Baxter v. Res. Energy Exploration Co. , 2015 Ohio 5525 ( 2015 )

[Cite as Baxter v. Res. Energy Exploration Co., 2015-Ohio-5525.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
TRUMBULL COUNTY, OHIO
MAE M. BAXTER, et al., : OPINION
Plaintiffs-Appellees, :
CASE NOS. 2014-T-0113,
- vs - : 2014-T-0114,
2014-T-0115,
RESERVE ENERGY : 2014-T-0117,
EXPLORATION CO., et al., 2014-T-0118,
: and 2014-T-0119
Defendant-Appellants.
Civil Appeals from the Trumbull County Court of Common Pleas, Case No. 2013 CV
02205.
Judgment: Reversed and remanded.
Michael D. Rossi, Guarnieri & Secrest, P.L.L., 151 East Market Street, P.O. Box 4270,
Warren, OH 44482 and Marty Nosich, The Law Offices of Marty D. Nosich, L.L.C., 143
West Main Street, Cortland, OH 44410 (For Plaintiffs-Appellees).
Mark W. Bernlohr and Sandra K. Zerrusen, Jackson Kelly, PLLC, 17 South Main
Street, Suite 101B, Akron, OH 44308 (For Defendant-Appellant, Anschutz Exploration
Corp.)
Timothy B. McGranor, Daniel E. Shuey, and Sean M. Kohl, Vorys, Sater, Seymour &
Pease, LLP, 52 East Gay Street, P.O. Box 1008, Columbus, OH 43216 (For
Defendants-Appellants, Reserve Energy Exploration Co., Chesapeake Appalachia,
LLC, Beldon and Blake Corp., Chesapeake Exploration, LLC., CHK Utica, LLC, and
Chesapeake Acquisition, LLC, a subsidiary of Chesapeake Energy Corp.)
COLLEEN MARY O’TOOLE, J.
{¶1} This consolidated appeal involves the grant of summary judgment by the
Trumbull County Court of Common Pleas to various landowners in their declaratory
actions to have certain oil and gas leases deemed invalid. Lessee oil and gas
companies appeal this judgment. Finding their arguments with merit, we reverse and
remand.
{¶2} Mae Baxter, Richard and Ladda Love, and Raymond J. Shaffer
(“landowners”), all filed actions, seeking declarations that the oil and gas leases they
had granted were void, since they were not properly acknowledged. All of the leases
involved a payment for a primary lease term of five years. The lessee had a right to pay
an amount equal to the initial payment, at the end of the primary term, extending the
lease for a further five years. At the end of the primary term, all of the landowners
refused to cash the checks tendered them. All of the landowners admitted they freely
entered the leases. Eventually, each of the landowners sought summary judgment.
{¶3} Anschutz Exploration Corp., which had obtained the leases, sought to
dismiss the actions against it, since it had assigned its interests in the leases to other
entities. This motion was denied. Thereafter, Anschutz moved for summary judgment
against landowners, again asserting it lacked any interest in the subject leases.
{¶4} The entities to which Anschutz had assigned the leases include Reserve
Energy Exploration Co.; Chesapeake Appalachia, LLC; Belden & Blake Co.;
Chesapeake Exploration, L.L.C.; Chesapeake Acquisition, L.L.C.; and CHK Utica,
L.L.C. (“lessees”). Having answered the complaints against them, lessees
counterclaimed, seeking, essentially, declarations the leases were valid, along with
ancillary relief. Lessees all filed for summary judgment on their claims.
{¶5} The trial court consolidated the cases. By a judgment entry filed
November 6, 2014, the trial court granted landowners’ motions for summary judgment,
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and denied those of Anschutz and lessees. The basis for this decision was that
advanced by landowners: the leases were invalid, since they were not acknowledged
pursuant to the Statute of Conveyances, R.C. 5301.01.
{¶6} Anschutz timely appealed, assigning two errors. Lessees timely
appealed, also assigning two errors. We consolidated the appeals for all purposes.
