Seiler v. Zeigler Coal Holding Co.

Case Date: 12/23/2002
Court: 5th District Appellate
Docket No: 5-00-0637 Rel

               NOTICE
Decision filed 12/23/02.  The text of this decision may be changed or corrected prior to the filing of a Petition for Rehearing or the disposition of the same.

NO. 5-00-0637

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT


DEON SEILER and FRED SEILER, 

     Plaintiffs-Appellants, 

v.

ZEIGLER COAL HOLDING COMPANY, 

     Defendant,

and

OLD BEN COAL COMPANY, 
TIMOTHY BAUMAN, TINA BAUMAN,
CARL V. GATES, and DONALD G. GATES,

     Defendants-Appellees.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
Appeal from the
Circuit Court of
Franklin County.

No. 96-L-103









Honorable
David Frankland,
Judge, presiding.


JUSTICE GOLDENHERSH delivered the opinion of the court:

Clarence Deon Seiler and Fred Seiler (plaintiffs) filed suit against Zeigler CoalHolding Company, Old Ben Coal Company, Timothy Bauman, Tina Bauman, Carl V. Gates,and Donald G. Gates (defendants) in the circuit court of Franklin County. Plaintiffs soughtdamages regarding an interest in minerals they claim as successors to parties to a covenant. The circuit court granted defendants' motion for summary judgment. On appeal, the issueis whether the covenant was a personal undertaking that has expired by virtue of the deathof the original parties. We affirm.

FACTS

I.W. Reagin, Marion E. Reagin, and Belle Seiler inherited three tracts of real estateas heirs of C.W. Reagin and Josephine Reagin. C.W. Reagin met his demise on December30, 1930, and Josephine Reagin met her demise on October 21, 1944. On November 27,1946, I.W., Marion, and Belle, and their respective spouses, signed a document entitled"Covenant."

The agreement described three parcels of land and stated that the parties had agreedto divide the land by transferring full title of the tracts, with parcel 1 going to I.W., parcel 2to Belle, and parcel 3 to Marion. The agreement stated, "[P]arcels 1 and 3 include all mineralrights and parcel 2 for surface only, the mineral rights having been heretofore conveyed toothers." The agreement then stated as follows:

"WHEREAS it is the desire of all said parties that the minerals underlying said tracts1 and 3 be shared in equally by each of said parties, but it is also the deswire [sic] ofthe parties that title to the mineral rights be not separated as a matter of record so asto expose such mineral rights to separate taxation;

NOW[,] THEREFORE[,] it is hereby mutually agreed by and between saidparties that all net proceeds from the sale or exploitation of such mineral rights shallbe divided between the parties hereto, each to take one[-]third thereof.

IT IS FURTHER AGREED by and between said parties that the record ownersof said tracts 1 and 3 shall consult the other parties hereto and obtain the consent ofboth of them, prior to leasing, selling[,] or otherwise disposing of or exploiting suchmineral rights.

IT IS FURTHER AGREED by and between said parties that this agreementshall be binding on the parties hereto and their respective heirs, personalrepresentatives[,] and assigns[] and shall constitute, with reference to tracts 1 and 3,a covenant running with the land."

The heirs executed deeds conveying the tracts of land, conveying parcel 1 to I.W.,parcel 2 to Belle, and parcel 3 to Marion. The agreement was recorded with the FranklinCounty recorder of deeds on July 27, 1955.

I.W. Reagin died intestate on July 5, 1955, still owning parcel 1 and leaving as heirs-at-law his widow, Ruth Reagin; Belle Seiler's children, Grace Seiler and Clarence Seiler; andhis brother, Marion E. Reagin. In separate quitclaim deeds, Grace Seiler and Clarence Seilerconveyed to Ruth Reagin all real estate interests inherited from I.W. Both of these deedsmentioned the mineral rights in parcel 3. Ruth Reagin then conveyed to Marion Reagin allof her interest in parcel 1 and the minerals underlying parcel 3 in a deed dated October 8,1955.

Defendants Timothy Bauman, Tina Bauman, Carl Gates, and Donald Gates are thesuccessors to the interests of Marion Reagin. In 1994 these defendants sold their interestsin the minerals underlying parcel 3 to defendant Old Ben Coal Company.

Plaintiffs (Clarence Deon Seiler and Fred Seiler) are the heirs to the interests of BelleSeiler. Plaintiffs brought this action for breach of covenant, trespass, and conversion. Theycomplain that defendants have exploited the minerals in parcel 3 without plaintiffs' consentor just compensation. Defendants filed a motion for summary judgment. As a part of theirresponse, plaintiffs pointed to title opinions that had been prepared for defendant ZeiglerCoal Holding Company, the parent company for defendant Old Ben Coal Company. Plaintiffs pointed out that the opinions noted that while I.W.'s interest in the mineralsunderlying parcel 3 arising out of the agreement had been conveyed to the record owner ofparcel 3, there had been no similar conveyance by the heirs of Belle Seiler. One of the titleopinions stated, "[Q]uitclaim deed or instrument showing consent on the part of Freddie G.Seiler and Clarence D. Seiler as surviving heirs of Grace Seiler, Clarence Seiler, and FrankSeiler should be obtained to indicate that they have no claim to any share in the minerals orproceeds of the minerals underlying the captioned premises."

