Southersby Development v. EQT Production ( 2020 )

J-A28036-20
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
SOUTHERSBY DEVELOPMENT : IN THE SUPERIOR COURT OF
CORPORATION : PENNSYLVANIA
:
Appellant :
:
:
v. :
:
:
EQT PRODUCTION COMPANY : No. 421 WDA 2020
Appeal from the Order Entered March 10, 2020
In the Court of Common Pleas of Allegheny County Civil Division at
No(s): No. GD-17-010019
BEFORE: OLSON, J., MURRAY, J., and McCAFFERY, J.
MEMORANDUM BY McCAFFERY, J.: FILED DECEMBER 11, 2020
Southersby Development Corporation (Appellant) appeals from the
order entered in the Allegheny County Court of Common Pleas dismissing with
prejudice Appellant’s amended complaint and granting summary judgment in
favor of EQT Production Company (Appellee). In this oil and gas lease action,1
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1 As the trial court notes:
[Pennsylvania] law has developed to provide that an oil and gas
lease, despite the use of the term “lease,” actually involves the
conveyance of property rights:
[A]n oil and gas lease reflects a conveyance of property
rights within a highly technical and well-developed
industry, and thus certain aspects of property law as
refined by and utilized within the industry are necessarily
brought into play.
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the trial court found — based upon Appellee’s presentation of public deeds and
Appellant’s own concessions on the record — Appellant owns oil and gas rights
to only 27.0312 acres of property. On appeal, Appellant argues the record
presents a genuine issue of material fact concerning whether it owns oil and
gas rights to 114.4241 acres.2 We affirm.
Appellant previously owned three large parcels of land — referred to in
the trial court proceedings as Parcels 1, 2, and 3 — and has subdivided them.
N.T. Motion H’rg, 3/10/20, at 7. The central factual dispute is the number of
acres to which Appellant retained oil and gas rights.
The trial court aptly summarized the relevant facts and procedural
history as follows. On October 6, 2015, the parties entered into an agreement
for Appellee to lease oil and gas rights owned by Appellant. Paragraph 6 of
this lease provides Appellee shall not pay for oil and gas rights that Appellant
does not own:
Representations and Warranties. [Appellant] warrants
generally and shall defend title to the Leased Premises. If
[Appellant] does not own all oil and gas on the Leased Premises:
(i) [Appellant] shall refund any overpayments, and (ii) [Appellee]
shall be released from making future payments in the proportion
that the outstanding interest or title bears to the entire Leased
Premises. . . .
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Nolt v. TS Calkins & Assocs., LP, 96 A.3d 1042, 1046 (Pa. Super. 2014)
(citations omitted); Trial Ct. Op., 6/5/20, at 2 n.2.
2For ease of discussion, we refer to these two acreages as simply 27 acres
and 114 acres.
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Oil & Gas Lease (Paid-Up), 10/6/15, at 2-3, Exh. 1 to Appellant’s Complaint,
7/14/17. Paragraph 3 of the lease provides a “due diligence period:”
[Appellee] shall have 75 days after [Appellant’s] execution of this
Agreement (the “Diligence Period”) to execute this
Agreement . . . .
Id. at 1.
On December 22, 2015, the parties entered into a modified lease
agreement,3 which amends the total acreage of land to 114 acres. Trial Ct.
Op. at 6-7. In conjunction with this lease modification, “the parties executed
an “Order of Payment,” which provides:
[Appellee] hereby agrees to pay to [Appellant] the amount of
$3,500.00 per acre of the Leased Premises actually owned by
[Appellant.] Further, such payment shall be subject to any
necessary adjustments as determined by [Appellee] from
[Appellee’s] due diligence under the Agreement. . . .
Order of Payment, 12/22/15 (some emphases added), Exh. 4 to Appellant’s
Complaint.