{¶7} “Summary judgment is a procedural tool that terminates litigation and thus
should be entered with circumspection. 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).
{¶8} “When considering a motion for summary judgment, the trial court may not
weigh the evidence or select among reasonable inferences. Dupler v. Mansfield
Journal Co., 64 Ohio St.2d 116, 121, * * * (1980). Rather, all doubts and questions
must be resolved in the non-moving party’s favor. Murphy v. Reynoldsburg, 65 Ohio
St.3d 356, 359, * * * (1992). Hence, a trial court is required to overrule a motion for
summary judgment where conflicting evidence exists and alternative reasonable
inferences can be drawn. Pierson v. Norfork Southern Corp., 11th Dist. No. 2002-A-
0061, 2003 Ohio 6682, ¶36. In short, the central issue on summary judgment is,
‘whether the evidence presents sufficient disagreement to require submission to a jury
or whether it is so one-sided that one party must prevail as a matter of law.’ Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 251-252, * * * (1986). On appeal, we review a trial
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court’s entry of summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d
102, 105, * * * (1996).” (Parallel citations omitted.) Meloy v. Circle K Store, 11th Dist.
Portage No. 2012-P-0158, 2013-Ohio-2837, ¶5-6.
{¶9} Regarding declaratory actions, the court held in Herrick v. Kosydar, 44
Ohio St.2d 128, 130 (1975):
{¶10} “‘[I]t is settled in Ohio that an action for a declaratory judgment may be
alternative to other remedies in those cases in which the court, in the exercise of sound
discretion, finds that the action is within the spirit of the Uniform Declaratory Judgments
Act, that a real controversy between adverse parties exists which is justiciable in
character, and that speedy relief is necessary to the preservation of rights which may be
otherwise impaired or lost.’” Id., quoting Am. Life & Acc. Ins. Co. v. Jones, 152 Ohio
St.287 (1949).
{¶11} For its first assignment of error, Anschutz states: “The trial court erred
when it found the Plaintiffs-Appellees had a viable declaratory judgment action against
Anschutz Exploration Corporation.” Anschutz argues the trial court erred in failing to
grant its motion for summary judgment, since it had assigned all of its interests in the
subject lease to lessees. Landowners counter by citing to Civ.R. 19(A), which provides,
in pertinent part: “A person who is subject to service of process shall be joined as a
party in the action if * * * (3) he has an interest relating to the subject of the action as an
assignor * * *.” (Emphasis added.) Use of the verb “shall” in a rule or statute indicates
the matter is mandatory. Aria’s Way, LLC v. Concord Twp. Bd. of Zoning Appeals, 173
Ohio App.3d 73, 2007-Ohio-4776, ¶22 (11th Dist.) Landowners argue that as the
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original lessee, and assignor of all the leases in question to the present lessees,
Anschutz was a necessary party.
{¶12} We find the opinion of the court in Cameron v. Hess Corp., 974 F.Supp.2d
1042 (S.D.Ohio 2013), relied on by Anschutz, persuasive. Defendant Mason Dixon
Energy, Inc., asserted it was not a proper party to an action concerning oil and gas
leases, since it had assigned all of its interests therein to other parties. The Southern
District of Ohio held:
{¶13} “In assigning the * * * Leases, however, Mason Dixon extinguished all of
its rights in those contracts under Ohio law. In alienating property via an assignment,
the assignee ‘acquires’ all attendant property rights, and the rights of the assignor are
‘extinguished.’ 6 Am. Jur.2d, Assignments § 1 (2012) (‘an assignment of a right is a
manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s
right to performance by the obligor is extinguished (* * *) and the assignee acquires a
right to such performance (* * *)’); W. Broad Chiropractic v. Am. Family Ins., 122 Ohio
St. 3d 497, 2009-Ohio-3506, * * * (Ohio) (‘An assignment is a transfer to another of all or
part of one’s property in exchange for valuable consideration’). As a result, ‘an
assignee (* * *) stands in the shoes of the assignor (* * *), and succeeds to all the rights
and remedies of the latter.’ Inter Ins. Exch. of Chi. Motor Club v. Wagstaff, 144 Ohio
St. 457, * * * (Ohio 1945) (citing 3 Ohio Jurisprudence, 275, § 32; 38 Ohio
Jurisprudence, 300, § 51; 4 American Jurisprudence, 321, § 115; 50 American
Jurisprudence, 752, § 110; 6 C.J.S., Assignments, § 85, p. 1142.). Thus, here, in
assigning the * * * Leases, Mason Dixon has no remaining interests in the leaseholds
that might be adjudicated in Plaintiffs’ declaratory judgment action. See Ford Motor
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Credit Co. v. Ryan, 189 Ohio App. 3d 560, 2010-Ohio-4601, * * * (Ohio Ct. App.)
