Court Opinion

ID: 4013469
Source: CourtListenerOpinion
Date Created: 2016-07-06 19:10:51.550987+00
Date Added: 2024-06-11T14:44:44.301037
License: Public Domain

[Cite as Lang v. Enervest Energy Institutional Fund XI A LP, 2016-Ohio-4844.]

                              IN THE COURT OF APPEALS OF OHIO
                                 FOURTH APPELLATE DISTRICT
                                    WASHINGTON COUNTY

PATRICK LANG, ET AL.,                             :       Case No. 15CA24

        Plaintiffs-Appellants,                    :

v.                                                :
                                                          DECISION AND
ENERVEST ENERGY INSTITUTIONAL                             JUDGMENT ENTRY
FUND XI A LP, ET AL.,         :

        Defendants-Appellees.                     :       RELEASED 06/29/2016

                                            APPEARANCES:

Ethan Vessels, Fields, Dehmlow & Vessels, LLC, Marietta, Ohio, for plaintiffs-appellants
Patrick and Amy Lang.
Michael D. Buell, Buell & Sipe Co., L.P.A., Marietta, Ohio, for defendants-appellees McAlester
Fuel Company and McAlester Fuel Holding Co., Inc.

Hoover, J.
        {¶1}    Plaintiffs-appellants, Patrick and Amy Lang (hereinafter “appellants”), appeal

several decisions and judgments of the Washington County Common Pleas Court in their action

seeking to declare an oil and gas lease encumbering their property forfeited and void.

        {¶2}    Appellants first contend that the trial court erred by denying their motion for

default judgment and by instead granting defendants-appellees, McAlester Fuel Company and

McAlester Fuel Holding Co., Inc. (hereinafter “appellees”), leave to file a responsive pleading.

Because we do not believe that the trial court abused its discretion in determining that excusable
Washington App. No. 15CA24                                                                           2

neglect existed justifying the appellees’ delayed response to the complaint, we disagree with

appellants’ first contention.

       {¶3}    Appellants next contend that the trial court erred by granting the appellees’

motion to dismiss the complaint. The trial court, after initially denying appellees’ motion to

dismiss the complaint, later revisited the motion upon the “presentment of evidence” and

ultimately granted the motion to dismiss. Because a Civ.R. 12(B)(6) motion to dismiss may only

be determined upon review of the complaint, and not upon the consideration of evidence, we find

merit in this argument.

       {¶4}    Finally, appellants contend that the trial court erred by denying their motion for

summary judgment. However, because the trial court chose not to consider appellants’ motion

for summary judgment, as opposed to denying or granting the motion, we also decline to

consider the motion.

       {¶5}    Accordingly, the judgment of the trial court is affirmed in part, and reversed in

part. The cause shall be remanded to the trial court for further proceedings.

                                 I. Facts and Procedural History

       {¶6}    Appellants own approximately 62 acres of real property located in Adams

Township in Washington County, Ohio (hereinafter the “property”). The property is subject to an

oil and gas lease entered April 19, 1978, between Frank and Ruth Lang as lessors and Eastern

Gas Systems, Inc., as the lessee (hereinafter the “lease”). Appellants are the successors-in-

interest to Frank and Ruth Lang and appellees are the successors-in-interest to the original lessee.

The term of the lease is for “a primary term of One (1) years [sic] from May 10, 1978 and as

long thereafter as operations for oil or gas are being conducted on the premises, or oil or gas is
Washington App. No. 15CA24                                                                               3

found in paying quantities thereon, or any formation underlying the herein leased land is used for

storage of gas provided under paragraph 7 hereof.” The lease also expressly grants the lessee the

right to unitize the property or portions thereof with other tracts of land to form a drilling unit or

units.

         {¶7}   Two wells were drilled on the property: the Frank and Ruth Lang # 1 Well

(hereinafter the “# 1 Well”) and the Frank and Ruth Lang # 2 Well (hereinafter the “# 2 Well”).

Neither the # 1 Well nor the # 2 Well has produced oil or gas since 2001.

