Title: Bertani v. Beck

State: pennsylvania

Issuer: Pennsylvania Supreme Court

Document:

330 Pa. Superior Ct. 248 (1984) 479 A.2d 534 Dante G. BERTANI, Receiver of B & R Lumber Company, and William G. Boyle, Executor of the Estate of Edgar W. Rugh and Ailsa P. Rugh, Assignees v. C.E. BECK and Amoco Production Company, Appellants. Supreme Court of Pennsylvania. Argued November 30, 1983. Filed June 15, 1984. Reargument Denied August 17, 1984. Petition for Allowance of Appeal Denied April 4, 1985. *249 James R. Cascio, Somerset, for appellants. James R. Mall, Pittsburgh, for appellees. Before ROWLEY, WIEAND and HESTER, JJ. WIEAND, Judge: The decision in this case rests upon the interpretation to be placed upon paragraph 6 of an oil and gas lease covering 13,604 acres of land in Clinton and Centre Counties. The lease, negotiated by C.E. Beck, agent for Amoco Production Company (Amoco), and executed on October 26, 1977, required Amoco to pay an initial consideration therefor of $13,604. In addition, Amoco was to pay royalties consisting of one-eighth (1/8) of the net proceeds derived from extracting *250 and marketing certain enumerated minerals. Although the term of the lease was stated to be ten years, paragraph 6 provided: It is undisputed that neither drilling nor mining operations were commenced within the first year. It is also clear that a "delay rental" was not paid before the expiration of the first year. The owner of the demised premises was B & R Lumber Company, a corporation owned by Ailsa P. Rugh (53.846%) and the Estate of Edgar Rugh, deceased (46.154%). On November 18, 1977, Dante G. Bertani became receiver of the corporation by agreement. Because the lease had been negotiated and executed on behalf of the corporation by Ailsa Rugh alone prior to appointment of the receiver, Bertani determined that he should obtain from the Court of Common Pleas of Westmoreland County a decree confirming the lease. This caused delay. While the confirmation *251 proceedings were pending, the first year of the lease expired without the commencement of drilling or mining by the lessee. The court, when it ultimately decreed confirmation, left it to the parties to make their own agreement regarding the uncertainty and delay which had been caused by Bertani's refusal to proceed without court confirmation. The corporation's interest in the lease was subsequently assigned to Ailsa Rugh and the Estate of Edgar Rugh, deceased, in shares consistent with their respective interests in the corporation. Continuing negotiations pertaining to the amount of delay rentals to be paid proved unsuccessful. On or about November 1, 1979, Amoco tendered separate drafts to the lessors in the total amount of $20,405 as payment of delay rentals due under paragraph 6 of the lease agreement for the years 1978-79 and 1979-80. This amount reflected a credit for a delay of six months, which Amoco contended had been caused by the confirmation proceedings instituted by the receiver. The lessors refused this tender and insisted upon payment in full ($27,208) for two years' delay. When Amoco refused to pay the amount demanded, the lessors commenced an action in assumpsit to recover $27,208. Extensive discovery, which demonstrated the facts aforesaid, was followed by cross motions for summary judgment. The trial court concluded that Amoco was obligated by the terms of the lease to pay delay rental for two years and, therefore, entered summary judgment in favor of the lessors. Amoco appealed. We reverse. A summary judgment may be granted under Pa.R. C.P. 1035(b) In determining whether summary judgment shall be entered, the following principles have application: Pennsylvania Gas & Water Co. v. Nenna & Frain, Inc., 320 Pa.Super. 291, 297-298, 467 A.2d 330, 333 (1983). See: Day v. Volkswagenwerk Aktiengesellschaft, 318 Pa.Super. 225, 231, 464 A.2d 1313, 1316 (1983). In an action based upon interpretation of a lease agreement, where the terms are unambiguous, summary judgment is appropriate. See: Pines Plaza Bowling, Inc. v. Rossview, Inc., 394 Pa. 124, 145 A.2d 672, aff'g 14 D. & C.2d 459 (1958). See generally: Woytek v. Benjamin Coal Co., 300 Pa.Super. 397, 446 A.2d 914 (1982). The unambiguous language of paragraph 6 established that the lease would terminate on October 26, 1977 unless drilling or mining commenced prior thereto or, in the alternative, Amoco paid prior thereto the sum of $13,604 as "delay rental." If neither of these events occurred, the lease was to terminate. In that event, the initial payment of $13,604 was forfeited, and neither party had any further obligation under the lease. The lease did not require Amoco to pay delay rentals. If it failed to do so, the only effect was a termination of the lease. After the lease had been *253 terminated, Amoco was not required to make any further payments. Therefore, the trial court was clearly in error when it caused judgment to be entered against Amoco for $27,208, representing "delay rental" for two additional years. It is correct, of course, that Amoco attempted to revive the lease agreement by tendering the sum of $20,405, which it deemed a fair compromise of the dispute concerning delay and monies due. This tender, however, was rejected by the lessors. Consequently, the attempted revival of the lease was unsuccessful. The tender of $20,405 did not constitute either a promise to pay or an estoppel requiring future payment of monies under the defunct lease agreement. In Glasgow v. Chartiers Oil Co., 152 Pa. 48, 25 A. 232 (1892), the Supreme Court had occasion to interpret the following clause in an oil and gas lease: There, as here, the lessors argued that the language of the clause required the lessee to pay monthly "delay rentals." The Supreme Court held that the clause did not impose upon the lessee an obligation to make monthly payments. The Court said: Id., 152 Pa. at 51-52, 25 A. at 232 (emphasis added). The same interpretation has been given to similar forfeiture clauses in other leases. See: Hays v. Forest Oil Co., 213 Pa. 556, 62 A. 1072 (1906); Jackson v. American Natural Gas Co., 31 Pa.Super. 408 (1906); McKee v. Colwell, 7 *255 Pa.Super. 607 (1898). Compare: McMillan v. Philadelphia Co., 159 Pa. 142, 28 A. 220 (1893) (despite limitations on lessees' duty to pay, the language of the lease demonstrated clearly that lessees had undertaken an obligation to commence operations or pay). The language of the agreement in the instant case is unambiguous. The facts, moreover, are undisputed. Neither the lease agreement nor Amoco's conduct was sufficient to create an obligation to pay delay rentals. Paragraph 6 of the lease was intended to confer upon Amoco the right to explore for the presence of minerals. If none were discovered, Amoco was free to allow the lease to be forfeited by the expedient of not paying a "delay rental." If Amoco wished to postpone the forfeiture, however, it could do so by paying a delay rental before the yearly period had expired. Paragraph 6 was not a covenant to pay "delay rental." It did not create a right in appellees to insist upon being paid delay rental. The option was vested in Amoco. When it did not make the payment provided in paragraph 6, the lease was terminated. Thereafter, it could be revived only by mutual agreement. That no such agreement was reached is undisputed. Judgment reversed and now entered in favor of appellants.