author: HALL, P.J.

text:
    U.S. BANK, N.A., Plaintiff-Appellee v. COURTHOUSE CROSSING, ACQUISITIONS, LLC, et al., Defendants-Appellants
    No. 27331
    Court of Appeals of Ohio, Second District, Montgomery County.
    Rendered on December 22, 2017
    JAMES P. BOTTI, Atty. Reg. No. 0023051 and JARED M. KLAUS, Atty. Reg. No. 0087780, 41 S. High Street, Suite 3100, Columbus, Ohio 43215, TAMI H. KIRBY, Atty. Reg. No. 0078473, 1 S. Main Street, Suite 1600, Dayton, Ohio 45402, Attorneys for Plaintiff-Appellee
    CHARLES PAWLUKIEWICZ, Atty. Reg. No. 11499, ROBERT KRACHT, Atty. Reg. 25574, and NICHOLAS OLESKI, Atty. Reg. No. 0095808, 101 W. Prospect Avenue, Suite 1800, Cleveland, OH 44115, Attorneys for Defendants-Appellants
   HALL, P.J.

{¶ 1} Courthouse Crossing Acquisitions, LLC and Schon C.C. Holding, LLC appeal from an order of the trial court appointing a receiver in this multi-tenant commercial property foreclosure action. Finding no error, we affirm.

I. Background

{¶ 2} In 2006, Courthouse and Schon (which we will refer to collectively as Courthouse, unless otherwise noted) borrowed $12.7 million from Deutsche Bank Mortgage Capital, LLC. The promissory note matured on March 1, 2016, at which time it became due and payable in full. Securing the promissory note is an open-ended mortgage and an assignment of leases and rents on the office and retail building at 10 North Ludlow Street in downtown Dayton. After a string of assignments, U.S. Bank came to own and hold the note, mortgage, and assignment of leases and rents.

{¶ 3} The maturation date came, and Courthouse failed to pay the roughly $11 million due on the promissory note. In October 2016, U.S. Bank filed a foreclosure action against Courthouse, seeking foreclosure of the mortgage and to collect rents and other income. At the same time, U.S. Bank moved for the appointment of a receiver, supporting its motion with an affidavit from a manager at the loan's special servicer. A hearing on the matter of a receiver was scheduled for November 4.

{¶ 4} The day before the hearing, Courthouse filed a motion to dismiss under Civ.R. 12(B)(1), (4), and (5). Courthouse argued that U.S. Bank was not the holder of the note and mortgage when it filed the complaint, so it lacks standing to bring this action. Courthouse also argued that U.S. Bank did not have the capacity to sue in Ohio because it failed to register as a business trust with the Ohio Secretary of State. Courthouse also argued that U.S. Bank had failed to serve Schon and quibbled with the method that it used to serve Courthouse. Lastly, Courthouse argued generally that service had not been perfected on Courthouse or Schon.

{¶ 5} The hearing was held on the scheduled date. Although neither Courthouse nor Schon had been formally served with process, both parties were represented at the hearing by counsel. Only arguments were presented at the hearing-no additional evidence. The trial court sustained U.S. Bank's motion for the appointment of a receiver and appointed the receiver requested by the bank.

{¶ 6} On November 8, 2016, Courthouse appealed from the order appointing the receiver.

{¶ 7} On January 9, 2017, the trial court overruled Courthouse's motion to dismiss.

II. Analysis

{¶ 8} Courthouse assigns four errors to the trial court:

I. The Trial Court Erred as a Matter of Law and Abused Its Discretion By Appointing a Receiver Before the Court Obtained Jurisdiction Over Appellants.
II. The Trial Court Erred as a Matter of Law When It Found That Appellee Has an Interest in the Subject Note and Mortgage.
III. The Trial Court Erred as a Matter of Law in Finding that Appellee Has Capacity to Sue in an Ohio [Court] as It Failed to Register with the Ohio Secretary of State.
IV. The Trial Court Erred as a Matter of Law and Abused Its Discretion When It Appointed a Receiver Without Clear and Convincing Evidence of the Need for One.

A. Dispositive defenses

{¶ 9} The issues raised in the first three assignments of error do not concern the receivership proceeding, but rather the main foreclosure action. The first assignment of error argues that the trial court lacked personal jurisdiction over Courthouse and Schon because neither had yet been served with process when the court appointed the receiver. The second assignment of error argues that U.S. Bank lacks standing. And the third assignment of error argues that even if U.S. Bank has standing, it lacks the capacity to sue in Ohio because it is a business trust governed by R.C. Chapter 1746 and failed to comply with that chapter's registration requirements. These are dispositive defenses to the main action. Because these issues do not concern the receivership proceeding, they are not properly before us.

{¶ 10} The appointment of a receiver is an ancillary proceeding. Community First Bank & Trust v. Dafoe , 108 Ohio St.3d 472, 2006-Ohio-1503, 844 N.E.2d 825, ¶ 26. It is a "separate procedure[ ] tied to a main action, acting in furtherance of the main action, but with [its] own li[fe]." Id. See also State v. Muncie , 91 Ohio St.3d 440, 449, 746 N.E.2d 1092 (2001) (saying that the appointment of a receiver "aids the principal proceeding-the underlying litigation-for the receiver conserves the interests of litigants with respect to property that is in the custody of the court during the course of that principal litigation"). Indeed, the order that Courthouse appeals here only appoints a receiver and authorizes the receiver to take certain actions. The issues raised in the first three assignments of error-jurisdiction, service, standing, capacity to sue-do not directly concern either the receiver's appointment or the scope of his powers. Rather, as we said, the issues concern dispositive defenses to the main foreclosure action.

{¶ 11} But dispositive defenses to the main action are not properly asserted in a receivership proceeding, or any other ancillary proceeding. The proper place for these types of defenses is in a motion to dismiss, which is where Courthouse in fact raised them. But the denial of a motion to dismiss is not immediately appealable. Polikoff v. Adam , 67 Ohio St.3d 100, 103, 616 N.E.2d 213 (1993). If we were to review these dispositive defenses in this appeal of an order in an ancillary proceeding, we would be creating a shortcut to appellate review of issues that would otherwise have to wait for review until after a final judgment is entered.

{¶ 12} We see no good reason to create such a shortcut. "A denial of a motion to dismiss is not a final appealable order because the party can seek a remedy on appeal after a final judgment is entered." Cantie v. Hillside Plaza , 8th Dist. Cuyahoga No. 99850, 2014-Ohio-822, 2014 WL 888426, ¶ 24. See also Haskins v. Haskins , 104 Ohio App.3d 58, 61, 660 N.E.2d 1260 (2d Dist.1995) (saying that "[g]enerally, an order denying a motion to dismiss is not a final order because the reasons for which the dismissal was sought continue undisturbed to the final judgment, permitting prosecution of the error, if any, on the final judgment"), citing Polikoff . Concerning jurisdiction, the Ohio Supreme Court has said that "[p]arties that believe an Ohio court has wrongly asserted jurisdiction over them have a right of appeal." Natl. City Commercial Capital Corp. v. AAAA At Your Serv., Inc., 114 Ohio St.3d 82, 2007-Ohio-2942, 868 N.E.2d 663, ¶ 10, citing State ex rel. Pearson v. Moore , 48 Ohio St.3d 37, 38, 548 N.E.2d 945 (1990) ("Absent a patent and unambiguous lack of jurisdiction, a court having general jurisdiction of the subject matter of an action has authority to determine its own jurisdiction. A party challenging the court's jurisdiction has an adequate remedy at law via appeal from the court's holding that it has jurisdiction."). We have precluded the immediate appeal of a motion challenging a trial court's jurisdiction, because "the issue sought to be raised on appeal can, as a practical matter, await determination until an appeal following the final disposition of the case in the trial court." Lonigro v. Lonigro , 55 Ohio App.3d 30, 31, 561 N.E.2d 573 (2d Dist.1989). The Eighth District has done the same, concluding that "[t]he rule that the denial of a motion to dismiss is not a final order applies with equal force to motions that challenge the subject matter jurisdiction of a court." Matteo v. Principe , 8th Dist. Cuyahoga No. 92894, 2010-Ohio-1204, 2010 WL 1101658, ¶ 21, citing id.

