2019 Ohio 4916
Ohio Ct. App.2019Background
- OPWC awarded a Clean Ohio grant enabling Guernsey County Community Development Corporation to purchase 228.45 acres and recorded a deed with restrictive covenants: (1) use/development restriction preserving the land as a "green space park area," (2) perpetual enforceability by OPWC, (3) liquidated-damages remedy, and (4) a restriction requiring OPWC's prior written consent before any sale/lease/transfer of the "Property."
- The deed conveyed surface and nearly all mineral rights (about 218 of 228.45 acres); ~10 acres had a prior mineral reservation.
- Without OPWC consent, Guernsey (a) executed an oil-and-gas lease (2011) later assigned to Gulfport; (b) sold 6/7 of its mineral interest to Siltstone (2013); and (c) sold additional mineral acres to Triple Crown/American Energy (2014). The surface has not been disturbed.
- OPWC sued seeking declaratory and injunctive relief (including nullifying leases/sales and return of interests) and liquidated damages; trial court dismissed equitable claims and granted partial summary judgment to the mineral owners, holding the "green space" restriction does not apply to subsurface and that the transfer restriction unlawfully restrained alienation.
- The court of appeals: affirmed that "green space park area" limits the use/development restriction to the surface, reversed as to the transfer/alienation restriction (holding it covers subsurface minerals and was violated), and held OPWC may pursue equitable relief; remanded to determine appropriate equitable remedies and/or liquidated damages. Judge Robb dissented, arguing the alienation restriction is an unreasonable restraint on subsurface alienation and would have affirmed the trial court.
Issues
| Issue | Plaintiff's Argument (OPWC) | Defendant's Argument (Appellees / mineral holders) | Held |
|---|---|---|---|
| Whether the "Use and Development" restriction (preserving a "green space park area") applies to subsurface/minerals | Restriction language is clear and covers the entire "Property," including subsurface; protecting water and ecology includes below-ground interests | "Green space" is surface-focused (park functions). The deed's wording (e.g., "on the premises") and common meaning limit the restriction to surface uses; leasing minerals without surface disturbance does not violate the covenant | Restriction is limited to the surface; lateral/mineral activity below ground did not fall within "green space park area." (Affirmed as to this point.) |
| Whether the "Restrictions on transfer of the Property" (requiring OPWC consent) apply to subsurface/mineral interests and were violated | The transfer restriction refers to the conveyed "Property" (including minerals) and unambiguously requires OPWC consent for any sale/lease/transfer; Guernsey violated it by leasing/selling minerals without consent | Applying the transfer restriction to subsurface is an unreasonable restraint on alienation; covenant should be read least restrictively and not bar normal mineral transactions | Transfer restriction covers subsurface minerals and Guernsey breached it by leasing and selling mineral interests without OPWC consent; summary judgment for OPWC should have been entered on that issue. |
| Whether OPWC may seek equitable relief (injunction, rescission) or is limited to statutory monetary remedies under R.C. 164.26(A) | The deed expressly authorizes enforcement "by any proceedings at law or in equity"; R.C.164.26(A) does not preclude equitable relief and only directs OPWC to set policies (including liquidated-damages provisions) | Trial court: statute specifies monetary remedies (liquidated damages/grant repayment), and therefore equitable relief is not available | OPWC may pursue equitable relief; the trial court erred in dismissing equitable claims. |
Key Cases Cited
- Comer v. Risko, 833 N.E.2d 712 (Ohio 2005) (summary-judgment review is de novo)
- Canton v. State, 766 N.E.2d 963 (Ohio 2002) (definition and role of restrictive covenants)
- Skivolocki v. East Ohio Gas Co., 313 N.E.2d 374 (Ohio 1974) (contract/deed construction focuses on parties' written language)
- Alexander v. Buckeye Pipe Line, 374 N.E.2d 146 (Ohio 1978) (clear, unambiguous contract terms control)
- Illinois Controls, Inc. v. Langham, 639 N.E.2d 771 (Ohio 1994) (parol evidence to resolve ambiguity)
- Houk v. Ross, 296 N.E.2d 266 (Ohio 1973) (ambiguities in deed restrictions are construed to least restrict land use)
- Newbury Twp. Bd. of Trustees v. Lomak Petroleum (Ohio), Inc., 583 N.E.2d 302 (Ohio 1992) (public policy encourages oil and gas production when safe)