Tera, L.L.C. v. Rice Drilling D, L.L.C.
Ohio Supreme Court
Tera, L.L.C. v. Rice Drilling D, L.L.C., 2024 Ohio 1945 (Ohio 2024)
Stewart, J.
Tera, L.L.C. v. Rice Drilling D, L.L.C.
Opinion
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as Tera, L.L.C. v. Rice Drilling D, L.L.C., Slip Opinion No.2024-Ohio-1945
.]
NOTICE
This slip opinion is subject to formal revision before it is published in an
advance sheet of the Ohio Official Reports. Readers are requested to
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65
South Front Street, Columbus, Ohio 43215, of any typographical or other
formal errors in the opinion, in order that corrections may be made before
the opinion is published.
SLIP OPINION NO. 2024-OHIO-1945
TERA, L.L.C., APPELLEE, v. RICE DRILLING D, L.L.C., ET AL., APPELLANTS.
[Until this opinion appears in the Ohio Official Reports advance sheets, it
may be cited as Tera, L.L.C. v. Rice Drilling D, L.L.C., Slip Opinion No.
2024-Ohio-1945.]
Contracts—Mineral rights—Summary judgment—Lease terms—Extrinsic
evidence—Because there remained genuine issues of material fact to be
litigated, neither party is entitled to judgment as a matter of law—Court of
appeals’ judgment reversed and cause remanded to trial court.
(No. 2023-0411—Submitted November 14, 2023—Decided May 23, 2024.)
APPEAL from the Court of Appeals for Belmont County, No. 21 BE 0047,
2023-Ohio-273.
__________________
STEWART, J.
{¶ 1} In this discretionary appeal from a judgment of the Seventh District
Court of Appeals, we are asked to determine whether a lease between appellee,
Tera, L.L.C., and appellants, Rice Drilling D, L.L.C., and Gulfport Energy
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Corporation, granting to appellants certain mineral rights in “the formation[]
commonly known as * * * the Utica Shale” beneath Tera’s land included the right
for appellants to drill wells into a geological area known as the “Point Pleasant.”
We are also asked to determine whether there was sufficient evidence to sustain the
trial court’s award of summary judgment to Tera on its bad-faith-trespass claim
against appellants. Because we conclude that there is a genuine issue of material
fact regarding the meaning of certain terms in the lease, we reverse the judgment
of the Seventh District and remand the case to the trial court for further proceedings.
Facts and Procedural History
{¶ 2} This case centers on the interpretation of a lease by which Thomas
Shaw agreed to lease to Rice Drilling1 mineral rights for geological formations
beneath the surface of Shaw’s land in Belmont County. Tera is Shaw’s successor-
in-title to the mineral rights. The relevant lease language granting the mineral rights
to Rice Drilling (“the grant clause”) reads:
Lessor, in consideration of the payments described herein
and the covenants and agreements hereafter contained, hereby leases
and lets exclusively to [Rice Drilling] all the oil, gas, minerals and
their constituents (not including coal) in the formations commonly
known as the Marcellus Shale and the Utica Shale, underlying the
land described below for the sole purpose of exploring for, drilling,
operating, producing and gathering the oil, gas, casinghead gasoline
and all other gases and their respective vapors, liquid or gaseous
hydrocarbons produced in association therewith other than as
reserved unto Lessor below.
1. The court of appeals’ decision states that Rice Drilling thereafter assigned a percentage of its
leased mineral interest to appellant Gulfport Energy. 2023-Ohio-273,205 N.E.3d 1168, ¶ 8
.
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(Emphasis added.) The relevant lease language reserving certain mineral rights to
the lessor (originally Shaw, now Tera) (“the reservation clause”) reads:
Lessor reserves all rights not specifically granted to Lessee
in this Lease. Lessor specifically reserves the rights to all products
contained in any formation: (1) from the surface of the Leased
Premises to the top of the formation commonly known as the
Marcellus Shale, (2) in any and all formations below the base of the
Marcellus Shale to the top of the formation commonly known as the
Utica Shale, and (3) in all formations below the base of the Utica
Shale.
{¶ 3} In 2017, Tera filed the underlying suit against appellants in the
Belmont County Common Pleas Court. Relevant here are Tera’s bad-faith-trespass
and conversion claims against appellants. In support of those claims, Tera alleged
that appellants had intentionally drilled six wells beneath Tera’s property into the
Point Pleasant formation, which it said falls outside of the Utica Shale formation
and beyond the bounds of the mineral rights leased to appellants by Tera.
{¶ 4} The parties filed cross-motions for summary judgment on Tera’s
trespass and conversion claims. The trial court awarded summary judgment to Tera
on both claims. In doing so, it stated that “it is undisputed that the Point Pleasant
Formation is the geological formation immediately below the Utica Shale
formation,” and it concluded that the lease contained “clear and unequivocal words
of limitation” that granted “rights solely to the Marcellus and Utica formations”
and reserved “rights to all formations above and below those [formations].” The
trial court also stated, “Even construing the available evidence most strongly in
favor of [appellants], they have not offered any sufficient evidence” to demonstrate
that the lease granted them the right to take oil and gas from the Point Pleasant.
