Yoskey v. Eric Petroleum Corp. ( 2014 )

[Cite as Yoskey v. Eric Petroleum Corp., 2014-Ohio-3790.]
STATE OF OHIO, COLUMBIANA COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
DAVID YOSKEY, )
) CASE NO. 13 CO 42
PLAINTIFF-APPELLANT, )
)
VS. ) OPINION
)
ERIC PETROLEUM CORP., et al., )
)
DEFENDANTS-APPELLEES. )
CHARACTER OF PROCEEDINGS: Civil Appeal from Common Pleas Court,
Case No. 12CV808.
JUDGMENT: Reversed and Remanded.
APPEARANCES:
For Plaintiff-Appellant: Attorney Michael Rossi
151 East Market Street
Warren, Ohio 44482
For Defendants-Appellees: Attorney Thomas Hill
6075 Silica Road, Suite A
Austintown, Ohio 44515-1053
Attorney Timothy McGranor
5 East Gay Street
P.O. Box 1008
Columbus, Ohio 43216-1008
JUDGES:
Hon. Joseph J. Vukovich
Hon. Cheryl L. Waite
Hon. Mary DeGenaro
Dated: August 29, 2014
[Cite as Yoskey v. Eric Petroleum Corp., 2014-Ohio-3790.]
VUKOVICH, J.
{¶1} Plaintiff-appellant David Yoskey appeals the decision of the
Columbiana County Common Pleas Court which granted summary judgment in favor
of Eric Petroleum Corporation and Chesapeake Energy Corporation, et al. First,
appellant contends that the court erred in holding that he failed to meet a tender back
rule which the court said required that any money paid under the lease be actually
returned in order to seek to rescind or otherwise set aside the lease due to fraudulent
inducement. This assignment of error has merit as any tender back rule for
rescinding a contract only requires an offer to return money paid under the contract.
The trial court’s tender back ruling is reversed, and the case is remanded for further
proceedings.
{¶2} Appellant’s second argument is that the trial court erred in ordering the
leases tolled. Regardless of whether tolling of the lease term was proper here, the
trial court’s decision was expressly based in part on the fact that the court was
granting summary judgment for the defendants on the plaintiff’s complaint. As that
decision is reversed under the first assignment of error as to the claims based upon
fraudulent inducement, the tolling decision no longer stands.
STATEMENT OF THE CASE
{¶3} On August 18, 2009, plaintiff executed an oil and gas lease with Eric
Petroleum Corporation (EPC) over his 73 acres of property in Columbiana County.
The lease provided for $5 per acre as an annual delay rental with a primary term of
five years. In 2010, EPC assigned the deep well rights to a Chesapeake entity and
maintained the shallow well rights.
{¶4} On December 21, 2012, plaintiff filed suit against EPC and
Chesapeake, et al. The plaintiff stated that he contemplated leasing with
Chesapeake but EPC’s landman talked him out of it by making misrepresentations.
The complaint provided these examples of alleged misrepresentations: only EPC
had the “two rigs” technology and capacity for deep-well drilling in Ohio, plaintiff’s
property was at the “very forefront” of EPC’s immediate plans for deep-well drilling
and production in the vicinity; plaintiff should not be surprised to have a deep well on
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his property within six months with free gas for his home; and nodding when plaintiff
characterized the latter statement as a guarantee.
{¶5} The first three claims in the complaint were labeled fraud in the
inducement-rescission, fraud in the inducement-damages, and fraud in the
inducement-declaratory judgment. Plaintiff added quiet title as his fourth claim via an
amended complaint,. Claims for unconscionability and declaratory judgment on
assignability were withdrawn.
{¶6} The defendants counterclaimed seeking to extend the primary term of
the lease due to the lawsuit preventing them from exercising their rights under the
lease. Depositions were taken. The defendants filed summary judgment motions
arguing that there was no genuine issue of material fact as to fraudulent
misrepresentations and that all four claims were based upon these allegations, and
equitable tolling of the lease was sought.
{¶7} As the defendants insisted that plaintiff was required to elect between
damages and rescission at that time, plaintiff elected to proceed on rescission and
thus withdrew his second fraud in the inducement claim for damages. (See Plaintiff’s
Memo Contra Summary Judgment at 1). The defendants then decided to contend
that rescission was improper because there was no tender back of the delay rentals
of $360 per year paid since 2009.
