Teska, R. v. EQT Corp. ( 2014 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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