SLT Holdings v. Mitch-Well ( 2019 )

J-A12007-19
2019 PA Super 258SLT HOLDINGS, LLC, JACK E. IN THE SUPERIOR COURT
MCLAUGHLIN AND ZUREYA OF
MCLAUGHLIN, PENNSYLVANIA
Appellees
v.
MITCH-WELL ENERGY, INC. AND
WILLIAM E. MITCHELL, JR., AN
INDIVIDUAL,
Appellants No. 542 WDA 2018
Appeal from the Order Entered March 13, 2018
In the Court of Common Pleas of Warren County
Civil Division at No(s): A.D. 626 of 2013
BEFORE: BENDER, P.J.E., DUBOW, J., and FORD ELLIOTT, P.J.E.
OPINION BY BENDER, P.J.E.: FILED AUGUST 23, 2019
Mitch-Well Energy, Inc. (“Mitch-Well”) and William E. Mitchell, Jr. (“Mr.
Mitchell”), an individual, (collectively “Appellants”), appeal from the March 13,
2018 order dismissing without prejudice count VI of the amended complaint
in equity filed by SLT Holdings, LLC (“SLT”), Jack E. McLaughlin and Zureya
McLaughlin (“the McLaughlins”) (collectively “Appellees”).1 After careful
review, we affirm.
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1On January 9, 2018, summary judgment was entered in favor of Appellees
on counts I, II, and V of Appellees’ amended complaint in equity. Appellees’
motion for voluntary dismissal of counts III and IV of its amended complaint
was granted without prejudice by order of court dated February 1, 2018;
however, said order was not entered on the docket until April 16, 2018 (four
days after the filing of the notice of appeal). Thus, facially, the order from
J-A12007-19
The trial court summarized the factual background of this case as
follows:
This action concerns certain leases granting oil, gas, and
mineral (OGM) rights for two parcels. Both parcels are in Warren
County. The parties have referred to the parcels according to how
they are identified for tax/recording purposes. The one parcel is
within Warrant 3010 and the other is within Lot 769. [SLT] came
to own the OGM rights for Warrant 3010, which it leased to a
company that subsequently assigned the lease to [Mitch-Well].
[See SLT Lease, 5/30/85.] [The McLaughlins] came to own the
OGM rights for Lot 769, which they leased to a company that
subsequently assigned the lease to Mitch-Well. [See McLaughlin
Lease, 5/30/85.][2] Neither of the above-described leases were
recorded[,] but appropriate memoranda concerning those leases
were recorded, as were the assignments to Mitch-Well.
The leases are similar in that they both contain provisions
requiring Mitch-Well to drill a certain number of wells on the two
parcels … and to make specified minimum payments to
lessors/[Appellees] each year if the royalties do not exceed said
minimum payments…. Beginning around 1996 and ending around
2013, the wells on Warrant 3010 and Lot 769 operated by Mitch-
Well did not produce OGM in marketable quantities. Thus[,]
Mitch-Well made no royalty payments to [Appellees] during this
time. Mitch-Well also failed to make minimum payments as
required under both leases. For approximately sixteen years,
Mitch-Well violated the leases by failing to either pay royalties in
excess of the minimum annual payments or to make said
minimum payments. Although Mitch-Well did visit the wells in
question during this period, it did so to ensure that the wells
remained safe and in compliance with applicable law. Mitch-Well
did not attempt to achieve marketable levels of OGM production
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which this appeal is taken appears interlocutory and unreviewable. However,
“[a] notice of appeal filed after the announcement of a determination but
before the entry of an appealable order shall be treated as filed after such
entry and on the day thereof.” Pa.R.A.P. 905(a)(5). Hence, no jurisdictional
defects impede our review.
2The SLT Lease and the McLaughlin Lease are referred to collectively herein
as “the leases.”
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between 1996 and 2013. It appears that the prevailing OGM
prices hindered production in that it was not economical for Mitch-
Well at that time.