Appellee performed due diligence as to Appellant’s title to the oil and
gas rights. N.T. at 7-8; Trial Ct. Op. at 7. Appellee determined that of the
total 114 acres, Appellant owned such rights to only 27 acres. Accordingly,
on April 13, 2016, Appellee tendered payment of $94,609.20 to Appellant,
representing 27 acres at $3,500 per acre. Trial Ct. Op. at 8. In the ensuing
correspondence between the parties, Appellee provided “a summary of the
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3For ease of discussion, we refer to the original lease and the lease
modification together as the “lease.”
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title failures” and explained that “[t]itle failed as to 87.3929 acres of the [114]
because [Appellant] failed to except and reserve the oil and gas in numerous
tracts that they outsold [sic] in their subdivisions.” Id. at 9 (emphasis
omitted). However, Appellee declined to provide a “title opinion” on the
ground it was protected by the attorney/client privilege. See id.; N.T. at 20.
Following unsuccessful resolution of their disagreement as to the proper
amount of payment, the parties either discussed the possibility of, or
according to Appellant, reached an oral “settlement agreement,” the terms of
which appear to be disputed. See Appellant’s Brief at 11. Appellant avers
Appellee agreed it would enter “either: (1) a full-lease surrender and new
lease for the acreage which [Appellee] was actually leasing, or (2) a partial
surrender of the lease to remove the acreage for which [Appellee] did not
pay,” and the parties would enter a new lease. Id. at 11-12. According to
Appellee, however, the parties’ agreement was dependent on Appellant
obtaining a surrender of another lease, involving Appellant’s affiliate, ESE, for
oil and gas rights.4 Appellee averred Appellant failed to obtain this surrender.
N.T. at 38-39. Appellee also represented that it did surrender the instant
lease with Appellant, as requested by Appellant, and that when Appellee
rejected Appellant’s invitation to “start [a] new lease,” Appellant filed the
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4No further explanation of this ESE lease was given at the summary judgment
hearing. See N.T. at 38-39.
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underlying suit to enforce the parties’ original lease. Appellee’s Motion for
Summary Judgment, 1/24/20, at 3 (unpaginated).
Appellant filed a complaint on July 14, 2017, and an amended complaint
on September 8th. Appellant averred it owned the subsurface or mineral
rights of all 114 acres. Appellant’s Amended Complaint, 9/8/17, at ¶ 6. The
amended complaint raised claims: (1) for declaratory relief, in the form of a
declaration of the parties’ rights under the lease; (2) of breach of contract,
breach of implied covenant of good faith and fair dealing, and promissory
estoppel, related to Appellee’s alleged non-payments under the written lease
and modified lease; and (3) of fraud and deceit, related to the parties’ alleged
oral “settlement agreement.” Id. at ¶¶ 53-88.
On January 24, 2020, Appellee filed a motion for summary judgment.
The trial court conducted a hearing on March 10, 2020. We review in detail
the parties’ arguments. Appellee first claimed the lease did not specify it
would pay for all 114 acres, but instead, Appellee would merely “pay $3,500
per acre of the leased premises actually owned by” Appellant. N.T. at 6.
Appellee thus reasoned that “[p]aying [Appellant] on less than 114 acres only
breaches the [lease] if [Appellant] actually owns 114 acres.” Id. The trial
court agreed and Appellant raised no objection. See id.
Appellee then argued Appellant could not meet its burden, in summary
judgment proceedings, to show it in fact owned oil and gas rights to all 114
acres. N.T. at 6, 9. The deeds for the subdivided lots in Parcels 1 and 2 all
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included the language, “‘Under and subject to all prior grants and reservations
of coal, oil and gas, mining rights,’ so on and so forth, ‘as the same appear in
prior incidents of record.’” Id. at 8. The deeds for the subdivided lots in
Parcel 3, however, included a different provision, which served to reserve oil
and gas rights: “Accepting and reserving onto the grantors[, Appellant,] its
heirs, successors and assigns.” Id. at 9. Comparing these two provisions, it
can be concluded the deeds for the lots in Parcels 1 and 2 did not reserve to
Appellant oil and gas rights. Id. Appellant did not dispute this interpretation
of the deed language. See id. Appellee then concluded its payment for 27
acres complied with the lease because Appellant only owned oil and gas rights
for 27 acres. Id.