{¶8} Due to the election of the rescission claim and defendants’ argument on
tender back, plaintiff attached an affidavit to his response to summary judgment
voicing that he was ready, willing, and able to return the consideration paid. Notably,
summary judgment evidence showed that plaintiff returned the May 2012 check and
was rejecting the 2013 check by refusing the certified mail delivery.
{¶9} On October 16, 2013, the trial court granted summary judgment for the
defendants on plaintiff’s three remaining claims (fraudulent inducement-rescission,
fraudulent inducement-declaratory judgment, and quiet title) and granted their
request to toll the lease. The court noted that fraud in the inducement renders an
agreement voidable (as opposed to fraud in the factum which renders an agreement
void and which need not be accompanied by tender back). The court stated that
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appellant’s requests for rescission and declaratory judgment were based upon the
claim of fraudulent inducement (which is not disputed).
{¶10} The court concluded that a plaintiff must tender back the consideration
as a condition precedent to seeking to set aside the agreement based upon
fraudulent inducement, citing the Supreme Court’s Haller and Barry cases. The trial
court disagreed with the plaintiff’s contention that the tender back rule is more
symbolic than physical. The court held that the applicable tender back rule imposes
an actual condition precedent of repayment and it was thus insufficient to merely
voice that one is ready, willing, and able to return the consideration paid. As plaintiff
did not return the consideration paid under the agreement, the court granted
summary judgment on the fraudulent inducement claim.
{¶11} The court then granted summary judgment on the quiet title claim as
the complaint simply alleged as to this claim that the defendants’ interests were
adverse to Yoskey’s interests. The court noted the difference between an
encumbrance on the title (a valid interest in land) and a cloud upon a title (which is an
interest that appears valid but is in fact invalid) and stated that the plaintiff failed to
show the lease was an invalid cloud on the title.
{¶12} Finally, the court granted the defendants’ request for equitable tolling of
the primary term of the lease equivalent to the time required to adjudicate the case,
including the date a final judgment is entered after all appeals are exhausted. The
trial court stated that when a lessor actively asserts to a lessee that his lease is
subject to cancellation, the obligations of the lessee are suspended during the time
such claims are being asserted. The trial court noted that tolling was not to punish
the plaintiff for asserting a claim but to restore the parties to their originally occupied
positions, finding that the lawsuit created a cloud on the lease rights and diminished
the time period of development available under the lease. In making its tolling
decision, the court explained that it balanced the equities, including the fact the
claims were not validated (due to the entry of summary judgment).
{¶13} Plaintiff-appellant David Yoskey filed a timely notice of appeal. He
asserts two assignments of error.
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ASSIGNMENT OF ERROR NUMBER ONE
{¶14} The first assignment of error provides:
{¶15} “The trial court erred in entering summary judgment in Defendants’
favor on the Amended Complaint’s ‘fraud in the inducement’ claims.”
{¶16} Appellant argues that the trial court should not have granted summary
judgment on his claim of fraudulent inducement (for which he sought the remedy of
rescission with a “parasitic” request for declaratory judgment in order to set aside the
lease). Appellant urges that we apply the Ohio Supreme Court’s 1891 holding in
Saxton v. Seiberling, stating that a tender of a specific amount is not required before
commencing an action to set aside a conveyance and all that is required is the
plaintiff offer in his petition to pay into court the sum ordered by the court as a
condition to granting relief. Appellant concludes that his complaint asking for
rescission and return to the status quo combined with the statement in his affidavit in
response to summary judgment, that he was ready, willing, and able to return to the
defendants any funds he had received under the lease, was sufficient. Appellant
urges that cases dealing with release of a tort claim are not on point.
{¶17} The defendants respond that Saxton is old and has been overruled by
the newer cases such as Berry and Haller. They also contend that there is no reason
to distinguish between the tort settlement release in Haller and this case, citing
Picklesimer for the proposition that a release is no different than any other contract
which requires tender back where rescission is sought and Cross and Miller for the
proposition that the tender back rule been applied outside of the release context.
{¶18} There is a long line of cases holding that an action for fraud in the
inducement of a settlement of a tort or other claim1 “is prohibited unless the plaintiff
tenders back the consideration received and rescinds the lease.” Berry v. Javitch,
Block, & Rathbone, 127 Ohio St. 3d 480, 940 N.E.2d 1265, 2010-Ohio-5772, ¶ 21.
