Robert Murray v. Chesapeake Energy Corp

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

ROBERT MURRAY, CHAD ANDERSON,

ANDREA ANDERSON, NORMA BLACK, UNPUBLISHED

ROBERT BURGIN, C & L PROPERTIES OF March 19, 2020

KALKASKA, DAVID CHMIELEWSKI, SUSAN

CHMIELEWSKI, CHRISTINA COLE, SHARON

DETMER, BARRY FOUNTAIN, SHARON

FOUNTAIN, GARY GOLDEN, MELBA

GOLDEN, WILLOWDEEN GOLDEN, RALPH

HARSHMAN, MARCY HARSHMAN, PAUL

HARSHMAN, DIANE HARSHMAN, JUDY

HOEK, LAKE FIVE INVESTMENTS, LLC,

JUDY MURRAY, the FRANK R. PFLUM

TRUST, by ROSE PFLUM, Trustee, NEIL

ROCKEY, MARTHA ROCKEY, LAUREL

ROOT, PATRICIA ROOT, MARK SCHUBEL,

PAT SCHUBEL, RONNIE SHAW, KIM SHAW,

THOMAS P. SHENEMAN, DEAN SIETING,

MICHELE SIETING, TERRY SIETING, JANET

SIETING, SMP INVESTMENT

CORPORATION, INC., SUNSET SHORES

DEVELOPMENT, SUNSET SHORES

FINANCIAL, INC., CALVIN TERHAAR, GAIL

TERHAAR, MIKE WOODMAN, CHRIS

WOODMAN, LAURA ZINGG RONALD

ZINGG, and NANCY ZINGG,

Plaintiffs-Appellants,

v No. 346062

Kalkaska Circuit Court

CHESAPEAKE ENERGY CORPORATION, OIL LC No. 14-011789-CH

NIAGARAN, LLC, NORTHERN MICHIGAN

EXPLORATION COMPANY, SILVER LAKE

ENERGY, LLC, REDSKY LAND, LLC, and OIL

ENERGY CORPORATION,

Defendants-Appellees.

-1-

Before: O’BRIEN, P.J., and JANSEN and GLEICHER, JJ.

PER CURIAM.

Various oil and gas companies planned to explore for minerals in the northern lower

peninsula and arranged to pay signing bonuses to landowners willing to lease their mineral rights.

Before all the agreements were reduced to writing, the companies changed their minds. In a

separate action, those landowners who had executed agreements with the oil and gas companies

received their signing bonuses. The plaintiffs in this appeal did not have completed agreements

and were not part of that earlier settlement. The circuit court summarily dismissed plaintiffs’

current breach-of-contract action because the leasing “agreements” did not comport with the

statute of frauds. We affirm.

I. FACTS

Plaintiffs are landowners in Kalkaska, Antrim, Cheboygan, Missaukee, and Grand

Traverse Counties. In 2010, a number of companies were interested in obtaining leases for mineral

rights for oil and gas. One of these companies, defendant Chesapeake Energy Corporation, worked

through defendant Silver Lake Energy, LLC to acquire access to private land by contracting for

leases with various landowners. An employee of Silver Lake, Al Couturier, entered into leasing

discussions with Robert Murray, one of the plaintiffs. In addition to offering to lease the land, the

companies offered to pay up-front “signing bonuses” to various property owners. The bonuses

would be paid to the landowner regardless of whether defendants drilled any wells on the property

or paid any future royalties. Murray, who allegedly owned more than 2,000 acres (some with

coowners) advised Couturier that he would represent the interests of certain other owners,

collectively the “Group A plaintiffs.”

On June 16, 2010, Couturier and Murray signed a letter of intent (LOI), providing that

Murray and his coowners would lease the land in which Murray had an interest in exchange for a

signing bonus of $1,900 an acre. Attached to this document as Exhibit A was a list of the coowners,

listed by name and property description. Two of these parties included C&L Properties of

Kalkaska and the Frank R. Pflum Trust. The LOI included a specific royalty payment for oil and

gas removed from the land and a lease term. The LOI also stated that the parties agreed to execute

the “Oil and Gas Lease attached hereto as exhibit A” contemporaneously with the execution of the

LOI. However, Exhibit A did not contain a separate lease; it contained only the list of properties

and owners, and a “market enhancement clause.” In addition, under the terms of the LOI, Silver

Lake had five days to approve the terms of the LOI and an additional seven to “deliver to owner a

completed lease and method of payment of said bonus consideration[.]” An addendum to the LOI,

also signed on June 16, 2010, provided in part that Murray was only representing the other

landowners in entering into the LOI and that the other owners would be responsible for their own

negotiations.

On June 25, 2010, Murray and Couturier signed another agreement (the “June 25

agreement”) that provided:

-2-

The undersigned referral agent and the undersigned oil, gas, mineral agent

(landman) agree to the following:

Murray, the referring agent, from time to time will provide the landman

names and contact information of property/mineral owners for him to contact.

Landman understands that Murray has an agreement in writing with the

property/mineral owners providing the terms for a fee to be paid to Murray, and

Murray agrees to provide landman with a full executed copy of said agreement.