{¶ 13} Here, Courthouse raised the issues of standing, jurisdiction, service, and capacity in their motion to dismiss-which the trial court has now overruled. These issues can be resolved in other appeals between these parties, to the extent raised therein.

{¶ 14} The first, second, and third assignments of error are overruled.

B. The appointment of a receiver

{¶ 15} The fourth assignment of error challenges the appointment of a receiver. "The decision to appoint a receiver is within the trial court's sound discretion. * * * Absent an abuse of discretion, an appellate court will not reverse a decision on whether to appoint a receiver." U.S. Bank, N.A. v. 2900 Presidential Drive, LLC , 2d Dist. Greene No. 2013 CA 60, 2014-Ohio-1121, 2014 WL 1339643, ¶ 12.

{¶ 16} The trial court's discretion, though, is limited by the applicable statute. R.C. 2735.01 governs the appointment of receivers and relevantly provides that a receiver may be appointed in these cases:

(2) In an action by a mortgagee, for the foreclosure of the mortgagee's mortgage and sale of the mortgaged property, when it appears that the mortgaged property is in danger of being lost, removed, materially injured, diminished in value, or squandered, or that the condition of the mortgage has not been performed, and either of the following applies:
* * *
(b) The mortgagor has consented in writing to the appointment of a receiver.
(3) To enforce a contractual assignment of rents and leases;

R.C. 2735.01(A). And "the movant must demonstrate the need for a receiver by clear and convincing evidence." (Citation omitted.) U.S. Bank at ¶ 11.

{¶ 17} U.S. Bank argues that it is entitled to the appointment of a receiver because Courthouse is in default of the mortgage and, in the mortgage, they contend, Courthouse consented to the appointment of a receiver. U.S. Bank also argues that a receiver should be appointed because Courthouse has collected, but failed to turn over, rents and profits and has failed to pay real estate taxes and assessments.

{¶ 18} U.S. Bank supports its motion for a receiver with an affidavit from Dmitry Sulsky, an Asset Manager of LNR Partners, LLC, which is the special servicer of the loan and the attorney-in-fact for U.S. Bank. Sulsky states that his responsibilities include oversight of loan servicing and that he has personal knowledge of the books and records of LNR Partners and U.S. Bank as to the loan at issue here. Sulsky states that U.S. Bank is the owner and holder of the promissory note, mortgage, and assignment of rents executed by Courthouse. By its terms, the note matured on March 1, 2016, and required full payment at that time. Courthouse defaulted by failing to pay. Sulsky says that they also defaulted by failing to pay real estate taxes and assessments, requiring U.S. Bank (or its predecessor in interest) to pay them. Courthouse also defaulted, says Sulsky, by collecting but not turning over rents and profits. Sulsky states that "[a] receiver is necessary to preserve and protect the Project [the real estate and associated personal property] during the pendency of this case, and particularly, to collect the Rents from the Project so that they are not dissipated during the pendency of the case." As of July 1, 2016, says the affidavit, Courthouse owes a little over $11.6 million in all. Sulsky also authenticates the copies of the promissory note, mortgage, and assignment of rents attached to the complaint.

{¶ 19} Courthouse dismisses the affidavit, saying that it "largely regurgitates the same wording and phrasing from Appellee's Complaint." Such an affidavit, they argue, is insufficient to establish the need for a receiver. We disagree.

{¶ 20} The evidence is sufficient to justify the appointment of a receiver under R.C. 2735.01(A)(2). Sulsky's affidavit establishes that the mortgaged property "is in danger of being lost, removed, materially injured, diminished in value, or squandered," R.C. 2735.01(A)(2), and that Courthouse defaulted on the mortgage. R.C. 2735.01(A)(2)(b) provides that a receiver is appropriate when "[t]he mortgagor has consented in writing to the appointment of a receiver." Section 13.1(d) of the mortgage provides that in the event of default the mortgagee may "[a]pply to a court for appointment of a receiver, trustee, liquidator or conservator of the Mortgaged Property without notice to Mortgagor." Courthouse argues that all they agreed to here was ex parte application for the appointment of a receiver, not appointment . But we are of the opinion that this is a distinction without a difference. By agreeing to ex parte application, Courthouse effectively consented to the appointment of a receiver. The evidence is also sufficient to justify the appointment of a receiver under R.C. 2735.01(A)(3), "[t]o enforce a contractual assignment of rents and leases." Sulsky's affidavit establishes that Courthouse collected rents but failed to turn them over.

{¶ 21} In these circumstances, we believe that the appointment of a receiver is reasonable, and we have held so before. In U.S. Bank, N.A. v. 2900 Presidential Drive LLC , 2014-Ohio-1121, 2014 WL 1339643, the bank in the foreclosure action supported its motion for a receiver with an affidavit from the loan's special servicer. The affidavit stated that the borrowers had defaulted on their note and mortgage by failing to pay and had defaulted by failing to turn over rents. The affidavit authenticated the loan documents attached to the complaint. In the mortgage, the borrowers agreed to the appointment of a receiver upon default. We held that the trial court did not abuse its discretion by appointing a receiver. We note too that the Eighth District has held that a trial court properly appointed a receiver over mortgaged property where the defaulting borrower had only failed to pay real-estate taxes. Bankers Natl. Life Ins. Co. v. 514 Prospect Ave. Co. , 8th Dist. Cuyahoga No. 41220, 1980 WL 354922 (Jun. 26, 1980).

{¶ 22} Courthouse also argues that the trial court erred by relying on a local rule rather than the receivership statute, R.C. 2735.01. In its oral ruling at the hearing, the trial court cited Mont. Co. C.P.R. 2.29(B), which governs the appointment of receivers in a real-estate foreclosure in Montgomery County common pleas courts. But in its written appointment order, the court cites R.C. 2735.01, though it does not identify the section under which it made the appointment. Citing the local rule or not identifying a particular statutory section does not render the appointment an abuse of discretion. Because we have found that U.S. Bank presented sufficient evidence justifying a receiver's appointment, there is no reason to disturb the trial court's appointment. Compare Whitaker v. Paru Selvam, L.L.C. , 2d Dist. Montgomery No. 26555, 2015-Ohio-3166, 2015 WL 4709076, ¶ 33 (affirming the appointment of a receiver based on the evidence even though the trial court did not cite a subsection of the receivership statute); State ex rel. Petro v. Gold , 166 Ohio App.3d 371, 2006-Ohio-943, 850 N.E.2d 1218 (10th Dist.) (affirming the appointment of a receiver based on the evidence, where the trial court found that the receivership statute supported the appointment of a receiver but did not identify an applicable subsection).

{¶ 23} The fourth assignment of error is overruled.

III. Conclusion

{¶ 24} We have overruled each of the assignments of error presented. The trial court's order appointing a receiver is therefore affirmed.

DONOVAN, J. and WELBAUM, J., concur.


source: Caselaw Access Project

author: TUCKER, J.

license: Public Domain

text:
    STATE of Ohio, Plaintiff-Appellee v. William T. BROWN, Defendant-Appellant
    Nos. 26945 26947 26948 27249 27250 27251 27419 27420 27421
    Court of Appeals of Ohio, Second District, Montgomery County.
    Rendered on the day of December 22, 2017.
    MATHIAS H. HECK, JR., by HEATHER N. JANS, Atty. Reg. No. 0084470, Assistant Prosecuting Attorney, Montgomery County Prosecutor's Office, Appellate Division, Montgomery County Courts Building, 301 West Third Street, Dayton, Ohio 45422, Attorney for Plaintiff-Appellee
    ROBERT ALAN BRENNER, Atty. Reg. No. 0067714, 120 West Second Street, Suite 706, Dayton, Ohio 45402, Attorney for Defendant-Appellant
   TUCKER, J.

{¶ 1} Defendant-appellant, William T. Brown, appeals from his convictions in Case No. 2014 CR 01637, Case No. 2014 CR 01721 and Case No. 2014 CR 03632, in each of which he pleaded guilty to two or more charges in lieu of a trial. Brown argues that the trial court erred by accepting his pleas, and again by overruling his subsequent motions to withdraw pursuant to Crim.R. 32.1, because he did not enter the pleas intelligently, knowingly and voluntarily. Additionally, Brown argues that the court erred by ordering him to pay costs, and in Case No. 2014 CR 03632, to pay restitution. We find that Brown's arguments lack merit, and therefore, we affirm the trial court.