(affirming summary judgment for defendant on breach of contract claims because
defendant had assigned its interest in the contract to another party).” (Parallel citations
omitted.) Cameron at 1055-1056.
{¶14} The record shows that, prior to the filing by landowners of their declaratory
actions, Anschutz had assigned all of its interests in the subject leases to lessees.
Thus, it had no interest in this matter, and its motion for summary judgment should have
been granted.
{¶15} Anschutz’ first assignment of error has merit.
{¶16} For its second assignment of error, Anschutz states: “The trial court erred
when it found the plaintiffs-appellees could invalidate their leases due solely to a
defective signature acknowledgment.” For their first assignment of error, lessees state:
“The trial court erred in granting Plaintiff’s Motion for Summary Judgment, and denying
Counterclaimant-Defendants’ Motion for Summary Judgment, on Plaintiffs’ declaratory
judgment claims.” For their second assignment of error, lessees state: “The trial court
erred in granting Plaintiffs’ Motion for Summary Judgment, and denying
Counterclaimant-Defendants’ Motion for Summary Judgment, on Counterclaimant-
Defendants’ Counterclaims.”
{¶17} We treat these assignments of error together.
{¶18} The principal contention of appellants under these three assignments of
error is the trial court erred in declaring the subject leases void, as requested by
landowners. Appellants all contend the leases are valid, and lessees further contend
the trial court erred in not declaring so as requested in their counterclaim. Lessees also
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contend they are entitled to findings that landowners breached the leases, and the
implied covenant of quiet enjoyment, and to equitable tolling of the leases.
{¶19} In finding the leases void, the trial court relied on R.C. 5301.01, which
provides, in pertinent part:
{¶20} “(A) A deed, mortgage, land contract as referred to in division (A)(21) of
section 317.08 of the Revised Code, or lease of any interest in real property and a
memorandum of trust as described in division (A) of section 5301.255 of the Revised
Code shall be signed by the grantor, mortgagor, vendor, or lessor in the case of a deed,
mortgage, land contract, or lease or shall be signed by the trustee in the case of a
memorandum of trust. The signing shall be acknowledged by the grantor, mortgagor,
vendor, or lessor, or by the trustee, before a judge or clerk of a court of record in this
state, or a county auditor, county engineer, notary public, or mayor, who shall certify the
acknowledgement and subscribe the official’s name to the certificate of the
acknowledgement.”
{¶21} Admittedly, none of these leases in question was properly acknowledged.
However, appellants correctly cite to our recent opinion in Dedor Revocable Declaration
of Trust v. Reserve Energy Exploration Co., 11th Dist. Portage No. 2014-P-0001, 2014-
Ohio-5383, for the proposition that this is not fatal to the validity of oil and gas leases
between the original parties and their assigns. Citing to the decision of the court in Cole
v. EV Properties, L.P., 6th Cir. No. 13-3677, 563 Fed. Appx. 389, 2014 U.S. App. LEXIS
7464, we held:
{¶22} “Cole recently relied upon and quoted Ohio’s long-standing rule that ‘“(a)
defectively executed instrument, either a lease [***7] or a deed, when made by the
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owner, may be enforced against him as a contract to make a lease or deed for the
reason that it is his contract.” Lithograph Bldg. Co. v. Watt, 96 Ohio St. 74, * * * (* * *)
(1917).’ (Emphasis sic.) (Parallel citation omitted.)