The trial court granted a summary judgment for defendants. The court stated in partas follows:

"In examining the 'Covenant', the court finds the same to be a personal undertakingthat expired at the deaths of the parties to the covenant. As noted above, no severedmineral interest was created by the covenant. Instead, the three heirs entered into apersonal undertaking to share net proceeds '... between the parties hereto.' Therequirement of Marion, the owner of Parcel 3, to obtain the consent of Ira and Belleis stated '... shall consult the other parties hereto and to [sic] obtain the consent ofboth of them.' The personal characteristics of the covenant are further underscoredby the fact that the original parties clearly did not choose to record the agreement asthey did their deeds. Not recording the agreement at the time the deeds were recordedis consistent with the terms of the covenant that full title pass to Marion on Parcel 3and the minerals not be severed of record. The covenant served as a secret agreementto avoid separate taxation of the minerals. As stated above, the goal wasaccomplished. Plaintiffs rely on the paragraph of the Covenant that it is '... bindingon the parties hereto and their respective heirs, personal representatives[,] and assignsand shall constitute, with reference to tracts 1 and 3, a covenant running with theland.' However, such language in a contract requiring personal duties does not negatethe implied condition that the contract terminates on the death of the parties. Vogelv. Melish[,] 31 Il[l]. 2d 620[] (1965) [sic][;] Aldrich v. Aldrich[,] 260 Ill. App. 333(1st Dist. 1931)[;] Galler v. Galler[,] 32 Il[l]. 2d 16 (1964)[;] Marcy v. Markiewicz[,]233 Ill. App. 3d 801 (1st Dist. 1992).

The court further finds that because the covenant was a personal undertakingwith no present interest in the minerals but only a contingent contractual interest inthe net proceeds, the same did not violate public policy." (Emphasis in original.)

Plaintiffs appeal.

ANALYSIS

The threshold issue to this appeal is whether the covenant was a personal undertakingthat has expired by virtue of the death of the original parties. Plaintiffs contend that theyreceived an interest in the mineral rights, or at least a right to the proceeds from a sale of theminerals, because the covenant ran with the land and extended past the lives of the partiesto the agreement. The plain language of the document, and case law interpreting similaragreements, leaves no issue regarding whether the agreement was limited to the lives of thesignatories of the covenant.

In Marcy v. Markiewicz, a similar provision was held to be a personal agreement. Marcy v. Markiewicz, 233 Ill. App. 3d 801, 804, 599 N.E.2d 1051, 1053 (1992). In Marcy,the plaintiffs and the defendants entered into a partnership agreement for the purpose ofconstructing buildings on two pieces of realty. The parties entered into a dissolutionagreement that read as follows:

"(15) If at any time hereafter[] MARKIEWICZ receives from a ready,willing[,] and able purchaser an acceptable bona fide offer to sell to such purchaser[]Parcel B or any part thereof, or any property which includes all or part of Parcel B,MARKIEWICZ shall give to MARCY and SONS notice, specifying the name andaddress of the purchaser and the price and terms of the offer[,] accompanied byMARKIEWICZ'S affidavit that the proposed sale is in good faith. MARCY andSONS shall thereupon have the prior option to purchase Parcel B or the part thereofor the entire property covered by such offer at the price and on the terms of the offer,which option MARCY and SONS may exercise by giving MARKIEWICZ noticewithin 15 days after their receipt of MARKIEWICZ'S notice of the offer ***.

* * *

(19) This Agreement shall be binding upon and inure to the benefit of therespective heirs, devisees, legatees, personal representatives, executors,administrators[,] and assigns of the parties hereto." Marcy, 233 Ill. App. 3d at 803-04, 599 N.E.2d at 1053.

The Markiewicz who had entered into the agreement gifted a portion of the land trustto his children. Parcel B was later sold to another party, Inland Real Estate Corp. TheMarcys then filed a complaint for specific performance. Inland Real Estate Corp. filed across-motion for summary judgment against the Markiewiczes. The Markiewiczes movedfor a summary judgment against the Marcys and Inland Real Estate Corp. They claimed thatthe right-of-first-refusal provision violated the rule against perpetuities. The trial courtgranted the Markiewiczes motions for summary judgment.

On appeal, the appellate court found that there was no violation of the rule againstperpetuities because the agreement was personal between the parties entering the contractand did not last beyond the lives of those parties. The court distinguished Martin v. PrairieRod & Gun Club, 39 Ill. App. 3d 33, 348 N.E.2d 306 (1976). In Martin, an agreement wasfound to have violated the rule because it contained very specific language giving the sellers'heirs a right of first refusal to buy the land back. The language in Martin read as follows:

" 'If[,] after the death of [Charles and Rena Pence], [the defendant] shall wish to sellall the [farm] or any part thereof, then the [defendant] promises and agrees to give tothe heirs of [Charles and Rena Pence] the option to purchase said lands or any partthereof, upon the conditions and terms to be prescribed by [the defendant].' "(Emphasis omitted.) Marcy, 233 Ill. App. 3d at 810, 599 N.E.2d at 1057 (quotingMartin, 39 Ill. App. 3d at 34-35, 348 N.E.2d at 307).

