author: PIETRYKOWSKI, J.

text:
    Scott T. FULLER, et al., Appellants v. ANCHOR POINTE MARINA, Appellee
    Court of Appeals No. L-17-1051
    Court of Appeals of Ohio, Sixth District, Lucas County.
    Decided: December 8, 2017
    Matthew O. Hutchinson, Toledo, for appellants.
    Gene Canestraro and Stephen C. Roach, Fairfield, for appellee.
    DECISION AND JUDGMENT
   PIETRYKOWSKI, J.

{¶ 1} This is an appeal from the judgment of the Lucas County Court of Common Pleas, granting summary judgment in favor of appellee, Anchor Pointe Marina, on appellants', Scott and Doll Fuller, claims for damage to their boat, loss of value of their dock space, and personal injury. For the reasons that follow, we affirm, in part, and reverse, in part.

I. Facts and Procedural Background

{¶ 2} The claims in this case arise from appellants' ownership of a boat and dock space at appellee's marina. In October 2012, appellants and appellee entered into an agreement for appellee to store their boat over the winter. During that winter, water froze inside of the boat causing extensive damage, and the boat was deemed a total loss. The damage resulted from the fact that the drain plugs were not pulled prior to the boat being stored.

{¶ 3} Relative to the failure to remove the drain plugs, the terms of the "Winter Boat Storage Worksheet" specifically state in two separate places that "Removal of Drain Plugs & Batteries are the boat owner's responsibility," and "[Appellee] is not responsible for any damaged, lost, or stolen items, or removal of batteries and drain plugs." Further, the "Winter Boat Storage Agreement" expressly provides that "This agreement is for rental of ground space and is not a bailment agreement. Therefore, [appellee] has no responsibility for damage to the boat and owner agrees to provide his own insurance on the boat."

{¶ 4} The parties originally agreed as indicated on the "Winter Boat Storage Worksheet" that the boat was to be removed from the water on October 29, 2012. Mr. Fuller was present that day to remove the drain plugs and battery from his boat. However, he was informed that the boat could not be removed at that time because of the weather. Mr. Fuller advised appellee that he was unable to return to have the boat removed because of his work schedule. He testified in his deposition that he was told by Donna, an office worker who has since passed away, to leave the boat near the sling, and when appellee resumed pulling boats from the water they would pull his. After he tied his boat near the sling, Mr. Fuller reminded Donna that his boat needed to be plugged in so that the batteries would not run out of power causing his boat to sink. He paid his bill at the time, and was told by Donna that "We'll take care of it."

{¶ 5} The next day, Mr. Fuller called appellee to see if his boat had been pulled from the water, and he was told that it had not been. The day after that, Mr. Fuller called again, and again was told that the weather was preventing the removal of any boats. Mr. Fuller testified that two days later he called for a third time, asking if his boat had been pulled. He stated that Donna told him, "Yep, we took care of everything, we got it winterized, shored, everything's taken care of. You don't have to worry about nothing."

{¶ 6} Mr. Fuller testified that he never specifically said anything to Donna about removing the drain plugs. However, he stated that when he left the boat at the sling, he spoke with a mechanic who was there, and opened up his boat and showed the mechanic where the drain plugs were, and told the mechanic to take care of it. Mr. Fuller testified that the mechanic replied "Yep, no problem."

{¶ 7} After the boat was deemed a total loss by appellants' insurance company, appellants purchased a new boat. The new boat was larger than the previous one, and would not fit in appellants' dock space. Appellants requested that they be assigned a larger dock space, but appellee refused. Appellants ultimately were directed to a docking space along the shoreline wall.

{¶ 8} Mr. Fuller testified that after he had been docked along the wall for one or two weeks he came to do some work on his boat on June 5, 2013. It was a warm, sunny day, and Mr. Fuller had made several trips from his truck onto his boat carrying the tools and items that he would need. He testified that on his third or fourth time getting onto the boat he tripped and fell over a metal conduit that was attached to the shoreline wall. Mr. Fuller admitted that nothing was obstructing his view of the conduit, and he knew that the conduit was there. As a result of his fall, Mr. Fuller broke his right shoulder.

{¶ 9} On May 28, 2015, appellants filed their three-count complaint, asserting claims for damage to the boat, loss of value of the dock space, and personal injury. Appellee answered and filed a counterclaim for past due assessments related to appellants' ownership of the dock space.

{¶ 10} On July 20, 2015, appellee moved for summary judgment on appellants' claims. Appellee argued that it was not liable for the damages to appellants' boat because the "Winter Boat Storage Agreement" expressly stated that it was not a bailment agreement, disclaimed any liability for damage to the boat, and contained a release of all claims and damages. Further, appellee argued that it was not liable for appellants' claim for the loss of value of the dock space because appellants chose to purchase a larger boat that did not fit, and thus any alleged wrongful conduct on the part of appellee was not a proximate cause of appellants' damages. Finally, appellee argued that it was entitled to summary judgment on appellants' personal injury claim because the hazard that caused the fall was a known condition to Mr. Fuller, and it was open and obvious.

{¶ 11} Appellants responded to the motion for summary judgment, and argued that a bailment agreement arose and superseded the "Winter Boat Storage Agreement" when appellee was unable to remove the boat from the water on October 29, 2012, and told Mr. Fuller that "it would take care of it" and haul it out without his presence. As to the claim for loss of value of the dock space, consistent with their complaint, appellants argued that appellee drove down the resale value of appellants' dock space by subsequently offering free dock space to anyone who was willing to pay an $800 assessment fee for five years. Finally, regarding the personal injury claim, appellants argued that either appellee was negligent per se because the conduit violated the building code, the placement of the conduit was willful and wanton misconduct, or the hazard was not open and obvious because it was in a location where a person's focus would be diverted towards stepping onto the boat.

{¶ 12} Appellee replied, and, inter alia, argued that the statements of the deceased office worker that appellants relied on to create the bailment agreement were inadmissible hearsay because they did not fall under Evid.R. 804(B)(5) governing statements by a deceased person.

{¶ 13} On August 25, 2016, the trial court granted appellee's motion for summary judgment. As to the count for damage to the boat, the trial court reasoned that the "Winter Boat Storage Agreement" disclaimed any liability on the part of appellee, and expressly did not create a bailment agreement. Further, the court found that the exculpatory clause was not unenforceable as against public policy. Regarding appellants' assertion of a subsequent bailment agreement, the trial court found that there was no admissible evidence to support appellants' claim because the statements of the now-deceased office worker and the unidentified mechanic were inadmissible hearsay.

{¶ 14} The trial court further awarded summary judgment in favor of appellee on appellants' claim for the loss of the value of the dock, finding that, in addition to Mr. Fuller being the sole cause of his inability to use the dock space, the complaint failed to state a claim. The court noted, in particular, that the complaint alleges that appellants purchased the dock space for $3,000, but appellants admit that appellee is now offering pier spaces for $4,000 ($800 assessment per year for five years). Thus, the court concluded that appellants were not precluded from marketing their space at a profit.

{¶ 15} Finally, in regards to appellants' claim for personal injury, the trial court found that appellee did not owe a duty to Mr. Fuller because Mr. Fuller had actual knowledge of the risk, and because the condition was open and obvious.

{¶ 16} Appellants appealed the trial court's August 25, 2016 decision. However, because the trial court failed to resolve appellee's counterclaim for past due assessments, we remanded the matter to the trial court as it was not a final, appealable order. On February 6, 2017, the trial court entered its judgment granting summary judgment in favor of appellee on its counterclaim.

II. Assignments of Error

{¶ 17} Appellants have timely appealed the trial court's judgment, and now assert four assignments of error for our review:

1. The trial court erred in finding that the Storage Agreement and Worksheet excused Anchor Pointe of liability for its failure to remove the drain plugs from Mr. Fuller's boat.
2. The trial court erred in excluding the statements made by Ms. Huth and the mechanic as inadmissible hearsay.
3. The trial court erred in finding that Mr. Fuller had failed to state a claim as to the loss of value of his boat condominium, which was caused by Anchor Pointe when it started to give away boat condominiums to prospective purchasers.
4. The trial court erred in finding that there was no genuine issue of material fact as to whether Anchor Pointe had established the open and obvious defense.

III. Analysis

{¶ 18} We review the grant of a motion for summary judgment de novo, applying the same standard as the trial court. Lorain Natl. Bank v. Saratoga Apts. , 61 Ohio App.3d 127, 129, 572 N.E.2d 198 (9th Dist.1989) ; Grafton v. Ohio Edison Co. , 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). Under Civ.R. 56(C), summary judgment is appropriate where (1) no genuine issue as to any material fact exists; (2) the moving party is entitled to judgment as a matter of law; and (3) reasonable minds can come to but one conclusion, and viewing the evidence most strongly in favor of the nonmoving party, that conclusion is adverse to the nonmoving party. Harless v. Willis Day Warehousing Co. , 54 Ohio St.2d 64, 66, 375 N.E.2d 46 (1978).

