Beattie v. State ex rel. Grand River Dam Authority

2002 OK 3, 41 P.3d 377, 73 O.B.A.J. 137, 2002 Okla. LEXIS 3, 2002 WL 49964

• Court: Supreme Court of Oklahoma
• Decided: January 15, 2002
• Docket: No. 91,359
• Status: Published

Opinions

PER CURIAM.

{1 This matter comes to the Court upon certiorari asking (1) whether certain relocation and removal rights held by the seller in connection with five utility easements were assignable so that those rights were transferred to the purchaser of the servient estate through an executed quitclaim deed, and (2) did a "subject to" clause in the quitelaim deed reserve the relocation and removal rights in the seller or otherwise prevent those rights from passing to the purchaser of the servient estate? We find that there are controverted material facts relating to whether the relocation and removal rights held by the seller were assignable so that those rights were transferred to the purchaser of the servient estate through the executed quitelaim deed. 'We also find, if the rights are determined to be assignable, the "subject to" clause did not reserve or otherwise prevent the relocation and removal rights from passing to the purchaser of the servient estate.

I. Factual Backgrdund

T2 The essential facts are not in controversy. Plaintiffs, Edward Beattie and Walter Bailey, Jr., purchased property from the United States of America in 1996. The U.S. conveyed the property to Plaintiffs by a quitclaim deed. The property conveyed was burdened by five utility easements that the U.S. had granted to the Defendant, Grand River Dam Authority (GRDA), at various points from 1960 through 1979. Four of the casements were for a limited fifty year term and were given at no cost to GRDA. The fifth, a perpetual easement, was given for nominal consideration. Each of the five easements contained a provision which gave the U.S. the right to require relocation or removal of GRDA's facilities should the property occupied by the facilities be "needed by the United States, or in the event the existence of said facilities shall be considered detrimental to governmental activities[.]" ¹

13 The quitclaim deed from the U.S. to Plaintiffs conveyed "all of its [United States] right, title and interest in the following de-seribed property" and specifically reserved to the U.S. certain mineral interests and a flow-age easement. The quitclaim deed contained a "subject to" clause that read as follows:

This deed and conveyance is expressly made subject to the following matters to the extent and only to the extent the same are valid and subsisting and affect the property:

a. Existing easements for public roads and highways, rights of way for railroads, pipelines, drainage ditches and public utilities, if any, whether or not shown of record. (Emphasis added).

In addition, the "subject to" clause specifically listed three of the five easements at issue.

T4 After Plaintiffs acquired the property, they began making plans to develop the tract as a waterfront subdivision. Plaintiffs asked GRDA to relocate its facilities underground or remove them from the newly purchased property. In support of their request, Plaintiffs referenced the provision contained in each of the easements which granted the U.S. the right to demand relocation or removal should the U.S. need the property. Plaintiffs contended the relocation or removyal rights were transferred or assigned to them by the U.S. through the quitclaim deed.

15 GRDA refused to either remove or relocate the facilities. As a result Plaintiffs filed this lawsuit seeking to enforce their rights under the easements. Both Plaintiffs and GRDA moved for summary judgment. The trial court granted GRDA's motion and denied Plaintiffs', resulting in this appeal. The Court of Civil Appeals affirmed the decision of the trial court, upholding the summary judgment in favor of Defendant, GRDA. This Court then granted certiorari.

II. Standard of Review

T6 This Court's standard of review upon summary judgment is de novo, meaning without deference, because "the ultimate decision turns on purely legal determinations, i.e. whether one party is entitled to judgment as a matter of law because there are no material disputed factual questions. We, like the trial court, will examine the pleadings and evidentiary materials submitted by the parties to determine if there is a genuine issue of material fact. Further, all inferences and conclusions to be drawn from the evidentiary materials must be viewed in the light most favorable to the non-moving party." Carmichael v. Beller, 1996 OK 48, 914 P.2d 1051, 1053 (citations omitted).

IIL - Were the Relocation and Removal Rights Assignable?

17 Plaintiffs acquired the real property burdened by GRDA's easements from the U.S. by quitclaim deed. A quitclaim deed executed in a form prescribed by statute conveys all right, title and interest of the grantor of the land. 16 O.S.1991 18; Bonebrake v. McNeill, 1971 OK 146, 491 P.2d 269. Accordingly, Plaintiffs acquired every interest of the U.S. in the real property that was not reserved in the quitclaim deed, unless that interest was not freely assignable. GRDA contends the relocation and removal rights held by the U.S. in connection with the utility easements were not assignable and therefore did not pass to Plaintiffs when they received the quitclaim deed.

