Holland v. Gas Ents., Co.

[Cite as Holland v. Gas Ents., Co., 2016-Ohio-4792.]

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

CHAD AND DIANIA HOLLAND, ET AL., : Case No. 15CA42

Plaintiffs-Appellees, :

v. : DECISION AND
JUDGMENT ENTRY
GAS ENTERPRISES, CO., ET AL., :

Defendants-Appellants. : RELEASED: 6/28/2016

APPEARANCES:

John E. Triplett, Jr., THEISEN BROCK, L.P.A., Marietta, OH, for appellant Gas
Enterprises, Co.

Ethan Vessels, FIELDS DEHMLOW & VESSELS, L.L.C., Marietta, OH, for appellees
Chad and Diania Holland, and Gregory and Brenda Westbrook.
Harsha, J.
{¶1} The trial court granted summary judgment in favor of the Hollands and

Westbrooks (“landowners”) by ordering that a mineral lease be declared void because

oil or gas had not been found in paying quantities necessary for the lease to remain in

effect. Gas Enterprises, Co. (“Gas Enterprises”), one of the successors-in-interest to

the original lessee, appealed.

{¶2} This matter is before us for a second time on the issue of the continued

viability of oil and gas lease.1

{¶3} Gas Enterprises claims that the trial court erred in granting summary

judgment because: (1) there was unrebutted evidence of production in paying

1 See Holland v. Gas Enterprises Co., 4th Dist. Washington No. 14CA35, 2015-Ohio-2527.
Washington App. No. 15CA42 2

quantities by the operator and another expert; (2) the landowners’ claims were barred

by the statute of limitations; and (3) the court failed to evaluate the equitable issues and

the adequacy of a remedy at law.

{¶4} We reject Gas Enterprises’s claims. According to its own records,

including forms it filed with the Ohio Department of Natural Resources (“ODNR”) and

the Washington County Auditor’s Office, Gas Enterprises affirmatively reported that no

oil or gas was produced from the wells it operated on the landowners’ property in 2006,

2007, 2008, 2012, and 2013. The affidavit of Gas Enterprises’s manager conceded that

the company did not have any actual sales for these years, but asserted that its

bookkeeper did not report production when there were no sales. The manager stated

that the wells produce oil on a slow, but consistent basis, but did not specifically state

that any oil was produced during the years specified in its reports as having no

production; instead, he only stated that year-by-year production figures could not easily

be obtained. The affidavit of a landman for a sublessee, who had conducted a due-

diligence review on the assignment of deep rights in the land, stated in a conclusory

manner that the sublessee had examined the production history for the wells and

determined that they operated to provide sufficient and paying quantities. Neither of

these conclusory affidavits is sufficient to raise a genuine issue of material fact

precluding summary judgment in favor of the landowners. The summary-judgment

evidence established that the lease expired by its own terms when no oil or gas was

found in paying quantities for at least two years, i.e., from 2006-2008 and 2012-2013.

{¶5} Contrary to Gas Enterprises’s claims, the statute of limitations is

inapplicable because the landowners’ action was not based on an alleged breach of the
Washington App. No. 15CA42 3

lease; rather the landowners sought to declare the lease had expired automatically

under its express terms. Moreover, the landowners filed their action in the underlying

case in early 2014, which was only a few months after the last two-year period in 2012

and 2013 in which no oil or gas was found in paying quantities in the wells. Therefore,

even assuming—as Gas Enterprises contends—that the R.C. 2305.041 four-year

statute of limitations applied, the statute did not bar the landowners’ claim.

{¶6} Likewise, the equitable defenses raised by Gas Enterprises are also

inapplicable because the oil and gas lease expired as a matter of law in accordance

with its own terms.

I. FACTS

{¶7} In March 2014 Chad and Diania Holland and Gregory and Brenda

Westbrook filed an amended complaint in the Washington County Court of Common

Pleas against Gas Enterprises, MNW Energy, L.L.C. (“MNW Energy”), and Triad

Hunter, L.L.C. (“Triad Hunter”). The amended complaint and admission in Gas

Enterprises’s answer establish that the Hollands and the Westbrooks (“landowners”)

own approximately 40 acres of real property located in Ludlow Township in Washington

County.

