Court Opinion

ID: 3189623
Source: CourtListenerOpinion
Date Created: 2016-03-29 21:08:37.049046+00
Date Added: 2024-06-11T14:35:45.142875
License: Public Domain

[J-7-2016]
                   IN THE SUPREME COURT OF PENNSYLVANIA
                               MIDDLE DISTRICT

        SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, JJ.

LEO E. SHEDDEN AND SANDRA L.                  :   No. 103 MAP 2014
SHEDDEN,                                      :
                                              :   Appeal from the Order of the Superior
                    Appellants                :   Court dated March 14, 2014 at No. 758
                                              :   MDA 2013 affirming the Order of the
                                              :   Court of Common Pleas of Tioga
             v.                               :   County, Civil Division, dated April 16,
                                              :   2013 at No. 876 CV 2011
                                              :
ANADARKO E. & P. COMPANY, L.P.,               :   ARGUED: October 7, 2015
                                              :   RESUBMITTED: January 20, 2016
                    Appellee                  :

                                        OPINION

JUSTICE TODD                                            DECIDED: March 29, 2016
      In this appeal, we consider whether the Superior Court properly applied the

doctrine of estoppel by deed to conclude that an oil and gas lease between Appellee,

Anadarko E. & P. Co., L.P. (“Anadarko”), and Appellants, Leo and Sandra Shedden,

covers the oil and gas rights to 100% of the property identified in the lease,

notwithstanding the fact that, unbeknownst to them, Appellants owned only a one-half

interest in the oil and gas rights to the property at the time the lease was executed, and,

consequently, received a bonus payment only for the oil and gas rights they actually

owned. Upon review, we affirm.

      The facts of the instant case are undisputed. Appellants are the owners of a 62-

acre parcel of land (the “Property”) located in Ward Township, Tioga County, which they

purchased from Colgate University in 1990. Unbeknownst to Appellants, on February
21, 1894, Appellants’ predecessors in interest, Ezra and Emma Baxter (the “Baxters”),

reserved by recorded deed one-half of the oil and gas rights to the Property.1 In May

2006, Appellants leased to Anadarko the oil and gas rights to the Property for a term of

five years, expressly warranting title in all of the oil and gas.2      As consideration,

Anadarko agreed to pay Appellants a bonus payment of $80 per acre. Anadarko sent

Appellants a Lease Purchase Report and an Order of Payment reflecting a bonus

payment of $80 per acre on 62 acres, totaling $4,960. Prior to tendering the bonus

payment, however, Anadarko’s land agent discovered the Baxters’ 1894 reservation of

one-half of the oil and gas rights to the Property, and informed Appellants that Anadarko

would pay a bonus on only 31 of the 62 acres. Thereafter, Anadarko sent Appellants a

revised Order for Payment, describing the subject Property as “a tract of land containing

62.00 gross acres, 31.00 net acres,” and indicating that, as consideration for the

agreement, Anadarko would pay Appellants a total of $2,480. Order for Payment (R.R.

at 19a).   Appellants did not sign the revised Order for Payment, but subsequently

accepted Anadarko’s payment of $2,480. Critical to the instant appeal, two years after

executing the Lease, Appellants filed a motion to quiet title on the Baxters’ previously-

reserved one-half interest in the oil and gas rights to the Property, which the trial court

granted.

1
  Although Appellants claim they were unaware of the reservation, they arguably had
record notice, as the reservation was properly recorded. See Collins v. Phillips, 84 A.
854, 854 (Pa. 1912) (a party has record notice where a deed is properly recorded).
Nevertheless, the issue of Appellants’ knowledge of the reservation is not before this
Court.
2
  Specifically, the covenant of warranty in the lease stated: “The LESSOR covenants
and agrees . . . [t]hat LESSOR has full title to the premises and to all the oil and gas
therein at the time of granting this Lease, and forever warrants title to the leasehold
estate hereby conveyed to LESSEE.” Lease (hereinafter, “Lease”), 5/23/06, at 2 § B.2
(Reproduced Record (“R.R.”) at 11a).

                                      [J-7-2016] - 2
       On March 31, 2011, Anadarko invoked the extension clause contained in the

Lease by sending Appellants a check in the amount of $4,340, which represented an

extension payment of $70 per acre on 62 acres. Appellants did not cash the check,

however, based on their belief that Anadarko had leased the oil and gas rights to only

one-half of the Property, and, thus, that Anadarko overpaid them by $2,170.              On

October 21, 2011, Appellants filed a declaratory judgment action seeking a declaration

that the Lease “only pertains to oil and gas contained on 31 acres” of the Property.

