[Cite as Burkhart v. Miley, 2017-Ohio-9006.]

STATE OF OHIO, MONROE COUNTY 

IN THE COURT OF APPEALS 

SEVENTH DISTRICT 

CYRIL AND ROSEMARY BURKHART, 

 PLAINTIFFS-APPELLEES, 

V. 

JEFF MILEY DBA MILEY GAS CO., ET 

AL., 

 DEFENDANTS-APPELLANTS. 

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CASE NOS. 15 MO 0012 

 15 MO 0013 

 15 MO 0014 

OPINION 

CHARACTER OF PROCEEDINGS: Civil Appeal from Court of Common 

Pleas of Monroe County, Ohio 

Case No. 2013-293 

JUDGMENT: Reversed 

Judgment in favor of appellants. 

JUDGES: 

Hon. Gene Donofrio 

Hon. Mary DeGenaro 

Hon. Carol Ann Robb 

Dated: December 8, 2017 
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APPEARANCES: 

For Plaintiffs-Appellees 

Cyril and Rosemary Burkhart 

Attorney Ethan Vessels 

309 Second Street 

Marietta, Ohio 45750 

For Defendants-Appellants 

Jeff Miley dba Miley Gas Co. 

For Defendant-Appellant 

Antero Resources 

For Amicus Curiae 

Ohio Oil and Gas Association 

Attorney William Taylor 

Attorney Scott Eickelberger 

Attorney David Tarbert 

Attorney Ryan Linn 

50 North Fourth Street 

P.O. Box 1030 

Zanesville, Ohio 43702-1030 

Attorney Lyle Brown 

Attorney Melanie Morgan-Norris 

Attorney J. West 

41 South High Street 

Columbus, Ohio 43215 

Attorney Gregory Russel 

Attorney Peter Lusenhop 

52 East Gay Street 

Columbus, Ohio 43216-1008 

Attorney Aaron Williams 

200 Public Square, Suite 1400 

Cleveland, Ohio 44114 

 

 

 
[Cite as Burkhart v. Miley, 2017-Ohio-9006.]

DONOFRIO, J. 

{¶1} Defendant-appellant, Antero Resources Corporation, along with 

defendant-appellant, Jeff Miley d.b.a. Miley Gas Company, appeal from a Monroe 

County Common Pleas Court judgment, resulting from a bench trial, finding that a 

certain oil and gas lease terminated due to the failure of the well at issue to produce 

in paying quantities. 

{¶2} Plaintiff-appellee, Rosemary Burkhart, individually and as the 

representative of the estate of Cyril Burkhart, is the owner of the mineral rights to a 

66-acre parcel of property located in Seneca Township in Monroe County (the 

Property). 

{¶3} By deed recorded February 2, 1945, Aloysius and Celia Burkhart, as 

lessors, executed an oil and gas lease with Burns Drilling Company, as lessee (the 

Lease). Aloysius and Celia were Cyril Burkhart’s parents. Aloysius’s and Celia’s 

mineral interest passed to Cyril. When Cyril passed away, his mineral interest 

passed to Rosemary. 

{¶4} The Lease provides that it is for a term of five years and “so much 

longer thereafter as oil, gas or their constituents are in paying quantities thereon.” 

{¶5} The Lease covers the entire property. A single well sits on the property 

(the Well). The Well was drilled in 1945. In 1992, the Burkharts transferred 

ownership of the Property’s surface rights to Leo and Judith Loraditch. The 

Burkharts reserved the mineral rights to the Property. 

{¶6} On October 11, 2011, the Burkharts recorded a Preservation Notice of 

Ownership in Oil and Gas Rights for the purpose of preserving their reserved mineral 

interest. 

{¶7} In 2011, defendant-appellant, Jeff Miley d.b.a. Miley Gas Company 

(Miley), purchased the Well from RMB Production Corporation. The Lease was also 

assigned to Miley. The assignment of the Lease from RMB to Miley was recorded 

April 12, 2011. In 2012, Miley assigned the deep rights of the Lease to defendantappellant, Antero Resources Corporation (Antero). 