Critically, Appellant conceded, several times on the record, that it could
not show it held rights for all 114 acres. Nevertheless, Appellant insisted
Appellee failed to produce requested documentation.5 We note these
exchanges:
THE COURT: . . . I don’t think you’re saying today you have
the oil and gas rights to the other 87 acres.
[Appellant’s counsel]: I’m not representing that to the Court,
that there is gas rights to the additional 87 acres. I’m not.
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5 See N.T. at 19 (Appellant’s counsel stating, “[W]hat was presented to
[Appellant] was not adequate to demonstrate . . . what gas rights were owned
in acreage by [Appellant.]”), 21-22 (“The proof relative to what [Appellee’s
counsel] said, . . . contrary to our request for the information.”), 26 (“They
didn’t give us any of the documents.”)
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N.T. at 21.
[THE COURT:] See, what’s bothering me here is you don’t own the
oil and gas rights to these 87 acres. I don’t think there’s a dispute
about that at this point.
Or am I missing something?
[Appellant’s counsel:] I don’t think it has ever been
addressed by [Appellant] whether there is ownership of the gas
rights to the remaining acreage. The basis for . . . the breach of
contract [is] whether we had . . . the title documents or not, it
was the reliance upon the due diligence from [Appellee] to provide
us with that information at a minimum. . . .
N.T. at 29-30.
Appellant then stated its witness, Ann Murphy, would provide testimony,
but Appellant ultimately agreed this witness could not show it owned the oil
and gas rights it claimed to have:
THE COURT: [This] is what I’m trying to understand. What
material issue of fact have you put forward that precludes
summary judgment?
* * *
[Appellant’s counsel:] Aside from what would be the
testimony of Ann Murphy that would address each individual
component of the title records. That’s what would be able to
refute the —
THE COURT: But counsel, correct me if I’m wrong.
If [Ann Murphy testifies] for two days in this hearing, the
conclusion we’re going to reach is . . . that you didn’t have
ownership to the 87.392 acres [of] oil and gas rights. That’s
the conclusion I’m going to reach.
Am I right?
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[Appellant’s counsel:] Based upon our information,
that’s right, Your Honor. . . .
N.T. at 30-32 (emphases added).
Finally, we note this exchange:
THE COURT: . . . At the end of the day are you going to prove
you had the ownership to 114 acres of oil and gas rights as you
said in the original lease? That’s the question I want you to
answer.
[Appellant’s counsel:] I do not believe that I would be
able to put the evidence on and prove that.
THE COURT: Right. Because you didn’t own the oil and gas
rights to the 114 acres. You only owned them to the 27 that
[Appellee] told you after they did their due diligence is what you
owned. You don’t dispute that at this point.
[Appellant’s counsel:] That has not been disputed, no.
N.T. at 43 (emphases added).
With respect to Appellant’s claim that Appellee did not provide requested
documentation, the trial court pointed out Appellant had the deeds upon which
Appellee based its title determinations. N.T. at 29. Indeed, Appellant was the
grantor in these deeds. Id. (trial court stated, “You had your deeds to the
property. That’s what the title opinion is based on[.]”).
At the conclusion of the hearing, the trial court granted Appellee’s
motion for summary judgment and dismissed Appellant’s amended complaint
with prejudice. N.T. at 49. Appellant filed a timely notice of appeal and
complied with the court’s Pa.R.A.P. 1925(b) order to file a concise statement
of errors complained of on appeal.
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Appellant presents six issues for our review:
[1.] Whether the trial court erred and abused its discretion by
granting [Appellee’s] motion for summary judgment and
dismissing [Appellant’s] amended complaint in its entirety in
disregard of the evidentiary record proving and/or creating an
issue of material fact relating to [Appellant’s] ownership of the gas
rights for the subject property?