A. Claim for Damage to the Boat

{¶ 19} Because appellants' first and second assignments of error both pertain to their claim for damage to the boat, we will address them together. In their first assignment of error, appellants argue that the exculpatory clauses in the "Winter Boat Storage Agreement" do not apply to the situation because the damage occurred not from the storage of the boat, but rather appellee's failure to remove the drain plugs from the boat when it hauled it out of the water. Further, as to the "Winter Boat Storage Worksheet," appellants argue that either the disclaimers of liability contained therein are unconscionable under the present circumstances, or appellee, through its agents, agreed to modify the terms of the "Winter Boat Storage Worksheet" to accept responsibility for removing the drain plugs.

{¶ 20} We initially note that, in the trial court, appellants argued that the exculpatory clauses were unenforceable as against public policy, not because the clauses were unconscionable. Regardless, we agree with the trial court's conclusion that the disclaimer of liability contained in the "Winter Boat Storage Worksheet" is enforceable. "As a general proposition, attempts to excuse liability for negligence by contract are disfavored in the law. This is especially true in the case of bailments made in the course of a general dealing with the public. Nonetheless, absent important public policy concerns, unconscionability, or vague and ambiguous terms, limiting or exculpatory provisions will be upheld." Collins v. Click Camera & Video , 86 Ohio App.3d 826, 832, 621 N.E.2d 1294 (2d Dist.1993). "A determination of whether a written contract is unconscionable is an issue of law." Taylor Bldg. Corp. of Am. v. Benfield , 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 34. "Unconscionability includes both an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party." (Citations omitted.) Id. at ¶ 33. "The party asserting unconscionability of a contract bears the burden of proving that the agreement is both procedurally and substantively unconscionable." Id.

{¶ 21} Here, appellants have not provided any evidence or arguments that the agreement was procedurally unconscionable. Instead, they argue that the disclaimer of liability is unconscionable under the facts of this case where Mr. Fuller was present and ready to remove the drain plugs and battery as agreed, but appellee refused to perform its obligation of pulling the boat out of the water. Thus, while appellants have failed to satisfy their burden of showing that the agreement was unconscionable, they do raise an issue regarding whether the parties either modified the agreement, or entered into a new agreement.

{¶ 22} Appellants argue that the agreement was modified when appellee refused to pull the boat out of the water and instructed Mr. Fuller to leave the boat at the sling, with Donna stating "We'll take care of it," and the unidentified mechanic replying that it was "no problem" to take out the drain plugs. The trial court discounted appellants' arguments, finding that the statements from Donna and the mechanic were inadmissible hearsay under Evid.R. 804(B)(5). In their second assignment of error, appellants contend that the trial court erred in excluding the out of court statements because they were not hearsay, but rather admissions of a party opponent under Evid.R. 801(D)(2), which provides "A statement is not hearsay if: * * * The statement is offered against a party and is * * * (d) a statement by the party's agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship."

{¶ 23} Appellee, in opposition, argues that Evid.R. 801(D)(2)(d) does not apply because the statements were not made within the scope of the employment. In support, appellee relies on an affidavit from Eric Van Duzen, Sr., an officer and member of the board of directors of appellee, in which Van Duzen states that no employee has ever been authorized to agree to remove drain plugs from boats stored at the marina. However, the issue of whether an employee was authorized to bind the company in a contractual agreement is separate from the issue of whether the statement was made within the scope of his or her employment for purposes of determining whether the statement was hearsay under Evid.R. 801(D)(2)(d). Here, the purported statements were made by employees of appellee, while they were acting on behalf of appellee, and regarding a transaction with one of appellee's customers. Therefore, we find that the out of court statements of Donna and the unidentified mechanic are not hearsay, and the trial court erred in excluding those statements.

{¶ 24} Considering those statements, we now turn to the issue of whether the parties agreed to modify the "Winter Boat Storage Worksheet" to provide for appellee accepting responsibility to remove the drain plugs from the boat. Appellee contends that Donna and the unidentified mechanic lacked authority to so bind the company. Appellants, on the other hand, argue that the employees, while perhaps not possessing actual authority, nonetheless possessed implied or apparent authority.

In order for a principal to be bound by the acts of his agent under the theory of apparent agency, evidence must affirmatively show: (1) that the principal held the agent out to the public as possessing sufficient authority to embrace the particular act in question, or knowingly permitted him to act as having such authority, and (2) that the person dealing with the agent knew of those facts and acting in good faith had reason to believe and did believe that the agent possessed the necessary authority.

Master Consol. Corp. v. BancOhio Natl. Bank , 61 Ohio St.3d 570, 575 N.E.2d 817 (1991), syllabus.

{¶ 25} "The existence of an agency relationship is a question of fact." Dickinson v. Charter Oaks Tree & Landscaping Co. , 10th Dist. Franklin No. 02AP-981, 2003-Ohio-2055, 2003 WL 1924638, ¶ 22, citing McSweeney v. Jackson , 117 Ohio App.3d 623, 631, 691 N.E.2d 303 (4th Dist.1996).

{¶ 26} Here, Mr. Fuller testified that Donna was the office worker for appellee, and that "She took care of everything in the office." Viewing this evidence in a light most favorable to appellants, we find that it is sufficient to create a genuine issue of material fact as to whether Donna had apparent authority to bind appellee to remove the drain plugs. As testified to by Mr. Fuller, Donna was a long-tenured worker, who handled all of the office matters. She was the person to whom he submitted his payment, was the person who directed him to leave his boat at the sling, and was the apparent contact person for removing the boat. From this evidence, a reasonable person could conclude that appellee held Donna out as possessing sufficient authority, or knowingly permitted her to act as though she had such authority, to agree to remove the boat at a later date, and to remove the drain plugs without Mr. Fuller's presence.

{¶ 27} Likewise, we hold that a genuine issue of material fact exists regarding whether the parties did in fact either create a new agreement or modify the existing one to provide for appellee to assume responsibility for removal of the drain plugs, based on Mr. Fuller's testimony that Donna told him "We'll take care of it," and later confirming that, "Yep, we took care of everything, we got it winterized, shored, everything's taken care of. You don't have to worry about nothing."

{¶ 28} Therefore, we hold that the trial court erred in granting summary judgment to appellee on appellants' first count for damage to their boat.

{¶ 29} Accordingly, appellants' first and second assignments of error are well-taken.

B. Claim for Loss of Value of Dock Space

{¶ 30} In their third assignment of error, appellants argue that the trial court erred in granting summary judgment to appellee on their claim for loss of value of their dock space. Appellants contend on appeal that a genuine issue of material fact exists whether appellee owed a fiduciary duty to all of appellee's boat condominium owners, including appellants, to maintain the market for the dock spaces, which appellee breached when it began to give away dock spaces if the new owner agreed to pay the $800 annual assessment for five years.

{¶ 31} In moving for summary judgment, appellee only argued that it was not the proximate cause of appellants' loss of value of the dock space, but rather the proximate cause was appellants' decision to purchase a boat that would not fit in their space. Appellee, however, ignored appellants' assertions in paragraphs 13 and 14 of the complaint that "Scott Fuller's old dock space is unmarketable since Anchor Pointe Marina, after Scott's dock purchased (sic) went into competition with its members by offering free dock spaces for persons who agree to pay the annual $800 assessment fees for five years. * * * Pursuant to such competition, Scott Fuller has lost the $3,000.00 investment he made in dock space C-22." Thus, the alleged cause of the loss of value was not appellants' purchase of a new boat, but rather the conduct of appellee in competing with its members. Therefore, as stated by appellants in their memorandum in opposition, appellee has not provided any factual or legal argument to support or demonstrate why it is entitled to summary judgment.

{¶ 32} Furthermore, the trial court, in its decision, determined that summary judgment was appropriate because "while [Mr. Fuller] alleges he invested $3,000 in the pier space, he also admits that Anchor Pointe is now offering pier spaces at the marina for $4,000 ($800 per year for five years) to any persons interested. Thus, he admits that his investment is less than what a new purchaser would have to pay-he does not appear to be precluded from marketing his pier space at a profit." However, the trial court's finding is not consistent with the allegation in the complaint that appellee gave dock spaces away at no cost, as well as the allegation in the counterclaim that the "Declaration of Condominium Ownership" provides that "each unit owner shall pay yearly or monthly or special assessments to the defendant for the cost of maintenance, insurance, and other common area expenses and assessments of the Association." Thus, at the least, a genuine issue of material fact exists whether every dock space owner, including the owner of appellants' dock space, must pay an assessment, with the net effect that appellee is giving away for free that for which appellant paid $3,000.

{¶ 33} Therefore, because appellee did not present any evidence demonstrating that no genuine issue of material fact exists, nor articulate any relevant legal theory explaining why appellants' claim for loss of value of the dock space based on appellee's conduct in giving away dock spaces for free with a five-year commitment was untenable as a matter of law, we hold that the trial court erred in granting summary judgment to appellee.

{¶ 34} Accordingly, appellants' third assignment of error is well-taken.

C. Claim for Personal Injury

{¶ 35} Finally, in their fourth assignment of error, appellants argue that the trial court erred in determining that the metal conduit was an open and obvious condition. Relying on an expert affidavit submitted with their opposition to appellee's motion for summary judgment, appellants argue that a genuine issue of material fact existed whether the act of getting onto and off of the boat was an attendant circumstance that would have rendered the trip hazard caused by the metal conduit not open and obvious.