{¶8} On July 26, 2013, Burkhart filed a complaint against Miley. The 
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complaint alleged that the primary term of the Lease expired on December 6, 1949, 

and there has not been sufficient production to continue the Lease. Therefore, 

Burkhart sought a declaration that the Lease expired under its own terms. She later 

amended the complaint to add Antero as a defendant. 

{¶9} The case proceeded to a bench trial on October 1, 2014. The trial court 

found that Miley had operated the Well in good faith and that it was profitable. The 

court found that Miley had declared a profit from its operation of the Well on tax 

returns in 2011, 2012, and 2013. 

{¶10} The trial court found there was confusion regarding the name and API 

number of the Well stemming from a sign hanging on the wellhead identifying the 

Well as the “Burkhart, No.: 1Permit; Unknown.” and the Form 7 (Request for Change 

of Owner), which identified the Well as the “Burkhart No. 2 API 20368.” The court 

went on to find that the evidence demonstrated the Well located on the Property is 

actually the Well designated as API No. 20368. It found that the argument that Miley 

had been using the production from a well located off of the Property (No. 20334) to 

hold the Lease was not supported by the evidence. The court found that the Ohio 

Department of Natural Resources (ODNR) records placed Well No. 20334 in a 

location that did not match the legal description of the Property. Moreover, the court 

found that the drilling of Well No. 20334 was completed prior to the execution of the 

Lease and the ODNR described this well as a non-producing historic well. On the 

other hand, the court found that Well No. 20368 is located in the southwest quarter of 

section 4, in which a portion of the Property is also located. And ODNR records 

reflected that Well No. 20368 was drilled approximately one month after the 

execution of the Lease. 

{¶11} Thus, the court found that the production from Well No. 20368 located 

on the Property was continuous and profitable. Therefore the court found that the 

Lease remained in full force because the Well was producing in paying quantities. 

The court entered judgment in favor of Miley and Antero. 

{¶12} Following the judgment in favor Miley and Antero, Burkhart filed a 
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motion for new trial or to amend the court’s findings of fact and conclusions of law. 

Burkhart alleged that Jeff Miley made knowing misrepresentations to the court during 

the trial. In the motion, Burkhart did not take issue with the court’s finding that the 

Well was located on the Property. But Burkhart argued that the court’s finding that 

Miley made a profit from 2011-2013 was incorrect. She noted that Jeff Miley and his 

wife Meleesa both testified that they declared a profit in those years. But Burkhart 

stated that Miley actually declared a loss in 2012 and 2013. She stated that she 

obtained this information by way of a motion to compel in another case where Miley 

produced his tax records. She further asserted that Miley’s tax records reported 

money spent for contract labor, repairs, and maintenance, contrary to his testimony 

that he did his own repairs. 

{¶13} The trial court found that Burkhart presented good cause to reopen its 

previous judgment and take additional testimony on the issue of Miley’s tax returns. 

{¶14} The court held a hearing where it took additional testimony and 

evidence on the sole issue of whether Miley had been profitably producing oil or gas 

from the Well under the Lease. 

{¶15} The court found that at the initial trial, Jeff Miley had testified for the 

relevant tax years of 2010-2013, Miley was profitable and did not declare a loss. But 

the court found Miley’s tax records showed otherwise. It noted that Miley declared a 

loss in 2012 and 2013. Additionally, it found that the tax returns demonstrated that 

much of Miley’s gross revenue did not come from the sale of oil and gas but from 

contract work that Jeff Miley performed for other oil and gas operators. The court 

went on to find that Miley did not report any production for 2011-2103 until late 2013, 

when Antero suggested that Miley submit its production to the ODNR. Based on this 

disclosure, the court inferred that the 2011 and 2012 production numbers were 

merely estimates. The court noted it was undisputed by Jeff Miley that it would be 

virtually impossible for any third party to look at documentary evidence and 

independently verify that the Well is profitable. The court also noted, however, that 

Miley’s tax preparer testified that the Schedule C forms for 2012 and 2013, did not 
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show the expenses associated with the production of oil and gas exceeded the 

revenues from the sale of oil and gas. 