I. Facts and Procedural History

{¶ 2} In Case No. 2014 CR 01637, a Montgomery County grand jury issued an indictment against Brown on May 29, 2014, charging him with one count of aggravated robbery in violation of R.C. 2911.01(A)(1), plus a firearm specification; one count of theft in violation of R.C. 2913.02(A)(1), plus a firearm specification; and one count of having a weapon while under disability in violation of R.C. 2923.13(A)(2). Brown pleaded guilty to the charges of aggravated robbery and having a weapon while under disability. Tr. of Plea Hr'g 4.

{¶ 3} In Case No. 2014 CR 01721, a Montgomery County grand jury issued an indictment against Brown on June 12, 2014, charging him with one count of aggravated robbery in violation of R.C. 2911.01(A)(1), plus a firearm specification; and one count of having a weapon while under disability in violation of R.C. 2923.13(A)(2). Brown pleaded guilty as charged. Tr. of Plea Hr'g 4.

{¶ 4} In Case No. 2014 CR 03632, a Montgomery County grand jury issued an indictment against Brown on December 5, 2014, charging him with two counts of felony murder in violation of R.C. 2903.02(B), plus firearm specifications; one count of aggravated robbery in violation of R.C. 2911.01(A)(1), plus a firearm specification; one count of felonious assault in violation of R.C. 2903.11(A)(2), plus a firearm specification; one count of discharge of a firearm on or near prohibited premises in violation of R.C. 2923.162(A)(3), plus a firearm specification; and one count of having a weapon while under disability in violation of R.C. 2923.13(A)(2). Brown pleaded guilty to one count of felony murder, with the attached firearm specification, as well as to the charges of aggravated robbery and having a weapon while under disability. Tr. of Plea Hr'g at 3-4.

{¶ 5} At his final pretrial hearing on October 9, 2015, Brown and the State informed the court that they had reached a plea agreement in the foregoing three cases. Id. at 3-6. The court discussed the agreement with Brown as required by Crim.R. 11(C)(2), and he formally entered his pleas into the record. Id. at 6-21.

{¶ 6} On October 21, 2015, Brown appeared for sentencing. Before the hearing began, Brown notified his counsel that he wanted to withdraw his pleas, at least in part on the basis of certain alleged deficiencies in counsel's performance. Id. at 23-24. Counsel informed the court, but the court nevertheless proceeded to sentence Brown because he had not yet filed a motion pursuant to Crim.R. 32.1. See id. at 24-26. The court sentenced Brown to an aggregate term of 24 years to life, in accord with his plea agreement. Id. at 6, 27 and 30. It also ordered him to pay costs, and in Case No. 2014 CR 03632, to pay restitution.

{¶ 7} On October 23, 2015, Brown filed motions to withdraw his pleas in all three cases, and his trial attorney sought leave to withdraw as counsel. In a pair of decisions entered on October 29, 2015, the court overruled Brown's motions, allowed his trial attorney to withdraw, and appointed substitute counsel. Brown then submitted a second series of motions to withdraw his pleas on November 17, 2015. The court held a hearing on December 7, 2015, and in a decision filed two days later, it again overruled Brown's motions to withdraw. In considering Brown's motions, the court applied "the pre-sentencing withdrawal standard" because it had been notified before sentencing that he wanted to withdraw his pleas. Decision Overruling Def.'s Mot. to Withdraw Guilty Plea 4, Dec. 22, 2016.

II. Analysis

{¶ 8} Assignment of Error Number One:

THE TRIAL COURT ERRED BY OVERRULING BROWN'S MOTION TO WITHDRAW HIS GUILTY PLEAS.

{¶ 9} In this assignment of error, Brown argues that he "had two legitimate and reasonable bases on which to withdraw his plea[s]." Appellant's Br. 7, Feb. 21, 2017. First, he faults his trial counsel for "not fully shar[ing] the discovery [materials produced by the State] with him," and second, he maintains that he did not understand a material term of his comprehensive plea agreement-the aggregate term of imprisonment to which he would be sentenced. Id. On the latter point, Brown contends that he believed "that he could be sentenced to a flat 20 year prison term even though his counsel, the State, and the judge all believed [that he] would be sentenced to a term of 24 years to life." Id. In response, the State argues that Brown had no valid reason for withdrawing his pleas, and that the trial court did not abuse its discretion by overruling Brown's motions to withdraw. See Appellee's Br. 13-17, May 9, 2017.

{¶ 10} A "presentence motion to withdraw a guilty plea should be freely and liberally granted," although "a defendant does not have an absolute right to withdraw a plea prior to sentencing." State v. Xie , 62 Ohio St.3d 521, 527, 584 N.E.2d 715 (1992). Instead, after conducting a hearing on the motion, the trial court must "determine whether [the defendant] has a reasonable and legitimate basis" for the withdrawal, rather than "[a] mere change of heart." Id. ; State v. Lambros , 44 Ohio App.3d 102, 103, 541 N.E.2d 632 (8th Dist.1988). Some of the factors that a trial court may weigh in considering a presentence motion to withdraw a plea are the following:

(1) whether the state will be prejudiced * * *, (2) the representation afforded to the defendant by counsel, (3) the extent of the Crim.R. 11 plea hearing, (4) the extent of the hearing on the motion to withdraw, (5) whether the trial court gave full and fair consideration to the motion, (6) whether the timing of the motion was reasonable, (7) the reasons for the motion, (8) whether the defendant understood the nature of the charges and potential sentences, [and] (9) whether the accused was perhaps not guilty or had a complete defense to the charge [or charges].

(Citations omitted.) State v. Cuthbertson , 139 Ohio App.3d 895, 898-899, 746 N.E.2d 197 (7th Dist.2000), citing State v. Thomas , 7th Dist. Mahoning Nos. 96 CA 223, 96 CA 225, 1998 WL 934645 (Dec. 17, 1998), and State v. Fish , 104 Ohio App.3d 236, 240, 661 N.E.2d 788 (1st Dist.1995) ; see also State v. Askew , 2d Dist. Montgomery No. 20110, 2005-Ohio-4026, 2005 WL 1846532, ¶ 10-11, quoting Cuthbertson , 139 Ohio App.3d at 898-899, 746 N.E.2d 197. Absent "an abuse of discretion on the part of the trial court," its decision on a presentence motion to withdraw "must be affirmed." Xie , 62 Ohio St.3d at 527, 584 N.E.2d 715 ; State v. Donaldson , 2d Dist. Greene No. 06 CA 110, 2007-Ohio-5756, 2007 WL 3121802, ¶ 6.

{¶ 11} A "trial court abuses its discretion when it makes a decision that is unreasonable, unconscionable, or arbitrary." State v. Darmond , 135 Ohio St.3d 343, 2013-Ohio-966, 986 N.E.2d 971, ¶ 34, citing State v. Adams , 62 Ohio St.2d 151, 157, 404 N.E.2d 144 (1980). Appellate review under this standard "is deferential and does not permit [the] appellate court to simply substitute its judgment for that of the trial court." Darmond , 2013-Ohio-966, 986 N.E.2d 971, ¶ 34, citing State v. Morris , 132 Ohio St.3d 337, 2012-Ohio-2407, 972 N.E.2d 528, ¶ 14. Hence, we will not usually find an "abuse of discretion in denying a pre-sentence motion to withdraw a guilty plea" in a case in which "(1) the [defendant] is represented by highly competent counsel, (2) the [defendant is] afforded a full hearing, pursuant to Crim.R. 11, before entering the plea, (3) * * * the [defendant] is given a complete and impartial hearing on the motion, and (4) the record reveals that the trial court gave full and fair consideration to the [defendant's] request." Donaldson , 2007-Ohio-5756, 2007 WL 3121802, ¶ 7, citing State v. Peterseim , 68 Ohio App.2d 211, 428 N.E.2d 863 (8th Dist.1980).