1
We note that the rule is not limited only to the settlement of tort claims. See, e.g., Haller v.
Borror Corp., 50 Ohio St. 3d 10, 14, 552 N.E.2d 207 (1990) (release of action for breach of
employment contract); Block v. Block, 165 Ohio St. 365, 135 N.E.2d 857 (1956) (decree for alimony
which incorporated separation agreement); Manhattan Life Ins. Co. v. Burke, 69 Ohio St. 294, 70 N.E.
74 (1903) (compromise of life insurance claim).
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Where a release of a claim is obtained by fraud in the inducement, it is voidable, and
“a subsequent action cannot be maintained by the claimant without returning or
tendering the consideration he received.” Id. at ¶ 23, 27; Picklesimer v. Baltimore &
O.R. Co., 151 Ohio St. 1, 4, 84 N.E.2d 214 (1949) (“in order to enable the releasor to
repudiate the release and to prosecute his original cause of action, he must return or
tender the consideration received by him”); Haller, 50 Ohio St. 3d at 14 (“A release of
liability procured through fraud in the inducement is voidable only, and can be
contested only after a return or tender of consideration;” “in order to subject it to
attack the releasor must first tender back the consideration paid.”).2
{¶19} Picklesimer concluded, “Inasmuch as the plaintiff’s amended petition
contains no allegation that he returned or tendered the money he received from the
defendant in consideration for the release, the trial court properly sustained the
demurrer.” Picklesimer, 151 Ohio St. at 7-8. These cases are based on two
principles: the law favors compromise and one should not be permitted to retain the
benefit of the compromise while attacking its validity. Haller, 50 Ohio St. 3d at 14.
See also Picklesimer, 151 Ohio St. 1 (as the releasor cannot enforce the settlement
while at the same time seeking more than the release permitted, the releasor must
“tender back the consideration paid before attacking the agreement.”).
{¶20} Attacking a release of a claim in order to sue on that claim can be seen
as distinguishable from attacking a contract. That is, asking for rescission of the
contract here is the goal, whereas recovery on a released claim is the goal in the
former cases, with rescission of the release being a prerequisite to such recovery.
{¶21} Yet, as the defendants point out, Picklesimer stated that a release is a
contract and there is no more reason why the releasor should be excused from
returning or tendering the consideration received than in other cases where
rescission is sought. Picklesimer, 151 Ohio St. at 7. We turn to rescission of
contracts in general and provide a brief history.
2
Whereas, release of liability obtained by fraud in the factum (where party did not know he
was signing release) is void ab initio and tender back is not required. Parties agree case involves
voidable fraudulent inducement rather than void fraud in the factum.
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{¶22} In 1846, the Ohio Supreme Court stated that “[n]o principle is better
settled than that a party who would rescind an agreement must place his adversary in
statu quo.” Taft v. Wildman, 15 Ohio 123, 128 (1846). The Court continued: “If he
have received anything of value, he must offer to restore it or he will not be permitted,
by rescinding his agreement, to recover for what he has advanced by reason
thereof.” Id.
{¶23} In 1891, the Court held: “Before a conveyance can be set aside, the
purchaser must be restored to his former condition; but it is not essential that there
should be a tender of any specific amount before the commencement of the action.”
Saxton v. Seiberling, 48 Ohio St. 554, 29 N.E. 179 (1891) syllabus at ¶ 3. “All that is
required is that the plaintiff should offer in his petition to pay into court, for the use of
the defendant, such sum as may be ordered as a condition to granting the relief.” Id.
The Court concluded that a tender before suit is unnecessary and that one cannot
seek dismissal of the complaint where a plaintiff offers in the complaint to return the
money paid for a conveyance sought to be set aside on the ground of fraud. Id. at
561.
{¶24} In 1931, the Ohio Supreme Court stated the general rule is that one
seeking to rescind a contract for any reason must first place the other in “statu quo”,
by returning all benefits received by him under the contract sought to be rescinded or
by making a tender thereof to the other party. Miller v. Bieghler, 123 Ohio St. 227,
233, 174 N.E. 774 (1931). The court stated that “[i]n nearly all jurisdictions a bill is
demurrable in which complainant does not offer to return any consideration which it
shows that he has received, or otherwise place defendant in statu quo or sufficiently
excuse himself from that duty.” Id. at 233. Since that plaintiff did in the complaint
offer to restore to the consideration with which her grantor parted, the complaint was
found subject to demurrer. Id. at 234. (“It would be inequitable to grant to plaintiff
that which she now claims and at the same time leave her in possession of that
which she received. She has not offered to do equity. That she has so done should
affirmatively appear in her petition, and it is necessary to the assertion of her rights in
a court of equity.”)
