, Ltd., 2021-Ohio-2940, 177 N.E.3d 308, ¶ 18 (10th Dist.). The court's authority to appoint the receiver and to allow him to reach the assets of the foregoing parties is not subject to dispute here.
{¶25} NEO bought the property through a valid sale. Receivership assets are no longer available once they are sold to a bona fide purchaser. State ex rel. Horvath v. Zmuda, 6th Dist. Lucas No. L-12-1009, 2013-Ohio-55, ¶ 15. See R.C. 2325.03 ("[t]he title to property, which title is the subject of a final judgment or order sought to be vacated, modified, or set aside by any type of proceeding or attack and which title has, by, in consequence of, or in reliance upon the final judgment or order, passed to a purchaser in good faith [including a purchaser at a duly confirmed judicial sale], shall not be affected by the proceeding or attack"). We do not find that Stone Collector sets forth an argument, supported by legal authority, which permits it to challenge a valid order of sale through receivership in a separate action many months after the sale was approved. Stone Collector cannot prevail on claims for Trespass, Ejectment, and Quiet title since NEO properly purchased the pipeline and accompanying right to utilize the pipeline, as will be discussed further below. See H & S Co., Ltd. v. Aurora, 11th Dist. Portage No. 2003-P-0104, 2004-Ohio-3507, ¶ 10 (a party with a right to enter or use property is not a trespasser since "trespass requires an interference with the exclusive possessory interest of the property owner"); Northwest Ohio Properties, Ltd. v. Cty. of Lucas, 6th Dist. Lucas No. L-17-1190, 2018-Ohio-4239, ¶ 43 (finding an ejectment claim to lack merit where a defendant is not "wrongfully in possession of real property").
{¶26} The first assignment of error is without merit.
{¶27} In its second assignment of error, Stone Collector argues that the lower court erred in finding an implied easement existed that was sold to NEO and that there was no easement to be acquired in the receivership proceedings.
{¶28} An easement may be created by grant, implication, prescription, or estoppel. Ranallo v. First Energy Corp., 11th Dist. Lake No. 2005-L-187, 2006-Ohio-6105, ¶ 33; Shiloh Ministries, Inc. v. Simco Exploration Corp., 2019-Ohio-2291, 138 N.E.3d 504, ¶ 38 (11th Dist.), citing Trattar v. Rausch, 154 Ohio St. 286, 95 N.E.2d 685 (1950), paragraph two of the syllabus. "Two types of implied easements are recognized in the law-those based on prior use and those based on necessity." Fairport Real Estate LLC v. Nautical Ridge Condominium Owners' Assn., Inc., 2018-Ohio-791, 108 N.E.3d 101, ¶ 40 (11th Dist.).
{¶29} To establish an implied easement by prior use, the party seeking the easement must prove: "(1) A severance of the unity of ownership in an estate; (2) that, before the separation takes place, the use which gives rise to the easement shall have been so long continued and obvious or manifest as to show that it was meant to be permanent; (3) that the easement shall be reasonably necessary to the beneficial enjoyment of the land granted or retained; [and] (4) that the servitude shall be continuous as distinguished from a temporary or occasional use only." Ciski v. Wentworth, 122 Ohio St. 487, 172 N.E. 276 (1930), syllabus.
{¶30} Stone Collector argues that the elements of an implied easement were not met. In particular, it contends that there was a lack of severance of the unity of the ownership in the estate.
