Barton, E. v. Graham, R. ( 2020 )

J. A12042/19
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
E.B. SUSAN BARTON, BRENT L. : IN THE SUPERIOR COURT OF
BARTON, AND TRACEE R. BARTON : PENNSYLVANIA
:
v. :
:
RONALD L. GRAHAM AND :
MICHAEL D. GRAHAM, : No. 1704 WDA 2018
:
Appellants :
Appeal from the Order Entered November 2, 2018,
in the Court of Common Pleas of Armstrong County
Civil Division at No. 2017-00796
BEFORE: BENDER, P.J.E., DUBOW, J., AND FORD ELLIOTT, P.J.E.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED MARCH 26, 2020
Ronald L. Graham and Michael D. Graham (collectively, “the Grahams”)
appeal from the November 2, 2018 order entered by the Court of Common
Pleas of Armstrong County granting the motion for summary judgment filed
by E.B. Susan Barton, Brent L. Barton, and Tracee R. Barton (collectively,
“the Bartons”).1 After careful review, we affirm.
The trial court set forth the following factual history:
The Bartons are the successor lessors to an
“Oil Lease” executed between their predecessors,
1 The trial court notes that E.B. Susan Barton “was the sole owner of the
Property at the time the complaint was filed. Since that filing, she has
conveyed the Property to [] Brent L. and Tracee R. Barton.” (Trial court
memorandum, 11/2/18 at 1 n.1.) The trial court defines “the Property” as
“approximately 100 acres situate[d] in Sugarcreek Township, Armstrong
County, Pennsylvania.” (Id. at 1.)
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Robert F. Mellish and Grace A. Mellish, and Edward B.
Boyle and Company on September 30, 1964 (the
“Lease”). Despite being executed in 1964, the Lease
was not recorded with the Armstrong County Recorder
of Deeds until February 7, 2011. By virtue of certain
assignments, the Grahams are the current successor
lessees of seven-eighths (7/8) interest in the
Lease.[Footnote 2] The Lease provides for a primary
term of fifteen (15) years, “and so long thereafter as
oil or gas can be produced in paying quantities.” The
Lease goes on to provide that “[i]t is agreed, [t]hat if
gas is found in paying quantities, the consideration in
full to the party of the first part for each gas well shall
be one-eighth (1/8th) royalty per annum for the gas
from each gas well when utilized off the aforesaid
premises.” After the typewritten insertion of a
“one-eighth (1/8th[])” royalty, the fixed amount
payment designation of “DOLLARS” is crossed out.
Typewritten at the end of the first page of the Lease
is a rental provision providing that “[t]he party of the
second party [sic] agrees to pay a rental of [f]ifty four
($54.00) dollars yearly until drilling operations are
begun” (the “Delay Rental”).
[Footnote 2] A third owner of the working
oil and gas interests underlying the
Property, Anna Marie Knoll, executed a
release of lease in May 2017,
relinquishing her one-eighth (1/8)
interest. Although the Grahams appear to
contest the Bartons’ determination of the
ownership of the working interests in the
oil and gas underlying the Property, those
determinations [were] not material to the
[trial court’s] disposition of the instant
motion for summary judgment; nor have
the Grahams[] presented to the [trial
court] any suggested additional or
alternative owners of these interests.
A single gas well has been drilled pursuant to the
Lease, presumably during the time when the Mellishes
owned the Property (the “Mellish Well”). The
Mellish Well at one time produced gas, but has not
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produced any gas since June 1993. It currently is
disconnected from any tanks or commercial
distribution systems for the sale of gas, and is
overgrown and surrounded by trees, brush, and
saplings. The Grahams have not paid to the Bartons
any royalty payments, but instead have tendered
rental payments of $54.00 per year for the past
several years. The Bartons have rejected these
payments and have not cashed any of the checks.
