THOMAS DUNDICS, ET AL., PLAINTIFFS-APPELLANTS, v. ERIC PETROLEUM CORPORATION, ET AL., DEFENDANTS-APPELLEES.
CASE NO. 15 MA 0156
STATE OF OHIO, MAHONING COUNTY IN THE COURT OF APPEALS SEVENTH DISTRICT
February 17, 2017
[Cite as Dundics v. Eric Petroleum Corp., 2017-Ohio-640.]
Hon. Gene Donofrio, Hon. Mary DeGenaro, Hon. Carol Ann Robb
CHARACTER OF PROCEEDINGS: Civil Appeal from Court of Common Pleas of Mahoning County, Ohio Case No. 2014 CV 02981. JUDGMENT: Affirmed.
For Plaintiffs-Appellants: Attorney Thomas Hull II, Attorney David Detec, 201 East Commerce Street, Youngstown, Ohio 44503-1541
For Defendants-Appellees: Attorney Thomas Hill, 6075 Silica Road, Suite A, Austintown, Ohio 44515-1053
For Amicus Curiae: Attorney Timothy McGranor, Attorney Mitchell Tobias, 52 East Gay Street, P.O. Box 1008, Columbus, Ohio 43216-1008
DONOFRIO, P.J.
{¶1} Plaintiffs-Appellants, Thomas Dundics and IBIS Land Group, Ltd., appeal the dismissal of their complaint by the Mahoning County Court of Common Pleas for failure to state a claim upon which relief can be granted.1
{¶2} Appellants filed a complaint on November 14, 2014 against Defendants-Appellees, Eric Petroleum Corporation and Bruce Broker. Appellants’ complaint included five counts. In count one of their complaint, Appellants alleged that they entered into an agreement with Appellees whereby Appellants would find property owners, negotiate gas leases, and work with Appellees to obtain executed gas leases. For compensation, Appellants alleged they were to receive $10.00 per leased acre and a 1% working interest in all wells placed on the leased acreage. Appellants further claimed in their complaint that oil and gas leases are not real estate and that, therefore, they did not need to be licensed real estate brokers to perform these services for Appellees. Appellants complained that they performed their end of the bargain and received some compensation. Now, Appellants complain, the leases may have been sold but Appellees refuse to provide an accounting or pay the monies due Appellants for services rendered. In counts two, three, four, and five of their complaint, Appellants assert alternative theories of conversion, fraud, unjust enrichment, and quantum meruit for the requested relief.
{¶3} On January 28, 2015, Appellees filed a motion to dismiss Appellants’ complaint for failure to state a claim upon which relief could be granted because Appellants did not allege they were licensed real estate brokers as required by
{¶4} On March 16, 2015, a hearing was held before a magistrate. The
{¶5} On June 17, 2015, Appellants filed objections to the Magistrate‘s Decision. Appellees filed a response on June 24, 2015. Appellants filed a motion for leave to supplement their objections on August 6, 2015, based on new information. On August 12, 2015, the trial court overruled Appellants’ objections but did not rule on Appellants’ August 12, 2015 motion for leave to supplement Appellants’ objections. Appellants filed a timely appeal.
{¶6} Appellants assign two errors to the trial court. Their first assignment of error states:
THE TRIAL COURT ERRED IN GRANTING DEFENDANTS/APPELLANTS’ [sic.] MOTION TO DISMISS.