{¶23} “Regarding leases, the Sixth Circuit further stated the following:
{¶24} “‘“There is no magic about the word ‘lease’” that exempts leases from
typical rules governing the enforcement of voluntary agreements between competent
parties. Pero v. Miller, 32 Ohio App. 174, * * * (* * *) (Ohio Ct. App. 1928). If supported
by consideration, a lease is “a valid and enforcible (sic) contract between the parties,”
even if “defectively executed and not recorded.” Id.; see also Seabrooke (v. Garcia, 7
Ohio App.3d 167, * * * (9th Dist.1982)). (* * *) Defective acknowledgment, therefore, is
not fatal to the enforceability of a lease as between parties who intended that it bind
them (* * *). (* * *) The Ohio courts have (* * *) repeatedly held (* * *) that defectively
acknowledged oil and gas leases remain enforceable between the parties, despite
defective execution. See, e.g., Logan Gas (Co. v. Keith, 117 Ohio St. 206, * * * (1927));
Langmede (v. Weaver, 65 Ohio St. 17, * * * (1901)); Swallie v. Rousenberg, 190 Ohio
App.3d 473, 2010-Ohio-4573, * * * ((7th Dist.2010)). (* * *) (Thus,) (w)here there is no
dispute that the parties actually signed the defectively acknowledged instruments and
intended that the transfer occur, the Ohio courts have insisted that the parties be bound
“to that which they intended.”’ Cole, supra, 563 Fed. Appx. 389, 2014 U.S. App. LEXIS
7464 at *12-17.” (Parallel citations omitted.) Dedor at ¶12-14.
{¶25} We went on to state in Dedor at ¶15-21:
{¶26} “Regarding deeds, this court stated the following:
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{¶27} “‘“There is no question that (under) R.C. 5301.01(,) (* * *) the notary must
properly acknowledge the grantor’s signature. A failure to comply with the provisions of
R.C. 5301.01 can result in an inability to pass ‘legal title’ as that term is defined in the
context of affording notice of recordation of the conveyance of the property to creditors
and subsequent purchasers. Nevertheless, as between the grantor and grantee, the
deed is valid, despite a defective acknowledgment. (* * *)” (Citations omitted.)’ Estate
of Niemi v. Niemi, 11th Dist. Trumbull No. 2008-T-0082, 2009-Ohio-2090, ¶70, quoting
Basler v. Multicare Co., Inc., 11th Dist. Geauga No. 98-G-2201, 1999 Ohio App. LEXIS
5506, *9 (Nov. 19, 1999).
{¶28} “This court further stated:
{¶29} “‘In Citizens Nat’l Bank v. Denison (1956), 165 Ohio St. 89, * * * (* * *), the
Supreme Court held that where the acknowledgment or execution of the deed is
defective, it is ineffective as against subsequent creditors. However, such a deed “is
valid as between the parties thereto, in the absence of fraud.” Id. at 95.’ Niemi, supra,
at ¶71. (Parallel citation omitted.)
{¶30} “In order to somehow escape the foregoing controlling law, appellants
attempt to rely on cases dealing with traditional surface leases. See, e.g., Delfino v.
Paul Davies Chevrolet, Inc., 2 Ohio St.2d 282, * * * (a defective lease involving
nonpayment of rent regarding a landlord who leased property to a tenant was found
invalid); Burger v. Buck, 11th Dist. Portage No. 2008-P-0041, 2008-Ohio-6061 (a
defective lease involving a barn to keep horses was found invalid). However, this case
involves an oil and gas lease. Unlike a traditional surface lease, ‘(a)n oil and gas lease
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differs from the ordinary lease of land for use by the lessee.’ Herman v. Grange Mut.
Cas. Co., 11th Dist. Ashtabula No. 935, 1978 Ohio App. LEXIS 8995, *3 (July 31, 1978).