Landman agrees to honor that agreement and pay the referral fee to Murray, and

said fee shall be deducted from lessors[’] bonus proceeds at the agreed percentage

of proceeds as stated in said agreement, a copy of which is attached hereto.

Also, prior to landman submitting payment of said fee to Murray, the

property/mineral owner/lessor must execute a payment directive authorizing

landman to pay said fee to Murray. This payment directive must be provided to

landman at the same time any oil and gas lease is executed by the property/mineral

owner.

The agreement contained an attached “Exhibit A,” which did not list any individual landowners.

It contained a table listing townships, acres of land, and a column titled “description,” which

contained what appears to be a list of the sections in the respective townships in which the parcels

were located, such as “28N-6W.” The exhibit also contained the notations “$1,750 per ac.,” “3/16

Royalty,” and “5+5.” These additional landowners are referred to as the “Group B plaintiffs.”

According to Murray, he met with individual Group B landowners and many signed

referral agreements. Murray claimed that he referred all of the Group B landowners to defendants

and provided defendants with the signed referral agreements. Couturier testified in his deposition

that Murray brought Silver Lake copies of the referral agreements, names of potential lessors, plat

maps and legal descriptions for lessors, and potential lessors other than those initially listed in

Exhibit A of the LOI. The referral agreements signed by the Group B plaintiffs specifically stated

that in exchange for a 10% referral fee taken from the initial royalty bonus, “[Murray] will give

your contact information to oil landmen he has a relationship with. If you do not do business with

them, you have no obligation to Murray.”

At least three leases were signed by Group A plaintiffs: those for C&L, the Pflum Trust,

and one for property owned by Level Acres, which raises no challenges on appeal. However, none

of the Group B plaintiffs entered into separate LOIs or leases with defendants. Indeed, Silver Lake

had yet to return the completed leases to Murray for the landowners’ signatures before outside

considerations caused Chesapeake to reconsider its mineral exploration plan. According to

plaintiffs, Chesapeake and the other gas and oil companies decided to withdraw from their leasing

ventures. In an e-mail exchange on July 25, 2010, Chesapeake instructed Silver Lake to freeze all

acquisition and leasing efforts.

Plaintiffs filed suit on October 23, 2014, raising claims that included breach of contract

and promissory estoppel. While this suit was pending, the Michigan Attorney General initiated a

separate proceeding against Chesapeake pursuant to the Michigan Antitrust Reform Act, MCL

-3-

445.771 et seq. Eventually, the state and Chesapeake reached a settlement under which

Chesapeake set up a fund to pay private landowners who had signed “enforceable” oil and gas

leases with Chesapeake’s affiliates in 2010. To receive payment from the fund, qualified

landowners were first required to execute a release. Plaintiffs C&L and the Pflum Trust were

among the landowners entitled to receive payment from the fund, and individuals purporting to

represent those plaintiffs signed releases.

This matter moved forward. Defendants ultimately sought summary disposition and the

circuit court found that the LOI contained the necessary elements to constitute a valid agreement

for Chesapeake to enter into a future agreement with the Group A plaintiffs. The court noted that

Murray signed the agreement on behalf of himself and the Group A plaintiffs, and that the

agreement listed the other landowners, the properties involved, and the consideration. The circuit

court agreed with defendants that the LOI itself did not satisfy the statute of frauds, MCL 566.108,

because the Group A plaintiffs failed to give Murray written authority to enter into the agreement

on their behalves. However, the court also found that if defendants had acted as they agreed to

under the LOI and in accordance with their assurances to the Group A plaintiffs, those plaintiffs

would have had written leases that would have adequately satisfied the statute of frauds. The court

thus held that the Group A plaintiffs’ inability to sign the leases could not be used by defendants

to avoid liability. The court also held that the Group A plaintiffs had stated a valid claim for

equitable (actually promissory) estoppel.

The Group B plaintiffs did not fare as well. The court found that these plaintiffs did not

have an LOI that identified them. Viewing the evidence in a light most favorable to the plaintiffs,

the court noted that a bonus per acre amount was set, but none of the Group B plaintiffs were

identified at the time of the referral agreement. Therefore, the agreement was unenforceable.

Following a separate summary disposition motion, the circuit court dismissed the

remaining claims of the Pflum Trust and C&L involving their “nonleased” properties (those for

which no lease had been entered with defendants). The court emphasized that these plaintiffs’

representatives had collected compensation from the fund in relation to the lands over which leases

had been entered, and had signed the required releases. Those releases applied to all claims

involving the Pflum Trust’s and C&L’s properties, not just those for which compensation was

paid. The circuit court denied these plaintiffs’ motion for reconsideration and a third motion

claiming that the Pflum Trust release was invalid.

The parties subsequently reached a settlement that resolved all of the Group A plaintiffs’

claims. Thus, the only claims remaining on this appeal are those of the Group B plaintiffs, C&L,

and the Pflum Trust.

