Court Opinion

ID: 6326322
Source: CourtListenerOpinion
Date Created: 2022-03-24 13:08:36.267643+00
Date Added: 2024-06-11T09:22:10.501078
License: Public Domain

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
French v. Ascent Resources-Utica, L.L.C., Slip Opinion No. 2022-Ohio-869.]

                                        NOTICE
     This slip opinion is subject to formal revision before it is published in an
     advance sheet of the Ohio Official Reports. Readers are requested to
     promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
     South Front Street, Columbus, Ohio 43215, of any typographical or other
     formal errors in the opinion, in order that corrections may be made before
     the opinion is published.

                         SLIP OPINION NO. 2022-OHIO-869
      FRENCH ET AL., APPELLANTS, v. ASCENT RESOURCES-UTICA, L.L.C.,
                                       APPELLEE.
  [Until this opinion appears in the Ohio Official Reports advance sheets, it
 may be cited as French v. Ascent Resources-Utica, L.L.C., Slip Opinion No.
                                    2022-Ohio-869.]
Property law—Contracts—R.C. 2711.01(B)(1)—An action seeking a determination
        that an oil and gas lease has expired by its own terms is a controversy
        involving the title to or the possession of real estate and, under R.C.
        2711.01(B)(1), is not subject to arbitration—Court of appeals’ judgment
        reversed and cause remanded.
   (No. 2021-0166—Submitted January 26, 2022—Decided March 24, 2022.)
              APPEAL from the Court of Appeals for Jefferson County,
                          No. 19 JE 0015, 2020-Ohio-4719.
                                 _________________
                              SUPREME COURT OF OHIO

        KENNEDY, J.
        {¶ 1} This discretionary appeal from a judgment of the Seventh District
Court of Appeals presents a single question: is an action seeking a determination
that an oil and gas lease has expired by its own terms a controversy “involving the
title to or the possession of real estate” so that the action is exempt from arbitration
under R.C. 2711.01(B)(1)?
        {¶ 2} The answer to that question is yes. An oil and gas lease grants the
lessee a property interest in real estate that affects the title to the land and permits
the lessee to physically occupy the land to the extent reasonably necessary to the
production of oil and gas—i.e., the lessee acquires the right to enter the property
and construct wells, buildings, telephone lines, pipelines, powerlines, and roads.
And once an oil and gas lease expires under its own terms, the property interest
granted under the lease reverts to the lessor by operation of law and the lessee no
longer has any right to occupy the land. Consequently, an action seeking a
determination that an oil and gas lease has expired is a controversy involving the
title to or the possession of real estate and, under R.C. 2711.01(B)(1), the action is
not subject to arbitration.
        {¶ 3} Because the trial court correctly declined to stay the action at issue in
this case pending arbitration, we reverse the contrary judgment of the court of
appeals and remand the matter to the trial court for further proceedings consistent
with this opinion.
                         I. Facts and Procedural History
        {¶ 4} Appellants, Michael P. French, Karen L. French, Thomas E.
Sutherland, Cynthia L. Sutherland, John D. Sutherland (trustee of the Sutherland
Family Revocable Trust), and Lloyd D. and Mary Ann Boyd (trustees of the Lloyd
and Mary Ann Boyd Irrevocable Trust) (collectively, “French”), are the joint
owners of a tract of land in Smithfield Township known as the “Sutherland Farm.”
Appellee, Ascent Resources-Utica, L.L.C., acquired leases to the oil and gas rights

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to the property. The leases permitted the lessee to physically occupy the land and
granted it the rights to construct wells and buildings, to erect telephone lines,
pipelines, and powerlines, and to build roads. The leases had a primary term of five
years and a secondary term for “as long thereafter as oil or gas * * * or either of
them, is produced from said land by the Lessee, its successors and assigns.” They
also provided that the primary term could be extended under the following
circumstances:

       If at the expiration of the primary term, oil or gas is not being
       produced on the leased premises or on acreage pooled therewith, but
       Lessee is engaged in drilling, deepening, plugging back or
       reworking operations thereon or shall have completed a dry hole
       thereon within ninety (90) days prior to the end of the primary term,
       this lease shall remain in force so long as operations on said well, or
       for the drilling, deepening, plugging back, or reworking of any
       additional well, are prosecuted with no cessation of more than ninety
       (90) consecutive days and, if they result in the production of oil or
       gas, so long thereafter as oil or gas is produced from the leased
       premises, or upon acreage pooled therewith.

As subsequently amended, the leases further stated:

                 Commencement of operations shall be defined as Lessee
       having secured a drilling permit from the State and further entering
       upon the herein described premises with equipment necessary to
       build any access road(s) for drilling of a well subsequently followed
       by a drilling rig for the spudding of the well to be drilled, and the
       commencement and completion of the drilling of a well.