Complaint, 10/12/11, at 4 (R.R. 5a). In response, Anadarko filed a motion for summary

judgment, asserting that Appellants were estopped, both by their contractual promises

and by the doctrine of estoppel by deed, from denying that the Lease grants Anadarko

100% of the oil and gas rights to the Property.

       In response to Anadarko’s motion for summary judgment, Appellants argued that

they could not have leased to Anadarko 100% of the oil and gas rights to the Property

because they owned only one-half of the rights thereto at the time the Lease was

executed. Appellants further maintained that Anadarko’s 2006 revised bonus payment

of $80 on 31 net acres of the Property constituted a modification of the Lease.

Appellants contended that, because Anadarko leased only one-half of the oil and gas

rights to the Property, Anadarko could extend the primary term of the Lease only as to

one-half of the oil and gas rights to the Property.

       On April 16, 2013, the trial court granted Anadarko’s motion for summary

judgment and dismissed Appellants’ declaratory judgment action, concluding that the

Lease “covers all oil and gas underlying the entirety of [Appellants’] 62-acre property . . .

and that the Primary Term of the Lease was timely and validly extended, and the Lease

remains in effect according to its terms.” Trial Court Order, 4/16/13. In support of its

order, the trial court observed that the Lease described the premises as:

                                       [J-7-2016] - 3
              containing for the purpose of calculating rentals and
              royalties, 62.00 acres whether actually containing more or
              less. In addition to the above described land, any and all
              strings or parcels of land adjoining or contiguous to the
              above described land and owned or claimed by LESSOR are
              hereby leased to LESSEE.
Lease at 1 (R.R. at 10a).   Based on this language, the trial court determined that

Appellants intended “to enter into a binding lease exclusively with Anadarko as to all 62

acres.” Trial Court Opinion, 6/19/13, at 3-4.

       The trial court rejected Appellants’ argument that their receipt of a bonus

payment equal to one-half of the agreed-upon sum for 62 acres modified the Lease

such that it applied only to 31 acres, noting that Paragraph C.3 of the Lease provides:

“[i]f LESSOR owns less than all of the oil and gas rights in the premises, LESSOR shall

be entitled to only a share of the rentals and royalties equivalent to the proportion of

such oil and gas rights owned by LESSOR.” Lease at 2 § C.3 (R.R. at 11A). Moreover,

the trial court determined that, under the doctrine of estoppel by deed, Appellants’

subsequent acquisition of title to the previously-reserved one-half interest in the oil and

gas rights to the Property passed to Anadarko under the terms of the Lease, and that

Appellants’ covenant of warranty in the Lease estops them from arguing otherwise.

Trial Court Opinion, 6/19/13, at 5-6.

       The Superior Court, in a unanimous published opinion, affirmed the trial court’s

grant of summary judgment in favor of Anadarko. Shedden v. Anadarko E & P Co.,

L.P., 88 A.3d 228 (Pa. Super. 2014). Citing this Court’s decision in Dixon v. Fuller, 46
A. 553 (Pa. 1900), and its own decision in Hennebont Co. v. Kroger Co., 289 A.2d 229

(Pa. Super. 1972), the court noted that the doctrine of estoppel by deed is well

established in this Commonwealth, and concluded that, pursuant thereto, “[Appellants]

are barred from denying that the Lease covers all 62 acres of the leased premises.”

Shedden, 88 A.3d at 233. The court found it immaterial that Appellants received a

                                        [J-7-2016] - 4
bonus payment of only one-half of the agreed-upon sum, noting that Paragraph C.3 of

the Lease specifically provides that they were entitled to only the share of the rentals

and royalties equivalent to the proportion of gas and oil they actually owned. Id. (citing

Lease at 2 § C.3). Finally, the Superior Court held that Anadarko’s exercise of its

contractual option to extend the Lease for an additional five years was timely, and

covered all 62 acres of the Property.

      We granted allowance of appeal to consider the propriety of the Superior Court’s

grant of summary judgment in favor of Anadarko, based on its finding that, pursuant to

the doctrine of estoppel by deed, Appellants are precluded from arguing that the Lease

does not cover the oil and gas rights to the entirety of the Property, despite Appellants

having initially received a bonus payment of one-half the agreed-upon sum.3

      Summary judgment is appropriate only where the record clearly demonstrates

that there is no genuine issue of material fact, and the moving party is entitled to

judgment as a matter of law. Summers v. Certainteed Corp., 997 A.2d 1152, 1159 (Pa.