{¶16} The trial court found that Miley has a major financial incentive to claim 

that the Well is profitable. It further found significant that Miley did not report any 

production for the years 2011 and 2012, until directed by Antero do to so in late 

2013. Finally, the court found that a lessee who claims his lease is profitable yet 

whose tax return shows a loss casts “real doubt” on the actual profitability. Based on 

these findings, the trial court found the Lease was cancelled for lack of production. 

Therefore, the court vacated its previous judgment and entered judgment in favor of 

Burkhart. 

{¶17} Antero subsequently filed a motion for new trial and to reopen and 

amend the judgment entry. 

{¶18} Miley filed a timely notice of appeal on June 26, 2015 (15-MO-12). 

Miley then filed a motion joining in Antero’s motion for new trial. 

{¶19} Antero then filed a notice of appeal (15-MO-13). The trial court, without 

leave, denied the motion for a new trial. Antero filed another notice of appeal from 

that judgment (15-MO-14). 

{¶20} This court then issued a limited remand so that the trial court could rule 

on the motion for new trial. The trial court denied the motion. This court then 

consolidated the appeals. This court also granted the Ohio Oil and Gas Association 

and the Southeastern Ohio Oil and Gas Association leave to file an amicus curiae 

brief in support of Antero and Miley. 

{¶21} Antero raises five assignments of error. Miley raises three assignments 

of error. We will address the assignments of error out of order for ease of discussion. 

{¶22} Antero’s second assignment of error and Miley’s second assignment of 

error control the outcome of this case. 

{¶23} Antero’s second assignment of error states: 

 THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT 

DID NOT USE THE CORRECT LEGAL STANDARD AND BURDEN OF 
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PROOF IN DETERMINING IF THERE WAS PRODUCTION IN 

PAYING QUANTITIES. 

{¶24} Miley’s second assignment of error states: 

 THE TRIAL COURT ERRED AS A MATTER OF LAW IN 

APPLYING THE WRONG LEGAL STANDARD IN DETERMINING 

WHETHER AN OIL AND GAS LEASE REMAINS IN EFFECT. 

{¶25} Here Antero argues the trial court erred in focusing on the overall 

profitability of the Lease’s total operation instead of on the profitability of the Well and 

in shifting the burden of proof to appellants to prove production in paying quantities. 

Antero points out that the law defers to the lessee’s determination as to the 

profitability of a well. It asserts paying quantities refers to a “well” as opposed to a 

“lease.” Antero goes on to argue that the cost of the lessee’s own labor in operating 

and maintaining a well is not considered when determining paying quantities. 

{¶26} Antero contends the trial court was correct in its First Decision when it 

limited its focus to the profitability of the Well and concluded there was production in 

paying quantities. It asserts the court erred in its Second Decision when it focused 

instead on the overall profitability of Miley’s operations as opposed to the profitability 

of the Well. 

{¶27} Additionally, Antero argues the trial court impermissibly shifted the 

burden from the Burkharts (to prove lack of paying quantities) to them (to prove 

paying quantities). 

{¶28} Miley adds that the Lease provides that it will continue so long as oil 

and gas are produced in paying quantities, not so long as the lessee declares a profit 

on its Schedule C with the IRS. It further points to testimony that these payments are 

consistent with the royalties paid to the Burkharts. Finally, it points to Jeff Miley’s 

testimony that the Well is profitable and his expenses for the Well are de minimis. 

{¶29} After the primary term of an oil and gas lease expires, if the conditions 
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of the secondary term are not being met, then the lease terminates by the express 

terms of the contract and by operation of law and revests the leased estate in the 

lessor. Swallie v. Rousenberg, 190 Ohio App.3d 473, 2010-Ohio-4573, 942 N.E.2d 

1109 (7th Dist.), ¶ 63. It is common for the secondary term of the lease to be 

conditioned upon oil or gas being produced in paying quantities. Dennison Bridge, 

Inc. v. Resource Energy, L.L.C., 7th Dist. No. 14 HA 21, 2015-Ohio-4736, ¶ 21. 

{¶30} The term “paying quantities,” when used in the habendum clause of an 

oil and gas lease, generally means quantities of oil or gas sufficient to yield even a 

small profit to the lessee over operating expenses, even though such things as 

drilling costs or equipping costs are not recovered which may result in the 

undertaking as a whole suffering a loss. Blausey v. Stein, 61 Ohio St.2d 264, 265-

266, 400 N.E.2d 408 (1980). 

