2022 Ohio 869
Ohio2022Background
- Landowners (French and others) own the Sutherland Farm; Ascent obtained oil-and-gas leases granting title-affecting interests and surface possession rights to explore, drill, and construct facilities.
- Leases had a five-year primary term and a secondary (production) term; extension required production or commencement of drilling operations within specified timeframes.
- Leases included an arbitration clause requiring disputes under the lease to be decided by arbitrators.
- French sued in common pleas court for a declaratory judgment that the leases expired by their terms for failure to produce or timely commence operations; Ascent counterclaimed that the leases remained in force.
- Trial court denied Ascent’s motion to stay proceedings pending arbitration, finding the dispute involves title or possession of real estate under R.C. 2711.01(B)(1); the Seventh District reversed.
- Ohio Supreme Court accepted review to decide whether an action declaring that an oil-and-gas lease expired involves title to or possession of real estate and is thus exempt from arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a declaratory action that an oil-and-gas lease expired "involves the title to or the possession of real estate" within R.C. 2711.01(B)(1) so as to be exempt from arbitration | French: Lease expiration quiets title and restores possession to lessor, so dispute directly involves title/possession and is exempt from arbitration | Ascent: Although leases create interests, the dispute is contractual (arbitral) and does not put the landowner’s title or possession at stake, so arbitration clause applies | Held: Yes. Lease expiration affects title and possession; the declaratory action is exempt from arbitration under R.C. 2711.01(B)(1). Trial court correctly refused the stay. |
Key Cases Cited
- Bohlen v. Anadarko E & P Onshore, L.L.C., 80 N.E.3d 468 (Ohio 2017) (oil-and-gas leases create property interests and have primary/secondary terms)
- Chesapeake Exploration, L.L.C. v. Buell, 45 N.E.3d 185 (Ohio 2015) (lease affects title and grants reasonable surface use affecting possession)
- Harris v. Ohio Oil Co., 48 N.E. 502 (Ohio 1897) (lessee has vested right to possession to extent reasonably necessary to perform lease)
- State ex rel. Claugus Family Farm, L.P. v. Seventh Dist. Court of Appeals, 47 N.E.3d 836 (Ohio 2016) (lease termination revests property interest to lessor by operation of law)
- Karas v. Brogan, 378 N.E.2d 470 (Ohio 1978) (oil-and-gas lease is an encumbrance that limits lessor’s ability to convey title free and clear)
- Stewart v. Vivian, 91 N.E.3d 716 (Ohio 2017) (statutory interpretation is a question of law reviewed de novo)
- Slingluff v. Weaver, 64 N.E. 574 (Ohio 1902) (statutory-interpretation principle: apply the statute’s meaning)
- Sears v. Weimer, 55 N.E.2d 413 (Ohio 1944) (unambiguous statutes are applied, not interpreted)