2010). An appellate court may reverse a grant of summary judgment if there has been

an error of law or an abuse of discretion. Weaver v. Lancaster Newspapers, Inc., 926
A.2d 899, 902 (Pa. 2007). The issue as to whether there are genuine issues as to any

3
  We note that the parties and the lower courts sometimes characterize the interest
conveyed to Anadarko via the lease as a one-half interest in the oil and gas rights to the
entire Property, and at other times characterize it as a full interest in the oil and gas
rights to 31 acres of the Property. For practical purposes, the amount of the bonus
payment to which Appellants were entitled was the same − $40 per acre on 62 acres, or
$80 per acre on 31 acres. However, as the Baxters’ reservation specifically reserved a
one-half interest in the oil and gas rights to the entire Property, it is most accurate to
describe the interest actually conveyed to Anadarko as a one-half interest in the oil and
gas rights to the Property as a whole, rather than a full interest in one-half of the
Property, i.e., 31 acres. Nevertheless, in order to accurately describe the parties’
specific arguments and the analysis of the lower courts, we will utilize the terminology
they use.

                                        [J-7-2016] - 5
material fact presents a question of law; thus, on that question, our standard of review is

de novo and our scope of review is plenary. Id. at 903.

      Appellants contend that the Superior Court erred in applying the doctrine of

estoppel by deed to conclude that the Lease grants Anadarko the oil and gas rights to

the entire 62 acres of the Property for two reasons.        First, Appellants submit that

application of the doctrine of estoppel by deed is not justified in this case because

Anadarko was not prejudiced by Appellants’ misrepresentation in the Lease that they

owned 100% of the oil and gas rights to Property. Second, Appellants contend that

there was a “necessary and implied modification of both the consideration and the

scope of the lease” as a result of Anadarko’s payment, and their receipt, of one-half of

the agreed-upon bonus. Appellants’ Brief at 14.

       As a finding that the Lease was modified by the parties would render the issue of

estoppel by deed moot, we begin by addressing Appellants’ lease modification

argument.    Appellants emphasize that the revised Order for Payment described the

Lease as covering only 31 net acres, and they argue that, by paying Appellants a bonus

on only 31 acres, Anadarko “elected to forego any attempt to lease the remaining

interest in the oil and gas which was reserved by Ezra and Emma Baxter,” and

“knowingly accepted a lease of one-half of the oil and gas underlying [Appellants’]

property.” Id. Appellants further aver that the concept of modification is in accord with

Paragraph C.3 of the Lease, which provides for a proportional reduction in rents and

royalties upon discovery that Appellants own less property than the Lease purports to

convey.

      In response, Anadarko asserts that its payment of a reduced bonus did not

constitute a modification of the scope of the Lease, but, rather, was proper

consideration for the interest actually conveyed by Appellants pursuant to the terms of

                                      [J-7-2016] - 6
the Lease.    Specifically, Anadarko relies on Paragraph C.3 of the Lease, noting it

provides that Appellants were entitled to a bonus payment only for the interest actually

conveyed, i.e., one-half of the oil and gas rights to the Property.

       An oil and gas lease is in the nature of a contract, and, thus, is controlled by

principles of contract law. T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261, 267 (Pa.

2012). A contract, either oral or written, may be modified by a subsequent agreement

which is supported by legally sufficient consideration, or a substitute therefor, and meets

the requirements for contract formation. Kreutzer v. Monterey Cty. Herald Co., 747
A.2d 358, 362 (Pa. 2000); see also Wilcox v. Regester, 207 A.2d 817, 821 (Pa. 1965)

(“An agreement may be modified with the assent of both contracting parties if the

modification is supported by consideration.”).

       We hold that the Lease between Appellants and Anadarko was not modified as a

result of Anadarko’s payment of, and Appellants’ acceptance of, a bonus payment of

one-half the originally agreed-upon sum. Anadarko originally agreed to pay Appellants

an $80 per acre bonus for the oil and gas rights to the Property. Paragraph 3.C of the

Lease provided, however, that if Appellants owned less than all of the oil and gas rights

to the Property, they would be entitled to payment only in proportion to the oil and gas

rights they actually owned.    Pursuant to that paragraph, upon finding that Appellants

owned only one-half of the oil and gas rights to the Property, under the express terms of

the Lease, Anadarko was obligated to pay Appellants only one-half of the agreed-upon

bonus payment − i.e., $40 per acre − and this was the exact consideration that

Appellants received. Accordingly, rather than a modification of the Lease, Anadarko’s

payment of a reduced bonus was in accord with its precise terms, and so cannot be

considered as additional consideration or evidence of an agreement to modify the

Lease.