[2.] Whether the trial court erred and abused its discretion by
granting [Appellee’s] motion for summary judgment and
dismissing, without argument or due process, [Appellant’s] claim
for declaratory relief for the amounts [Appellee] owed to
[Appellant] under the parties’ agreements?
[3.] Whether the trial court erred and abused its discretion by
granting [Appellee’s] motion for summary judgment and
dismissing [Appellant’s] amended complaint in its entirety in
disregard of the evidentiary record proving and/or creating an
issue of material fact relating to [Appellant’s] claims for breach of
contract and breach of implied duty of good faith and fair dealing
that [Appellee] owed to [Appellant] with respect to [Appellee’s]
breaches and bad faith in entering into, and failing to perform its
obligations under, the lease agreement between the parties?
[4.] Whether the trial court erred and abused its discretion by
granting [Appellee’s] motion for summary judgment and
dismissing [Appellant’s] amended complaint in its entirety in
disregard of the evidentiary record proving and/or creating an
issue of material fact relating to [Appellant’s] claims for breach of
contract and breach of implied duty of good faith and fair dealing
that [Appellee] owed to [Appellant] with respect [to Appellee’s]
breaches and bad faith in entering into, and failing to perform its
obligations under, the settlement agreement between the parties
requiring [Appellee] to remove the encumbrance on [Appellant’s]
property, to pay [Appellant], at a minimum, for property with
undisputed gas rights and to enter into a new lease agreement
with [Appellant]?
[5.] Whether the trial court erred and abused its discretion by
granting [Appellee’s] motion for summary judgment and
dismissing [Appellant’s] amended complaint in its entirety in
disregard of the evidentiary record proving and/or creating an
issue of material fact relating to [Appellant’s] promissory estoppel
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claims against [Appellee] with respect to [Appellee’s]
misrepresentations and inducement of [Appellant] that [Appellee]
would pay [Appellant] for the encumbered property, and that
[Appellee] would resolve the parties’ dispute via settlement
agreement by [Appellee] removing the encumbrance on
[Appellant’s] property, [Appellee] paying [Appellant], at a
minimum, for the undisputed mineral rights, [Appellant] accepting
a full surrender of the lease agreement, and [Appellee] entering
into a new lease agreement with [Appellant]?
[6.] Whether the trial court erred and abused its discretion by
granting [Appellee’s] motion for summary judgment and
dismissing [Appellant’s] amended complaint in its entirety in
disregard of the evidentiary record proving and/or creating an
issue of material fact relating to [Appellant’s] fraud and deceit
claims against [Appellee] with respect to the [Appellee’s]
fraudulent misrepresentations and fraudulent inducement of
[Appellant] to resolve the parties’ dispute by [Appellee] removing
the encumbrance of [Appellant’s] property, paying [Appellant], at
a minimum, for the undisputed mineral rights, [Appellant]
accepting a full surrender of the lease agreement, and [Appellee]
entering into a new lease agreement with [Appellant]?
Appellant’s Brief at 2-3.
Preliminarily, we note the relevant standard of review:
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
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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.
Seneca Res. Corp. v. S & T Bank, 122 A.3d 374, 378 (Pa. Super. 2015)
(some citations omitted).
In its first issue, Appellant avers the trial court erred in granting
Appellee’s motion for summary judgment. Appellant contends the evidentiary
record creates a genuine issue of material fact as to whether it owned oil and
gas rights to all 114 acres. Specifically, Appellant reasons, the court
improperly disregarded: (1) its response to an interrogatory from Appellee,
seeking “all facts” and “all documents” that would support Appellant’s claim it
owned oil and gas rights to more than 27 acres;6 (2) the deposition testimony
of Appellant’s corporate representative, Timothy Murphy; (3) the deposition
testimony of Ann Murphy;7 and (4) Appellant’s counsel’s arguments at the
summary judgment hearing. Appellant’s Brief at 16-27. Appellant provides
pages-long quotations from each of these sources. No relief is due.
