Court Opinion

ID: 2700754
Source: CourtListenerOpinion
Date Created: 2014-08-04 19:25:02.061959+00
Date Added: 2024-06-11T12:52:54.283366
License: Public Domain

[Cite as Conny Farms, Ltd. v. Ball Resources, Inc., 2013-Ohio-2874.]

STATE OF OHIO, COLUMBIANA COUNTY

                                   IN THE COURT OF APPEALS

                                        SEVENTH DISTRICT

CONNY FARMS LTD.,                                  )
                                                   )       CASE NO. 12 CO 18
        PLAINTIFF-APPELLANT,                       )
                                                   )
        - VS -                                     )       OPINION
                                                   )
                                                   )
BALL RESOURCES, INC., et al.,                      )
                                                   )
        DEFENDANTS-APPELLEES.                      )

CHARACTER OF PROCEEDINGS:                                  Civil Appeal from Common Pleas
                                                           Court, Case No. 08 CV 833.

JUDGMENT:                                                  Affirmed.

JUDGES:
Hon. Mary DeGenaro
Hon. Gene Donofrio
Hon. Joseph J. Vukovich
                           Dated: June 12, 2013
APPEARANCES:

For Plaintiff-Appellant:   Attorney Scott Kurakowski
                           Attorney Aletha Carver
                           Krugliak, Wilkins, Griffiths & Dougherty
                           4775 Munson Street, NW
                           P.O. 36963
                           Canton, OH 44735-6963

For Defendants-Appellee:   Attorney Eric Walter
                           Dworken & Berstein Co., LPA
                           60 South Park Place
                           Painesville, OH 44077

                           Attorney John Rambacher
                           Winkhart, Rambacher & Griffin
                           825 South Main Street
                           North Canton, OH 44720
[Cite as Conny Farms, Ltd. v. Ball Resources, Inc., 2013-Ohio-2874.]
DeGenaro, P.J.
        {¶1}     Plaintiff-Appellant, Conny Farms Ltd., appeals the judgment of the
Columbiana County Court of Common Pleas granting summary judgment in favor of
Defendants-Appellees1 in a suit concerning the validity of two oil and gas leases on
Conny Farms' property. On appeal, Conny Farms asserts there are genuine issues of
material fact concerning: (1) whether Conny Farms failed to comply with the "change
in ownership clause" of the leases, and (2) whether the leases expired pursuant to
their habendum clauses for failure to store gas on the property.
        {¶2}     Upon review, the trial court properly granted summary judgment in favor
of Appellees and thus Conny Farms' assignments of error are meritless.                            The
undisputed evidence demonstrates that Conny Farms failed to comply with the change
in ownership clause and thus Appellees were not obligated to make payments.
Further, gas was continuously stored on and withdrawn from the property. Thus there
are no genuine issues of material fact regarding the expiration of the leases.
Accordingly, the judgment of the trial court is affirmed.
                                  Facts and Procedural History
        {¶3}     This is the second time this case has come before this court. In Conny
Farms Ld. v. Ball Resources, Inc., (Conny Farms I) this court summarized the
pertinent facts and procedural history as follows:

                 Conny Farms is the record title owner of land in Columbiana
        County. Since 1950, there have been two oil and gas leases on that
        land, which were originally held by East Ohio Gas Company (nka
                                                           2
        Dominion East Ohio), but are now held by Appellees. For convenience,
        the parties refer to the leases as the Gibson lease and the Thompson
        lease.     The two leases are identical except for the dollar amounts,
        several dates, and the names of the original lessors.
                 There was never a well drilled on the property; it was used for gas
        storage purposes only.            Michael and Jennifer Conny purchased the