{¶7} In Javorsky v. Sterling Med., 7th Dist. No. 14 MA 87, 2015-Ohio-2113, ¶ 11-12, we reiterated the standard of review regarding a trial court‘s dismissal of a complaint for failure to state a claim upon which relief can be granted. A Civ.R. 12(B)(6) motion to dismiss for failure to state a claim upon which relief can be granted is a procedural motion that tests the sufficiency of the complaint. Id. citing State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548, 1992-Ohio-73, 605 N.E.2d 378. In order to dismiss a complaint for failure to state a claim upon which relief can be granted, the court must find beyond doubt that the plaintiff can prove no set of facts warranting relief after it presumes all factual allegations in the complaint are true, and construes all reasonable inferences in the
{¶8} The parties and Amicus Curiae agree that there are two decisions which have previously decided the issue before this court, Binder v. OG Land Development and Exploration, LLC N.D.Ohio No. 4:11-cv-02621, 2012 WL 1970239 (May 31, 2012), and Wellington Resource Group, LLC v. Beck Energy Corp., 975 F.Supp.2d 833 (S.D.Ohio 2013). The courts in Binder and Wellington reached conflicting results. The Binder court concluded that one who engages in the brokering of oil and gas leases is subject to the provisions of
{¶9} Appellants and Landmen (unless noted otherwise, collectively referred to as “Appellants“) argue that
{¶10}
No right of action shall accrue to any person, partnership, association, or corporation for the collection of compensation for the performance of the acts mentioned in section 4735.01 of the Revised Code, without alleging and proving that such person, partnership, association, or corporation was licensed as a real estate broker or foreign real estate dealer.
{¶11}
- Sells, exchanges, purchases, rents, or leases, or negotiates the sale, exchange, purchase, rental, or leasing of any real estate;
- Offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of any real estate;
* * *
- Directs or assists in the procuring of prospects or the negotiation of any transaction, other than mortgage financing, which does or is calculated to result in the sale, exchange, leasing, or renting of any real estate;
{¶12} In Binder, plaintiff alleged that he agreed, in return for compensation, to identify landowners with whom defendant could negotiate to obtain mineral rights. Binder at *1. Plaintiff acknowledged that some payment had been offered by
{¶13} Colucy involved a plaintiff who was given the right to purchase mineral rights, including rights to coal, oil, and gas, for the defendant. Colucy at 771. The Tuscarawas Common Pleas Court concluded “that it is quite apparent that the service the plaintiff performed or was to perform comes within the strict definition of the term ‘Real Estate Broker’ as defined by the statute.” Id.
{¶14} The year after Binder, the Wellington court reached a different conclusion. The Wellington court determined that oil and gas leases are not “real estate” under Ohio law. Wellington at 838. The court in Wellington concluded that its “thorough survey of Ohio case law leaves this [the Wellington] Court convinced that the Ohio Supreme Court, if given the occasion to rule on this issue today, would so hold.” Id. Referring to its prior decision in In re Frederick Petroleum Corp., 98 B.R. 762 (S.D. Ohio 1989), the court acknowledged that the exact nature of a lessee‘s interest under an oil and gas lease has not been clearly established in Ohio. Wellington at 839. The court then summarized a number of Ohio decisions for purposes of illustrating its observation that Ohio courts have treated oil and gas leases differently from an interest in real property.
{¶15} Wellington refers to Detlor v. Holland, 57 Ohio St. 492, 505, 49 N.E. 690 (1898), for the proposition that the right to produce oil and gas from a tract of land is not a lease but a grant of an exclusive right to produce oil and gas for the term of the agreement. Wellington at 839, quoting Detlor at 505-506. Detlor was an action to quiet title where the agreement to produce oil was limited to 90 days unless a
{¶16} However, as the Wellington court acknowledged, in Harris v. Ohio Oil Co., 57 Ohio St. 118, 48 N.E. 502 (1897), the Ohio Supreme Court, stated that an oil and gas lease is more than a mere license and concluded that a lease to drill for oil and gas “is a lease of the land” and that “the lessee has a vested right to the possession of the land to the extent reasonably necessary * * *” Id. at 129-130.
{¶17} And, Wellington explained, more recently, in Back v. Ohio Fuel Gas Co., 168 Ohio St. 81, 113 N.E.2d 865 (1953), the Ohio Supreme Court considered whether an instrument conveying a right and privilege to operate on land to obtain oil and gas and to lay pipe over the land to transfer the oil and gas should be recorded in the record of leases or in the record of deeds. Id. at 83. In considering whether such an instrument was a lease or a license, the Supreme Court discussed the nature of the activity of drilling for oil and gas:
The character of the instrument of conveyance reveals that it is other than a grant of real property. Possession of oil and gas, having as they do a migratory character, can be acquired only by severing them from the land under which they lie, and in effect the instrument of conveyance in the instant case is no more than a license to effect such a severance. The very sale of oil and gas, separate and apart from the real estate surface, constitutes, in law, a constructive severance such as occurs in the case of sale of standing timber or growing crops.