18 The relocation and removal rights held by the U.S. were created in paragraph 11 of the easement grants between the U.S. and GRDA. When interests in or rights to property are created by deed, the deed should be interpreted and meaning of the parties thereto ascertained in the same manner as govern other written contracts. Jennings v. Amerada Petroleum Corp., 1937 OK 228, 179 Okla. 561, 66 P.2d 1069, 1071. In determining whether the rights under a contract are assignable the Court must look at the construction of the contract itself and "every case must turn at last upon the intention of the parties." Minnetonka Oil Co. v. Cleveland Vitrified Brick Co., 1910 OK 279, 27 Okla. 180, 111 P. 826, 829.

{9 Oklahoma has long held that rights under a contract are presumed to be assignable, unless the parties expressly provide otherwise.² Id. at 382; See also Earth Products Co. v. Oklahoma City, 1968 OK 89, 441 P.2d 399, 404. This presumption of as-signability is in keeping with a long tradition to encourage economic and commercial development, "with a view that whatever one owns cannot be rendered valueless as an asset in business and trade." Minnetonka, 111 P. at 382 Another commentator has suggested that a presumption of assignability for all contracts is consistent with the fundamental policy that "free alienability ... is essential to commerce." JOHN D. CALAMARI & JOSEPH M. PERRILLO, CONTRACTS 683, n. 138 (8d ed.1987).

However, Oklahoma case law has also recognized that certain rights and duties under a contract are too personal in character to permit them to be assigned. Minne-tonka, 111 P. at 329; Earth Products Co., 441 P.2d at 404. These cases rest on the proposition that when the personal qualities of either party are material to the contract, an assignment would amount to a material change in the terms of the contract.³ In Minnetonka Oil v. Cleveland Vitrified Brick Co., 27 Okla. 180, 111 P. 326 (Okla.1910), the Court examined an assigned gas supply contract. Although the gas supply contract contained no express provision prohibiting assignment, the obligor gas company sought to relieve itself of its obligation under the contract by asserting that the assignment of the contract breached its terms. Although the Minnetonka court rejected this argument, it recognized that even in the absence of an explicit provision prohibiting assignment, a contract may by its nature or terms be too personal in character to be freely assigned. The Minnetonka Court observed that in some contracts the "skill, credit, or some other personal quality or cireumstances" of a party may be a material inducement to the contract.⁴ In these situations, "performance by another would be an essentially different thing from that contracted for." ⁵ Minnetonka, 111 P. at 329.

111 Relying on this exception, GRDA argues that the relocation and removal rights created in the easements are too personal in character to permit them to be assigned. Specifically, GRDA asserts that it expected the U.S., and no one else, to exercise the relocation and removal rights. GRDA argues that it would never have made substantial improvements to the property otherwise.

112 In evaluating GRDA's contention that the U.S. possessed relocation and removal rights too personal in nature to be assigned without the consent of GRDA, we are presented with a question of contract construction. Id. The easement instruments must serve as the seminal gauge of the parties' intent. Id. at 331; See also Earth Products, 441 P.2d at 404-05. In every case, this question must turn upon the intention of the parties as manifested in the agreement itself. Minnetonka, 111 P. at 329. If the intention of the parties to the deed is plain and unambiguous, that intention must be ascertained solely from the language used in the conveyance. Messner v. Moorehead, 787 P.2d 1270, 1990 OK 17. If the court determines the deed is ambiguous, extrinsic evidence may be used to determine the intent of the parties. Crockett v. McKenzie, 867 P.2d 463, 1994 OK 3.

113 In our view, the language of paragraph 11 does not unambiguously resolve the issue of whether the relocation and removal rights are too personal in character to permit them to be assigned. The instruments themselves contain no express provisions limiting or prohibiting assignment of the relocation and removal rights. Paragraph 11 does not specifically limit or restrict in any substantial fashion the manner in which the U.S., as owners of the servient estate, can exercise the rights. On the contrary, the instruments allowed the U.S. to exercise the relocation and removal rights if the land occupied by the facilities was merely "needed" or the facilities were "detrimental to governmental activities[.]"

[ 14 On the other hand, paragraph 11 contains some language which might be construed in such a fashion to warrant the conclusion that the relocation and removal rights are so personal that they may not be freely assigned. For example, paragraph 11 conditions the exercise of the relocation and removal rights on the land occupied by the facilities being "needed by the United States" or the existence of the facilities being "detrimental to governmental activities[.]' The easements also provide that relocation or removal of facilities may only be required at the direction of the "officer having immediate jurisdiction over the property." (emphasis added).

T15 We view paragraph 11 as possessing an intrinsic uncertainty, shown within the four corners of the instrument, relating to whether the relocation and removal rights are so personal that they may not be freely assigned. Accordingly, we remand to the trial court, for the trier of fact, to ascertain the provision's true meaning by considering relevant parole and extrinsic evidence that bears on the parties' intent. If the trier of fact determines that the rights are freely assignable it must decide another issue, whether Plaintiffs' needs or activities with respect to developing the purchased property actually require the relocation or removal of the GRDA's facilities.