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6 Specifically, the interrogatory sought an admission that Appellant owned
only 27 acres of oil and gas rights. See Appellant’s Brief at 16. The
interrogatory provided that if Appellant did not admit this, it was to identify
“all facts” and “all documents” to support its reason for the denial. See id. at
16-17.
7 Appellant’s brief refers to this witness as Anna Murphy. For ease of
discussion, we use the name “Ann,” consistent with the parties’ discussion at
the summary judgment hearing.
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We note: “To show a breach of contract, a party must establish: (1) the
existence of a contract, including its essential terms, (2) a breach of a duty
imposed by the contract, and (3) resultant damages.” Seneca Res. Corp.,
122 A.3d at 379 (citation omitted).
The trial court found Appellant failed to meet its burden of proof or
“present sufficient evidence on an issue essential to its case — ownership of
114 acres of land with oil and gas rights[.]” Trial Ct. Op. at 15-16 (emphasis
omitted). The court reasoned Appellant “was not precluded as the non-
moving party to present sufficient evidence on [this] issue[.]” Id. at 15.
Appellant “had the opportunity to conduct its own title search and to ‘defend’
its title pursuant to the terms of the Lease but did not present any record
evidence to the contrary.” Id. at 20 n.9. Instead, the court found, Appellant,
“sub silentio, did not rebut nor defend title to more than [27] acres with oil
and gas rights pursuant to its own contractual obligation.” Id. at 15. The
court then reasoned:
[Appellant] could not lease oil and gas rights that it did not
own. The Lease provided payment to [Appellant] for oil and gas
rights that it did, in fact, own. Ownership of the oil and gas rights
is an essential element of the Lease. It is undisputed that
[Appellant] owned oil and gas rights to 27 acres.
. . . There was no breach of contract as [Appellee] tendered
payment for the undisputed quantity of acreage containing oil and
gas rights actually owned by [Appellant].
Id. at 18.
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We agree. None of Appellant’s extensive quotations of the “evidentiary
record” present any specific evidence showing ownership of all 114 acres.
Indeed, some of these quoted sources contradict Appellant’s own argument.
First, the quoted portion of Appellant’s response to the interrogatory merely
“incorporates by reference all of the allegations in [its] Amended Complaint”
and other answers to interrogatories. See Appellant’s Brief at 16. The quoted
response also includes non-relevant argument that Appellee recorded the
lease “with the intention of encumbering the entirety of [Appellant’s] property
while tendering payment for only part of [the] property.” See id. Second,
the quoted portion of Ann Murphy’s deposition testimony includes her
statements that she “would assume” Appellant owns oil and gas rights but,
when asked to confirm, she did not know. Id. at 22. Third, the quoted
portions of the summary judgment hearing transcript include: (1) counsel’s
admission that even if Ann Murphy were called to testify, Appellant could not
establish ownership of the remaining 87 acres; (2) counsel’s non-relevant
argument that it was Appellee who sought to enter the lease with Appellant;
and (3) discussion of the alleged oral “settlement agreement.” See id. at 23-
27.
Finally, we note the quoted portions of Timothy Murphy’s deposition
testimony include his belief that Appellant retained all oil and gas rights. See
Appellant’s Brief at 18, 20. However, Appellant does not address how this
testimony was “sufficient evidence” in light of Appellant’s own on-the-record
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concession that it did not own oil and gas rights to all 114 acres. See Seneca
Res. Corp., 122 A.3d at 378; N.T. at 21, 32, 43. We further agree with the
trial court’s analysis that Appellee did not breach the terms of the contract by
tendering payment for only 27 acres. See Seneca Res. Corp., 122 A.3d at
379; Trial Ct. Op. at 18.