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The trial court limited its summary-judgment decision to the question of appellants’
liability for trespass and conversion, leaving the question of damages for trial.
{¶ 5} Prior to a trial on damages, both Tera and appellants moved for partial
summary judgment on the question whether appellants’ trespass had been in bad
faith. The trial court granted summary judgment to Tera on that issue, concluding
that appellants had “knowingly, willfully, and recklessly drilled their wells into the
Point Pleasant.” This conclusion was primarily based on the trial court’s finding
that the lease language “could not be any clearer—the lease was limited to just the
Marcellus Shale and Utica Shale, and the Point Pleasant Formation was not
conveyed or leased” and that appellants’ interpretation of the lease was therefore
unreasonable. Based on its determination that appellants had trespassed in bad
faith, the trial court stated that “the damages owed to [Tera were] to be calculated
without any deduction for the cost of drilling, operating, transporting, and any other
expense incurred in removing the oil and gas from [Tera’s] property.” A jury trial
proceeded on the issue of damages, and the jury found that Tera was entitled to net
damages in the amount of $40,129,357.62.
{¶ 6} The Seventh District affirmed. 2023-Ohio-273,205 N.E.3d 1168, ¶ 52
. In a split decision, it concluded that the lease language at issue was
unambiguous, id. at ¶ 49-51, and that the phrase “Utica Shale” had a “technical
stratigraphic meaning,” id. at ¶ 50. Its reasoning was similar to that of the trial
court:
It is undisputed that the Point Pleasant is a formation below the Utica
Shale. Consequently, we find that Shaw unambiguously reserved
the Point Pleasant formation from the lease. To the extent that
ambiguity exists with the “grant of lease” provision, we conclude
that it is clarified by the plain language of the reservation section.
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Finally, insofar as the contract language is unambiguous, we need
not consider any parol evidence.
Id. at ¶ 51. The dissenting judge concluded that “[t]he plain language of the lease
clearly granted [appellants] rights in the Point Pleasant formation after employing
extrinsic evidence on the specialized meaning of certain terminology used in the
lease.” Id. at ¶ 136 (Robb, J., dissenting).
{¶ 7} This court accepted appellants’ discretionary appeal on the following
propositions of law:
1. Gas leases are no exception to this court’s precedents
requiring that courts consider evidence of common meaning.
2. “Bad faith” trespass in energy cases—as in other cases—
turns on subjective intent.
See 170 Ohio St.3d 1441,2023-Ohio-1830
,210 N.E.3d 545
.
Analysis
{¶ 8} Under their first proposition of law, appellants ask this court to
interpret the phrase “the formation commonly known as the Utica Shale” in the
lease according to its common meaning, which, appellants argue, includes the Point
Pleasant.2 Appellants assert that we should reverse the court of appeals’ judgment
and enter summary judgment in their favor or, in the alternative, remand the case
to the trial court so that a jury can determine the meaning of the lease.
2. In the parties’ briefs here and in the decisions of the trial court and the court of appeals below,
the Point Pleasant is also referred to as the “Point Pleasant Formation” or “Point Pleasant
formation.” This court’s use of any particular phrase in that regard is only to describe the arguments
presented and is not meant to accord any significance to a particular phrase.
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{¶ 9} Tera argues in response that the trial court and the court of appeals
correctly concluded that the lease is unambiguous because the technical, geological
meaning of the phrase “Utica Shale” excludes the Point Pleasant formation.
Accordingly, Tera argues that this court should affirm the court of appeals’
judgment.
{¶ 10} The issues in this appeal were decided below on summary judgment.
Appellate review of summary-judgment decisions is de novo. Grafton v. Ohio
Edison Co., 77 Ohio St.3d 102, 105,671 N.E.2d 241
(1996). Under Civ.R. 56(C),
summary judgment may be granted if it is determined 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; and
(3) it appears from the evidence that reasonable minds can come to
but one conclusion, and viewing such evidence most strongly in
favor of the party against whom the motion
for summary judgment is made, that conclusion is adverse to that
party.
Temple v. Wean United, Inc., 50 Ohio St.2d 317, 327,364 N.E.2d 267
(1977).
{¶ 11} Oil and gas leases are contracts and are subject to the traditional rules
of contract interpretation. Lutz v. Chesapeake Appalachia, L.L.C., 148 Ohio St.3d
524,2016-Ohio-7549
,71 N.E.3d 1010, ¶ 11
; see also Harris v. Ohio Oil Co.,57 Ohio St. 118
, 129,48 N.E. 502
(1897). We have explained:
When confronted with an issue of contract interpretation, our
role is to give effect to the intent of the parties. We will examine
the contract as a whole and presume that the intent of the parties is
reflected in the language of the contract. In addition, we will look
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January Term, 2024
to the plain and ordinary meaning of the language used in the
contract unless another meaning is clearly apparent from the
contents of the agreement. When the language of a written contract
is clear, a court may look no further than the writing itself to find
the intent of the parties.
