2019 Ohio 3647
Ohio Ct. App.2019Background
- Original oil and gas lease (310 acres) had a 20-year primary term and a secondary term that continued "so much longer thereafter as oil, gas, or their constituents are produced in paying quantities". 58 acres conveyed to the Naus in 1993; that 58 acres lies within a 147-acre portion of the 310-acre lease tract.
- The Noll C. and Baker C. Well #1 ("Baker #1"), drilled 1975, was identified in discovery as the only well on the 147-acre portion; Positron (lessee successor) and Stonebridge (operator) conceded Baker #1 produced no oil or gas from 2000–2005 in discovery responses and produced a Well Completion Report showing gaps in production.
- The Naus (and intervenor Siltstone) moved for summary judgment seeking declaratory termination of the lease for nonproduction in paying quantities; defendants delayed and later filed an opposition attaching an affidavit from Stonebridge’s manager (Eddy Biehl) and various discovery documents.
- The trial court ordered defendants to identify any other wells on the leased premises; defendants did not identify additional wells and later failed to oppose the renewed summary-judgment motion, and the trial court granted summary judgment declaring the lease terminated.
- The appellate court held that, absent a Pugh clause or contrary lease language, an oil-and-gas lease is indivisible (production on any part preserves the whole), but the record established Baker #1 was the only well on the entire leasehold and it produced no oil/gas during the relevant period; the Biehl affidavit’s contested portions were inadmissible because they were based on belief, not personal knowledge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether lease is divisible or leases are perpetuated by production on any portion | Nau: lease indivisible; must show nonproduction across entire leasehold; Baker #1 is the only well and had no production | Stonebridge/Positron: defendants suggested other wells/owners may exist on the 310-acre tract and production elsewhere preserves lease | Court: lease is presumptively indivisible absent Pugh clause; but record showed Baker #1 was the only well on entire leasehold, so the Naus met burden |
| Whether evidence offered by defendants created genuine issue of material fact about production or other wells | Nau: discovery admissions and the 2013 report establish nonproduction; defendants failed to identify other wells when ordered | Defs: Biehl affidavit and attached documents (ODNR maps, suspense lists, tax forms, prior settlement check, repair invoices) indicate other wells, royalties held, and prior litigation resolving nonproduction | Court: Biehl’s relevant averments were based on belief (not personal knowledge) and thus inadmissible; documentary items did not show paying-quantity production or additional wells; no genuine issue remained |
| Whether affidavit and discovery documents were admissible to defeat summary judgment | Nau: defendants’ affidavit fails Civ.R.56(E) personal-knowledge requirement; unauthenticated docs carry little weight | Defs: documents produced in discovery and affidavit suffice to raise issues | Court: affidavit portions based on belief cannot create genuine factual issue; documents produced in discovery may be considered but here they did not establish production or other wells sufficient to avoid summary judgment |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (Ohio 1996) (de novo appellate review of summary-judgment rulings)
- Temple v. Wean United, Inc., 50 Ohio St.2d 317 (Ohio 1977) (summary-judgment standard; view evidence most favorably to nonmoving party)
- Dresher v. Burt, 75 Ohio St.3d 280 (Ohio 1996) (moving party’s initial burden and nonmoving party’s reciprocal burden in summary judgment practice)
- Swallie v. Rousenberg, 190 Ohio App.3d 473 (7th Dist. 2010) (secondary term ends when production in paying quantities ceases)
- Neuhart v. TransAtlantic Energy Corp., 121 N.E.3d 802 (7th Dist. 2018) (lease indivisibility absent contrary lease language)
- Mathews v. Sun Oil Co., 425 S.W.2d 330 (Tex. 1968) (production on one tract perpetuates the lease as to all tracts absent contrary intent)
- Bonacorsi v. Wheeling & Lake Erie Ry. Co., 95 Ohio St.3d 314 (Ohio 2002) (definition and requirement of personal knowledge for affidavits)
- Potts v. Unglaciated Indus., Inc., 77 N.E.3d 415 (7th Dist. 2016) (discussion of Civ.R.56(E) personal-knowledge defects and waiver)