{¶31} In cases of an implied easement, the severance of unity of ownership occurs when the owner initially owns the entire estate but its ownership is then split. "Easements by implication arise where property has been held in a unified title, and during such time an open and notorious servitude has apparently been impressed upon one part of the estate in favor of another part, and such servitude, at the time that the unity of title has been dissolved by a division of the property or a severance of the title, has been in use and is reasonably necessary for the fair enjoyment of the portion benefited by such use." (Citation omitted.) Id. at 495. In determining whether an implied easement exists, courts consider, inter alia, "the relationship of the parts separated to each other." (Citation omitted.) Id. "Where an owner of two parcels of land subjects one of them to an easement in favor of the other and where such owner sells the dominant parcel without providing for that easement in his grant and where the enjoyment of such easement is reasonably necessary to the beneficial enjoyment of the parcel granted, it may reasonably be inferred that the parties mutually intended that there should have been a grant of such easement." (Citation omitted.) Cadwallader v. Scovanner, 178 Ohio App.3d 26, 2008-Ohio-4166, 896 N.E.2d 748, ¶ 17 (12th Dist.). In those instances where an implied easement has been found, the property was initially one parcel that was split into multiple parcels with different owners, thereby necessitating and justifying an implied easement. See Ciski at 487 (right of way "becomes, when the lands are severed and pass into other hands, an easement by implication"); Cadwallader at ¶ 21 (unity was severed when owner sold one lot and retained the other); Raines v. Hodgson, 12th Dist. Brown No. CA2019-09-011, 2020-Ohio-3404, ¶ 70 (land split into multiple tracts from one, which met the element of "severance of a prior unified estate"); Kraus v. Dotson, 6th Dist. Lucas No. L-78-084, 1979 WL 207095, *1-2 (May 11, 1979) ("[t]he law of implied easements arising from a severance of a parcel from a larger tract owned by a common owner" applied where there were two lots). Here, the parcel was not divided into two estates but was sold to Jeremy Osborne, and then Stone Collector, as one property.
{¶32} Further, as to the third element, "that the easement shall be reasonably necessary to the beneficial enjoyment of the land granted or retained," similar concerns apply. The easement to utilize the pipeline is not applicable to granted or retained land as it is on the entirety of the land sold to Stone Collector.
{¶33} Of note, implied easements apply when there is an easement appurtenant, since they run with the land and are transferable to future buyers. An easement appurtenant "attaches to the property and requires a dominant estate and a servient estate. The dominant estate receives the benefit of the easement, while the servient estate is burdened by the easement." Acorn Dev., LLC v. Sanson Co., 8th Dist. Cuyahoga Nos. 110530 and 111003, 2022-Ohio-2576, ¶ 21. In contrast, an easement in gross conveys to another "a personal privilege to use the land" and exists independently of ownership of land, but that privilege expires "with the party to whom the privilege belongs." (Citations omitted.) Id. at ¶ 20. "An easement appurtenant runs with the land and is transferable to future buyers," while an "easement in gross is personal only to the grantee and, therefore, does not run with the land." Walbridge v. Carroll, 172 Ohio App.3d 429, 2007-Ohio-3586, 875 N.E.2d 144, ¶ 17 (6th Dist.). It has been observed that easements of a commercial character, like a gas pipeline, are easements in gross. Acorn at ¶ 43 (Gallagher, J., dissenting). See also Am. Premier Underwriters, Inc. v. Marathon Pipe Line Co., 3d Dist. Mercer No. 10-2001-08, 2002 WL 437998, *5 (Mar. 20, 2002) (where an easement "did not exist for the benefit of any land" but instead so that an oil pipeline could be utilized for profit, it was not appurtenant to the land).
{¶34} Nonetheless, even presuming that there was not an implied easement that runs with the land, we do not find the right to utilize the pipeline was improperly conveyed to NEO, since it constituted a license coupled with an interest. While a license is a privilege to do an act upon land terminable at the will of a licensor, a license coupled with an interest, also called an irrevocable license, is a license that is intended to be permanent. Helfrich v. Foor Family Invests., LLC, 5th Dist. Licking No. 2021 CA 00070, 2022-Ohio-3446, ¶ 76; Varjaski v. Pearch, 7th Dist. Mahoning No. 04 MA 235, 2006-Ohio-5268, ¶ 13 ("[i]f the parties intend the agreement to be permanent in nature, the license is said to be coupled with an interest") (citation omitted). It has been held that "[licenses coupled with an interest can be, in effect, easements which either have not complied with formalities necessary to create an easement or easements by parol agreement." Kamenar R.R. Salvage, Inc. v Ohio Edison Co., 79 Ohio App.3d 685, 691, 607 N.E.2d 1108 (3d Dist.1992); Dalliance Real Estate, Inc. v. Covert, 2013-Ohio-4963, 1 N.E.3d 850, ¶ 34 (11th Dist.); Helfrich at ¶ 76 ("a license coupled with an interest is an easement that arises from circumstances that do not fulfill other requirements for the creation of an easement"). "This is because there is not merely permission to do the act, but a right to do the act. If so construed to be a right it takes on those qualities. One such quality of a right is that it is not revocable." Kamenar at 691. A license coupled with an interest "is no longer terminable at the will of the licensor, and constitutes a right to do the act rather than a mere privilege to do it." Dalliance at ¶ 33, citing Cambridge Village Condominium Assn. v. Cambridge Condominium Assn., 139 Ohio App.3d 328, 333-334, 743 N.E.2d 954 (11th Dist.2000).