1
  Chowder Gas Storage Facility, LLC; Ball Resources, Inc., Bass Energy, Inc.; William E. Blair; Richard
W. Petticrew; Jeffrey B. Petticrew; C. Richard Petticrew; and 5 Star, LLC.
2
  Chowder holds a 60% working interest in the leases, the other Appellees own the remaining aggregate.
                                                                              -   2-

property on October 7, 2005.      Prior to purchasing the property, the
Connys were provided with a title commitment which revealed the
existence of the leases. The Connys transferred the property to Conny
Farms Ltd. on September 6, 2006. Michael and Jennifer Conny are the
sole members of Conny Farms Ltd. Both the Connys and Conny Farms
admit they had knowledge of the leases prior to taking ownership to the
property.
       In a July 2, 2008 letter to lessees Ball Resources Inc. and William
E. Blair, counsel for Conny Farms/The Connys stated the leases
terminated because no payments had been made since the Connys
took ownership of the property in 2005, and demanded cancellation of
the leases.
       Counsel for Ball Resources and Blair responded in a July 16,
2008 letter that he was aware of the transfer of the property to the
Connys since his office handled the closing, noted the Connys were
provided with the leases, were represented by independent third-party
counsel in connection with that transaction, and stated with regard to the
notice provision in the leases: "It is my understanding that Mr. Conny
never notified Dominion as to the transfer of ownership in this property
and did not notify my clients prior to the notification contained in your
July 2, 2008 correspondence.           Based upon your July 2, 2008
correspondence, we will now transfer the storage rental to Mr. Conny in
accordance with the terms of the subject leases."
       And in a July 23, 2008 follow-up letter, counsel for Ball Resources
and Blair provided documentation of the storage rental payments made
by their predecessor in interest, Dominion, to the Connys' predecessor-
in-interest, Klaus Forester, from April 2001 through May 2005.         This
letter went on to state:
       "Storage    rental   payments   thereafter   were   suspended    by
                                                                                   -   3-

      Dominion East Ohio since your client [Conny Farms] did not notify them
      of the real estate transfer. Based upon the notification contained in your
      July 2, 2008 correspondence regarding this transfer, these suspended
      funds will be transferred to Mr. Conny in the immediate future. Based
      upon this payment history and the express terms of the subject oil and
      gas leases, we believe that our leases remain valid and will proceed
      accordingly."
             Less than one month later, Conny Farms filed a multi-count
      complaint which hinged on the allegation that Appellees breached the
      leases by failing to make any royalty or rental payments; and/or that the
      leases expired under their own terms because no production or storage
      of gas had occurred upon or under the property by Appellees or by their
      predecessor-in-title, Dominion.

Conny Farms I at ¶3-9.
      {¶4}   The leases each contain the following clauses that are germane to this
appeal. First, there is a granting clause which states:

      WITNESSETH: That the said Lessor, for and in consideration of the
      sum of One ($1.00) Dollar cash in hand paid, receipt of which is hereby
      acknowledged, and of the covenants and agreements hereafter
      contained on the part of the lessee to be paid, kept and performed, has
      granted, demised, and leased, and by these presented does grant
      demise, and lease exclusively unto [sic] said Lessee, for the purpose of
      drilling, operating for, producing, removing and disposing of oil and gas
      and for the further purpose and with the exclusive right in the Lessee, as
      he may see fit, to store gas of any kind and from any field or source by
      pumping or otherwise introducing the same into any sand or sands, sub-
      strata or horizon in or under said land, and to remove the same by
      pumping or otherwise through any well on said lands or other lands and
                                                                                      -   4-

       laying of pipe lines and of building tanks, powers, [sic] stations, and
       structures thereon to produce, save and take care of and transport said
       products, all that certain tract of land situate [sic] in the * * *

       {¶5}    The habendum clause provides:

       It is agreed that this Lease shall remain in force for the term of ten years
       from the date hereof, and as long thereafter as the said land is operated
       by the Lessee in the search for or production of oil or gas or so long as
       gas is being stored, held in storage, or withdrawn from the premises by
       Lessee.

