Myers v. East Ohio Gas Co., 76-1007

• Decision Date: 20 July 1977
• Docket Number: No. 76-1007,76-1007
• Citation: 51 Ohio St.2d 121,364 N.E.2d 1369,5 O.O.3d 103
• Parties: , 5 O.O.3d 103 MYERS et al., Appellees, v. The EAST OHIO GAS COMPANY, Appellant.
• Court: Ohio Supreme Court

Page 121

51 Ohio St.2d 121

364 N.E.2d 1369, 5 O.O.3d 103

MYERS et al., Appellees, v. The EAST OHIO GAS COMPANY, Appellant.

No. 76-1007.

Supreme Court of Ohio.

July 20, 1977.

Syllabus by the Court

A gas storage agreement of uncertain duration, clearly and unambiguously terminable at the will of only one party, is to be given effect according to its express terms and does not fall within the common-law doctrine that a "lease" at the will of one party is a "lease" at the will of both.

In 1927, George Merz executed an "Oil and Gas Lease" with F. A. Brendel, who assigned that lease to appellant, The East Ohio Gas Company, in 1930. The agreement "leased" approximately 277 acres located in Summit County to East Ohio "for the sole and only purpose of drilling and operating for oil and gas" for five years or "so much longer as oil or gas or their constituents is or are found on said premises in paying quantities in the judgment of the lessee." In consideration for the oil and gas drilling rights, East Ohio agreed to pay Merz and his successors in interest a minimum annual rent of $1 per acre or quarterly fixed sums and royalties if gas and oil were produced on the property.

In 1941, East Ohio and George Merz and his wife executed and recorded a "Supplemental Gas Storage Agreement" supplementing the still valid oil and gas lease in consideration of $1. The storage agreement granted East Ohio the "additional right" (in exchange for quarterly payments) of "introducing, injecting, storing and removing gas of any kind * * * into, in and from any and all sub-surface sands, formations or reservoirs" underlying the Merz property for "ten years and so much longer" as East Ohio either produces, stores, withdraws or holds gas in the sub-surface reservoirs or finds oil or gas on the premises in paying quantities.

Appellees, Forrest D. Myers and Marian H. Myers, the successors in interest of the Merzes, instituted this action in the Court of Common Pleas of Summit County well after the end of the primary ten-year term of the storage agreement; they sought (1) a determination of East Ohio's rights in their property, (2) a declaration that the oil and gas lease and supplemental agreement are void for uncertainty, and (3) an injunction preventing further construction of additional well sites, pipe line right-of-ways, or additional structures, by East Ohio on their property. The Court of Common Pleas found appellees' cause to be controlled by Rayl v. East Ohio Gas Co. (1973), 46 Ohio App.2d 167, at page 174, 348 N.E.2d 385, which held, that a similar supplemental gas storage agreement, also challenged after the expiration of the primary term, "was a valid and subsisting contract which, beyond the primary term, was terminable at the will of the lessors or lessee * * *." The Court of Appeals affirmed the trial court on the basis of its decision in Rayl.

The cause is now before this court pursuant to an allowance of a motion to certify the record.

Amer, Cunningham & Brennan Co., L. P. A., and Bernard J. Amer, Akron, for appellees.

Jones, Day, Reavis & Pogue, H. Chapman Rose, Victor E. DeMarco, Lanty L. Smith, Michael A. Nims, Cleveland, Buckingham, Doolittle & Burroughs, John M. Glenn, Akron, and Robert W. Corp, Cleveland, for appellant.

WILLIAM B. BROWN, Justice.

The main issue presented by this cause is whether a "Supplemental Gas Storage Agreement" for a primary term, followed by a grant of uncertain duration that conditions termination upon the occurrence of an event within the control of the "lessee," gives rise to a tenancy at will once the primary term has expired.

In the Rayl case, supra, 46 Ohio App.2d 167, 348 N.E.2d 385, the Court of Appeals for Summit County held that a gas storage agreement, terminable after a ten-year primary period upon the failure of the "lessee" to produce, store or withdraw gas from underground storage areas became a tenancy at will once the primary term expired. The Rayl court reasoned (1) that the gas storage agreement was "simply a rental agreement for the use of the lessor's land"; (2) that the tenancy created by that agreement was not like those created in oil and gas drilling agreements because it was terminable at the will of the gas company and not "by contingency or operation of the law"; ¹ and (3) that the law in Ohio is that "a tenancy at the will of one party is also a tenancy at the will of the other," and, therefore, that the gas storage agreement could be terminated at will by the landowners. ² (Rayl, at pages 172-173, 348 N.E.2d at page 388-389.)