Sunoco, Inc. (R&M) v. Toledo Edison Co., 129 Ohio St.3d 397,2011-Ohio-2720
,953 N.E.2d 285
, ¶ 37. “ ‘As a matter of law, a contract is unambiguous if it can be given a definite legal meaning.’ ”Id.,
quoting Westfield Ins. Co. v. Galatis,100 Ohio St.3d 216
,2003-Ohio-5849
,797 N.E.2d 1256, ¶ 11
.
{¶ 12} “Extrinsic evidence is admissible to ascertain the intent of the parties
when the contract is unclear or ambiguous, or when circumstances surrounding the
agreement give the plain language special meaning.” Graham v. Drydock Coal
Co., 76 Ohio St.3d 311, 313-314,667 N.E.2d 949
(1996). “ ‘If a contract is clear and unambiguous, then its interpretation is a matter of law and there is no issue of fact to be determined.’ ” Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm,73 Ohio St.3d 107, 108
,652 N.E.2d 684
(1995), quoting Inland Refuse Transfer Co. v. Browning-Ferris Industries of Ohio, Inc.,15 Ohio St.3d 321, 322
,474 N.E.2d 271
(1984). But terms in a contract are ambiguous when they are susceptible to more than one reasonable interpretation. See Motorists Mut. Ins. Co. v. Ironics, Inc.,168 Ohio St.3d 467
,2022-Ohio-841
,200 N.E.3d 149, ¶ 14
. It is generally the role of the fact-finder to resolve any ambiguity in a contract. Westfield Ins. Co. at ¶ 13. In other words, whether a contract is ambiguous is a question of law, but the resolution of an ambiguous term in a contract is a question of fact. McOmber v. Liebrecht, 3d Dist. Van Wert No. 15-22-05,2023-Ohio-2019, ¶ 29
; Atelier Dist.,
L.L.C. v. Parking Co. of Am., Inc., 10th Dist. Franklin No. 07AP-87, 2007-Ohio-
7138, ¶ 17.
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{¶ 13} In the lease at issue, the phrase “Point Pleasant” is not found within
the four corners of the lease. The operative question, then, is whether the phrase
“the formation[] commonly known as * * * the Utica Shale,” as used in the lease to
describe the mineral rights leased, can reasonably be read to include the Point
Pleasant.
{¶ 14} The trial court found that the plain language of the lease clearly did
not grant appellants the mineral rights for the Point Pleasant. To reach that
conclusion, however, the trial court necessarily relied on evidence outside the four
corners of the agreement to determine that the Point Pleasant was beneath the Utica
Shale and thus was not part of “the formation[] commonly known as * * * the Utica
Shale,” because nothing in the agreement itself indicates that the Point Pleasant is
not part of the formation commonly known as the Utica Shale. The trial court stated
that “it is undisputed that the Point Pleasant Formation is the geological formation
immediately below the Utica Shale formation,” and it determined that the
reservation clause in the lease—which reserved to Tera the mineral rights “in all
formations below the base of the Utica Shale”—demonstrated the parties’ intent to
limit the mineral rights granted to appellants under the lease to only those for the
Marcellus Shale and Utica Shale formations. But the stratigraphic location of the
Point Pleasant—meaning its geologic location within the layers of rock or
sediment—as understood by the parties today does not answer the question whether
the Point Pleasant was considered part of the formation commonly known as the
Utica Shale when the parties entered into the lease. And because the lease does not
expressly refer to the Point Pleasant, its plain language does not answer the question
whether the Point Pleasant was meant by the parties to be included in what they
referred to as “the[] formation commonly known as * * * the Utica Shale.” Without
language in the lease specifically demonstrating the parties’ understanding of the
stratigraphic location of the Point Pleasant or whether they intended for the Utica
Shale to include the Point Pleasant, the lease itself offers no guidance on the
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question whether the parties had agreed that the Point Pleasant was part of the Utica
Shale.
{¶ 15} Moreover, in finding that the parties to the lease did not intend for it
to grant appellants the right to take oil and gas from the Point Pleasant, the trial
court stated that “[e]ven construing the available evidence most strongly in favor
of [appellants], [appellants] have not offered any sufficient evidence to the
contrary.” This language suggests that the court did consider and weigh evidence
outside the lease in reaching its conclusion. Even if the trial court merely
considered “the available evidence” in an effort to understand a technical term, it
appears that it nonetheless conducted fact-finding rather than simply determining,
for purposes of summary judgment, whether a disputed fact existed. That is not a
permissible action by a trial court at the summary-judgment stage. See Dupler v.
Mansfield Journal Co., Inc., 64 Ohio St.2d 116, 121,413 N.E.2d 1187
(1980) (noting that a court considering summary judgment “may not weigh the proof or choose among reasonable inferences”); see also Marshall v. Colonial Ins. Co., 7th Dist. Mahoning No. 15 MA 0169,2016-Ohio-8155, ¶ 48
; Telecom Acquisition Corp. I, Inc. v. Lucic Ents., Inc.,2016-Ohio-1466
,62 N.E.3d 1034
, ¶ 93 (8th Dist.);
Finn v. Nationwide Agribusiness Ins. Co., 3d Dist. Allen No. 1-02-80, 2003-Ohio-
4233, ¶ 7.