{¶ 12} In its evaluation of Brown's motion to withdraw, the trial court individually weighed eight of the factors listed in the Cuthbertson opinion as part of its analysis. Decision Overruling Def.'s Mot. to Withdraw Guilty Plea 4-15. It found that: (1) the State would be prejudiced were Brown allowed to withdraw his pleas, but not enough to justify overruling Brown's motion; (2) Brown received "competent legal counsel" at all relevant times; (3) Brown "was afforded a full and extensive hearing in accordance with Crim.R. 11"; (4) the hearing on the motion was "complete and impartial"; (5) the timing of the motion was reasonable; (6) the reasons Brown offered in support of withdrawal were "unpersuasive"; (7) Brown "understood the charges and penalties" associated with his plea agreement; and (8) the record of the case provided "no indication that [Brown] ha[d] a complete defense" to the charges against him. Id. at 5-15. Finding thus that only two of the eight factors favored Brown's position (i.e. the first and the fifth), the court overruled his motion. See id. at 16.

{¶ 13} Here, as noted, Brown directs his arguments to the second and seventh factors, contending that his trial counsel improperly withheld discovery materials from him and that he did not understand key provisions of his plea agreement with the State. Appellant's Br. 7. The record before us includes little evidentiary support for these contentions.

{¶ 14} Although Brown's trial counsel acknowledged that he did not provide Brown with copies of all discovery materials, counsel testified that he discussed the materials with Brown and refrained from providing copies only because the "majority of the discovery, [to his] understanding, was 'for counsel['s] eyes only.' " Tr. of Hr'g on Def.'s Mot. to Withdraw 21-23, Dec. 7, 2015. The trial court accepted counsel's account, which Brown's own testimony at least partly corroborates. See id. at 6-8.

{¶ 15} Regarding Brown's understanding of the terms of the plea agreement, the trial court determined that he "fully understood the nature of the charges, and [the] penalties [for] his offenses." Decision Overruling Def.'s Mot. to Withdraw Guilty Plea 15. Brown testified at the hearing on his motions to withdraw that, before he entered into the plea agreement, his counsel told him that "if [he] took the deal for 24 [to] life, the judge could still [sentence him to] 20 years flat." Tr. of Hr'g on Def.'s Mot. to Withdraw 5. Even standing alone, this testimony supports the trial court's determination-it demonstrates that despite hoping to be sentenced to 20 years without a life tail, Brown was nonetheless aware that he was entering into an agreement calling for a recommended sentence of 24 years to life. For that matter, he had the following exchange with the court during his plea hearing on October 9, 2015:

THE COURT: And if my math is correct, it looks like this is going to be a 24 year to [l]ife sentence. Is that your understanding?
BROWN: Yes, sir.

Tr. of Plea Hr'g 6.

{¶ 16} Given the deferential standard of review applicable to this appeal, we find no reason to disturb the trial court's determinations that Brown "was afforded competent legal counsel at the time of, and prior to, entering his guilty pleas" and that Brown "understood the charges and penalties" set forth in his plea agreement. Dec. Overruling Def.'s Mot. to Withdraw Guilty Plea 7 and 15. Furthermore, before he entered his pleas, Brown had a hearing as required by Crim.R. 11, during which the trial court advised him as required by Crim.R. 11(C)(2). Tr. of Plea Hr'g 5-14. Likewise, the court convened a hearing on Brown's motions to withdraw, and the court proceeded afterward to give full and fair consideration to Brown's request to withdraw his pleas. See generally Decision Overruling Def.'s Mot. to Withdraw Guilty Plea. We find, therefore, that the trial court did not abuse its discretion by denying Brown's request, and consequently, we overrule Brown's first assignment of error. See State v. Donaldson , 2d Dist. Greene No. 06 CA 110, 2007-Ohio-5756, 2007 WL 3121802, ¶ 7.

{¶ 17} Assignment of Error Number Two:

BROWN DID NOT WAIVE HIS RIGHT TO APPEAL KNOWINGLY AND VOLUNTARILY.

{¶ 18} In his second assignment of error, Brown argues that the "record does not demonstrate that [he] made a knowing and voluntary waiver of his right to appeal" because: (1) the plea forms make no "reference to a waiver of his right to appeal"; and (2) at his plea hearing, he "was never specifically asked, as a separate matter, if he waived" this right. Appellant's Br. 9. We find that Brown's argument lacks merit.

{¶ 19} At his plea hearing, the State read the agreement into the record, noting that as "part of [the] agreement, [Brown] would agree to waive all rights to appeal that may be waived by law and as indicated on the plea form[s]." (Emphasis added.) Tr. of Plea Hr'g 4. The trial court later verified that Brown understood as much:

THE COURT: Do you understand, sir, that a guilty plea, it is a complete admission of your guilt[,] and you're giving up your rights to appeal any pretrial rulings in all of these cases-
BROWN: Yes, sir.
THE COURT: -do you understand that?
BROWN: Yes, sir.

(Emphasis added.) Id. at 12-13. As the transcript of Brown's plea hearing indicates, Brown did not agree to a blanket waiver of his right to appeal, but instead, he agreed to waive his right to appeal only to the extent allowed "by law," which the court explained as a waiver of his right to appeal "any pretrial rulings" in Case Nos. 2014 CR 01637, 2014 CR 01721 and 2014 CR 03632.

{¶ 20} By "entering a voluntary guilty plea while represented by competent counsel, [a defendant] waive[s] his right to appeal all nonjurisdictional defects in prior stages of the proceedings." (Citation omitted.) State v. Guerra , 2d Dist. Miami No. 2015-CA-28, 2016-Ohio-5647, 2016 WL 4591377, ¶ 9 ; see also R.C. 2953.08(D)(1). Crim.R. 11(C)(2), moreover, "does not require [that] the trial court * * * inform a defendant that by pleading guilty," the defendant "is [thereby] waiving his * * * right to appeal a jointly-agreed sentence under R.C. 2953.08(D)(1)." As such, even if the court had not advised Brown that he would waive the right to appeal certain issues by pleading guilty, his plea agreement would remain valid and enforceable; by extension, the absence of this advice in the plea forms does not invalidate the agreement. Accordingly, we overrule Brown's second assignment of error.

{¶ 21} Assignment of Error Number Three:

BROWN'S PLEAS WERE NOT MADE KNOWINGLY, INTELLIGENTLY, AND VOLUNTARILY.

{¶ 22} In his third assignment of error, Brown reasons that because "he did not waive his right to appeal knowingly and voluntarily, [whereas] the State and [the court] believed his waiver of his right to appeal was part of the bargained for exchange, [he] could not have entered his pleas knowingly, intelligently and voluntarily." Appellant's Br. 10. As we have observed, however, Brown waived his right to appeal certain issues by operation of law when he entered into the plea agreement, and no warning to this effect was required by Crim.R. 11(C)(2). We find, then, that the waiver of Brown's right to appeal certain issues is irrelevant to the question of whether he entered into his plea agreement intelligently, knowingly and voluntarily. Brown's third assignment of error is overruled.

{¶ 23} Assignment of Error Number Four:

THE TRIAL COURT ERRED IN ORDERING BROWN TO PAY RESTITUTION IN CASE 2014 CR 03632.

{¶ 24} In his fourth assignment of error, Brown charges the trial court with "abus[ing] [its] discretion [by] imposing restitution in the amount of $5,598.14," without considering his ability to pay, as part of his sentence in Case No. 2014 CR 03632. Appellant's Br. 11. We find that the court did not err by ordering Brown to pay restitution.

{¶ 25} Pursuant to R.C. 2929.18(A)(1), a court "imposing a sentence upon an offender for a felony may sentence the offender to any financial sanction or combination of financial sanctions" authorized by law, including restitution "to the victim of the offender's crime or any survivor of the victim, in an amount based on the victim's economic loss." If the court decides to impose restitution, then

[it] may base the amount of restitution it orders on an amount recommended by the victim, the offender, a presentence investigation report, estimates or receipts indicating the cost of repairing or replacing property, and other information, provided that the amount the court orders as restitution shall not exceed the amount of the economic loss suffered by the victim as a direct and proximate result of the commission of the offense.