In February 2017, counsel for the Bartons sent letters
by certified mail to both Grahams advising them that
the Lease had expired 1) because of the lack of
production, and 2) because the Bartons, specifically
their predecessor the Barton Equity Partnership, had
purchased the Property in good faith and for value in
1999. Because the Lease was not recorded until
2011, the Bartons advised that the Partnership was a
bona fide purchaser for value without record notice of
the Lease which, therefore, cannot encumber the
Property. The Bartons requested that the Grahams
execute releases of their interest in the Lease, but
[the Grahams] have refused to do so.
The Bartons filed a complaint in ejectment on May 31,
2017, in which they include counts for ejectment and
“good faith purchaser for value.” They [sought]
declarations by [the trial court] that the Lease has
expired and that the Grahams have no remaining
interest in the oil and gas underlying the Property.
Trial court memorandum, 11/2/18 at 2-4.
The Bartons filed a motion for summary judgment on June 15, 2018.
After hearing argument, the trial court entered an order granting the Bartons’
motion for summary judgment on November 2, 2018. On November 13,
2018, the Grahams filed a motion for reconsideration. The trial court denied
the Grahams’ motion on November 27, 2018.
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The Grahams filed a timely notice of appeal to this court on
November 30, 2018. The trial court ordered the Grahams to file a concise
statement of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b),
and the Grahams timely complied. The trial court filed an opinion pursuant to
Pa.R.A.P. 1925(a) on January 4, 2019.
Preliminarily, we note that the Pennsylvania Rules of Appellate
Procedure include requirements for the content of briefs filed with this court.
See generally Pa.R.A.P. 2111(a). Here, the Grahams’ brief fails to include a
statement of jurisdiction, a summary of the argument, a copy of the trial
court’s Rule 1925(a) opinion, and a copy of the Grahams’ Rule 1925(b)
statement of errors complained of on appeal. See Pa.R.A.P. 2111(a)(1), (6),
(b), and (d). Additionally, the structure of the Grahams’ brief is not in
compliance with Rule 2111(a). Further, the Grahams failed to divide the
argument section of their brief into as many parts as there are questions to
be answered, pursuant to Pa.R.A.P. 2119(a).
We have the authority to dismiss appeals for failing to comply with the
Rules of Appellate Procedure and will do so in cases where such a failure
hinders our ability to conduct meaningful appellate review. Kern v. Kern,
892 A.2d 1, 5-6 (Pa.Super. 2005) (citation omitted), appeal denied, 903
A.2d 1234 (Pa. 2006); see also PHH Mortg. Corp. v. Powell, 100 A.3d 611,
615 (Pa.Super. 2014), citing Pa.R.A.P. 2101 (requiring that briefs conform
with all material aspects of the relevant Rules of Appellate Procedure and
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granting appellate courts the power to quash or dismiss appeals in cases
where defects in the brief are substantial). Here, because our ability to
conduct meaningful appellate review has not been hindered despite the
Grahams’ multiple violations of the Rules of Appellate Procedure, we shall
reach a decision on the merits.
The Grahams allege the following trial court errors:
The trial court has erred in granting summary
judgment to [the Bartons]. In doing so, the trial court
has erred in both fact-finding and application of the
laws of the Commonwealth of Pennsylvania. First, the
trial court erred in granting summary judgment while
material and relevant discovery was still pending.
Second, the trial court erred in finding that no genuine
issue of material fact existed in this matter.
The trial court further erred in finding that the lease
at issue was a royalty-based lease, and not a
rental-based lease or hybrid lease. In doing so, the
trial court erred in finding that the lease was
terminated or was subject to termination.
Additionally, the [trial] court abused its discretion
and/or misapplied the law in applying its standard of
review and in its review of the facts in determining
summary judgment.
Grahams’ brief at 6-7.
Based on our review of the Grahams’ brief, we summarize the Grahams’
complaints as follows:
I. Whether the trial court improperly assigned the burden of
proof to the Grahams?
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II. Whether the trial court erred in granting summary judgment
while discovery was still ongoing and when a genuine issue
of material fact existed?
