Chesapeake Exploration, LLC v. Whillock

Cite as 2014 Ark. App. 55

ARKANSAS COURT OF APPEALS
DIVISION III
No. CV-12-1035

CHESAPEAKE EXPLORATION, LLC Opinion Delivered January 22, 2014
APPELLANT
APPEAL FROM THE VAN BUREN
V. COUNTY CIRCUIT COURT
[NO. CV-10-37]

THOMAS WHILLOCK AND GAYLA HONORABLE MICHAEL A.
WHILLOCK MAGGIO, JUDGE
APPELLEES
AFFIRMED IN PART AND
REVERSED AND REMANDED IN
PART ON DIRECT APPEAL;
REVERSED AND REMANDED ON
CROSS-APPEAL

RITA W. GRUBER, Judge

Appellant, Chesapeake Exploration, LLC, appeals from an order of the Van Buren

County Circuit Court granting summary judgment to appellees, Thomas and Gayla Whillock,

and from an order clarifying the summary judgment. The court ruled that, as a matter of law,

Chesapeake could not recover a $120,000 oil-and-gas-lease bonus it had paid to the

Whillocks. The court also dismissed the Whillocks’ counterclaim for estoppel and

misrepresentation. With regard to the summary-judgment orders, we affirm in part and

reverse and remand in part. We also reverse and remand, on cross-appeal, the order dismissing

the Whillocks’ counterclaim.1

1
We previously ordered rebriefing in this case and dismissal for lack of finality.
Chesapeake Exploration, LLC v. Whillock, 2013 Ark. App. 339, and Chesapeake Exploration,
LLC v. Whillock, 2012 Ark. App. 397. The parties have obtained a final order, and the
Cite as 2014 Ark. App. 55

Mr. and Mrs. Whillock own eighty acres of land in Van Buren County. In 2005 or

2006, an oil-and-gas company other than Chesapeake asked Mr. Whillock to lease the mineral

rights to his property. The transaction was never consummated because Mr. Whillock learned

that he did not own the mineral rights.

In 2008, Gary Beavers, a representative of Chesapeake, asked Mr. Whillock to enter

into an oil-and-gas lease. Mr. Whillock told Beavers that he did not own the mineral rights.

When Beavers insisted to the contrary and offered an additional signing bonus, the Whillocks

executed a five-year oil-and-gas lease with Chesapeake on January 21, 2008. That same day,

Chesapeake gave the Whillocks a bonus draft in the amount of $120,000. The draft contained

the following language:

Payable on or before 10 business days sight with approval of title and form of
agreement. Not subject to recall by depository bank before due date. Re-drafting
privileges granted.

The record does not reveal whether Chesapeake conducted a title search of the

Whillocks’ minerals interests at the time this sight draft was issued, or within ten days

thereafter. In any event, Chesapeake paid the draft on or about February 11, 2008. The

Whillocks paid taxes on the $120,000 and spent the remainder.

On April 21, 2009—approximately fourteen months after the draft was

paid—Chesapeake wrote to the Whillocks requesting a refund of the $120,000. The letter

stated that a “drilling title opinion” reflected that the Whillocks did not own the minerals in

the leased property. Attached to the letter was a “Release of Oil, Gas and Mineral Lease.”

briefing error has been corrected.

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The release recited that Chesapeake

does hereby release, relinquish and surrender unto THOMAS W. AND GAYLA L.
WHILLOCK, husband and wife, their successors, heirs or assigns all their right title
and interest in and to that certain Oil and Gas Lease made and entered into by and
between [the Whillocks] as Lessor, and [Chesapeake] as Lessee, said lease dated the 21st
day of January, 2008, covering the following described property in Van Buren County
in the State of Arkansas, to wit: [attached description] said Oil and Gas Lease dated
January 21, 2008, being recorded in the Official Records of Van Buren County,
Arkansas under Document #200881824.

Chesapeake filed the release in Van Buren County on May 22, 2009.

The Whillocks declined to refund the bonus money. As a result, Chesapeake sued

them for breach of the warranty of title contained in section 13 of the oil-and-gas lease and

for unjust enrichment. The Whillocks responded that Chesapeake misrepresented the facts

when it induced them to sign the lease; that Chesapeake’s claim was barred by estoppel; and

that title work should have been completed before the bonus draft was paid. The Whillocks

also filed a counterclaim for estoppel and fraud based on Gary Beavers’s representation that

the Whillocks had good title to the minerals.