       {¶6}    The change in ownership clause states:

       If the estate of either party is assigned—and the privilege of assigning in
       whole or in part is expressly allowed—the covenants hereof shall extend
       to the heirs, executors, administrators, and assigns, but no change in
       ownership of the land or assignment of rentals or royalties shall be
       binding on the lessee until after the lessee has been furnished with a
       written transfer or assignment or a true copy thereof.

       {¶7}    In its Complaint, Conny Farms raises causes of action sounding in quiet
title, wrongful taking/misappropriation, slander of title, trespass, breach of lease
agreement, interference with use and injunction, promissory estoppel and breach of
fiduciary duty. Appellees answered, and both sides filed cross-motions for summary
judgment.     On October 16, 2009, the trial court issued a judgment entry denying
Conny Farms' motion and granting Appellee Chowder Gas' motion.
       {¶8}    The trial court based its decision on a judicial ascertainment clause
contained in the leases, in which the parties agreed that the lease "shall never be
forfeited or cancelled for failure to perform, in whole or in part, any of its covenants,
conditions or stipulations, until it shall have been first finally judicially determined that
                                                                                 -   5-

such failure exists, and after such final determination, lessee is given a reasonable
time therefrom to comply with any such covenants, conditions or stipulations." The
trial court concluded that since there had been no prior judicial determination that the
leases had been in violation of any of the lease covenants, conditions or stipulations
there was no way that Conny Farms could sustain its case.
      {¶9}   On appeal, as a matter of first impression in Ohio, this court held that
judicial ascertainment clauses are against public policy in Ohio and are therefore
unenforceable. Conny Farms I, 2011-Ohio-5472, ¶27-28. Because the trial court had
decided summary judgment on the basis of the judicial ascertainment clause and had
not decided the merits of the other summary judgment arguments, this court
remanded the case for further proceedings. Id. at ¶28.
      {¶10} On remand, Appellee Chowder filed a renewed motion for summary
judgment on January 27, 2012. On February 24, 2012, the trial court granted leave for
all parties to file further pleadings relative to the previously filed cross-motions for
summary judgment.       The parties filed supplemental briefs in support of their
respective motions for summary judgment.       These briefs did not include any new
evidence, only legal arguments; discovery was not reopened on remand.
      {¶11} On April 18, 2012, the trial court issued a judgment entry overruling
Conny Farms' motion and granting Chowder's motion.          In so doing the trial court
concluded that the Conny Farms "failed to send the proper notification to the
Defendants and/or their predecessors when [Conny Farms] took ownership of the
subject property. Their non-compliance with the lease term is fatal to [its] position.
Further the evidentiary materials submitted by the Defendant, which are permitted to
be considered under Rule 56, indicate that gas has been and is being stored under
the subject property." The trial court dismissed Conny Farms' Complaint in its entirety.
                                 Standard of Review
      {¶12} When reviewing a trial court's decision to grant summary judgment, an
appellate court applies the same standard used by the trial court and, therefore,
engages in de novo review. Parenti v. Goodyear Tire & Rubber Co., 66 Ohio App.3d
                                                                                        -   6-

826, 829, 586 N.E.2d 1121 (9th Dist.1990). Under Civ.R. 56, summary judgment is
only proper when the movant demonstrates that, viewing the evidence most strongly
in favor of the nonmovant, reasonable minds must conclude no genuine issue as to
any material fact remains to be litigated and the moving party is entitled to judgment
as a matter of law. Doe v. Shaffer, 90 Ohio St.3d 388, 390, 738 N.E.2d 1243 (2000).
A fact is material when it affects the outcome of the suit under the applicable
substantive law. Russell v. Interim Personnel, Inc., 135 Ohio App.3d 301, 304, 733
N.E.2d 1186 (6th Dist.1999).
       {¶13} When moving for summary judgment, a party must produce some facts
that suggest a reasonable fact-finder could rule in her favor. Brewer v. Cleveland Bd.
of Edn., 122 Ohio App.3d 378, 386, 701 N.E.2d 1023 (8th Dist.1997). "[T]he moving
party bears the initial responsibility of informing the trial court of the basis for the
motion, and identifying those portions of the record which demonstrate the absence of
a genuine issue of fact on a material element of the nonmoving party's claim."
Dresher v. Burt, 75 Ohio St.3d 280, 296, 662 N.E.2d 264 (1996). The trial court's
decision must be based upon "the pleadings, depositions, answers to interrogatories,
written admissions, affidavits, transcripts of evidence, and written stipulations of fact, if
any, timely filed in the action." Id., citing Civ.R. 56(C). The nonmoving party has the
reciprocal burden of specificity and cannot rest on the mere allegations or denials in
the pleadings. Id. at 293.
                             Change in Ownership Clause
       {¶14} In its first of two assignments of error, Conny Farms asserts:
       {¶15} "The trial court erred when it concluded Appellant failed to comply with
the 'change in ownership' clause of the leases"
       {¶16} In their motion for summary judgment, Appellees took the position that
they were not obligated to pay Conny Farms delay rentals because Conny Farms
failed to comply with the change in ownership provision in the leases, which states:

       If the estate of either party is assigned -- and the privilege of assigning in
                                                                                    -   7-

      whole or in part is expressly allowed -- the covenants hereof shall extend
      to the heirs, executors, administrators, and assigns, but no change in
      ownership of the land or assignment of rentals or royalties shall be
      binding on the lessee until after the lessee has been furnished with a
      written transfer or assignment or a true copy thereof.         (Emphasis
      added.)

      {¶17} Appellees maintain that their predecessor Dominion had placed the
funds due under the lease agreements into a suspense account, pending notification
of the identity of the new lessors. When Chowder Gas became the primary lessee, it
sent rental payments to the last known lessor, Klaus Forester.          Stephen Rigo,
President of Chowder Gas' parent company, testified that he had no knowledge that
Conny Farms was the successor on the leases. Mr. Conny conceded that he failed to
provide Appellees or Dominion with a written transfer or other notice when he
purchased the property or when the property was transferred to Conny Farms.
      {¶18} Conny Farms counters that Dominion, and Appellee Ball Resources had
notice of the change in ownership. In support of its argument, Conny Farms cites to
the July 2, 2008 letter from Conny Farms to Appellee Ball Resources and Appellee
Blair, and the July 16, 2008 letter in response from counsel for those Appellees.
      {¶19} Those letters do not create a genuine issue of material fact as to
whether Conny Farms complied with the change in ownership clause. In the July 2,
2008 letter, counsel for Conny Farms contended that no lease payments had been
made since the Connys took ownership of the property, thereby terminating the
leases. It threatened to sue unless the lessees executed a cancellation or release of
the two oil and gas leases.
      {¶20} In the July 16, 2008 response letter, an attorney for Ball Resources and
Blair stated he was aware of the transfer of the property to the Connys since the title
agency within his law office handled the closing. He noted that the Connys were
provided with the leases as part of the title insurance policy and that Mr. Conny was
                                                                                   -   8-