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        {¶ 5} The amended leases also purported to require arbitration: “Any
questions concerning th[e] lease or performance there under shall be ascertained
and determined by three disinterested arbitrators * * * and the award of such
collective group shall be final and conclusive.”
        {¶ 6} French brought an action for declaratory judgment in the Jefferson
County Court of Common Pleas, alleging that the oil and gas leases had terminated
because Ascent failed to produce oil or gas or to commence drilling operations
within the terms of the lease.          Ascent answered French’s complaint and
counterclaimed for a declaration that the leases had not expired. It alleged that it
had obtained permits to drill wells on the land and had begun constructing them
before the expiration of the leases, and it alleged that it began drilling and producing
oil or gas thereafter.
        {¶ 7} Ascent subsequently moved to stay the action pending arbitration.
The trial court denied the request for a stay, concluding that French’s claims
involved the title to or the possession of real property and therefore were exempt
from arbitration pursuant to R.C. 2711.01(B)(1).
        {¶ 8} The Seventh District reversed, reasoning that “even though oil and
gas leases create an interest in real estate, they are not issues concerning title to or
possession of real estate. There is no dispute that [French holds] title to the
Sutherland Farm. There is also no indication that [French’s] title to or possession
of the Sutherland Farm is at stake regardless of how this action is resolved.” 2020-
Ohio-4719, ¶ 24. The appellate court concluded that R.C. 2711.01(B)(1) did not
preclude arbitration of the controversy, and it remanded the matter to the trial court
for it to decide whether Ascent had lost its right to arbitrate the controversy by
failing to timely assert that right. Id. at ¶ 26-29.
        {¶ 9} We accepted French’s appeal to review a single proposition of law:

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                                   January Term, 2022

                Whether R.C. 2711.01(B)(1), which excepts controversies
        involving title to or possession of real estate from arbitration, is
        applicable to declaratory judgment actions in which a landowner
        seeks a declaration that title in the landowner’s oil and gas estate has
        reverted to said landowner because an oil and gas lease has expired
        by its own terms due to the lessee’s failure to satisfy certain
        conditions in the lease.

See 162 Ohio St.3d 1437, 2021-Ohio-1399, 166 N.E.3d 1254.
        {¶ 10} The sole issue in this appeal, then, is whether an action seeking a
determination that an oil and gas lease has expired involves “the title to or the
possession of real estate” within the meaning of R.C. 2711.01(B)(1).
                               II. Law and Analysis
                               A. Standard of Review
        {¶ 11} “The interpretation of a statute is a question of law that [this court]
reviews de novo.” Stewart v. Vivian, 151 Ohio St.3d 574, 2017-Ohio-7526, 91
N.E.3d 716, ¶ 23.
                              B. Statutory Construction
        {¶ 12} In order to resolve the issue before this court, we return to a familiar
place: statutory interpretation. As we explained long ago, “[t]he question is not
what did the general assembly intend to enact, but what is the meaning of that which
it did enact.” Slingluff v. Weaver, 66 Ohio St. 621, 64 N.E. 574 (1902), paragraph
two of the syllabus. Moreover, “[a]n unambiguous statute is to be applied, not
interpreted.” Sears v. Weimer, 143 Ohio St. 312, 55 N.E.2d 413 (1944), paragraph
five of the syllabus.
                                    C. R.C. 2711.01
        {¶ 13} R.C. 2711.01(A) states, “A provision in any written contract, except
as provided in division (B) of this section, to settle by arbitration a controversy that

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subsequently arises out of the contract * * * shall be valid, irrevocable, and
enforceable, except upon grounds that exist at law or in equity for the revocation of
any contract.” In turn, R.C. 2711.01(B)(1) provides that R.C. 2711.01 through
2711.16—a statutory scheme that includes the authority for a court to stay
proceedings pending arbitration, see R.C. 2911.02(B)—“do not apply to
controversies involving the title to or the possession of real estate.”
       {¶ 14} This court has explained that “the natural meaning of the word
‘involving’ is ‘to relate closely’ or ‘connect.’ ” State ex rel. Suwalski v. Peeler, ___
Ohio St.3d ___, 2021-Ohio-4061, ___ N.E.3d ___, ¶ 21, quoting Webster’s Third
New International Dictionary 1191 (1993). The word “title” means “ ‘[t]he union
of all elements (as ownership, possession, and custody) constituting the legal right
to control and dispose of property.’ ” Chesapeake Exploration, L.L.C. v. Buell, 144
Ohio St.3d 490, 2015-Ohio-4551, 45 N.E.3d 185, ¶ 59, quoting Black’s Law
Dictionary 1712 (10th Ed.2014). And the word “possession” means “the exercise
of dominion over property.” Black’s Law Dictionary at 1351.
                       D. The Nature of Oil and Gas Leases
       {¶ 15} It is well settled in our caselaw that an oil and gas lease grants the
lessee a property interest in the land. Bohlen v. Anadarko E & P Onshore, L.L.C.,
150 Ohio St.3d 197, 2017-Ohio-4025, 80 N.E.3d 468, ¶ 12; Harris v. Ohio Oil Co.,
57 Ohio St. 118, 129-130, 48 N.E. 502 (1897). Notably, R.C. 5301.09 provides
that all oil and gas leases must be recorded in the applicable county’s land records,
“[i]n recognition that such leases and licenses create an interest in real estate.” See
also R.C. 317.08(A)(25). This is consistent with our prior determination that when
an oil and gas lease burdens property, it prevents the landowner from passing “title
free and clear of all liens and encumbrances.” Karas v. Brogan, 55 Ohio St.2d 128,
129, 378 N.E.2d 470 (1978). And our decision in Buell made clear that an “oil and
gas lease constitutes a title transaction because it affects title” to real estate.

