| Jayne v Talisman Energy USA, Inc. |
| 2011 NY Slip Op 03957 [84 AD3d 1581] |
| May 12, 2011 |
| Appellate Division, Third Department |
| Cecil R. Jayne, Appellant, v Talisman Energy USA, Inc., FormerlyKnown as Fortuna Energy Inc., Respondent, et al., Defendant. |
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McCarthy, J. Appeal from a judgment of the Supreme Court (O'Shea, J.), entered October 20,2010 in Chemung County, which granted a motion by defendant Talisman Energy USA, Inc. todismiss the complaint.
Plaintiff, his two brothers and his sister-in-law held title to a parcel of real property in theTown of Van Etten, Chemung County as tenants in common. In August 2000, without notifyingplaintiff, one of plaintiff's brothers, Stanley Jayne, entered into an oil and gas lease for theproperty with defendant Potter-McKean Resources, Inc. That lease was subsequently assigned todefendant Talisman Energy USA, Inc. (hereinafter defendant). Defendant obtained well permitsto extract natural gas from an area containing the property at issue. In 2007, plaintiff executed aratification agreement provided by defendant, as did his sister-in-law and his other brother, afterwhich defendant compensated each of the cotenants for the natural gas that had been extractedfrom the land.
Plaintiff commenced this action pursuant to RPAPL article 15 seeking a determination thatthe ratification agreement he signed was null and void by virtue of defendant's failure to [*2]include a provision informing him of the right to cancel theagreement within three days, which plaintiff claimed was a violation of General Obligations Law§ 5-333 (5). Supreme Court granted defendant's motion to dismiss the complaint, findingthat the statute only applies to oil and gas leases and the ratification agreement did not qualify asa lease. Plaintiff appeals.
On this motion to dismiss, we liberally construe the complaint, accept the allegations as trueand afford plaintiff every favorable inference (see Trump on the Ocean, LLC v State of New York, 79 AD3d1325, 1326 [2010]). The issue here basically distills to the legal question of whether GeneralObligations Law § 5-333 (5) applies to the ratification agreement that plaintiff signed. Thatsubdivision requires that all oil and gas leases entered into on or after January 1, 2006 contain thefollowing language in bold type of at least 10-point font: "THIS IS A LEASE OF OIL AND GASRIGHTS, NOT A SALE, CONTAINING TERMS THAT MAY BE NEGOTIATED BY YOU.YOU HAVE THE RIGHT TO CANCEL THIS LEASE WITHIN THREE BUSINESS DAYSAFTER EXECUTION OF THE LEASE BY NOTIFYING THE LESSEE THAT YOU HAVECANCELED THIS CONTRACT. IN ORDER TO CANCEL THIS LEASE, YOU MUSTEXECUTE A NOTICE OF CANCELLATION IN THE FORM PROVIDED BELOW, MAIL ITTO THE LESSEE AND REFUND ALL AMOUNTS PAID TO YOU BY THE LESSEEWITHIN THE THREE-DAY CANCELLATION PERIOD. THE MAILING MUST BEPOSTMARKED WITHIN THE THREE-DAY CANCELLATION PERIOD TO BEEFFECTIVE." The ratification agreement at issue does not contain this language. If the languagewas not statutorily required, however, defendant was entitled to have the complaint dismissed forfailure to state a cause of action.
A lease is defined as "[a] contract by which a rightful possessor of real property conveys theright to use and occupy the property in exchange for consideration" (Black's Law Dictionary 907[8th ed 2004]). A ratification, on the other hand, is an " 'adoption of the acts of another by one forwhom the other assumes to be acting, but without authority' " (Rocky Point Props. vSear-Brown Group, 295 AD2d 911, 913 [2002], quoting Holm v C.M.P. SheetMetal, 89 AD2d 229, 232 [1982]; see Lipman v Vebeliunas, 39 AD3d 488, 490 [2007]). "Thedoctrine of ratification presupposes the existence of a contract" (Leasing Serv. Corp. v VitaItalian Rest., 171 AD2d 926, 927 [1991]), as the ratification "relates back and suppliesoriginal authority to execute the conveyance" or agreement (Holm v C.M.P. Sheet Metal,89 AD2d at 232; see Matter of Rice vNovello, 25 AD3d 992, 994 [2006]; Rocky Point Props. v Sear-Brown Group,295 AD2d at 913).
The August 2000 oil and gas lease was valid. Stanley Jayne, as a tenant in common, had theright to lease the property or mine minerals from it (see O'Brien v Ginter, 296 AD2d 387,387 [2002]; see also LeBarron v Babcock, 122 NY 153, 157-158 [1890]; Wilsey vLoveland, 180 App Div 279, 282 [1917], amended 181 App Div 916 [1917]).Plaintiff's interest in the property, as a cotenant, did not invalidate the lease, but merely created apotential dispute between him, Stanley Jayne and the other cotenants regarding the disposition ofthe proceeds of that lease (see O'Brien v Ginter, 296 AD2d at 387-388; see alsoAbbey v Wheeler, 170 NY 122, 129 [1902]). The ratification agreement resolved thisdispute, at least going forward from the time of its execution, because defendant then begansending royalty payments to each cotenant.
The ratification agreement does not contain all of the terms of the August 2000 lease (or allof the terms that would normally be contained in any lease), but specifically refers to that lease,stating that plaintiff "does hereby let, lease, quit claim, ratify and confirm said oil and gas lease. . . as if [plaintiff] had been named therein as lessor and had duly executed anddelivered [*3]said lease."[FN*] The plain language of General Obligations Law § 5-333 (5) addresses oil and gas leases,not all types of documents or agreements that may affect oil and gas rights. Thus, the ratificationagreement, which merely confirmed a valid preexisting lease nunc pro tunc, was not required toinclude the notice provided for by that statute. As the statutory notice was not required, SupremeCourt properly dismissed the complaint for failure to state a cause of action.
Peters, J.P., Spain, Kavanagh and Stein, JJ., concur. Ordered that the judgment is affirmed,with costs.
Footnote *: Because the original lease wasentered into before January 1, 2006, it was not required to—and did not—includethe three-day cancellation notice (see General Obligations Law § 5-333 [5], [6]).