Fox v. Positron Energy Resources, Inc.
101 N.E.3d 1
| Ohio Ct. App. | 2017Background
- Steven T. Fox (lessor) sued to terminate an oil & gas lease (Bartlett‑Fagg well) alleging breaches of implied covenants to reasonably develop, explore, protect from drainage, and to operate with due care; trial court dismissed his amended complaint and Fox appealed.
- The contested lease covered deep (Devonian Shale) rights on land Fox owns; the producing wellhead is on severed land but Fox retains mineral burden.
- Fox, an experienced well‑operator who testified as an expert, introduced photographs and testified the well was improperly plumbed, vented to atmosphere, and corroded, and that he had not received royalties.
- Defendants (Positron/Stonebridge) introduced production and service records and two industry experts who testified the deep well produced gas in paying quantities, was tied into a gathering system and compressor, and required no additional equipment (e.g., pump jack).
- The trial court credited the defendants’ evidence, found the well produced in paying quantities, Fox had received/was entitled to royalties, and Fox had not given the 10‑day written notice required by the lease’s shut‑in clause; court of appeals affirmed.
Issues
| Issue | Plaintiff's Argument (Fox) | Defendant's Argument (Positron/Stonebridge) | Held |
|---|---|---|---|
| Whether lessee breached implied covenant to operate with reasonable care and due diligence | Fox argued the well was negligently operated (open valves, no separator, corroded casing), reducing production and harming his royalty interest | Defendants produced records and expert testimony showing continuous production in paying quantities, proper tying into gathering system, and routine maintenance | Court found competent, credible evidence the well produced in paying quantities and no breach; assignment overruled |
| Whether lessee breached implied covenants to explore further, reasonably develop, or protect from drainage (and whether partial horizontal forfeiture is available) | Fox sought termination or partial horizontal forfeiture of deep rights because only one well was drilled and his acreage remained undeveloped | Defendants argued continued paying production in shallow/depths and that Ohio precedent does not permit partial horizontal forfeiture where production in paying quantities continues | Court relied on precedent rejecting partial horizontal forfeiture when lease area produces in paying quantities; no breach found; assignment overruled |
| Whether Fox was required to give 10 days’ written notice under shut‑in clause before suing | Fox contended notice was not required because no evidence showed lack of transmission facilities that would trigger shut‑in payments | Defendants relied on the lease language requiring registered‑mail notice and Fox’s admission he never gave written demand/notice | Court held Fox admitted he did not provide the required 10‑day written notice; even apart from this, the primary basis was lack of proof of non‑production; assignment overruled |
| Standard of review / weight of evidence | N/A — factual disputes should be resolved in favor of trial court’s findings | N/A — appellee urged deference to bench trial factfinding | Court applied manifest‑weight standard for bench trial and declined to reverse where competent, credible evidence supported findings |
Key Cases Cited
- Shemo v. Mayfield Heights, 88 Ohio St.3d 7 (Ohio 2000) (presumption in favor of trial‑court factual findings in reviewing manifest weight)
- Seasons Coal Co. v. Cleveland, 10 Ohio St.3d 77 (Ohio 1984) (same)
- Blausey v. Stein, 61 Ohio St.2d 264 (Ohio 1980) (definition of "paying quantities")
- Beer v. Griffith, 61 Ohio St.2d 119 (Ohio 1980) (forfeiture may be appropriate remedy for breach of implied covenant when damages are inadequate)
- Ionno v. Glen‑Gery Corp., 2 Ohio St.3d 131 (Ohio 1982) (lease includes implied covenant to reasonably develop absent contrary express terms)
- C.E. Morris Co. v. Foley Constr. Co., 54 Ohio St.2d 279 (Ohio 1978) (judgments supported by competent, credible evidence will not be disturbed)
- State v. Thompkins, 78 Ohio St.3d 380 (Ohio 1997) (discussing manifest‑weight standard applied to credibility and persuasion)