{¶31} In determining whether a well is profitable, courts look to the discretion 

of the lessee. Lang v. Weiss Drilling Co., 7th Dist. Nos. 15 MO 0005, 15 MO 0006, 

2016-Ohio-8213, ¶ 34. Although the lessee has discretion to determine a well's 

profitability, the determination of whether a well is profitable cannot be arbitrary. Id. 

Courts impose a standard of good faith on the lessee. Id. 

{¶32} This case is controlled by another decision of this court involving The 

Burkhart Family Trust and Antero. Burkhart Family Trust v. Antero Resources Corp., 

7th Dist. Nos. 14 MO 0019, 14 MO 0020, 2016-Ohio-4817, appeal not allowed, 147 

Ohio St.3d 1437, 2016-Ohio-7677, 63 N.E.3d 156. 

{¶33} In that case, the Burkhart Family Trust (BFT) filed a complaint against 

Antero and Tri-County seeking a declaratory judgment that a certain lease had been 

forfeited for lack of production in paying quantities. The matter proceeded to a bench 

trial and the trial court entered judgment in favor of BFT. Antero and Tri-County 

appealed to this court. They argued that the trial court improperly placed the burden 

of proof on them at trial to prove that the wells in question were producing in paying 

quantities. Id. at ¶ 10. Instead, they asserted, because BFT brought the complaint 

against them, the trial court should have placed the burden on BFT to prove that the 
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wells were not producing in paying quantities. Id. 

{¶34} This court started out by noting that although the case involved an oil 

and gas lease, its resolution depended on the Rules of Civil Procedure, specifically 

who held the burden of proof. Id. at ¶ 12. We found that although the trial court 

never directly stated which party bore the burden of proof, it was clear from the 

record that the court improperly shifted the burden to Antero and Tri-County. Id. For 

example, we pointed to the trial court’s finding that Sulsberger, Tri-County’s owner, 

had presented “no credible evidence to support his blanket assertion” that the wells 

were profitable. Id. We further pointed to the trial court’s finding that Sulsberger did 

not keep a business ledger, bookkeeping software, or list of the income versus 

expenses for his company. Id. 

{¶35} We went on to address Sulsberger’s testimony. We noted that 

Sulsberger was BFT’s sole witness. Id. at ¶ 15. Sulsberger testified that the wells 

were producing in paying quantities. Id. The trial court found Sulsberger’s testimony 

to be not credible. Id. We found that while the trial court disbelieved Sulsberger, this 

did not lead to the conclusion that Sulsberger’s testimony was evidence of the 

opposite, that being that the wells were not producing in paying quantities. Id. 

Instead, it left BFT with no credible witness. Id. 

{¶36} We then addressed the trial court’s finding that the wells were not 

producing in paying quantities. We noted that only some of the trial court’s findings 

were relevant to whether the wells produced in paying quantities and those relevant 

findings were not supported by the record. Id. at ¶ 21. 

{¶37} First, we pointed to the trial court’s finding that Sulsberger had 

miscalculated the royalties paid to BFT. Id. at ¶ 22. We found that any 

miscalculation of royalties was irrelevant to the question of paying quantities. Id. 

Thus, we found the trial court improperly considered this factor. 

{¶38} Second, we pointed to the trial court’s finding that Sulsberger failed to 

report production to the ODNR and the county auditor. Id. at ¶ 23. We stated that 

the failure to file production reports with the ODNR did not add to the determination of 
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whether a well is producing. Id., citing Mobberly v. Wade, 7th Dist. No. 13 MO 18, 

2015-Ohio-5287, ¶ 16. 

{¶39} Third, we noted that while Sulsberger testified as to his Schedule C tax 

forms, they were not offered into evidence. Id. at ¶ 24. We noted that although 

Sulsberger testified that his Schedule C showed a loss in certain years, he testified 

that the form contained business expenses for all of his business projects, not just 

the wells in question. Id. Therefore, while his Schedule C may have shown that his 

projects as a whole were unprofitable, it did not provide information specific to the 

wells at issue. Id. Thus, we found it had no evidentiary value to the issue of 

production in paying quantities. Id. 

