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Conny Farms Ltd. v. Ball Resources Inc.

Court of Appeals of Ohio, Seventh District

June 12, 2013

CONNY FARMS LTD., PLAINTIFF-APPELLANT,
v.
BALL RESOURCES, INC., et al., DEFENDANTS-APPELLEES.

Civil Appeal from Common Pleas Court, Case No. 08 CV 833.

For Plaintiff-Appellant: Attorney Scott Kurakowski Attorney Aletha Carver Krugliak, Wilkins, Griffiths & Dougherty

For Defendants-Appellee: Attorney Eric Walter Dworken & Berstein Co., LPA Attorney John Rambacher Winkhart, Rambacher & Griffin

JUDGES: Hon. Mary DeGenaro Hon. Gene Donofrio Hon. Joseph J. Vukovich

OPINION

DeGenaro, P.J.

{¶1} Plaintiff-Appellant, Conny Farms Ltd., appeals the judgment of the Columbiana County Court of Common Pleas granting summary judgment in favor of Defendants-Appellees[1] in a suit concerning the validity of two oil and gas leases on Conny Farms' property. On appeal, Conny Farms asserts there are genuine issues of material fact concerning: (1) whether Conny Farms failed to comply with the "change in ownership clause" of the leases, and (2) whether the leases expired pursuant to their habendum clauses for failure to store gas on the property.

{¶2} Upon review, the trial court properly granted summary judgment in favor of Appellees and thus Conny Farms' assignments of error are meritless. The undisputed evidence demonstrates that Conny Farms failed to comply with the change in ownership clause and thus Appellees were not obligated to make payments. Further, gas was continuously stored on and withdrawn from the property. Thus there are no genuine issues of material fact regarding the expiration of the leases. Accordingly, the judgment of the trial court is affirmed.

Facts and Procedural History

{¶3} This is the second time this case has come before this court. In Conny Farms Ld. v. Ball Resources, Inc., (Conny Farms I) this court summarized the pertinent facts and procedural history as follows:

Conny Farms is the record title owner of land in Columbiana County. Since 1950, there have been two oil and gas leases on that land, which were originally held by East Ohio Gas Company (nka Dominion East Ohio), but are now held by Appellees.[2] For convenience, the parties refer to the leases as the Gibson lease and the Thompson lease. The two leases are identical except for the dollar amounts, several dates, and the names of the original lessors.
There was never a well drilled on the property; it was used for gas storage purposes only. Michael and Jennifer Conny purchased the property on October 7, 2005. Prior to purchasing the property, the Connys were provided with a title commitment which revealed the existence of the leases. The Connys transferred the property to Conny Farms Ltd. on September 6, 2006. Michael and Jennifer Conny are the sole members of Conny Farms Ltd. Both the Connys and Conny Farms admit they had knowledge of the leases prior to taking ownership to the property.
In a July 2, 2008 letter to lessees Ball Resources Inc. and William E. Blair, counsel for Conny Farms/The Connys stated the leases terminated because no payments had been made since the Connys took ownership of the property in 2005, and demanded cancellation of the leases.
Counsel for Ball Resources and Blair responded in a July 16, 2008 letter that he was aware of the transfer of the property to the Connys since his office handled the closing, noted the Connys were provided with the leases, were represented by independent third-party counsel in connection with that transaction, and stated with regard to the notice provision in the leases: "It is my understanding that Mr. Conny never notified Dominion as to the transfer of ownership in this property and did not notify my clients prior to the notification contained in your July 2, 2008 correspondence. Based upon your July 2, 2008 correspondence, we will now transfer the storage rental to Mr. Conny in accordance with the terms of the subject leases."
And in a July 23, 2008 follow-up letter, counsel for Ball Resources and Blair provided documentation of the storage rental payments made by their predecessor in interest, Dominion, to the Connys' predecessor-in-interest, Klaus Forester, from April 2001 through May 2005. This letter went on to state:
"Storage rental payments thereafter were suspended by Dominion East Ohio since your client [Conny Farms] did not notify them of the real estate transfer. Based upon the notification contained in your July 2, 2008 correspondence regarding this transfer, these suspended funds will be transferred to Mr. Conny in the immediate future. Based upon this payment history and the express terms of the subject oil and gas leases, we believe that our leases remain valid and will proceed accordingly."
Less than one month later, Conny Farms filed a multi-count complaint which hinged on the allegation that Appellees breached the leases by failing to make any royalty or rental payments; and/or that the leases expired under their own terms because no production or storage of gas had occurred upon or under the property by Appellees or by their predecessor-in-title, Dominion.

Conny Farms I at ¶3-9.

{¶4} The leases each contain the following clauses that are germane to this appeal. First, there is a granting clause which states:

WITNESSETH: That the said Lessor, for and in consideration of the sum of One ($1.00) Dollar cash in hand paid, receipt of which is hereby acknowledged, and of the covenants and agreements hereafter contained on the part of the lessee to be paid, kept and performed, has granted, demised, and leased, and by these presented does grant demise, and lease exclusively unto [sic] said Lessee, for the purpose of drilling, operating for, producing, removing and disposing of oil and gas and for the further purpose and with the exclusive right in the Lessee, as he may see fit, to store gas of any kind and from any field or source by pumping or otherwise introducing the same into any sand or sands, substrata or horizon in or under said land, and to remove the same by pumping or otherwise through any well on said lands or other lands and laying of pipe lines and of building tanks, powers, [sic] stations, and structures thereon to produce, save and take care of and transport said products, all that certain tract of land situate [sic] in the * * *

{¶5} The habendum clause provides:

It is agreed that this Lease shall remain in force for the term of ten years from the date hereof, and as long thereafter as the said land is operated by the Lessee in the search for or production of oil or gas or so long as gas is being stored, held in storage, or withdrawn from the premises by Lessee.

{¶6} The change in ownership clause states:

If the estate of either party is assigned-and the privilege of assigning in whole or in part is expressly allowed-the covenants hereof shall extend to the heirs, executors, administrators, and assigns, but no change in ownership of the land or assignment of rentals or royalties shall be binding on the lessee until after the ...

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