{¶35} A license coupled with an interest has been found in circumstances where the evidence demonstrated the parties' intention was to create a permanent and perpetual contract. Id. at ¶ 35. In Kamenar, where the parties intended to grant a utility company a permanent right in the land, a license coupled with an interest was created which was irrevocable, transferable and assignable. Thus, the "right to maintain and construct wires, cables, and the like upon the railroad's right-of-way did not terminate when" the railroad conveyed its interest in land to another party. Kamenar at 692-693. A license coupled with an interest has also been found where a party invested "effort and expense" in creating and maintaining a drain system on another's property, since these facts demonstrated the parties intended that utilization of the property for that purpose would be permanent. Helfrich at ¶ 80. Courts have observed that the existence of a license for an extended period of time lends further support to a conclusion that the parties intended for the license to be permanent and irrevocable. Varjaski at ¶ 15 ("common sense would dictate that the permission granted twenty years ago to build a stockade fence enclosing an in-ground swimming pool constitutes something more permanent than a mere license"); Hampton Ridge Condominium Assn. No. 1 v. Hampton Woods Condominium, Inc., 9th Dist. Summit No. 22036, 2005-Ohio-9, ¶ 7 (a license existed for 25 years before a party attempted to revoke it).
{¶36} In this matter, although OTP did not own the land on which the pipeline was situated, it is evident it was given permission to permanently utilize a portion of the land for operation of the pipeline from Osair, with Richard Osborne as president, which owned the property at the time the pipeline was constructed. Richard Osborne, Trustee, also owned the majority of OTP shares. OTP built the pipeline in the mid-2000s, applied for and received authorization from the Public Utilities Commission of Ohio to operate the pipeline to transport natural gas, and continued to operate the pipeline continuously for over a decade and a half, while the property was under the ownership of several different companies (owned by Osborne) which allowed the pipeline to operate. This demonstrated the intention for the use of the property to be permanent. Where the parties' agreement "evinces an intent for the use to be permanent and irrevocable," there is an irrevocable "license coupled with an interest." Dalliance at ¶ 35-36 ("a license coupled with an interest can be interpreted as an easement without complying with all of the rules or formalities of establishing an easement"). For these reasons, OTP maintained an irrevocable license over the property which could be reached and sold by the receiver.
{¶37} The second assignment of error is without merit.
{¶38} In its third assignment of error, Stone Collector argues that it did not have notice of an easement on the property, arguing it did not have actual knowledge of the pipeline. See R.C. 5301.25(A) ("All deeds * * * and instruments of writing properly executed for the conveyance or encumbrance of lands * * * shall be recorded in the office of the county recorder * * * Until so recorded or filed * * *, they are fraudulent insofar as they relate to a subsequent bona fide purchaser having, at the time of purchase, no knowledge of the existence of that former deed, land contract, or instrument").
{¶39} "[A] bona fide purchaser for value is bound by an encumbrance upon land only if he has constructive or actual knowledge of the encumbrance." H & S Co., 2004-Ohio-3507, at ¶ 14, citing Tiller v. Hinton, 19 Ohio St.3d 66, 68, 482 N.E.2d 946 (1985). Constructive notice has been defined as "notice which is presumed because of the fact that a person has knowledge of certain facts which should impart to him, or lead him to knowledge of the ultimate fact." (Emphasis sic.) (Citation omitted.) Johnston v. Faith Baptist Church, Inc., 3d Dist. Allen No. 1-87-14, 1989 WL 43017, *6 (Apr. 26, 1989).