In contrast, the language in Marcy expressly stated that "MARCY and SONS" were entitledto notice of a proposed sale and to have the right of first refusal. The appellate courtdebunked the trial court's holding that paragraph 19 gave the heirs the power to exercise theright. In citing to other cases in which language similar to paragraph 19 had been used, thecourt found that because the language granting the right was personal to the parties, theadditional paragraph did not extend the right to the heirs. Marcy, 233 Ill. App. 3d at 811, 599N.E.2d at 1057 (citing Vogel v. Melish, 31 Ill. 2d 620, 626-27, 203 N.E.2d 411, 414 (1964);Galler v. Galler, 32 Ill. 2d 16, 31, 203 N.E.2d 577, 586 (1964)).

Similarly, the language granting rights in this agreement was personal to the parties.The plain language of the agreement supports the trial court's determination that theagreement was a personal undertaking between the parties. As the court aptly noted, theprovision describing a distribution upon a sale stated that it had been agreed "between saidparties" that the net proceeds should "be divided between the parties hereto." The nextparagraph creating a restriction on a sale stated that "the record owners" of said tracts shouldconsult "the other parties hereto" and "obtain the consent of both of them" (emphasis added)prior to a sale or lease. The said "parties hereto" were the signatories-I.W. Reagin, BelleSeiler, and Marion Reagin. Unlike the language in Martin, the language granting rights waspersonal to the signatories. Martin, 39 Ill. App. 3d at 34-35, 348 N.E.2d at 307. Thesubsequent binding of heirs, successors, and assigns did not enlarge the grant. See Vogel,31 Ill. 2d at 622, 203 N.E.2d at 412; Galler, 32 Ill. 2d at 31, 203 N.E.2d at 586. As in Marcy,the language granting rights was personal to the parties.

Plaintiffs claim that reading the document as a personal agreement would rendercertain language nugatory. Plaintiffs point to the following language in the agreement:"[T]his agreement *** shall constitute, with reference to tracts 1 and 3, a covenant runningwith the land." This language serves a purpose and does not make the agreement ambiguouson any issue in this case.

Defendants distinguish the "covenant" in this case from those in cases that arediscussed in detail by plaintiffs. Unlike in cases relied upon by plaintiffs, the covenant in thecase at hand was not in the document conveying other interests in the property. Cf. La SalleNational Trust, N.A. v. Village of Westmont, 264 Ill. App. 3d 43, 71, 636 N.E.2d 1157, 1174(1994) (an easement agreement); Streams Sports Club, Ltd. v. Richmond, 99 Ill. 2d 182, 185,457 N.E.2d 1226, 1228 (1983) (condominium declarations); Mathis v. Mathis, 402 Ill. 60,68, 83 N.E.2d 270, 274 (1948) (a deed of conveyance); McAnelly v. Graves, 126 Ill. App. 3d528, 531, 467 N.E.2d 377, 378 (1984) (a coal lease); see also Bowes v. City of Chicago, 3 Ill.2d 175, 197, 120 N.E.2d 15, 28 (1954) (a covenant in a contract was restricted by a deedconveyed in the effectuation of the contract). Furthermore, the covenant in this case is notattached to an easement or a lien that specifies a certain debt. Cf. C-B Realty & TradingCorp. v. Chicago & North Western Ry. Co., 198 Ill. App. 3d 926, 930-31, 556 N.E.2d 634,636-37 (1990); La Salle National Trust, N.A., 264 Ill. App. 3d at 74, 636 N.E.2d at 1176;Streams Sports Club, Ltd., 99 Ill. 2d at 188, 457 N.E.2d at 1231; Mathis, 402 Ill. at 68, 83N.E.2d at 274. Indeed, these distinctions raise questions of whether a covenant was createdor whether the document was an impermissible attempt to avoid taxation by not conveyinga property interest in the deed while later claiming that a vested interest had been bestowedin order to avoid the rule against perpetuities. See Fairways of Country Lakes TownhouseAss'n v. Shenandoah Development Corp., 113 Ill. App. 3d 932, 935, 447 N.E.2d 1367, 1369(1983) (the agreement was not a covenant per se, but a reservation of rights).

If the document had been written differently, these distinctions would be more centralto our discussion. Plaintiffs' interpretation rests upon an apparent contradiction betweenclaiming that the covenant created only personal benefits and claiming that it ran with theland. A closer look at the language of the document, however, clears up what wouldotherwise seem to be a contradiction. The covenant in this case made no claim for the benefitto run with the land. The covenant in this case states that the running with the land was onlyto the binding of the heirs, personal representatives, and assigns of tracts 1 and 3.

The questions of whether a covenant binds the successors of a party and whether thesuccessors of another party may enforce a covenant are distinct matters of contractual intentthat should be viewed separately. This is an accurate statement of the law, both now and atthe time the parties entered into the agreement. Compare Restatement of Property:Servitudes