Fisher, S. v. Powell, D. ( 2015 )


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  • J-A13020-15
    NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
    SANDRA L. FISHER, JEANNE E. BELL,                   IN THE SUPERIOR COURT OF
    NANCY L. JORDAN, MARTHA J. KEENEY                         PENNSYLVANIA
    AND JOHN R. CUNNINGHAM,
    Appellees
    v.
    DONOVAN L. POWELL, D/B/A POWELL
    SERVICES, L.P.,
    Appellant                      No. 1689 WDA 2014
    Appeal from the Order September 19, 2014
    In the Court of Common Pleas of Greene County
    Civil Division at No(s): A.D. No. 889, 2012
    BEFORE: PANELLA, SHOGAN, and OTT, JJ.
    MEMORANDUM BY SHOGAN, J.:                                  FILED JULY 07, 2015
    Donovan    L.    Powell,   doing   business    as    Powell   Services,   L.P.
    (“Appellant”), appeals from the order entered on September 19, 2014, that
    declared an oil and gas lease null and void and entered judgment in favor of
    Sandra L. Fisher, Jeanne E. Bell, Nancy L. Jordan, Martha J. Keeney, and
    John R. Cunningham (collectively “Appellees”) in this action to quiet title.
    We affirm.
    The trial court set forth the relevant background of this case as
    follows:
    On May 5, 2014, sitting without a jury, we heard the
    complaint of [Appellees] asking that we quiet title to a tract of oil
    and gas lands they own in Whiteley Township. Specifically, they
    ask that we declare a certain oil and gas lease dated October 30,
    J-A13020-15
    2006, and of record in Record Book 404 page 968 in the Office of
    the Recorder of Deeds of Greene County, to be “deemed
    abandoned and relinquished”. Complaint[, 8/28/12, at 6
    (unnumbered)].
    In 1967, Mary Louise Cunningham, widow, formerly known
    as Mary Louise John, conveyed to Harold F. VanDruff and
    Gertrude VanDruff 295.179 acres of land in Whiteley Township,
    reserving to herself the oil and gas. Complaint Ex. A.
    [Appellees] are the heirs of Mary Louise Cunningham. See Deed
    of Distribution dated March 15, 2006, Record Book 344 page
    312. In 2006, [Appellant] approached [Appellees] about a
    possible lease of their oil and gas. There were some discussions
    and then [Appellees] signed the “Oil and Gas Lease” dated
    October 30, 2006. For our purposes, the relevant language is as
    follows:
    2. This lease shall continue in force and the rights
    granted hereunder be quietly enjoyed by the Lessee
    for a period of Three (3) year(s) and so much
    longer thereafter as oil or gas or their constituents
    are produced or are capable of being produced on
    the premises in paying quantities, in the judgment of
    the Lessee, or as the premises shall be operated by
    Lessee in the search for oil and gas and as provided
    in Paragraph Seven (7) following. After Three (3)
    years an Annual Delay Rental of Fifteen ($15.00)
    Dollars per acre per year shall be paid to Lessor,
    which payment shall be made on the anniversary
    date of the lease.
    3. This lease, however, shall become null and void
    and all rights of either party hereunder shall cease
    and terminate unless, within twelve (12) months
    from the date hereof, a well shall be commenced or
    placed into production on the premises. A well shall
    be deemed commenced when preparations for
    drilling have been commenced. A well shall be
    deemed placed into production at such time as a well
    is producing gas in marketable [quantities]. A second
    well must be commenced or placed into production in
    the second twelve (12) months of the Lease on the
    same terms and conditions stated herein above.
    -2-
    J-A13020-15
    ***
    8. In the event a well drilled hereunder is a
    producing well and the Lessee is unable to market to
    production therefrom, or should production cease
    from a well drilled on the premises, or should the
    Lessee desire to shut in producing wells, the Lessee
    agrees to pay the Lessor, commencing on the date
    one year from the completion of such producing well
    or the cessation of production, or the shutting in of
    producing wells, an advance royalty in the amount
    and under the terms herein above provided for delay
    rental until production is marketed and sold off the
    premises or such well is plugged and abandoned
    according to law.