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{¶25} In 1954, the Court stated: “Where a contract has been procured by
fraudulent representations of a party thereto, the party defrauded, after offering to
return what he has received under the contract, may elect to have the contract set
aside and be restored to his original position.” Cross v. Ledford, 161 Ohio St. 469,
120 N.E.2d 118 (1954) syllabus at ¶ 1 (or may sue for damages caused). The Court
noted that the plaintiff offered to reassign the leasehold interest prior to filing suit and
the complaint prayed that they be restored to their original position. Id. at 475. The
Court then cited Picklesimer for the proposition that where a defrauded party rescinds
a contract and offers to restore what he has received under the contract, he may
recover any consideration paid. Id.
{¶26} Appellate cases have concluded that a complaint seeking rescission of
a contract must contain some statement offering to return the status quo. Bell v.
Turner, 4th Dist. Nos. 12CA14, 12CA15, 2013-Ohio-1323, ¶ 25 (complaint must
contain averment of return or offer to return); Ady v. Miller Day Iseli Energy Co., 7th
Dist. No. 624 (May 28, 1987) (pleading must offer to restore possession or offer to
place in status quo). See also Herzig v. Hunkin Conkey Constr. Co., 101 N.E.2d 255,
256-257 (8th Dist.1941) (petition should allege the plaintiff “put, offered or were ready
to put” the defendant in status quo).
{¶27} Notably, besides seeking rescission and declaratory judgment to
invalidate the lease based upon fraudulent inducement, the complaint here
alternatively sought damages for such fraudulent inducement claim. The defendant
thereafter insisted the plaintiff choose a remedy, and after plaintiff chose to proceed
on rescission rather than damages, this claim of lacking tender for rescission was
made at the summary judgment stage. Plaintiff responded with an affidavit that he
was ready, willing, and able to restore any funds paid to him under the lease. Those
funds were a mere $360 per year in delay rentals paid beginning in 2009 lease but
rejected in 2012 and 2013.
{¶28} EPC’s motion for summary judgment on this topic alleged that there
was no offer to return because the plaintiff’s separation agreement with his ex-wife
called for splitting the May 2012 delay rental payment. As aforementioned, plaintiff
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testified that they did not end up cashing that check, and the exhibit provided at
deposition showed that he wrote void on it. Chesapeake’s motion for summary
judgment on this topic seemed to suggest that the consideration must actually be
returned before proceeding with a rescission request. The trial court ruled likewise.
{¶29} However, an actual return of the approximately $1,000 was not required
before bringing the action. Tender, in this context, refers to an offer, not a completed
transaction. The case law speaks of return or offer to return. Cross, 161 Ohio St. at
475 (plaintiff offered to reassign their leasehold interest prior to filing suit; complaint
prayed that they be restored to their original position); Miller, 123 Ohio St. at 233-234
(complainant must offer to tender or to return any consideration); Columbus & T.R.
Co. v. Steinfeld, 42 Ohio St. 449, (1884) (in order to rescind contract, must pay back
or offer to return money received under contract). See also Berry, 127 Ohio St. 3d
480; Haller, 50 Ohio St. 3d at 14; Picklesimer, 151 Ohio St. at 4 (all speaking of return
or tender, in the alternative, not as synonyms).
{¶30} Here, the complaint alleged fraud in the inducement regarding an oil
and gas lease and asked for rescission (and an ancillary declaration to this effect). In
seeking a judgment for rescission of the lease, the complaint specifically sought an
enabling order expressly asking to return the status quo ante. This is an offer to
return to the parties to the pre-contractual status quo, which would necessarily
include returning the delay rental payments received. And after the election of
remedies, an affidavit was provided reiterating that plaintiff was ready, willing, and
able to return the minimal funds and testimony that he did physically reject the last
two annual payments.
{¶31} We conclude that there was a sufficient offer to return the money
received under the contract, especially considering the liberal pleading requirements
of today’s Civil Rules. The entry of summary judgment on the fraudulent inducement
claims (seeking rescission and declaratory judgment) is reversed, and this case is
remanded for further proceedings.