{¶ 36} Initially, we note that the parties do not contest that Mr. Fuller was on appellee's premises as a business invitee. "A shopkeeper owes business invitees a duty of ordinary care in maintaining the premises in a reasonably safe condition so that its customers are not unnecessarily and unreasonably exposed to danger." Paschal v. Rite Aid Pharmacy, Inc. , 18 Ohio St.3d 203, 480 N.E.2d 474 (1985). "A shopkeeper is not, however, an insurer of the customer's safety." Id. Thus, "a shopkeeper is under no duty to protect business invitees from dangers 'which are known to such invitee or are so obvious and apparent to such invitee that he may reasonably be expected to discover them and protect himself against them." Id. , quoting Sidle v. Humphrey , 13 Ohio St.2d 45, 233 N.E.2d 589 (1968), paragraph two of the syllabus.

{¶ 37} Appellants focus on whether the hazard was open and obvious. However, appellants do not address the fact that Mr. Fuller admitted that he knew the conduit was there. Regardless of whether the hazard was open and obvious, because Mr. Fuller had actual knowledge of it, appellee was under no duty to protect him from the danger. See Wicichowski v. Gladieux V. Enterprises, Inc. , 54 Ohio App.3d 177, 179, 561 N.E.2d 1012 (6th Dist.1988) (where injured party tripped in a stairwell, "[B]ecause appellant had knowledge of the condition of the step at least equal to that of appellee, appellee did not breach any duty owed to appellant and, therefore, is not guilty of actionable negligence as a matter of law."). Further, "the plaintiff's failure to avoid a known peril is not excused by the fact that he 'did not think,' or 'forgot.' " Raflo v. Losantiville Country Club , 34 Ohio St.2d 1, 3, 295 N.E.2d 202 (1973). Therefore, we hold that because appellee owed no duty to protect Mr. Fuller from the trip hazard caused by the metal conduit, the trial court did not err in granting summary judgment to appellee on appellants' claim for personal injury.

{¶ 38} Accordingly, appellants' fourth assignment of error is not well-taken.

IV. Conclusion

{¶ 39} For the foregoing reasons, we find that substantial justice has not been done the parties complaining, and the judgment of the Lucas County Court of Common Pleas is reversed, in part, and affirmed, in part. This matter is remanded to the trial court for further proceedings consistent with this decision on appellants' claims for damage to their boat and loss of value of their dock space. Pursuant to App.R. 24, the costs of this appeal are ordered to be shared evenly by the parties.

Judgment reversed, in part, and affirmed, in part.

James D. Jensen, P.J., Thomas J. Osowik, J., CONCUR.

      Appellee also contends that appellants failed to raise in the trial court the argument that the out of court statements were admissions of a party opponent, and therefore they cannot raise the issue for the first time on appeal. However, appellee did not challenge the admissibility of the statements until it filed its reply brief in support of its motion for summary judgment.


source: Caselaw Access Project

author: McFarland, J.

license: Public Domain

text:
    Steven T. FOX, Plaintiff-Appellant, v. POSITRON ENERGY RESOURCES, INC., et al., Defendants-Appellees.
    No. 17CA2
    Court of Appeals of Ohio, Fourth District, Washington County.
    Released: November 15, 2017
    James R. Addison Co., L.P.A., Marietta, Ohio, for Appellant.
    John E. Triplett, Jr., Theisen Brock, L.P.A., Marietta, Ohio, for Appellees.
    DECISION AND JUDGMENT ENTRY
   McFarland, J.

{¶ 1} Steven T. Fox appeals the journal entry entered December 14, 2016 in the Washington County Court of Common Pleas, whereby his amended complaint to terminate an oil and gas lease was dismissed with prejudice. In the first assignment of error, Appellant asserts the trial court erred as a matter of law in failing to apply the implied covenant to conduct operations affecting his royalty interest with reasonable care and due diligence. In the second assignment of error, Appellant asserts the trial court erred as a matter of law in failing to apply the implied covenants to protect the lease from drainage and to explore further and reasonable development. Appellant's third assignment of error challenges the trial court's finding that Appellant was required to give 10 days' written notice of failure to pay shut in payments, before filing his complaint to terminate the lease. Having reviewed the record, we find the trial court's factual determination is supported by competent, credible evidence. Accordingly, we find no merit to Appellant's assignments of error and hereby affirm the judgment of the trial court.

FACTS

{¶ 2} Appellant is a resident of Tennessee. Appellant's parents owned real property in Salem Township, Washington County, Ohio. He has experience working on oil and gas wells and has taught classes in oil and gas drilling and in the operations of oil and gas wells. Appellee Positron Energy Resources, Inc., is the owner of the deep well at issue in this case. Appellee Stonebridge Operating Co., LLC, is the operator of the subject well.

{¶ 3} In 1972, Appellant's parents granted a lease for the oil and gas mineral rights below the Berea Sand Formation. This leased tract of land was 113 acres. One well, the Bartlett-Fagg well, was drilled subject to the first lease. The Bartlett-Fagg well was drilled to a depth of 4,011 feet from the surface, and is considered a deep well.

{¶ 4} In 1978, a second lease, on a 116-acre tract, was granted by Appellant and his mother, now deceased. One well was drilled on the second lease. In 2000, Appellant and his mother deeded 29.803 acres of their property to Ernest and Shelby Farkas. Both wells are on property which Appellant and his mother deeded to the Farkases. However, Appellant's land is subject to the aforesaid leases.

{¶ 5} The wells are in close proximity. Appellant owns 86.357 acres of both original tracts. He seeks cancellation of the leases only as to the property he owns. The well pursuant to the second lease is not at issue in this case.

{¶ 6} On April 3, 2014, Appellant filed a complaint seeking a declaratory judgment that the first oil and gas lease terminated due to breach of implied covenants to reasonably develop, explore, and conduct all operations affecting Appellant's royalty interest with reasonable care and due diligence. In the alternative, Appellant sought a partial horizontal forfeiture of the lease. The parties engaged in written discovery and motion practice. The trial court found genuine issues of material fact precluded summary judgment.

{¶ 7} On October 26, 2016, the parties presented evidence at a bench trial. On December 14, 2016, the trial court issued a journal entry dismissing Appellant's complaint. The trial court stated it could not find a preponderance of evidence to support the allegations of the complaint.

{¶ 8} This timely appeal followed. Where pertinent, additional facts will be set forth below. Appellant requests the trial court decision be reversed and the first lease terminated for breach of the implied covenants. In the alternative, Appellant requests a partial horizontal forfeiture of the first lease.

ASSIGNMENTS OF ERROR

"I. THE TRIAL COURT ERRED AS A MATTER OF LAW IN FAILING TO APPLY THE IMPLIED COVENANT TO CONDUCT ALL OPERATIONS THAT AFFECT APPELLANT'S ROYALTY INTEREST WITH REASONABLE CARE AND DUE DILIGENCE.
II. THE TRIAL COURT ERRED AS A MATTER OF LAW IN FAILING TO APPLY THE IMPLIED COVENANTS TO PROTECT THE LEASE FROM DRAINAGE, TO EXPLORE FURTHER AND REASONABLE DEVELOPMENT.
III. THE TRIAL JUDGE ERRED IN FINDING APPELLANT WAS REQUIRED TO GIVE 10 DAYS WRITTEN NOTICE TO APPELLEES OF FAILURE TO PAY SHUT IN PAYMENTS BEFORE FILING HIS COMPLAINT TO TERMINATE THE LEASE."

A. STANDARD OF REVIEW

{¶ 9} Here, the parties presented evidence in a bench trial in which the trial court sat as trier of fact. In ordinary civil actions with issues of fact, an appellant contesting the resolution of factual issues can argue the decision was contrary to the manifest weight of the evidence. Paulus v. Beck Energy Corp. , 2017-Ohio-5716, 94 N.E.3d 73, ¶ 16. If an underlying factual determination in a declaratory action was supported by competent credible evidence, it will not be reversed on appeal. See, e.g., Shemo v. Mayfield Hts., 88 Ohio St.3d 7, 10, 722 N.E.2d 1018 (2000), citing Seasons Coal Co. v. Cleveland , 10 Ohio St.3d 77, 461 N.E.2d 1273 (1984) (every reasonable presumption must be made in favor of the judgment and findings of fact); Erie Ins. Group v. Fisher, 15 Ohio St.3d 380, 383-384, 474 N.E.2d 320 (1984), citing C.E. Morris Co. v. Foley Construction Co., 54 Ohio St.2d 279, 376 N.E.2d 578 (1978), syllabus (judgments supported by competent, credible evidence going to the material elements of the case will not be disturbed as being against the manifest weight of the evidence).

{¶ 10} Weight of the evidence concerns the inclination of the greater amount of credible evidence offered at trial to support one side of the issue over the other; it relates to persuasion and involves the effect of the evidence in inducing belief. Paulus, supra, at ¶ 17 ; Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, 972 N.E.2d 517, ¶ 12, 19 (applying Thompkins to civil cases), citing State v. Thompkins, 78 Ohio St.3d 380, 678 N.E.2d 541 (1997). In conducting a manifest weight of the evidence review, the reviewing court is to weigh the evidence and all reasonable inferences to be drawn therefrom, consider the credibility of witnesses, and determine whether in resolving evidentiary conflicts, the fact-finder clearly lost its way and created such a manifest miscarriage of justice that the judgment must be reversed. See Thompkins, 78 Ohio St.3d at 387, 678 N.E.2d 541.