{¶31} “‘“(A)n oil and gas lease is not a ‘lease’ in the traditional sense of a lease
of the surface of real property. In a typical oil or gas lease, the lessor is a grantor and
grants a fee simple determinable interest to the lessee, who is actually a grantee.
Consequently, the lessee/grantee acquires ownership of all the minerals in place that
the lessor/grantor owned and purported to lease, subject to the possibility of reverter in
the lessor/grantor. The lessee’s/grantee’s interest is ‘determinable’ because it may
terminate and revert entirely to the lessor/grantor upon the occurrence of events that the
lease specifies will cause termination of the estate.”’ Kramer v. PAC Drilling Oil & Gas,
LLC, 197 Ohio App.3d 554, 2011-Ohio-6750, ¶11, * * * (9th Dist.), quoting Natural Gas
Pipeline Co. of Am. v. Pool, 124 S.W.3d 188, 192 (Tex. 2003).
{¶32} “Our review of the record and the foregoing case law reveals that the oil
and gas lease at issue is valid, despite a defective acknowledgement, as there is no
evidence of fraud. Cole, supra, 563 Fed. Appx. 389, 2014 U.S. App. LEXIS 7464 at
*14; Swallie, supra, at ¶35. Contrary to appellants’ assertions, there is no evidence that
the contract is invalid. In fact, pursuant to Cole, both parties intended to be bound by
the terms of the contract. They have acted under such terms with no allegations of any
breach during the requisite time period. Appellants were given ample opportunity to
read and review the document prior to signing. There is no dispute that appellants
voluntarily signed the lease, thereby expressing their clear intent to be bound by the
terms of that agreement. Appellants cannot now renege on their agreement by claiming
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that the oil and gas lease contained a defective acknowledgement. Seabrooke, supra,
169.”” (Parallel citations omitted.)
{¶33} As in Dedor, there is no evidence the subject leases were obtained by
fraud. Landowners admit they entered the leases freely. The cases relied on by the
trial court in rendering its decision were Delfino, supra, and Burger, supra, which we
found inapplicable to oil and gas leases.
{¶34} Landowners invite us to revisit Dedor, based on the decisions in Back v.
Ohio Fuel Gas Co., 160 Ohio St. 81 (1953); and In re Gasoil, Inc., 59 B.R. 804(Bankr.N.D.Ohio 1986). We respectfully find the cases inapplicable. Back dealt with
the proper filing of oil and gas leases with the county recorder. Id. at paragraph one of
the syllabus. In re Gasoil involved interpreting a section of the Bankruptcy Code, 11
U.S.C. 365(d)(4), and whether certain oil and gas leases constituted leases for
purposes of that section. See, e.g., In re Gasoil at 809.
{¶35} At oral argument, counsel for landowners appeared to concede that Ohio
courts have long held that oil and gas leases need not meet the requirements of the
Statute of Conveyances to be valid between the original parties and their assigns.
However, landowners contend this rule is limited to situations wherein actual
development and production of oil or gas has commenced. As support they cite to
Harris v. The Ohio Oil Co., 57 Ohio St. 118, 130 (1897), where the court held: “In this
case, possession was delivered to the lessee and operations commenced, wells drilled,
and oil produced in paying quantities, and in such cases it cannot be doubted that the
lessee has a vested, though limited, estate in the lands for the purposes named in the
lease. Venture Oil Company v. Fritts, 152 Pa. St., 451.” Landowners argue that where
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no oil or gas production has commenced, the lessee has no vested estate, and the
normal rule that attestation in the form required by R.C. 5303.01 is required to make the
lease valid. See, e.g., Delfino, supra, at 284 (“Since early in Ohio legal history, it has
been held that a defectively executed lease is invalid and does not operate to convey
the estate or create the term of leasehold sought to be created thereby.”)
{¶36} We respectfully disagree with landowners’ contention. For instance, in
The Logan Gas Co. v. Keith, 117 Ohio St. 206 (1927), wherein the subject oil and gas
lease was improperly acknowledged, no oil or gas production had commenced, and the
court nevertheless held the lease was valid between the assignees of the original
parties.