EPC’S ALTERNATIVE ARGUMENTS TO AFFIRMING
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{¶32} EPC sets forth two alternative arguments as to why we should affirm
the grant of summary judgment in its favor even if we reverse summary judgment
under appellant’s first assignment of error. Notably, Chesapeake does not join in
these alternative arguments for affirming.
{¶33} First, EPC states that the trial court’s summary judgment can be
affirmed because the complaint for rescission fails to show that there is a lack of an
adequate remedy at law and thus failed to state a claim. The fraudulent inducement
claim seeking rescission states, “Unless and until the lease is rescinded, the plaintiff
will have suffered irreparable harm for which he has no adequate remedy at law.”
EPC argues that the complaint must explain why there is no adequate remedy at law.
As they admit, they did not raise this argument below.
{¶34} Moreover, EPC provides no support for a requirement to explain the
lack of an adequate remedy at law when seeking rescission of a contract based upon
fraud in the inducement. The case law cited above contains no such requirement,
and EPC does not explain how this argument would coincide with the case law
allowing the plaintiff to elect between damages or rescission for fraudulent
inducement. See, e.g., Cross, 161 Ohio St. at 475 (“Where a contract has been
procured by fraud, the party defrauded may elect to have the contract set aside and
be restored to his original position, or he may sue for damages caused by the fraud
of the guilty party.”).
{¶35} In any event, as this matter was not raised to or ruled upon by the trial
court, we shall not delve into the topic. See, e.g., Bowen v. Kil-Kare, Inc., 63 Ohio
St.3d 84, 94, 585 N.E.2d 384 (1992) (not raised in summary judgment, not necessary
to address); Conny Farms, Ltd. v. Ball Resources Inc., 7th Dist. No. 12CO18, 2013-
Ohio-2874, ¶ 25; State ex rel. Conroy v. Williams, 185 Ohio App. 3d 69, 923 N.E.2d
191, 2009-Ohio-6040 (7th Dist.) (de novo review does not give parties a second
chance to raise arguments that they should have raised below).
{¶36} EPC’s other argument for upholding the grant of summary judgment
against appellant is that the decision of fraudulent inducement is moot because the
plaintiff set forth no appellate argument regarding the trial court’s decision on the
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quiet title claim. EPC focuses on the court’s statement that the plaintiff “has provided
this Court with no evidentiary basis to find that the Lease is an invalid cloud upon
title” and the court’s statement that “the Lease is a valid encumbrance.” EPC then
restates arguments from its summary judgment motion as to why summary judgment
should have been granted on the fraudulent inducement allegations (besides the
tender back argument).
{¶37} However, there is no indication that the trial court was ruling on the
fraudulent inducement claim in granting judgment on quiet title. The court did not rule
that the plaintiff failed to meet the summary judgment burden in showing an issue as
to the elements for fraudulent inducement. The court ruled against plaintiff’s
fraudulent inducement claim solely due to the perceived tender back issue.
{¶38} As to the quiet title claim, the court explained that a said action deals
with a cloud on the title rather than a mere encumbrance on the title. The court
stated: “The fourth claim of the amended complaint (quiet title) simply claims the
interest of EPC and Chesapeake and their assignees are adverse to the Yoskey.”
Notably, the quiet title claim did not mention fraudulent inducement or refer to the
paragraphs detailing the fraudulent inducement claim. (Compare Claims 1-3, which
all reassert fraudulent inducement and refer to ¶1-6 of the first claim, with Claim 4,
which merely states defendants claim interests adverse to plaintiff and then refers to
only to ¶1-2 rather than ¶1-6.) The court was disposing of the quiet title claim
because the complaint claim failed to allege anything but an encumbrance.
{¶39} In addition, since the lease was not rescinded for fraudulent inducement
due to the claimed lack of tender back, the lease was not a cloud on the title (even if
the quiet title portion of the complaint had been sufficient). That is, the court avoided
any analysis of the elements of fraudulent inducement by applying the tender back
rule and then could dispose of quiet title as a further domino effect of that holding.
Since the court’s judgment on quiet title was not an alternative basis to support the
entire summary judgment decision, appellant did not moot his appeal of the summary
judgment decision by failing to appeal matters never reached by the trial court.