{¶ 11} "In weighing the evidence, the court of appeals must always be mindful of the presumption in favor of the finder of fact." Paulus, supra, at ¶ 18. Finally, if an appellate court finds the judgment rendered after a civil bench trial was contrary to the manifest weight of the evidence (and does not find any other prejudicial error in the briefed assignments of error), the appellate court can either weigh the evidence and render the judgment the trial court should have rendered or remand the case to the trial court for further proceedings. App.R. 12(C)(1).

B. LEGAL ANALYSIS

1. Did the trial court err as a matter of law in failing to apply the implied covenant to conduct all operations that affect Appellant's royalty interest with reasonable care and due diligence?

{¶ 12} "Since the 1800s, courts have recognized the existence of implied covenants in oil and gas leases." Alford v. Collins-McGregor, 4th Dist. Washington No. 16CA9, 2016-Ohio-5082, 2016 WL 3981034, at ¶ 15 (Appeal accepted for review, 148 Ohio St.3d 1425, 71 N.E.3d 297 (Table), 2017-Ohio-905 ), quoting, Yoder v. Artex Oil Co., 5th Dist. Guernsey No. 14CA4, 2014-Ohio-5130, 2014 WL 6467477, ¶ 45, citing Hall, The Application of Oil & Gas Lease Implied Covenants in Shale Plays: Old Meets New, 32 Energy & Min.L.Inst. "[A]n implied covenant can only be construed in a lease if there are no express provisions to the contrary," and "[w]here the lease specifies that no implied covenant shall be read into the agreement, an implied covenant to develop * * * cannot be imposed." Bohlen v. Anadarko, 2014-Ohio-5819, 26 N.E.3d 1176 (4th Dist.), at ¶ 32. See Huppv.Beck Energy, Corp., 2014-Ohio-4255, 20 N.E.3d 732, at ¶ 115, and cases cited therein. As Appellees have not directed us to express language in the parties' lease disclaiming implied covenants, we proceed to analyze the facts and circumstances of this case, in light of the evidence the parties presented at trial.

{¶ 13} In his brief, Appellant argues that, based on his observation and examination, the well at issue was not operated with reasonable care and due diligence in order to maximize gas production. The trial court construed the central issue for his determination as whether there had been continuous production in paying quantities. In Bohlen v. Anadarko, supra, at ¶ 28, we discussed the term "paying quantities" as follows:

"The term 'paying quantities,' when used in the habendum clause of an oil and gas lease, has been construed by the weight of authority to mean 'quantities of oil or gas sufficient to yield a profit, even small, to the lessee over operating expenses, even though the drilling costs, or equipping costs, are not recovered, and even though the undertaking as a whole may thus result in a loss.' " Blausey v. Stein, 61 Ohio St.2d 264, 265-266, 400 N.E.2d 408 (1980), quoting Annotation; Gardner v. Oxford Oil, 2013-Ohio-5885, 7 N.E.3d 510, ¶ 37 (7th Dist.). We have previously held that "[s]uch language indicates it is for lessee to determine if a profit is being generated above the amount of operating expenses. The amount of royalties paid has no relevancy as to whether a well is actually 'producing in a paying quantity.' " Siley v. Remmele , 4th Dist. Washington No. 86 CA 6, 1987 WL 7585, *3. * * * "[T]he construction of the phrase 'paying quantities' must be from the standpoint of the lessee and [its] 'good faith judgment' that production is in paying quantities must prevail." Hupp, 2014-Ohio-4255, 20 N.E.3d 732, at ¶ 103, quoting Cotton [v. Upham Gas Co.], 1987 WL 8741, at *1 ; see also Litton v. Geisler, 80 Ohio App. 491, 496, 76 N.E.2d 741 (4th Dist.1945) * * *."

{¶ 14} At trial, Appellant testified he became involved in the drilling of oil and gas wells when he was a teenager. By his twenties, he was engaged in work including well completion, casings, cement placement, well logging, perforating, and fracking. Appellant was hired by Hocking State College to teach oil and gas well drilling and production. He actually utilized a working rotary rig on the campus of the college, physically drilling wells with student help, as well as classroom teaching. Appellant testified he had instructed the drilling and completion of wells in seminars. His experience with deep wells is in Ohio, Texas, Oklahoma, and Kansas, dating back to the mid-1970's.

{¶ 15} The trial court accepted Appellant as a qualified expert witness pursuant to Evid.R. 702 in the field of drilling and completing oil and gas wells. Appellant introduced several photographs of the well that was drilled pursuant to the first lease, the Bartlett-Fagg well. He provided opinions as to what the photographs represented. On appeal, Appellant directs our attention to the following exhibits:

Appellant's Exhibit 11-a drip tank
Appellant's Exhibit 12-a condenser tank
Appellant's Exhibit 13-a main valve coming out of the wellhead
Appellant's Exhibit 14-a conductor pipe

{¶ 16} Appellant testified Exhibits 11, 12, and 13 were photographs of the well taken by him at Thanksgiving, 2013. Regarding Exhibit 11, Appellant testified that any gas flowing out of the pipe would be flowing into the atmosphere:

"It looks like it shows a drip tank. There's a rise, a one inch steel riser pipe it looks, coming out of that with open valves, going in and out, and the pipe coming up has nothing on it. It's just open to the air. The other valves are open, which would tell me that any gas coming into that would be flowing out of that orifice. * * * And if you look at the other valves, there's three you can see closely, they're all open, in the open position."

{¶ 17} Regarding Exhibit 12, Appellant testified the photograph depicted additional plumbing that was open to the atmosphere. Appellant stated:

"There's a-another-a condenser tank, another valve. The top valve in the center of the photo is clearly in the open position, and you can follow the piping over to the meter and then out of the meter and through an open pipe on the other side."

Appellant further explained that any gas being produced by the well would come out of the open place. He further described the absence of a separator at the site: "Well, gas and oil, you would have a separator there on the site. * * * To separate any oil from gas or fluids that come up out of the well." When asked whether at the time the photograph was taken, "If there was any gas being produced, this would show it's not connected to a line, is that right?" Appellant responded: "It doesn't appear that way to me."

{¶ 18} Appellant also discussed Exhibit 13 as follows:

"The main valve, coming out of the wellhead, the four-and-a-half inch casing, to a two inch swedge, (sic) there's a valve there that's clearly closed and the handle's been removed. And also, right next to it, on the discharge side, there's another two inch ball valve and the handle's been removed and it's in the off and closed position. * * * No gas can come out of the well, with those valves closed."

{¶ 19} To further support his contentions, Appellant submitted Exhibit 14, a photograph of the well drilled on the first lease, taken in September 2016. Appellant testified as follows:

"I'd like to point out the eight-and-five-eighths surface casing, which is visible above-just above the conductor pipe, is rusted almost completely through. Heavy corrosion there that will eventually turn into an environmental problem if it's not addressed."

{¶ 20} Appellant concluded his testimony, indicating that from the year 2000 to the date he filed his complaint in 2014, the condition of the wells was as his testimony provided and his photographs depicted.

{¶ 21} At trial, Appellees' countered Appellant's evidence with the testimony of John Schneider, a petroleum engineer for Appellee Stonebridge. Schneider's work for Stonebridge is in engineering and field operations. He is in charge of pipeline and production operations.

{¶ 22} Schneider testified he studied petroleum engineering at Marietta College and holds a degree. He has worked as a petroleum engineer for over 20 years, except during a "down-turn" in the industry between 1987 through 1994. Schneider owns 21 of his own wells and has "hands on" experience. The trial court accepted Schneider as an expert in drilling, recompleting wells, setting up production facilities, and maintaining wells and pipelines.

{¶ 23} Generally, Schneider testified as to the operational status of the wells at issue. He testified he was familiar with both free-flowing wells. The Bartlett-Fagg well produces from the Devonian Shale (Ohio Shale). The wells are "a short walk" apart. Schneider identified Appellees' Exhibit H, a service record of routine maintenance work performed on the Bartlett-Fagg deep well. He testified to his knowledge, it produced only gas, not oil. He also identified Appellees' Exhibit I, a service record for the shallow well. That record indicated typical day-to-day maintenance.

{¶ 24} Schneider testified both wells flowed through a combined meter, known as a lease meter. The wells eventually moved upstream into a gathering system to a sales point. He testified the deep well is a "pretty decent producer." Nothing in the documentation or other evidence suggested to him that the well had not been in production for the last 5-6 years or had not been selling gas for 5-6 years.

{¶ 25} Eddy Biehl also testified on behalf of Appellees. He is employed by Stonebridge as a manager and serves as custodian of their records, including records acquired from previous companies. Biehl was also qualified as an expert in the gas and oil industry, and specifically in production operations.