II. CLAIMS OF THE GROUP B PLAINTIFFS

The Group B plaintiffs maintain that they are entitled to the signing bonus amount of

$1,750 an acre pursuant to the June 25 agreement, which they contend is not governed by the

statute of frauds. They also maintain that, if the statute of frauds does apply, the circuit court erred

by failing to review the June 25 agreement in conjunction with the LOI and other documentation

submitted by plaintiffs. Plaintiffs further argue that they qualify as third-party beneficiaries of the

June 25 agreement.

-4-

The circuit court determined that the statute of frauds barred the Group B plaintiffs’ claims

because the June 25 agreement did not identify them and they never entered into any agreement

addressing the material terms between them and Chesapeake. Thus, the issue whether the statute

of frauds applies and whether it was satisfied by the June 25 agreement is preserved. However,

plaintiffs did not contend that the court could consider extrinsic evidence to determine the rights

of the Group B plaintiffs until their motion for reconsideration. “Where an issue is first presented

in a motion for reconsideration, it is not properly preserved.” Vushaj v Farm Bureau Gen Ins Co

of Mich, 284 Mich App 513, 519; 773 NW2d 758 (2009). Moreover, plaintiffs never argued below

that the agreement between Murray and Silver Lake created a third-party beneficiary claim for the

benefit of the Group B plaintiffs. However, we “may review an unpreserved issue if it is an issue

of law for which all the relevant facts are available.” Id.

We review de novo a circuit court’s summary disposition ruling. Zaher v Miotke, 300 Mich

App 132, 139; 832 NW2d 266 (2013). The circuit court granted defendants’ motion under MCR

2.116(C)(10). In reviewing a motion brought under (C)(10), we consider the “affidavits,

pleadings, depositions, admissions, and other evidence submitted by the parties in the light most

favorable to” the nonmoving party to determine whether “the substantively admissible evidence”

creates a genuine issue of material fact that should proceed to trial. Maiden v Rozwood, 461 Mich

109, 119-121; 597 NW2d 817 (1999).

We review de novo as questions of law “whether contract language is ambiguous” and “the

proper interpretation of a contract.” Klapp v United Ins Group Agency, Inc, 468 Mich 459, 463;

663 NW2d 447 (2003). Similarly, the interpretation of a statute is a question of law to be reviewed

de novo. Lear Corp v Dep’t of Treasury, 299 Mich App 533, 537; 831 NW2d 255 (2013).

However, we review plaintiffs’ unpreserved claims for plain error affecting substantial rights.

Total Armored Car Serv, Inc v Dep’t of Treasury, 325 Mich App 403, 412; 926 NW2d 276 (2018).

“To merit relief, the injured party must show prejudice, i.e., that the error affected the outcome of

the . . . proceedings.” Id.

The June 25 agreement, even when considered in conjunction with the other writings

presented, does not satisfy either the “form” or “substance” requirements of the statute of frauds

as it applies to an interest in land. Plaintiffs have also failed to show that they qualify as intended

third-party beneficiaries of the June 25 agreement.

In AFT Mich v Michigan, 303 Mich App 651, 661; 846 NW2d 583 (2014), aff’d 497 Mich

197 (2015), this Court stated:

A party claiming a breach of contract must establish by a preponderance of

the evidence (1) that there was a contract, (2) that the other party breached the

contract and, (3) that the party asserting breach of contract suffered damages as a

result of the breach. A valid contract has five elements: (1) parties competent to

-5-

contract, (2) a proper subject matter, (3) a legal consideration, (4) mutuality of

agreement, and (5) mutuality of obligation. [Cleaned up.1]

“Our goal in contract interpretation is to give effect to the intent of the parties, to be determined

first and foremost by the plain and unambiguous language of the contract itself.” Wyandotte

Electric Supply Co v Electrical Technology Sys, Inc, 499 Mich 127, 143-144; 881 NW2d 95

(2016). However, “[w]ords should not be construed in the void, but should be read together to

harmonize the meaning, giving effect to the agreement as a whole.” Thiel v Goyings, 504 Mich

484, 501; ___ NW2d ___ (2019) (cleaned up.) “[W]here a term is not defined in a contract, we

will interpret such term in accordance with its commonly used meaning.” Bloomfield Estates

Improvement Ass’n, Inc v City of Birmingham, 479 Mich 206, 215; 737 NW2d 670 (2007) (cleaned

up).

A. STATUTE OF FRAUDS

In Michigan, with one exception, “the form of a contract for the sale or lease of land is

dictated by the statute of frauds.” Zurcher v Herveat, 238 Mich App 267, 276; 605 NW2d 329

(1999). MCL 566.106 and MCL 566.108 make up Michigan’s statute of frauds and provide:

No estate or interest in lands, other than leases for a term not exceeding 1

year, nor any trust or power over or concerning lands, or in any manner relating

thereto, shall hereafter be created, granted, assigned, surrendered or declared,

unless by act or operation of law, or by a deed or conveyance in writing, subscribed

by the party creating, granting, assigning, surrendering or declaring the same, or by

some person thereunto by him lawfully authorized by writing. [MCL 566.106.]

Every contract for the leasing for a longer period than 1 year, or for the sale

of any lands, or any interest in lands, shall be void, unless the contract, or some

note or memorandum thereof be in writing, and signed by the party by whom the

lease or sale is to be made, or by some person thereunto by him lawfully authorized

in writing . . . . [MCL 566.108.]

