State ex rel. Claugus Family Farm, L.P. v. Seventh Dist. Court of Appeals (Slip Opinion)
145 Ohio St. 3d 180
| Ohio | 2016Background
- Beck Energy used a standardized "Form G & T (83)" oil-and-gas lease with a ten-year stated term and secondary-term language allowing continuation "so much longer *as oil and gas... are produced or are capable of being produced" and separate delay-rental provisions if no well commenced within 12 months.
- Monroe County landowners (class) sued Beck Energy claiming the Form G & T (83) leases were perpetual and void as against public policy; trial court granted summary judgment for plaintiffs and certified a CIV.R. 23(B)(2) class.
- Beck Energy appealed; the Seventh District modified a trial-court tolling order to apply to unnamed class members as of Oct. 1, 2012, and ultimately held the leases had a definite primary term and were not perpetual.
- Claugus Family (unnamed class member) claimed its Beck lease expired and, after entering a new lease with Gulfport, sought writs prohibiting enforcement of the Seventh District’s tolling order as to its property.
- The Ohio Supreme Court consolidated the appeal and the original-action petition and addressed (1) whether the Form G & T (83) leases are void as perpetual leases, (2) whether an implied covenant to reasonably develop exists, and (3) whether Claugus was entitled to extraordinary relief overturning the tolling order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Form G & T (83) lease is a perpetual lease void as against public policy | Landowners: lease allows indefinite extension without development (through lessee’s judgment and delay rentals) → perpetual, void | Beck: lease sets a ten‑year definite term; secondary term requires production or operation after primary term | Lease is not perpetual; primary 10‑year term is definite and delay rentals operate only during primary term → not void |
| Whether an implied covenant to reasonably develop applies | Landowners: lease permits indefinite delay → implied covenant should be imposed | Beck: lease specifies a primary term and disclaims implied covenants | No implied covenant during the primary term; the lease’s timing and disclaimer preclude imposing one |
| Whether the Seventh District could toll leases for unnamed class members pending appeal | Claugus: tolling order retroactively extended its lease without notice, harming property and contract rights | Seventh Dist./Beck: tolling preserved status quo during appeal; court had jurisdiction to issue such order | Tolling order was within the court of appeals’ authority; not an unauthorized exercise of power |
| Whether Claugus was entitled to writs of mandamus or prohibition to vacate tolling order | Claugus: had no adequate remedy at law and court’s tolling order injured its rights | Respondents: Claugus had an adequate remedy (could intervene in the appeal); court did not plainly lack jurisdiction | Writs denied — Claugus had an adequate remedy by intervening and the court of appeals did not patently and unambiguously lack jurisdiction |
Key Cases Cited
- Ionno v. Glen‑Gery Corp., 2 Ohio St.3d 131 (1983) (long‑term mineral leases without a definite development period may be void as against public policy; courts may imply a covenant to develop when lease is silent)
- Chesapeake Exploration, L.L.C. v. Buell, 144 Ohio St.3d 490 (2015) (granting clause controls lease nature; primary and secondary term framework)
- Brown v. Fowler, 65 Ohio St. 507 (1902) (delay‑rental payments do not extend a lease beyond an expressly fixed primary term)
- Beer v. Griffith, 61 Ohio St.2d 119 (1980) (absent express contrary language, an oil and gas lease includes an implied covenant to reasonably develop)
- Am. Energy Servs., Inc. v. Lekan, 75 Ohio App.3d 205 (1992) (if secondary‑term conditions are not met, the lease terminates by its express terms and operation of law)