{¶ 26} Biehl's education and experience were also extensive. Biehl testified he is a geologist and has worked as a pumper, worked on a rig, and he has supervised drilling completions and productions. Biehl holds a bachelor's degree from Harvard in geological sciences with a major in economic geology. Biehl also serves on various local, state, and national organizations, in committee and board positions, developing and promoting better safety measures in the oil and gas industry. Biehl is often called upon as a consultant to offer perspective on the industry in Appalachia. He has served on the Ohio Oil and Gas Association and was appointed by Ohio's governor in the late 1980's to the Oil and Gas Regulatory Review Commissions. He has presented for the Department of Energy in Washington D.C.

{¶ 27} Biehl testified at one time, there was a separate meter for the deep well. When Columbia Gas, who had a previous interest in the wells, filed bankruptcy, the meter was shut-off. As Schneider had testified, Biehl also explained the Bartlett-Fagg deep well was tied into the same branch of the gathering line as the shallow well.

{¶ 28} Biehl opined, to a reasonable degree of scientific certainty, that the deep well had economically produced during the entire time of operation. He further testified there is a whole range of production methods and an operator determines what is best, based on the actual well. Biehl's testimony conflicted with Appellant's, as to the need for an apparatus called a pump jack. Appellant had testified there was no pump jack on either well, which caused him speculation as to whether oil could be produced. However, Biehl testified there was nothing to justify installing a pump jack. Biehl explained here, the prior production method actually reduced the amount of production. Therefore, Stonebridge removed the pump jack and actually improved the well performance.

{¶ 29} Biehl further testified that the well produced in paying quantities and had done so the entire time Stonebridge operated it. Based upon his review of prior records, the well had also produced in paying quantities prior to that time. Biehl testified he had analyzed state records as to production levels for similar shale wells as to the Bartlett-Fagg well. He testified the Bartlett-Fagg well was in the upper half of performance for similar Devonian Shale wells in the State of Ohio.

{¶ 30} On cross-examination, Biehl admitted he had never done an analysis of the income on the deep well versus the cost of maintaining the well. Biehl was also asked about work done on the well in October 2016, approximately 3 weeks prior to trial. Biehl explained that when he reviewed Appellant's sworn affidavit that the well was full of water, he became concerned and wanted to verify the status of the well. In doing so, he learned the well was not full of water. However, while the wellhead was torn apart, he went ahead and re-plumbed it and installed flow meters on it in order to visually check it more easily. He testified the work done had no effect on well production.

{¶ 31} Appellees argue the evidence presented supported the trial court's findings of lack of breach of the implied covenants. We agree. The trial court found:

"The Plaintiff is concerned about the lack of certain production fixtures at these well sites. In fact, these are solely gas wells and do not produce oil. When Columbia Gas went bankrupt to get out from under these leases and similar leases on other wells, the Defendant tied these two wells together and then fed the gas into one of the Defendant's pipelines. The Defendant's pipeline has a compressor on its line so the gas from these and other low pressure wells can flow freely into its line. This compressor reduces the line pressure. The wells are metered where they go into the line, not at the well head.
The Defendants' records show that maintenance has been performed on these wells. Both of the Defendants' witnesses have extensive education, experience and training in all aspects of the oil and gas industry. They belong to numerous professional organizations. As noted above, these are free flowing wells. They are tied into each other. There is old plumbing on the wells that has never been removed. Since the Columbia bankruptcy they have flowed through one meter. The Defendants checked the corporate records prior to purchasing these wells and those records showed continuous production. The State of Ohio's records are incomplete. Some records have been lost and some were disposed of because they blocked a fire exit. These wells are in the top 50% of the Defendant's wells in production and profitability. They cost little to operate."

{¶ 32} In his brief, Appellant also asserts there was no economic benefit to him from the two wells. At trial, Appellant offered Defendant's Exhibit M, a composite of copies of returned royalty checks. Essentially, Appellant testified the wells had never been profitable in any way. He denied receiving royalties from the Appellees in 16 years. However, he acknowledged his mother, who died in 2008, may have received royalties.

{¶ 33} At trial, Appellees also disputed Appellant's assertion regarding the royalty payments, pointing to evidence of payment and Appellant's correspondence with Appellees to insure payment after Appellant's mother's death. On cross-examination, Appellant was confronted with several exhibits compiled by Appellees: F, G, and J. Appellant identified and acknowledged:

1) Exhibit F, a 2008 letter from him to Jennifer Duty, an employee of Stonebridge. The letter advised Stonebridge to send royalty checks "if there are checks" to his mother to avoid "check endorsement complications";
2) Exhibit G, correspondence to Jennifer Duty, advising that his mother had died and providing a death certificate; and,
3) Exhibit J, a group of documents of correspondence to Stonebridge, including a tax form he signed. He acknowledged the purpose of the tax form was "probably for taxes on production."

{¶ 34} However, after identifying the documents, Appellant continued to maintain he did not remember receiving royalty checks from Stonebridge and did not remember giving his attorney royalty checks to return to Stonebridge, although it could have happened.

{¶ 35} Biehl provided additional testimony as to the royalty issue. Biehl identified Appellees' Exhibit M, a letter from Appellant in September 2013 returning 6 royalty checks for production and royalties off the Bartlett-Fagg deep well. Biehl testified Stonebridge had mailed royalty checks to Appellant from 2010 until the ones returned in 2013. He testified quite a number of checks were sent and all but one were cashed. Biehl also identified Appellees' Exhibit E, a request of change of payee from the estate of Laura Bartlett to Appellant in 2010.

{¶ 36} Appellees argue the record was sufficient to support a finding that Appellant derived economic benefit from the wells. We agree. On this issue, the trial court found:

"The Plaintiff asserted in his testimony in his case in chief that he had not received royalty checks in the last 16 years. This testimony was not supported in other testimony given in this case. * * * In fact, the Plaintiff has no knowledge of what monies his mother got under these leases. When his father died he had all checks sent to his mother, including those for his interest in these leases. * * * There are gaps in the Plaintiff's knowledge of past production and royalty payments. He admits he doesn't know what was and wasn't paid to his mother."

{¶ 37} In conclusion, the trial court heard conflicting evidence and found that the well at issue was in production and in proper repair. The trial court also agreed that Appellant derived an economic benefit from the well. We are mindful of the presumption in favor of the finder of fact. In particular, we observe the trial court's comment regarding credibility of the witnesses:

"In the Defendant's final cross examination of the Plaintiff, the Plaintiff admitted that * * * he believed that the testimony on the Defendant's operations manager, Mr. John Schneider, a petroleum engineer, was truthful. The Plaintiff also admitted at trial that the affidavits he submitted in support of his Motion for Summary Judgment in this action were not correct."

{¶ 38} For the foregoing reasons, we find competent credible evidence supports the trial court's judgment. We do not find the fact-finder clearly lost its way or created a manifest miscarriage of justice necessitating reversal of the judgment. As such, we overrule the first assignment of error and affirm the judgment of the trial court.

2. Did the trial court err as a matter of law in failing to apply the implied covenants to protect the lease from drainage, to explore further and reasonable development?

{¶ 39} "The most commonly recognized implied covenants are * * * the covenant to reasonably develop, the covenant of further exploration, the covenant to protect against drainage, * * *." Collins-McGregor,supra, at ¶ 15, quoting Hall , supra. The Supreme Court of Ohio "has long adhered to the principle that absent express provisions to the contrary, a mineral lease includes an implied covenant to reasonably develop the land." Ionno v. Glen-Gery Corp., 2 Ohio St.3d 131, 132, 443 N.E.2d 504 (1983). Forfeiture of an oil and gas lease may be an appropriate remedy, under limited circumstances, for a breach of an implied covenant. Hoop v. Kimble, 7th Dist. Harrison No. 14 HA 9, 2015-Ohio-2110, 2015 WL 3489020, ¶ 15.

{¶ 40} While Appellant has set forth the implied covenant to protect from drainage, there was conflicting testimony, as set forth above, regarding this issue. Appellant has failed to develop this argument. Appellant's argument hereunder has focused on the implied covenants to explore further and to reasonably develop. We begin by consideration of the applicable law cited by Appellant.

{¶ 41} In his brief, Appellant cites various cases in which courts have found forfeiture of a lease to be the appropriate remedy. Coffinberry v. The Sun Oil Co., 68 Ohio St. 488, 67 N.E. 1069 (1903) (Cancellation of the undrilled portion of the premises can be granted if the lessee has failed to drill further and develop or test the undrilled portion of the lease); Beer v. Griffith, 61 Ohio St.2d 119, 399 N.E.2d 1227 (1980) (Breach of an implied covenant can forfeit part of a lease if damages are inadequate); Core v. Samurai, 2015-Ohio-5437, 55 N.E.3d 449 (7th Dist.) (Where no drilling activity for 22 years on 414 acres of a 515 acre lease, court found lessee had breached the implied covenant to reasonably develop.) Appellant argues the lease covered 113 acres and only one well was drilled, on the acreage no longer owned by him. Appellant also argues he is not even entitled to royalties from the well. Appellant concludes that forfeiture or cancellation of the lease is compelling, in order to do justice.