    According to the “Addendum to the Lease”, [Appellees]
    were to receive $20,000.00 at signing, $10,040.00 on the first
    anniversary and $10,040.00 on the second anniversary. This
    money was paid. The Addendum provided for royalties of 20%,
    but no royalties have been paid. In 2010, [Appellant] tendered
    delay rental to [Appellees] which was not accepted.
    [Appellant] has been in the oil and gas business since
    1986, mostly for Equitable, but recently on his own. In 2002, he
    heard from Greg Barbe, at that time, a Consolidation Coal
    Company (Consol) landman, that the company owned a well on
    the VanDruff farm known as the R.F. John Well 462 and that it
    might be interested in selling. After securing permission from
    VanDruff, [Appellant] inspected the well and believed it to be
    capable of producing gas in marketable quantities. He hired
    Greene County Gas and Oil, Inc., to bail the well and found it
    could produce six to eight mcf per day, but after another bailing
    session in 2003, production increased to about 14 mcf per day.
    He therefore offered to buy and Consol agreed to sell Well 462.
    The date of the assignment was November 30, 2006, one month
    after the date of the lease. At the moment of the Consol
    assignment, [Appellant] was, by his lights [sic], in compliance
    with the first part of Paragraph Three of the lease. He had a
    producing well on the land encumbered by the lease. By 2012,
    says [Appellant], the well was producing approximately 50 mcf
    per day, although no gas was going to market.
    There was also on the VanDruff farm a methane drainage
    borehole apparently drilled by Consol. On June 6, 2008,
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    J-A13020-15
    [Appellant] accepted an assignment of this borehole from the
    VanDruffs. Ex. 120. [Appellant] says he examined the gas
    issuing from the borehole and estimated its production to be 70
    mcf (Powell Affidavit, October 3, 2013). He never measured the
    flow but relied on his experience with similar wells. He captured
    a sample on June 1, 2006, and had it analyzed by Gas
    Analytical, Inc. It proved to be a little high in nitrogen and
    oxygen, but if blended with the output of Well 462 would be of
    pipeline quality, in [Appellant’s] opinion. [Appellant] believed he
    had his second well. It is interesting to note that [Appellant]
    testified that even though he has owned as many as seven gas
    wells, he has never drilled any. His business seems to be
    reconditioning old wells.
    For years after the execution of the lease, and probably
    even before, [Appellant] worked diligently to market the gas.
    The problem of course is transportation. He attempted to
    reestablish a connection with Equitable Line 311, which had at
    one time carried the output of Well 462, but was refused
    because of the poor condition of the line. He inquired of
    Columbia and Dominion, but their pipelines were some distance
    away and intervening surface owners denied him permission to
    cross. Each one of these attempts involved negotiations with
    various individuals and companies. He even explored the
    possibility of moving the gas by truck. Ex. 21.
    Meanwhile, [Appellees] were waiting for their royalties. On
    February 4, 2009, Attorney Theron G. Noble, on behalf of
    [Appellees], wrote to [Appellant] and advised him that the lease
    was null and void for failure to produce and failure to complete
    two wells. On November 19, 2009, one of the lessors (the letter
    is unsigned), wrote to [Appellant] to point out there was no
    production of oil and gas and no activity to drill a second and
    therefore the lease was null and void. A second letter was sent
    on October 20, 2010, demanding evidence that there were two
    producing wells on the property. Finally, this action was
    commenced on August 28, 2012.
    Trial Court Opinion, 8/5/14, at 1-5 (emphasis in original) (footnote omitted).