“Simply put, . . . a contract for the sale of land must, to survive a challenge under the statute of

frauds, (1) be in writing and (2) be signed by the seller or someone lawfully authorized by the

seller in writing.” Zurcher, 238 Mich App at 277. “Contracts conveying an interest in land made

by an agent having no written authority are invalid under the statute of frauds unless ratified by

the principal.” Forge v Smith, 458 Mich 198, 208-209; 580 NW2d 876 (1998).

There are also requirements for the substance of a contract for the sale of land. Zurcher,

238 Mich App at 276.

1

This opinion uses the new parenthetical “cleaned up” to improve readability without altering the

substance of the quotation. The parenthetical indicates that nonsubstantive clutter such as brackets,

alterations, internal quotation marks, and unimportant citations have been omitted from the

quotation. See Metzler, Cleaning Up Quotations, 18 J App Pract & Process 143 (2017).

-6-

A general requirement for a valid contract for the sale of land is that it

contain certain essential elements. 77 Am Jur 2d, Vendor and Purchaser, § 5, p

121. More specifically, “such a contract must generally be in writing and must set

forth the terms of the agreement with sufficient certainty and definiteness,

specifying the identities of the parties and their mutual assent, the property which

is the subject of the contract, the price of such property, and the consideration.” Id.

at 121-122. [Zurcher, 238 Mich App at 282.]

One essential element is “an adequate description of the land be included in the contract.” Id.

“Such a description is acceptable ‘if it discloses with sufficient certainty what the intention of the

grantor is with respect to the quantity and location of the land to which reference is made so that

its identification is practicable.’ ” Id., quoting 77 Am Jur 2d, Vendor and Purchaser, § 11, p 126.

A second essential element, “the identification of the parties,” is met “by designating ‘the names

of the buyer and the seller with sufficient certainty so as to identify them.’ ” Zurcher, 238 Mich

App at 282, quoting 77 Am Jur 2d, Vendor and Purchaser, § 12, p 127. A third is “consideration,”

which requires the contract “ ‘either set forth the price to be paid by the purchaser or furnish a

basis from which the price may be ascertained.’ ” Zurcher, 238 Mich App at 282, quoting 77 Am

Jur 2d, Vendor and Purchaser, § 8, p 124.

Plaintiffs correctly posit that the circuit court should have looked at the LOI and the June

25 agreement together, although it is not clear that the circuit court failed to do so. The writing

requirement of the statute of frauds “may be satisfied by several writings made at different times,”

or a series of writings, “ ‘up to the time the action is brought to enforce the contract,’ ” as long as

the documents considered together establish the agreement’s essential terms. Kelly-Stehney &

Assoc, Inc v MacDonald’s Indus Prod, Inc (On Remand), 265 Mich App 105, 113-114; 693 NW2d

394 (2005), quoting 4 Corbin, Contracts (rev ed), § 22.8, p 773. See also Opdyke Investment Co

v Norris Grain Co, 413 Mich 354, 367; 320 NW2d 836 (1982) (“[T]he ‘nothing in parol’ approach

to the statute of frauds has been so dishonored in this Court that it has lost any claim to

legitimacy.”). However, “extrinsic evidence may be used to supplement, but not contradict, the

terms of the written agreement.” Id.

More generally, Michigan courts allow extrinsic evidence to be used to explain a “patent”

ambiguity or to discover and interpret a “latent” ambiguity in a contract.

An ambiguity may either be patent or latent. This Court has held that

extrinsic evidence may not be used to identify a patent ambiguity because a patent

ambiguity appears from the face of the document. However, extrinsic evidence

may be used to show that a latent ambiguity exists. . . . A latent ambiguity . . . is

one that does not readily appear in the language of a document, but instead arises

from a collateral matter when the document’s terms are applied or executed.

Because the detection of a latent ambiguity requires a consideration of factors

outside the instrument itself, extrinsic evidence is obviously admissible to prove

the existence of the ambiguity, as well as to resolve any ambiguity proven to exist.

A latent ambiguity exists when the language in a contract appears to be clear

and intelligible and suggests a single meaning, but other facts create the necessity

for interpretation or a choice among two or more possible meanings. To verify the

-7-

existence of a latent ambiguity, a court must examine the extrinsic evidence

presented and determine if in fact that evidence supports an argument that the

contract language at issue, under the circumstances of its formation, is susceptible

to more than one interpretation. Then, if a latent ambiguity is found to exist, a court

must examine the extrinsic evidence again to ascertain the meaning of the contract

language at issue. [Shay v Aldrich, 487 Mich 648, 668; 790 NW2d 629 (2010)

(cleaned up).]

However, “[p]arol evidence under the guise of a claimed latent ambiguity is not permissible

to vary, add to or contradict the plainly expressed terms of [a] writing or to substitute a different

contract for it to show an intention or purpose not therein expressed.” Mich Chandelier Co v

Morse, 297 Mich 41, 48; 297 NW 64 (1941) (cleaned up). Also, as a general rule, “a court must

never cross the point at which the written contract is altered under the guise of contract

interpretation.” Grosse Pointe Park v Mich Muni Liability & Prop Pool, 473 Mich 188, 218; 702

NW2d 106 (2005). Extrinsic evidence thus cannot be used to contradict the clear language of an

agreement.