                                       [J-7-2016] - 7
       Having concluded that the Lease was not modified as a result of Anadarko’s

payment of a reduced bonus, we next consider whether, having quieted title to the

entire Property, the doctrine of estoppel by deed precludes Appellants from asserting

that Anadarko is entitled to only one-half of the oil and gas rights to the Property.

Under the doctrine of estoppel by deed,

              [w]here one conveys with a general warranty land which he
              does not own at the time, but afterwards acquires the
              ownership of it, the principle of estoppel is that such
              acquisition inures to the benefit of the grantee, because the
              grantor is estopped to deny, against the terms of his
              warranty, that he had the title in question.
Jordan v. Chambers, 75 A. 956, 958 (Pa. 1910);4 see also Hennebont, 289 A.2d at 233

(noting that, in Pennsylvania, doctrine of estoppel by deed precludes one who leases

property which he does not own, but of which he later acquires ownership, from denying

the lease on the basis he did not have ownership at the time the lease was executed).

       Appellants do not dispute the viability of the doctrine of estoppel by deed in this

context.5   However, they contend that, because estoppel by deed is an equitable

doctrine, its application requires a finding of detrimental reliance by the grantee.

Appellants’ Brief at 10-11 (citing Novelty Knitting Mills, Inc. v. Siskind, 457 A.2d 502 (Pa.

1983), In re Estate of Tallarico, 228 A.2d 736 (Pa. 1967), and Northwestern Nat’l Bank

v. Commonwealth, 27 A.2d 20 (Pa. 1942)). Appellants further note that, in Shell Oil Co.

v. Trailer & Truck Repair Co., Inc., 828 F.2d 205 (3d Cir. 1987), the United States Court

of Appeals for the Third Circuit predicted that New Jersey courts would conclude that

4
  An oil and gas lease is considered a conveyance of a property interest. Hutchison v.
Sunbeam Coal Corp., 519 A.2d 385, 387 n.1 (Pa. 1986).
5
  We note, however, that other courts have applied the doctrine of estoppel by deed to
leases, see, e.g., Southland Corp. v. Shulman, 331 F. Supp. 1024, 1029 (D. Md. 1971)
(applying Maryland law), including mineral leases, see, e.g., White v. Hodges, 9 So. 2d
433, 443 (La. 1942).

                                       [J-7-2016] - 8
detrimental reliance is, in fact, an essential element of both equitable estoppel and

estoppel by deed. Noting that Anadarko paid a reduced bonus upon learning of the

Baxters’ 1894 reservation of one-half of the oil and gas rights to the Property,

Appellants maintain that there can be no finding of detrimental reliance by Anadarko

and that the doctrine of estoppel by deed does not apply.

       In response, Anadarko contends that Appellants conflate the principles of

equitable estoppel with those of estoppel by deed, and are improperly attempting to

impose a requirement of detrimental reliance on the application of estoppel by deed

where none exists. Specifically, Anadarko observes that there are three distinct types

of estoppel − estoppel by record, estoppel by deed, and equitable estoppel (also

referred to as estoppel in pais) − and that estoppel by deed is a “technical legal theory”

based on the grantor’s own covenant in the deed and divorced from the subjective

elements of inducement and justifiable reliance. Anadarko’s Brief at 11-12 (citing In re

Webb, 99 B.R. 283, 290 (Bankr. E.D. Pa. 1989) (“Estoppel by deed . . . allows

application of estoppel without any reference to the moral qualities of the party seeking

to be estopped.” (citation and internal quotation marks omitted)); In re Solomon, 40 F.

Supp. 62, 65 (E.D. Pa. 1941) (“[T]he doctrine of estoppel by deed is a distinct kind of

estoppel which does not require all of the elements of estoppel in pais.”)).

       Anadarko further notes that, in Phillips v. Tetzner, this Court applied the doctrine

of estoppel by deed despite a grantee’s lack of payment at the time the grantor obtained

full legal title to the subject property. 53 A.2d 129, 131-32 (Pa. 1947) (purchaser’s

failure to tender consideration for a lease did not preclude application of estoppel by

deed because tender of purchase money is excused “where such tender would be a

useless and idle ceremony.”).      Thus, Anadarko maintains that, notwithstanding its

reduced bonus payment to Appellants, estoppel by deed is applicable here because

                                      [J-7-2016] - 9
Appellants warranted their title, conveyed less than what they warranted, and

subsequently perfected title.6

       Appellants’ sole basis for arguing that the doctrine of estoppel by deed should

not apply is their contention that, because Anadarko paid a reduced bonus upon

learning of the Baxters’ 1894 reservation of one-half of the oil and gas rights to the

Property, Anadarko failed to demonstrate detrimental reliance. However, unlike the

doctrine of equitable estoppel, we find that the doctrine estoppel by deed does not

require detrimental reliance. The doctrine of equitable estoppel

              prevents one from doing an act differently than the manner
              in which another was induced by word or deed to expect. A
              doctrine sounding in equity, equitable estoppel recognizes
              that an informal promise implied by one’s words, deeds or
              representations which leads another to rely justifiably
              thereon to his own injury or detriment, may be enforced
              in equity.
Novelty Knitting Mills, 457 A.2d at 503 (emphasis added).

