Siltstone Res. v. Ohio Pub. Works Comm'n

• Decision Date: 23 February 2022
• Docket Number: 2020-003
• Citation: 2022 Ohio 483
• Court: Ohio Supreme Court
• Parties: Siltstone Resources, L.L.C., et al., Appellants, v. Ohio Public Works Commission, Appellee, et al.

2022-Ohio-483

Siltstone Resources, L.L.C., et al., Appellants, v. Ohio Public Works Commission, Appellee, et al.

No. 2020-003

Supreme Court of Ohio

February 23, 2022

Submitted January 26, 2021

Appeal from the Court of Appeals for Belmont County, No. 18 BE 0042 2019-Ohio-4916.

Critchfield, Critchfield & Johnston, Ltd., and Andrew P Lycans; and Manmeet S. Walia, for appellant Siltstone Resources, L.L.C.

Frost Brown Todd, L.L.C., Kevin L. Colosimo, Christopher W. Rogers, and Daniel P. Craig, for appellant American Energy-Utica Minerals, L.L.C.

Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A., Scott M. Zurakowski, Matthew W. Onest, and William G. Williams, for appellant Eagle Creek Farm Properties, Inc.

Dave Yost, Attorney General, Benjamin M. Flowers, Solicitor General, Samuel C. Peterson, Deputy Solicitor General, and James Patterson and Christie Limbert, Assistant Attorneys General, for appellee.

Bricker & Eckler, L.L.P., Daniel C. Gibson, and Kara H. Herrnstein; and Zachary M. Simpson, urging reversal for amicus curiae Gulfport Energy Corporation.

Hanlon, Estadt, McCormick & Schramm Co., L.P.A., Erik A. Schramm Sr., and Kyle W. Bickford, urging reversal for amicus curiae Axebridge Energy, L.L.C.

Pelini, Campbell & Williams, L.L.C., Craig G. Pelini, and Paul B. Ricard, urging reversal for amicus curiae Whispering Pines, L.L.C.

Isaac, Wiles, Burkholder & Teetor, L.L.C., Maribeth Meluch, and Dale D. Cook, urging reversal for amicus curiae Guernsey County Community Development Corporation.

BRUNNER, J.

{¶ 1} Appellants, Siltstone Resources, L.L.C. ("Siltstone"), American Energy-Utica Minerals, L.L.C. ("Utica"), and Eagle Creek Farm Properties, Inc. ("Eagle Creek"), appeal a decision of the Seventh District Court of Appeals. 2019-Ohio-4916, 137 N.E.3d 144, ¶ 46, 54, 73 (7th Dist). The court of appeals reversed a decision of the Belmont County Court of Common Pleas and held that amicus curiae Guernsey County Community Development Corporation ("CDC") had violated land-transfer restrictions that were included in a deed under the terms of CDC's grant agreement with appellee, Ohio Public Works Commission ("OPWC"). Id; see Belmont C.P. No. 17 CV 128, 2018 WL 11188473 (July 20, 2018). The appellate court also found that OPWC was entitled to seek remedies in equity to conserve the land at issue. 2019-Ohio-4916 at ¶ 70-73.

{¶ 2} This court accepted jurisdiction and heard the parties' arguments on appeal along with supporting arguments of amici curiae, CDC, Gulfport Energy Corporation ("Gulfport"), Axebridge Energy, L.L.C., and Whispering Pines, L.L.C. Because we find that the restriction on transferability in the deed is valid, being reasonable and serving a charitable or public purpose, CDC's transfer of mineral interests to appellants as successors in interest was a violation of the deed restrictions. Accordingly, the state is entitled to relief as contemplated in the agreement between OPWC and CDC and we affirm the judgment of the Seventh District Court of Appeals.

I. Facts and Procedural History

{¶ 3} In 2000, Ohio voters approved a constitutional amendment giving local communities a means to conserve and revitalize natural areas, open spaces, and lands devoted to agriculture. See Ohio Constitution, Article VIII, Section 2o. This new provision of the state constitution created a tax-exempt bond fund for making grants to political subdivisions and nonprofit organizations to revitalize and preserve natural spaces. Ohio voters adopted the following constitutional language describing the types of purposes the new bond fund would support:

(1) Conservation purposes, meaning conservation and preservation of natural areas, open spaces, and farmlands and other lands devoted to agriculture, including by acquiring land or interests therein; provision of state and local park and recreation facilities, and other actions that permit and enhance the availability, public use, and enjoyment of natural areas and open spaces in Ohio; and land, forest, water, and other natural resource management projects;

(2) Revitalization purposes, meaning providing for and enabling the environmentally safe and productive development and use or reuse of publicly and privately owned lands, including those within urban areas, by the remediation or clean up, or planning and assessment for remediation or clean up, of contamination, or addressing, by clearance, land acquisition or assembly, infrastructure, or otherwise, that or other property conditions or circumstances that may be deleterious to the public health and safety and the environment and water and other natural resources, or that preclude or inhibit environmentally sound or economic use or reuse of the property.

