In Stalder v. Gatchell, No. 20 MO 0010, 2022-Ohio-1325, Appellant, Gulfport Energy Corporation (“Gulfport”), argued that it was not in breach of the oil and gas lease at issue, as it was not required to pay a signing bonus or royalties for a one-half mineral interest (the “Gatchell Reservation”) the Appellees, Jess and Lindsay Stalder (the “Stalders”), did not own.[1]
In 2011, the Stalders executed an oil and gas lease of 64.73 acres with Gulfport, half of which lies on the Gatchell Reservation.[2] Gulfport paid the Stalders a signing bonus representing one-half of the 64.73 acres due to the Gatchell Reservation covering the other one-half of the oil and gas.[3]
The Gatchell Reservation was created in a deed in 1904.[4] Cross-Appellant, Richard Parry (“Parry”), inherited the Gatchell Reservation in 1996, but no deed was recorded transferring the Gatchell Reservation to Parry.[5] The Stalders published a notice of intent to declare the mineral interest on the Gatchell Reservation abandoned in 2012, pursuant to the Dormant Mineral Act (the “DMA”).[6] There was no attempt to serve the last record holder by certified mail, but the published notice stated it was being served upon Margaret J. Gatchell and her heirs, assigns, and successors.[7]
In 2015, Gulfport recorded a declaration of pooling and unitization for the Truax unit, which included 20 acres of the subject property.[8] Once again, Gulfport only paid the Stalders one-half of the royalties due under the lease because the other portion was on the Gatchell Reservation.[9] At that time, the Stalders sent a notice of intent to declare the mineral interest abandoned by certified mail to Society National Bank, Trustee; Society National Bank of Cleveland, Trustee; KeyBank; and any other unknown successors and assigns to the mineral interest in the 1968 and 1984 deeds of the Gatchell Reservation.[10] The Stalders recorded an affidavit of abandonment in January of 2016 and notified the recorder to note the abandonment on the deed which created the Gatchell Reservation.[11]
In 2017, Parry executed a paid-up oil and gas lease with Gulfport for the Gatchell Reservation.[12] Then, in June of 2018, Parry recorded an affidavit containing a claim to preserve the Gatchell Reservation, and in April of 2018 the Stalders filed a complaint against Parry, Gulfport, and the bank who was the record holder and prior trustee of the Gatchell Reservation.[13]
The Stalders’ complaint sought the following: (1) declaratory judgment on abandonment of the Gatchell Reservation under the DMA; (2) quiet title to the Gatchell Reservation; and (3) a finding that Gulfport was in breach of the lease by failing to pay the full signing bonus.[14]
In November of 2018, Gulfport filed a motion for summary judgment, alleging that the Stalders’ abandonment and quiet title claims failed because the Gatchell Reservation was never abandoned by the Parrys.[15] Additionally, Gulfport argued that abandonment was precluded by the time the Stalders served the November 2015 notice on the bank because actual production had been achieved by a “holder” (Parry), pointing to their own production from the Truax unit earlier that year.[16]
Citing Ohio Rev. Code § 5301.56(B)(3)(b), the Stalders correctly acknowledged, and the trial court pointed out, that the record holder, being the bank, did not produce from the land and the Parrys did not sign a lease with Gulfport until 2017, which was long after the abandonment.[17] Additionally, the Stalders quoted the “Title” clause of their lease and argued that if the court ruled the Gatchell Reservation was abandoned, then the adverse claim would be fully resolved and Gulfport would be required to pay the Stalders the unpaid signing bonus and royalties related to the Gatchell Reservation.[18]
In June of 2019, the Parrys and Stalders executed a settlement which awarded the Stalders with 75% of the Gatchell Reservation and the Parrys with the remaining 25%.[19]
In June of 2020, the trial court granted the Stalders’ motion for summary judgment and denied Gulfport’s motion for summary judgment, stating that the title attorney exercised reasonable due diligence in finding the bank’s successor to the Gatchell Reservation, the Stalders could not have discovered the Parrys were owners of the Gatchell Reservation, and notice of abandonment was timely filed, and no affidavit or preservation claim was recorded within 60 days.[20]
The Seventh District Court of Appeals ultimately overruled Gulfport’s assignments of error and affirmed the trial court’s decision, holding that the Gatchell Reservation was deemed abandoned pursuant to the 2006 DMA and was thus vested in the Stalders.[21]
This article was authored by Ryan Stewart and Tanner Cremeans.
[1] Stalder v. Gatchell, 2022-Ohio-1325.
[2] Id.
[3] Id.
[4] Id. at 3.
[5] Id. at 4.
[6] Id. at 5.
[7] Id.
[8] Id. at 6.
[9] Id.
[10] Id.
[11] Id.
[12] Id. at 7.
[13] Id.
[14] Id. at 8.
[15] Id. at 9.
[16] Id. at 10.
[17] Id. at 12. Ohio Rev. Code § 5301.56(B)(3)(b) states, “actual production or withdrawal of minerals by the holder must occur within the twenty years immediately preceding the date on which notice is served.”
[18] Id. The “Title” clause of the lease stated, “[i]f Lessee receives evidence that Lessor does not have title to all or any part of the right herein leased, Lessee may immediately withhold payments that would be otherwise due and payable hereunder to Lessor until the adverse claim is fully resolved.”
[19] Id. at 13-14.
[20] Id. at 17.
[21] Id. at 54.
Ryan represents clients in connection with transactional matters, due diligence, complex mineral titles, lease analysis, surface use issues and title curative. In addition, Ryan has extensive experience in the drafting and review of original drilling title opinions, as well as supplemental drilling title opinions and limited acquisition title opinions. He also assists in litigation and regulatory matters, including unitizations.