Court Opinion

ID: 4154017
Source: CourtListenerOpinion
Date Created: 2017-03-20 17:12:09.323004+00
Date Added: 2024-06-11T14:34:26.222183
License: Public Domain

[Cite as Burke v. Excalibur Exploration, 2017-Ohio-999.]

                                   IN THE COURT OF APPEALS

                               ELEVENTH APPELLATE DISTRICT

                                   ASHTABULA COUNTY, OHIO

GERALD W. BURKE, et al.,                                   :   OPINION

                 Plaintiffs-Appellees,                     :
                                                               CASE NO. 2016-A-0041
        - vs -                                             :

EXCALIBUR EXPLORATION, INC,                                :

                 Defendant-Appellant.                      :

Civil Appeal from the Ashtabula County Court of Common Pleas, Case No. 2015 CV
0578.

Judgment: Affirmed.

William P. Bobulsky, William P. Bobulsky Co., L.P.A., 1612 East Prospect Road,
Ashtabula, OH 44004 (For Plaintiffs-Appellees).

Brent A. Barnes and Bruce E. Smith, Geiger Teeple Robinson & McElwee, PLLC, 1844
West State Street, Suite A, Alliance, OH 44601 (For Defendant-Appellant).

CYNTHIA WESTCOTT RICE, P.J.

        {¶1}     Appellant, Excalibur Exploration, Inc., appeals from the judgment of the

Ashtabula County Court of Common Pleas entering summary judgment in favor of

appellees, Gerald W. Burke, et al., on their complaint seeking cancellation of an oil-and-

gas lease encumbering a large portion of property of which they are owners. At issue is

whether the lease between appellant, as lessee, and appellees, as lessors, on the

subject property expired due to appellant’s failure to use the great majority of the
property in question or remains valid due to appellant’s unitization of a small portion of

the property with certain adjoining property on which appellant’s operate a functioning

well. For the reasons discussed in this opinion, we affirm the trial court’s judgment.

       {¶2}   Appellees own 227.7 acres of land located in Austinburg Township,

Ashtabula County, Ohio. On August 4, 2000, the appellant entered into an oil-and-gas

lease with appellees, which encumbered the subject property for a term of three years

and as long as operations were being conducted or oil or gas could be produced in

paying quantities. Paragraph seven of the lease provides:

       {¶3}   Lessee may utilize the leased lands, or any portion, with any other
              lands to form a drilling unit or units according to the rules and
              regulations which may be adopted for the proper development and
              conservation of the field. Operations upon and production from any
              unit, including all or any portion of the leased lands, shall be treated
              as if such operations were upon or such production were from the
              leased lands whether or not the well or wells are located thereon;
              provided, however, that Lessee shall pay Lessor, in lieu of other
              royalties and shut-in payments, only such proportion of the Lessor’s
              acreage in the unit bears to the total acreage in the unit and
              provided further that Lessor may take gas from a unit well only if
              said well is located on lands actually owned by the Lessor.

       {¶4}   The parties subsequently included an addendum to the lease, which

provided: “With reference to paragraph seven (7) of this lease, Lessee hereby agrees

not to pool or unitize the herein leased lands or any part thereof without prior written

consent from Lessor. Such consent shall not be unreasonably withheld. This clause

supersedes anything to the contrary contained herein.”

       {¶5}   On March 26, 2003, appellees signed a letter providing consent for the

unitization of 20.52 acres of the property into a drilling unit which included lands of other

property owners. Pursuant to paragraph seven, appellees received a percentage of the

monthly royalties from the production generated by the well on the unitized land.

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Appellant, however, did not develop any of the remaining property that was subject to

the lease.

       {¶6}   On October 14, 2015, appellees filed the underlying complaint seeking to

cancel the subject lease as it related to the property that was not part of the unitization.

Appellant filed a timely answer.     On February 4, 2016, appellant filed a motion for

summary judgment. In the motion, appellant relied upon language in the lease which, it

maintained, did not permit appellees’ unilateral attempt to cancel the same. It further

asserted the lease included a notification clause, which required appellees to give it

notice prior to filing any action on the lease, which appellees failed to do.

       {¶7}   On April 11, 2016, appellees filed a memorandum in opposition to

appellant’s motion as well as a cross motion for summary judgment. In their motion,

appellees argued the lease had expired as it related to the subject property because it

had not been developed or improved. And, because the lease had expired, they were

not required to provide notice. Appellant subsequently responded to appellees’ cross

motion.

       {¶8}   On July 13, 2016, the trial court granted appellees’ motion for summary

judgment, concluding that, because appellant had not conducted any operations on

subject property, the lease had expired. The court excepted the 20.52-acre parcel

unitized as operations and production were active, pursuant to paragraph seven. And,

because the lease had expired, appellees were not required to provide notice of their

intention to bring the underlying action. Appellant now appeals assigning two errors. Its

first assignment of error states:

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       {¶9}   “The trial court committed prejudicial error in granting the plaintiffs’ motion

for summary judgment terminating an oil and gas lease, and denying the motion for

summary judgment filed by defendant, based on the plain and unambiguous language

of the contract between the parties.”