{¶40} Fourth, we noted that the trial court relied on its finding that Sulsberger 

was a poor record keeper. Id. at ¶ 25. We found that aside from its reliance on 

Sulsberger’s lack of records, BFT did not present any evidence to support its position 

that the wells were not producing in paying quantities. Id. 

{¶41} Fifth, we noted that Sulsberger regularly paid royalties to BFT. Id. at ¶ 

25, 28. And we stated that while not conclusive, the payment of royalties is some 

evidence of production in paying quantities. Id. at ¶ 28. 

{¶42} Finally, we noted that the trial court relied on the finding that 

Sulsberger’s company stood to profit by holding on to the lease until deep drilling on 

the property was completed. Id. at ¶ 29. We found this finding to be irrelevant to the 

issue of paying quantities. Id. 

{¶43} Based on all of the above, this court concluded: 

While Mr. Sulsberger's lack of records is troubling and he clearly 

convinced the trial court that he was untruthful, the fact remains that the 

Burkhart family, on behalf of the Trust, had the burden of proving by 

means of evidence that the wells (that they admit produce) do not 

produce in paying quantities. In support of shifting the burden of proof 

to Appellants, Appellee argued at hearing that this would force them 

into proving the negative. It is apparent the Burkhart family had the 
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ability to use discovery to uncover evidence necessary to prove their 

assertions. Instead of subpoenaing Tri–County's records or 

subpoenaing any other type of evidentiary records on the issue of 

whether paying quantities of either gas or oil were being produced, the 

Burkhart family insists that Appellants were required to prove the 

production from the wells was adequate in order to withstand their 

demands for termination of the lease. As the Trust has failed to meet its 

burden, the trial court's judgment is erroneous. 

Id. at ¶ 29. 

{¶44} In this case too, the trial court incorrectly placed the burden on Miley 

and Antero to prove that the Well was producing in paying quantities instead of 

placing the burden on Burkhart to prove that the Well was not producing in paying 

quantities. The trial court here, like the trial court in BFT, considered several factors 

we deemed in BFT to be irrelevant to a determination of paying quantities. 

{¶45} First, the trial court found that Miley’s tax returns revealed that Miley 

declared a loss of $10,211 in 2012, and a loss of $76,126 in 2013. It also found that 

the tax returns demonstrated that much of Miley’s gross revenues did not come from 

the sale of oil and gas but from contract work that Jeff Miley performed for other oil 

and gas operators. 

{¶46} Notably absent from the trial court’s finding here is any mention of how 

the Well at issue performed. Miley’s tax returns are not specific to the Well. They 

encompass all of Miley’s operations including, as the trial court noted, work Jeff Miley 

performed for other oil and gas operators. And while Miley as a company overall 

may have declared losses in 2012 and 2013, there is no indication as to whether the 

Well produced oil and gas in paying quantities in those years. Therefore, the court 

erred in relying on this factor. 

{¶47} Second, the trial court found that Miley did not report any production on 

any of its wells, including the Well at issue, until late 2013. At that time, after a 

suggestion by Antero, Miley submitted production reports to the ODNR. The trial 
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court then, “clearly infer[ed] that the 2011 and 2012 production numbers are mere 

estimates by Mr. Miley.” It also found it “significant” that Miley did not report any 

production in 2011 or 2012. 

{¶48} We stated in BFT that “the failure to file production reports with ODNR 

does not add to the determination of whether a well is producing.” Id. at ¶ 23, citing 

Mobberly, 2015-Ohio-5287, ¶ 16. Thus, the fact that Miley did not timely submit 

production reports to the ODNR does not help to determine whether the Well 

produced in paying quantities. 

{¶49} Third, the trial court found it was undisputed by Jeff Miley that it would 

be “virtually impossible” for a third party to look at documentary evidence presented 

by Miley and verify that the Lease was profitable. 

{¶50} This statement by the trial court is an example of how the trial court 

placed the burden of proof on Miley to show production in paying quantities. We 

found similar statements by the trial court in BFT, to show that the trial court 

impermissibly shifted the burden of proof. Id. at ¶ 12 (where the trial court found 

Sulsberger did not keep a business ledger, did not have any electronic bookkeeping 

software, and did not keep a list of the income versus expenses). Thus, the trial 

court improperly shifted the burden from Burkhart to Miley. 