{¶ 16} The court of appeals agreed with the trial court that the lease
language was unambiguous. It concluded that the words “commonly known as”
within the phrase “the formation[] commonly known as * * * the Utica Shale” were
intended to “simply memorialize[] the rule of contract interpretation that obliges a
court to rely on the common meaning of words, unless doing so would cause an
absurd result,” 2023-Ohio-273,205 N.E.3d 1168, at ¶ 50
. The court of appeals also
concluded that if the phrase “commonly known as” created any ambiguity in the
lease, the meaning was clarified by the lease’s reservation clause. Id. at ¶ 51.
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Therefore, the court concluded, it was not necessary to consider any parol evidence.
Id.
{¶ 17} Again, neither the grant clause nor the reservation clause of the lease
expressly mentions the Point Pleasant. Nor does the lease language answer the
question whether the parties intended for the Point Pleasant to be considered part
of the Utica Shale when the lease was executed. Even if we were to accept the
court of appeals’ determination that the phrase “commonly known as” was simply
meant to “memorialize” a contract-interpretation principle, we would still have to
look outside the four corners of the lease to determine whether the common
meaning of the phrase “the formation[] commonly known as * * * the Utica Shale”
included the Point Pleasant. In other words, were the lower courts relying on the
common meaning or the technical, stratigraphic meaning of “Utica Shale”? Or
could the lower courts say, with certainty and without turning to extrinsic evidence,
that the common meaning of the phrase “Utica Shale” when the parties entered into
the lease was the same as its technical, stratigraphic meaning? Because the answers
to those questions remain unclear, we are not persuaded that the lease language
clearly established that the Point Pleasant was or was not to be considered part of
the Utica Shale.
{¶ 18} The judge dissenting from the court of appeals’ decision asserted
that extrinsic evidence was properly considered to construe a term within the
lease—“Utica Shale”—that had a special meaning and that the evidence
demonstrated that the special meaning of “Utica Shale” when the lease was entered
into included the Point Pleasant. 2023-Ohio-273 at ¶ 136-141, 146 (Robb, J.,
dissenting). But Tera cites extrinsic evidence that it contends demonstrates the
opposite conclusion. Thus, even when considering extrinsic evidence to understand
the special, industry meaning of the phrase “Utica Shale” as it relates to the Point
Pleasant, we cannot discern a clear legal meaning intended by the parties. All we
can discern is that the lease is reasonably susceptible to different interpretations.
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Because both interpretations are reasonable, we cannot give the phrase “Utica
Shale” a definite legal meaning based on the lease language alone. Therefore, we
conclude that the lease is ambiguous.
{¶ 19} Resolving the meaning of ambiguous terms in a contract is a matter
of factual determination for the fact-finder. See Davis v. Loopco Industries, Inc.,
66 Ohio St.3d 64, 66,609 N.E.2d 144
(1993). We have noted that “the purpose of summary judgment is ‘not to try issues of fact, but rather to determine whether triable issues of fact exist.’ ” Smathers v. Glass,172 Ohio St.3d 84
, 2022-Ohio- 4595,222 N.E.3d 554, ¶ 3
, quoting Viock v. Stowe-Woodward Co.,13 Ohio App.3d 7, 15
,467 N.E.2d 1378
(6th Dist. 1983). Rather than weighing the evidence, a court
considering summary judgment must construe the evidence in favor of the
nonmoving party, including when drawing inferences from facts or resolving
factual ambiguities or inconsistencies. See id. at ¶ 32.
{¶ 20} Here, the parties’ filings and arguments demonstrate that triable
issues of fact remain regarding whether they intended for the Point Pleasant to be
considered part of “the formation[] commonly known as * * * the Utica Shale”
when they entered into the lease. As the court of appeals noted, both parties
submitted multiple expert reports on that issue. 2023-Ohio-273,205 N.E.3d 1168, at ¶ 48
. Their briefs refer to conflicting evidence from numerous depositions and
other sources on the topic, including evidence regarding what the parties negotiated
and what they understood at the time they entered into the lease, how the Ohio
Department of Natural Resources had referred to the geological formations in its
publications and forms, and how the geologic formations had been referred to by
members of the public and the news media and industry representatives. To
determine from all of that information the definitive legal meaning that the parties
intended by the lease language would require this court to step into the role of fact-
finder and weigh the credibility of the witnesses and draw inferences from the
evidence. But it is no more proper for this court to weigh evidence and the
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credibility of witnesses to decide issues of fact at the summary-judgment stage than
it is for a trial court to do so.3 A jury may very well come to the same conclusion
as Tera and the dissent about the meaning of the lease’s terms, but that is precisely
the role of the jury in a case involving disputed facts, and such disputes cannot be
resolved on summary judgment. Because there remain genuine issues of material
fact to be litigated, we are unable to conclude that either party is entitled to
judgment as a matter of law. Accordingly, we reverse the judgment of the Seventh
District and remand the case to the trial court for further proceedings.