represented by independent third-party counsel in connection with that transaction.
He then cited to the change in ownership provision in the leases, as quoted above,
and further stated: "It is my understanding that Mr. Conny never notified Dominion as
to the transfer of ownership in this property and did not notify my clients prior to the
notification contained in your July 2, 2008 correspondence. Based upon your July 2,
2008 correspondence, we will now transfer the storage rental to Mr. Conny in
accordance with the terms of the subject leases."          Conny Farms nonetheless
maintained its position that the leases had terminated and filed the instant suit several
weeks later.
      {¶21} Conny Farms claims the July 16 letter proves that Appellees'
predecessor Dominion had notice of the change in ownership. However, all this letter
actually proves is that a title agency within the law firm handled the closing when the
Connys purchased the subject property in 2005. Counsel's July 16 response letter
does not prove that any of the lessees themselves had "been furnished with a written
transfer * * * or a true copy thereof," when either the Connys or Conny Farms took
ownership of the property, as required by the leases.
      {¶22} Conny Farms argues that it substantially complied with the change in
ownership provision. The substantial performance doctrine is well-established in Ohio
with respect to most, but not all, contractual disputes. See U.S. Bank, NA v. Stewart,
2nd Dist. No. 21775, 2007-Ohio-5669, ¶40, citing Ohio Farmers' Ins. Co. v. Cochran,
104 Ohio St. 427, 135 N.E. 537 (1922). In Ohio Farmers' Ins. Co., the Ohio Supreme
Court held that the "long and uniformly settled rule as to contracts requires only a
substantial performance in order to recover upon such contract.         Merely nominal,
trifling, or technical departures are not sufficient to breach the contract."      Id. at
paragraph two of the syllabus.
      {¶23} It is undisputed that neither the Connys, nor Conny Farms made any
attempts to notify Appellees of the change in ownership until June 2008, when it wrote
to Ball Resources. Conny Farms seeks for the leases to be invalidated for Appellees
failure to pay rentals during the time period (2005-2008) when neither Appellees nor
                                                                                  -   9-

their predecessor had knowledge of the lessor's identity. This is a particularly harsh
remedy when one considers Conny Farms is asking this court to hold it to a lower
threshold, substantial performance, and yet impose a remedy that requires this court
to strictly construe the lease. Substantial performance, by definition requires at least
some performance; here Conny Farms completely failed to comply with the change in
ownership provision.    It is undisputed that the July 2, 2008 letter was the first
communication Conny Farms had with Appellees or its predecessor Dominion.
      {¶24} Conny Farms is actually making a constructive notice argument;
Appellees "should have known" about the title transfer by virtue of the 2008 letter and
thus contractually bound to pay delay rentals to Conny Farms despite the fact that
Conny Farms failed to technically comply with the change in ownership provision.
However, as a Texas Appeals Court recently explained with regard to change in
ownership clauses, "[w]here such a provision is included in the lease, the lessee is not
charged with constructive notice from the record of a subsequent transfer by the
lessor." Jones v. Clem, Tx.App. No. 11-10-00123-CV, 2012 WL 1069168 (Mar. 29,
2012). Thus, any constructive notice argument also fails.
      {¶25} Conny Farms also argues that the doctrine of waiver by estoppel
precludes Appellees from requiring strict compliance with the change in ownership
clause. Appellees correctly counter that this argument was never raised in the trial
court. As this court has explained concerning summary judgment appeals "[e]ven
though this is a de novo review of a summary judgment decision, there is no 'second
chance to raise arguments' that should have been raised before the trial court." Am.
Express Centurian Bank v. Banaie, 7th Dist. No. 10 MA 9, 2010-Ohio-6503, ¶24.
Thus, we will not consider this argument.
      {¶26} Finally, Conny Farms argues there are genuine issues of material fact
regarding whether the "suspense payments" were proper under the terms of the lease
agreements. Once payments to the prior lessor were returned unclaimed, Dominion
began placing payment in a suspense account pending notification of the new lessor.
      {¶27} While the leases do not expressly provide for suspense payments in the
                                                                                -   10 -

event the identity of a new lessor is unknown, the plain language of the change in
ownership provision does not require any payment until actual written notice of a
change in ownership has been provided to the lessee.             Appellees and their
predecessor acted in good faith by suspending the payments as they did.
       {¶28} The Fourth District, in construing an oil and gas lease that had no
change in ownership provision but required the lessees to mail or tender the rental
payment to the lessors, concluded that absent any indication that either the original
lessors or their successors notified the lessee about the change in ownership, the
lessee acted in good faith by mailing the annual rental payment to the original lessors
at the address specified in the lease. Burlington Resources Oil & Gas v. Cox, 133
Ohio App.3d 543, 548-549, 729 N.E.2d 398 (4th Dist.1999).          Thus, even in the
absence of an express change in ownership provision, the court declined to place a
burden upon the lessee to constantly search title records in search of the identity of
the lessors:

               The [lessors] argue that [the lessee] should fill the gap in this
       contract by using its vast resources each year to identify the lessors or
       successor lessors. The [lessors] do not say how [the lessee] should
       accomplish this task. Apparently, they want us to impose a duty of good
       faith upon [the lessee] to check the records at the Jackson County
       Recorder's Office each year before it sends out the eighty dollar rental
       payment. Under the terms the [lessors] seek to imply, if the contract
       remained in force for ten years, then [the lessee] would have the duty to
       check the record ten times. After carefully reviewing the terms of the
       lease, we do not think that the original parties intended to impose this
       yearly burden upon the lessee.

Id. at 548.
       {¶29} This reasoning is even more applicable in the present situation, where
there is a change in ownership clause in the lease.       Neither Appellees nor their
                                                                                    -   11 -

counsel had a duty to search title records or counsel’s internal records to ascertain
the identity of the new lessors after delay rental payments to the prior lessor were
returned unclaimed.       To so hold would obviate the purpose of the change in
ownership clause.
         {¶30} For all of the above reasons, reasonable minds could come to only one
conclusion, that Conny Farms failed to comply with the change in ownership clause.
Accordingly, Conny Farms' first assignment of error is meritless.
                                       Gas Storage
         {¶31} In its second of two assignments of error, Conny Farms asserts:
         {¶32} "The trial court erred when it concluded gas has been and is being
stored under the subject property."
         {¶33} Conny Farms argues that the leases expired pursuant to their respective
habendum clauses, which state:
         {¶34} "It is agreed that this Lease shall remain in force for the term of ten years
from the date hereof, and as long thereafter as the said land is operated by the
Lessee in the search for or production of oil or gas or so long as gas is being stored,
held in storage, or withdrawn from the premises by Lessee." (Emphasis added.)
         {¶35} Appellees counter that gas has been continually stored on and
withdrawn from the property and therefore the habendum clause argument is without
merit.    Appellees point to the deposition testimony of Stephen Rigo, President of
Appellee Chowder Gas' parent company. Chowder Gas had taken a majority working
ownership interest in the leases in 2008. Rigo testified that there was gas presently in
the storage field: "We own gas that's in storage gas that's in there. We have not
injected anything ourselves yet.        We're in the process of actually installing a
compressor which would allow us to do it * * * But yes, it's a storage unit and it's being
withdrawn on right now."
         {¶36} Rigo admitted that to his knowledge Dominion had not injected any gas
into the storage fields since before 2005. However, he testified there had been on-
going storage and withdrawals of gas since that time:
                                                                               -   12 -

             A. There was no injection, but here's 2008 from an engineer,
      projected remaining inventory contained in Dominion East Ohio,
      Columbiana storage field calculated at 720,000 MCF. So there's plenty
      of storage in there.
             Q. Were you aware of when Dominion last withdrew any gas from
      that storage field?
             A. Yes.     Since November 2002, Dominion has made three
      withdrawals of gas from Columbiana storage field.          This first from
      November 2002 to April 2003 – do you want to know all this?
             Q. Yes.
             A. The second, from January to July 2005, a total of 350,000
      MCF. And the last, from January to May of 2006, a total of 50,000 MCF.
      Since then we've withdrawn gas, as did our predecessor.
             Q. Do you know when your predecessors withdrew gas?
             A. Yes.
             Q. When?
             A. Well they've sold gas that was withdrawn from the field under a
      contract with a company called Integyrs, I-n-t-e-g-y-r-s. And the tract
      was for 12 months starting in April 2008 and it expired March 2009. It
      called for 9,000 decatherms a month, I believe, at a fixed price. Since
      then they've been - - we just started in May, they're withdrawing.