III. Whether the trial court committed an error of law because
an oil and gas lease term can be extended when the lessee
exercised good faith in attempting to extract and produce
natural gas from a well?2
When reviewing an order granting or denying a motion for summary
judgment, we are governed by the following standard of review:
We 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. Only where is no genuine
issue of material fact and it is clear that the moving
party is entitled to a judgment as a matter of law will
summary judgment be entered. Our scope of review
of a trial court’s order granting or denying summary
judgment is plenary, and our standard of review is
clear: the trial court’s order will be reversed only
2 The table of contents in the Grahams’ brief contains the following point
headings:
[▪] The [trial] court erred in granting summary
judgment during ongoing discovery.
[▪] A genuine issue of material fact exists.
[▪] The lease has not terminated by operation of law.
[▪] An oil and natural gas lease does not expire and is
not forfeited.
[▪] The trial court improperly relied upon the Hite
case.
[▪] The trial court misapplied the standard of review.
Grahams’ brief at ii (full capitalization omitted).
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where it is established that the court committed an
error of law or abused its discretion.
Daley v. A.W. Chesterton, Inc., 37 A.3d 1175, 1179 (Pa. 2012), quoting
Pappas v. Asbel, 768 A.2d 1089, 1095 (Pa. 2001) (citations omitted).
I.
First, the Grahams aver that the trial court, in granting the Bartons’
motion for summary judgment, improperly placed the burden of proof on the
Grahams. (Grahams’ brief at 26-28.) Specifically, the Grahams argue that
the trial court misapplied our supreme court’s holding in Ertel v.
Patriot-News Co., 674 A.2d 1038 (Pa. 1996), cert. denied, 519 U.S. 1008(1996). (Grahams’ brief at 27.) The Grahams further argue that because
they had no burden to meet in this case, they were “prejudiced by a
requirement to produce evidence to disprove elements of the case in summary
judgment.” (Id.)
The Ertel court held that,
a non-moving party must adduce sufficient evidence
on an issue essential to his case and on which he bears
the burden of proof such that a jury could return a
verdict in his favor. Failure to adduce this evidence
establishes that there is no genuine issue of material
fact and the moving party is entitled to judgment as a
matter of law.
Ertel, 674 A.2d at 1042, quoted by trial court memorandum, 11/2/18 at 4-5.
The plain language of our Rules of Civil Procedure, however, belies the
Grahams’ argument. Indeed, Rule of Civil Procedure 1035.3 explicitly
prohibits a non-moving party from resting upon the mere denials of the
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pleadings; further, Rule 1035.3 requires a non-moving party to file a response
to a motion for summary judgment in which the non-moving party identifies
“evidence in the record establishing the facts essential to the [] defense
which the motion cites as not having been produced.”
Pa.R.Civ.P. 1035.3(a)(2) (emphasis added). See also Am. S. Ins. Co. v.
Halbert, 203 A.3d 223, 227 (Pa.Super. 2019) (reiterating that a non-moving
party may not rely upon mere denials of the pleadings).
Accordingly, the trial court did not improperly assign the burden of proof
to the Bartons.
II.
Next, the Grahams argue that the trial court erred in granting summary
judgment in favor of the Bartons after concluding, as a matter of law, that the
Lease terminated by operation of law. (Grahams’ brief at 12.) The Grahams
further argue that an oil and gas lease does not expire and is not forfeited
when the lessee acts in good faith to extract and produce the oil and gas, and
that the trial court improperly relied upon our decision in Hite v. Falcon
Partners, 13 A.3d 942 (Pa.Super. 2011). (Grahams’ brief at 22-25.)
As explained by this court:
“A lease is in the nature of a contract and is controlled
by principles of contract law.” T.W. Phillips Gas &
Oil Co. v. Jedlicka, [] 42 A.3d 261, 267 ([Pa.] 2012)
(“Jedlicka”). As such, a lease must be construed in
accordance with the terms of the lease 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
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construction to be given the agreement.” Id. (quoting
J.K. Willison v. Consol. Coal Co., [] 637 A.2d 979,
982 ([Pa.] 1994)). The party seeking to terminate the
lease bears the burden of proof. Jedlicka, 42 A.3d at
267.
