Court Opinion

ID: 2720977
Source: CourtListenerOpinion
Date Created: 2014-08-26 19:05:56.843344+00
Date Added: 2024-06-11T10:10:21.553994
License: Public Domain

J-A23021-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

RONALD K. TESKA, AND GIULIA                   IN THE SUPERIOR COURT OF
MANNARINO,                                          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

                                                                   pro se

nature of a demurrer of EQT Corporation, EQT Production Company, and

consideration, we affirm.

     Our review of the record indicates that on February 11, 2013,

Appellants initiated this action against EQT alleging trespass, theft of

minerals, and fraud. On March 5, 2013, EQT filed preliminary objections in

the nature of a demurrer. On March 22, 2013, Appellants filed an amended

complaint in which they alleged only fraud and trespass. On April 5, 2013,
J-A23021-14

amended complaint. On September 13, 2013, the trial court conducted oral

objections and explaining its order.

      In its October 22, 2013 memorandum, the trial court summarized the

factual and procedural background:

            In 1913, G.E. Houston and Florence Houston leased to
      Carnegie Natural Gas Company a tract of land containing 22
      acres. The lease provided: "... this lease shall remain in force
      for the term of 5 years from this date and as long thereafter as
      oil and gas, or either of them, is produced from the said land by
      the said party of the second part, his successors and assigns."
      Ex. A-1 Amended Complaint. The lease further provided that in
      consideration for the right to produce oil and gas the lessors
      would be paid "Seventy five ($75.00) Dollars each three months
      in advance for the gas from each and every gas well drilled on
      the premises, the product from which is marketed and used off
      the premises, said payment to be made ... each three months
      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 650456,
      drilled pursuant to the 1913 lease, based on the alleged lack of
      production from that well. By a document recorded October 13,
      2011, in the Recorder's Office of Greene County, Pennsylvania,
      [EQT] surrendered the lease. [Appellants] attempted to buy the
      well, but the parties could not agree on the terms, hence 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. Furthermore, the Oil
      and Gas Act, 58 P.S. §601.101 et seq., provides that
      nonproducing gas wells must be plugged by the owner, and

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      [Appellants] were not the owners.     [Appellants] appealed 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 rental amount by
      [EQT] was a misrepresentation that the well continued to
      produce when in fact it did not. According to the Amended
      Complaint, the well produced at least until 2001. From 2005
      through 2009, it did not produce, except for a minimal 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 the well
      was not producing. To [Appellants,] these tenders were a willful
      misrepresentation. The count of trespass is based on entries
      onto the land at times when [EQT] knew there was no valid
      lease. [EQT] filed Preliminary Objections in the nature of a
      demurrer.

Trial Court Memorandum, 10/22/13, at 1 - 3.

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 nonproductive
             well, whose lease was held by production and where
             lessors were not informed that production had ceased, was

      [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 nonproductive
             well, whose lease was held by production and where
             lessors were not informed that production had ceased,

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          established a tenancy at will without the knowledge and
          mutual consent of lessors.

     We recognize:

           As a trial court's decision to grant or deny a demurrer
       involves a matter of law, our standard for reviewing that
       decision is plenary. Preliminary objections in the nature of
       demurrers are proper when the law is clear that a plaintiff
       is not entitled to recovery based on the facts alleged in the
       complaint. Moreover, when considering a motion for a
       demurrer, the trial court must accept as true all well-
       pleaded material facts set forth in the complaint and all
       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 marks
     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 apply the
       same standard as the trial court.

       Preliminary objections in the nature of a demurrer test the
       legal sufficiency of the complaint ... Preliminary objections
       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
       sufficient to establish the right to relief. If any doubt
       exists as to whether a demurrer should be sustained, it
       should be resolved in favor of overruling the preliminary
       objections.

     Joyce v. Erie Ins. Exch., 74 A.3d 157, 162 (Pa. Super.2013)
     (citation omitted).

                                   -4-
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A.3d     at 3 (Pa. Super. 2014), 2014 WL 1717029 at 3 (May 1, 2014).

may be barred by res judicata and collateral estoppel as averred by EQT in

their preliminary objections. See generally
                                                 1
                                                     Appellants previously instituted

a declaratory judgment action against EQT. As the trial court observed, in

that [Appellants] were the rightful owners of Well 650456, drilled pursuant

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

this Court

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

                                                           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).

____________________________________________

1

                                                           randum, 10/22/13, at 3.

                                          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 an appellate court may
affirm a trial court's decision on any grounds supported by the record on
appeal).