    As noted, Appellees filed the underlying action to quiet title on August
    28, 2012.     In response, Appellant filed preliminary objections, and on
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    September 21, 2012, Appellees filed an amended complaint.          Appellant
    subsequently filed his answer and new matter, and on November 16, 2012,
    Appellees filed their reply to new matter.   On August 19, 2013, Appellees
    filed a motion for summary judgment that the trial court denied in an order
    filed on January 13, 2014. The case proceeded to a two-day nonjury trial
    that commenced on May 5, 2014. On August 5, 2014, the trial court found
    Appellant in default of his obligations under Paragraph Three of the lease by
    failing to produce a second well within the second twelve months of the
    term. Trial Court Opinion, 8/5/14, at 8. Therefore, the trial court concluded
    that the lease was “null and void.” Order, 8/5/14. Post-trial motions were
    filed and denied, and on September 19, 2014, judgment was entered in
    favor of Appellees. This timely appeal followed.
    On appeal, Appellant raises the following issues for this Court’s
    consideration:
    1. Did the Trial Court properly place the burden of proof on
    [Appellant]?
    2. Did the Trial Court properly consider a claim of default of the
    Oil and Gas Lease because Well #2 was not proven to be capable
    of producing gas in paying quantities?
    3. Did the Trial Court properly reject the un-contradicted
    testimony of [Appellant], which had been elicited on cross-
    examination?
    4. Did the Trial Court properly terminate the Oil and Gas Lease
    when there had been substantial part performance?
    5. Did the Trial Court properly refuse to enter a non-suit after
    [Appellees’] case in chief when [Appellees] had offered no
    -5-
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    testimony showing a failure to have two wells capable of
    production, but instead had elicited the un-contradicted
    testimony of [Appellant] on cross examination that there were
    two wells capable of production?
    6. Did the Trial Court properly disregard the substantial, and
    uncontradicted evidence that there were two wells producing in
    paying quantities?
    Appellant’s Brief at 3-4.
    The relevant standard of review of a trial court’s decision in a nonjury
    trial is as follows:
    Our review in a non-jury case is limited to whether the findings
    of the trial court are supported by competent evidence and
    whether the trial court committed error in the application of law.
    We must grant the court’s findings of fact the same weight and
    effect as the verdict of a jury and, accordingly, may disturb the
    non-jury verdict only if the court’s findings are unsupported by
    competent evidence or the court committed legal error that
    affected the outcome of the trial. It is not the role of an
    appellate court to pass on the credibility of witnesses; hence we
    will not substitute our judgment for that of the factfinder. Thus,
    the test we apply is not whether we would have reached the
    same result on the evidence presented, but rather, after due
    consideration of the evidence which the trial court found
    credible, whether the trial court could have reasonably reached
    its conclusion.
    Kennedy v. Consol Energy Inc., ___ A.3d ___, 
    2015 Pa. Super. 93
    , *12
    (Pa. Super. 2015) (citations and quotation marks omitted).       Moreover, a
    lease is in the nature of a contract, and it is controlled by principles of
    contract law. T.W. Phillips Gas and Oil Co. v. Jedlicka, 
    42 A.3d 261
    , 267
    (Pa. 2012) (citation omitted). The lease must be construed in accordance
    with the terms of the agreement as manifestly expressed, and “the accepted
    and plain meaning of the language used, rather than the silent intentions of
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    J-A13020-15
    the contracting parties, determines the construction to be given the
    agreement.” 
    Id. (citations omitted).
    The party seeking to terminate a lease
    bears the burden of proof. 
    Id. It is
    well settled that “[w]hen performance
    of a duty under a contract is due, any nonperformance is a breach.”
    Widmer Engineering, Inc. v. Dufalla, 
    837 A.2d 459
    , 467 (Pa. Super.
    2003) (citing Restatement (Second) of Contracts § 235(2) (1981)).           “If a
    breach constitutes a material failure of performance, then the non-breaching
    party is discharged from all liability under the contract.” 
    Id. However, if
    the
    breach is an immaterial failure of performance, and the contract was
    substantially performed, the contract remains effective. 
    Id. While Appellant
    has presented six issues, we agree with the trial court
    that there is, in fact, one overarching issue in this matter, and it involves the
    termination provisions of Paragraph Three in the lease. Trial Court Opinion,
    8/5/14, at 8. The language in Paragraph Three is clear and unambiguous.
