Browne v. Artex Oil Co., 2018-0942

Citation158 Ohio St.3d 398,144 N.E.3d 378,2019 Ohio 4809
Decision Date26 November 2019
Docket NumberNo. 2018-0942,2018-0942
Parties BROWNE et al., Appellants, v. ARTEX OIL COMPANY et al., Appellees.
CourtUnited States State Supreme Court of Ohio

Fields, Dehmlow & Vessels, L.L.C., and Ethan Vessels ; Marietta, and Knowlton Bennett & Conaway and Bryan Conaway, Cambridge, for appellants.

Theisen Brock, L.P.A., Daniel P. Corcoran, Marietta, and Kristopher O. Justice; and Donald D. Brown Law Offices and Donald D. Brown, Cambridge, for appellees.

Chad A. Endsley, Leah F. Curtis, and Amy Milam, urging reversal for amici curiae Ohio Farm Bureau Federation and Guernsey County Farm Bureau.

Vorys, Sater, Seymour & Pease, L.L.P., Timothy B. McGranor, and Gregory D. Russell, Columbus, urging affirmance for amici curiae Ohio Oil and Gas Association and Southeastern Ohio Oil and Gas Association.

French, J. {¶ 1} In this appeal, we consider which statute of limitations applies to a claim for declaratory judgment that an oil and gas lease has terminated by its terms and by operation of law due to lack of production. We hold that the applicable statute is R.C. 2305.04, which states that an action to recover title to or possession of real property shall be brought within 21 years after the cause of action accrues.

Facts and procedural background

{¶ 2} Appellants, Barry L. Browne and Rosa R. Browne, own approximately 86 acres of land, along with the oil and gas interests underlying the property, in Guernsey County, Ohio. An oil and gas lease executed in 1975 by one of the Brownes' predecessors in interest and recorded in January 1976 burdens the property. The lease "grant[ed], demise[d], lease[d] and let" the identified real property to the lessee for the purpose of mining and operating for oil and gas for a one-year primary term and a secondary term for as "long thereafter as oil and gas, or either of them, is produced by lessee from said land." One well was drilled on the property.

{¶ 3} Appellees, Artex Oil Company, Artex Energy Group, L.L.C., Arloma Corporation, and James Huck, L.L.C., acquired interests in the lease through various assignments, cross-assignments, and stipulations of interest. Artex Oil Company has operated the well since 1999. Its records state that from December 1999 through September 2014, the well produced 1,771.49 barrels of oil, which generated gross revenue of more than $100,000. Artex Oil Company presented evidence in 2016 that since the Brownes obtained ownership of the mineral interests in 2012, it had paid royalties to the Brownes in 2013, 2014, and 2015.

{¶ 4} In December 2014, two years after obtaining ownership of the mineral estate, the Brownes filed this action against appellees for quiet title, declaratory judgment, conversion, and unjust enrichment, all based on their contention that the lease had terminated by its terms due to lack of production. The complaint alleged that the well did not produce any oil or gas from its inception until 1999 and that the well had been inoperative for a sufficient time to terminate the lease. The Brownes based their allegation of pre-1999 lack of production on reports from the Ohio Department of Natural Resources that allegedly showed no reported production from the well through 1999. The Brownes requested that the court quiet the title to their property, declare the lease null and void, and award damages for appellees' conversion and unjust enrichment.

{¶ 5} In their answer, appellees asserted a statute-of-limitations defense to the Brownes' claims. Appellees also filed a counterclaim for a declaratory judgment that the lease remained valid and in effect because of continuous production of oil since 1977.

{¶ 6} The parties filed cross-motions for summary judgment. Although it initially denied the parties' motions, the trial court, on reconsideration, granted summary judgment for appellees and dismissed the Brownes' claims with prejudice. The trial court acknowledged appellees' evidence of production in paying quantities from the well and held that the Brownes had not presented any evidence to satisfy their burden of proving that the well was no longer profitable. With respect to the Brownes' allegations of lack of production prior to 1999, however, the court held that "there is a 15-year statute of limitation" applicable to the Brownes' claims, so any lack of production prior to 1999 was irrelevant. Based on appellees' evidence of production since 1999, the court held that the lease remained valid and enforceable according to its terms.