Both sides filed motions for summary judgment. Chesapeake argued that the Whillocks

undisputedly breached section 13 of the oil-and-gas lease because they did not own title to

the minerals and that the Whillocks were unjustly enriched by receiving $120,000 for minerals

they did not own. The Whillocks argued that the release filed by Chesapeake waived any

right to sue for breach of the lease and that the doctrine of unjust enrichment did not apply

because the parties had entered into an express contract. To this latter argument, Chesapeake

claimed that there was no meeting of the minds on the lease contract and, therefore, unjust

enrichment was available as a cause of action.

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Following a hearing, the circuit court entered an order granting the Whillocks’ motion

for summary judgment. The court ruled that Chesapeake had “no cause of action for breach

of contract against the Whillocks” because Chesapeake “rescinded the Lease through their

Release of Oil, Gas and Mineral Lease on May 22, 2009.” In response to the court’s order,

Chesapeake filed a motion for clarification and supplemental findings of fact, correctly noting

that the court had not addressed Chesapeake’s unjust-enrichment claim. Chesapeake also

asked the court to explain why, if the lease had been rescinded, the Whillocks were not liable

for restitution in the amount of $120,000.

The court issued a clarifying order in which it stated that the release filed by

Chesapeake was a “general release” of all of Chesapeake’s claims, including those for unjust

enrichment or restitution. The court also rejected Chesapeake’s argument regarding a meeting

of the minds and ruled that Chesapeake’s payment of the bonus draft established that

Chesapeake “approved of title when it entered into the lease agreement.” Chesapeake appeals

from the clarifying order and from the order granting summary judgment.

We begin by addressing the effect of the release, which the circuit court characterized

as a general release that waived all of Chesapeake’s causes of action against the Whillocks. A

general release is not restricted by its terms to particular claims or demands, and it ordinarily

covers all claims and demands due at the time of its execution that were within the

contemplation of the parties. See Union Pac. R.R. Co. v. Mullen, 966 F.2d 348 (8th Cir. 1992);

66 Am. Jur. 2d Release § 28 (2012).

The release filed by Chesapeake was not a general release. It did not purport to absolve

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the Whillocks from any and all liability to Chesapeake, nor did it state that Chesapeake

waived any and all claims against the Whillocks. Instead, it relinquished and surrendered

Chesapeake’s right, title, and interest in the lease. Consequently, it did not affect Chesapeake’s

right to pursue other, extra-contractual remedies. The circuit court therefore erred in treating

the release as a general waiver of all of Chesapeake’s claims against the Whillocks.

The court did not err, however, in holding that the release prohibited Chesapeake’s

claim for breach of the lease. The meaning of a writing should be interpreted in accordance

with the plain language employed. Po-Boy Land Co., v. Mullins, 2011 Ark. App. 381, 384

S.W.3d 555. Chesapeake drafted the release in broad terms, stating that it “does hereby

release, relinquish, and surrender” to the Whillocks “all right, title, and interest” in the lease.

There were no equivocal expressions nor any reservation of Chesapeake’s contractual claims.

Rather, there was a complete surrender of Chesapeake’s rights under the lease, which would

necessarily include the right to sue for breach of the warranty of title contained in the lease’s

section 13. Moreover, the oil-and-gas lease itself provided that Chesapeake could “surrender

or cancel” the lease by delivering or mailing a release to the Whillocks, or by placing a release

of record in the proper county. These are the precise actions taken by Chesapeake. We

therefore conclude that Chesapeake relinquished its right to sue for breach of the lease. See

Farmers’ Cotton Oil Co. v. Brint, 184 Ark. 1193, 40 S.W.2d 789 (1931) (holding that, where

a contract was extinguished and canceled by a party, the party could not recover damages for

breach of the contract).

Chesapeake argues that the release was a mere “abandonment” of the lease, which

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preserved its right to seek damages for breach. We disagree. First, it does not appear that

Chesapeake raised this argument below. An appellant is bound by the scope and nature of his

arguments at trial. Pope v. John Hancock Mut. Life Ins. Co., 2013 Ark. App. 189, ___ S.W.3d

___. Secondly, regardless of how the release is described, its language removes any doubt that

Chesapeake’s rights under it were fully surrendered.

Chesapeake also contends that its intent in filing the release was not to forego its right

to sue the Whillocks but to meet a statutory obligation to remove a cloud on the record

owner’s title, once it was determined that the Whillocks did not own the minerals. See Ark.

Code Ann. § 15-73-203 (Repl. 2009). While this may be true, we must discern Chesapeake’s

intent from the plain wording it employed in the release. Po-Boy Land Co., supra. The release

clearly evidences an intent to relinquish all rights under the lease contract.