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      In BuyFigure.com, Inc. v. Autotrader.com, Inc., 76 A.3d 554, 560

                                           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, and the parties were

either identical or had privity with one another, so as to be bound in state

                                                         We explained:

         As [the Pennsylvania Commonwealth] Court recently
         decided in Callowhill Center Associates, [LLC v. Zoning
         Board of Adjustment, 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 Supreme
      Court:

         As pertinently stated in Hochman v. Mortgage Fin. Corp.,
         289 Pa. 260, 263, 137 A. 252, 253 (1927);
         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 trial
         on the same cause between the same parties. The thing
         which the court will consider is whether the ultimate and
         controlling issues have been decided in a prior proceeding
         in which the present parties actually had an opportunity to
         appear and assert their rights. If this be the fact, then the
         matter ought not to be litigated again, nor should the
         parties, by a shuffling of plaintiffs on the record, or by
         change in the character of the relief sought, be permitted

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

Buyfigure.com, Inc., 76 A.3d at 561.

                            res judicata and collateral estoppel preliminary

                                        [a]lthough the parties, in some

instances, are the same and the facts may be similar it is because

the claims all center around the same lease and the same gas

well[.]

(unnumbered) (emphasis supplied). Significantly, Appellants acknowledged

                                                         udgment due to the

controversy that arose regarding the                      to this abandoned

      Id. at 12 (unnumbered) (emphasis supplied).

received from EQT, which was a party in the prior action. See

Brief at 7-

property, and could have been raised in the prior action. Appellants had an

                                    Buyfigure, supra, at 561.      Therefore,

                                                                     identical

characteristics, and the parties were either identical or had privity with one

                                             rmination that the lease did not

terminate until October 13, 2011, thereby precluding any finding of fraud

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     The   applicability   of   res    judicata   and   collateral   estoppel

                                                                            -

productive gas we

           Here, [Appellants] allege that the well did not produce,
     that [EQT] knew it was not producing, that [EQT] nonetheless
     tendered the royalty payment, thereby inducing [Appellants] to
     believe that the lease was still in effect. Does the tender of
     continued royalty payments on a nonproductive well constitute
     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 of 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. 1994).
     Furthermore, these elements must be stated with particularity.
     McGinn v. Vallotti, 525 A.2d 732 (Pa. Super 1987).

           Here, the alleged misrepresentation is the "continued
     remuneration to [Appellants] ... that gave rise to their
     presumption as required to maintain the lease, as compensation
     was dependent on the act of production." Amended Complaint
     Par. 28. There is no allegation of a more direct deception, such
     as a statement by [EQT] that "Your well continues to produce" or
     words to that effect. That being the case, the issue is whether
     the tender of a flat royalty payment by Lessee for a

                                      -8-
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     nonproducing well is a misrepresentation. It is not. It 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 Inc., 52
     A.3d 341 (Pa. Super 2012). In Heasley, the defendant was the
     holder of a nonproductive lease who continued to tender 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 thereafter as oil or
     gas, or either of them, is produced therefrom". [Id. at 347.]
     This is identical to the language found in the lease before 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 cessation of
     production may have marked the end of the extended term of
     the lease so as to permit legal enforcement, but it did not mark
     the termination of the lease.       That event occurred when
     [Appellants] returned the royalty check and filed an Affidavit of
     Non-Production. Until then, the lease was in effect and its terms
     required payment of royalties to [Appellants].       [Appellants]
     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 will occurs
     when production ceases but payments continue.

           For the reason that [Appellants] have not stated a cause of
     action for fraud, their count in trespass must also fail because
     during the term of the tenancy at will [EQT] still had 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 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

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           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

           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.

     [T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261,] 267-268
     [(Pa. 2012)].

     compensation is subject to the volume of production, the period
     of active production of oil or gas is the measure of the duration
                     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 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.

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. Specifically, we observed:

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        [T]he Lease Agreement in the instant case set the duration of
                                             g thereafter as oil or gas,
        or either of them, is produced therefrom by the party of the

        Likewise, the Lease Agreement required [appellant] to tender

        Agreement at p. 2 (Paragraph Second and Paragraph Third). By
        this language, the Lease Agreement is similar to the production
        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 production
        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 lapsed into
        a tenancy at-will).

Id. at 346-

recognition that:

        [T]he leaseholds in this case became tenancies in the nature of
        tenancies at will at the time production ceased. They thus
        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, supra, as cited

in Heasley, we find that there was a tenancy at will between the parties

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 the

                                      - 11 -
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time EQT proferred the lease payments, EQT did not commit fraud in issuing

                                                            rty constitute

Little Mountain, supra.

sustaining

      Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 8/26/2014

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