    Paragraph Three expressly provides that the lease shall become null and
    void unless two wells are commenced or placed into production.           “A well
    shall be deemed placed into production at such time as a well is producing
    gas in marketable quantities.”           Oil and Gas Lease, 10/30/06, at ¶ 3.
    Appellant argues that he is not in breach of the terms of the lease.1
    ____________________________________________
    1
    Appellant claims in his brief that Appellees failed to provide notice of their
    belief that he was in breach pursuant to Paragraph Sixteen of the lease.
    Appellant’s Brief at 22. However, this claim is refuted by the record,
    (Footnote Continued Next Page)
    -7-
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    The trial court addressed Appellant’s argument as follows:
    [Appellees] argue that Paragraph Three of the lease,
    requiring two wells within 24 months of the date of the lease,
    overrides Paragraph Two, which sets a primary term of three
    years, and in any event by now over seven years have elapsed,
    with no production. [Appellant] responds that the lease obliges
    him only to place in production two wells which he has done,
    according to the definitions in the lease. Paragraph Three
    provides: “A well shall be deemed placed into production at such
    times as a well is producing gas in marketable quantities.”
    Paragraph Two also provides that the secondary term of the
    lease shall continue so long as “oil or gas . . . are produced or
    are capable of being produced on the premises in paying
    quantities, in the judgment of the Lessee.” Paragraph Eight of
    the lease further provides: “In the event a well drilled hereunder
    is a producing well and the Lessee is unable to market
    production therefrom . . . the Lessee agrees to pay the Lessor...
    an advance royalty in the amount . . . provided for delay rental
    until production is marketed and sold off of the premises . . . [.]”
    [Appellant’s] position is that the lease obligates him to drill
    no wells at all but only to place wells into production. A well
    becomes productive when it produces gas in marketable
    quantities, which is a judgment to be made by the Lessee alone.
    Furthermore, the lease authorizes him to shut in the wells
    indefinitely so long as he tenders a delay rental. He argues he is
    able to do this because there were in fact two wells on the
    premises at the time the [Appellees] signed the lease and even
    long before.
    _______________________
    (Footnote Continued)
    because, as noted above, Appellees, on February 4, 2009, through Attorney
    Theron G. Noble, wrote to Appellant and advised him that the lease was null
    and void due to his failure to produce and failure to complete two wells.
    Subsequently, on November 19, 2009, Appellees wrote to Appellant and
    placed him on notice of his breach. Another letter was sent on October 20,
    2010, demanding evidence that there were two producing wells on the
    property. Finally, this action was commenced on August 28, 2012.
    Accordingly, Appellant had sufficient notice, and his claim to the contrary is
    meritless.
    -8-
    J-A13020-15
    We consider these arguments with certain guidelines. An
    oil and gas lease is a contract to be construed like any other
    contract. Willison v. Consolidation Coal Company, 
    637 A.2d 979
         (Pa. 1994). The judgment of the lessee is presumed to be in
    good faith[,] Colgan v. Forest Oil Company, 
    45 A. 119
    (Pa.
    1899), at least until the operator shows clearly that he is not
    acting in good faith. 
    Id. We pause
    here to review part of the procedural history of
    this case. The complaint was file[d] on August 28, 2012. An
    Answer and New Matter was filed on October 31, 2012.
    Discovery followed. On August 19, 2013, [Appellees] filed a
    Motion for Summary Judgment and a Brief in Support Thereof.
    On October 3, 2013, [Appellant] filed an “An Answer to Motion
    for Summary Judgment”, a Brief in Support Thereof, and the
    Affidavit of Donovan L. Powell. On January 13, 2014, we denied
    the Motion for Summary Judgment, because a key issue in these
    kinds of cases implicates the good faith of the lessee, and that
    concept is generally an improper one for disposition through
    summary judgment. Coy v. Ford Motor Credit Company, 
    618 A.2d 1024
    (Pa. Super. 1973).