Id. at 87. The Court then observed that in most producing states, gas and oil in situ are not subject to absolute ownership. Id. The Court concluded that the instrument in Back was, for recording purposes, a license rather than a deed of conveyance. Id. at 89. The Supreme Court observed that many authorities hold that the owner of the land surface does not own the oil and gas that may be in place thereunder. Id. at 86-87.
{¶18} Appellees argue that the recent Buell decision validates the trial court‘s decision here. Buell was an action brought in the federal district court for the Southern District of Ohio to quiet title to oil and gas rights against a surface property owner. Buell at ¶ 13. Because of the lack of available authority from Ohio courts regarding the interpretation of Ohio‘s Dormant Mineral Act in the context of an Ohio oil and gas lease, the federal court certified two questions to the Ohio Supreme Court. Although Buell does not involve
{¶19} Buell observes that “[o]il and gas can be viewed as realty or personalty depending on the location of the oil and gas relative to the land in which it lies.” Id. at ¶ 20. According to Buell, oil and gas underlying the surface have, in Ohio, long been recognized as part of the realty. Id. at ¶ 21. The interests in the surface and the minerals below the surface can be severed. However, even though these rights may be severed, the rights to the subsurface oil and gas may still affect the rights and/or value of the surface rights. According to Buell, absent language to the contrary in the conveying instrument, “a severed mineral estate is considered to include those rights to use of the surface as are reasonably necessary for the proper working of the mine and the obtaining of the minerals.” Id. at 23.
{¶20} In Buell, the Supreme Court confronted the seemingly different
{¶21} Buell then notes that this court‘s decision in Eisenbarth v. Reusser, 2014-Ohio-3792, 18 N.E.3d 477 (7th Dist.), is in accord with the Columbiana County Common Pleas Court in Bender v. Morgan, Columbiana C.P. No. 2012-CV-378 (Mar. 20, 2013), where the common pleas court observed that, in analyzing the meaning of a title transaction, the courts have “concluded that an oil and gas lease conveyed a fee simple determinable in the severed mineral rights subject to a reverter on conditions described in the lease * * * ” Buell at ¶ 51. Kramer v. PAC Drilling Oil & Gas, L.L.C., 197 Ohio App.3d 554, 2011-Ohio-6750, 968 N.E.2d 64, (9th Dist.) ¶ 11, is cited by Buell for reaching the same conclusion as Bender, i.e., an oil and gas lease grants a fee simple determinable to the lessee. Id. at ¶ 52. The Eleventh District similarly stated that the typical oil and gas lease “grants a fee simple determinable interest to the lessee.” Bernard Philip Dedor Revocable Trust v. Reserve Energy Exploration Co., 11th Dist. No. 2014-P-0001, 2014-Ohio-5383, 24 N.E.3d 1225, ¶ 20.
{¶22} In considering whether the services allegedly performed by Appellants
{¶23} In light of the above, we return to the language of
{¶24} In further support of Appellants’ first assignment of error, the Landmen argue that recent proposed legislation, seeking to establish requirements governing oil and gas land professionals, supports its position that Chapter 4735 does not apply to Appellants here, even though the legislation was never adopted. But the proposed un-enacted legislation upon which Appellants rely is insufficient to establish a contrary interpretation to Chapter 4735.
{¶25} Next, the Landmen complain that the requirements necessary to obtain
{¶26} As Appellees observe, this court recently confirmed the rule that inquiry into legislative intent, legislative history, public policy, the consequences of an interpretation, or other factors identified in
{¶27} As discussed above, any agreement allowing one to reach beneath
{¶28} Appellants further argue that even if
{¶29} Appellees respond by arguing that Appellants cannot assert this issue as error because they did not present it as an objection to the Magistrate‘s Decision in the trial court.
Except for a claim of plain error, a party shall not assign as error on appeal the court‘s adoption of any factual finding or legal conclusion, whether or not specifically designated as a finding of fact or conclusion of law under Civ.R. 53(D)(3)(a)(ii), unless the party has objected to that finding or conclusion as required by Civ.R. 53(D)(3)(b).