         {¶8}   In 2001, 3.30 acres of the property were consolidated with other properties in

Adams Township, Washington County, Ohio, to form a 40-acre drilling unit under a

“Declaration of Consolidation” (hereinafter the “Consolidation”). The purpose of the

Consolidation was to “develop and operate the lands [therein] described, [and] to consolidate to

the extent [therein] described said lands into a single operating unit (the ‘Consolidated Unit’) for

the purpose of development and production of oil and/or gas from all zones and formations

available to the Lessee pursuant to the provisions of the Leases and the rights of the Lessee.”

         {¶9}   One well was drilled on the Consolidated Unit in 2001, the W Lang # 3-SE36

Well (hereinafter the “# 3 Well”). Although the # 3 Well is part of the Consolidated Unit, it is

not located on the appellants’ property. It is undisputed that the # 3 Well is currently producing

oil or gas in paying quantities. No other wells have been drilled on the Consolidated Unit.

         {¶10} The appellants filed their complaint in this case on November 25, 2013. In count

one of their complaint, the appellants alleged that the lease had expired under its own terms as to

the 58.7 acres unencumbered by the Consolidation due to a lack of production of oil or gas.

Appellants requested a judgment declaring the oil and gas lease forfeited and void as to those
Washington App. No. 15CA24                                                                                        4

58.7 unencumbered acres. In count two, the appellants claimed that the defendants had breached

implied covenants, thus voiding the lease.

        {¶11} The appellees were served with the complaint by certified mail on December 4,

2013.1 However, the appellees failed to respond to the complaint, or otherwise notify the trial

court of their intent to contest the case within the time prescribed by the Civil Rules of

Procedure.

        {¶12} On January 24, 2014, the appellants filed a motion for default judgment against

the appellees. The appellees responded to the motion for default judgment by filing a combined

motion in opposition to default, and motion for leave to file a responsive pleading. In their

combined motion, supported by the affidavit of in-house counsel, the appellees alleged that they

had retained Attorney Thomas Webster to represent them in the lawsuit. The appellees further

claimed that Attorney Webster had told them that he had obtained from the appellants a two-

week extension of time to file an answer. Thereafter, appellees’ in-house counsel attempted to

contact Attorney Webster several times for an update of the case status but to no avail. It was

upon the filing of appellants’ motion for default judgment that appellees hired new counsel,

Attorney Michael D. Buell, to represent their interests in the lawsuit. Appellees claimed that the

misunderstanding and lack of communication constituted mistake, inadvertence, and/or

excusable neglect.

        {¶13} The appellants filed a memorandum in opposition to the combined motion of

appellees. In their memorandum in opposition, the appellants denied that their counsel had ever

granted a filing extension; and even if they had, they argued that the appellees still failed to

1
  The complaint named several defendants in addition to the appellees. However, those additional defendants
released any interest they may have had in the disputed portion of the property and were subsequently dismissed
from the lawsuit.
Washington App. No. 15CA24                                                                           5

timely respond by the extended date. They also argued that a lawyer’s mistake is not “excusable

neglect” warranting leave to respond under Civ.R. 6.

       {¶14} Appellees filed a reply memorandum in support of their motion for leave to file a

responsive pleading. Attached to the reply memorandum was an affidavit from Attorney

Webster. Through the affidavit, Attorney Webster averred that he agreed to represent the

appellees in the lawsuit. He further averred that shortly after he received a copy of the summons

and complaint he saw appellants’ counsel in the courthouse and verbally requested “at least an

additional two weeks” to investigate the matter and file a responsive pleading. Attorney Webster

claimed to have received a verbal extension from opposing counsel at that time. He further

averred that since he had been granted an extension, he believed that opposing counsel would

contact him before proceeding on the matter pursuant to local custom.

       {¶15} In June 2014, the trial court denied appellants’ motion for default judgment and

granted appellees’ motion for leave to file a responsive pleading. The trial court determined that

appellees’ actions constituted excusable neglect, citing the “local practice to ‘informally’ seek

additional time to plead”. The trial court also noted that the appellants would not be prejudiced

by allowing appellees to respond because appellees sought to “reuse” defenses raised by the co-

defendants prior to their dismissal from the case.