{¶ 21} Appellants’ second proposition of law concerns Tera’s bad-faith-
trespass claim and, more specifically, appellants’ assertion that the trial court and
the court of appeals improperly determined that appellants acted in bad faith based
merely on the court’s conclusion that the lease language did not grant appellants
the mineral rights to the Point Pleasant formation beneath Tera’s land. Although
the court of appeals recognized that “[t]he question of good faith is an issue of
ultimate fact as to whether or not there was bona fide belief of right in the action
taken and complained of, to be arrived at by the trier of facts from all the relevant
material evidence adduced in the case,” id. at ¶ 55, citing Bamer v. Tiger, Inc., 5th
Dist. Muskingum No. CA-86-17, 1987 WL 11004 (May 8, 1987), it nonetheless
concluded that based on its resolution of the lease language, “there [was] no set of
facts by which [appellants] could demonstrate a good faith belief of right to drilling
into and extracting minerals from the Point Pleasant,” id. at ¶ 57. Because that
conclusion depended on the court of appeals’ judgment with respect to the lease
language, which we reverse, we must also reverse the court of appeals’ judgment
3. The dissent argues that everyone knows what the Point Pleasant formation is and where it lies
and that it was clearly excluded from the lease. The dissent’s confidence in determining that fact
for the parties is inspiring. But the question here is not what the Point Pleasant is or how its location
is defined today. The question is what did the parties to the lease intend by the phrase “the
formations commonly known as the Marcellus Shale and the Utica Shale,” without there being any
mention in the lease of the Point Pleasant formation by name and, more importantly, whether that
question should ultimately be determined by this court or by the fact-finder.
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on appellants’ second assignment of error below (which correlates to their second
proposition of law here) and remand the case to the trial court for further
proceedings on that issue.
Conclusion
{¶ 22} For the foregoing reasons, we reverse the judgment of the Seventh
District Court of Appeals affirming the trial court’s grants of summary judgment to
Tera, and we remand the case to the trial court.
Judgment reversed
and cause remanded.
FISCHER, DONNELLY, and EKLUND, JJ., concur.
DEWINE, J., dissents, with an opinion joined by KENNEDY, C.J., and
DETERS, J.
JOHN J. EKLUND, J., of the Eleventh District Court of Appeals, sitting for
BRUNNER, J.
_________________
DEWINE, J., dissenting.
{¶ 23} This is a case about a lease that granted mineral rights to only a
specific portion of a landowner’s subsurface estate. By failing to construe the lease
as a whole and by misapplying the summary judgment standard, the majority
incorrectly concludes that the lease is ambiguous. It reverses the judgment of the
courts below and remands the case for a jury to consider extrinsic evidence about
the contract’s meaning. I would not. Because the lease is unambiguous, I would
uphold the trial court’s grant of summary judgment in favor of the landowner.
The Lease Is Unambiguous
{¶ 24} Thomas Shaw leased to Rice Drilling D, L.L.C., the mineral rights
to a specific portion of his subsurface property. Shaw’s remaining rights are now
held by Tera, L.L.C., and Gulfport Energy Corporation now apparently holds a
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portion of Rice Drilling’s rights. To keep things simple, I will refer to the opposing
parties simply as the landowner and the drilling companies.
{¶ 25} The underlying question in this case is straightforward: Did the
lease, by granting the drilling companies the right to drill into the geological
formation known as the Utica Shale, also grant the drilling companies the right to
drill into the geologically distinct Point Pleasant formation?
{¶ 26} There is no dispute about the locations of the respective geological
formations. The experts in this case agreed on the Utica Shale’s basic geological
meaning. The Utica Shale is all the strata between the Kope and Point Pleasant
formations. The Seventh District Court of Appeals below noted that both sides also
agree that as a matter of geology, the Point Pleasant formation lies below the base
of the Utica Shale. See 2023-Ohio-273,205 N.E.3d 1168, ¶ 51
. And an expert for
each side confirmed that the Ohio Department of Natural Resources identified the
Utica Shale and the Point Pleasant formation as distinct formations at the time the
lease was signed.
{¶ 27} The lease identified the parameters of the subsurface property leased
to the drilling companies in two separate—but complementary—ways. First, the
granting clause defined the subsurface areas that were leased to the drilling
companies. And in a belt-and-suspenders approach, the reservation clause defined
the subsurface areas that were not leased to the drilling companies but were instead
retained by the landowner. Both provisions make clear that the Point Pleasant
formation was not part of the subsurface area granted to the drilling companies.
{¶ 28} In the granting clause, the landowner leased to the drilling
companies mineral rights “in the formations commonly known as the Marcellus
Shale and the Utica Shale.” And in the reservation clause, the landowner reserved
for himself all rights not specifically granted to Rice Drilling in the lease and “all
products contained in any formation: * * * (3) in all formations below the base of
the Utica Shale.” Thus, the granting clause makes clear that the drilling companies
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did not have rights to the Point Pleasant formation, because the formation is not
part of the “Marcellus Shale and the Utica Shale.” The reservation clause makes
this doubly clear: it reserves to the landowner all formations below the base of the
Utica Shale, and the Point Pleasant formation is indisputably below the Utica Shale.