IV. The "Subject to" Clause in the Quitclaim Deed from the U.S. to Plaintiffs Did Not Reserve the Relocation and Removal Rights in the U.S. or Prevent Those Rights from Passing to the Plaintiffs if the Trial Court Upon Remand Determines The Rights Were Freely Assignable

{16 The quitclaim deed executed by the U.S. stated the conveyance to Plaintiffs was "subject to". existing easements for public utilities. The Court of Civil Appeals opinion implies the "subject to" clause reserved all the referenced servient easement rights; including the relocation and removal rights in the U.S. Plaintiffs argue on certiorari that the Court of Civil Appeals incorrectly analyzed the legal impact of the "subject to" clause. Because GRDA could prevail in the event the "subject to" clause either reserved the relocation and removal rights in the U.S. or otherwise prevented those rights from passing to the Plaintiff, this Court must address the effect of the "subject to" clause.

T17 The "subject to" clause in the quitclaim deed did not reserve the relocation and removal rights in the U.S. The words "subject to" are frequently used in conveyances and have historically been interpreted as meaning "subordinate to," "subservient to," "limited by," or "charged with." Hendrickson v. Freericks, 620 P.2d 205, 209 (Alaska 1980). The Hendrickson court observed that:

When used in a deed these words are generally regarded as terms of qualification, not contract. They serve to put a purchaser on notice that he is receiving less than a fee simple. There is nothing in their use which connotes a reservation or retention of property rights.

Hendrickson, 620 P.2d at 209 (emphasis added) (citations omitted); See also Hancock v. Planned Dev. Corp., 791 P.2d 183, 186 (Utah 1990) (quoting Hendrickson); Wild River Adventures, Inc. v. Board of Trustees of School Dist. No. 8, 248 Mont. 397, 812 P.2d 344, 347 (1991) ("There is nothing in the use of the words 'subject to', in their ordinary use, which would even hint at the creation of affirmative rights or connote a reservation or retention of property rights.").

{ 18 Similarly, the language of the "subject to" clause did not prevent the relocation and removal Tights from passing to the Plaintiffs, if the trier of fact determines upon remand that the rights were freely assignable.⁶ Holdings from this Court, reviewing language similar in effect to that of a "subject to" clause, have stated that a conveyance instrument containing terms such as "except right of way" or "less the right of way" successfully convey the grantor's entire interest in the servient estate, while recognizing the encumbrance. Jennings v. Amerada Petroleum Corp., 66 P.2d at 1071 (considering language "except right of way" and "less the right of way") and Putnam v. Oklahoma City, 1950 OK 272, 203 Okla. 570, 224 P.2d 270, 272 (considering language "except right of way"). Such words of qualification are simply not intended "to pass a less estate than the whole or entire interest of the grantor therein." Jennings, 66 P.2d at 1071.

V. Conclusion

119 We find that there are controverted material facts relating to whether the relocation and removal rights held by the seller were assignable so that those rights were transferred to the purchaser of the servient estate through the executed quitclaim 'deed.

We also find that if the rights are determined to be assignable, the "subject to" clause did not reserve or otherwise prevent the relocation and removal rights from passing to the purchaser of the servient estate. On remand the trier of fact is directed to determine whether the relocation and removal rights held by Plaintiffs in connection with the five utility easements were freely assignable. If the trier of fact determines that the rights were freely assignable, it must decide another issue, whether Plaintiffs' needs or activities with respect to developing the purchased property actually require the relocation or removal of the GRDA's facilities.

120 REHEARING GRANTED; THE OPINION OF THE COURT ISSUED MAY 15, 2001, IS WITHDRAWN AND THIS OPINION ORDERED SUBSTITUTED THEREFOR; CERTIORARI PREVIOUSLY GRANTED, COURT OF CIVIL APPEALS OPINION VACATED, JUDGMENT OF THE DISTRICT COURT REVERSED WITH INSTRUCTIONS.

T 21 WATT, V.C.J., HODGES, OPALA, SUMMERS, BOUDREAU, JJ.-concur. 1 22 HARGRAVE, C.J.-dissents. 123 KAUGER, J., with whom LAVENDER and WINCHESTER, JJ., join, dissenting.

1 . Paragraph 11, containing the relocation and removal right, reads as follows in each of the respective easements:

That, in the event all or any portion of said land occupied by said facilities shall be needed by the United States, or in the event the existence of said facilities shall be considered detrimental to governmental activities; the grantee shall, from time to time, upon notice so to do, and as often as so notified, remove said facilities to such other location or locations on said land as may be designated by said officer, or the grantee shall reconstruct said facilities underground on said land without expense to the United States, as may be directed by said officer, and in the event said property shall not be removed or relocated within ninety (90) days after any aforesaid notice, the United States may cause the same to be done at the expense of the grantee, provided, however, that if directed to reconstruct its facilities underground the grantee may, at its option, in lieu of taking such action, wholly remove its facilities from lands of the United States as described herein, at which time the right granted herein shall cease but the restoration obligation set forth in Condition No. 13 hereof shall remain.