{¶8} In 1930 the predecessors-in-interest to the landowners leased the oil and

gas rights in the property to D.B. Yaw for the term of “[o]ne year from the date hereof

and as much longer as gas or oil is found in paying quantities thereon.” Four wells that

were drilled under the lease remain on the property.
Washington App. No. 15CA42 4

{¶9} Gas Enterprises obtained the lessee's interest in 1996. Gas Enterprises

subleased the deep rights to oil and gas to MNW Energy in July 2013; MNW Energy in

turn assigned its interest in the sublease to Triad Hunter in December 2013.

{¶10} In their amended complaint the landowners alleged that the production

from the four wells on the property had not been sufficient to hold the lease, resulting in

its expiration under its own terms. The landowners requested a judgment declaring that

the oil and gas lease, sublease, and assignments were forfeited and void because they

expired when there was insufficient production of oil or gas. They also claimed Gas

Enterprises, MNW Energy, and Triad Hunter had breached various implied covenants.

The named defendants filed answers denying the landowners' claims.

{¶11} The landowners subsequently filed a motion for summary judgment. They

attached Gas Enterprises’s “Ohio Well Completions Reports,” which the company filed

with ODNR; these reports showed that the four wells had produced no oil or gas in

2006, 2007, 2008, 2012, and 2013. They also attached Gas Enterprises' responses to

their discovery requests, which indicated that “Gas Enterprises (lease), Upper Fifteen

Mile Investment (override) and Triad Hunter (sublease)” claimed interests in the wells.

In those responses Gas Enterprises also stated that the wells were primarily oil wells,

that there was oil in the tanks that could be sold, and that yearly comparisons of oil

sales could not be easily obtained because sales were done in lots or loads.

{¶12} Gas Enterprises and Triad Hunter filed affidavits and memoranda in

opposition to the motion for summary judgment. 2 Both filed an affidavit of James

Williams, the manager of Gas Enterprises, in which he stated: (1) the wells had been

2 The landowners voluntarily dismissed MNW Energy without prejudice because it no longer had an
interest in the leased property.
Washington App. No. 15CA42 5

assigned to Gas Enterprises; (2) Gas Enterprises had owned and operated the wells

since that time; (3) the wells produced oil on a slow, but consistent basis; (4) oil sales

are done in lots or loads because of irregular production and transport charges;

therefore, year-by-year production figures cannot be easily obtained; (5) there were

alleged gaps in reported production in 2006, 2007, and 2008—it did not have actual

sales in those years, so the company bookkeeper did not report production; the

manager had since instructed the bookkeeper to report production regardless of sales;

(6) Gas Enterprises continues to operate the wells and believes they are paying in

sufficient quantities to be economical for the company based on the total costs of

operation; (7) the company continues to invest in well operations, by providing and

upgrading electrical service, changing to new pump jacks, running lines, and paying for

acid treatments on the wells; and (8) in the company’s discussions with one of the

landowners, the landowner expressed concerns that the company bury the lines it

installed and that it not operate the wells during deer gun season.

{¶13} Triad Hunter filed an affidavit of Jarrett Barnhouse, an employee working

as a landman, whose duties include the review of due-diligence analyses for lease

interests acquired by Triad Hunter. Barnhouse stated that: (1) when Triad Hunter was

assigned MNW Energy’s interest in the sublease for the deep rights in the oil and gas

lease, Triad Hunter completed its due-diligence review; (2) as part of this review, Triad

Hunter examined the production history for the wells; (3) Triad Hunter determined that

the wells were prudently operated to provide sufficient and paying quantities to be

economical and therefore held by production by Gas Enterprises; and (4) based on its
Washington App. No. 15CA42 6

review, Triad Hunter determined that two of the landowners each held a royalty interest

in the wells.