In 2013, storage tanks connected to the wells on Warrant
3010 and Lot 769 had collected enough fluid to cause Mr. Mitchell
to have them emptied[,] and their contents were transferred to
two storage tanks located on a parcel referred to in this litigation
as “Mitchell Farm[.”] Mitchell Farm is owned by the Mitchell
family. One of the storage tanks on Mitchell Farm was connected
to one of three wells on Mitchell Farm. These three wells are
owned by Mr. Mitchell[,] individually[,] and not by Mitch-Well. Mr.
Mitchell allowed the fluid to settle in the two tanks on the farm so
that the brine separated from the oil. Mr. Mitchell had an
agreement with a company called Ergon, which then came and
collected the oil and marketed it. Ergon remitted payment for the
entirety of the gross production to Mr. Mitchell. Mr. Mitchell
attempted to distribute the royalties to [Appellees] out of Mr.
Mitchell’s personal account. This attempt at payment was
apparently not deposited. Mitch-Well did not have a bank account
at the time[,] although it does now. Mitch-Well “probably” went
five years without a bank account.
[Mr. Mitchell] is currently the sole owner, shareholder,
officer, and employee of Mitch-Well….
There is a controversy surrounding an unnumbered
subparagraph under ¶17 of both leases. The language in each of
the leases is identical. The subparagraph provides for the
retention of certain land by lessee/Mitch-Well even after
termination of the lease. However, there is limiting language in
the subparagraph. The subparagraph states that if Mitch-Well
fails to meet its drilling obligations then the lease is terminated,
but Mitch-Well shall retain 20 acres surrounding each well it drilled
that is capable of producing oil and/or gas. This matter is further
complicated by certain identical amendments to both leases.
These amendments reduced the retained acreage from the 20
acres referenced above to only 5 acres. The enforceability of the
amendments is disputed by [Appellants]. The amendments were
signed by [Mitch-Well’s] predecessor in interest rather than
[Mitch-Well or Mr. Mitchell], and neither of the amendments was
recorded nor was a memorandum recorded as with the leases
themselves.
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[Appellees] argue that because Mitch-Well has defaulted on
the lease[s], the lease[s] ha[ve] terminated[,] or else [they have]
been abandoned. [Appellants] argue[] that the leases do not
allow for a finding of termination. [Appellants] rely on certain
identical provisions in the two leases. Paragraph 2 of each lease
purports to govern the length of the term of the lease. This
paragraph provides in relevant part that each lease will continue
in effect for so long as the lessee (Mitch-Well) determines that
OGM can be produced in paying quantities. Thus, Mitch-Well has
the exclusive power to end the term of the lease. Paragraph 12
of each lease is also identical[,] and it governs default and
remedies. Termination of each lease is the exclusive remedy for
default, but [Appellees] must comply with certain prerequisites.
[Appellees] must give written notice to Mitch-Well describing the
default. Mitch-Well has thirty days from receipt of the notice to
cure said default. If a court subsequently determines that the
default has not been cured, then the lease is terminated under its
own provisions.
Trial Court Opinion (“TCO”), 1/9/18, at 1-5 (citations to record omitted).
Appellees commenced this action on November 19, 2013, with the filing
of a complaint in equity against Appellants, seeking injunctive relief (Count I),
a declaratory judgment (Count II), an accounting (Count III), ejectment
(Count IV), conversion (Count V), and tortious interference with contract
(Count VI).3 On that same date, Appellees filed a petition for a preliminary
injunction against Appellants, which was subsequently granted by the trial
court on January 24, 2014. The preliminary injunction enjoined Appellants
from physically entering upon Warrant 3010 and Lot 769, and from removing,
selling, transferring or otherwise disposing of any material from either
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3 An amended complaint was filed by Appellees on April 14, 2015.
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property, “including fixtures, whether oil, gas, or mineral.” Trial Court Order,
2/14/14.4
On July 26, 2017, Appellees filed a motion for partial summary judgment
relating to counts I, II, and V, which was granted by the trial court on January
8, 2018, after hearing argument thereon. A jury trial was scheduled on the
remaining counts III, IV, and VI; however, the trial court subsequently
granted without prejudice Appellees’ motions for voluntary dismissal
regarding these counts. On April 12, 2018, Appellants filed a timely notice of
appeal. No order was issued by the trial court directing the filing of a Pa.R.A.P.