Heasley v. KSM Energy, Inc., 52 A.3d 341, 344 (Pa.Super. 2012).
At this juncture, we shall set forth the relevant language contained in
the Lease at issue. The record reflects that the Lease provides a primary term
of 15 years “and so long thereafter as oil or gas can be produced in paying
quantities.” (Trial court memorandum, 11/2/18 at 2; Complaint, Exhibit 5;
R.R. at 34a.) The Lease further provides for royalty payments when gas is
found in paying quantities. (Id.) The Lease also requires the lessee to pay a
rental of $54 per year “until drilling operations are begun.” (Id. at 2-3.)
As this court further explained:
Within the oil and gas industry, 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
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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 267-268.
Our Supreme Court has long held that “[w]here a
lessor’s compensation is subject to the volume of
production, the period of active production of oil or
gas is the measure of the duration of the lease.”
Clark v. Wright, [] 166 A. 775, 776 ([Pa.] 1933). By
contrast,
[w]here [a] lessor’s compensation is a
definite and fixed amount unrelated to the
volume of production, the duration of the
lease is not measured by the length of
time the mineral is actually extracted and
marketed; but by the time during which
the lease provides that the lessor shall
receive the fixed rental. Under these
latter circumstances, it can make no
difference to lessor whether 100 or
1,000,000 cubic feet of gas is produced.
Id.Two leading cases in this
[Commonwealth] illustrate these rules.
[1] In Cassell v. Crothers, [44 A. 446([Pa.] 1899)], the clause under
consideration reads: “as long thereafter
as oil or gas is found in the land described
in paying quantities.” The remuneration
which the lessor was to obtain for the use
of his land was on a royalty basis and not
on a flat rental basis. . . . [The Supreme
Court held] that in an oil lease for a fixed
period and “as long thereafter as oil is
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found in paying quantities,” where the
lessor’s compensation is one-eighth of the
oil produced, the tenancy as to the
surface of the land, after the expiration of
the fixed period, and after the fact that oil
is not being found and produced in paying
quantities becomes susceptible of proof,
is a tenancy in the nature of a tenancy at
will, and if not actually terminated by
mutual consent, or continued by mutual
consent in order that further exploration
be made, may be terminated by either
party.” . . .
[2] The other case . . ., and typical of the
second rule as to compensation, is that of
Summerville v. Apollo Gas Co., [56 A.
867 ([Pa.] 1904)], wherein, under the
terms of the lease, the lessee had the
right to hold the premises “for and during
the term of two years . . . and as much
longer as oil and gas are found in paying
quantities, or the hereinafter described
rental is paid.” The lessee failed to
market any gas during the extended
period, but retained it in the well,
although the evidence indicated the well
would produce one million feet per day.
The lower court instructed the jury to
bring in a verdict for the defendant on the
ground that gas was found in paying
quantities. [The Pennsylvania Supreme]
court affirmed the judgment below, and in
its opinion stated that it may be that for
sometime the lessee was not able to find
a purchaser for the gas, “but that was not
the affair of the lessors; that they are not
interested in the proceeds of the sale of
the gas. Their rights under the agreement
extended only to the receipt of a
stipulated annual rental for each well.”
(Numerals in brackets supplied).
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[T.W. Phillips Gas and Oil Co. v. Komar, 227 A.2d
163, 165 (Pa. 1967)] (emphasis and some internal
quotation marks omitted) (quoting Clark v. Wright,
[] 166 A. 775, 776 ([Pa.] 1933).
Heasley, 52 A.3d at 344-345.
The Grahams argue that the Lease at issue is a Summerville lease,
meaning that the
production of natural gas pursuant to this [L]ease is
not tied to the royalty received by [the Bartons], and
as a result, the objective production of the
[Mellish W]ell is irrelevant to the determination of the
validity of the [L]ease. The [L]ease at issue in this
case does not and cannot be terminated and
transformed into a tenancy at will by a lack of, or lapse
in, production of oil and gas.
