J-A23021- 14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37 RONALD K. TESKA, AND GIULIA MANNARINO, IN THE SUPERIOR COURT OF PENNSYLVANIA Appellants

v. EQT CORPORATION, EQT PRODUCTION COMPANY, AND EQT MIDSTREAM (EQUITRANS) Appellee No. 1839 WDA 2013

Appeal from the Order entered October 22 , 2013, in the Court of Common Pleas of Greene County, Civil Division, at No(s): 110 -2013

BEFORE: DONOHUE, ALLEN, and MUSMANNO, JJ. MEMORANDUM BY ALLEN, J.: FILED AUGUST 26, 2014 Ronald K. Teska and Giulia Mannarino, (“Appellants”), a ppeal pro se from the trial court’s order sustaining the preliminary objections in the nature of a demurrer of EQT Corporation, EQT Produc tion Company, and EQT Midstream (EQUITRANS), (collectively “EQT”). After careful consideration, we affirm. Our review of the record indicates that on February 11, 2013, Appellants initiated this action against EQT alleging t respass, theft of minerals, and fraud. On March 5, 2013, EQT filed pr eliminary objections in the nature of a demurrer. On March 22, 2013, Appell ants filed an amended complaint in which they alleged only fraud and trespass . On April 5, 2013, EQT preliminarily objected to Appellant’s amended comp laint. On April 23,J-A23021- 14

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2013, Appellants answered EQT’s preliminary objections to Appellant’s amended complaint. On September 13, 2013, the trial court conducted oral arguments on EQT’s preliminary objections. On October 2 2, 2013, the trial court filed an order and memorandum sustaining EQT’s pr eliminary objections and explaining its order. In its October 22, 2013 memorandum, the trial court sum marized the factual and procedural background:

In 1913, G.E. Houston and Florence Houston leased to Carnegie Natural Gas Company a tract of land containin g 22 acres. The lease provided: "... this lease shall remain i n force for the term of 5 years from this date and as long th ereafter as oil and gas, or either of them, is produced from the sa id land by the said party of the second part, his successors and assigns ." Ex. A-1 Amended Complaint. The lease further provi ded that in consideration for the right to produce oil and gas the lessors would be paid "Seventy five ($75.00) Dollars each thre e months in advance for the gas from each and every gas well dri lled on the premises, the product from which is marketed and used off the premises, said payment to be made ... each three mo nths thereafter while the gas from said well is so marketed and used". Id. By various conveyances and assignments[,] [Appellants] now stand in the shoes of the Houstons as lessors and [EQT] has succeeded Carnegie Natural Gas as lessee. In 2012, [Appellants] filed a Declaratory Judgment action asking that we declare that they were the rightful owners of Well 65 0456, drilled pursuant to the 1913 lease, based on the alleg ed lack of production from that well. By a document recorded Octo ber 13, 2011, in the Recorder's Office of Greene County, Pennsy lvania, [EQT] surrendered the lease. [Appellants] attempted t o buy the well, but the parties could not agree on the terms, he nce the lawsuit. EQT demurred and we sustained the demurrer, holding that the lease provided that the lessee had the right to move its fixtures, including the casing of the well. Furthermo re, the Oil and Gas Act, 58 P.S. §601.101 et seq., provides that nonproducing gas wells must be plugged by the owner, a ndJ-A23021- 14

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[Appellants] were not the owners. [Appellants] appea led but Superior Court affirmed. They have now taken a different tack. They filed a new Complaint alleging fraud by EQT. It is their theory in this proceeding that the tender to them of the flat renta l amount by [EQT] was a misrepresentation that the well continued to produce when in fact it did not. According to the Ame nded Complaint, the well produced at least until 2001. Fr om 2005 through 2009, it did not produce, except for a minim al amount in 2006 and 2007. [Appellants] have no information for 2010, but allege the well was shut in 2011. The Amended Complaint raises counts of fraud and trespass. The count of fraud is premised on the tender of royalty checks year after year when [EQT] knew that th e well was not producing. To [Appellants,] these tenders wer e a willful misrepresentation. The count of trespass is based on entr ies onto the land at times when [EQT] knew there was no v alid lease. [EQT] filed Preliminary Objections in the natu re of a demurrer.