       {¶16} Thereafter, on June 11, 2014, the appellees filed a motion to dismiss the

complaint pursuant to Civ.R. 12(B)(6). The appellees argued, through the motion, that dismissal

of the complaint was required because oil or gas produced from the # 3 Well on the Consolidated

Unit was sufficient to hold the lease on all of the appellants’ property. Appellees also argued that

the lease contained an express provision disclaiming all implied covenants. Conversely, in their

memorandum in opposition, the appellants argued that the language of the lease required the
Washington App. No. 15CA24                                                                                          6

release of their property except for the 3.30 acres that were made part of the Consolidated Unit.

The trial court denied the motion to dismiss by ruling filed August 20, 2014. However, the trial

court held in its ruling that the motion was “subject to reconsideration upon presentment of

evidence regarding production volume and royalty payments” from the # 3 Well. An entry

denying the motion to dismiss was journalized on August 26, 2014.

        {¶17} Appellants ultimately moved for summary judgment; again arguing that the lack

of production on the non-consolidated acreage causes the lease to expire under its own terms.

The appellants also argued that the appellees had breached the implied covenant to develop the

property, thus voiding the lease as to the non-consolidated acreage. In their memorandum in

opposition to the summary judgment motion, the appellees renewed their argument that the

production of oil or gas on the Consolidated Unit held the lease on all of the appellants’ property.

Attached to the memorandum in opposition was the affidavit of appellees’ President and Chief

Executive Officer, documenting for the first time the oil and gas production and royalty

payments from the # 3 Well. Notably, the appellees did not file a cross-motion for summary

judgment.

        {¶18} In its “Ruling on Motion for Summary Judgment”, filed June 10, 2015, the trial

court noted that it had chosen “to revisit the [appellees’] Motion to Dismiss” given the

“production/royalty information” presented in appellees’ opposition memorandum. The trial

court then announced that it was granting appellees’ motion to dismiss and declining to consider

appellants’ motion for summary judgment.2 In a subsequent “Entry”, filed on June 22, 2015, the

trial court again stated it was granting appellees’ motion to dismiss. However, in the Entry the

trial court stated that appellants’ motion for summary judgment was “denied”.

2
 Specifically, the ruling states that: “Defendant’s Motion to Dismiss is GRANTED. As a result, the Court will not
consider Plaintiffs’ Motion for Summary Judgment * * *.”
Washington App. No. 15CA24                                                                          7

       {¶19} Following the journalization of the June 22, 2015 Entry, appellants filed a timely

notice of appeal indicating their intent to appeal the trial court’s judgments on the motion for

default judgment/motion for leave to file a responsive pleading, motion to dismiss, and motion

for summary judgment.

                                    II. Assignments of Error

       {¶20} Appellants assign the following errors for our review:

First Assignment of Error:

       The trial court erred in denying the Langs’ Motion for Default Judgment.

Second Assignment of Error:

       The trial court erred in granting McAlester’s Motion to Dismiss and denying the
       Langs’ Motion for Summary Judgment.

                                  III. Law and Analysis

       {¶21} In their first assignment of error, appellants contend that the trial court erred by

granting appellees' motion for leave to file their responsive pleading and by overruling their

motion for default judgment. In particular, appellants argue that the appellees failed to prove that

their failure to file a timely answer or to otherwise defend was due to excusable neglect.

       {¶22} “A trial court's decision to either grant a default judgment in favor of the moving

party, or allow the defending party to file a late answer pursuant to Civ.R. 6(B)(2) upon a finding

of excusable neglect, will not be reversed absent an abuse of discretion.” Huffer v. Cicero, 107
Ohio App. 3d 65, 74, 667 N.E.2d 1031 (4th Dist.1995), citing Miller v. Lint, 62 Ohio St. 2d 209,

404 N.E.2d 752 (1980) and McDonald v. Berry, 84 Ohio App. 3d 6, 616 N.E.2d 248 (8th
Washington App. No. 15CA24                                                                              8

Dist.1992). Accordingly, we must uphold the trial court’s decision so long as the trial court did

not act unreasonably, unconscionably, or arbitrarily. Lauer v. Positron Energy Resources, Inc.,

4th Dist. Washington No. 13CA39, 2014-Ohio-4850, ¶ 9. Furthermore, in applying the abuse of

discretion standard, we may not substitute our judgment for that of the trial court. Id.