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                                 January Term, 2022

(Emphasis added.) Id. at ¶ 66; see also R.C. 5301.47(F) (defining “title transaction”
for purposes of Ohio’s Marketable Title Act, R.C. 5301.47 et seq.).
        {¶ 16} In addition, an oil and gas lease affects the possession of the land.
As this court said long ago in Harris, an oil and gas lease “is a lease of the land for
the purpose and period limited therein, and the lessee has a vested right to the
possession of the land to the extent reasonably necessary to perform the terms of
the instrument on his part.” (Emphasis added.) Id. at 129-130. Similarly and more
recently, this court explained in Buell that an oil and gas lease affects the possession
of the land “[b]ecause the lessee also enjoys reasonable use of the surface estate to
accomplish the purposes of the lease.” Id. at ¶ 60. That is, the lessee may exercise
dominion over the part of the real estate that is subject to the lease, sometimes to
the exclusion of the lessor.
        {¶ 17} What happens, then, when an oil and gas lease expires under its own
terms? Our precedent also supplies the answer to that question.
        {¶ 18} “Generally, a contemporary oil and gas lease sets forth the duration
of the lease in a habendum clause that contains two tiers: a ‘primary term’ and a
‘secondary term.’ ” Bohlen, 150 Ohio St.3d 197, 2017-Ohio-4025, 80 N.E.3d 468,
at ¶ 16. “The primary term sets forth a period of definite duration, and the
secondary term then sets forth a period of indefinite duration, permitting extension
of the lease as long as certain conditions are met, typically, when oil and gas are
produced in paying quantities.” Id. If the conditions of the primary term or the
secondary term are not met, then the lease terminates by its express terms and the
property interest that it created is revested to the lessor by operation of law. State
ex rel. Claugus Family Farm, L.P. v. Seventh Dist. Court of Appeals, 145 Ohio
St.3d 180, 2016-Ohio-178, 47 N.E.3d 836, ¶ 20. The expiration or termination of
an oil and gas lease returns the lessor and the lessee to the status quo prior to the
execution of the lease: the lease no longer encumbers the land or affects title to it,

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                                 SUPREME COURT OF OHIO

and the lessee has no right to possess it. See Buell, 144 Ohio St.3d 490, 2015-Ohio-
4551, 45 N.E.3d 185, at ¶ 73.
                  E. Application of Law to the Leases in this Case
        {¶ 19} The oil and gas leases at issue in this case are no different from the
typical lease discussed above. The leases grant rights to Ascent to explore the land
for oil and gas and to produce it, and they permit Ascent to physically occupy the
land, which includes the rights to construct wells and other facilities, to erect
telephone lines, pipelines, and powerlines, and to build roads. The leases also
include a primary term and a secondary term, and they state that the leases terminate
unless a well is producing oil or gas or unless Ascent has commenced drilling
operations within 90 days of the expiration of the primary term. Therefore, the oil
and gas leases may terminate by operation of law if certain conditions stated in their
terms are not met.
        {¶ 20} The action in this case is therefore a controversy involving the title
to or the possession of real property. If the action is successful, it will quiet title to
the property, remove the leases as encumbrances to the property, and restore the
possession of the land to the lessors. If the action is unsuccessful, however, title to
the land will remain subject to the leases, affecting the transferability of the
property. See Buell at ¶ 64. Also, Ascent would have the continued right to possess
and occupy the land, as permitted by the leases, denying French the right to use the
property without restriction. See id. Either way, the action closely involves the
title to or the possession of real property and, under R.C. 2711.01(B)(1), the action
is not subject to arbitration.
                                    III. Conclusion
        {¶ 21} An action seeking a determination that an oil and gas lease has
expired by its own terms is a controversy involving the title to or the possession of
real estate and, under R.C. 2711.01(B)(1), the action is not subject to arbitration.
The Seventh District Court of Appeals therefore erred in reversing the trial court’s

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                                January Term, 2022

judgment declining to stay the action in this case pending arbitration.
Consequently, we reverse the judgment of the Seventh District and remand the
matter to the trial court for further proceedings consistent with this opinion.
                                                                  Judgment reversed
                                                                and cause remanded.
       O’CONNOR, C.J., and FISCHER, DEWINE, DONNELLY, STEWART, and
BRUNNER, JJ., concur.
                                _________________
       Buckingham, Doolittle & Burroughs, L.L.C., Joshua E. O’Farrell, and Jude
B. Streb, for appellants.
       Frost Brown Todd, L.L.C., Matthew C. Blickensderfer, Kevin L. Colosimo,
and Christopher W. Rogers, for appellee.
       Thomas A. Hill and Joseph N. Spano, urging reversal for amicus curiae,
Eric Petroleum Corporation.
                                _________________

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