{¶ 42} In response, Appellees point out Appellant has neither, in writing or verbally, complained about the lack of development of his property nor requested further development. Notably, Appellees interpret Appellant's argument herein as an attempt to compel partial horizontal forfeiture of the deep rights. Appellees point to Appellant's testimony that he has made an attempt to sever the "deep rights," and to lease the "deep" horizons, ignoring the clear precedent of the Collins-McGregor decision, supra . Regarding partial horizontal forfeiture of Appellant's lease, the trial court's decision spoke to the authority of the Collins-McGregor decision as follows:

"There are two leases involved in this case. At some point in time part of the surface of the subject tract was sold with the mineral rights on that part. There has been one well drilled pursuant to each lease. These wells are close in proximity. Both well heads are physically on the land that was severed and are not on the Plaintiff's land. However, his land is subject to the aforesaid leases. Both of these leases are in their secondary terms. The issue for this Court is whether there has been continuous production in paying quantities. The Plaintiff now owns 86.357 acres of both the original leased tract of 113 acres on the first lease and 116 acres on the second lease. He seeks cancellation of the leases only as to the property he owns. The well on the first lease is a shallow well and was drilled to a depth of 4,011 feet and the well and the second lease is simply referred to as a "shallow well."
The shallow well that was drilled pursuant to the second lease is not at issue in this case. The Defendant seeks either a forfeiture of the first lease with the deep well or a partial horizontal forfeiture of that lease. Ohio law does not permit partial horizontal lease forfeitures. Alford v. Collins-McGregor Operating Co., et al., 16CA9, Fourth District Court of Appeals for Washington County, Ohio (7/15/16)."

{¶ 43} In Collins-McGregor, as Appellant points out, we observed: "[w]here legal remedies are inadequate, forfeiture or cancellation of an oil and gas lease, in whole or in part, is an appropriate remedy for a lessee's violation of an implied covenant." Beer at paragraph four of the syllabus; see also Core v. Samurai Corp., 2015-Ohio-5437, 55 N.E.3d 449, ¶ 14 (7th Dist.). Consequently, depending on the facts and circumstances, the remedy of partial forfeiture of an oil and gas lease may be an appropriate remedy for the breach of an implied covenant. Collins-McGregor, supra, at ¶17.

{¶ 44} In Collins-McGregor, we observed that none of the cases cited by the landowners addressed the availability of partial forfeiture as a remedy for horizontal, as opposed to vertical, property. And the landowners' action in Collins-McGregor expressly sought relief declaring that the depths below the Gordon Sand formation were unencumbered by the oil and gas lease because of the lessees' breach of the implied covenants to reasonably explore and develop that horizontal portion of the leasehold. In Collins-McGregor, we relied upon an earlier decision of our own district, Marshall v. Beekay Co., 2015-Ohio-238, 27 N.E.3d 1 (4th Dist.).

{¶ 45} In Marshall, supra, the landowners sought the partial horizontal termination of the deep rights of oil and gas leases based on the lessees' failure to produce oil or gas in areas below the Germantown Sand formation, notwithstanding the continued production of 15 shallow wells. Based upon several cases, including Popa v. CNX Gas Co., LLC, N.D. Ohio No. 4:14CV143, 2014 WL 3749415 (July 20, 2014), and Clark v. Wolfcale, 5th Dist. Ashland No. CA-648, 1977 WL 201058 (June 2, 1977), we held there was "no authority" to support a partial forfeiture of the deep, i.e., horizontal, rights of the leasehold. Marshall , supra , at ¶ 21. Importantly, we further held that the deep-rights lessees did not breach the implied covenant to reasonably develop the property because "there was no duty to further develop as long as gas and oil were being found in paying quantities" in the shallow part of the leasehold. Id. at ¶ 23.

{¶ 46} In Collins-McGregor, we also looked to the decision in Clark , wherein the Fifth District Court of Appeals rejected landowners' attempt to declare an oil and gas lease abandoned horizontally below the Berea Sands formation. The Clark court determined that Ohio law had not recognized this type of partial forfeiture or abandonment, stating:

"What this appeal boils down to is an in genius [sic] attempt to find a way to get out from under an old oil and gas lease which in the light of changed circumstances respecting the price of oil is now economically disadvantageous' [sic] to the land owner. However ingenuously [sic] this argument has been developed and how resourcefully it has been researched and how strenuously it has been urged, it is totally without support in Ohio law and this court declines to blaze the trail." Id. at *3.

{¶ 47} In Collins-McGregor, we found the Marshall decision to be directly applicable. As in Marshall, the Collins-McGregor lessees' continuous production of oil and gas in paying quantities in the shallow area of the leasehold held the depths below that formation. In Marshall, we further observed at ¶ 22:

"The landowners cite no Ohio case, and offer no persuasive out-of-state authority, for modifying our current precedent to permit the requested partial horizontal forfeiture of oil and gas leases. Our own limited legal research reveals that this is a complex, evolving issue with no easy answer. See Burford, Legal Issues Involving Private Rights in Appalachia, 12 E.Min.L.Found. Section 21.04 (1991)."

{¶ 48} In this case, Appellant does seem to ignore his own testimony regarding his request for partial horizontal forfeiture of the lease. Appellant testified that "a couple different companies" approached him regarding the right to deep lease. He later testified he was approached by "three or four different companies on the phone that called me," but he did not recall the names of persons or companies he may have talked to.

{¶ 49} In Collins-McGregor, we found current precedent did not recognize the availability of partial horizontal forfeiture of oil and gas rights in Ohio, and an absence of authority to the contrary. Furthermore, we are mindful of the importance of the facts and circumstances of each case. The cases Appellant cites in his brief may be distinguished in that they either involved a finding that implied covenants had been breached, or a finding that the subject wells had failed to produce in paying quantities.

{¶ 50} As previously discussed, we have found competent, credible evidence to support the trial court's judgment that the well at issue was producing in paying quantities. As such, we also agree with the trial court's reliance upon our decision in Collins-McGregor. Accordingly, we find no merit to Appellant's second assignment of error. It is hereby overruled.

3. Did the trial judge err in finding Appellant was required to give 10 days' written notice to Appellees of failure to pay shut in payments before filing his complaint to terminate the lease?

{¶ 51} Ordinarily, the third assignment of error challenging the trial court's finding that Appellant was required to give 10 days' written notice to Appellees of failure to pay shut in payments before filing his complaint, would be a threshold issue which we would find dispositive. However, the thrust of the trial court's decision in favor of Appellees was that Appellant failed to prove the well at issue was non-producing. The trial court's finding that Appellant failed to provide written notice was "an additional basis," for dismissal of Appellant's complaint.

{¶ 52} The notice requirement arises from certain language in Paragraph 3 of the parties' lease agreement. Interpretation of a written contract is a matter of law requiring de novo review. Alford v. Collins-McGregor Operating Co.,supra, at ¶ 11 ; Arnott v. Arnott , 132 Ohio St.3d 401, 2012-Ohio-3208, 972 N.E.2d 586, ¶ 14, quoting Saunders v. Mortensen , 101 Ohio St.3d 86, 2004-Ohio-24, 801 N.E.2d 452. Our role is to ascertain and give effect to the intent of the parties, which is presumed to lie in the contract language. Arnott, at ¶ 14. In our context, "[t]he rights and remedies of the parties to an oil or gas lease must be determined by the terms of the written instrument" and "[s]uch leases are contracts, and the terms of the contract with the law applicable to such terms must govern the rights and remedies of the parties." Collins-McGregor,supra, at ¶ 12, quoting Harris v. Ohio Oil Co., 57 Ohio St. 118, 129, 48 N.E. 502 (1897) ; Bohlen, supra , at ¶13.

{¶ 53} Here, unfortunately, Paragraph 3 containing the shut in clause is extremely difficult to read. The parties appear to agree that the language of the shut in clause provides that if the lessor has not been receiving payment for non-production, lessor has to provide written notice by registered mail, 10 days prior to filing suit. Appellant argues that he was not obligated to give the required notice because there is no evidence in the record indicating a lack of transmission facilities requiring Appellees to make shut in payments. Appellees point to Appellant's admission that he demanded no payments of any kind, despite evidence that he corresponded with Appellees frequently over other issues.

{¶ 54} The trial court found:

"Additionally, the lease at question (the deep well) contains a provision that the lessor (i.e. the Plaintiff) make a demand for delay or shut in payments if the lessor objects to an issue of payment. The Plaintiff offered no evidence that such a demand was ever made."

{¶ 55} Appellant admitted he never gave written notice. The trial court found the well at issue was in its secondary term and was producing in paying quantities. Given the trial court's findings that Appellant's lease was not forfeited for lack of production, the notice provision applied. And, Appellant admitted he did not provide notice. Therefore, the trial court did not err in its finding that Appellant failed to give requisite notice prior to filing his complaint. Accordingly, we find no merit to Appellant's third assignment of error and it is hereby overruled. As such, we affirm the judgment of the trial court.

JUDGMENT AFFIRMED.

Hoover, J.: Concurs in Judgment and Opinion.

Harsha, J.: Concurs in Judgment Only.

      Numerous other parties and entities were named as party-defendants in the trial court proceedings, by virtue of having an interest in the royalty payments. None of the additional party-defendants filed answers or appeared in the underlying proceedings.

      Biehl identified Defendant's Exhibit N, a production graph for the Bartlett-Fagg No. 1 well. The graph was based upon reported production in the field, maintained on a weekly basis, to show well performance. The graph was based upon the records of the Stonebridge Biehl personally maintained.

