Foreclosure – Royalty Agreements and Repurchase Options

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WI Court of Appeals – District IV

Case Name: Global Proppant Supply, LLC, v. David M. Tuttle, et al.

Case No.: 2017AP1137

Officials: Lundsten, P.J., Sherman and Blanchard, JJ.

Focus: Foreclosure – Royalty Agreements and Repurchase Options

This case arises out of a failed plan to construct and operate a frac sand mine. An entity called Global Proppant Supply sought foreclosure on property that was to be used for the mine. The circuit court granted a judgment of foreclosure. The dispute here is between Global and the previous owners of the property. It is undisputed that, when these landowners sold their property, the pertinent agreements included royalties and repurchase options for the selling landowners. The agreements were not with Global. The dispute here, broadly speaking, relates to whether the sellers’ interests under the agreements or Global’s mortgage interests take precedence.

At the sellers’ request, the circuit court reformed the written agreements that governed the sellers’ interests. The court then concluded, based on the reformed agreements, that Global’s mortgage interests were subordinate to the sellers’ interests and that the sellers’ repurchase options had ripened. Global appeals. Global argues that the circuit court erred by reforming the agreements. In the first section of our discussion, we explain why we agree with Global that the circuit court erred by reforming the agreements. In the remainder of the opinion, we resolve various disputes among the parties by looking to the unreformed language of the agreements. We conclude that: (1) The Royalty Agreements have no effect on Global’s ability to foreclose; (2) One of the repurchase options is subordinate to Global’s mortgages; (3) Global’s mortgages are subordinate to other repurchase options; and (4) As to the repurchase options that are not subordinate, one has ripened and two have not.

Based on these conclusions, we affirm the judgment in part, reverse the judgment in part, and remand for the circuit court to determine what further proceedings might be necessary consistent with this opinion.

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.