1925(b) statement of errors complained of on appeal. Appellants now present
the following issues for our review, which we have renumbered for ease of
disposition:
1. Did the trial court err in granting summary judgment in favor
of [Appellees] and against [Appellants] on its claim for
declaratory judgment?
2. Did the trial court err in granting summary judgment in favor
of [Appellees] and against [Appellants] on its claim for
permanent injunction?
3. Did the trial court err in granting summary judgment in favor
of [Appellees] and against [Appellants] on its claim for
conversion?
4. Did the trial court err in granting voluntary dismissal without
prejudice and without hearing on [Appellees’] claim for
accounting, ejectment, and tortious interference with contract?
Appellants’ Brief at 5 (unnecessary capitalization omitted).
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4The preliminary injunction was affirmed by this Court on appeal at no. 460
WDA 2014.
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Our standard of review with respect to a trial court’s decision to grant
or deny a motion for summary judgment is well-settled:
A reviewing court may disturb the order of the trial court only
where it is established that the court committed an error of law or
abused its discretion. As with all questions of law, our review is
plenary.
In evaluating the trial court’s decision to enter summary
judgment, we focus on the legal standard articulated in the
summary judgment rule. Pa.R.C.P. 1035.2. The rule states that
where there is no genuine issue of material fact and the moving
party is entitled to relief as a matter of law, summary judgment
may be entered. Where the non-moving party bears the burden
of proof on an issue, he may not merely rely on his pleadings or
answers in order to survive summary judgment. Failure of a non-
moving party to adduce sufficient evidence on an issue essential
to his case and on which it bears the burden of proof establishes
the entitlement of the moving party to judgment as a matter of
law. Lastly, we will view the record in the light most favorable to
the non-moving party, and all doubts as to the existence of a
genuine issue of material fact must be resolved against the
moving party.
Thompson v. Ginkel, 95 A.3d 900, 904 (Pa. Super. 2014) (citations
omitted).
We further note:
[A] lease is in the nature of a contract and is controlled by
principles of contract law. J.K. Willison v. Consol. Coal Co.,
536 Pa. 49, 54 637 A.2d 979, 982 (1944). It must be construed
in accordance with the terms of the agreement as manifestly
expressed, and “[t]he accepted and plain meaning of the language
used, rather than the silent intentions of the contracting parties,
determines the construction to be given the agreement.” Id.(citations omitted). Further, a party seeking to terminate the
lease bears the burden of proof. See Jefferson County Gas Co.
v. United Natural Gas Co., 247 Pa. 283 286, 93 A. 340, 341
(1915).
T.W. Phillips Gas and Oil Co. v. Jedlicka, 42 A.3d 261, 267 (Pa. 2012).
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[Our] Supreme Court has aptly observed that “[t]he traditional oil
and gas ‘lease’ is far from the simplest of property concepts.”
Brown v. Haight, 435 Pa. 12, 255 A.2d 508, 510 (1969). In the
context of oil and gas leases, the title conveyed is inchoate and
initially for the purpose of exploration and development. Calhoon
v. Neely, 201 Pa. 97, 50 A. 967, 968 (1902); accord Burgan v.
South Penn Oil Co., 243 Pa. 128, 89 A. 823, 826 (1914) (“The
title is inchoate, and for purposes of exploration only until oil is
found.”). If development during the primary terms is
unsuccessful, no estate vests in the lessee. Id. If oil or gas is
produced, the right to produce becomes vested and the lessee has
a property right to extract the oil or gas. Calhoon, 50 A. at 968….
In such circumstances[,] the lessee will be protected in
accordance with the terms of the lease and will be required to
operate the leasehold for the benefit of both parties. Venture Oil
Co., 25 A. at 734; Calhoon, 50 A. at 968; Burgan, 89 A. at 826.
Jacobs v. CNG Transmission Corp., 332 F.Supp.2d 759, 772-73 (W.D. Pa.
2004).
In Jedlicka, our Supreme Court further explained that,
oil and gas leases generally contain several key provisions,
including the granting clause, which initially conveys to the lessee
the right to drill for and produce oil or gas from the property; the
habendum clause, which is used to fix the ultimate duration of the
lease; the royalty clause; and the terms of surrender....