The June 25 agreement is subject to the statute of frauds because it involves “an estate or

interest in lands, other than [a lease] for a term not exceeding 1 year, . . . any trust or power over

or concerning lands, or in any manner relating thereto.” MCL 566.106. Although plaintiffs

characterize this agreement as involving the mere payment of money, the agreement provides on

its face that it relates to the lease of land. Moreover, plaintiffs claim that they are entitled to the

signing bonuses based on their status as landowners and defendants’ status as lessees of plaintiffs’

mineral rights. Therefore, plaintiffs were required to provide substantively admissible evidence

that satisfied both the form and substance requirements of the statute of frauds with respect to the

Group B plaintiffs’ properties in order to survive summary disposition.

Contrary to plaintiffs’ contentions, the June 25 agreement on its own is the underlying

contract in this case, although the LOI and other documents entered by the various parties are

relevant to fleshing out the terms of the June 25 agreement. In this regard, we note that the LOI

makes no mention of the Group B plaintiffs as they were not even in contemplation at that point.

Indeed, the June 25 agreement only alludes to Group B plaintiffs. The LOI and the June 25

agreement are also fundamentally different. The LOI relates to an ongoing “agreement to agree”

between the landowners and Silver Lake. The June 25 agreement discusses Murray’s right to a

referral fee from various landowners he would connect with defendants. Plaintiffs contend that

the June 25 agreement includes an essentially hidden promise by Chesapeake to lease the Group

B plaintiffs’ mineral rights. Ultimately, however, other documents such as the LOI, the referral

agreements and their included property descriptions, and any lists created by Chesapeake can be

considered to flesh out the June 25 agreement, Thiel, 504 Mich at 501, but those other documents

may not be used to alter, vary, or contradict the June 25 agreement’s otherwise plain and

unambiguous terms. See Grosse Pointe Park, 473 Mich at 218; Opdyke, 413 Mich at 367; Mich

Chandelier Co, 297 Mich at 48.

Plaintiffs imply that the June 25 agreement meets the form and substance requirements of

the statute of frauds because it identifies the parties (Murray and Chesapeake), refers to specific

consideration of 10% of the landowners’ $1,750-an-acre signing bonus, and identifies the relevant

properties, particularly when coupled with the property descriptions in the later referrals. This

-8-

would arguably be correct if Murray were suing for payment of the 10% referral fee. However,

because plaintiffs are claiming that the June 25 agreement entitles them to payment of the signing

bonus, they must meet the requirements in connection with the leases—or potential leases—of

their own properties.

With respect to the Group B plaintiffs, neither the June 25 agreement standing alone nor

all the documents considered together meet the “form” requirements to satisfy the statute of frauds.

The June 25 agreement is in writing, but it is not “signed by the seller or someone lawfully

authorized by the seller in writing.” Zurcher, 238 Mich App at 277. The other documents do not

mend this deficiency. The LOI makes no mention of the Group B plaintiffs and Murray did not

sign the LOI on the Group B plaintiffs’ behalf (he signed it on behalf of himself and the Group A

plaintiffs). Chesapeake’s lists of properties contain no signatures. The only documents that some

of the Group B plaintiffs personally signed were the releases, but those documents clearly state

that plaintiffs had to yet to enter any mineral lease agreements. And no document signed by

Murray could bind the Group B plaintiffs; he did not have that authority. Even if Murray could

bind them, the Group B plaintiffs never argued that Murray actually signed a lease or an LOI on

their behalf. The June 25 agreement is not an LOI or a lease, and the LOI Murray did sign

specifically includes only the Group A plaintiffs. There simply are no writings that show that

Murray had explicit authority to enter into either the June 25 agreement or to sign any other lease

documents on behalf of the Group B plaintiffs. To the contrary, the deposition testimony shows

that he did not.

Plaintiffs also rely on statements in Couturier’s affidavit and deposition that a “Joe

McFerron” authorized Couturier to contract with the Group B plaintiffs by use of the LOI and June

25 agreement instead of the usual oil and gas leases because Silver Lake’s offices were busy, or

that McFerron agreed to pay the bonuses if “Murray and his people” agreed to sign the leases.

However, any statements attributable to McFerron would be inadmissible hearsay. MRE 801;

MRE 802. In any event, McFerron’s alleged statements are not evidence that the Group B

plaintiffs either considered Murray their agent or were willing to sign leases without negotiation,

thus ratifying Murray’s actions on their behalf. Ultimately, plaintiffs have presented no

substantively admissible evidence, such as affidavits from any of the Group B landowners, that

they were prepared to sign a lease with Chesapeake, that they intended Murray to act as their agent

in order to sign an LOI or lease or on their behalf, or that they ratified any attempt by Murray to

act on their behalf.

For these reasons, we hold that the Group B plaintiffs have failed to meet the “form”

requirements to satisfy the statute of frauds. The failure in form renders irrelevant whether the

statute of frauds “substance” requirements were met and we need not consider the parties’

additional challenges.