Id. R.C. 2929.19(B)(5), in addition, directs the court to "consider the offender's present and future ability to pay the amount of the sanction" before "imposing a financial sanction under [R.C.] 2929.18 * * *." On review of a trial court's imposition of restitution as part of a felony sentence, we apply the standard set forth in R.C. 2953.08(G)(2)(b), inquiring whether the imposition of restitution is clearly and convincingly contrary to law. State v. Marcum , 146 Ohio St.3d 516, 2016-Ohio-1002, 59 N.E.3d 1231, ¶ 7 and 10 ; State v. Becraft , 2017-Ohio-1464, 89 N.E.3d 218, ¶ 17 (2d Dist.).

{¶ 26} Brown pleaded guilty, among other things, to one count of felony murder in Case No. 2014 CR 03632. At his sentencing on October 21, 2015, the court informed him that it had "reviewed the presentence investigation report," and finding "that [he had] either the present or future ability to pay," ordered him to "pay restitution * * * for [the victim's] funeral expenses in the amount of $5,598.14." Id. at 31.

{¶ 27} Here, Brown argues that the court's restitution order in Case No. 2014 CR 03632 should be reversed because "there was nothing in the [presentence investigation] that indicates [he] will have the ability to pay [the amount ordered], and [because] his ability to pay was not discussed at [his] sentencing hearing." Appellant's Br. 11. Yet, R.C. 2929.18(A)(1) and 2929.19(B)(5) constrain the court's authority to order restitution in only two respects: first, the amount of restitution may "not exceed the amount of the economic loss suffered by the victim as a direct and proximate result of the commission of the offense"; and second, the court must "consider the offender's present and future ability to pay the amount of the sanction." Brown does not argue that the amount he has been ordered to pay in restitution exceeds the economic loss suffered by the victim's family, and the court indicated for the record that it had considered his ability to pay. See Tr. of Plea Hr'g 31.

{¶ 28} We find no evidence in the record of Case No. 2014 CR 03632 to suggest that the trial court's order of restitution is clearly and convincingly contrary to law. As a result, Brown's fourth assignment of error is overruled.

{¶ 29} Assignment of Error Number Five:

THE TRIAL COURT ERRED IN ORDERING TO [sic] PAY COURT COSTS.

{¶ 30} Brown contends in his final assignment of error that the trial court further "abused [its] discretion [by] overruling [his] motion to waive the imposition of court costs." Appellant's Br. 12. R.C. 2947.23(A)(1)(a) states that "[i]n all criminal cases, * * *, the judge or magistrate shall include in the sentence the costs of prosecution, * * *, and render a judgment against the defendant for such costs." (Emphasis added.) In State v. White , 103 Ohio St.3d 580, 2004-Ohio-5989, 817 N.E.2d 393, ¶ 8, the Ohio Supreme Court emphasized that R.C. 2947.23"does not prohibit a court from assessing costs against an indigent defendant; rather it requires [emphasis in original] a court to assess costs against all convicted defendants." Regardless of Brown's present or future ability to pay, the trial court cannot have erred by following an unequivocal statutory mandate, and consequently, Brown's fifth assignment of error is overruled.

III. Conclusion

{¶ 31} We find that Brown's assignments of error lack merit. Therefore, we affirm Brown's convictions in Case No. 2014 CR 01637, Case No. 2014 CR 01721 and Case No. 2014 CR 03632; the trial court's decision overruling Brown's motions to withdraw his pleas; and the trial court's decisions overruling Brown's motions for waiver of the imposition of financial sanctions and court costs.

HALL, P.J. and DONOVAN, J., concur.

      The termination entries in all three cases, particularly those in Case Nos. 2014 CR 01721 and 2014 CR 03632, appear to require additional amendment inasmuch as they do not appear to be entirely precise reflections of the terms of Brown's plea agreement as read into the record on October 9, 2015.

      All references in this opinion to the trial court's ruling on Brown's motions to withdraw relate to the trial court's decision of December 22, 2016. Brown filed his initial notices of appeal in this matter on December 9, 2015, the same day that the trial court entered its decision overruling Brown's second series of motions to withdraw; he eventually filed no fewer than twelve notices of appeal. We dismissed three of these on November 10, 2016. In our subsequent decision and entry of December 5, 2016, we sua sponte consolidated the remaining six appeals (Case Nos. CA 26945, CA 26947, CA 26948, CA 27249, CA 27250 and CA 27251), and remanded the cases "to the trial court to enter or re-enter decisions resolving the motions to withdraw Brown's guilty pleas." The trial court entered its decision of December 22, 2016 in compliance with our order, after which Brown filed three more notices of appeal (Case Nos. CA 27419, CA 27420 and CA 27421). On January 31, 2017 we sua sponte consolidated all nine referenced appeals.

      In our past decisions, we have omitted the fifth of these and referred to a renumbered list of eight factors. See , e.g. , State v. Donaldson , 2d Dist. Greene No. 06 CA 110, 2007-Ohio-5756, 2007 WL 3121802, ¶ 8-9 ; State v. Askew , 2d Dist. Montgomery No. 20110, 2005-Ohio-4026, 2005 WL 1846532, ¶ 10-11, citing State v. Cuthbertson , 139 Ohio App.3d 895, 898-899, 746 N.E.2d 197 (7th Dist.2000).

      See supra note 3. The trial court cited our decision in Donaldson , in which we cited our earlier decision in Askew . Decision Overruling Def.'s Mot. to Withdraw Guilty Plea 4.

      The State argues that Brown has waived all but plain error on this issue by failing to raise it before the trial court, though it acknowledges that Brown filed a presentence motion to waive financial sanctions. Appellee's Br. 22. By the State's argument, Brown did not raise the issue of restitution in his presentence motion because he requested only the waiver of " 'any fine[s] or court costs,' " as opposed to "restitution." Id. In the motion, Brown asked the court to "waive the imposition of any fine[s] or court costs due to [his] indigency and his present and future inability to pay financial sanctions * * *," adding that he expected that he would "be ordered to pay restitution." Def.'s Mot. to Waive the Imposition of Financial Sanctions 1-2, Oct. 12, 2015. Regardless of the imprecision with which Brown phrased his request for waiver, restitution would seem to be a "financial sanction," leading us to conclude that Brown's motion did constitute a request for waiver of all financial sanctions, including restitution. See , e.g. , State v. Thomas , 2d Dist. Montgomery No. 26907, 2017-Ohio-5501, 2017 WL 2729885, ¶ 39 (referring to "restitution" as a "financial sanction").


text:
    Donald V. HOGUE, et al., Plaintiffs-Appellants v. Koy L. WHITACRE, et al., Defendants-Appellees
    NO. 16 MO 0015
    Court of Appeals of Ohio, Seventh District, Monroe County.
    Dated: December 22, 2017
    Atty. Timothy B. Pettorini, Atty. Sara E. Fanning, Atty. J. Benjamin Fraifogl, Roetzel & Andress, LPA, 222 South Main Street, Suite 400, Akron, Ohio 44308, For Plaintiffs-Appellants
    Atty. Richard A. Yoss, Atty. Ryan M. Regel, Atty. Todd J. Abbott, Yoss Law Office, 112 North Main Street, Woodsfield, Ohio 43793, For Defendants-Appellees Koy L. Whitacre, KLJ, Inc., Buckeye Oil Co., Clearfork Oil Co., Whitacre Oil Co., and Whitacre Enterprises, Inc.
    Atty. Peter A Lusenhop, Atty. Steven A. Chang, Vorys, Sater, Seymour and Pease LLP, 52 East Gay Street, P.O. Box 1008, Columbus, Ohio 43216-1008, For Defendant-Appellee AR OHIO LLC
    Atty. Kevin L. Colosimo, Atty. Christopher W. Rogers, Frost Brown Todd LLC, Union Trust Building, 501 Grant Street, Suite 800, Pittsburgh, Pennsylvania 15219, For Defendant-Appellee American Energy-Utica Minerals, LLC
   JUDGES: Hon. Cheryl L. Waite, Hon. Mary DeGenaro, Hon. Carol Ann Robb

OPINION

WAITE, J.

