Evans v. Holloway Sand and Gravel, Inc.
106 Mich.App. 70, 308 N.W.2d 440 (1981)
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Rule of Law:
An agreement granting the right to enter land and remove minerals creates a non-revocable property interest, such as a profit à prendre, if the language of the entire agreement demonstrates the parties' intent to convey a present interest in the land. This interest is binding on a subsequent purchaser who has knowledge of the agreement, even if the instrument lacks the formal requirements of a deed.
Facts:
- On March 12, 1973, C. Merle Dixon and Alma Dixon entered into a 'Sales Agreement' with Holloway Sand and Gravel, Inc. (Holloway) for the removal of all sand, stone, and gravel from their 126-acre property.
- The agreement stated that the Dixons 'do hereby bargain and sell' the materials to Holloway for a three-year period with an option to renew.
- The agreement provided for a 'reconveyance' of remaining materials upon cancellation and stated that rights to unmined materials would 'revert' to the sellers after a certain period.
- Holloway was required to remove a minimum of 50,000 tons per year or pay its equivalent value ($5,000).
- On January 22, 1976, Holloway sent a letter to the Dixons stating its intent to exercise its option to renew the agreement.
- On March 22, 1976, the Dixons sold the property via warranty deed to William and Katherine Evans, who were aware of the sales agreement with Holloway.
- On April 15, 1976, Evans notified Holloway that he had purchased the property and that Holloway's continued presence constituted a trespass.
Procedural Posture:
- William and Katherine Evans filed suit in Washtenaw County Circuit Court (trial court) seeking to restrain Holloway from mining on the property.
- The trial court granted summary judgment in favor of Holloway, finding the agreement created a binding property interest that was properly renewed.
- The Evanses, as appellants, appealed to the Michigan Court of Appeals (intermediate appellate court), which reversed and remanded the case for a full trial.
- C. Merle Dixon then filed a separate suit against Holloway, which was consolidated with the Evanses' case for a bench trial.
- Following the trial, the trial court found no cause of action for the plaintiffs' claims.
- The plaintiffs (Evanses and Dixon), as appellants, appealed the trial court's decision to the Michigan Court of Appeals.
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Issue:
Does a 'Sales Agreement' that grants the exclusive right to remove minerals from a property, uses terms like 'bargain and sell,' 'reconveyance,' and 'revert,' and requires minimum payments, create a non-revocable property interest binding on a subsequent purchaser with notice of the agreement?
Opinions:
Majority - Danhof, C.J.
Yes, an agreement to remove minerals that uses language indicating a present transfer of rights creates a non-revocable property interest that is binding on a subsequent purchaser with notice. The court determined that the agreement created a profit à prendre or an easement in gross, which is an interest in land, rather than a mere revocable license. In ascertaining the parties' intent, the court looked beyond the document's title ('Sales Agreement') to its substantive terms. The use of language such as 'bargain and sell,' 'reconveyance,' and 'revert' strongly indicated that the parties intended to convey a present property interest in the minerals. Because the Evanses purchased the property with full knowledge of this agreement, they were not good faith purchasers and took the land subject to Holloway's existing interest. The lack of formalities required for recording a deed does not invalidate the conveyance as against a party with actual notice.
Analysis:
This decision reinforces the legal principle that courts will prioritize the substance of an agreement over its form to determine the intent of the parties in creating property interests. It establishes that specific terms implying a present conveyance of rights (e.g., 'sell,' 'reconveyance,' 'revert') can create a durable interest in land, such as a profit à prendre, even if the document is not a formal deed. The ruling clarifies that a subsequent purchaser with actual notice of such an unrecorded interest cannot defeat it, thereby limiting the 'good faith purchaser' defense. This precedent provides security for entities with mineral or timber rights, ensuring their interests are not easily extinguished by the sale of the underlying land.