We are not persuaded by this reasoning. In the first place, it is by no means certain whether the property interest or estate created by the gas storage agreement is a tenancy. ³ Assuming, arguendo, that the agreement does create a tenancy, however, we do not agree that it creates a tenancy at will.

The characteristics of a tenancy at will, whether it is created by express contract or by implication of law, are "uncertainty respecting duration and the right of either party to terminate it by proper notice * * *." 3 Thompson on Real Property 33, Section 1020 (1959); Thompson v. Baxter (1909), 107 Minn. 122, 123, 119 N.W. 797; 1 Casner, American Law of Property, 229 Section 3.28 (1952); 1 Restatement of Property, Section 20 (1936); 1 Restatement of Property 2d, Section 1.6 (1976). At common law, because a fee simple could not be granted without livery of seisin, a lease purporting, without livery of seisin, to grant an estate otherwise the equivalent of a fee was ineffective to convey the estate granted. Therefore, courts treated an estate of uncertain duration, terminable at the will of the grantee, as if it were also terminable at the will of the grantor. From this treatment of estates at will arose the legal inference, which has outlasted livery of seisin, that a lease terminable at the will of one party is terminable at the will of both. Effinger v. Lewis (1859), 32 Pa. 367, 369; Lindlay v. Raydure (E.D.Ky.1917), 239 F. 928, 942; 2 Summers, The Law of Oil & Gas, 136-137, Section 235 (1959); 1 Casner, American Law of Property, supra, at page 231, Section 3.30. The implications of this rule are best expressed by Casner, supra, at pages 231 and 232:

"Coke after commenting that a lease at will must in law be at the will of both parties, stated * * * that a lease to hold at the will of the lessee 'must also be at the will of the lessor.' "

"Taken literally," Coke's proposition "would seem to state that all leases for life or in fee become leases at will if the lessee has power to terminate the lease at any time, and this literal interpretation has been used in some cases. Still, it is clear that one can create a life estate or a fee on limitation or subject to a condition, and it would seem immaterial that the event on which the estate is conditioned or limited is within the control of the owner of the estate."

Livery of seisin has, of course, long been a mere legal memory, and the rule that a lease at the will of one party is at the will of both has no other apparent usefulness. In addition to having outlived its usefulness and to having possibly barred otherwise valid grants of life estates or fees, the rule may also frustrate the intent of the parties to the lease. It is a legal commonplace that courts, in deciding the rights of parties under a written agreement, including a lease, should give effect to the unambiguously expressed intent of the parties. See Hallock v. Kintzler (1943), 142 Ohio St. 287, 51 N.E.2d 905; Stahl v. Van Vleck (1895), 53 Ohio St. 136, 41 N.E. 35; Bell v. Panhandle Eastern Pipeline Co. (S.D.Ind.1976); Charles Ilfeld Co. v. Taylor (1964), 156 Colo. 204, 397 P.2d 748. The doctrine urged by the Rayl court does not promote the intention of the parties. SeeThompson v. Baxter, supra, 107 Minn. at page 123, 119 N.W. 797. Instead, it may thwart their intention by creating a lease terminable at the will of both parties even in those agreements which clearly and unambiguously provide for termination at the will of only one party. Thus, it was only after the court in Effinger v. Lewis supra, rejected the rule that it was able to say, at page 370:

"There is nothing, therefore, to prevent us from giving effect to this contract according to the intention of the parties. If they meant to create an estate that should endure so long as the grantee, his heirs and assigns, should desire to keep it at the rent agreed upon, then such is its character; and this silences all the minor objections brought to bear on the title."

Despite the fact that it has outlived the purpose for which it was created and that it may thwart the intent of the parties and unnecessarily block the grant of otherwise valid estates, the doctrine that a lease at the will of one party is a lease at the will of both has been adopted by a majority of American jurisdictions and has been referred to as the prevailing law by a number of commentators. Annotation, 137 A.L.R. 362, 367; 33 Ohio Jurisprudence 2d 604, Landlord and Tenant, Section 79; 51C C.J.S. Landlord and Tenant § 167, p. 475. Ohio, however, has not adopted the rule, ⁴ and we decline to do so at this time. Instead, in keeping with what we perceive to be a better approach to the rule than its total acceptance or rejection and in recognition of the validity of the rule at common law, which may have been relied upon in particular cases, we elect to treat the doctrine as a presumption. Since a "presumption cannot arise where the very terms of the * * * (agreement) are squarely to the contrary," Adams Express Co. v. Beckwith (1919), 100 Ohio St. 348, 357, 126 N.E. 300, 302; those leases which clearly and unambiguously terminate at the will of only one party are to be controlled by their express terms. However, those leases which do not clearly state whether they are terminable at the will of one or both parties will be presumed, in keeping with the majority rule, to be terminable at...