Trial Court Memorandum, 10/22/13, at 1 - 3. The trial court sustained EQT’s preliminary objections a nd Appellants filed a timely notice of appeal. The trial court did not order compliance with

Pa.R.A.P. 1925. Appellants present the following issues for our review: [1.] Whether the [trial] court committed an error or abused its discretion in making the determination that continued payment of flat rate royalty by lessees on a nonproduct ive well, whose lease was held by production and where lessors were not informed that production had ceased, was not a representation but merely a “contractual obligati on”. [2.] Whether the [trial] court committed an error or abused its discretion in making the determination that continued payment of flat rate royalty by lessees on a nonproduct ive well, whose lease was held by production and where lessors were not informed that production had ceased,J-A23021- 14

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Appellants’ Brief at 4. We recognize:

As a trial court's decision to grant or deny a demurre r involves a matter of law, our standard for reviewing that decision is plenary. Preliminary objections in the nat ure of demurrers are proper when the law is clear that a pl aintiff is not entitled to recovery based on the facts alleged i n the complaint. Moreover, when considering a motion for ademurrer, the trial court must accept as true all wellpleaded material facts set forth in the complaint and a ll inferences fairly deducible from those facts. Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425, 436 (2004) (citations and internal quotation mar ks omitted). Accord, Friedman v. Corbett,

––– Pa.

–––– , 72 A.3d 255, 257 n. 2 (2013). Furthermore, Our standard of review of an order of the trial court overruling or granting preliminary objections is to determine whether the trial court committed an error of law. When considering the appropriateness of a ruling on preliminary objections, the appellate court must appl y the same standard as the trial court. Preliminary objections in the nature of a de murrer test the legal sufficiency of the complaint ... Preliminary obj ections which seek the dismissal of a cause of action should be sustained only in cases in which it is clear and free from doubt that the pleader will be unable to prove facts legally su fficient to establish the right to relief. If any do ubt exists as to whether a demurrer should be sustained, it should be resolved in favor of overruling the prelimi nary objections. Joyce v. Erie Ins. Exch., 74 A.3d 157, 162 (Pa. Super.2013) (citation omitted).

Little Mountain Community Ass’n, Inc. v. Southern Col umbia Corp.,

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A.3d

— at 3 (Pa. Super. 2014), 2014 WL 1717029 at 3 (May 1, 2014). Initially, we note that Appellants’ instant fraud and trespass action may be barred by res judicata and collateral estoppel as averred by EQT in their preliminary objections. See generally EQT’s Preliminary Objections to [Appellants’] Amended Complaint, 4/5/13. 1 Appellants previously instituted a declaratory judgment action against EQT. As the tri al court observed, in the 2012 declaratory judgment action, Appellants “ask[ed ] that we declare that [Appellants] were the rightful owners of Well 6 50456, drilled pursuant to the 1913 lease, based on the alleged lack of produc tion from that well.”

Tr ial Court Memorandum, 10/22/13, at 1. In resolving the ensuing appeal,

this Court expressed that “[e]ven if [EQT] ‘abandoned’ the gas we ll at some point, the lease itself did not terminate until October 13, 2011, when EQT Production Company filed a Release and Surrender of Oil and Gas Lease in the Greene County Recorder of Deeds.” Teska, et al. v. EQT Corporation, et al., 82 A.3d 463 (Pa. Super. 2013) (unpublished memorandum), appeal denied 85 A.3d 484 (Pa. 2014).

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1 The trial court’s order did not “specify or discuss” this obje ction “in light of [its] disposition of the case[.]” Trial Court Memo randum, 10/22/13, at 3. However, “[i]t is well settled that this Court may aff irm the decision of the trial court if it is correct on any grounds.” Liberty Mut. Ins. Co. v. Domtar Paper, Co., 77 A.3d 1282, 1286, citing Lilliquist v. Copes – Vulcan, Inc., 21 A.3d 1233, 1235 (Pa. Super. 2011) (stating that a n appellate court may affirm a trial court's decision on any grounds supported by the record on appeal).J-A23021- 14

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In BuyFigure.com, Inc. v. Autotrader.com, Inc. , 76 A.3d 554, 560 (Pa. Super. 2013), we determined that “r es judicata and collateral estoppel applied to bar [a]ppellant's claims, because the claims and issues in both the federal and state courts had identical characteristics, an d the parties were either identical or had privity with one another, so as to be bound in state court by the decisions and rulings of the federal court.” We explained:

As [the Pennsylvania Commonwealth] Court recently decided in Callowhill Center Associates, [LLC v. Zoning Board of Adjustmen t, 2 A.3d 802 (Pa. Cmwlth. 2010)], the doctrine of res judicata/collateral estoppel applies not only to matters decided, but also to matters that could have, or should have, been raised and decided in an earlier action. Our decision in Callowhill Center Associates recognized well-settled precedent that collateral estoppel applies if there was adequate opportunity to raise issues in the previous action. Stevenson v. Silverman, 417 Pa. 187, 208 A.2d 786 (1965) ; Hochman v. Mortgage Finance Corporation, 289 Pa. 260, 137 A. 252 (1927). Bell v. Township of Spring Brook, 30 A.3d 554, 558 (Pa. Cmwlth. 2011) (emphasis supplied). Significantly, as emphasized by our Pennsylvania Suprem e Court: As pertinently stated in Hochman v. Mortgage Fin. Corp., 289 Pa. 260, 263, 137 A. 252, 253 (1927); ‘The [doctrine of res judicata] should not be defeated by minor differences of form, parties, or allegations, when these are contrived only to obscure the real purpose,-a second tria l on the same cause between the same parties. The thing which the court will consider is whether the ultimate an d controlling issues have been decided in a prior proceedin g in which the present parties actually had an opportunit y to appear and assert their rights. If this be the fact, then the matter ought not to be litigated again, nor should t he parties, by a shuffling of plaintiffs on the record, o r by change in the character of the relief sought, be permi tted to nullify the rule.’ (Emphasis supplied.)J-A23021- 14

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Stevenson v. Silverman, 208 A.2d 786, 788 (Pa. 1965).

Buyfigure.com, Inc., 76 A.3d at 561. In addressing EQT’s res judicata and collateral estoppel preliminary objections, Appellants conceded that “ [a]lthough the parties, in some instances, are the same and the facts may be similar it i s because

the claims all center around the same lease and the same gas well[.] ” Appellants’ Memorandum in Opposition to [EQT’s] Prelim inary Objections to [Appellants’] Amended Complaint, 4/23/13 , at 11 (unnumbered) (emphasis supplied). Significantly, Appe llants acknowledged that their prior action “was a request for a declaratory j udgment due to the controversy that arose regarding the parties’ rights to this abandoned

well.” Id. at 12 (unnumbered) (emphasis supplied). Instantly, Appellants’ claims of fraud involve the pay ments they received from EQT, which was a party in the prior actio n. See Appellants’

Brief at 7- 8. Further, Appellants’ trespass count relates to the sa me property, and could have been raised in the prior act ion. Appellants had an “adequate opportunity” to raise their fraud and trespa ss issues, and to “appear and assert their rights.” Buyfigure, supra, at 561. Therefore, Appellants’ claims and issues in the present action “had identical characteristics, and the parties were either identical or had privity with one another, so as to be bound” by the prior dete rmination that the lease did not terminate until October 13, 2011, thereby precluding any finding of fraudJ-A23021- 14

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against EQT for continued payments, or for trespass for EQT’s prior entries onto Appellants’ land. The applicability of res judicata and collateral estoppel notwithstanding, we find that Appellants’ challenge t o the trial court’s order sustaining EQT’s preliminary objections is without merit . Appellants contend that “[c]ontinued payments by [EQT] of the flat rate r oyalty on the non

productive gas we ll ... [was] a fraudulent misrepresentation that producti on continued,” and that the payments “did not establish a tenancy at will[.]” Appellants’ Brief at 9. In rebutting Appellants’ arguments, the trial court e xplained: Here, [Appellants] allege that the well did not prod uce, that [EQT] knew it was not producing, that [EQT] none theless tendered the royalty payment, thereby inducing [App ellants] to believe that the lease was still in effect. Does the te nder of continued royalty payments on a nonproductive well const itute fraud, or can it? The elements of fraud are: (1) a misrepresentation; ( 2) which is material to the transaction at hand; (3) made falsely with knowledge of its falsity; (4) with the intent o f misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) a resulting injury which was caused by the reliance. Gibbs v. Ernst, 647 A.2d 802 (Pa. 1 994). Furthermore, these elements must be stated with particu larity. McGinn v. Vallotti, 525 A.2d 732 (Pa. Super 1987). Here, the alleged misrepresentation is the "continued remuneration to [Appellants] ... that gave rise to th eir presumption as required to maintain the lease, as compen sation was dependent on the act of production." Amended Compl aint Par. 28. There is no allegation of a more direct dece ption, such as a statement by [EQT] that "Your well continues to pro duce" or words to that effect. That being the case, the issue i s whether the tender of a flat royalty payment by Lessee for aJ-A23021- 14