We therefore affirm the circuit court’s dismissal of Chesapeake’s breach-of-contract

action. Our holding makes it unnecessary to reach Chesapeake’s argument that the court erred

in ruling that the terms of the bonus draft waived the warranty-of-title provision of the lease.

We turn now to Chesapeake’s equitable claims of unjust enrichment and restitution.

As stated earlier, the circuit court erred in ruling that these claims were waived in the release.

But that does not end our inquiry. We must still determine if the particular facts of this case

warrant summary judgment in favor of the Whillocks on these theories.

With regard to restitution, Chesapeake argues that, because the circuit court ruled that

the oil-and-gas lease was rescinded, restitution must accompany the rescission in order to

return the parties to the status quo. Given the court’s decision to characterize the lease as

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rescinded, Chesapeake could properly seek a restitutionary remedy. See generally Maumelle Co.

v. Eskola, 315 Ark. 25, 865 S.W.2d 272 (1993); Smith v. Walt Bennett Ford, Inc., 314 Ark. 591,

864 S.W.2d 817 (1993); Howard W. Brill, Arkansas Law of Damages § 31:3, at 573 (5th ed.

2004); Dan B. Dobbs, Remedies § 4.3, at 254 (1973).

The Whillocks argue, however, that Chesapeake is barred from seeking restitution

because it did not plead this remedy in its complaint. We see no procedural bar. Chesapeake’s

complaint sought a return of the $120,000 bonus. And, Chesapeake raised the issue of

restitution in response to the court’s ruling that the oil-and-gas lease had been rescinded.

The Whillocks also argue that, where the right to rescind derives from a contract, any

right to restitution must be derived from the same contract. They contend that the lease in

this case did not provide for restitution, and they rely on McKinney v. Jones, 210 Ark. 912, 198

S.W.2d 415 (1946), for its language that, in the event of a mutual rescission, no claim for

restitution can be made unless it is expressly or impliedly reserved in the contract. This,

however, was not a case of mutual rescission but of Chesapeake unilaterally releasing the oil-

and-gas-lease. Chesapeake is therefore not prohibited from asserting a claim for restitution.

Chesapeake’s unjust-enrichment claim is likewise viable. Unjust enrichment applies

when a party has received something of value to which he is not entitled and which he must

restore. Edwards v. MSC Pipeline, LLC, 2013 Ark. App. 165. Arguably, the Whillocks’ receipt

of money for property they did not own falls within these requirements. The Whillocks

contend, however, that unjust enrichment cannot apply when the parties’ dealings are

governed by an express contract. This argument is not well taken. While it is true that there

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generally can be no recovery for unjust enrichment where there is an express contract, there

are exceptions to that rule. Unjust enrichment is not barred in appropriate cases, such as

where there has been a rescission at law, or the contract is void or has been discharged by

impossibility or frustration of purpose, or the parties have made a mistake about something

important to the contract. See Campbell v. Asbury Auto., Inc., 2011 Ark. 157, 381 S.W.3d 21.

Here, according to the circuit court, the lease contract was rescinded or voided. Unjust

enrichment is therefore not precluded as a cause of action for Chesapeake.2

Based on the foregoing, there is no legal impediment to Chesapeake’s claims for

restitution and unjust enrichment. However, we do not hold that Chesapeake should prevail

on these claims as a matter of law. Restitution and unjust enrichment are equitable theories

and necessarily involve a weighing of the equities as to all parties. The Whillocks have set

forth several matters to be considered in deciding where the equities lie, including

Chesapeake’s alleged misrepresentation of the ownership of the minerals and Chesapeake’s

waiting more than a year before informing the Whillocks that there was a problem with the

title to the minerals. We therefore conclude that fact-finding involving a weighing of the

equities is necessary on these claims. Accordingly, we reverse the summary-judgment order

as it pertains to Chesapeake’s actions for unjust enrichment and restitution and remand for

further proceedings on these issues. In light of our remand, we also reverse the circuit court’s

dismissal of the Whillocks’ counterclaim, which set forth their assertions of misrepresentation

2
Our holding makes it unnecessary to address Chesapeake’s alternative contention that
there was no express contract between the parties because there was no meeting of the
minds.

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and estoppel.

Affirmed in part and reversed and remanded in part on direct appeal; reversed and

remanded on cross-appeal.

WHITEAKER and VAUGHT, JJ., agree.

Danielson Law Firm, PLLC, by: Erik P. Danielson, for appellant.

Morgan Law Firm, P.A., by: M. Edward Morgan, for appellees.

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