Conny Farms, Ltd. v. Ball Resources, Inc.
2013 Ohio 2874
Ohio Ct. App.2013Background
- Conny Farms Ltd. owned land in Columbiana County with two oil and gas leases (Gibson and Thompson) historically held by predecessors of the defendants.
- Property was used for gas storage; no wells were drilled on the land.
- Conny Farms acquired the property in 2006; complaints filed in 2008 alleging lease breaches and potential expirations.
- Leases contain a change in ownership clause, a habendum clause, and a gas storage/withdrawal provision with a separate delay rental payment scheme.
- Trial court granted summary judgment to Defendants; on remand, evidence showed gas storage continued; issue became whether change in ownership clause was satisfied and whether storage kept leases alive.
- Appellate court held Conny Farms failed to comply with the change in ownership clause, and gas was stored, so habendum expiration did not occur; affirmed summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Change in ownership clause compliance | Conny Farms substantially complied with notice requirement | Strict written transfer is required before binding | Conny Farms failed to comply; clause not satisfied |
| Habendum expiration due to storage | Gas storage ended leases under habendum | Gas storage continued, so leases remain in effect | Gas storage continued; habendum not expired |
| Suspense payments and notice | Suspense payments and prior notices affect rights | No duty to continue payments without written notice; suspense was proper | Suspense payments were proper; no breach due to lack of written notice |
| Waiver by estoppel/constructive notice | Waiver/estoppel precludes strict compliance | Argument not raised below; waived for appellate review | Argument not considered |
Key Cases Cited
- Conny Farms Ltd. v. Ball Resources, Inc., 2011-Ohio-5472 (Ohio 9th Dist. 2011) (judicial ascertainment clauses against public policy)
- Burlington Resources Oil & Gas v. Cox, 133 Ohio App.3d 543 (4th Dist. 1999) (lessor-notice duties and lessee good faith regarding change in ownership)
- U.S. Bank, NA v. Stewart, 2007-Ohio-5669 (2nd Dist. 2007) (substantial performance standard for contract breach remains if not wholly in breach)