       {¶23} Civ.R. 55 governs default judgments, and provides, in relevant part, that when a

party defending a claim has “failed to plead or otherwise defend”, the court may, upon motion,

enter a default judgment on behalf of the party asserting the claim. Civ.R. 55(A) and (C); Ohio

Valley Radiology Assocs., Inc. v. Ohio Valley Hosp. Assn., 28 Ohio St. 3d 118, 120, 502 N.E.2d
599 (1986).

       {¶24} Civ.R. 12 and Civ.R. 6 are also applicable to this appeal. Civ.R. 12(A)(1)

provides that “[t]he defendant shall serve his answer within twenty-eight days after service of the

summons and complaint upon him * * *.” Civ.R. 12(B) provides that any Civ.R. 12(B) defense

“shall be made [by motion] before pleading if a further pleading is permitted.” Additionally,

Civ.R. 6(B)(2) provides that if a party fails to act as required within the time specified, the court

may, upon motion, “permit the act to be done where the failure to act was the result of excusable

neglect * * *.” Thus, once an applicable filing deadline passes, the court only has the discretion

to grant an extension upon motion and demonstration of excusable neglect.

       {¶25} The Ohio Supreme Court has reasoned that “the test for excusable neglect under

Civ.R. 6(B)(2) is less stringent than that applied under Civ.R. 60(B).” State ex rel. Lindenschmidt

v. Bd. of Commrs. of Butler Cty., 72 Ohio St. 3d 464, 466, 650 N.E.2d 1343 (1995). “The

determination of whether neglect was excusable or inexcusable must take into consideration all

the surrounding facts and circumstances, and courts must be mindful that cases should be

decided on their merits where possible, rather than on procedural grounds.” Duffy v. Nourse
Washington App. No. 15CA24                                                                          9

Family of Dealerships-Chillicothe, Inc., 4th Dist. Ross No. 05CA2846, 2006-Ohio-2057, ¶ 11,

citing Lindenschmidt at 466. “Indicators of whether neglect was excusable in a particular

instance include whether the opposing party was prejudiced by the delay, the relative length of

the delay, and whether the opposing party filed its own materials in a timely matter.” Duffy at ¶

11.

       {¶26} Here, the trial court denied appellants’ motion for default judgment based upon its

reasoning that appellees’ had demonstrated excusable neglect in failing to timely file their

answer or to otherwise defend. Based on the following, we conclude that the trial court did not

abuse its discretion in reaching this decision.

       {¶27} First, we note that appellants have not identified any prejudice suffered as a result

of the trial court granting appellees’ motion for leave to file a responsive pleading. The very

defenses sought to be raised by appellees had already been raised by the co-defendants via a

motion to dismiss. While the trial court never reached a decision on the co-defendants’ motion to

dismiss, in granting appellees’ motion for leave to file a responsive pleading, the trial court

explicitly noted appellants’ familiarity with the defenses. The appellees also filed their combined

motion in opposition to default, and motion for leave to file a responsive pleading within three

weeks of being served with appellants’ motion for default judgment, and within three months of

the service of the complaint. We believe this is a relatively short delay. Furthermore, the trial

court noted that “cases should be decided on their merits as opposed to procedural grounds”; a

view that reflects the applicable law.

       {¶28} As a final matter, we reiterate that our resolution of appellants’ first assignment of

error turns upon the abuse of discretion standard of review. As the Tenth District Court of
Washington App. No. 15CA24                                                                           10

Appeals succinctly stated in McGee v. C & S Lounge, 108 Ohio App. 3d 656, 661, 671 N.E.2d
589 (10th Dist.1996):

       Discretion necessarily connotes a wide latitude of freedom of action on the part of

       the trial court, and a broad range of more or less tangible or quantifiable factors

       may enter into the trial court's determination. Simply put, two trial courts could

       reach opposite results on roughly similar facts and neither be guilty of an abuse of

       discretion.