***
Typically, ... the habendum clause in an oil and gas lease provides
that a lease will remain in effect for as long as oil or gas is
produced “in paying quantities.” Traditionally, use of the term “in
paying quantities” in a habendum clause of an oil or gas lease was
regarded as for the benefit of the lessee, as a lessee would not
want to be obligated to pay rent for premises which have ceased
to be productive, or for which the operating expenses exceed the
income. More recently, however, and as demonstrated by the
instant case, these clauses are relied on by landowners to
terminate a lease.
Jedlicka, 42 A.3d at 267-68 (citations and footnote omitted).
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Instantly, the habendum clause in each of the leases provides that the
lease “shall be in force for a primary term of five (5) years from the effective
date of this lease, and for as long thereafter as oil or gas or other substances
covered hereby are or can be produced in paying quantities….” SLT Lease at
1¶2; McLaughlin Lease at 1¶2. The leases further provide:
5) Rental Payment – This Lease is made on the condition that it
will become null and void and all rights hereunder shall cease and
terminate unless work for the drilling of a well is commenced …
within ninety (90) days and prosecuted with due and reasonable
diligence, or unless the Lessee shall pay to the Lessor, in advance,
every twelve (12) months until work for the drilling of a well is
commenced, the sum of Twelve Dollars ($12.00) per acre, that is
Thirty-Six Hundred Dollars ($3,600.00) for each twelve (12)
months during which the commencing of such work is delayed.[5]
6) Continuing Operations – If, at the end of the primary term or
any time thereafter, this lease is not being kept in force … but
[Mitch-Well] is then engaged in drilling, reworking or any other
operation calculated to obtain production on the leased premises
or lands pooled therewith, this lease shall remain in force as long
as … such operations are conducted in a reasonable, prudent
manner and, if such operations result in production of oil or gas
or other substance covered thereby, as long thereafter as
production continues in paying quantities.
***
8) Shut-In Gas Royalty – Notwithstanding anything herein to the
contrary, if all wells on the leased premises are capable of
producing gas in paying quantities but the wells are shut-in, such
wells shall nevertheless be considered as though the wells are
producing gas in paying quantities for the purpose of maintaining
this lease in effect by Lessee on or before the end of each calendar
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5 The SLT Lease requires the sum of “Five Dollars ($5.00) per acre” (or
$4,950.00) to be paid to the lessor every twelve (12) months until work for
the drilling of a well is commenced. SLT Lease at 2¶5. Aside from the
difference in acreage and dollar amounts noted herein, the operative language
of the SLT Lease is essentially the same as in the McLaughlin Lease.
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year in which the wells are shut-in, pay Lessor a shut-in gas
royalty equal to the delay rental provided for herein prorated by
the number of days the wells were shut in.
McLaughlin Lease at 2.
Thus, by its own terms, paragraph 8 of the leases provides for the
extension of each lease by allowing payment of shut-in gas royalties when the
well(s) are capable of producing gas in paying quantities. See Trial Court
Memorandum (“TCM”), 2/14/14, at 3. “It follows logically that if no shut-in
gas royalties are paid and the wells are capable of production, then the lease
terminates.” Id. Additionally, the trial court noted that in accordance with
paragraph 6, the leases terminate whenever oil, gas or minerals are not
produced in paying quantities. Id. Here, the record establishes that no shut-
in payments were paid to Appellees under either lease, nor were oil and gas
produced in paying quantities from the land for over twenty-five years. See
id.
In accordance with paragraph 17 of the leases, Appellants promised to
drill one well during the first year and five additional wells each year
thereafter, until a total of thirty (30) wells were drilled under the McLaughlin
Lease, and a total of 20 wells drilled under the SLT Lease. See McLaughlin
Lease at 3-4¶17; SLT Lease at 3-4¶17. Each lease also stated it would
terminate if Appellants failed to perform this drilling commitment, with the
exception that Appellants would retain the twenty (20) acres surrounding each
well drilled which was capable of producing oil and/or gas pursuant to the
lease. See id. On February 20, 1986, unrecorded amendments of each lease
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were entered into, which reduced the lessee’s retained property rights from
twenty (20) acres to five (5) acres of land surrounding each well for any wells
drilled during the term and capable of producing oil and/or gas.