{¶40} Notice of an easement for use of water and sewer lines has been found when an owner was aware of their presence on the property. Stern v. Stern, 7th Dist. Jefferson No. 97 JE 77, 1999 WL 1243316, *3 (Dec. 21, 1999). See also Shangrila Ohio, LLC. v. Westbridge Realty Co., 8th Dist. Cuyahoga No. 99784, 2013-Ohio-3817, ¶ 11 (owner had knowledge that a parking lot was used for the benefit of a salon due to ownership of adjacent property and the fact that the lot was used exclusively by the salon). Here, Jeremy Osborne, the owner of Stone Collector, testified that he was aware the pipeline was on his property and had seen it when inspecting the property. He further knew that his brother had owned the property and that part of his business had been in natural gas. He also testified as to his belief that the signs indicating the pipe contained natural gas were present on the property when he purchased it. The pipeline was above ground and visible, running across a portion of the Stone Collector property. Given this knowledge that the pipeline was part of the property, the facts show that Stone Collector should be bound by the encumbrance.
{¶41} The third assignment of error is without merit.
{¶42} In the fourth assignment of error, Stone Collector argues that the lower court erred in relying on the receivership court's ruling authorizing the sale of OTP's assets given the "quit claim nature" of the sale to NEO. In particular, it cites to Recital A in the Assignment And Assumption of Easements document attached to the Asset Purchase Agreement which states: the "Assignor [the receiver] hereby assigns and transfers to Assignee [NEO] * * * on a 'as-is' 'where-is' basis without any representations or warranties, all of Assignor's right, title, claims, and interest, in and to all easements, rights of way, licenses, leases, agreements, and other rights * * * being held and/or deemed to be held by OTP in connection with the Pipeline Assets * * *."
{¶43} While it is accurate that the foregoing clause exists, this clause relates to the protection of the receiver, who is the assignor/seller under the Asset Purchase Agreement. It protects the assignor from claims by the buyer. It does not relate to claims between the buyer and third parties. While the receiver makes no warranties in relation to his sale of the property, it is useful to further examine the agreement and order of sale. The sale order, section L (V) states: "[T]his Order is and shall be effective as a determination that all Mortgages, Liens, claims, encumbrances and interests shall be and are, without further action by any person or entity, released with respect to the Assets as of the Closing date." Section L (VIII) further provides:
On the Closing Date, this Order shall be construed and shall constitute for any and all purposes a full and complete general assignment, conveyance, and transfer by to the Purchaser of Debtor's interests in the Assets, including any and all necessary easements, licenses, leases, rights of way or other agreements reasonably necessary for the effectuation of the Purchased Assets and uninterrupted operation of the Assets. Purchaser as successor in interest to ownership of the Assets, or in its own name, is authorized to do any and all things necessary or advisable to reduce the Assets to Purchaser's exclusive unrestricted ownership and possession, including entering into any and all necessary easements, licenses, leases, rights of ways of other agreements reasonably necessary for the effectuation of the transfer of the Assets to the Purchaser.
{¶44} Finally, the Purchase Agreement states that the seller "shall sell, assign, transfer, convey and deliver to Purchaser, free and clear of all Liabilities (other than Assumed Liabilities [liabilities accrued after closing and for 'missing easements']) and Liens and Purchaser shall purchase * * * all of Debtor's right and interest in" the Purchased Assets, which include the Pipeline Assets and all real property and easements used in the "Specified Business," i.e. "the high-pressure distribution of natural gas."
{¶45} The foregoing provisions contradict the argument that the "as is" clause results in NEO being granting "nothing in the sale," as Stone Collector argues. It can hardly be said that this clause justifies a challenge to a valid and legal order of the court approving the sale of the property months after the sale took place, in a different court and different proceedings. While Stone Collector argues that the clause disclaiming warranties creates a quit claim sale and prevents protections for the buyer, it has been held that a "'No Warranty of Title' clause does not convert [an oil and gas lease] into a quitclaim" and protects the landowner from claims subsequently raised by a lessee. Bd. of Edn. Toronto City Schools v. Am. Energy Utica, LLC, 2020-Ohio-586, 152 N.E.3d 378, ¶ 43-44 (7th Dist.). It does not dictate the outcome of any claims arising relating to the property sold.
{¶46} The fourth assignment of error is without merit.