While a different trial court or even certain members of this Court may have reached a different

result, we cannot say that the trial court's decision constituted an abuse of its discretion. The trial

court best understands local practices and customs; and it did not act unreasonably,

unconscionably, or arbitrarily in assessing the actions of appellees and finding excusable neglect

in light of those customs. Accordingly, we overrule appellants’ first assignment of error.

       {¶29} In their second assignment of error, the appellants contend that the trial court

erred by granting the appellees’ motion to dismiss while simultaneously denying their motion for

summary judgment.

       {¶30} A Civ.R. 12(B)(6) motion to dismiss for failure to state a claim upon which relief

may be granted is procedural and tests the sufficiency of the complaint. State ex rel. Hanson v.

Guernsey Cty. Bd. of Commrs., 65 Ohio St. 3d 545, 548, 605 N.E.2d 378 (1992). A trial court

may not grant a motion to dismiss for failure to state a claim upon which relief may be granted

unless it appears “beyond doubt from the complaint that the plaintiff can prove no set of facts

entitling him to recovery.” O'Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St. 2d 242,

327 N.E.2d 753 (1975), syllabus.
Washington App. No. 15CA24                                                                                      11

           {¶31} When a trial court considers a Civ.R. 12(B)(6) motion to dismiss, it must review

only the complaint, accepting all factual allegations contained in the complaint as true and

making all reasonable inferences in favor of the nonmoving party. State ex rel. Talwar v. State

Med. Bd. of Ohio, 104 Ohio St. 3d 290, 2004–Ohio–6410, 819 N.E.2d 654, ¶ 5; Perez v.

Cleveland, 66 Ohio St. 3d 397, 399, 613 N.E.2d 199 (1993); Estate of Sherman v. Millhon, 104
Ohio App. 3d 614, 617, 662 N.E.2d 1098 (10th Dist.1995). Furthermore, the trial court “cannot

rely on evidence or allegations outside the complaint to determine a Civ.R. 12(B)(6) motion.”

State ex rel. Fuqua v. Alexander, 79 Ohio St. 3d 206, 207, 680 N.E.2d 985 (1997).3 When a party

presents evidence outside the pleadings, the trial court bears the “responsibility either to

disregard [the] extraneous material or to convert [the] motion to dismiss into a motion for

summary judgment * * *.” Keller v. Columbus, 100 Ohio St. 3d 192, 2003–Ohio–5599, 797
N.E.2d 964, ¶ 18. If the court converts the motion to dismiss to one for summary judgment, the

court must give the parties notice and a reasonable opportunity to present all of the available

evidence that Civ.R. 56(C) permits. Civ.R. 12(B). As our sister district aptly explained in Powell

v. Vorys, Sater, Seymour & Pease, 131 Ohio App. 3d 681, 684–685, 723 N.E.2d 596 (10th

Dist.1998):

           When a motion to dismiss presents matters outside the pleadings, the trial court

           may either exclude the extraneous matter from its consideration or treat the

           motion as one for summary judgment and dispose of it pursuant to Civ.R. 56.

3
    Civ.R. 12(B) provides:

           When a motion to dismiss for failure to state a claim upon which relief can be granted presents
           matters outside the pleading and such matters are not excluded by the court, the motion shall be
           treated as a motion for summary judgment and disposed of as provided in Rule 56. Provided
           however, that the court shall consider only such matters outside the pleadings as are specifically
           enumerated in Rule 56. All parties shall be given reasonable opportunity to present all materials
           made pertinent to such a motion by Rule 56.
Washington App. No. 15CA24                                                                                          12

         However, a trial court may not, on its own motion, convert a Civ.R. 12(B)(6)

         motion to dismiss to a motion for summary judgment and thus dispose of it

         without giving notice to the parties of its intent to do so and fully complying with

         Civ.R. 12(B) and Civ.R. 56 in its considerations. Civ.R. 12(B); State ex rel. Baran

         v. Fuerst (1990), 55 Ohio St. 3d 94, 97, 563 N.E.2d 713, 716. * * * * Failure to

         notify the parties that the court is converting a Civ.R. 12(B)(6) motion to dismiss

         into one for summary judgment is, itself, reversible error. State ex rel. Boggs v.