The following additional findings of fact were set forth by the trial court:
[T]he initial term of one (1) year with which to drill [under ¶17 of]
both the SLT … [L]ease and the McLaughlin [L]ease was extended
for a period of thirty (30) days until June 30, 1986, giving lessee,
Mitch-Well, more time to drill its first well on each of the two
properties. Before the initial term expired, on or about May 15,
1986, one well was drilled on both the SLT property and the
McLaughlin property. No other wells were drilled on either
property until approximately 2011 by Utica Resources, Inc.
[(“Utica”)].[6] The total number of wells to be drilled remained
unchanged at twenty (20) on the SLT property lease and thirty
(30) on the McLaughlin property lease.
Mr. McLaughlin stated in his affidavit that from at least
January 17, 1991 through November 3, 2013, he received no
payments of any kind, including royalty payments, delay rental
payments or any other type of payments for the leases at issue.
Similarly, Richard C. Cochran, manager of SLT Holdings, LLC,
testified that neither SLT Holdings, nor its predecessor in interest,
Sheffield Land and Timber Company, a company in which he was
also involved, had ever received royalty payments, delay rental
payments or any other type of payments.
Furthermore, there was no physical indication at the 1986
well sites that the wells were either producing or capable of
producing oil and gas. Testimony indicated that no motor, brine
tank, power source, equipment or other indication that the wells
were producing or capable of producing was observed at or near
either well. In fact, testimony indicated that the post upon which
the motor had once rested was rusty, indicating the motor had
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6 Utica entered into an OGM lease with both SLT and the McLaughlins on March
17, 2011. See TCM at 6. The trial court found that upon execution of its
leases, “Utica began performing its obligations thereunder, including
preparing for drilling operations, and actually drilling five (5) wells in the first
two years of the Utica leases.” Id.
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not been there for some time. Additionally, no brine tank was
found on site, and although testimony indicated that an oil and
gas well need not necessarily have a brine tank nearby in order to
be in production, the industry standard is for a brine tank to be
placed nearby the well. Thus, the absence of a brine tank is rare.
In fact, testimony indicated that the May 1986 Mitch-Well drill site
was overgrown with weeds and undergrowth. The Affidavit of Jack
E. McLaughlin indicated that fallen timber and logs blocked paths
used to access the well site, and that said pathways were
impassible for over two consecutive years. A report filed by the
Pennsylvania Department of Environmental Protection indicated
that as early as March 27, 1990, the well sites had been
abandoned.
On October 18, 2015, McLaughlin filed an Affidavit of Non-
Production with respect to the McLaughlin [L]ease. Along the
same lines, on February 6, 2012, Sheffield Land and Timber
Company filed an Affidavit of Non-Production with respect to the
SLT [L]ease. Each affidavit stated that there had been no
production of oil and gas on the property at issue and that the
1986 Lease had expired.
TCM at 5-6.
As a result of Appellants’ failure to maintain their drilling commitment
and/or otherwise remit delay rental payments, Appellees sought judgment in
their favor declaring that Appellants have no rights with respect to either
Warrant 3010 or Lot 769. See Complaint in Equity, 1/19/13, at 19-20. The
trial court granted summary judgment on Appellees’ claim for declaratory
judgment after concluding that the leases had been abandoned by Appellants.
Herein, Appellants assert that the granting of summary judgment in favor of
Appellees constituted an error as a matter of law by the trial court. Appellants’
Brief at 21. Appellants maintain that there are several issues of material fact,
including whether or not abandonment occurred, which should have prevented
the entry of summary judgment. Appellants also contend that the trial court’s
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finding of abandonment was an error of law. After careful review, we deem
Appellants’ claim to be meritless.
In support of its finding of abandonment, the trial court opined:
The instant case is analogous in all relevant aspects to the
seminal case of Jacobs…, 332 F.Supp.2d [at] 759…(interpreting
Pennsylvania law).[7] Jacobs also involved a lawsuit over an oil
and gas lease brought by plaintiffs/lessors against
defendant/lessee. Id. Plaintiffs sought relief in the form of a
judicial determination that the lease was terminated. Id. As in
the instant case, the lease in Jacobs was a “drill or pay” lease,
meaning that the lessee/defendant was required to pay a specified
rental fee if it did not produce oil or gas and make royalty
payments. The term of the lease in Jacobs was also divided
between a primary term and an indefinite period thereafter,
similar to the provisions in paragraph 2 of the leases under
consideration in the instant case. Id. The Jacobs defendant had
not produced oil or gas on the property in almost forty-eight years.