{¶14} The landowners later supplemented their motion for summary judgment

with additional discovery provided to them by Gas Enterprises. These documents,

entitled “Ohio Return of Oil and Gas Properties,” were Gas Enterprises's own forms

prepared for filing with the county auditor stating that for 2001 through 2013, no oil or

gas had been produced by the wells on the property, except for 2010 and 2011.

{¶15} The trial court entered summary judgment in favor of the landowners. The

trial court found that oil or gas had not been found in paying quantities necessary for the

lease to remain in effect and declared the lease, the sublease, and assignments void.

{¶16} In Gas Enterprises’s appeal we held that the trial court erred in granting

summary judgment in favor of the landowners when they failed to join Upper Fifteenmile

Investments, LLC (“Upper Fifteenmile”) as an additional defendant in light of its

overriding royalty interest in the lease. Holland v. Gas Enterprises, Co., 4th Dist.

Washington No. 14CA35, 2015-Ohio-2527. We reversed the judgment of the trial court

and remanded the cause for further proceedings. Id.

{¶17} On remand the landowners filed a second amended complaint adding

Upper Fifteenmile as a defendant and reiterating their prior claims. The landowners

filed another motion for summary judgment, relying on the same summary-judgment

evidence it previously had, including Gas Enterprises’s own records establishing that

the company had reported to both ODNR and the county auditor that it had produced no

oil or gas on the property’s four wells in 2006-2008 and 2012-2013. Triad Hunter refiled

its previous affidavit of its employee, Barnhouse. Gas Enterprises and Triad Hunter
Washington App. No. 15CA42 7

also filed a second affidavit of Gas Enterprises’s manager, Williams, who reiterated the

statements from his previous affidavit, but also acknowledged the gaps in production in

the additional years of 2012 and 2013. Williams also stated that since Gas Enterprises

took over the wells in 1996, the company had restored them to production and that he

“believe[s]” the company “showed a profit in all years since 2006 to the present.”

{¶18} After its review of the evidence, the trial court again entered summary

judgment in favor of the landowners. The trial court again found that oil or gas had not

been found in paying quantities necessary for the lease to remain in effect and declared

the lease, the sublease, and the assignments void. This appeal by Gas Enterprises

followed.

II. ASSIGNMENT OF ERROR

{¶19} Gas Enterprises assigns the following error for our review:

THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT TO
THE PLAINTIFF-APPELLEE ON THE RECORD BEFORE THE COURT.

III. STANDARD OF REVIEW

{¶20} Appellate review of summary judgment decisions is de novo, governed by

the standards of Civ.R. 56. Vacha v. N. Ridgeville, 136 Ohio St.3d 199, 2013-Ohio-

3020, 992 N.E.2d 1126, ¶ 19; Chase Home Finance, LLC v. Dunlap, 4th Dist. Ross No.

13CA3409, 2014-Ohio-3484, ¶ 26. Summary judgment is appropriate if the party

moving for summary judgment establishes that (1) there is no genuine issue of material

fact; (2) the moving party is entitled to judgment as a matter of law; and (3) reasonable

minds can come to but one conclusion, which is adverse to the party against whom the

motion is made. Civ.R. 56(C); New Destiny Treatment Ctr., Inc. v. Wheeler, 129 Ohio
Washington App. No. 15CA42 8

St.3d 39, 2011-Ohio-2266, 950 N.E.2d 157, ¶ 24; Settlers Bank v. Burton, 4th Dist.

Washington Nos. 12CA36 and 12CA38, 2014-Ohio-335, ¶ 20.

{¶21} The moving party has the initial burden of informing the trial court of the

basis for the motion and identifying the parts of the record that demonstrate the

absence of a genuine issue of material fact on the pertinent claims. Dresher v. Burt, 75

Ohio St.3d 280, 293, 662 N.E.2d 264 (1996). Once the moving party satisfies this initial

burden, the non-moving party has the reciprocal burden under Civ.R. 56(E) to set forth

specific facts to show that a genuine issue exists for trial. Id.; Chase Home Finance at ¶

27.