B. AVOIDABILITY OF THE STATUTE OF FRAUDS

Plaintiffs also raise a modified version of their argument below that defendants’ actions

should prevent them from relying on the statute of frauds as a defense. Plaintiffs appear to now

argue that defendants’ abandonment of the mineral exploration plan and subsequent failure to pay

signing bonuses to those landowners with whom it had actually contracted somehow transforms

the contract into one for the payment of money, rather than an interest in land. The cases cited by

-9-

plaintiffs do not support this claim. Instead, they only support the general proposition that a party

to a contract cannot be allowed to rely on that party’s own failure to perform as a condition to

defeat the contract. See Stanton v Dachille, 186 Mich App 247, 258; 463 NW2d 479 (1990).

Further, an analysis similar to that applied by the circuit court to the Group A plaintiffs to

avoid application of the statute of frauds, even if correct, will not aid the Group B plaintiffs. The

circumstances of the Group A plaintiffs are factually distinguishable from those in Group B.

Murray had signed a LOI on behalf of himself and the Group A plaintiffs. Murray averred that he

had an interest in each of the Group A plaintiffs’ properties and that he was acting as the

representative for those plaintiffs. The LOI provides support that the other Group A plaintiffs

intended him to act on their behalf and that they would ratify his actions. Other evidence was

presented to support this as well. Moreover, as the circuit court discussed, the LOI specifically

required defendants to provide the Group A plaintiffs with a completed lease within 12 days, and

defendants did not do so.

In contrast, the Group B plaintiffs were under no obligation to enter into a lease at the time

defendants decided not to pursue them. They had not signed any LOI. The written referral

agreements specifically provided no authority for Murray to act other than to deliver the referral

agreements to defendants, and plaintiffs have presented no substantially admissible evidence to

the contrary, such as affidavits that they were ready and willing to sign leases with Chesapeake

without additional negotiation or that they agreed to have Murray do so for them. In addition,

under the June 25 agreement, defendants were not obligated to accept the referral agreements or

act on them until Murray delivered signed leases from the plaintiffs. Moreover, nothing prevented

any of the plaintiffs from actually signing an LOI and presenting it to defendants to be signed. For

these reasons, we reject plaintiffs’ argument that defendants should be prevented from relying on

the statute of frauds.

C. THIRD-PARTY BENEFICIARY

For the first time on appeal, plaintiffs contend that they can enforce the June 25 agreement

between Murray and defendants as intended third-party beneficiaries of the agreement. The third-

party beneficiary statute, MCL 600.1405, provides, in pertinent part:

Any person for whose benefit a promise is made by way of contract, as

hereinafter defined, has the same right to enforce said promise that he would have

had if the said promise had been made directly to him as the promisee.

(1) A promise shall be construed to have been made for the benefit of a

person whenever the promisor of said promise had undertaken to give or to do or

refrain from doing something directly to or for said person.

* * *

(b) If such person is not in being or ascertainable at the time the promise

becomes legally binding on the promisor then his rights shall become vested the

moment he comes into being or becomes ascertainable if the promise has not been

discharged by agreement between the promisor and the promisee in the meantime.

-10-

With respect to the distinction between incidental and intended beneficiaries, our Supreme

Court has provided the following comprehensive discussion:

Importantly, the plain language of this statute reflects that not every person

incidentally benefitted by a contractual promise has a right to sue for breach of that

promise, but rather only if the promisor has “undertaken to give or to do or refrain

from doing something directly to or for said person.” MCL 600.1405(1) (emphasis

added).

In other words, MCL 600.1405 draws a distinction between intended third-

party beneficiaries who may sue for a breach of a contractual promise in their favor,

and incidental third-party beneficiaries who may not. In this regard, we agree with

and adopt the following statutory analysis from the lead opinion in [Koenig v South

Haven, 460 Mich 667, 680; 597 NW2d 99 (1999)]:

In describing the conditions under which a contractual

promise is to be construed as for the benefit of a third party to the

contract in [MCL 600.1405], the Legislature utilized the modifier

“directly.” Simply stated, section 1405 does not empower just any

person who benefits from a contract to enforce it. Rather, it states

that a person is a third-party beneficiary of a contract only when the

promisor undertakes an obligation “directly” to or for the person.

This language indicates the Legislature’s intent to assure that

contracting parties are clearly aware that the scope of their

contractual undertakings encompasses a third party, directly referred

to in the contract, before the third party is able to enforce the

contract. . . . [Brunsell v City of Zeeland, 467 Mich 293, 296-298;

651 NW2d 388 (2002).]

In contrast:

“ ‘A third person cannot maintain an action upon a simple contract merely because

he would receive a benefit from its performance or because he is injured by the

breach thereof. Where the contract is primarily for the benefit of the parties thereto,

the mere fact that a third person would be incidentally benefited does not give him

a right to sue for its breach.’ ” [Koenig, 460 Mich at 679, quoting Greenlees v

Owen Ames Kimball Co, 340 Mich 670, 676; 66 NW2d 227 (1954), quoting 12 Am

Jur, Contracts, § 282, p 834.]