{¶ 7} The Brownes appealed the trial court's judgment and, as relevant here, argued that the trial court erred by holding that their claims were subject to a 15-year statute of limitations. They argued that this is a case for recovery of title to or possession of real property and that the correct limitations period is the 21-year period under R.C. 2305.04. The Fifth District rejected that argument and affirmed the trial court's judgment. It held that pursuant to R.C. 2305.041, the Brownes' case is subject to the 15-year statute of limitations for an action upon a written agreement or contract in former R.C. 2305.06, Am.Sub.H.B. No. 152, 145 Ohio Laws, Part II, 3341, 3569 ("H.B. 152").

{¶ 8} This court accepted a discretionary appeal on a single proposition of law. 153 Ohio St.3d 1485, 2018-Ohio-3867, 108 N.E.3d 82. The Brownes ask this court to hold that an action for a declaratory judgment that an oil and gas lease has terminated by its own terms for lack of production is governed by the 21-year statute of limitations in R.C. 2305.04 and that the limitations period does not begin to run until a justiciable controversy arises.

Analysis

{¶ 9} This appeal presents a purely legal question—which statute of limitations applies to the Brownes' claim that the lease terminated by its terms and by operation of law. See Ohio Bur. of Workers' Comp. v. McKinley , 130 Ohio St.3d 156, 2011-Ohio-4432, 956 N.E.2d 814, ¶ 34.

Law of the case does not moot the statute-of-limitations question

{¶ 10} Before turning to the parties' arguments regarding the appropriate statute of limitations, we first address the dissenting opinion's assertion that that question is moot because its answer will not affect the outcome of this case. The dissent states that the appellate court's rulings regarding the burden of proof and the evidence that may be used to establish production of oil and gas remain the law of the case and foreclose any possibility that the Brownes can survive appellees' motion for summary judgment, even if a 15-year statute of limitations does not bar consideration of pre-1999 lack of production. We disagree.

{¶ 11} The law-of-the-case doctrine provides that "the decision of a reviewing court in a case remains the law of that case on the legal questions involved for all subsequent proceedings in the case at both the trial and reviewing levels." Nolan v. Nolan , 11 Ohio St.3d 1, 3, 462 N.E.2d 410 (1984). The law-of-the-case doctrine is a rule of practice, not a rule of substantive law, and courts will not apply it to achieve unjust results. Id. , citing Gohman v. St. Bernard , 111 Ohio St. 726, 730-731, 146 N.E. 291 (1924), overruled in part on other grounds , New York Life Ins. Co. v. Hosbrook , 130 Ohio St. 101, 196 N.E. 888 (1935), paragraph two of the syllabus.

{¶ 12} As we have stated, the Brownes' complaint alleged that the lease expired due to lack of production of oil and gas from the lease's inception until 1999. The trial court, however, did not address that claim; because it determined that a 15-year statute of limitations applied, the trial court held that any lack of production prior to 1999 was irrelevant.

{¶ 13} Having concluded that lack of production prior to 1999 was irrelevant, the trial court—with respect to both the Brownes' claims and the counterclaim—considered only the evidence of production, or lack thereof, from 1999 onward. With respect to the time period beginning in 1999, the trial court held, on reconsideration, that the Brownes "have not presented any evidence to satisfy their burden" of proving that the wells are no longer profitable. But the trial court's entry of judgment for appellees on their counterclaim depends on its determination that the 15-year statute of limitations rendered pre-1999 lack of production irrelevant. Had the trial court determined that any of the years prior to 1999 remained in play, it would have had to consider whether there was, in fact, consistent production during those years. The trial court did not do that.

{¶ 14} Even accepting as true the dissent's position that the Fifth District's rulings regarding the burden of proof and the evidence that may establish production of oil and gas are the law of the case, nothing in the court of appeals' decision renders our determination of the applicable statute of limitations advisory.

{¶ 15} The court of appeals affirmed the trial court's holding that the Brownes had "the burden to prove that the wells are no longer profitable." 2018-Ohio-3746, 116 N.E.3d 687, ¶ 35. The trial court's holding, however, did not address whether the Brownes presented evidence of lack of production prior to 1999, because the court held that any lack of production before 1999 was irrelevant. In reviewing the trial court's holding regarding the burden of proof, the court of appeals applied the accepted standards applicable to summary judgment under Civ.R. 56 and merely concluded that the Brownes bore, but did not meet, the reciprocal burden of producing evidence to rebut appellees' evidence of "continued production" from the well. Id. at ¶ 34. Like the trial court, the court of appeals did not address the Brownes' ability to prove that the well went out of production prior to 1999.

{¶ 16} In response to appellees' motion for summary judgment, the Brownes argued that appellees had not met their initial burden with respect to production prior to 1999. If that were true, then the Brownes were not required to meet a...

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