{¶22} Additionally, this case involves the interpretation of a written contract,

which normally is a matter of law that we review de novo. Arnott v. Arnott, 132 Ohio

St.3d 401, 2012-Ohio-3208, 972 N.E.2d 586, ¶ 14, quoting Saunders v. Mortensen, 101

Ohio St.3d 86, 2004-Ohio-24, 801 N.E.2d 452, ¶ 9 (“ ‘[t]he construction of a written

contract is a matter of law that we review de novo’ ”). Our role is to ascertain and give

effect to the intent of the parties, which is presumed to lie in the contract language. See

Arnott at ¶ 14. “Common words appearing in a written instrument will be given their

ordinary meaning unless manifest absurdity results, or unless some other meaning is

clearly evidenced from the face or overall contents of the instrument.” Alexander v.

Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146 (1978), paragraph two of

the syllabus, superseded by statute on other grounds, Harding v. Viking Internatl.

Resources Co., Inc., 2013-Ohio-5236, 1 N.E.3d 872, ¶ 12 (4th Dist.).

{¶23} In our context “[t]he rights and remedies of the parties to an oil or gas

lease must be determined by the terms of the written instrument” and “[s]uch leases are
Washington App. No. 15CA42 9

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, 48 N.E. 502 (1897); Harding at ¶ 11.

IV. LAW AND ANALYSIS

A. Expiration of Lease on its Own Terms:

Lack of Oil and Gas Production from 2006-2008 and 2012-2013

{¶24} The trial court did not err by declaring the oil and gas lease terminated as

a matter of law by its express terms. The oil and gas lease contains a habendum

clause with a primary and secondary term. The primary one-year term expired in 1931.

The secondary term extends the lease for as much longer as “gas or oil is found in

paying quantities.” In this context the word “found” is synonymous with the word

“produced.” See Tedrow v. Shaffer, 23 Ohio App.510, 155 N.E. 510 (4th Dist.1926)

(“We see reason for holding that the word ‘found’ as here used is synonymous with the

word ‘produced,’ since oil in the ground cannot be said to be ‘found’ until it is brought to

the surface, and when brought to the surface is then ‘produced’ ”); Blausey v. Stein, 61

Ohio St.2d 264, 265, 400 N.E.2d 408 (1980) (interpretation of the phrase “found in

paying quantities” in the habendum clause of an oil and gas lease turned on whether oil

or gas was produced in paying quantities because “the mere existence of oil which is

capable of being produced is insufficient to support an extension of the leasehold under

this type of lease, unless that oil has, in fact, been produced”). “The term ‘paying

quantities,’ when used in the habendum clause of an oil and gas lease, has been

construed by the weight of authority to mean ‘quantities of oil or gas sufficient to yield a

profit, even small, to the lessee over operating expenses, even though the drilling costs,
Washington App. No. 15CA42 10

or equipping costs, are not recovered, and even though the undertaking as a whole may

thus result in a loss.’ ” Blausey, 61 Ohio St.2d at 266, 400 N.E.2d 408, quoting

Annotation, 43 A.L.R.3d 8, 25 (1972); see also Gardner v. Oxford Oil Co., 2013-Ohio-

5885, 7 N.E.3d 510, ¶ 37 (7th Dist.).

{¶25} An oil and gas lease containing a habendum clause that states the lease

shall remain in effect as long as oil or gas is produced in paying quantities automatically

expires when no oil or gas is produced for two years or more:

“Courts universally recognize the proposition that a mere temporary
cessation in the production of a gas or oil well will not terminate the lease
under a habendum clause of an oil and gas lease where the owner of the
lease exercises reasonable diligence and good faith in attempting to
resume production of the well. A critical factor in determining the
reasonableness of the operator's conduct is the length of time the well is
out of production. * * *

A review of the reported cases reflects that while courts tend to hold the
cessation of production temporary when the time periods are short,
lessees have, for the most part, been held not to have proceeded
diligently when the cessation from production exists for two years or
more.”

Lauer v. Positron Energy Resources, Inc., 4th Dist. Wash. No. 13CA39, 2014-

Ohio-4850, ¶ 12, quoting Wagner v. Smith, 8 Ohio App.3d 90, 92–94, 456 N.E.2d

523 (4 Dist. 1982); see also Casto v. Positron Energy Resources, Inc., 4th Dist.