A covenant-and-entireties clause reinforces this understanding, providing that “[the
drilling companies] will utilize current and future technologies to * * * maximize
production recovery of all the oil and gas resources contained in the Marcellus
Shale and Utica Shale * * *.” (Emphasis supplied.)
{¶ 29} The drilling companies’ only response to this plain reading of the
contract is to argue that the “commonly known as” modifier in the granting clause
changes the plain meaning of the contract. In their view, the phrase “commonly
known as” demonstrates that the parties meant to reject the geological meaning of
Utica Shale and instead adopt a colloquial meaning of the term. In support of this
argument, they rely on a handful of news articles and other anecdotal materials in
which they contend that the term “Utica Shale” was sometimes loosely used in a
manner that also included the Point Pleasant formation. The landowner counters
that when read as a whole, the contract is plain and unambiguous and that the phrase
“commonly known as” was simply used to reflect that the Utica Shale has different
names depending on the area of the country in which it is found.
{¶ 30} I don’t find persuasive the drilling companies’ argument that
extrinsic evidence establishes that the parties intended to give a colloquial and
imprecise meaning to the term “Utica Shale.” To start, extrinsic evidence is only
admissible if a contract is ambiguous. Graham v. Drydock Coal Co., 76 Ohio St.3d
311, 313-314,667 N.E.2d 949
(1996). The first question, then, is whether the lease
is ambiguous. It is not.
{¶ 31} “One cannot really determine if a phrase is ambiguous on its own,
because interpretation is contextual.” Caleb Nelson, Statutory Interpretation 101;
see also Scalia & Garner, Reading Law: The Interpretation of Legal Texts 167
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(2012) (“Context is a primary determinant of meaning”). And here, context weighs
heavily against the drilling companies’ argument. The idea that the parties intended
a loose, colloquial meaning of Utica Shale does not square with the contract when
read as a whole.
{¶ 32} Ordinarily, oil and gas contracts lease the rights to all subsurface
geological formations. See, e.g., K & D Farms, Ltd. v. Enervest Operating, L.L.C.,
5th Dist. Stark No. 2015CA00038, 2015-Ohio-4475, ¶ 29. But this lease was
unusual. The landowner only leased the rights to specific portions of the subsurface
area. Not surprisingly, then, the contract defines the areas that are the subjects of
the lease with precise geological terms. The reservation clause, for example,
reserves to the landowner “all products contained in any formation: (1) from the
surface of the Leased Premises to the top of the formation commonly known as the
Marcellus Shale, (2) in any and all formations below the base of the Marcellus
Shale to the top of the formation commonly known as the Utica Shale, and (3) in
all formations below the base of the Utica Shale.” (Emphasis supplied.) Quite
simply, the loose, colloquial meaning of Utica Shale proffered by the drilling
companies is at odds with the highly specific language used to detail the precise
geological contours of the parties’ rights throughout the lease.
{¶ 33} The drilling companies might have a stronger argument if the lease
simply granted them the rights to drill into the geological area “commonly known
as the Utica Shale.” But the words “the formation” precede the phrase “commonly
known as.” The plain and ordinary meaning of “formation” is “any igneous,
sedimentary, or metamorphic rock represented as a unit in geological mapping.”
Webster’s Third New International Dictionary 893 (1993). It was undisputed at
the time the contract was signed—and remains undisputed today—that the Utica
Shale and the Point Pleasant formation constitute two distinct formations. It would
be illogical to say that the right to drill into “the formation commonly known as the
Utica Shale” includes the right to drill into multiple formations.
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January Term, 2024
{¶ 34} Also problematic for the drilling companies is the fact that under the
reservation clause, the landowner reserved the rights to all products “in all
formations below the base of the Utica Shale.” The “commonly known as”
language is not included in this portion of the reservation clause. Thus, to accept
the drilling companies’ argument requires one to assume either that the granting
clause trumps the reservation clause, or that the clauses set forth inconsistent rights.
There is no textual basis for the first assumption. And adopting the second
assumption would mean that the landowner granted the drilling companies the right
to drill into the Point Pleasant formation and at the same time reserved for himself
all rights in the Point Pleasant formation—a nonsensical result.
{¶ 35} Finally, the lease suggests that the parties explicitly recognized a
potential need for the landowner to drill through the Utica Shale to reach the Point
Pleasant formation. The reservation clause provides, “[Landowner] also reserves
the right to drill through any leased shale(s) subject to [the drilling companies’]
approval which shall not be unreasonably withheld * * *.” While not dispositive
by itself, the inclusion of this language is another indication that the parties
understood that the landowner was retaining rights to the formations—such as the
Point Pleasant formation—that lie below the Utica Shale.