{¶ 1} Appellants Donald V. and Julie A. Hogue appeal a November 17, 2016 decision of the Monroe County Common Pleas Court to grant summary judgment in favor of Appellees Roy L. Whitacre, K.L.J., Inc. ("KLJ"), Buckeye Oil Company ("Buckeye"), Clearfork Oil Company ("Clearfork"), Whitacre Oil Company ("Whitacre Oil"), Whitacre Enterprises, Inc. ("Whitacre Enterprises"), AR Ohio L.L.C. ("AR"), and American Energy. Appellants argue that the trial court erroneously determined that a well located on their property produced in paying quantities during a three-year time span. For the reasons provided, Appellants' arguments are without merit and the judgment of the trial court is affirmed.

Factual and Procedural History

{¶ 2} Appellants own 78.5 acres of land in Franklin Township, Monroe County. On January 16, 2006, Appellants entered into an oil and gas lease with Whitacre Enterprises. On July 7, 2006, a single well was drilled on the property. The well produced significant amounts of oil and gas for several years until construction began on a compression station used to produce gas from the well. The details are not clear from the record, but at some point KLJ, Buckeye, and Clearfork obtained an interest in the oil and gas rights.

{¶ 3} On June 2, 2011, Whitacre Enterprises, KLJ, Buckeye, Clearfork, and Whitacre Oil subleased the oil and gas rights to HG Energy. HG Energy then assigned the rights to Hall and Ross Resources. Hall and Ross Resources later merged with AR.

{¶ 4} All gas produced from Appellants' land was transported to a compression station through a pipeline called the "PPP line." The compression station is owned by Dominion Oil and Gas ("Dominion"). Sometime in 2014, Dominion informed Whitacre Enterprises that it was planning to construct a new compression station. In August of 2014, Dominion told Whitacre Enterprises that the compression station would be completed in thirty to forty days. However, Dominion did not begin construction until March of 2015 and the project was not completed until mid-September of 2015. Appellees were finally able to use the compression station in October of 2015. As a result of these issues, Whitacre Enterprises decided to construct a compression station on Appellants' property, which was completed in November of 2015.

{¶ 5} According to production records, Appellees profited by more than $1,000 each year from 2006 until 2012. In 2013, the year before the Whitacre Enterprises' construction began, Appellees received $687.01 in profits. In 2014 and 2015, the construction period, Appellees were left with a loss of -$328.95 and -$231.38. In the following two quarters after construction was completed, Appellees received $1,326.49 in profits.

{¶ 6} On July 13, 2015, Appellants filed a complaint against Appellees, collectively, seeking a declaratory judgment that the lease had terminated on its own terms due to the lack of production and seeking quiet title to Appellees' oil and gas rights. On September 2, 2016, the parties filed competing motions for summary judgment. On September 23, 2016, Appellants filed a motion to strike certain exhibits, however, the trial court did not rule on the motion. On October 7, 2016, Appellees filed a motion for leave to supplement or amend their response to Appellants' discovery. The court also failed to rule on this motion. On November 17, 2016, the trial court granted summary judgment in favor of Appellees. This timely appeal followed.

Summary Judgment

{¶ 7} An appellate court conducts a de novo review of a trial court's decision to grant summary judgment, using the same standards as the trial court set forth in Civ.R. 56(C). Grafton v. Ohio Edison Co. , 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). Before summary judgment can be granted, the trial court must determine that: (1) no genuine issue as to any material fact remains to be litigated, (2) the moving party is entitled to judgment as a matter of law, (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing the evidence most favorably in favor of the party against whom the motion for summary judgment is made, the conclusion is adverse to that party. Temple v. Wean United, Inc. , 50 Ohio St.2d 317, 327, 364 N.E.2d 267 (1977). Whether a fact is "material" depends on the substantive law of the claim being litigated. Hoyt, Inc. v. Gordon & Assoc., Inc. , 104 Ohio App.3d 598, 603, 662 N.E.2d 1088 (8th Dist.1995).

{¶ 8} "[T]he moving party bears the initial responsibility of informing the trial court of the basis for the motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of fact on a material element of the nonmoving party's claim." (Emphasis deleted.) Dresher v. Burt , 75 Ohio St.3d 280, 296, 662 N.E.2d 264 (1996). If the moving party carries its burden, the nonmoving party has a reciprocal burden of setting forth specific facts showing that there is a genuine issue for trial. Id. at 293, 662 N.E.2d 264. In other words, when presented with a properly supported motion for summary judgment, the nonmoving party must produce some evidence to suggest that a reasonable factfinder could rule in that party's favor. Brewer v. Cleveland Bd. of Edn. , 122 Ohio App.3d 378, 386, 701 N.E.2d 1023 (8th Dist.1997).

{¶ 9} The evidentiary materials to support a motion for summary judgment are listed in Civ.R. 56(C) and include the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact that have been filed in the case. In resolving the motion, the court views the evidence in a light most favorable to the nonmoving party. Temple , 50 Ohio St.2d at 327, 364 N.E.2d 267.

Exhibits B and C

{¶ 10} Much of the following analysis involves two exhibits attached to Appellees' motion for summary judgment, exhibits B and C. The exhibits are charts that summarize Appellees' expenses and profits for the relevant years and were prepared by an accountant, Lisa A. Jones. Appellants argue that these documents should not have been considered by the trial court as they amount to hearsay. Appellees respond by arguing that these exhibits are appropriate in summary judgment pursuant to Evid.R. 1006, because they represent summaries of voluminous records.

{¶ 11} On September 23, 2016, Appellants filed a motion to strike exhibits B and C. As noted by Appellants, the trial court did not rule on this motion. If a trial court has failed to rule on a motion at the time the case is disposed, an appellate court will presume that the motion was overruled. State v. Labiaux , 7th Dist. No. 16 HA 0016, 2017-Ohio-7760, 2017 WL 4220082, ¶ 9, Cherol v. Sieben Invests. , 7th Dist. No. 05 MA 112, 2006-Ohio-7048, 2006 WL 3849907, ¶ 18.

{¶ 12} A motion to strike evidence in a summary judgment motion is reviewed for an abuse of discretion. Miller v. J.B. Hunt Transport, Inc. , 10th Dist. No. 13AP-162, 2013-Ohio-3892, 2013 WL 4807036, ¶ 41, citing Ward v. Summa Health Sys. , 128 Ohio St.3d 212, 2010-Ohio-6275, 943 N.E.2d 514, ¶ 13 ; Bellamy v. Montgomery , 10th Dist. No. 11AP-1059, 2012-Ohio-4304, 2012 WL 4321160, ¶ 7.

{¶ 13} Pursuant to Evid.R. 1006,

The contents of voluminous writings, recordings, or photographs which cannot conveniently be examined in court may be presented in the form of a chart, summary, or calculation. The originals, or duplicates, shall be made available for examination or copying, or both, by other parties at a reasonable time and place. The court may order that they be produced in court.

{¶ 14} Exhibits B and C were designed as a condensation of a large number of documents related to Appellees' expenses and profits. Contrary to Appellants' assertion, each of the underlying documents were made available to Appellants along with exhibits B and C. See 9/2/16 Appellants' Motion for Summary Judgment, Exhs. 6-9.

{¶ 15} In their motion to strike exhibits B and C, Appellants complain that records for the years 2006 to 2010 and 2016 were not made available. However, Appellants have admitted that production and expense records were made available for the years 2012 to 2015, the only relevant years in this matter. Appellants have not explained why the absence of records from 2006 to 2010 and 2016 affected the trial court's ability to review the production records for the years which are relevant, 2012 through 2015.

{¶ 16} As the exhibits represent a summary of voluminous records and the originals have been made available to Appellants, Appellees complied with Evid.R. 1006. Thus, the exhibits are properly considered evidence in summary judgment. Accordingly, the trial court did not abuse its discretion in denying Appellants' motion to strike exhibits B and C.

ASSIGNMENT OF ERROR NO. 1

THE TRIAL COURT ERRED BY GRANTING SUMMARY JUDGMENT IN FAVOR OF DEFENDANTS-APPELLEES.

ASSIGNMENT OF ERROR NO. 2

THE TRIAL COURT ERRED BY FAILING TO GRANT SUMMARY JUDGMENT IN FAVOR OF PLAINTIFFS-APPELLANTS.