Washington No. 14CA39, 2016-Ohio-285, ¶ 16.

{¶26} According to Gas Enterprises’s own records—the forms it issued to ODNR

and the county auditor’s office—it affirmatively reported that no oil or gas was produced

from the wells on the landowners’ property in 2006, 2007, 2008, 2012, and 2013.

Therefore, in its own filings, Gas Enterprises acknowledged that the wells had ceased

production for two periods of at least two years—2006-2008 and 2012-2013. Based on
Washington App. No. 15CA42 11

this evidence, the trial court correctly concluded that the oil and gas lease expired by its

own terms because no oil or gas had been found, i.e., produced in paying quantities.

{¶27} Nonetheless, Gas Enterprises argues that the affidavits of its manager,

Williams, and Triad Hunter’s landman, Barnhouse, raised genuine issues of material

fact about whether the wells produced oil in paying quantities, thereby precluding

summary judgment. We disagree. Williams’s affidavits conceded that Gas Enterprises

did not report any production of oil or gas from 2006-2008 and 2012-2013, but claimed

that the company bookkeeper did not report production because there were no sales.

He did not, however, ever specifically state in his affidavits that there was any

production in paying quantities during those years; instead, he only stated in vague,

conclusory terms that the wells produce oil on a slow, but consistent basis, that year-by-

year production figures cannot be easily obtained, and that the company bookkeeper

may have erroneously reported no production for the relevant years. These statements

are insufficient to establish a genuine issue of material fact. See Wheatley v. Marietta

College, 4th Dist. Washington No. 14CA18, 2016-Ohio-949, ¶ 45 (mere speculation and

unsupported conclusory assertions are not sufficient to meet the nonmovant’s reciprocal

burden to set forth specific facts to show that a genuine issue exists).

{¶28} In claiming that mere reporting errors do not establish the lack of

production, Gas Enterprises cites Mobberly v. Wade, 2015-Ohio-5287, 44 N.E.3d 313, ¶

12 (7th Dist.), where the court rejected a lessor’s argument that a lessee’s failure to

send production reports to ODNR as required by law was evidence of a lack of

production. This case is inapposite because Gas Enterprises did not merely fail to send

production reports to ODNR; instead, Gas Enterprises affirmatively reported to both
Washington App. No. 15CA42 12

ODNR and the county auditor that the wells on the pertinent property did not produce

any oil or gas in 2006-2008 and 2012-2013. And unlike the lessee in Mobberly, Gas

Enterprises did not introduce production reports listing the number of barrels of oil sold

and the allocation of corresponding royalties and deposition testimony detailing the

production of oil. Id. at ¶ 17.

{¶29} Williams’s statement in his second affidavit that he believed that Gas

Enterprises showed a profit in all years from 2006 to the present is likewise conclusory

and immaterial. Williams merely stated that the company as a whole showed a profit;

he did not specify that the profit came from the production of oil or gas from wells on the

landowners’ property.

{¶30} Similarly, Triad Hunter employee Barnhouse’s affidavit, stating that the

company’s due-diligence review of the lease determined that the wells were prudently

operated to provide sufficient and paying quantities, is conclusory and insufficient. In

fact, Barnhouse claims that the Triad Hunter review consisted of an examination of Gas

Enterprises’s production history for the wells. But the only existing production

documents in the record are those provided by Gas Enterprises in discovery—the

documents it issued to ODNR and the county auditor reporting no production of oil or

gas in 2006-2008 and 2012-2013.