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{¶40} As the trial court did not rule on the merits of the fraudulent inducement
allegations, EPC’s alternative argument on the elements of fraudulent inducement
shall not be considered. See, e.g., Bowen, 63 Ohio St. 3d at 89 (where the trial court
declined to address an issue due to another ruling, the Court held that the question
which had not been addressed was not properly before the appellate court); Murphy
v. Reynoldsburg, 65 Ohio St. 3d 356, 360, 604 N.E.2d 138 (1992) (de novo review
still entails a review of what the trial court decided; trial court initial determination
cannot be replaced by appellate court’s de novo review; remand to trial court); Tree
of Life Church v. Agnew, 7th DIst. No. 12BE42, 2014-Ohio-878, ¶ 27; Teeter v.
Teeter, 7th Dist. No. 13CA887, 2014-Ohio-1471, ¶ 38 (trial court found a summary
judgment motion issue moot, this court remanded for trial court to address in the first
instance after reversing other summary judgment). See also Mills-Jennings, Inc. v.
Dept. of Liquor Control (1982), 70 Ohio St. 2d 95, 99, 435 N.E.2d 407 (where trial
court legal ruling made further decisions on other issues unnecessary, reviewing
court, upon reversing that initial legal ruling, need not decide other issues).
{¶41} In other words, if a party raises ten arguments in a summary judgment
motion, the trial court adopts the first one, and the appellant assigns that position as
error, the appellee cannot require this court to address the nine other arguments by
arguing that the judgment can be affirmed on other grounds that the trial court never
reached. See id. See also Scalia v. Aldi, Inc., 9th Dist. No. 25436, 2011-Ohio-6596,
¶ 15; Orvets v. Natl. City Bank, Northeast, 131 Ohio App. 3d 180, 194, 722 N.E.2d
114 (9th Dist.1999). For these reasons, EPC’s alternative arguments are overruled.
ASSIGNMENT OF ERROR NUMBER TWO
{¶42} Appellant’s second assignment of error provides:
{¶43} “The trial court erred in entering summary judgment in Defendants’
favor on their ‘equitable tolling’ counterclaims.”
{¶44} After granting summary judgment to the defendants on appellant’s
remaining claims, the trial court found it reasonable and equitable to order the lease
tolled from the date the plaintiff filed suit on December 21, 2012 through the date of
the trial court’s judgment and the date any appeal is concluded. In making its
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decision, the trial court reviewed various cases. For instance, the court noted that
the Monroe County Common Pleas Court found that tolling the term of a lease was
equitable where the plaintiff unsuccessfully argued the lease was invalid due to
issues with the notarization. See Three Waters, LLC v. Northwood Energy Corp.,
Monroe C.P. 2012-042 (J.E. June 12, 2012) (finding lease valid). That court stated,
“each day the lawsuit pends decreases the period of time the Lessee has paid and
bargained for in which to choose to drill.” Id. See also HGN Fossil Fuels Co. v.
Roach, 103 N.M. 793, 715 P.2d 66 (1986) (finding that equitable tolling of the lease
was a matter of common sense).
{¶45} The trial court here also reviewed the federal Jicarilla case where the
trial court found a “technical” violation of a notice provision, ordered an adjusted
bonus instead of cancelling the leases, and tolled the lease term. In that case, the
plaintiff argued on appeal that the trial court erred in tolling the leases to extend
beyond their maximum term, which was set by a statute, but the Circuit Court
concluded that by seeking judicial cancellation of the lease, the plaintiff placed a
cloud on the title of the leaseholds and discouraged companies from proceeding to
fully develop. Jicarilla Apache Tribe v. Andrus, 687 F.2d 1324 (10th Cir.1982). It
was concluded that, in fairness, the running of the leases could be tolled based upon
equity regardless of the statutory maximum lease term. Id.
{¶46} The plaintiff in Jicarilla also argued that tolling was improper as their
allegations were not “wrongful;” however, the Circuit Court explained that tolling was
not to punish the plaintiff for suing but to restore the parties to the position they
previously occupied. Id., citing 2 E. Kuntz, Oil and Gas at 326-27 and H. Williams
and C. Meyers, Oil and Gas Law § 604.7, p. 82 (1980). The general rule was said to
be: “When a lessor actively asserts to a lessee that his lease is terminated or subject
to cancellation, the obligations of the lessee to lessor are suspended during the time
such claims of forfeiture are being asserted.” Id., citing Morrison Oil and Gas Co. v.