{¶37} At oral argument, counsel for landowners also expressed concern that the
leases in question impose an undue encumbrance on the land, limiting its transferability.
The issue also concerns this court. The public policy of Ohio encourages the
development of gas and oil production. Newbury Twp. Bd. of Twp. Trustees v. Lomak
Petroleum (Ohio), Inc., 62 Ohio St.3d 387, 389 (1992). Further, the Supreme Court of
Ohio has held that leases for mineral production include an implied covenant to
reasonably develop the land, and that leases which effectively allow a lessee simply to
hold mineral rights based on annual payments to the lessor, without developing the
land, breach the covenant. Ionno v. Glen-Gery Corp., 2 Ohio St.3d 131, 132-134.
{¶38} Perpetual leases, generally, are disfavored at Ohio law. Hupp v. Beck
Energy Corp., 7th Dist. Monroe Nos. 12 MO 6, 13 MO 2, 13 MO 3, 13 MO 11, 2014-
Ohio-4255, ¶82 (collecting cases). Hupp presents the issue raised by landowners at
oral argument: the degree to which oil and gas leases may constitute an undue
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encumbrance on the land. In Hupp, the landowners signed oil and gas leases with a
nominal term of ten years. Id. at ¶9. Landowners sought to have the leases declared
void, which the trial granted. The trial court’s conclusion was based principally on two
paragraphs of the leases in question:
{¶39} “‘2. This lease shall continue in force and the rights granted hereunder be
quietly enjoyed by the Lessee for a term of ten years and so much longer thereafter as
oil and gas or their constituents are produced or are capable of being produced on the
premises in paying quantities, in the judgment of the Lessee, or as the premises shall
be operated by the Lessee in the search for oil or gas and as provided in Paragraph 7
(the dry hole clause).’
{¶40} “‘3. This lease, however, shall become null and void and all rights of either
party hereunder shall cease and terminate unless, within 12 months from the date
hereof, a well shall be commenced on the premises, or unless the Lessee shall
thereafter pay a delay rental of each year, payments to be made quarterly until the
commencement of a well. A well shall be deemed commenced when preparations for
drilling have commenced.’ Hupp at ¶83. (Emphasis added.)
{¶41} As the Seventh District went on to observe:
{¶42} “The trial court concluded that these two provisions, when read together,
allow Beck to extend the leases in perpetuity, in violation of Ohio public policy, ‘either by
making nominal delay rental payments pursuant to paragraph 3 or by determining in its
own judgment that the premises are capable of producing oil or gas in paying quantities
pursuant to paragraph 2.’” Hupp at ¶84.
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{¶43} The Seventh District, largely relying on case law interpreting gas and oil
leases, reversed the decision of the trial court, concluding the leases were for a term,
not perpetual. Hupp, supra, at ¶85-104. The landowners appealed; and, January 28,
2015, in Hupp v. Beck Energy Corp., 141 Ohio St.3d 1454, 2015-Ohio-239, the
Supreme Court accepted the appeal on the following propositions of law:
{¶44} “An oil and gas lease which can be maintained indefinitely without
development is a perpetual lease that is void as against public policy. That a lease
purports to establish a fixed term is of no consequence if the duration of that term can
be extended without development.”
{¶45} “Where the express terms of an oil and gas lease effectively allow the
lessee to postpone development indefinitely, and any stated time limits can be
unilaterally extended by the lessee in perpetuity without any development, the lease is
subject to the implied covenant of reasonable development notwithstanding a general
disclaimer of all implied covenants.” Hupp v. Beck Energy Corp., S.Ct. Case No. 2014-
1933, Memorandum in Support of Jurisdiction of Appellants Clyde A. Hupp, et al.
{¶46} Unfortunately for landowners in this case, none of the leases they signed
contain provisions similar to those disapproved by the trial court in Hupp. Despite any
other differences, each of the leases provides for a primary term of five years. Each
provides that, if lessees do not develop oil or gas resources during the primary term,
lessees may obtain an additional five year term to do so, by tendering payment. Each
provides the leases expire, if, during the additional five year term, no development of oil
or gas resources occurs. Nothing in the leases can be interpreted as rendering them
perpetual leases, with no duty to reasonably develop.