Id. at [] 793. Plaintiffs asked the Jacobs court to find that the
lease had terminated notwithstanding the rental payments in lieu
of production, and the court did so for the reasons discussed
below. Id. at [] 783-96. The instant case differs only insofar as
neither [Appellant] paid [Appellees] the minimum annual payment
required by ¶ 18 of both leases during the period of no production.
The Jacobs court offered multiple, independent rationales
for its decision. One rationale offered by the court was based on
an analysis of the lease and a concomitant finding that the term
of the lease had expired. Id. at [] 783-96. A second, independent
rationale given by the Jacobs court was that the defendant had
abandoned the lease. The proposition that an oil and gas lease
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7 We disregard Appellants’ assertion that the trial court improperly followed
Jacobs, rather than Jedlicka. The trial court’s reliance on Jacobs was
proper, as the facts in Jacobs are analogous to the instant case and the
Jacobs Court applied relevant Pennsylvania law. Jedlicka, on the other
hand, is distinguishable because, unlike in the present matter, the crux of the
dispute in Jedlicka was the meaning of the term “in paying quantities” under
the lease and the focus of the Court was on determining the proper test for
evaluating whether oil or gas has been produced “in paying quantities.” See
Jedlicka, 42 A.3d at 267-68.
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may be abandoned arises from the implied covenant to produce
that is read into oil and gas leases. Id. The court found that “the
clear purpose of an oil and gas lease providing for production
royalties … is to develop the property for the mutual benefit of
both parties, regardless of whether the lease contains an
expressed provision obligating the lessee to do so.” Id. at 789
(citing Ray v. Western Pennsylvania Nat’l Gas Co., 138 Pa.
576, 20 A. 1065 (Pa. 1891)). An obligation to make payments in
lieu of production royalties is only intended to spur the lessee
toward development and compensate the lessor for the delay. Id.The Jacobs court expressly rejected the proposition that the
defendant could indefinitely postpone development of the
property by paying rental fees in place of royalties. Id. at 790.
This proposition would render the lease “a mere option[.”] Id.
The doctrine of abandonment was first applied to an oil and
gas lease in the case of Aye v. Philadelphia Co., 193 Pa. 451,
44 A. 555 (1899), which was approvingly cited by the Jacobs
court. The Aye court found that the lessee in an oil and gas lease
has an obligation to diligently develop the leased property and a
failure to do so constitutes abandonment. Id. The question of
whether or not abandonment has occurred is one of fact and the
[c]ourt must analyze the acts and intentions of the parties to the
lease. Id. The Aye court specifically found that four years of
inaction by a lessee gives rise to a presumption of abandonment.
Id. If the lessee fails to present a valid explanation for the
inaction then judgment as a matter of law is appropriate. Id.In the instant case, there was a prolonged period of
inactivity by [Appellants] concerning production at the relevant
wells. This period was approximately sixteen years long, which is
far longer than the four year period contemplated by the Aye
court. Mr. Mitchell’s deposition testimony suggests that his
explanation for this inactivity is that the price of OGM had fallen
so dramatically that [Appellants] could not make money by
producing at the wells in question. Transcript of Deposition of
William Mitchell[, 5/19/17,] at [] 75-76, 84. The [c]ourt does not
find this to be a valid explanation that will defeat the presumption
of abandonment. If the [c]ourt found otherwise, then the leases
would be reduced to mere options and the implied covenant to
produce would be practically insignificant.
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TCO at 5-7 (emphasis added). We discern no genuine issue of material fact,
and we deem the trial court’s finding of abandonment to be adequately
supported by the record.
Appellants further assert that the granting of a permanent injunction
barring Mitch-Well from entering onto Warrant 3010 and Lot 769 to produce
oil and gas from the wells drilled by Mitch-Well thereon is inappropriate.