When deciding whether a person or entity is an intended beneficiary, a court must use an objective

standard “to determine from the contract itself whether the promisor undertook to give or to do or

to refrain from doing something directly to or for the putative third-party beneficiary.” Brunsell,

467 Mich at 297 (cleaned up). “Therefore[,] the parties’ motives and subjective intentions are not

relevant in determining whether plaintiff is a third-party beneficiary.” Rieth-Riley Constr Co v

Dep’t of Transp, 136 Mich App 425, 430; 357 NW2d 62 (1984).

-11-

Plaintiffs cannot show that they are intended third-party beneficiaries of the June 25

agreement, even if that agreement is reviewed in conjunction with the earlier LOI and the other

writings. The June 25 agreement does not contain any promise by defendants directly for the

benefit of the Group B plaintiffs. It is primarily for the benefit of defendants and Murray, whereby

these parties agreed that Murray would be paid if his referral of other landowners resulted in a

signed lease by those landowners. The LOI is an agreement between Murray, on behalf of himself

and the Group A plaintiffs, to enter into such a lease. It does not contain a promise by defendants

directly for the benefit of the Group B plaintiffs. The LOI can be used to determine what an

acceptable “lease” is with respect to payment under the June 25 agreement or the terms Murray

could discuss with the landowners concerning what defendants were prepared to offer. However,

the documents explicitly provide that they are not agreements to contract and that the landowners

did not have to contract with defendants at all. Defendants’ various lists reflect, at most, their

subjective intent that the landowners would eventually sign leases with them,2 and the lists are not

relevant to determining whether the June 25 agreement actually contained a direct promise toward

the Group B plaintiffs. To the extent it would be admissible, additional evidence (such as the

deposition statements by Murray and Couturier) are also evidence of the parties’ subjective beliefs.

Given the evidence presented, plaintiffs have not shown that they were intended third-party

beneficiaries of the June 25 agreement merely because they would have received a benefit from

defendants’ performance of that agreement or because they could be injured by its breach.

III. THE C&L AND PFLUM TRUST NONLEASED CLAIMS

Plaintiffs argue that the circuit court erred when it dismissed the claims of plaintiffs Pflum

Trust and C&L with respect to their nonleased properties (those for which leases were not entered)

on the basis that their claims were within the scope of a release that representatives for those two

entities signed in connection with their leased properties. Generally, “[w]hen the plaintiffs’ claims

are barred because of a release, summary disposition is proper under MCR 2.116(C)(7). The

interpretation of a release presents a question of law that is reviewed de novo.” Radu v Herndon

& Herndon Investigations, Inc, 302 Mich App 363, 373-374; 838 NW2d 720 (2013) (cleaned up).

“A claim may be barred because of a release.” Cole v Ladbroke Racing Mich, Inc, 241

Mich App 1, 13; 614 NW2d 169 (2000). The Pflum Trust and C&L entered into identical releases

with respect to their leased properties, which provided, in pertinent part:

In exchange for the receipt of the Settlement Award issued by the

Settlement Fund’s Escrow Agent, I hereby on behalf of myself, as well as on behalf

of my heirs, successors, assigns, and all representatives, do hereby release, waive,

and forever discharge any and all claims, whether civil, criminal, or administrative,

demands, suits, causes of actions, relief, damages, liabilities of any nature, as well

as costs, expenses, and attorney’s fees, I have, which are known or unknown,

accrued or unaccrued, against Chesapeake Energy Corporation, and all of its

parents, affiliates, subsidiaries, divisions, officers, directors, shareholders, advisors,

employees and agents as well as . . . Silver Lake Energy, LLC . . . (collectively

2

They also are arguably inaccurate with respect to the status of the Group B plaintiffs, none of

whom ever signed LOIs.

-12-

‘‘Brokers”) and all of the Brokers’ former and current affiliates, officers, directors,

owners, members, shareholders, employees, agents and contractors (collectively

the “Released Parties”).

I understand that upon receipt of the Settlement Award check, I will have

no further right or remedy against the Released Parties, or against the Attorney

General of the State of Michigan, the Claims Administrator, or the Escrow Agent.

I understand that this Release becomes effective and irrevocable when; (i) l

negotiate (i .e., deposit or cash) the check that is the Settlement Award, or (ii) upon

forty-five (45) days following my receipt of the award check. whichever occurs

earlier.

I understand that I have had the opportunity to seek independent legal,

financial , and accounting counsel prior to executing this Release, and have sought

counsel if I so chose. [Emphasis added.]

A. SCOPE OF THE RELEASE

The language of the release evidences a clear intent to waive and release “any and all

claims . . . which are known or unknown, accrued or unaccrued, against Chesapeake Energy

Corporation,” to which plaintiffs agreed that they would have “no further right or remedy.” This

language plainly encompasses all claims of the Pflum Trust and C&L against Chesapeake and

other entities, and thus includes any claims concerning plaintiffs’ nonleased properties. See

Dresden v Detroit Macomb Hosp Corp, 218 Mich App 292, 297-298; 553 NW2d 387 (1996)

(discussing the broad nature of release language pertaining “ ‘any and all’ causes of action” and

concluding that it applied to bar a fraud claim); Heritage Resources, Inc v Caterpillar Fin Servs

Corp, 284 Mich App 617, 642; 774 NW2d 332 (2009) (“There cannot be any broader classification

than the word ‘all.’ In its ordinary and natural meaning, the word ‘all’ leaves no room for

exceptions.”) (cleaned up). Accordingly, the circuit court correctly determined that the release

foreclosed any claims of the Pflum Trust and C&L concerning the nonleased properties.