2 . The Restatement (Second) of Contracts also favors the free assignability of contract rights. It provides:

A contractual right can be assigned unless:

(a) the substitution of a right of the assignee for the right of the assignor would materially change the duty of the obligor, or materially increase the burden or risk imposed on him by his contract, or materially impair his chance of obtaining return performance, or materially reduce its value to him, or

(b) the assignment is forbidden by statute or is otherwise inoperative on grounds of public policy, or

(c) assignment is validly precluded by contract.

Restatement (Second) of Contracts Ch. 15, § 317(2)(a)-(c). The law also favors the free as-signability of property interests generally; it assumes that "they are alienable except in so far as their alienability is restricted by the manner or the terms of their creation." - Restatement of Property Ch. 40 § 489 (comment b); See also Restatement of Property Ch. 40 § 489 (comment a).

The instant controversy involves an attempted assignment of rights and not a delegation of duties.

3 . Minnetonka Oil v. Cleveland Vitrified Brick Co., 1910 OK 279, 111 P. 326; Earth Products Co. v. Oklahoma City, 1968 OK 39, 441 P.2d 399; See also Restatement (Second) of Contracts Ch. 15, § 317(a).

4 . Various courts have employed this rational to prohibit the assignment of a contract for personal services that requires the exercise of knowledge, judgment or skill: a contract to furnish an abstract of title, See Linn County Abstract Co. v. Beechley, 124 Iowa 146, 99 NW. 702 (1904); an agreement to render professional services as a physician, lawyer or architect, See Deaton v. Lawson, 40 Wash. 486, 82 P. 879 (1905) (re: physician); Corson v. Lewis, 77 Neb. 446, 109 N.W. 735 (1906) (re: attorney); Smith v. Bd. Of Education of Liberal, 115 Kan. 155, 222 P. 101 (1924) (re: architect). 6 AmJur 2d Assignments, § 30, pp. 169-70.

A similar rational has been used to prohibit the assignment of a contract which relies for its performance on the integrity, credit or personal responsibility of another. Examples of the application of this rule include: a contract for support and maintenance; a contract where a party is entrusted with funds or property of another; a contract where something remains to be done which an assignee cannot do. 6A C.J.S. Assignments, § 33, p. 636. "The personal confidence which precludes the assignment of rights arising out of a contract must be involved in the nature of the rights themselves." 6A C.J.S. Assignments, § 33, p. 636.

5 . After engaging in the contract construction analysis, the Minnetonka Court determined the parties did not intend to make the contract unas-signable; there was no express provision in the contract to prohibit assignment and no particular element of trust, skill or confidence between the original parties to the contract which would necessitaic performance by the original brick company, rather than an assignee. The Court focused its analysis upon whether a distinctive characteristic or skill was a material inducement to the contract and finding it was not, the Court permitted assignment and directed the gas company to honor the supply agreement. Minnetonka, 27 Okla. 180, 111 P. 326 (1910).

In Earth Products Co., 441 P.2d 399 (Okla.1968) the Court analyzed the role trust, skill or confidence played in the formulation of a licensing agreement allowing the removal of sand from city property, engaging in much the same analysis as the Minnetonka Court. Similarly, the Earth Products court concluded there was no special skill or element of trust material to the formulation of the licensing agreement in question. The Court concluded the license was effectively assigned to a subsequent licensee.

6 . The Court of Civil Appeals opinion incorrectly stated, "[The rights of the United States under the easements were not conveyed to Plaintiffs. This result is consistent with the reservation by the United States of express mineral rights and a flowage easement." The cases cited by the Court of Civil Appeals, Cox v. Butts, 48 Okla. 147, 149 P. 1090 (1915) and Hyman v. District of Columbia, 247 F.2d 585 (D.C.Cir.1957), do not support this ultimate conclusion. Cox examined a promise or covenant made in connection with the land and questioned whether a subsequent assignee was obligated under the covenant simply by virtue of acquiring the property. The instant case focuses on rights that pass with a conveyance and does not involve an affirmative obligation or promise as Cox did. Hyman evaluated what portion of a decedent's estate can be taxed when it is "subject to" a claim of the devisee. Hyman analyzed how the "subject to" language effected the value of the inherited property, particularly for the purposes of inheritance tax. While this Court finds no fault with Eyman's analysis of the qualifying effect of the "subject to" language in a testamentary instrument, the case does not have direct application to the facts of the instant case.