Appellants’ Brief at 35. Appellants maintain that, pursuant to ¶17 of the
leases, Mitch-Well owns twenty acres surrounding the well it drilled on each
lot. See id. at 39. However, contrary to Appellants’ assertion, the trial court
succinctly determined that “[b]ecause the [c]ourt finds that [Appellants]
abandoned the leases, the provisions at ¶17 of both leases which allow for the
retention of acreage around wells by lessee are nullities.” TCO at 7.
Considering our determination that the trial court properly found that
Appellants abandoned the leases, we agree with the trial court’s decision that
Appellants’ right to enter upon either property has also extinguished.
Next, we address Appellants’ claim regarding conversion. Appellees
claim that Appellants’ removal of oil from the tanks on Warrant 3010 and Lot
769 in 2013 and the marketing of the oil through Ergon constituted
conversion. Appellants admit that Mitch-Well entered onto the SLT and
McLaughlin properties, pumped a total of 88.53 barrels of oil from the tanks
and sold the oil for a total of $9,069.53 (or $100.1987 per barrel). Appellants’
Brief at 32. Appellants argue, however, that there could be no conversion
because Mitch-Well was the owner of the oil at the time. Id. at 33.
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The tort of conversion involves interference with another’s
property rights in a chattel, such as by possession without consent
or justification. Stevenson v. Economy Bank of Ambridge,
413 Pa. 442, 451, 197 A.2d 721, 726 (1964); Bank of
Landisburg v. Burruss, 362 Pa. Super. 317, 524 A.2d 896(1987)…. A conversion takes place when a party: acquires
possession of goods, with an intent to assert a right to them which
is in fact adverse to that of the owner; transfers the goods in a
manner which deprives the owner of control; unreasonably
withholds possession from the one who has the right to it; and
seriously damages the chattel in defiance of the owner’s rights.
[Norriton East Realty Corp. v. Central-Penn National Bank,
245 A.2d 637, 638 (Pa. 1967)]. Thus[,] it is sufficient where a
party takes possession of another’s goods to the detriment of the
owner and keeps and disposes of them in a way that gives rise to
damages.
TCO at 7-8. Appellants’ argument that the sale of oil through Ergon did not
constitute conversion is based on the faulty conclusion that Mitch-Well
maintained the rights to the oil at the time it was marketed to Ergon.
Applying the foregoing principles of conversion to the instant matter,
the trial court stated:
[Appellants] argue that they owned the oil in question and thus
there was no conversion. The [c]ourt is convinced that
[Appellants] sincerely believed that they owned the oil at the time,
but that is irrelevant to the court’s analysis. The tort of conversion
does not rest on proof of specific intent to commit a wrong.
[Norriton East Realty Corp., 245 A.2d at 638]. The [c]ourt
must apply an objective standard and in light of the above finding
of abandonment the [c]ourt finds that [Appellants] were not the
owners of the oil. Upon [Appellants’] abandonment, the
McLaughlins re-entered onto the previously-leased property. The
fact of re-entry is evidenced by the signing of a new lease between
the McLaughlins and another business (“Utica”) for the OGM rights
to Lot 769 in 2009 or 2010. Transcript of Deposition of [Mr.]
Mitchell at p. 102. [Mr.] Mitchell also alleges that the McLaughlins
produced oil from “his” well in 2011, marketed it themselves and
kept the revenue. [Id. at] 95-99. For these reasons, the [c]ourt
finds that [Appellants’] actions in 2013 did amount to conversion.
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J-A12007-19
TCO at 8. Based on the trial court’s finding of abandonment and Appellants’
own admissions, we conclude that Appellants have failed to establish any
material issue of fact. We discern no error of law in the trial court’s finding of
conversion.
Lastly, Appellants withdraw their claim regarding whether the trial court
erred in granting voluntary dismissal; thus, we need not reach the merits of
this issue.
For the reasons stated above, we conclude that Appellants failed to
establish any genuine issue of material fact. Accordingly, we discern that the
trial court did not commit an error of law or abuse its discretion when it
granted Appellees’ motion for summary judgment on counts I, II, and V of its
amended complaint. We affirm the March 13, 2018 order dismissing count VI
without prejudice.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/23/2019
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