         Springfield Local School Dist. Bd. of Edn. (1995), 72 Ohio St. 3d 94, 96, 647
N.E.2d 788, 791.

         {¶32} In the case sub judice, we cannot uphold the trial court’s judgment of dismissal as

either a dismissal under Civ.R. 12(B)(6) or as a valid summary judgment under Civ.R. 56. The

trial court, in reaching its decision, clearly considered and relied upon evidence and materials

outside of the pleadings. Thus, the trial court’s judgment fails as a dismissal under Civ.R.

12(B)(6). Furthermore, there is no indication that the trial court notified the parties that it would

convert the motion to dismiss into a summary judgment motion. Because the trial court’s

judgment fails to comply with either Civ.R. 12(B)(6) or Civ.R. 56(C), we must reverse it.4

         {¶33} With regards to appellants’ contention that the trial court erred by denying their

motion for summary judgment, we note that the trial court actually did not enter a decision on the

motion. Rather, in its June 10, 2015 ruling, the trial court stated that “[a]s a result [of the granting

of appellees’ motion to dismiss], the Court will not consider [appellants’] Motion for Summary

4
  In this instance, the trial court’s actions are not excused as constituting harmless error because appellants did not
have sufficient notice and an opportunity to respond. The evidence considered by the trial court was submitted in
opposition to appellants’ motion for summary judgment, and in no way could the appellants have known that the
trial court would consider the evidence to unilaterally change it previous ruling on appellees’ motion to dismiss. For
a more thorough discussion of the harmless error doctrine in the conversion-notification context, see our ruling in
Rice v. Lewis, 4th Dist. Scioto No. 13CA3551, 2013-Ohio-5890.
Washington App. No. 15CA24                                                                          13

Judgment * * *.” Because the trial court did not first consider the motion, we decline to consider

it. See Sites v. Sites, 4th Dist. Lawrence No. 09CA19, 2010-Ohio-2748, ¶ 30 (noting that as a

reviewing court, an appellate court should decline to address the merits of a motion in the first

instance).

        {¶34} Based on the foregoing, we sustain appellants’ second assignment of error in part

and overrule it in part.

                                          IV. Conclusion

        {¶35} In summary, appellants’ first assignment of error contesting the trial court's denial

of their motion for default judgment is overruled, and that aspect of the trial court's judgment is

affirmed. We further decline to address the portion of appellants’ second assignment of error

relative to the merits of their motion for summary judgment until the trial court has had an

opportunity to do so. However, having sustained the remaining portion of appellants’ second

assignment of error, we reverse the judgment of the trial court that granted appellees’ motion to

dismiss the complaint. This matter is remanded to the Washington County Common Pleas Court

for further proceedings in accordance with the law and this opinion.

                                                              JUDGMENT AFFIRMED IN PART,
                                                                       REVERSED IN PART,
                                                                   AND CAUSE REMANDED.
Washington App. No. 15CA24                                                                      14

                                     JUDGMENT ENTRY

       It is ordered that the JUDGMENT IS AFFIRMED IN PART AND REVERSED IN
PART; and the CAUSE IS REMANDED. Appellants and appellees shall equally divide the
costs.

       The Court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate issue out of this Court directing the Washington
County Common Pleas Court to carry this judgment into execution.

       A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the
Rules of Appellate Procedure.

Harsha, J.:    Concurs in Judgment and Opinion.
McFarland, J.: Concurs in Judgment Only as to Assignment of Error II.
               Dissents as to Assignment of Error I.

                                             For the Court

                                             BY: ________________________________
                                                 Marie Hoover, Judge

                                   NOTICE TO COUNSEL

       Pursuant to Local Rule No. 14, this document constitutes a final judgment entry and
the time period for further appeal commences from the date of filing with the clerk.