{¶ 36} In finding the lease ambiguous, the majority fixates on the phrase
“commonly known as” to the exclusion of the rest of the contractual language. But
that’s not the way that we read contracts. See Great Lakes Bar Control, Inc. v
Testa, 156 Ohio St.3d 199,2018-Ohio-5207
,124 N.E.3d 803, ¶ 9
(“Evaluating the
context in which a word is written is essential to a fair reading of the text”); see
also Scalia & Garner, Reading Law at 56. When the contract is read as a whole,
there is no ambiguity.
{¶ 37} The majority misses this point. It neglects to consider the contract
as a whole and instead jumps to the conclusion that extrinsic evidence is required
to understand the meaning that the parties ascribed to the terms of the contract. But
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SUPREME COURT OF OHIO
where there is no ambiguity, a foray into extrinsic evidence is inappropriate.
Graham, 76 Ohio St.3d at 313-314,667 N.E.2d 949
.
The Majority Misapplies the Summary Judgment Standard
{¶ 38} Other than its laser focus on a single phrase, the majority does not
seriously engage with the language of the contract in its determination of ambiguity.
Instead, it concludes that the trial court was confronted with a question of fact for
the jury because the lease fails to specifically reference the Point Pleasant
formation. In so concluding, the majority states, “[T]he trial court necessarily relied
on evidence outside the four corners of the agreement * * *, because nothing in the
agreement itself indicates that the Point Pleasant is not part of the formation
commonly known as the Utica Shale.” Majority opinion, ¶ 14. And the majority
reasons that “because the lease does not expressly refer to the Point Pleasant, its
plain language does not answer the question whether the Point Pleasant was meant
by the parties to be included in what they referred to as ‘the[] formation commonly
known as the * * * Utica Shale.’ ” (Brackets and ellipsis in original.) Id. at ¶ 14.
The finding of ambiguity seems to rely wholly on the fact that it is necessary to
look outside the four corners of the contract to understand that the Point Pleasant
formation is not part of the Utica Shale.
{¶ 39} Such analysis is overly simplistic and misstates the proper role of a
court in interpreting a contract for purposes of a motion for summary judgment.
“The construction of written contracts and instruments of conveyance is a matter of
law.” Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241,374 N.E.2d 146
(1978), paragraph one of the syllabus. “As a matter of law, a contract is unambiguous if it can be given a definite legal meaning.” Westfield Ins. Co. v. Galatis,100 Ohio St.3d 216
,2003-Ohio-5849
,797 N.E.2d 1256, ¶ 11
. It is only when a court determines that a contract is ambiguous that it is proper for a jury to consider extrinsic evidence of the parties’ intent. SeeGraham at 313-314
. But if
the evidence is so clear and one-sided that no reasonable person would determine
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January Term, 2024
the disputed issue in any way but one, the court is well within its authority to decide
the question as a matter of law. 5 Corbin on Contracts, Section 24.30
(Rev.Ed. 2018); see also Buckeye Pipe Line at 248.
{¶ 40} The majority rests its determination of ambiguity on the fact that it
is necessary to look outside the four corners of the contract to understand that the
Point Pleasant formation is not part of the Utica Shale. But that makes little sense.
Imagine a contract that gave a party the right to distribute a product in Ohio. A
judge in Ashtabula might not know that Wapakoneta is part of Ohio and might need
to look at a map to determine that the contract included the right to distribute the
product in Wapakoneta. But nobody would argue that because a judge had to look
outside the four corners of a contract to ascertain the universally agreed-upon
meaning of a term, the contract was ambiguous. Similarly, there should be no
objection here to looking at widely agreed-upon geological definitions and
stratigraphic maps to understand the geological terms in the lease.
{¶ 41} Indeed, it is commonly understood that a judge may consult
dictionaries and other similar materials outside the four corners of a contract to
determine the meaning of its terms. See, e.g., Buckeye Pipe Line at 247-248
(relying on a dictionary to ascertain the meaning of undefined terms in an oil and
gas lease); see also In re Envirodyne Industries, 29 F.3d 301, 305 (7th Cir. 1994)
(“Cases in which courts use [dictionaries and similar materials] to interpret
contractual or statutory provisions are legion”).
{¶ 42} The majority also accuses the trial court of improperly
“consider[ing] and weigh[ing] evidence.” Majority opinion at ¶ 15. As the basis
for this claim, it points to the trial court’s statement that “[e]ven construing the
available evidence most strongly in favor of [the drilling companies], [they] have
not offered any sufficient evidence to the contrary.” But despite what the majority
says, the trial court did exactly what it was supposed to do. When a trial court
evaluates a motion for summary judgment, “the evidence must be construed most
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SUPREME COURT OF OHIO
strongly in favor of the nonmoving party.” Bliss v. Johns Manville, 172 Ohio St.3d
367,2022-Ohio-4366
,224 N.E.3d 22
, ¶ 13. So what the majority complains about is simply a straightforward application of the summary judgment standard. The trial court’s statement that the drilling companies had not offered sufficient evidence to the contrary did not constitute an improper weighing of the evidence but simply conveyed the court’s assessment that the evidence presented was not sufficient to create a genuine issue of material fact for trial. Such an analysis is appropriate; indeed, it is required. See Civ.R. 56; see also Buckeye Pipe Line,53 Ohio St.2d at 248
,374 N.E.2d 146
(trial court’s interpreting a contract on summary
judgment as a matter of law was proper when affidavit submitted by nonmoving
party provided meanings of terms as used in oil and gas industry, and evidence was
insufficient to raise a genuine issue of material fact).