{¶31} Because the affidavits were vague, conclusory, and immaterial, they did

not satisfy Gas Enterprises’s reciprocal burden under Civ.R. 56(E) to set forth specific

facts to show that a genuine issue of material fact existed for trial. The trial court

correctly held that the oil and gas lease expired by its own terms when no oil or gas was

produced during 2006-2008 ad 2012-2013.
Washington App. No. 15CA42 13

B. Statute of Limitations

{¶32} Next, Gas Enterprises argues that the landowners’ declaratory-judgment

claim was barred by the four-year statute of limitations in R.C. 2305.041, which

provides:

With respect to a lease or license by which a right is granted to operate or
to sink or drill wells on land in this state for natural gas or petroleum and
that is recorded in accordance with section 5301.09 of the Revised Code,
an action alleging breach of any express or implied provision of the lease
or license concerning the calculation or payment of royalties shall be
brought within the time period that is specified in section 1302.98 of the
Revised Code. An action alleging a breach with respect to any other issue
that the lease or license involves shall be brought within the time period
specified in section 2305.06 of the Revised Code.

{¶33} R.C. 1302.98 provides a four-year statute of limitations for the breach of

any contract for sale, and R.C. 2305.06 provides an eight-year statute of limitations for

an action upon a contract or promise in writing.

{¶34} Gas Enterprises’s argument is meritless for several reasons. First,

assuming arguendo that the four-year statute of limitations in R.C. 2305.041 and

1302.98 applies, the landowners’ action in early 2014 was filed within four years of the

2012-2013 period that no oil or gas was found in paying quantities from the wells Gas

Enterprises operated.

{¶35} Second, the four-year statute of limitations of R.C. 2305.041 and 1302.98

is inapplicable because the landowners’ declaratory-judgment claim was not based on

the “breach of any express or implied provision of the lease or license concerning the

calculation or payment of royalties.” In fact, the claim was not based on the breach of

the oil and gas lease at all; it instead sought a declaration that the lease had terminated

as a matter of law based on its express language.
Washington App. No. 15CA42 14

{¶36} Third, as we recently held in Schultheiss v. Heinrich Enterprises, Inc.,

2016-Ohio-121, __ N.E.3d __, ¶ 23-26 (4th Dist.), and the subsequent entry denying in

part an application for reconsideration in that case, Schultheiss v. Heinrich Enterprises,

Inc., 4th Dist. No. 15CA20 (Mar. 11, 2016), the equitable defenses raised by Gas

Enterprises do not apply when an oil and gas lease has expired in accordance with its

own express provisions. Therefore, the statute of limitations did not bar the landowners’

declaratory-judgment claim.

C. Equitable Issues and Public Policy

{¶37} Finally, Gas Enterprises asserts that the trial court erred in granting a

forfeiture of the oil and gas lease because it failed to take into account the equities and

public policy.

{¶38} We reject this contention because this case involves the expiration of an

oil and gas lease and accompanying automatic and self-executing reversion of rights to

the lessor based on the express terms of the lease, rather than a lease that is forfeited

based on the breach of an implied contractual duty. In these cases, the trial court

should not weigh the equitable considerations to determine if forfeiture is the

appropriate remedy because under the express terms of the lease the parties, in

essence, contractually agreed that it is. See, e.g., Sims v. Anderson, 2015-Ohio-2727,

38 N.E.3d 1123, ¶ 14-16. And although their first claim broadly referred to “forfeiture,” it

included the allegation that the four wells on the property had not had sufficient

production to hold the lease, assignment, and sublease, and that they consequently

“expired by their own terms.” Similarly, the landowners argued in their motion for
Washington App. No. 15CA42 15

summary judgment that the lease expired on its own terms and revested the leased

estate in them.

{¶39} Consequently, in the absence of a provision in the lease requiring notice

to the lessees, the trial court was not required to address any purported failure of the

landowners to complain to Gas Enterprises about the lack of production of oil or gas in

paying quantities. Because the lease expired automatically and as a matter of law by its

own terms when Gas Enterprises failed to produce oil or gas in paying quantities for two

different periods of at least two years (2006-2008 and 2012-2013), “ ‘no affirmative

action’ ” on the part of the landowners was “ ‘required to formally terminate the lease.’ ”

Casto, 2016-Ohio-285, at ¶ 21, quoting Tisdale v. Walla, 11th Dist. Ashtabula No. 94-A-