Grahams’ brief at 17, citing McCausland v. Wagner, 78 A.3d 1093, 1101
(Pa.Super. 2013). The Bartons, however, contend that the Lease is a
royalty-based lease, and that the continued “payment of delay rentals alone,
after the expiration of the primary term, and after a once-productive well has
been drilled, is inapplicable to continuation of the leasehold.” (Bartons’ brief
at 19.)
Here, the Grahams admit that the Mellish Well3 is currently disconnected
from any tanks and commercial distribution systems for the sale of oil and/or
gas and that the well last produced gas on June 26, 1993. (Grahams’ response
to Bartons’ request for admissions at ¶ 6, Grahams’ responses to Bartons’
3The Mellish Well is the only well that exists on the Property; and no oil and/or
gas has been sold from the Mellish Well in excess of six years. (Grahams’
response to Bartons’ request for admissions at ¶¶ 1, 3, 5; R.R. at 92a-93a.)
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interrogatories at ¶ 4; R.R. at 93a, 95a.) The record further reflects that the
Grahams admit to paying only delay rental payments for the Mellish Well over
the past six years. (Grahams’ response to Bartons’ request for admissions at
¶ 9; R.R. at 94a.) The Bartons aver that they have not accepted and/or
cashed any checks for delay rental payments; and the Grahams admit that
the Bartons have not cashed any checks tendered by the Grahams.
(Complaint at ¶ 44, R.R. at 9a; answer and new matter at ¶ 44, R.R. at 71a.)
The trial court, relying in part on our decision in Hite, concluded that
the Lease expired “by its own terms” and that the Bartons were entitled to
summary judgment. (Trial court memorandum, 11/2/18 at 13-14.) We find
that Hite controls here. In Hite, the parties executed oil and gas leases in
2002 and 2003 that granted the lessee the right to enter the property for the
purposes of oil and gas production for the term of one year and,
as long thereafter as oil or gas or either of them is
produced from the property, or as operations continue
for the production of oil or gas, or as lessee shall
continue to pay lessors two ($2.00) dollars per acre
as delayed rentals, or until all oil and gas has been
removed from the property, which ever shall last
occur.
Hite, 13 A.3d at 944 (citation and extraneous capitalization omitted). As of
2008, the lessee failed to commence any drilling operations on the property
and the lessors sent notice declaring termination of the leases as the result of
lessee’s inaction. Id. The trial court granted the lessors’ motion for summary
judgment. This court affirmed the trial court’s order, holding that once a
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primary lease term expires, the “mere payment of delay rentals alone” does
not preserve a lessee’s drilling rights. Id. at 948. This court further stated
that even if a party were to accept delay rental payments after the expiration
of the primary term as implied extensions of the lease, such extensions cease
when a party refuses to accept further delay rental payments. Id. at 949 n.8.
Nevertheless, the Grahams contend that the trial court improperly relied
upon the holding in Hite, relying on an unpublished decision from the
United States Court of Appeals for the Third Circuit, Smith v. Steckman
Ridge, LP, 590 Fed. Appx. 189 (3d Cir. 2014), in which the Third Circuit
applied Pennsylvania law.4 In Smith, the Third Circuit found Hite to “not
apply to leases where the [lessee] acts in good faith, extracts reserves during
the primary term of the lease, and does not attempt to indefinitely preserve
extraction rights without compensating the lessor for the dormant reserves in
accord with habendum and shut-in clauses.” Id. at 199, citing Hite, 13 A.3d
at 948-950.