Despite this unambiguous language, plaintiffs argue that they should be permitted to offer

extrinsic evidence to show the existence of a latent ambiguity in the releases. Even considering

the extrinsic evidence, plaintiffs’ claim fails as the cited evidence does not demonstrate an

ambiguity. The cited e-mail exchange between one of defendants’ attorneys and an assistant

attorney general states that an executed lease was a requisite for payment under the fund, but makes

no attempt to describe the scope of the release. It therefore sheds no light on the issue at all.

Plaintiffs also contend that the first line of the release creates an ambiguity; specifically

that the landowner signs the release in exchange for an award payment, while the release itself

does not assert to cover other claims the signor might have against defendants. However, this

release term is not confusing. Unlike in Shay, where the Court allowed extrinsic evidence to be

considered to explain a term in the release, plaintiffs here seek to impermissibly use extrinsic

evidence to directly contradict the plain language in the release. Extrinsic evidence cannot be used

in this manner. Grosse Pointe Park, 473 Mich at 218; Mich Chandelier Co, 297 Mich at 48.

-13-

Plaintiffs argue that there was no consideration for the release with respect to the nonleased

properties. However, there was consideration—being able to resolve their claims concerning the

leased properties without further litigation where the outcome was uncertain. This could also serve

as consideration for the Pflum Trust and C&L giving up their claims for the nonleased properties.

The certainty of some monetary payment was valuable consideration “worth far more than the

legendary peppercorn,” Gen Motors Corp v Dep’t of Treasury, 466 Mich 231, 241; 644 NW2d

734 (2002), particularly considering the tenuous nature of the claims involving the nonleased

properties, as discussed earlier.

Accordingly, we hold that the releases signed by the representatives of the Pflum Trust and

C&L concerning their leased properties in connection with obtaining settlement funds also

released any claims these plaintiffs might have had against defendants concerning the nonleased

properties.

B. THE PFLUM TRUST

The Pflum Trust also argues that David Pflum did not have authority to release the claims

concerning the nonleased parcels formerly owned by the Pflum Trust because, at the time the

release was signed, none of the property remained in the trust as it had been transferred to FRP

Investments, LLC. We note, however, that defendants present former trustee Rosalie Pflum’s

March 30, 2017 release that she signed on behalf of the trust. Although this release was not

attached to any motion below, defendants did offer on the record to present a copy of this release

and the circuit court found it unnecessary to review before making its ruling. Under MRE

7.210(A)(3), evidence offered in the trial court may be included as part of the record on appeal.

As defendants offered to provide the document below and were rebuffed by the circuit court, we

will deem it part of the record. And the document establishes that the Pflum Trust release was

actually signed by a party with authorization to do so.

With respect to the Pflum Trust’s argument that the underlying property was transferred to

FRP Investments, “[o]nce a right of action accrues, it becomes a ‘piece’ of intangible personal

property called a ‘chose in action.’ ” Herr v United States Forest Serv, 803 F3d 809, 821 (CA 6,

2015), citing Sprint Communications Co v APCC Servs, Inc, 554 US 269, 275; 128 S Ct 253; 1171

L Ed 2d 424 (2008). See also Black’s Law Dictionary (11th ed) (defining chose in action in part

as “[t]he right to bring an action to recover a debt, money or thing”); In re Beatrice Rottenberg

Living Trust, 300 Mich App 339, 357; 833 NW2d 384 (2013) (a chose in action is personal

property); Fodale v Waste Mgt of Mich, Inc, 271 Mich App 11, 21; 718 NW2d 827 (2006) (choses

in action are intangible personal property interests and are not classified as real property). “Choses

of action to enforce property rights do not, as a general matter, automatically transfer when the

underlying property changes hands.” Herr, 803 F3d at 821.

The Pflum Trust relies on a January 30, 2015 mineral deed, executed after plaintiffs filed

suit on October 23, 2014, from the Pflum Trust to FRP Investments. However, this deed only

transferred the trusts interest in the “oil, gas, and other minerals in and under that may be produced

from the [property]” along with “an undivided interest and to all bonuses, rents, royalties and other

benefits which may accrue under the terms of said lease(s) insofar as it covers the above described

property[.]” The deed did not contain an assignment of the cause of action for breach of contract.

In addition, the trust continued to pursue the breach-of-contract action and ultimately received

-14-

payment from the Fund. FRP Investments did not even attempt to intervene as a party. The Pflum

Trust has not demonstrated that it is entitled to relief with respect to this issue.

We affirm.

/s/ Colleen A. O’Brien

/s/ Kathleen Jansen

/s/ Elizabeth L. Gleicher

-15-