Appellant’s second claim on appeal is that the trial court erred in denying
it “declaratory relief for the amounts [Appellee] owed . . . under the parties’
agreements.” Appellant’s Brief at 27 (capitalization removed). Appellant’s
entire discussion spans two paragraphs and avers: “The evidentiary record
proves the existence of the lease between [the parties] and [Appellee’s] failure
to comply with its obligations under the lease to pay [Appellant] the full
amount of the lease . . . .” Id. at 28.
We incorporate our discussion above and likewise conclude no relief is
due on Appellant’s second claim. We reject Appellant’s assertion that the
evidentiary record shows a failure by Appellee to comply with the lease. See
Seneca Res. Corp., 122 A.3d at 379; Trial Ct. Op. at 18. Rather, Appellee
properly tendered payment for the oil and gas rights to the 27 acres Appellant
actually owned.
Appellant’s third claim is that the trial court erred in entering summary
judgment for Appellee on the claims of breach of contract and breach of
implied duty of good faith and fair dealing. Appellant’s Brief at 29. It
maintains Appellee breached the terms of the written lease. For the reasons
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set forth above, we conclude no relief is due. See Seneca Res. Corp., 122
A.3d at 379; Trial Ct. Op. at 18.
Appellant’s fourth, fifth, and sixth issues challenge the trial court’s entry
of summary judgment on its claims of breach of contract, breach of implied
duty of good faith and fair dealing, promissory estoppel, fraud, and deceit.
Appellant’s Brief at 31, 33-34, 36. These claims relate to the alleged oral
“settlement agreement,” which Appellant avers is not subject to the statute of
frauds. Id. at 32-33. Appellant argues the following. Appellee “represented
it would, at a minimum, agree to a new lease with [Appellant] to lease the 27
undisputed acres[, and] then even agreed it would lease another 41 acres for
an additional $145,000, which acreage [Appellee] apparently realized it should
have paid for in the first place.” Id. at 35. Based on these representations,
Appellant agreed Appellee “could file the lease surrender to allow the new
lease to be signed for the 68 acres[.]” Id. However, Appellee then “ignored
its promises and advised [Appellant] that it would not lease any acreage from”
it. Id. at 36. This “evidence proves [Appellee’s] fraudulent conduct and
fraudulent inducement of [Appellant] to enter an agreement to resolve the
parties’ payment dispute and . . . the illegal encumbrance on all of
[Appellant’s] property caused by [Appellee’s] recording of the lease[.]” Id. at
38.
At the summary judgment hearing, Appellee cited Nolt for
the long tradition of treating oil and gas leases as the sale of an
estate in land subject to the general statute of frauds codified at
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33 P.S. § 1. This conclusion is bolstered by this Court's
determination that the assignment of an oil and gas lease must
be in writing.
See Nolt, 96 A.3d at 1047 n.3; N.T. at 10-11. Nolt also noted: “The Statute
of Frauds instructs that a purported transfer of an ownership interest in real
property is not enforceable unless evidenced in writing and signed by the
parties granting the interest.” Nolt, 96 A.3d at 1047, quoting Long v.
Brown, 582 A.2d 359, 361 (Pa. Super. 1990). Appellant responded the oral
agreement was not “a second new lease,” but rather a “settlement
agreement,” which was not required to be in writing. N.T. at 40-41.
Reviewing the record in the light most favorable to Appellant as the non-
moving party, it is undisputed that the alleged oral agreement addressed the
assignment or lease of oil and gas rights. See Seneca Res. Corp., 122 A.3d
at 378. By Appellant’s own description, the agreement was that Appellee
would “agree to a new lease” and “file the lease surrender” of the existing
lease. Appellant’s Brief at 35. Accordingly, contrary to Appellant’s contention,
we conclude such an agreement was subject to the statute of frauds, and the
parties’ alleged oral agreement was not enforceable. See Nolt, 96 A.3d at1047 n.3. Therefore, the trial court properly entered summary judgment on
Appellant’s claims arising from the oral agreement.
We affirm the order granting Appellee’s motion for summary judgment
and dismissing Appellant’s amended complaint with prejudice.
Order affirmed.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/11/2020
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