Burger, 423 F.2d 1178, 1182-83 (5th Cir.1970) and 2 E. Kuntz, Oil and Gas 324-26
(1964).
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{¶47} Appellant Yoskey argues that the mere filing of a suit to rescind an oil
and gas lease should not be considered sufficient evidence to toll the term of the
lease. He posits that without the imposition of a restraining order or other injunctive
relief pending the lawsuit, there was nothing preventing the companies from
developing the leasehold. He also asserts that the defendants provided no summary
judgment evidence on this topic besides the pleadings.
{¶48} The defendants respond that the complaint, answers, and
counterclaims are proper considerations in determining their tolling claim. See Civ.R.
56(C) (listing the pleadings as a type of summary judgment evidence). They note
that Civ.R. 56(A) provides that the movant can seek summary judgment, with or
without supporting affidavits. As the plaintiff acknowledges the equitable nature of
his claim, they add that a court asked to act in equity can fashion any remedy
appropriate to do justice in the particular case. See Allason v. Gailey, 189 Ohio
App.3d 491, 503, 2010-Ohio-4952, 939 N.E.2d 206, ¶ 49 (7th Dist.).
{¶49} The defendants point out that tolling acts to discourage a landowner
from filing suit (or delaying a suit) merely in order “run out the clock” on the lease.
They assert that the filing of a lawsuit to cancel an oil and gas lease obviously
prevents the lessees from drilling which warrants tolling of the lease term. Citing
Jicarilla, 687 F.2d 1324; HGN Fossil Fuels Co., 103 N.M. 793 (reversing trial court’s
refusal to toll after balancing the equities). They posit that the roots of tolling in Ohio
can be traced to an obstruction doctrine set forth in Hanna v. Shorts, 163 Ohio St. 44,
125 N.E.2d 338 (1955) (lessee can ask that lease be extended beyond the end of its
term if the acts of the lessor prevented or interfered with production).3
3
See also Ridge Oil Co., Inc. v. Guinn Investments, Inc., 47 Tex. Sup. Ct. J. 1080, 148 S.W.3d
143, 157 (2004) (doctrine of obstruction or repudiation relieves lessee of any obligation to conduct
operations on the land in order to maintain the lease in force pending a judicial resolution of the
controversy over the validity of the lease); Kothman v. Boley, 158 Tex. 56, 60, 308 S.W.2d 1 (1957)
(Supreme Court tolled lease until eight months after its judgment where the lessees wrongful claimed
leases terminated in an unequivocal letter sent eight months before the end of the primary term and
held, “Lessors who thus wrongfully repudiate the lessees' title by unqualified notice that the leases are
forfeited or have terminated cannot complain if the latter suspend operations under the contract
pending a determination of the controversy and will not be allowed to profit by their own wrong.”); Teon
Mgmt. LLC v. Turquoise Bay Corp., 357 S.W.3d 719, 730 (Tex.App.2011) (repudiation is a variation of
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{¶50} As this court is reversing and remanding due to the summary judgment
on the tender back issue, we conclude that the trial court’s tolling order is essentially
eliminated. The tolling issue was brought as a counterclaim and was set before the
trial court for decision at the same time summary judgment was sought on the
plaintiff’s complaint. In ruling on tolling (after entering summary judgment for the
defendants on the plaintiff’s claims), the trial court recognized that many cases “go to
some lengths in an attempt to balance the equities between the parties to the lease
based upon considerations of prejudice and whether the prevailing party was the
lessor or the lessee.”
{¶51} The trial court concluded by noting that it had disposed of the plaintiff’s
claims. The court then expressly announced that its tolling decision was in
accordance with the decisions “balancing the equities, which in part turned on
whether the party initiating the litigation ultimately prevailed.” The trial court thus
partially based its tolling decision on the fact that plaintiff did not ultimately prevail.
As our reversal on the tender back issue and remand of the case leaves no party as
prevailing, the trial court’s tolling decision no longer stands. The substantive
arguments presented under this assignment of error are therefore moot.
{¶52} For the foregoing reasons, the judgment of the trial court is reversed,
and the case is remanded for further proceedings.
Waite, J., concurs.
DeGenaro, P.J., concurs.
estoppel doctrine and exists when lessor asserts a clear, unequivocal challenge to lessee’s right in the
lease); NRG Exploration, Inc. v. Rauch, 671 S.W.2d 649, 652 (Tex.App.1984).