       In contrast, the doctrine of estoppel by deed precludes one who conveys an

interest in land that he does not own, but subsequently acquires the title thereto, from

denying the validity of the first conveyance. Jordan, supra; Phillips, supra; Bowen v.

A.R. Boyd Enterprises, Inc., 191 A. 137, 140 (Pa. 1937) (under the doctrine of estoppel

by deed, “when a vendor or mortgagor either sells or mortgages land which he does not

own, and afterwards acquires title thereto, he is not permitted to set up this after-

acquired title to defeat his previous grant or mortgage, for this would permit him to

6
  The Pennsylvania Independent Oil & Gas Association filed an amicus brief in support
of Anadarko, presenting substantially the same arguments as Anadarko. Notably,
however, Amicus contends that, even if this Court holds that prejudice is required for
application of the doctrine of estoppel by deed, Anadarko did, in fact, suffer prejudice as
a result of “not having the sole and exclusive right to develop the oil and natural gas
resources underlying all 62 acres . . . unless and until the Lessors removed the cloud on
their title.” Amicus Brief at 5.

                                     [J-7-2016] - 10
perpetrate a fraud upon his grantee or creditor.”); Daley v. Hornbaker, 472 A.2d 703,

705 (Pa. Super. 1984) (“A grantor is estopped to assert anything in derogation of his

deed, as against grantee.”).

       While the doctrine of estoppel by deed is rooted in equity, its considerations are

broader:

              The principle is that when a person has entered into a
              solemn engagement by deed, he or she will not be permitted
              to deny any matter that he or she has asserted therein for a
              deed is a solemn act to any part of which the law gives effect
              as the deliberate admission of the maker; to him or her it
              stands for truth, and in every situation in which he or she
              may be placed with respect to it, it is true as to him or her.
              Estoppel by deed promotes the judicious policy of making
              certain formal documents final and conclusive evidence of
              their contents.

28 Am.Jur.2d, Estoppel by Deed or Bond, § 5 (footnotes omitted). Accordingly, we

reject Appellants’ contention that detrimental reliance is a prerequisite for application of

the doctrine of estoppel by deed. 7

       Herein, Appellants conveyed, through a lease, the oil and gas rights to the

Property, expressly warranting their full title to all the oil and gas therein.        After

discovering that they owned less than all of the oil and gas rights to the Property,

7
   But see Shell Oil Co., 828 F.2d at 209 (recognizing that some courts, including the
court in In re Solomon, supra, have held that detrimental reliance is not an element of
estoppel by deed, but stating that “[w]e know of no reason” for such a conclusion and
opining that, “detrimental reliance is so obvious that courts may not bother to mention
it.”); McLaughlin v. Lambourn, 359 N.W.2d 370, 372 (N.D. 1985) (in case involving
reservation of mineral rights, application of estoppel by deed requires, inter alia, that the
party asserting estoppel relied directly upon such conduct or admissions, and will be
injured by allowing the truth to be disproved). However, we note that, even if we were
to follow the decisions of those courts which require a demonstration of detrimental
reliance for the doctrine of estoppel by deed to apply, Appellants fail to support their
suggestion that proof of detrimental reliance is limited to monetary loss. Cf. supra note
6.

                                      [J-7-2016] - 11
Appellants filed a motion to quiet title to the one-half interest in the oil and gas rights to

the Property, ultimately perfecting their title to all of the oil and gas rights to the

Property. Under the doctrine of estoppel by deed, Appellants may not deny the validity

of their initial conveyance to Anadarko of all of the oil and gas rights to the Property.

See Jordan; Bowen; Daley.

       For the above reasons, we hold that the Superior Court properly affirmed the trial

court’s grant of summary judgment in favor of Anadarko based on the doctrine of

estoppel by deed.

       Order affirmed.

       Chief Justice Saylor and Justices Baer, Dougherty and Wecht join the opinion.

       Justice Donohue did not participate in the consideration or decision of this case.

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