    A comparison of [Appellant’s] Affidavit with his trial
    testimony opens a window on [Appellant’s] credibility and good
    faith. In his Affidavit he swore: “Currently, I have installed a two
    inch pipeline connecting the two existing wells to within twenty-
    five feet of the EQT Gathering, LLC., Pipeline 311.” The wells are
    approximately 2,500 feet apart. At trial, he testified that no such
    connection had been made and in fact displayed a picture of coils
    of plastic pipe which he said he intended to use for that purpose.
    This testimony was offered some seven months after his
    Affidavit. Falso in uno, Falsus in omnibus. If [Appellant] lied in
    his Affidavit, and it appears he did, what else is he lying about?
    The fact finder is free to reject even uncontradicted evidence,
    especially opinion evidence[,] Taliaferro v. Darby Township
    Zoning Hearing Board, 
    873 A.2d 807
    (Pa. Cmwlth. 2005) and we
    specifically reject [Appellant’s] opinion that Well 2 is capable of
    producing gas in paying quantities. The evidence on this point
    rests entirely on his opinion, and we find it untrustworthy. As
    there is absolutely no corroborating testimony of the production
    of Well 2, and we are unable to accept [Appellant’s] word on the
    matter, we find he is [in] default of his obligations described in
    Paragraph 3 of the lease by failing to produce a second well
    within the second twelve months of the term.
    -9-
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    Trial Court Opinion, 8/5/14, at 5-8 (footnote omitted).
    In the argument portion of his brief, Appellant asks this Court to
    ignore or reweigh the trial court’s credibility determinations. Appellant avers
    that the determination as to whether there was production in marketable
    quantities establishing the existence of two “wells” should have been based
    upon his opinion alone, and because he testified as such, the trial court
    erred. Appellant’s Brief at 23-24. However, as set forth above, the crucial
    detail Appellant fails to address is the trial court’s conclusion that Appellant
    was not credible in his testimony and lied in his affidavit.        Trial Court
    Opinion, 8/5/14, at 8. As discussed earlier, it is not the role of an appellate
    court to determine the credibility of a witness. Kennedy, ___ A.3d at ___,
    
    2015 Pa. Super. 93
    at *12. Accordingly, we will not substitute our judgment
    for that of the factfinder. 
    Id. “Thus, the
    test we apply is not whether we
    would have reached the same result on the evidence presented, but rather,
    after due consideration of the evidence which the trial court found credible,
    whether the trial court could have reasonably reached its conclusion.” 
    Id. After review,
    we agree with the trial court as we have no basis upon
    which to conclude that the trial court erred or abused its discretion in
    assessing Appellant’s credibility. Appellant’s credibility, or lack thereof, was
    fatal to his defense of Appellees’ claim that he breached the terms of the
    lease. The lease required two wells producing in marketable quantities. Oil
    and Gas Lease, 10/30/06, at ¶ 3. Appellees filed the underlying quiet title
    - 10 -
    J-A13020-15
    action because there was only one well on the property as the borehole was
    not a well, and even if the borehole were deemed a well, it was not
    producing in marketable quantities.          The trial court, concluding that
    Appellant was not credible, also found that Appellant was not acting in good
    faith, and thus, he breached the terms of the lease. Colgan v. Forest Oil
    Company, 
    45 A. 119
    , 121 (Pa. 1899).
    Pursuant to our standard of review, we conclude the trial court’s
    decision and its findings are aptly supported by the record.        Therefore,
    because we agree with the trial court’s determination that Appellant
    breached the terms of the lease, we discern no error in the trial court’s order
    that declared the lease null and void and entered judgment in favor of
    Appellees. Accordingly, we affirm the order.
    Order affirmed.
    Judgment Entered.
    Joseph D. Seletyn, Esq.
    Prothonotary
    Date: 7/7/2015
    - 11 -
    

Document Info

Docket Number: 1689 WDA 2014

Filed Date: 7/7/2015

Precedential Status: Non-Precedential

Modified Date: 12/13/2024