      Our review of the transcript and testimony indicates the well on the first lease, the Bartlett-Fagg well, was repeatedly referenced as a deep well. It appears the trial court may have simply misspoken, in light of the court's reference later in the entry as to "forfeiture of the lease with the deep well."

      In Collins-McGregor, we cited Beer, wherein the Supreme Court of Ohio affirmed the partial forfeiture of an oil and gas lease for a lessee operating only one well on a 150-acre leasehold because of a breach of the implied covenant to reasonably develop the land. The Supreme Court held that the lessee's breach forfeited all but the 40-acre tract associated with its producing well. In light of significant further efforts necessary to develop the resources and the amount of unexploited acreage, the trial court reasoned the lessee's financial and operating difficulties would render a mere damage award inadequate; thus "forfeiture of lessee's interest is warranted in order to assure the development of the land and the protection of lessor's interests." See Beer, supra, at 61 Ohio St.2d at 122, 399 N.E.2d 1227.

      Williams, Oil and Gas Law, Vol. 8 Manual of Terms, defines a shut in well as a producing well that is closed down. See Gelb. v.Santa Fe Drilling Co., 4th Dist. Washington No. 83X3, 1984 WL 4285, (Mar. 30, 1984), *2.


author: ABELE, J.

text:
    STATE of Ohio, Plaintiff-Appellee, v. Kenneth S. STORMS, Jr., Defendant-Appellant.
    No. 16CA18
    Court of Appeals of Ohio, Fourth District, Gallia County.
    DATE JOURNALIZED: November 15, 2017
    Timothy P. Gleeson, Logan, Ohio, for appellant.
    Adam R. Salisbury, Gallipolis City Solicitor, Gallipolis, Ohio, for appellee.
    DECISION AND JUDGMENT ENTRY
   ABELE, J.

{¶ 1} This is an appeal from a Gallipolis Municipal Court judgment that ordered Kenneth S. Storms, Jr., defendant below and appellant herein, to pay $10,961.23 in restitution to the Ohio Department of Natural Resources (ODNR). Appellant assigns the following error for review:

ASSIGNMENT OF ERROR:
"THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY FINDING RESTITUTION WAS MANDATORY PURSUANT TO R.C. 1531.201."

{¶ 2} On December 9, 2015, appellant left a voicemail for Wildlife Officer Roy Rucker and stated that he had shot a deer on opening day of the 2015 deer gun season, but that he could not locate the deer. Officer Rucker returned the call and instructed appellant that, if he found the deer, he should tag it, check it in as he would normally, and enter the date and time into the ODNR system. Officer Rucker also asked appellant to let him know when he had found and registered the deer so that Rucker could note in the system the reason for the late registration (because the deer had not been timely located).

{¶ 3} On December 27, 2015, appellant contacted Officer Rucker to inform him, per the officer's request, that he had found the deer and checked it in, as the officer had advised. However, when Officer Rucker logged onto appellant's ODNR customer account to comment about the circumstances of registering the deer outside the permitted time frame, Rucker noticed that appellant had purchased his hunting license and deer permit on December 2, 2015. Because appellant told Officer Rucker that he had shot the deer on the November 30, 2015 opening day, Rucker visited appellant's residence, confirmed the date of the shot, and issued two citations (1) hunting without a license in violation of R.C. 1533.10, and (2) hunting without a deer permit in violation of R.C. 1533.11, both fourth-degree misdemeanors. Also at that time, Officer Rucker seized the deer's antlers as evidence.

{¶ 4} After a bench trial, the trial court found appellant guilty of both charges. The state then requested restitution and asserted that, in accordance with R.C. 1531.201, the statutory scoring formula required $10,961.23 for restitution, which the wildlife officer testified is a "trophy class deer." At the sentencing hearing, the court ordered that (1) $10,961.23 in restitution be paid to the ODNR, (2) the antlers be forfeited to ODNR to give to the Gallia County Conservation Club for educational use, and (3) appellant's hunting license be suspended until restitution is paid per R.C. 1531.201. This appeal followed.

{¶ 5} In his sole assignment of error, appellant asserts that the trial court erred by finding that the ordered amount of restitution is mandatory under R.C. 1531.201. Appellant argues that the state advocated, and the trial court agreed, that R.C. 1531.201 controlled the issue of restitution. Appellant claims, however, that (1) R.C. 1533.99 should apply and that provision gives a trial court discretion to order restitution, (2) R.C. 2929.28(B) allows courts to consider an offender's ability to pay a financial sanction, and (3) his trial counsel provided ineffective assistance.

{¶ 6} According to R.C. 1531.02, "[t]he ownership and title to all wild animals in this state, not legally confined or held by private ownership legally acquired, is in the state, which holds title in trust for the benefit of all the people." Here, appellant violated R.C. 1533.10, which provides: "* * * no person shall hunt any wild bird or wild quadruped without a hunting license," and R.C. 1533.11, which provides: "* * * no person shall hunt deer on lands of another without first obtaining an annual deer permit." Both violations are fourth-degree misdemeanors. R.C. 1533.99(F).

{¶ 7} The trial court applied R.C. 1531.201(B), which provides: "The chief of the division of wildlife or the chief's authorized representative may bring a civil action to recover possession of or the restitution value of any wild animal held, taken, bought, sold, or possessed in violation of this chapter or Chapter 1533 of the Revised Code or any division rule against any person who held, took, bought, sold, or possessed the wild animal. The minimum restitution value to the state for wild animals that are unlawfully held, taken, bought, sold, or possessed shall be established in division rule." (Emphasis added.) R.C. 1531.201(C)(1) provides: "In addition to any restitution value established in division rule, a person who is convicted of a violation of this chapter or Chapter 1533 of the Revised Code or a division rule governing the holding, taking, buying, sale, or possession of an antlered white-tailed deer with a gross score of more than one hundred twenty-five inches also shall pay an additional restitution value that is calculated using the following formula: Additional restitution value = ((gross score - 100)2 x $1.65) (Emphasis added.)" Section (C)(2) details the measurement of the deer's antlers to form the gross score. Finally, R.C. 1531.201(D) provides: "Upon conviction of holding, taking, buying, selling, or possessing a wild animal in violation of this chapter, Chapter 1533 of the Revised Code, or a division rule, the chief shall revoke until payment of the restitution value is made such hunting license, fur taker permit, deer permit, wild turkey permit, wetlands habitat stamp, and fishing license issued to that person under this chapter or Chapter 1533 of the Revised Code. No fee paid for such a license, permit, or stamp shall be returned to the person." (Emphasis added.)

{¶ 8} Appellant argues that R.C. 1531.99 should control. Under R.C. 1533.99(G), "A court that imposes sentence for a violation of any section of this chapter governing the holding, taking, or possession of wild animals may require the person who is convicted of or pleads guilty to the offense, in addition to any fine, term of imprisonment, seizure, and forfeiture imposed, to make restitution for the minimum value of the wild animal or animals illegally held, taken, or possessed as established under section 1531.201 of the Revised Code." Appellant argues that the use of the term "may" in R.C. 1533.99(G) provides trial courts with the authority and discretion to order restitution in an amount calculated pursuant to R.C. 1531.201, but does not require a court to order restitution. Appellant further argues that his view is supported by a revision of this code section in 2007 Am.H.B. 238. In this legislation, the change to Division (G) of R.C. 1533.99 replaced the word "shall" with "may." The Bill Analysis explains: "Authorizes a court, rather than requires a court as in former law, upon the conviction or a plea of guilty by a person for the illegal holding, taking, buying, selling, or possession of a wild animal, to require the person to make restitution for the minimum value of the animal." Ohio Bill Analysis, 2007 H.B. 238.

{¶ 9} We begin our review by observing that R.C. 1531.201 contains two separate subsections for calculating restitution values for wild animals. The first section, R.C. 1531.201(B), applies to "any wild animal," while R.C. 1531.201(C)(1) applies only to antlered white-tailed deer. Only R.C. 1531.201(B) involves "minimum value" restitution. This subsection allows ODNR to establish a schedule to assign a minimum value for "any wild animal." In comparison, R.C. 1531.201(C)(1)mandates that restitution for antlered white-tailed deer with a gross score of more than 125 inches "shall pay" an "additional restitution value." R.C. 1533.99 does not address the "additional restitution value" mandated by R.C. 1531.201(C)(1). Thus, R.C. 1533.99 does not appear to negate or conflict with R.C. 1531.201(C)(1).

{¶ 10} Generally, the interpretation of a statute involves a purely legal question. Thus, an appellate court will conduct a de novo review of a trial court's judgment interpreting a statute and will afford no deference whatsoever to a trial court's interpretation. Oliver v. Johnson , 4th Dist. Jackson No. 06CA16, 2007-Ohio-5880, 2007 WL 3227668, ¶ 5. We must first look to the plain language of the statute itself to determine the legislative intent. Hubbell v. Xenia , 115 Ohio St.3d 77, 2007-Ohio-4839, 873 N.E.2d 878, ¶ 11. We apply a statute as it is written when its meaning is unambiguous and definite. Id. , citing Portage Cty. Bd. of Commrs. v. Akron , 109 Ohio St.3d 106, 2006-Ohio-954, 846 N.E.2d 478, ¶ 52. When a statute is subject to various interpretations, a court may invoke rules of statutory construction to arrive at legislative intent. R.C. 1.49 ; Cline v. Ohio Bur. of Motor Vehicles , 61 Ohio St.3d 93, 573 N.E.2d 77 (1991) ; Carter v. Youngstown , 146 Ohio St. 203, 65 N.E.2d 63 (1946), paragraph one of the syllabus.