      {¶37} Conny Farms provided no evidence to contradict Rigo's testimony,
instead taking small portions of that testimony out of context in an attempt to argue
that gas has not been stored on the property for many years. The leases have not
expired under their habendum clauses as gas was continuously held in storage on the
property and continually withdrawn from the property since the time Conny Farms took
ownership. Conny Farms' argument to the contrary is meritless.
      {¶38} Conny Farms also asserts in this assignment of error that Appellees'
                                                                                -   13 -

predecessor Dominion failed to pay Conny Farms' predecessor some of the delay
rentals due under the leases. Specifically, Conny Farms asserts: "In the least, this
Court should determine that Appellees no longer maintain the right to drill wells for
production which was terminated and now vests with Appellant." This argument was
raised for the first time on remand to the trial court.
       {¶39} The leases provide the following with regard to delay rentals:

              If no well is drilled or if the production of gas from the leased
       premises has terminated and so long as gas is being stored, held in
       storage or withdrawn from the premises by the lessee, lessee shall pay
       the lessor an annual rental of [$186.00 for Thompson lease, $222.00 for
       Gibson lease] it being understood that such payments shall be in lieu of
       and not in addition to royalties or rentals otherwise provided for by this
       agreement even though the Lessee continues to store gas within the
       leased land after having plugged and abandoned all wells thereon. It is
       agreed that the Lessee may drill or not drill on said land, may store gas
       therein, hold the same in storage, or withdraw any gas from storage, as
       he may elect and rentals paid and to be paid constitute adequate
       compensation for such privilege.
              If operations for the drilling of a well for oil and gas are not
       commenced on the said lands on or before the 9th of June 1950 this
       lease shall terminate as to both parties, unless the lessee on or before
       that date shall pay or tender to the lessor or the lessor's agent the sum
       of [[$186.00 for Thompson lease, $222.00 for Gibson lease], which shall
       act as rental and confer the privilege of deferring the commencing of a
       well for a period of twelve months from said date. In like manner and
       upon like payments or tenders the commencement of a well may be
       further deferred for like periods successively. And it is understood and
       agreed that the consideration first recited herein, the down payment
                                                                                -   14 -

      covers not only the privilege granted to the date when the first rental is
      payable as aforesaid, but also the lessee's option of extending the
      period as aforesaid, and       any and all rights conferred. (Emphasis
      added.)

      {¶40} Conny Farms claims that no delay rental payments were ever made
pursuant to the second clause to preserve the future right to drill.      According to
deposition testimony of Kimberly Milano, Dominion's Land Service Coordinator, to her
knowledge no payment pursuant to the second clause was ever made to the prior
lessor. This is consistent with Dominion's annual rental payment history, which was
an exhibit during Milano's deposition.
      {¶41} However, based upon the language of the lease agreements, a second
payment was not necessary to preserve the lessee's future right to drill. Notably, the
heading used by Conny Farms at page 18 of its appellate brief ("Annual Payment for
Future Right to Drill Producing Well,") does not exist in the actual lease agreements.
Further, the language in the first clause provides that a payment pursuant to that
clause is sufficient to preserve the future right to drill insofar as it states: "such
payments shall be in lieu of and not in addition to royalties or rentals otherwise
provided for by this agreement," and further that "[i]t is agreed that the Lessee may
drill or not drill on said land, * * * , as he may elect and rentals paid and to be paid
constitute adequate compensation for such privilege." (Emphasis added.)
      {¶42} For all of the above reasons, Conny Farms' second assignment of error
is meritless. There is no genuine issue of material fact concerning the expiration of
the leases pursuant to the habendum clauses; rather, the evidence demonstrates that
gas has been and is being stored under the subject property.
      {¶43} In sum, the trial court properly granted summary judgment in favor of
Appellees and thus Conny Farms' assignments of error are meritless. The undisputed
evidence demonstrates that Conny Farms failed to comply with the change in
ownership clause and thus Appellees were not obligated to make payments. Further,
                                                                                -   15 -

gas was continuously stored on and withdrawn from the property. Thus, there are no
genuine issues of material fact regarding the expiration of the leases. Accordingly, the
judgment of the trial court is affirmed.
Donofrio, J., concurs.
Vukovich, J., concurs.