Potts v. Unglaciated Indus., Inc.

• Citation: 2016 Ohio 8559,77 N.E.3d 415
• Decision Date: 30 December 2016
• Docket Number: No. 15 MO 0003.,15 MO 0003.
• Parties: Marvin POTTS, et al., Plaintiffs–Appellants, v. UNGLACIATED INDUSTRIES, INC., et al., Defendants–Appellees.
• Court: United States Court of Appeals (Ohio)

77 N.E.3d 415

2016 Ohio 8559

Marvin POTTS, et al., Plaintiffs–Appellants,

v.UNGLACIATED INDUSTRIES, INC., et al., Defendants–Appellees.

No. 15 MO 0003.

Court of Appeals of Ohio, Seventh District, Monroe County.

Dec. 30, 2016.

Scott Zurakowski, Ryan Reaves Krugliak, Wilkins, Griffiths & Dougherty, Canton, OH, for plaintiffs-appellants.

Craig Sweeney, Yoss Law Office, Woodsfield, OH, for defendants-appellees.

CAROL ANN ROBB, J., GENE DONOFRIO, J., and MARY DeGENARO, J.

OPINION

ROBB, J.

{¶ 1} Plaintiffs–Appellants Marvin Potts, Duane Potts, and Pam Potts appeal the declaratory judgment issued by the Monroe County Common Pleas Court finding the oil and gas lease held by Defendants–Appellees Unglaciated Industries, Inc. remains valid and enforceable. Contrary to Appellants' initial argument, the judgment is a final appealable order. Next, Appellants argue the trial court lacked jurisdiction to enter the declaratory judgment due to Unglaciated's failure to join a necessary party when it filed a counterclaim. This argument is without merit as the judgment did not affect the rights of the landowners whom Appellants claim should have been joined.

{¶ 2} Appellants alternatively argue Unglaciated was not entitled to summary judgment because it did not show production under the lease for the entire 112– year secondary term. They assert their claim is not subject to any statute of limitations. As for the years Unglaciated provided documentary evidence of production, Appellants say the production may not have been in "paying quantities" as there was no evidence of operating costs. Appellants conclude their failure to respond to the motion for summary judgment was irrelevant due to Unglaciated's failure to meet its initial summary judgment burden. However, we conclude Unglaciated met its summary judgment burden, and Appellants failed to meet their reciprocal burden. In accordance, the trial court's decision is affirmed.

STATEMENT OF THE CASE

{¶ 3} This case involves an oil and gas lease executed and recorded in 1896, whereby Nathaniel Moffett leased 159 acres of his land to T.J. Crawford "for a term and period of five years and as much longer as oil or gas is found in paying quantities thereon; yielding and paying to the lessor the one eighth part of all the oil produced and saved from the premises, delivered free of expense into tanker or pipe lines * * *." Leonard Hines acquired the rights in the lease. In 1962, Hines assigned the lease rights to the formations reaching down to the base of the Berea Sandstone to Walter Dye; the Hines estate assigned the remaining rights to Walter Dye in 1976. Walter and Janet Dye assigned the lease to Unglaciated by way of an assignment recorded on February 27, 1989. The president and owner of Unglaciated is Chuck Dye, Walter Dye's son.

{¶ 4} At some point, the land subject to the lease was divided among various landowners. In 2012, Marvin Potts (and his wife Arla, who is no longer a party) sent a letter to Unglaciated's attorney raising issues with the lease. In 2013, suit was filed against Unglaciated by the following plaintiffs: Marvin and Arla Potts, who owned 19.46 acres; Duane and Pamela Potts, who owned 10.556 acres; David and Vicky Groves; Howard and Barbara Williams; Sam and Dorothy Rentz; and the Trustees of the Moffett–Fletcher U.M. Church.¹ The plaintiffs collectively owned approximately 90 acres of property subject to the lease.

{¶ 5} The complaint asserted claims for quiet title, declaratory judgment, slander of title, and conversion.² The complaint sought termination of the lease due to lack of production and breach of the lease or implied covenants. It alleged no production was reported to the ODNR. There was also a claim of lease forfeiture under R.C. 5301.332. The statutory forfeiture claim was based upon an affidavit of forfeiture recorded by Marvin and Arla Potts in 2012, which they believed was permissible due to the letter they sent to Unglaciated's counsel.

{¶ 6} Unglaciated filed a counterclaim for slander of title and for declaratory relief, alleging the lease remained valid. In August 2014, Unglaciated filed a motion for summary judgment. Factually, the motion said ten wells were drilled pursuant to the lease and at least one produced continuously since the expiration of the primary term of the lease. Unglaciated noted its predecessor lessee issued royalty payments to Pure Oil Company, who assigned its interest to Chevron. After assignment of the lease, Unglaciated received notice the royalty was assigned to Union Oil Company of California, who later assigned the royalty to Cherokee Minerals, L.P.