{¶ 11} In construing a statute, a court's paramount concern is the legislative body's intent in enacting the provision. State ex rel. Russell v. Thornton , 111 Ohio St.3d 409, 2006-Ohio-5858, 856 N.E.2d 966, ¶ 11. The court must look to the statute itself to determine legislative intent, and, if such intent is clearly expressed, the statute may not be restricted, constricted, qualified, narrowed, enlarged or abridged, and significance and effect should, if possible, be accorded to every word, phrase, sentence and part of an act. State ex rel. McGraw v. Gorman , 17 Ohio St.3d 147, 149, 478 N.E.2d 770 (1985). To determine legislative intent, a court must read words and phrases in context and construe them in accordance with the words of grammar and common usage. Russell at ¶ 11. In construing the terms of a particular statute, words must be given their usual, normal and customary meanings. Proctor v. Kardassilaris , 115 Ohio St.3d 71, 2007-Ohio-4838, 873 N.E.2d 872, ¶ 12. Moreover, related statutory provisions must be read in pari materia. Maxfield v. Brooks , 110 Ohio St. 566, 144 N.E. 725 (1924), paragraph two of the syllabus. In reading statutes in pari materia, courts must give a reasonable construction that provides the proper effect to each. All provisions bearing upon the same subject matter should be construed harmoniously, unless they are irreconcilable. Couts v. Rose , 152 Ohio St. 458, 90 N.E.2d 139 (1950) ; Chesapeake Exploration, LLC v. Oil & Gas Comm. , 135 Ohio St.3d 204, 2013-Ohio-224, 985 N.E.2d 480.

{¶ 12} Recently, the Supreme Court of Ohio decided Risner v. Ohio Dept. of Natural Resources , 144 Ohio St.3d 278, 2015-Ohio-3731, 42 N.E.3d 718. In Risner, the court considered whether ODNR has the authority to seek, pursuant to R.C. 1531.201(B), the recovery of the civil restitution value of an antlered white-tailed deer taken in violation of R.C. Chapter 1533 when ODNR had also seized parts of the deer as evidence during the criminal investigation, and those parts had been subsequently forfeited to ODNR in the criminal action. The court held that "reading the statute as a whole, R.C. 1531.201 operates by its clear terms as follows: upon a conviction in violation of R.C. Chapter 1531 or 1533 or division rule involving a white-tailed deer with a gross score of more than 125 inches, ODNR is required to recover civil restitution from the offender, see R.C. 1531.201(C), and revoke the offender's hunting license until payment of the restitution value is made, see 1531.201(D). ODNR has no discretion with respect to either civil restitution or revocation of the license . In the event the offender does not pay the restitution value in order to regain the hunting license, R.C. 1531.201(B) permits ODNR to file a civil action to recover the civil restitution value even though ODNR had seized the deer meat and antlers as evidence in the criminal investigation and was awarded possession of that evidence as a result of a conviction for a violation of R.C. Chapter 1531 or 1533 or division rule." Id. at ¶ 19 (Emphasis added).

{¶ 13} The Risner court also stated "[i]t is evident from these excerpts that the legislative intent in enacting R.C. 1531.201 is to preserve Ohio's wildlife for legitimate hunters and naturalists and to provide a significant deterrent to those individuals who seek to harm the state's aesthetic, economic, and recreational interests." Id. at ¶ 23. "Therefore, we hold that R.C. 1531.201(C) mandates that ODNR recover the civil restitution value of an antlered white-tailed deer with a gross score of more than 125 inches from an offender who has been convicted of a violation of R.C. Chapter 1531 or 1533 or division rule. We further hold that R.C. 1531.201(B) permits ODNR to file a civil action to recover the civil restitution even though it had seized the deer's meat and antlers as evidence during the criminal investigation and was awarded possession of that evidence as a result of a conviction for a violation of R.C. Chapter 1531 or 1533 or division rule." Id. at ¶ 31.

{¶ 14} Thus, because Risner indicates that R.C. 1531.201(C) mandates that restitution is required pursuant to the statutory formula, whereas R.C. 1533.99 refers only to restitution "minimum value[s]" as discretionary, we conclude that the trial court in the case sub judice correctly determined that the restitution value in R.C. 1531.201(C)(1) is mandatory. At this juncture, we also wish to emphasize that as an intermediate appellate court, we are obligated to follow all Ohio Supreme Court decisions, regardless of whether individual judges may personally agree with those decisions. The same holds true for enactments from the Ohio General Assembly. Although individual members of this court may view the amount of mandated restitution in this case as excessive, we do not possess the authority to reach a contrary result.

{¶ 15} In addition to the statutory construction argument, appellant also contends that he received ineffective assistance of counsel because counsel failed to provide the trial court with the legal authority within R.C. 1533.99(G) and R.C. 2929.28(B) to advocate that the trial court did have discretion over restitution.

{¶ 16} In Strickland v. Washington (1984), 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674, the United States Supreme Court set forth the standard for judging ineffective-assistance claims. "When a convicted defendant complains of the ineffectiveness of counsel's assistance, the defendant must show that counsel's representation fell below an objective standard of reasonableness." Id. at 687-688, 104 S.Ct. at 2064, 80 L.Ed.2d at 693. Further, "[t]he defendant must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome." Id. at 694, 104 S.Ct. at 2068, 80 L.Ed.2d at 698. See also State v. Bradley , 42 Ohio St.3d 136, 538 N.E.2d 373 (1989), paragraphs two and three of the syllabus.

{¶ 17} The Supreme Court of Ohio instructed in State v. Sanders , 94 Ohio St.3d 150, 761 N.E.2d 18 (2002), " Strickland charges us to '[apply] a heavy measure of deference to counsel's judgments,' 466 U.S. at 691, 104 S.Ct. at 2066, 80 L.Ed.2d at 695, and to 'indulge a strong presumption that counsel's conduct falls within the wide range of reasonable professional assistance,' Id. at 689, 104 S.Ct. at 2065, 80 L.Ed.2d at 694. * * * [W]e note that courts must 'judge the reasonableness of counsel's challenged conduct on the facts of the particular case, viewed as of the time of counsel's conduct.' Strickland , 466 U.S. at 690, 104 S.Ct. at 2066, 80 L.Ed.2d at 695." Sanders at ¶ 3-5. Reversal of a conviction for ineffective assistance of counsel requires that the defendant show, first, that counsel's performance was deficient and, second, that the deficient performance prejudiced the defense so as to deprive the defendant of a fair trial. State v. Drummond , 111 Ohio St.3d 14, 2006-Ohio-5084, 854 N.E.2d 1038, ¶ 205. To establish prejudice, an appellant must show a reasonable probability exists that, but for the alleged errors, the result of the proceeding would have been different. State v. Conway (2006), 109 Ohio St.3d 412, 2006-Ohio-2815, 848 N.E.2d 810, ¶ 95, citing Strickland v. Washington (1984), 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 ; State v. Bradley (1989), 42 Ohio St.3d 136, 143, 538 N.E.2d 373. In the case at bar, we believe, as we pointed out above, that the trial court properly ordered the mandated restitution in accordance with R.C. 1531.201(C). Thus, we do not agree with appellant's assertion that he received ineffective assistance from his trial counsel.

{¶ 18} Appellant further argues that the trial court failed to consider his ability to pay restitution. R.C. 2929.28(B) sets forth the types of financial sanctions that may be ordered in misdemeanor cases, including, inter alia, monetary fines, cost of confinement and restitution. The statute also provides that a court may determine an offender's ability to pay a financial sanction, and can consider imposing a community service sanction in lieu of a financial sanction. However, in view of the mandatory nature of the restitution sanction in the instant case, the trial court had no obligation to consider appellant's ability to pay the ordered amount of restitution. Nonetheless, we note that the trial court did consider appellant's ability to pay and the record in this case so demonstrates. The October 6, 2016 entry regarding the R.C. 1533.11 violation indicated that appellant is able to pay the financial sanctions/costs, and indicated a payment plan. The October 6, 2016 entry regarding the R.C. 1533.10 violation indicated similarly that appellant was able to pay the financial sanctions/costs and noted a payment plan, and also noted a monthly income of $365-$500 and that appellant is residing with his father. Thus, the record in this case demonstrates that the trial court did, in fact, consider appellant's ability to pay. See State v. Daniels , 2015-Ohio-5348, 45 N.E.3d 266, ¶ 39-40. Once again, we believe that appellant has not persuaded this court that his counsel provided him ineffective assistance of counsel.

{¶ 19} Accordingly, based upon the foregoing reasons, we overrule appellant's assignment of error and affirm the trial court's judgment.

JUDGMENT AFFIRMED.

Harsha, J. & McFarland, J.: Concur in Judgment & Opinion