{¶30} A fair reading of Appellants’ objections to the Magistrate‘s Decision reflects that the argument that fraud be an exception to the requirement in
{¶31} Appellees also argue that, even if the fraud exception argument is considered, it should nonetheless be rejected. Indeed, in Binder the court concluded that the plaintiff‘s fraud claim was barred by his failure to hold a real estate broker‘s license as required by
{¶32} Accordingly, Appellants’ first assignment of error is without merit and is overruled.
{¶33} Appellants’ second assignment of error states:
THE TRIAL COURT ERRED IN FAILING TO ALLOW PLAINTIFFS/APPELLANTS TO AMEND THEIR COMPLAINT TO CLARIFY THE FACTS AT ISSUE AND STATE A CLAIM THAT IS NOT BARRED BY O.R.C. 4735.21.
{¶34} Appellants filed with the trial court what they styled an alternative motion to amend their complaint. In their initial motion, Appellants simply stated that, in the event the trial court found merit in any of the arguments offered by Appellees, Appellants sought leave to amend the complaint to correct any deficits in the pleading. Appellants offered no other reason and did not file a proposed amended complaint. In a subsequent pleading Appellants asserted that they had not supplied reasons to amend their complaint because they did not believe there was any reason to amend their complaint. Appellants suggest that the amendment would only be necessary if the trial court concluded that their claims for fraud and conversion were insufficiently pled.
{¶35} The trial court ultimately did not dismiss any of Appellants’ claims because they were insufficiently pled. Instead, citing Walgate v. Kasich, 10th Dist. No. 12AP-548, 2013-Ohio-946, 989 N.E.2d 140, ¶ 35, affirmed in part and reversed in part, Walgate v. Kasich, 2016-Ohio-1176, the magistrate, and then the trial court, denied Appellants’ motion to amend the complaint because they provided no grounds as to why leave should be granted, no explanation of any new matters they wished to include in the complaint, and no explanation of how the amendment would cure any deficiencies in the complaint.
{¶36} In their Objection to the Magistrate Decision, Appellants did not object to the denial of their alternative motion to amend their complaint.
{¶37} As Appellees point out, the trial court signed its judgment entry on August 3, 2015. It was not filed until August 12, 2015. Appellants, on August 6, 2015, filed a Motion for Leave to Supplement Plaintiff‘s Objections to the Magistrate Decision of May 27, 2015 Based on New Information. Leave was never granted or denied. Appellants state therein that the reason for the filing was to support its motion for leave to file an amended complaint and to support the fraud allegation. Attached were an email from 2011, the affidavit of Appellant Dundics, and a First Amended Complaint With Jury Demand. In essence, in addition to the previous claims, Appellants now alleged that they performed consulting services directly to Appellees based on Appellant Dundics’ extensive oil and gas knowledge and expertise and that those services are not governed by
{¶38} It is clear that this last filing was never considered by the magistrate or the trial court. As noted above, the motion for leave to supplement was not timely filed, leave was never granted, and, because of the timing, the trial court never considered the motion. Appellees draw the court‘s attention, again, to
[N]either Civ.R. 53 nor statutory law permits a party to submit a memorandum supplementing her timely objections to a magistrate‘s decision, as of right, after the time for filing objections has passed. Civ.R. 53(E)(3)(a) only permits a party to file objections to a magistrate‘s decision within fourteen days of the filing of the decision. Courts may grant a party leave to supplement [her] objections upon request.
{¶39} Here, the Magistrate‘s Decision was filed on May 27, 2015. Appellants filed objections to the Magistrate‘s Decision on June 17, 2015. In each of its pleadings prior to the last, Appellants offered no proposed amended complaint, no reason why an amended pleading should be permitted, and no proposed allegations
{¶40} Accordingly, Appellants’ second assignment of error is without merit and is overruled.
{¶41} For the reasons stated above, the trial court‘s judgment is hereby affirmed.
DeGenaro, J., concurs.
Robb, P.J., concurs.