{¶ 17} Appellants argue that Appellees misrepresented the amount of expenses incurred in operating the well. For instance, Appellants argue that Appellees' expense report omits a $250 monthly fee owed to its managing company, Whitacre Store. Appellants also question an expense category titled "Operating: Direct Expense" and argue that Appellees have not defined this category. Appellants claim that Appellees improperly took credits for the removal of certain equipment and machines. Additionally, Appellants argue that a genuine issue of fact remains as to whether Appellees made reasonable efforts to restore production during a temporary cessation.

{¶ 18} In response, Appellees argue that Appellants are attempting to prove unprofitability through the use of the overheard costs for Whitacre Enterprises' entire business. Appellees urge that the appropriate standard looks solely to the expenses incurred during the production of the relevant well. Appellees contend that Appellants also improperly rely on the initial discovery responses, which were supplemented prior to the trial court's ruling. Finally, Appellees argue that the temporary cessation in production was caused by circumstances outside of their control and the efforts in restoring production were reasonable.

{¶ 19} Due to the nature of Appellants' arguments, the relevant years will be addressed individually. However, the applicable law remains the same. The lease in this case included a two-tiered habendum clause. Pursuant to the habendum clause, the term of the lease was a "period of 1 year(s) from the date hereof, and as much longer as oil or gas is found in paying quantities thereon." (9/2/16 Plaintiff's Motion for Summary Judgment, Exh. 2.)

{¶ 20} The Ohio Supreme Court has defined the term "paying quantities" as the production of "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).

{¶ 21} A lessee is given discretion to determine whether a well is profitable, however, a good faith standard is imposed on the lessee. Burkhart Family Trust v. Antero Resources Corp. , 7th Dist. Nos. 14 MO 0019, 14 MO 0020, 2016-Ohio-4817, 68 N.E.3d 142, ¶ 18, citing Hupp v. Beck , 7th Dist. Nos. 12 MO 0006, 13 MO 0002, 13 MO 0003, 13 MO 0011, 2014-Ohio-4255, 20 N.E.3d 732. A plaintiff holds the burden of proving that a well is not producing in paying quantities. Burkhart , supra , at ¶ 13, citing Moore v. Adams , 5th Dist. No. 2007AP090066, 2008-Ohio-5953, 2008 WL 4907590.

2012

{¶ 22} As to the well's production in 2012, Appellants argue that the production records fail to define what constitutes a "direct operating expense." Appellants contend that the category is kept intentionally vague in an attempt to obscure the true operating expenses. In support of their argument, Appellants point to a $250 monthly fee that Whitacre Enterprises pays to Whitacre Store. According to Appellants, the fee paid for Whitacre Store's employees, vehicles, and equipment are necessary to operate the well. Appellants argue that the monthly fee adds $3,000 per year to Whitacre Enterprises' expenses and is erroneously excluded from exhibits B and C.

{¶ 23} In response, Appellees argue that a "paying quantities" analysis looks to the expenses and profits only as they pertain to the well at issue. Here, Appellees assert that the monthly Whitacre Store fee applied not only to Appellants' well, but to all wells operated by Whitacre Enterprises. Appellees assert that the operating expenses specific to the Hogue well are as follows: $204.20 for landowner royalties, $17.13 for gas severance taxes, $152.60 for maintenance, and $135.39 for direct operating expenses. Appellees explain that this portion of the Whitacre Store fee pertaining to the Hogue well is included within the direct operating expense category.

{¶ 24} Resolution of this issue depends on the interpretation of exhibits B and C. Exhibit B shows the following operating expenses for 2012: office payroll ($201.53), office lease ($181.95), oil and gas software ($12.20), office expenses ($30.74), office postage ($7.32), professional expenses (legal, IT, finance, safety, consulting) ($73.76), building utilities ($63.71), fire resistant clothing ($24.72), insurance for buildings and vehicles ($100.74), shop and warehouse lease ($1,383.02), furniture and fixtures (equipment and machinery) ($231.31), and vehicles ($553.61). According to the exhibit, the total operating expenses for the year were $3,000. However, this total is divided into two subcategories, direct and indirect expenses. This is where the dispute arises between the parties.

{¶ 25} Appellants argue that the division of these expenses misrepresents the total expenses. In response, Appellees explain that the indirect expenses are paid regardless of the Hogue well's existence and do not contribute to its production. Thus, they should not be used in the "paying quantities" calculation. Among the indirect expenses paid to Whitacre Store are the office payroll, office lease, software, postage, professional services, building utilities, fire resistant clothing, vehicles, and machinery. According to Appellees, the portion of these expenses that related directly to the production of the Hogue well amounted to $133.39.

{¶ 26} There is no Ohio precedent directly addressing whether the "paying quantities" analysis includes indirect expenses such as business overhead costs. However, we recently cited to a Williams & Myers, Oil and Gas Law, footnote which noted that a regulation of the United States Department of Interior has interpreted the term "paying quantities" as "a positive stream of income after subtracting normal expenses, which include royalties and direct operating costs." (Emphasis changed.) Paulus v. Beck Energy Corp. , 7th Dist. No. 16 MO 0008, 2017-Ohio-5716, 2017 WL 2839567, ¶ 54, citing to 6 Williams & Myers, Oil and Gas Law , Section 604.5 (2010), fn. 4.

{¶ 27} Appellants encourage us to apply Paulus to the instant case. While we focused on royalties in Paulus , the Williams & Myers citation is equally applicable, here. Thus, in a "paying quantities" analysis, we look to direct operating costs and exclude any indirect costs that do not contribute to the production of oil or gas.

{¶ 28} This principle accords with rulings in other districts. For instance, a Louisiana appellate court held that overhead costs are generally not considered as operating costs in a "paying quantities" analysis. Menoah Petroleum, Inc. v. McKinney , 545 So.2d 1216, 1221 (LA.App. 2d Cir. 1989). In Oklahoma, the general costs of operating a company are excluded as administrative overhead in determining the cost of production. Mason v. Ladd Petroleum , 1981 OK 73, 630 P.2d 1283, 1286 (Okl.1981). Administrative overhead was defined as "the administrative cost of production alone" which includes expenses such as "the cost of accounting, interest, postage, office supplies, telephone, depreciation of office equipment, and all the other indirect expenses of the oil company regarding production." Id.

{¶ 29} Beginning with the monthly payments to Whitacre Store, we first note the significance of the fact that Whitacre Store, despite being a separate entity, is also owned by Koy Whitacre. Further, the evidence in this matter shows that at least a portion of the payments from Whitacre Enterprises to Whitacre Store do not contribute to the extraction of minerals and other portions pertain to other wells owned by Appellees. According to Appellees, Whitacre Enterprises pays Whitacre Store for maintaining its entire business, which includes wells other than the one at issue in this matter.

{¶ 30} While some of these expenses could be classified as direct operating expenses, Appellants failed to rebut the testimony of Koy Whitacre that these expenses do not pertain to the Hogue well. Whitacre testified that the monthly payments compensate Whitacre Store for operating Whitacre Enterprises' entire business. These expenses do not contribute to the production of oil or gas from the Hogue well and are paid to Whitacre Store regardless of whether the Hogue well is operated.

{¶ 31} As these expenses do not contribute to the production of oil or gas from the Hogue land, Appellees correctly excluded them from the paying quantities analysis. The remaining expenses include: royalty payments, gas severance tax, maintenance, and operating costs directly relating to the production of oil and gas. These expenses were properly included as direct costs of production. Based on these figures, Appellees' profit for 2012 was $1,124.03.

{¶ 32} Appellants next argue that Appellees deflated expenses by adding two "credits" for the removal of two tanks. Appellants argue that these cannot be used to reduce the amount of the total expenses for purposes of determining whether the well produces in paying quantities. In response, Appellees argue that they have not used these credits to reduce expenses. In support of their argument, Appellees cite to exhibits B and C, which do not show such "credit".

{¶ 33} Appellees correctly point out that exhibits B and C do not include a credit for removed machinery. As such, the cost of removing machinery was not calculated into Appellees' "paying quantities" analysis. While Appellants argue that a separate exhibit shows this credit, exhibits B and C demonstrate that Appellees did not use this credit in calculating their $1,124.03 profit. It is apparent from the record that the trial court relied on exhibits B and C in reaching its decision.