       {¶10} Summary judgment is a procedural tool that terminates litigation and thus

should be entered with caution. Davis v. Loopco Industries, Inc., 66 Ohio St. 3d 64, 66

(1993). Summary judgment is proper where (1) there is no genuine issue of material

fact remaining to be litigated; (2) the movant is entitled to judgment as a matter of law;

and (3) it appears from the evidence that reasonable minds can come to but one

conclusion, and, viewing the evidence in the non-moving party’s favor, that conclusion

favors the movant. See, e.g., Civ.R. 56(C). An appellate court reviews a trial court’s

entry of summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St. 3d 102,

105 (1996).

       {¶11} With respect to oil and gas leases, the Supreme Court of Ohio has stated:

“The rights and remedies of the parties to an oil or gas lease must be determined by the

terms of the written instrument * * *. Such leases are contracts, and the terms of the

contract with the law applicable to such terms must govern the rights and remedies of

the parties.” Harris v. Ohio Oil Co., 57 Ohio St. 118, 129 (1897). See also Morrison v.

Petro Evaluation Services, Inc., 5th Dist. Morrow No. 2004 CA 0004, 2005-Ohio-5640,

citing Lake v. Ohio Fuel Gas Co., 2 Ohio App. 2d 227, 231 (1965). “Contracts are to be

interpreted so as to carry out the intent of the parties, as that intent is evidenced by the

contractual language.” Skivolocki v. East Ohio Gas Co., 38 Ohio St. 2d 244 (1974),

paragraph one of syllabus.

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       {¶12} In this case, appellant contends that, pursuant to paragraph seven of the

lease, the incorporation of any portion of the leased property into a drilling unit binds the

entire leasehold estate, such that production related to any lands within the drilling unit

should be considered the same, as though the operations were on the remainder of the

lands outside the drilling unit. We do not agree.

       {¶13} Paragraph seven of the lease addresses unitization; it provides that any

portion of leased lands may be unitized with other lands to form a drilling unit. It further

provides that “[o]perations upon and production from any unit, including all or any

portion of the leased lands, shall be treated as if such operations were upon or such

production were from the leased lands whether or not the well or wells are located

thereon.”

       {¶14} Paragraph seven, as well as the parties’ ultimate addendum to paragraph

seven, governs a lessor’s ability to unitize leased lands. And the wells discussed in

paragraph seven refer to those that are physically located in a drilling unit. It would

consequently follow that the remaining discussion relating to leased land that does not

have the well or wells physically located on them also relates only to lands that are a

part of the drilling unit. This interpretation is consistent with the cannon of construction

known as ejusdem generis, latin for “of the same kind.” Under this rule, the latter term

will be read as “‘embracing only things of a similar character as those comprehended by

the preceding limited and confined terms.’” Moulton Gas Serv., Inc. v. Zaino, 97 Ohio

St.3d 48, 2002-Ohio-5309, ¶14, quoting State v. Aspell, 10 Ohio St.2d (1967),

paragraph two of the syllabus. Because paragraph seven, in its entirety, addresses the

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narrow issue of unitizing lands, it should be read to envelop only leased lands that

become part of a drilling unit and how unitizing effects those limited property portions.

       {¶15} Interpreting paragraph seven as appellant urges would ignore the narrow

nature of paragraph seven; if the parties intended such an interpretation, the paragraph

would have stated that production from any lands within the drilling unit shall be treated

as if the operations were on the entirety of the leased premises out of which the unit is

comprised.     Because, however, paragraph seven addresses the limited issue of

unitizing, we decline to read it so broadly.       We therefore hold the trial court correctly

construed the lease and properly concluded paragraph seven refers to only those lands

that comprise a drilling unit and the effects of such unitization.

       {¶16} Appellant’s first assignment of error is without merit.

       {¶17} Appellant’s second assignment of error provides:

       {¶18} “The trial court committed prejudicial error in its determination that

appellees did not need to comply with the notice clause (paragraph 8) of the lease.”

       {¶19} Appellant asserts that paragraph eight of the lease required appellees to

give it a certified-mail notice of any claimed failure to comply with any provision of the

lease, which would allow appellant 30 days to correct or commence correction of any

perceived problem. Because appellees did not do so, he claims they breached the

lease. We do not agree.

       {¶20} It is undisputed that appellees did not put appellant on notice of the

underlying suit.   It is also undisputed, however, that the lease was effective “for 3

year(s), and as long thereafter as operations are being conducted or oil and gas can be

produced in paying quantities in Lessee’s judgment.”           There was no evidence that

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operations had been conducted or that oil and gas was produced on any of the non-

unitized portion of appellees’ property.   Appellees filed the underlying complaint 12

years after the lease, by its own terms, expired. Because the primary term of the lease

expired and the secondary term was not triggered on the non-unitized property, the

lease had expired as it pertained to the land at issue and, as a result, its notice

requirement was no longer in effect.       The trial court did not err in drawing this

conclusion.

      {¶21} Appellant’s second assignment of error lacks merit.

      {¶22} For the reasons discussed in this opinion, the judgment of the Ashtabula

County Court of Common Pleas is affirmed.

DIANE V. GRENDELL, J.,

TIMOTHY P. CANNON, J.,

concur.

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