{¶ 43} The trial court acted well within the proper standards for interpreting
a contract as a question of law on a motion for summary judgment. The court
examined the contract and determined its unambiguous language constituted “a
grant of rights solely to the Marcellus and Utica formations.” The court also noted
that it was “undisputed that the Point Pleasant formation is the geological formation
immediately below the Utica Shale formation.” Thus, the court found that “by the
plain language [of the contract], [the drilling companies] acquired no interest in the
oil and/or gas in the Point Pleasant formation.” The trial court didn’t weigh the
evidence—it applied the plain language of the contract to the undisputed evidence
and concluded that the landowner was entitled to judgment as a matter of law.
{¶ 44} Thus, unlike the majority, I would affirm the judgment of the court
of appeals upholding the trial court’s grant of summary judgment in favor of the
landowner on the contract issue.
Good-Faith Trespass
{¶ 45} I also find no error in the trial court’s grant of summary judgment on
the issue of good-faith trespass. Under Ohio law, the act of trespass creates a
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January Term, 2024
presumption of willfulness and places the burden on the trespasser to prove that he
acted in good faith. See Athens & Pomeroy Coal & Land Co. v. Tracy, 22 Ohio
App. 21, 31,153 N.E. 240
(4th Dist. 1925), aff’d,115 Ohio St. 298
,152 N.E. 641
(1926); see also Brady v. Stafford,115 Ohio St. 67
,152 N.E. 188
(1926). The drilling companies contend that the question whether one has trespassed in good faith is purely a subjective inquiry. But our caselaw is to the contrary. See State ex rel. Ohio History Connection v. Moundbuilders Country Club Co.,171 Ohio St.3d 663
,2022-Ohio-4345
,220 N.E.3d 678, ¶ 32
(question of good faith or bad faith includes an objective standard that requires consideration of whether one acted reasonably under the circumstances in addition to considering whether one acted honestly); Brady v. Stafford,115 Ohio St. 67
,152 N.E. 188
(1926), paragraph four
of the syllabus (good-faith trespass requires a bona fide belief that trespasser has a
right to take minerals). The trial court properly found that in light of the
unambiguous contract and the other materials submitted in support of summary
judgment that the drilling companies did not have a reasonable claim of right to
exploit the Point Pleasant formation.
Conclusion
{¶ 46} The judgment of the court of appeals should be affirmed. Because
the majority does otherwise, I respectfully dissent.
KENNEDY, C.J., and DETERS, J., concur in the foregoing opinion.
_________________
C.J. Wilson Law, L.L.C., and Craig J. Wilson; Law Office of Elizabeth L.
Glick, and Elizabeth L. Glick; and Myser & Davies and Richard Myser, for
appellee.
Steptoe & Johnson, P.L.L.C., John Kevin West, and John C. Ferrell, for
appellants, Rice Drilling D, L.L.C., and Gulfport Energy Corporation.
Kirkland & Ellis, L.L.P., Ragan Naresh, Joseph C. Schroeder, and Kenneth
A. Young, for appellant Rice Drilling D, L.L.C.
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SUPREME COURT OF OHIO
Kirkland & Ellis, L.L.P., and Daniel T. Donovan, for appellant Gulf Energy
Corporation.
Shuman McCuskey Slicer, P.L.L.C., and Natalie C. Schaefer, urging
affirmance for amicus curiae National Association of Royalty Owners—Ohio.
Roetzel & Andress, L.P.A., Emily K. Anglewicz, David J. Wigham,
Timothy B. Pettorini, and Sara E. Fanning, urging affirmance for amici curiae
Cardinal Minerals, L.L.C.; Portland Resources, L.L.C.; Ray Norris, individually
and as trustee of the Ray Norris Trust U/A Dated March 11, 2014; and Janice K.
Emrick, individually and as trustee of the June E. Norris Trust U/A Dated March
11, 2014.
Vorys, Sater, Seymour and Pease, L.L.P., Gregory D. Russell, Thomas H.
Fusonie, and Christopher A. LaRocco, urging reversal for amicus curiae Ohio Oil
and Gas Association.
Theisen Brock, L.P.A., and Daniel P. Corcoran, urging reversal for amicus
curiae Southeastern Ohio Oil and Gas Association.
Tony Long, Ohio Chamber of Commerce, urging reversal for amicus curiae
Ohio Chamber of Commerce.
Steptoe & Johnson, P.L.L.C., and Dallas F. Kratzer III, urging reversal for
amicus curiae American Gas Association.
_________________
22
Reference
- Cited By
- 22 cases
- Status
- Published
- Syllabus
- Contracts—Mineral rights—Summary judgment—Lease terms—Extrinsic evidence—Because there remained genuine issues of material fact to be litigated, neither party is entitled to judgment as a matter of law—Court of appeals' judgment reversed and cause remanded to trial court.