{¶47} In the fifth assignment of error, Stone Collector argues that the lower court erred in granting summary judgment in favor of NEO "to the extent it considered" the claim of easement by estoppel. NEO argues that it never asserted such a claim.
{¶48} While NEO did assert arguments relating to easement by estoppel in its Answer, it advanced arguments relating to implied easement in its motion for summary judgment and the trial court found the existence of an implied easement. Since the lower court did not address an easement by estoppel and it is unnecessary to determine this issue to resolve the appeal for the reasons stated above, we find this issue is moot.
{¶49} The fifth assignment of error is moot.
{¶50} For the foregoing reasons, the judgment of the Lake County Court of Common Pleas, granting summary judgment in favor of NEO, is affirmed. Costs to be taxed against appellant.
JOHN J. EKLUND, P.J., concurs,
MARY JANE TRAPP, J., concurs in judgment only in part with a Concurring Opinion.
{¶51} I concur fully in the majority's disposition of the first, third, fourth, and fifth assignments of error raised by plaintiff-appellant, Stone Collector, Inc. ("Stone"). I concur in judgment only with respect to Stone's second assignment of error, which involves whether defendant-appellee, Northeast Ohio Natural Gas Corp. ("NEO"), obtained a valid implied easement over Stone's property.
{¶52} While this case presents a situation that does not fit within the traditional mold, I would find an implied easement exists based on application of the "control test." In particular, Richard Osborne's control over the subject properties through his labyrinth of related entities and transactions resulted in the creation of an implied easement by prior use.
Implied Easement by Prior Use
{¶53} "Easements may be created by express grant, prescription, implication, or estoppel. Tower 10, LLC v. 10 W Broad Owner, LLC, 2020-Ohio-3554, 154 N.E.3d 1060, ¶ 28 (10th Dist.). There is no express easement of record in favor of Orwell Trumbull Pipeline Co., LLC ("OTP"), which installed the pipeline in the mid-2000s and operated it until October 2019, or in favor of NEO, which purchased the pipeline and related easements through receivership. In addition, NEO does not assert it obtained an easement by prescription or estoppel. Thus, the sole issue is whether NEO has an implied easement that permits it to operate and maintain the pipeline.
{¶54} "Easements may be implied in several ways-from an existing use at the time of the severance of ownership in land, from a conveyance describing the premises as bounded upon a way, from a conveyance with reference to a plat or map[,] or from necessity alone, as in the case of ways of necessity." Trattar v. Rausch, 154 Ohio St. 286, 291 -292, 95 N.E.2d 685 (1950). "A prior use easement looks retrospectively at how the land was used before it was severed in order to ascertain what beneficial use the grantor truly intended to convey." Arkes v. Gregg, 10th Dist. Franklin No. 05AP-202, 2005-Ohio-6369, ¶ 14.
{¶55} "An easement implied by prior use has four elements: (1) a severance of the unity of ownership in an estate; (2) the use giving rise to the easement shall exist before severance takes place, and shall have continued and been obvious or manifest for so long as to show that it was meant to be permanent; (3) the easement shall be reasonably necessary to the beneficial enjoyment of the land granted or retained; [and] (4) the servitude shall be continuous rather than temporary or occasional." Kiko v. King Mountain LLC, 7th Dist. Monroe No. 14 MO 9, 2015-Ohio-2688, ¶ 15, originating from Ciski v. Wentworth, 122 Ohio St. 487, 495, 172 N.E. 276 (1930), paragraph one of the syllabus. The "use must be continuous, apparent, permanent, and necessary to be the basis of an implied easement upon the severance of the ownership of an estate." Trattar at 292. Reasonable necessity is sufficient for this type of implied easement. Id.
Severance of Unity of Ownership
{¶56} The only element in dispute in this appeal is the first-i.e., whether there was "a severance of the unity of ownership." Stone argues that Richard Osborne ("Richard") never owned the Stone property or held an interest in OTP in his individual capacity. The majority finds that the first and third elements are not satisfied. However, the majority concludes that instead of an implied easement, OTP obtained a "license coupled with an interest."