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{¶47} Anschutz’ second assignment of error, and lessees’ first assignment of
error, have merit: the trial court should not have granted landowners summary judgment
on their declaratory action. Lessees’ second assignment of error also has merit, in that
the trial court should have granted lessees summary judgment on their counterclaim,
finding the leases valid.
{¶48} Lessees’ second assignment of error also set forth claims for breach of
contract. As we stated in Marks v. Swartz, 174 Ohio App.3d 450, 2007-Ohio-6009, ¶33
(11th Dist.): “A contract requires ‘an offer, an acceptance, contractual capacity,
consideration (the bargained-for legal benefit or detriment), a manifestation of mutual
assent, and legality of object and of consideration.’ Lake Land Employment Grp of
Akron, LLC v. Columber, 101 Ohio St.3d 242, 246, 2004 Ohio 786, * * *.” (Parallel
citation omitted.) Oil and gas leases are contracts. Dedor, supra, at ¶14. All of the
elements of an action for breach of contract are met in these cases. Anschutz offered
the landowners the leases. The landowners all accepted the leases: none claim they
did not understand them, or acted under duress. Nothing indicates any of the parties
lacked contractual capacity. The landowners received payment for the initial lease
terms. Oil and gas leases are legal in Ohio. At the end of the initial lease terms,
landowners refused tender of payment for additional five year terms, as required under
the leases. Lessees were entitled to summary judgment on their breach of contract
claims.
{¶49} Lessees further asserted claims for breach of the implied covenant of
quiet enjoyment.
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{¶50} “In Ohio, a covenant of quiet enjoyment is implied into every lease
contract for realty and protects the tenant’s right to a peaceful and undisturbed
enjoyment of his leasehold. Glyco v. Schultz (1972), 35 Ohio Misc. 25, 33, * * *. In
discussing the covenant of quiet enjoyment, this court has stated: ‘The covenant is
breached when the landlord “‘* * * obstruct(s), interfere(s) with, or take(s) away from the
(* * * ) (tenant) in a substantial degree the beneficial use (* * *);” of the leasehold.’
Howard v. Simon (1984), 18 Ohio App.3d 14, 16, * * *, citing Frankel v. Steman (1915),
92 Ohio St. 197, 200, * * *. The degree of the impairment required is a question for the
finder of fact. Id.” (Parallel citations omitted.) Dworkin v. Paley, 93 Ohio App.3d 383,
386 (8th Dist. 1994).
{¶51} In this case, we have determined that valid leases existed between
landowners and lessees. By filing the actions to declare these leases invalid,
landowners have effectively taken from lessees any beneficial use of their leaseholds.
Consequently, lessees were entitled to summary judgment regarding the issue of
liability on their claims for breach of the implied covenant of quiet enjoyment.
{¶52} Under their second assignment of error, lessees also argue they are
entitled to the benefit of the doctrine of equitable tolling: i.e., that the lease terms be
extended for the period that landowners’ actions have interfered with the leases. See,
e.g., Cameron v. Hess Corp., S.D.Ohio No. 2:12-CV-00168, 2014 U.S. Dist. LEXIS
56510, *9 (April 23, 2014). In Cameron, the court determined that, since it had found
the subject leases valid, lessee oil and gas company was entitled to tolling from the time
service of the papers commencing the action to invalidate the leases was made upon
the company, until final disposition of the case, including appeal. Id. at *17. As the
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subject leases in this case are valid, lessees herein are entitled to equitable tolling from
the time the service of process of landowners’ actions was made upon lessees, until this
matter is finally disposed.
{¶53} The assignments of error having merit, the judgment of the Trumbull
County Court of Common Pleas is reversed, and this matter is remanded for further
proceedings consistent with this opinion.
DIANE V. GRENDELL, J., concurs.
THOMAS R. WRIGHT, J. concurs in judgment only.
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