{¶ 7} In case it was determined Cherokee had no right to the royalty, Unglaciated pointed out there was no language in the lease providing non-payment of royalties was grounds for cancellation. The statute of limitations for non-payment of royalties was four years. See R.C. 2305.041. In any event, Unglaciated argued a lessee is not bound by a change in royalty ownership absent written notice. Unglaciated also said any lack of compliance with ODNR reporting requirements is not a ground for cancelling the lease or conclusive evidence of non-production.

{¶ 8} Unglaciated asserted: it was undisputed there has been production since it was assigned the lease; 1991 was the date of assignment; and evidence shows its predecessor was also producing oil under the terms of the lease. Unglaciated claimed there can be no allegation of non-production prior to the applicable statute of limitations. The court was asked to apply the statute of limitations for contracts in R.C. 2305.06, with the amended eight-year limitations period. As to the statutory forfeiture claim, Unglaciated pointed to the failure to follow the procedures required by R.C. 5301.332. Appellants did not file a response to the summary judgment motion.³

{¶ 9} On February 10, 2015, the trial court entered judgment declaring the lease valid and enforceable. The court concluded "there are no genuine issues of material fact to be litigated from the Plaintiffs' Complaint or Defendants' counterclaim." The court ordered the clerk to forward the judgment to the recorder for the addition of a marginal notation on the recorded lease indicating the lease is valid and enforceable.

{¶ 10} On the termination claim, the court concluded the lease had not expired due to continuous production, pointing to evidence of: production since the assignment to Unglaciated; production since 1991 (more than 21 years prior to the filing of the complaint); and production by Unglaciated's predecessor under the terms of the lease (pointing to some evidence from 1950). The court found Unglaciated's contract statute of limitations argument moot due to the above undisputed evidence. In further support, the court noted royalty payments were made by the oil purchaser on behalf of Unglaciated. The court held payment of royalties to an incorrect party is not a ground for cancellation. The court also found a lessee's failure to comply with ODNR reporting requirements was not a ground for cancellation of the lease.

{¶ 11} Regarding the statutory forfeiture claim, the court found the notice of intent to declare a forfeiture failed to comply with various procedural mandates of R.C. 5301.332. In addition, the court found there was a producing well on the land and explained the statute only applies to leases "concerning lands upon which there are no producing or drilling oil or gas wells." The decision on the statutory forfeiture claim is not raised on appeal.

{¶ 12} The trial court concluded "there is no just reason for delay" and described the entry as "a final appealable order as defined by Civil Rule 54." Appellants say this language prompted their timely appeal, but they do not believe the entry is a final appealable order.

ASSIGNMENT OF ERROR ONE: FINAL APPEALABLE ORDER

{¶ 13} Appellants set forth four assignments of error, the first of which contends:

"THE TRIAL COURT ERRED WHEN IT FOUND THE FEBRUARY 10, 2015 JUDGMENT ENTRY TO BE A FINAL APPEALABLE ORDER."

{¶ 14} This assignment of error is essentially a motion to dismiss the appeal for lack of jurisdiction. In seeking dismissal of this appeal, Appellants argue there was no determination of their own claim for slander of title or Unglaciated's claim for slander of title. Slander of title is a tort claim. A person who claims slander of title must show: a statement disparaging the title was published; the statement was false; the statement was made with reckless disregard of its falsity; and this caused actual or special damages. See, e.g., Nye v. White–Rhoades, 3d Dist. No. 9–15–04, 2015-Ohio-3719, 2015 WL 5320271, ¶ 36 ; Green v. Lemarr, 139 Ohio App.3d 414, 433, 744 N.E.2d 212 (2d Dist.2000).

{¶ 15} Appellants allege a pending slander of title claim would render the order non-final under R.C. 2505.02, claiming the slander of title claims were inextricably intertwined with the resolved claims. Appellants note the mere incantation of Civ.R. 54(B) language cannot transform a non-final order into a final order. Even if the order qualifies as a final order, Appellants alternatively contend the trial court should not have added "no just reason for delay" language under the circumstances of this case, claiming judicial economy was not thereby promoted.

{¶ 16} Unglaciated responds the trial court's judgment rendered the slander of title claims moot. However, the two opposing slander of title claims do not involve the same analysis. We begin with Appellants' claim for slander of title.

{¶ 17} As Unglaciated emphasizes, the trial court's decision finding the lease remained valid means Unglaciated did not engage in slander of title when it recorded a document saying the lease remained valid. Even if a judgment in a multi-claim case does not expressly adjudicate a claim, the judgment can still be a final appealable order if the effect of the judgment is to render a claim moot or the judgment "effectively resolved" the claim. See General...