{¶57} NEO did not claim this type of interest in the proceedings below, nor does NEO assert it on appeal as an alternative basis for affirmance. In addition, the cases the majority cites do not support a determination that OTP obtained an irrevocable license as a matter of law. The majority relies on the Third Appellate District's statement in Kamenar R.R. Salvage, Inc. v. Ohio Edison Co., 79 Ohio App.3d 685, 607 N.E.2d 1108 (3d Dist.1992), that a "license coupled with an interest can be, in effect, easements which either have not complied with the formalities necessary to create an easement or easements by parol agreement." Id. at 691. It appears this statement refers to deficient written agreements and to oral agreements, neither of which was alleged in this case.
{¶58} For example, in Kamenar, the parties had written agreements that were not acknowledged as required by statute. Id. In Dalliance Real Estate, Inc. v. Covert, 2013-Ohio-4963, 1 N.E.3d 850 (11th Dist.), the parties had a written agreement but had not gone before the county planning commission. Id. at ¶ 36. The agreement in Helfrich v. Foor Family Invests., LLC, 5th Dist. Licking No. 2021 CA 00070, 2022-Ohio-3446, was not written, but the matter was also not resolved on summary judgment. The appeal challenged the trial court's denial of a motion for a directed verdict on counterclaims for a prescriptive easement, easement by estoppel, and an irrevocable license. See id. at ¶ 64-83. The appellate court found the record contained sufficient evidence from which the jury could reasonably find an easement by estoppel and an irrevocable license. See id. at ¶ 75, 82.
Control Test
{¶59} While this case presents a situation that does not fit within the traditional mold, I would find an implied easement exists based on application of the "control test." Generally, the law treats trusts, corporations, and limited liability companies as separate legal entities. However, this rule is not absolute. In the context of implied easements, courts have applied a "'control test'" to establish unity of ownership, "which considers whether the same party had 'the power to arrange and adapt the properties.'" Anderson v. Fleagane, 7th Dist. Belmont No. 21 BE 0020, 2022-Ohio-1120, ¶ 42, quoting Dabrowski v. Bartlett, 246 Ariz. 504, 515, 442 P.3d 811 (2019). As one court has explained, "Clearly, the underpinning of the unity of ownership requirement is the concept of authority: the ability to impress or reserve an encumbrance on property without which an easement cannot be created." Houston Bellaire Ltd. v. TCP LB Portfolio I, LP, 981 S.W.2d 916, 921 (Tex.App.1998).
{¶60} For example, in M.C. Headrick & Son Ents., Inc. v. Preston, Tenn.App. No. 124, 1989 WL 37262 (Apr. 20, 1989), B individually acquired Lot 1 and built a house; a driveway was built on a 50-foot strip to serve the structure; B was the sole stockholder of a company which acquired the strip; and B "had the power to, and did, deal freely with both Lot 1 and the strip and treat them as though he personally owned them." Id. at *6. The court held "where an individual has had common ownership of certain parcels, but was not technically the owner at all, a dominant interest or influence in a corporation(s) owning those parcels can satisfy the necessary unity of title requirement." Id.
{¶61} In this case, Richard controlled the Stone property from 2000 until November 2018. Specifically, Richard purchased the property through his entity, Osair, Inc., in 2000. He successively transferred it to three of his other entities-McKay Real Estate Corporation in 2010; Heisley-Hopkins, Inc. in 2011; and Nathan Properties LLC in 2011-and purchased it at sheriffs sale through yet another entity, 8667 East Avenue LLC, in 2014. In November 2018, he transferred the property to his brother, Jeremy Osborne ("Jeremy"). Jeremy subsequently transferred it to his own entity, Stone, in May 2020.
{¶62} Richard's trust owns a controlling interest in OTP. Thus, the pipeline and any related rights were under Richard's control from the mid-2000s, when OTP installed the pipeline, until the receiver's sale of OTP's assets to NEO in October 2019.
{¶63} Based on these facts, severance of ownership occurred in November 2018 when Richard (through 8667 East Avenue LLC) transferred the property to Jeremy. Upon such severance, OTP obtained an implied easement in its favor with respect to the Stone property. Based on the provisions in the transaction documents, the receiver's transfer of OTP's assets to NEO encompassed this implied easement. Thus, Stone's claims against NEO are barred as a matter of law, and the trial court did not err in granting summary judgment to NEO.
{¶64} Accordingly, I would overrule Stone's second assignment of error on the foregoing basis.