Ohio Constitution, Article VIII, Section 2o(A).

{¶ 4} Following voter approval of the constitutional amendment, the Ohio General Assembly adopted legislation to implement it, creating the Clean Ohio Conservation Fund, administered by OPWC. See R.C. 164.27(A). According to the legislation, OPWC's director is authorized to establish policies that encourage the "long-term ownership, or long-term control" of properties that are the subject of projects approved for funding through the Clean Ohio Conservation Fund. R.C. 164.26(A).

{¶ 5} In 2005, CDC, a nonprofit organization, applied for a Clean Ohio Conservation Fund grant. As part of its Leatherwood Creek Riparian Project grant application, CDC proposed to purchase a 228.485-acre property in Belmont County. CDC proposed to use the property to create a "green corridor" connecting several natural areas along Leatherwood Creek in Belmont and Guernsey counties.

{¶ 6} OPWC approved the project and in April 2006, the parties executed a 17-page grant agreement. The grant agreement described the project purpose, how CDC was to purchase the property, and the terms and conditions of funding through OPWC, including perpetual deed restrictions that were to be included in the recorded deed to the property. In 2007, CDC purchased the property and the deed was recorded in Belmont County.

{¶ 7} CDC's deed for the property included two essential restrictions. The first is a restriction on the use and development of the property, the "use restriction."

1. Use and Development Restrictions. Declarant [CDC] hereby agrees, for itself and its successors and assigns as owners of the Property, which Property shall be subject to the following: This property will not be developed in any manner that conflicts with the use of the Premises as a green space park area that protects the historical significance of this particular parcel. Only current structures will be maintained and no new structures will be built on the Premises.

(Boldface and underlining sic.)

{¶ 8} The second is a restriction requiring continued ownership and control, the "transfer restriction."

4. Restriction on transfer of the Property. Grantee acknowledges that the Grant is specific to Grantee and that OPWC s approval of Grantee's application for the Grant was made in reliance on Grantee's continued ownership and control of the Property. Accordingly, Grantee shall not voluntarily or involuntarily sell, assign, transfer, lease, exchange, convey or otherwise encumber the Property without the prior written consent of OPWC, which consent may be withheld in its sole and absolute discretion.

(Underlining sic.)

{¶ 9} Following the acquisition of the property by CDC, there were a number of assignments and transfers of the subsurface mineral rights involving different entities. In 2011, CDC entered into an oil and gas lease of the property with Patriot Land Company, L.L.C. ("Patriot") that provided CDC with a 14 percent royalty interest in the resulting production revenues. In 2012, Patriot assigned its lease to Gulfport, and in 2013, CDC sold 186.9189 acres of the subsurface mineral rights in the property to Siltstone for $3, 884, 180. Siltstone was thereafter entitled to collect the 14 percent royalty interest previously paid to CDC under the Patriot/Gulfport lease, the royalty interest having transferred to Siltstone as a result of its mineral-rights purchase from CDC.

{¶ 10} Even though it acquired the property with Clean Ohio grant funds and subject to the grant agreement, CDC did not inform or request permission from OPWC when it made its various transfers of the property's subsurface mineral rights. CDC held the opinion that a change in the use or ownership of the property's subsurface mineral rights did not affect the use of the property as a green space and therefore did not have an impact on or violate the deed restrictions that attached to the property as a result of CDC s grant agreement with OPWC. CDC also held the opinion that the property's subsurface mineral rights were severable from the property's surface rights and that CDC also was free to transfer or lease those rights without violating the transfer restrictions in the property's deed.

{¶ 11} The parties do not contest that in 2015 assignee Gulfport suspended its mineral royalty payments apparently after concerns were raised that CDC may have been restricted by the deed from transferring the subsurface mineral rights. Thereafter, Siltstone filed suit in the Belmont County Court of Common Pleas for declaratory judgment and breach-of-contract claims against CDC and sought to quiet title to its ownership of the mineral rights in the subsurface of the property. Siltstone's original complaint named as defendants OPWC, CDC, and assignee Gulfport. OPWC counter- and cross-claimed, seeking an injunction against the subsurface mining activities and nullification of the subsurface leases and transfers as violating the deed restrictions required by the terms of the grant agreement between CDC and OPWC. Siltstone moved...