0008, 1994 WL 738744, *4 (Dec. 23, 1994); Am. Energy Servs. v. Lekan, 75 Ohio

App.3d 205, 212, 598 N.E.2d 1315 (5th Dist.1992) (“If after the expiration of the primary

term the conditions of the secondary term are not continuing to be met, the lease

terminates by the express terms of the contract herein and by operation of law and

revests the leased estate in the lessor”); see also 3-6 Williams & Meyers, Oil and Gas

Law, Section 604.7 (2014) (footnotes omitted) (“No cases have been found in which the

court has found that the doctrine of laches is a defense to the lessor’s claim that a lease

has terminated pursuant to the special limitation in the habendum clause”); see also

Schultheiss, 2016-Ohio-121, __ N.E.3d __, at ¶ 23-27. No notice was required before

the landowners filed their claim for declaratory relief. See Casto at ¶ 22 (“Because the

lease required no affirmative action on Casto’s part, the notice provision permitting an

opportunity to cure a default is inapplicable”). If a lessee desires a notice and an

opportunity to cure, the lessee should include those terms in the lease it drafts.
Washington App. No. 15CA42 16

{¶40} Nor—as contended by Gas Enterprises—did the trial court need to

address the payment or acceptance of royalties. Assuming that the landowners

accepted royalty payments after the oil and gas lease had terminated, because the

acceptance of these payments was not inconsistent with their legal claim, they were not

estopped from seeking a declaration that the lease had terminated. As owners of the

land they were entitled to at least the royalties, no matter what the outcome in the case.

See Sims, 2015-Ohio-2727, at ¶ 24-28, citing Bonner Farms, Ltd. v. Fritz, 355

Fed.Appx. 10, 15 (6th Cir.2009). And the summary-judgment evidence did not indicate

that the landowners received any royalty payments in the years in which no oil or gas

was found or produced in paying quantities here—2006-2008 and 2012-2013.

{¶41} Likewise, the trial court did not need to determine whether there was an

adequate remedy at law. The parties’ oil and gas lease specified the remedy—the

expiration of the lease and reversion of the interest to the landowners when no oil or

gas was found or produced in paying quantities in 2006-2008 and 2012-2013. No

weighing of equitable considerations was necessary. Sims at ¶ 16.

{¶42} Finally, Gas Enterprises’s policy arguments are meritless. Under well-

established contract law, contracts entered into freely and fairly are valid and will be

enforced by courts. See generally Cincinnati City School Dist. Bd. of Edn. v. Conners,

132 Ohio St.3d 468, 2012-Ohio-2447. 974 N.E.2d 78, ¶ 15. “The freedom to contract is

a deep-seated right that is given deference by the courts.” Id. Gas Enterprises does

not assert or even suggest that the lease was not entered into freely and fairly or claim

that a specific public-policy exception exists that would allow us to ignore the explicit
Washington App. No. 15CA42 17

provisions of the contract. Instead, its policy arguments are based on its interpretation of

the applicable law and evidence that we have rejected.

{¶43} Therefore, summary judgment was properly entered in favor of the

landowners based on the express language of the parties’ oil and gas lease. Because

our role is to enforce valid contract as written, rather than to apply equity in attempting

to avoid the consequences of its application, we overrule Gas Enterprises’s sole

assignment of error. See Boone Coleman Construction, Inc. v. Piketon, __Ohio St.3d__.

2016-Ohio-628, __N.E.3d__, ¶ 39.

V. CONCLUSION

{¶44} The trial court properly entered summary judgment in favor of the

landowners by declaring that the oil and gas lease was void because oil or gas had not

been found in paying quantities in the wells on the property necessary for the lease to

remain in effect. Having overruled Gas Enterprises’s sole assignment of error, we

affirm the judgment of the trial court.

JUDGMENT AFFIRMED.
Washington App. No. 15CA42 18

JUDGMENT ENTRY

It is ordered that the JUDGMENT IS AFFIRMED and that Appellant shall pay 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 Court of Common Pleas to carry this judgment into execution.

Any stay previously granted by this Court is hereby terminated as of the date of
this entry.

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

Abele, J. & Hoover, J.: Concur In Judgment and Opinion.

For the Court

BY: ________________________________
William H. Harsha, 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.