The Grahams’ reliance on Smith is misplaced. In Smith, the parties
executed a dual-purpose lease for the extraction and storage of gas for a
primary term of five years. Id. at 191. Unlike the Lease in the instant case,
the lease in Smith contained provisions pertaining to the conversion of the
4The Grahams acknowledge, and we note, that Smith is not binding authority
on this court, although it may be used for persuasive value. (See Grahams’
brief at 25 n.3; Cambria-Stoltz Enterprises v. TNT Investments, 747 A.2d
947, 952 (Pa.Super. 2000), appeal denied, 795 A.2d 970 (Pa. 2000), citing
Martin v. Hale Products, Inc., 699 A.2d 1283, 1287 (Pa.Super. 1997).)
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lease from gas production to gas storage. Id. The Third Circuit specifically
noted that Hite “did not address what effect a dual purpose lease or a shut-in
clause would have upon a delay rental payments clause.” Id. at 199.
Based on our review of the record, we find that the trial court neither
abused its discretion nor erred as a matter of law when it granted the Bartons’
motion for summary judgment. Indeed, pursuant to the Lease terms and this
court’s holding in Hite, the primary term in the Lease ended when production
ceased and the Bartons refused the Grahams’ delay rental payments. Hite,
13 A.3d at 949 n.8.
III.
Finally, the Grahams contend that the trial court erred by granting
summary judgment while discovery was still ongoing. (Grahams’ brief at 7.)
Specifically, the Grahams argue that discovery responses from the Bartons—
in the form of two sets of requests for production of documents—were still
outstanding at the time the Bartons presented their motion for summary
judgment. (Id.) The Grahams further aver that the trial court overlooked a
genuine issue of material fact. (Id. at 10.)
In Pennsylvania, “parties must be given
reasonable time to complete discovery before a
trial court entertains any motion for summary
judgment[.]” Reeves v. Middletown Athletic
Ass’n, 866 A.2d 1115, 1124 (Pa.Super. 2004)
(emphasis added).
....
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We, nevertheless, recognized that “the party seeking
discovery is under an obligation to seek discovery in a
timely fashion.” [Id.]; see Fort Cherry School Dist.
v. Gedman, 894 A.2d 135, 140 (Pa.Super. 2006)
(reasoning “[t]he Pennsylvania Rules of Civil
Procedure do not give [parties] an unlimited amount
of time to conduct discovery”). However, this Court
has unequivocally stated that the purpose of Rule
1035.2 “is to eliminate cases prior to trial where a
party cannot make out a claim or defense after
relevant discovery has been completed; the intent is
not to eliminate meritorious claims prematurely
before relevant discovery has been completed.”
Burger v. Owens Illinois, Inc., 966 A.2d 611, 618
(Pa.Super. 2009), quoting Gerrow [v. John Royle &
Sons, 813 A.2d 778,] 781-782 [(Pa. 2002)].
Moreover, “[t]he adverse party must be given
adequate time to develop the case and the motion [for
summary judgment] will be premature if filed before
the adverse party has completed discovery relevant
to the motion.” Id.Anthony Biddle Contractors, Inc. v. Preet Allied Am. Street, LP, 28 A.3d
916, 928-929 (Pa.Super. 2011) (footnote omitted).
Here, the Grahams aver that they sought to acquire tax records from
the Bartons for the Barton Equity Partnership that would “reveal that [the
Bartons] and their predecessors in interest have been receiving and accepting
regular payment under the lease.” (Grahams’ brief at 8.) As discussed in
detail supra, this claim is belied by the record. The Grahams further argue
that they made delay rental payments to the Bartons’ predecessors in interest
and in so doing, the Grahams satisfied their duties under the lease. (Id. at
10-11.)
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As noted in Hite, this is of no import to the case at bar. Indeed, the
primary term in the lease at issue ended when production ceased and the
Bartons refused the Grahams’ delay rental payments. Hite, 13 A.3d at949 n.8. Put another way, the Bartons’ refusal to cash the Grahams’ delay
rental payments—that the Grahams admit—is not a genuine issue of material
fact. (See answer and new matter at ¶ 44, R.R. at 71a.) Accordingly, we find
that the trial court did not err when it granted the Bartons’ motion for
summary judgment because relevant discovery had been completed and no
genuine issue of material fact existed.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/26/2020
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