Burke v. Excalibur Exploration
2017 Ohio 999
Ohio Ct. App.2017Background
- Plaintiffs (Burke et al.) own 227.7 acres in Ashtabula County; defendant Excalibur held an oil-and-gas lease dated August 4, 2000, for a 3-year primary term and thereafter so long as operations continued or production occurred in paying quantities.
- Lease paragraph 7 allowed unitization of "any portion" of the leased lands into drilling units and treated production from a unit as if it were from the leased lands; parties added an addendum barring unitization without the lessor’s prior written consent (not to be unreasonably withheld).
- In 2003 the parties consented to unitize 20.52 acres into a drilling unit that produced and generated royalties; Excalibur did not develop or operate on the remaining non-unitized acreage.
- In 2015 plaintiffs sued to cancel the lease as to the non-unitized acreage; Excalibur moved for summary judgment arguing paragraph 7 kept the entire lease alive and that plaintiffs violated a lease notice provision (paragraph 8) before suing.
- Trial court granted plaintiffs’ summary judgment, holding the lease had expired as to the non-unitized acreage (no operations or production occurred there), except for the active 20.52-acre unit; because the lease had expired as to the non-unitized land plaintiffs were not required to give the contractual notice prior to suing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether unitization of a small portion (20.52 acres) keeps the entire lease in force | Unitization only preserved lease rights for the lands in the unit; non-unitized acreage lapsed for lack of operations | Paragraph 7 treats production from any unit as if operations occurred on the entire leased premises, preserving the whole lease | Court held paragraph 7 applies only to lands that become part of a drilling unit; the lease expired as to non-unitized acreage |
| Whether the addendum requiring lessor consent to unitize was effective | Addendum limits unitization without lessor consent; parties consented for 20.52 acres, so unitization was valid only for that parcel | Excalibur argued paragraph 7 alone would bind the whole lease regardless of the addendum | Court treated the addendum as controlling for unitization consent and effect; only the consented 20.52 acres remained active |
| Whether plaintiff’s failure to give contractual notice (paragraph 8) barred relief | Notice clause was inapplicable because the lease had already expired as to non-unitized land before suit | Excalibur argued plaintiffs breached paragraph 8 by suing without certified notice and 30-day cure opportunity | Court held notice was not required because the primary term expired and secondary term was not triggered for non-unitized acreage |
| Whether summary judgment for plaintiffs was proper | No genuine issue: no operations or production on non-unitized land → lease expired as a matter of law | Claimed contractual language was unambiguous in keeping the lease alive and procedural notice was required | Court affirmed summary judgment for plaintiffs; legal interpretation favored plaintiffs as a matter of law |
Key Cases Cited
- Davis v. Loopco Indus., 66 Ohio St.3d 64 (summary judgment standard and caution in granting SJ)
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (de novo appellate review of summary judgment)
- Harris v. Ohio Oil Co., 57 Ohio St. 118 (oil and gas leases construed as contracts; rights governed by written instrument)
- Skivolocki v. E. Ohio Gas Co., 38 Ohio St.2d 244 (contract interpretation seeks parties’ intent from language)
- Moulton Gas Serv., Inc. v. Zaino, 97 Ohio St.3d 48 (use of ejusdem generis and rules of construction)
- Lake v. Ohio Fuel Gas Co., 2 Ohio App.2d 227 (principles on lease interpretation and production)