{¶51} Fourth, the trial court found that Miley had a “major financial incentive” 

to claim the Well is profitable and Miley “obviously stand[s] to profit immensely by 

maintaining the current Lease.” The court found that the deep rights were assigned 

to Antero whose production efforts could result in a “financial windfall” to Miley. 

{¶52} In BFT, we specifically found that the trial court’s reliance on the finding 

that the lessee stood to profit by holding onto the lease until deep drilling was 

completed was irrelevant to the issue of paying quantities. Id. at ¶ 29. In fact, we 

stated that whether the lessee would profit from deep drilling activities “has no 

bearing at all on the pertinent determination.” Id. Thus, the trial court here erred in 

relying on this factor. 

{¶53} Fifth, the trial court found that a lessee who claims its lease is profitable 
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yet the tax returns show a loss “casts real doubt on his actual profit.” 

{¶54} This statement by the trial court is another example of shifting the 

burden to prove paying quantities to Miley. 

{¶55} Finally, there was no dispute here that Miley had been paying royalties 

to Burkhart, yet the trial court did not mention this in its findings. And “[w]hile not 

conclusive evidence, royalty payments can be evidence of production in paying 

quantities.” RHDK Oil & Gas, L.L.C. v. Dye, 7th Dist. No. 14 HA 0019, 2016-Ohio4654, ¶ 30. 

{¶56} The party who asserts a claim in an oil and gas case, just as in any 

other civil case, carries the burden of proof. Burkhart Family Trust, 2016-Ohio-4817, 

at ¶ 13. Thus, in this case, the burden was on Burkhart to prove that the Well was 

not producing in paying quantities. The trial court’s findings, however, demonstrate 

that it placed the burden on Miley and Antero to prove the Well was producing in 

paying quantities. Moreover, in making its determination, the trial court relied on 

several factors this court has found to be irrelevant to a paying quantities 

determination. Therefore, the trial court erred in finding that the Well was not 

producing in paying quantities and in entering judgment in favor of Burkhart. 

{¶57} Accordingly, Antero’s second assignment of error has merit and is 

sustained. Likewise, Miley’s second assignment of error has merit and is sustained. 

{¶58} Antero’s first assignment of error states: 

 THE TRIAL COURT ERRED IN ENTERING A JUDGMENT IN 

FAVOR OF PLAINTIFF-APPELLEE. 

{¶59} Antero’s third assignment of error states: 

 THE TRIAL COURT’S JUDGMENT AND DECISION ISSUED 

MAY 27, 2015 ARE AGAINST THE MANIFEST WEIGHT OF THE 

EVIDENCE AND A VIOLATION OF SUBSTANTIAL JUSTICE. 

{¶60} Antero’s fourth assignment of error states: 
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 THE TRIAL COURT ERRED IN GRANTING A NEW TRIAL TO 

APPELLEE PURSUANT TO CIVIL RULE 59. 

{¶61} Antero’s fifth assignment of error states: 

 THE TRIAL COURT ERRED IN VACATING ITS NOVEMBER 7, 

2014 JUDGMENT IN ITS ENTIRETY. 

{¶62} Miley’s first assignment of error states: 

 THE TRIAL COURT ERRED IN VACATING ITS PRIOR 

JUDGMENT ENTRY AND ENTERING A JUDGMENT IN FAVOR OF 

APPELLEE ON MAY 27, 2015. 

{¶63} Miley’s third assignment of error states: 

 THE TRIAL COURT’S SECOND JUDGMENT ENTRY DATED 

MAY 27, 2015 IS AGAINST THE MANIFEST WEIGHT OF THE 

EVIDENCE AND A VIOLATION OF SUBSTANTIAL JUSTICE. 

{¶64} Given our resolution of Antero’s second assignment of error and Miley’s 

second assignment of error, the remaining assignments of error are moot. 

{¶65} For the reasons stated above, the trial court’s judgment is hereby 

reversed. Judgment is entered in favor of Antero and Miley. 

DeGenaro, J., concurs. 

Robb, P.J., concurs.