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nonproducing well is a misrepresentation. It is not. I t is merely the tender of a royalty payment. The question of what such a payment represents was answered in the recent case of Heasley v. KAS Energy In c., 52 A.3d 341 (Pa. Super 2012). In Heasley, the defendan t was the holder of a nonproductive lease who continued to tende r flat royalty payments even in the absence of any production. Defendant argued that so long as those payments were made, the lease stayed in effect regardless of production. Our Superior Court held that the duration of the Heasley lease was according to its terms for the primary term and "so long thereaf ter as oil or gas, or either of them, is produced therefrom". [ Id . at 347.] This is identical to the language found in the lease b efore us. The Court further held that "[w]hen production ceased, the lease became an at-will tenancy subject to termination by the Lessor at any time". [ Id .] The tender of a contracted for rent payment is not a representation, but a contractual obligation. The cessa tion of production may have marked the end of the extended t erm of the lease so as to permit legal enforcement, but it did not mark the termination of the lease. That event occurred whe n [Appellants] returned the royalty check and filed an Affidavit of Non-Production. Until then, the lease was in effect an d its terms required payment of royalties to [Appellants]. [Appe llants] argue that the creation of a tenancy at will requires "mutual knowledge and consent". Memorandum In Opposition (unnumbered) pg. 6. On the contrary, a tenancy at w ill occurs when production ceases but payments continue. For the reason that [Appellants] have not stated a cau se of action for fraud, their count in trespass must also fail because during the term of the tenancy at will [EQT] still ha d all rights granted by the original lease.

Trial Court Memorandum, 10/22/13, at 3-5. We agree. We have explained: Within the oil and gas industry, oil and gas leases generally contain several key provisions, including th e granting clause, which initially conveys to the lessee the right to drill for and produce oil or gas from the pr operty; the habendum clause, which is used to fix the ultimateJ-A23021- 14

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... * * * Typically, ... the habendum clause in an oil and gas l ease 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 b y the instant case, these clauses are relied on by landowne rs to terminate a lease. [ T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261,] 267-268 [(Pa. 2012)]. Our Supreme Court has long held that “[w]here a lessor' s co mpensation is subject to the volume of production, the p eriod of active production of oil or gas is the measure of t he duration of the lease.” Clark v. Wright, 311 Pa. 69, 166 A. 775, 776 (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 o f time the mineral is actually extracted and marketed; but by the time during which the lease provides that the lessor sh all receive the fixed rental. Under these latter circumsta nces, it can make no difference to lessor whether 100 or 1,000,000 cubic feet of gas is produced. Id.

Heasley v. KSM Energy, Inc. 52 A.3d 341, 344-345 (Pa. Super. 2012).

In Heasley, we determined that the language of the gas lease prescribed the lease term by production, which created a tenancy at will that could be terminated by the landowner lessor. Specifical ly, we observed:J-A23021- 14

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[T]he Lease Agreement in the instant case set the durat ion of the lease for twenty years, and “as lon g thereafter as oil or gas, or either of them, is produced therefrom by the party of the second part[.]” Lease Agreement, at p. 1 (emphasis added ). Likewise, the Lease Agreement required [appellant] to tender payments only “while the gas from said well is so used[.]” Lease Agreement at p. 2 (Paragraph Second and Paragraph Th ird). By this language, the Lease Agreement is similar to the pr oduction agreement described in Cassell [v. Crothers, 44 A 446 (Pa. 1899)]. []. The Lease Agreement, by its terms, remained in effect only so long as production continued. When prod uction ceased, the lease became an at-will tenancy, subject to termination by the lessor at any time. See [T.W.] Phillips [Gas and Oil Co. v. Komar,] 227 A.2d [163,] 165 [(Pa. 1967)] (recognizing that when production ceased, the lease laps ed into a tenancy at-will).

Id. at 346- 347. Based on the foregoing, we approved the trial court’s recognition that: [T]he leaseholds in this case became tenancies in the natu re of tenancies at will at the time production ceased. They t hus became subject to termination by either party. See Cassell, supra. Heasley elected to terminate them, first by ceasing to accept KSM's payments after 2009, and second and more definitively, by filing suit asking the court to deem the leases to be terminated. That was his right under the law.

Id. at 347 (citation omitted). Applying Heasley

to the lease language in this case, and consonant with the rationale espoused by our Supreme Court in Clark, supr a, as cited

in Heasley , we find that there was a tenancy at will between th e parties which continued until Appellants “ceas[ed] to accept” addit ional payments from EQT, and “more definitively,” after EQT filed a Release and Surrender of Oil and Gas Lease in the Greene County Recorder of Deeds on October 13,

2011. Heasley, 52 A.3d at 347. Because the lease was in effect at theJ-A23021- 14

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time EQT proferred the lease payments, EQT did not co mmit fraud in issuing the payments, nor did EQT’s entry onto Appellants’ pro pe rty constitute trespass. Accordingly, “it is clear and free from doubt” that Appellants “will be unable to prove facts legally sufficient to establish the right to relief.” Little Mountain, supra

. We therefore affirm the trial court’s order sustaining EQT’s preliminary objections in the nature of a demur rer. Order affirmed. Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 8/26/2014