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Friday, January 17, 2020

Ohio Supreme Court rules 21-year statute of limitations applies in dispute over oil and gas lease

State Court

By John Sammon | Jan 15, 2020

Oil 1280

COLUMBUS, Ohio (Legal Newsline) – The Ohio Supreme Court has sent a dispute over an oil and gas lease back to the trial court after determining which statute of limitations applied to the case.

"We hold that the applicable statute is R.C. 2305.04, which states that an action to recover title to or possession of real property shall be brought within 21 years after the cause of action accrues," Justice Judith French wrote. 

“We reverse the 5th District Court’s judgment and remand the matter back to the trial court to evaluate the parties’ claims in light of the correct statute of limitations.” 

Barry L. Browne and Rosa R. Browne own 86 acres of land with oil and gas interest in a property in Guernsey County, Ohio. An oil and gas lease on the property was executed in 1975.

Artex Oil Co. and others acquired interest in the lease and Artex has operated the well since 1999. From that time to 2014, 1,700 barrels of oil were produced and generated revenue of more than $100,000. The company paid royalties to the Brownes for mineral interests acquired in 2012 for the years 2013 through 2015.

The Brownes filed an action for quiet title and declaratory judgment in December of 2014, alleging that the well did not produce oil from its inception until 1999, and had been inoperative for a sufficient amount of time to terminate the lease. They based their contention on the lack of pre-1999 production according to reports of the Ohio Department of Natural Resources.

The couple requested the trial court declare the lease void and award damages, including for unjust enrichment.

Attorneys for Artex filed a counter-claim asking for a declamatory judgment, maintaining that the lease remained valid because of continuous production of oil since 1977.

Both parties filed for a summary judgment.

The Guernsey County Court of Appeals dismissed the Brownes’ claims of a lack of oil production prior to 1999, saying there was a 15-year statute of limitations applicable to the lease, so the claims were irrelevant.

The Brownes appealed the judgment to the 5th District Court of Appeals, arguing that under law, a 21-year limit applied.

French cited as a precedent a 4th District Court case finding that an oil and gas lease is not a written contract but a quiet-title action, and that under law is subject to a 21-year statute of limitations.

“We agree with the 4th District’s holding...,” French wrote. “...We therefore hold that the Brownes’ claims are governed by the 21-year statute of limitations."

French said the Brownes had not claimed a breach of the oil lease and the lack of evidence of oil production prior to 1999 in this case was not irrelevant.

The Supreme Court reversed the 5th District Court decision and remanded the case back to the trial court to evaluate the parties’ claims in light of the correct statute of limits.

Justices Sharon Kennedy and Melody Stewart issued a dissenting opinion in the ruling, arguing that the appeal is moot.

"By accepting only the proposition of law related to the statute of limitations, this court rendered the appellants’ appeal moot," Kennedy wrote. "...Regardless of this court’s ruling on the statute-of-limitations issue, the ultimate judgment will be the same—summary judgment in favor of the oil companies (because under the law-of-the-case doctrine, the court of appeals’ rulings on the issues that were not accepted for review by this court will remain in place on remand).

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