{¶ 34} Exhibit C details the total expenses for the year, which includes: $133.39 for direct operating costs, $204.20 for royalty payments, $17.13 for gas severance taxes, and $152.60 for maintenance for a total of $509.32. The exhibit also shows a total gross income of $1,633.35. After subtracting the expenses, Appellees' total profit for 2012 was $1,124.03.

{¶ 35} As the evidence properly submitted in summary judgment demonstrates a profit for the year 2012, the trial court properly determined that the well produced in paying quantities.

2013

{¶ 36} Appellants repeat their argument that Appellees mischaracterized its expenses by dividing them into "direct" and "indirect" expenses. As previously discussed, the direct expenses related to the production of the Hogue well while the indirect expenses did not. Appellees correctly divided the expenses into these categories.

{¶ 37} Appellants next claim that Koy Whitacre admitted the Hogue well did not produce in 2013. This argument is based on an interrogatory. Koy Whitacre stated that revenue from the Hogue well did not exceed expenses in 2013. However, in the same interrogatory, Whitacre denied that the well did not produce in paying quantities. While there is a discrepancy in the responses to the interrogatory, exhibits B and C show that the well was profitable in 2013.

{¶ 38} According to exhibit C, Appellees total gross income for 2013 was $1,418.00. As for expenses, the document shows $177.27 for landowner royalties, $10.83 for gas severance taxes, $60 for maintenance, $347.50 for water hauling, and $135.39 for direct operating expenses for a total of $730.99. After deducting these expenses from the gross income, Appellees show a $687.01 profit for the year 2013.

{¶ 39} Appellants also argue that Appellees' investors were not paid in the years 2013, 2014, and 2015. According to Appellants, failure to pay investors is evidence that the well was not profitable. However, the investor agreement is not part of the record on appeal. We cannot determine how and when investors were to be paid pursuant to that agreement. As the record does not provide evidence about payments to investors, Appellants' argument is unsupported.

{¶ 40} As the summary judgment evidence demonstrates a profit for the year 2013, the trial court properly determined that the well produced in paying quantities.

2014 and 2015

{¶ 41} We have previously recognized that a mere temporary cessation in the production of an oil and gas well will not terminate a lease under the habendum clause where the owner of the lease exercises reasonable diligence and good faith in attempting to resume production of the well. RHDK Oil & Gas, L.L.C. v. Dye , 7th Dist. No. 14 HA 0019, 2016-Ohio-4654, 2016 WL 3522555, ¶ 20, citing Wagner v. Smith , 8 Ohio App.3d 90, 92, 456 N.E.2d 523 (5th Dist.1982).

{¶ 42} Appellants urge that the Hogue well failed to produce any oil or gas from January of 2014 to November of 2015. While Appellees assert that the lack of production was caused by construction involving the compression station, Appellants urge that construction did not begin until March of 2015. In fact, Appellants argue that several other wells connected to the compression station produced during this timeframe, as evidenced by Julie Hogue's affidavit.

{¶ 43} In response, Appellees explain that the production issues in 2014 and 2015 were caused by problems with the Dominion compression station and the ensuing construction of Dominion's new compression station. The compression station was replaced due to several problems that were apparently affecting production. As the compression station is owned and operated by Dominion, Appellees urge that these problems were outside of their control. Appellees point out that production returned to normal levels following completion of the new compression station.

{¶ 44} Appellees also argue that Julie Hogue's affidavit does not provide any evidence they acted unreasonably when resuming production following the temporary cessation. Even so, Appellees argue that the affidavit is not competent, as Julie Hogue does not demonstrate that she is qualified to offer evidence of the reasonableness of Appellees' actions.

{¶ 45} A critical factor in determining the reasonableness of the operator's conduct is the length of time the well is out of production. Id. at ¶ 21, citing Wagner, supra , at 93, 456 N.E.2d 523 ; Jath Oil Co. v. Durbin Branch , 1971 OK 127, 490 P.2d 1086 (Okl.1971). Although the length of the cessation is a critical factor, we have previously declined to establish a bright-line rule in regard to cessation period. Dennison Bridge, Inc. v. Resource Energy, L.L.C. , 7th Dist. 14 HA 21, 2015-Ohio-4736, 50 N.E.3d 242. We have acknowledged that no case can be found where an Ohio appellate court deemed a lease forfeited based on less than two years of nonproduction. RHDK at ¶ 22 ; Lang v. Weiss Drilling Co. , 7th Dist. Nos. 15 MO 0005, 15 MO 0006, 2016-Ohio-8213, 70 N.E.3d 625, ¶ 16. In addition to the length of cessation, a court must consider all attendant circumstances. RHDK at ¶ 21, citing Wagner, supra , at 93, 456 N.E.2d 523 ; Barrett v. Dorr , 140 Ind.App. 295, 212 N.E.2d 29 (1966).

{¶ 46} It appears that the low production in 2014, and even to a degree in 2013, was caused by a problem with Dominion's compression station. According to Koy Whitacre's uncontroverted testimony, the oil and gas produced from Appellants' land traveled through a pipeline leading to the compression station, which was owned by Dominion. (5/12/16 Koy L. Whitacre Depo., p. 60.) Whitacre testified that in 2013, he began experiencing problems with the pipeline. According to Whitacre, he made the decision to stop production until the problems were fixed to ensure that production would be consistent. (Id. , p. 55.) He also testified that he ended up building his own compression station on the Hogue property to enable consistent production due to the problems with the Dominion station. (Id. )

{¶ 47} We note that Appellants contest the admissibility of an affidavit from Koy Whitacre which referred to a statement by a Dominion employee regarding the construction of the compression station. Appellants argue that the statement is hearsay. In response, Appellees assert that the employee's statement formed the basis for Whitacre's beliefs at the time he decided to stop production. Hence, Appellees contend that the statement was not offered to prove the truth of the matter asserted, and is not hearsay.

{¶ 48} Hearsay is defined as "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Evid.R. 801(C). As pointed out by Appellees, Koy Whitacre's statement regarding information he was given by Dominion formed his understanding of the compression station's ability to assist in the production of gas. This statement was not made to prove the truth of the matter asserted and is not hearsay.

{¶ 49} Regardless, Julie Hogue's affidavit tends to support Whitacre's argument that the pipeline was not functioning properly from August of 2014 through October of 2015. In her affidavit, Hogue averred that she received "check stubs for payments made from gas produced" by two wells operated by a different company that were connected to the Dominion compression station during the relevant time period. Attached to the affidavit are records of gas sales and royalty payments from these other wells. It appears from these records that each of the wells produced nominal royalties. This supports Appellees' argument that shutting down production until the completion of Dominion's compression station was reasonable. The October 2014 records show that a check was issued to Julie Hogue for $58.84 for what appears to be royalty payments from six different wells. While the December 2014 check increased to $276.55, January and February's combined check was only for $20.25, and March and April's combined check was only $23.71. The July check was $26.49. The checks did not increase until December of 2015, when Hogue received a check in the amount of $283.54. Based on these figures, Whitacre's decision to delay production until the compression station problem was fixed appears to have been reasonable.

{¶ 50} Importantly, the new Dominion compression station and new Hogue compression station successfully restored normal production levels. This is evident from exhibit C, which shows that the gas production resumed its normal levels. Additionally, after the compression stations were finished, the well produced oil (60.87 barrels) for the first time since 2008. The exhibit shows five months of production along with one month of projected production (totaling two quarters) which resulted in $1,026.49 in profit.

{¶ 51} Based on this record, the lack of production in 2014 and 2015 was a temporary cessation. There is no evidence demonstrating that Appellees' actions in restoring production were unreasonable. Accordingly, Appellants' first and second assignments of error are without merit and are overruled.

Conclusion

{¶ 52} Appellants argue that the trial court erroneously determined that the Hogue well produced in paying quantities for the years 2012 through 2015. The summary judgment evidence demonstrates that the Hogue well produced in paying quantities from 2012 through 2013. The record also shows that the lack of production in 2014 and 2015 was caused by only a temporary cessation. As such, Appellants' arguments are without merit and the judgment of the trial court is affirmed.

DeGenaro, J., concurs.

Robb, P.J., concurs.