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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P 65.37
L.D. OIL & GAS ENTERPRISES, INC., : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
v. :
:
DOROTHY C. LOOP AND ESTATE OF :
MARY A. CAWLEY, DECEASED, :
:
Appellees : No. 1883 WDA 2016
Appeal from the Order November 18, 2016
in the Court of Common Pleas of Venango County
Civil Division at No(s): 2014-1168
BEFORE: STABILE, J., FORD ELLIOTT, P.J.E., and STRASSBURGER,* J.
MEMORANDUM BY STRASSBURGER, J.: FILED SEPTEMBER 12, 2017
L.D. Oil & Gas Enterprises, Inc. (L.D. Oil) appeals from the November
18, 2016 order granting a motion for judgment on the pleadings filed by
Dorothy C. Loop and the estate of Mary A. Cawley (Lessor). We reverse and
remand for proceedings consistent with this memorandum.
On May 12, 2006, L.D. Oil entered into a lease (the Lease) with Lessor
for the right to produce oil and gas from a 157-acre parcel of land located in
Venango County (the Leasehold) owned by Lessor. The Lease provided the
following, in relevant part.
LEASE TERM. This lease shall remain in force for a primary
term of five years from the date hereof and for as long
thereafter as prescribed payments are made, or as long
thereafter as operations are conducted on the Land in search of
or production of oil or gas, or for as long as a well capable of
production is located on the Land. If after the primary term the
*Retired Senior Judge assigned to the Superior Court.
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last producing well on the Leasehold is plugged and abandoned,
the Land will remain under lease for an additional period of one
year from the date of plugging and abandonment.
***
LIMITATION OF FORFEITURE. Any provision of this Lease to
the contrary notwithstanding, this Lease shall not terminate and
shall not be subject to a civil action or other proceeding to
enforce a claim of forfeiture or termination unless Lessor has
given Lessee written notice of Lessee’s breach or of the cause of
termination and Lessee does not cure such a breach or remove
such cause of termination within 180 days from the receipt of
the notice.
Complaint, 10/10/2014, at Exhibit.
On February 3, 2012, the parties “amended the Lease by granting to
L.D. Oil the right to pool and utilize the Leasehold.” Complaint, 10/10/2014,
at ¶ 6. “The Lease provides for L.D. Oil to pay [Lessor] a royalty equal to
one-eighth part of all oil and gas produced and marketed from the
Leasehold.” Id. at ¶ 7.
According to L.D. Oil, Ergon Oil Purchasing, Inc., has purchased oil
produced by L.D. Oil on the Leasehold, but is “withholding payment for the
oil until L.D. Oil [and Lessor] provide to Ergon a division order apportioning
interests in the oil.” Id. at ¶ 8. Lessor and L.D. Oil were not able to agree
on such a division order; thus, on October 10, 2014, L.D. Oil filed a
complaint for, inter alia, declaratory judgment against Lessor. Specifically,
L.D. Oil was seeking an order declaring it “holds a seven-eighths working
interest” in the Leasehold. Complaint, 10/10/2014, at 2.
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Lessor filed an answer and new matter averring that the Lease expired
on May 11, 2011, the end of the five-year primary term provided for in the
Lease. Specifically, Lessor claimed that at that time, there was “no
production of oil and gas on the premises,” nor were there “operations
conducted on the land in search of or production of oil or gas, and there
were no activities which would allow a carryover of the lease after expiration
of the primary term.” Answer and New Matter, 11/14/2014, at ¶ 11.
Additionally, Lessor averred that the 2012 amendment “did not extend the
primary term.” Id. at ¶ 12.
L.D. Oil filed a reply to new matter admitting that it had not produced
oil or gas on the premises prior to May 12, 2011. Reply and New Matter,
11/20/2014, at ¶ 11. However, L.D. Oil averred that it did conduct
operations on the land in search of oil and gas:
a. L.D. Oil graded and graveled an existing access road across
the land…
b. …L.D. Oil spent months searching the ground of the partially
wooded 167-acre property for well bores; and
c. L.D. Oil pulled and attempted to put into production three
wells which, unfortunately, produced only water.
Id. at ¶ 19.
Additionally, L.D. Oil asserted that Lessor did not provide notice of
breach prior to May 11, 2011, pursuant to the Limitation of Forfeiture clause.
In fact, L.D. Oil points out that Lessor executed the 2012 amendment “nine
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months after the expiration of the initial five-year period.” Id. at ¶ 25. On
May 23, 2012, Lessor’s counsel “wrote a letter to L.D. Oil taking the position
that L.D. Oil did ‘not have a lease that was still operative.’” Id. at ¶ 28.
According to L.D. Oil, within the next 180 days, it conducted operations that
would “cure any possible breach.” Id. at ¶ 30. Significantly, L.D. Oil has in
production a well on the Leasehold that is producing oil and gas that was
purchased by Ergon in December 2013. Id. at ¶ 32.
After pleadings closed, L.D. Oil filed a motion for partial judgment on
the pleadings, and Lessor filed a motion for judgment on the pleadings.
Both parties offered interpretations of the lease provisions. Lessor argued
that the lease expired on May 11, 2011 pursuant to the Lease Term
provision of the Lease. L.D. Oil argued that pursuant to the Limitation of
Forfeiture provision, the Lease could terminate only upon written notice by
Lessor.
The trial court heard argument on the motions, and on April 21, 2016,
it entered an opinion and order denying L.D. Oil’s motion and granting
Lessor’s motion. Specifically, the trial court concluded that the “Lease
expired at the end of the primary term, and by virtue of failing to be in
production at that time, [L.D. Oil’s] interests in the land expired along with
it.” Trial Court Opinion, 4/22/2016, at 13.
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L.D. Oil timely filed a motion for reconsideration, which was also
granted that day. On November 18, 2016, the trial court again entered
judgment on the pleadings in favor of Lessor. On December 12, 2016, L.D.
Oil filed a notice of appeal, and both L.D. Oil and the trial court complied
with Pa.R.A.P. 1925.
On appeal, L.D. Oil sets forth one issue for our review:
Did the trial court err in ruling that the oil and gas lease between
[L.D. Oil and Lessor] terminated automatically upon expiration of
its primary term, notwithstanding [Lessor’s] not having given
notice of termination pursuant to the anti-forfeiture clause of the
[L]ease or, if notice of termination was given, notwithstanding
[L.D. Oil’s] having resumed operations and commenced
production of oil within the cure period afforded by the anti-
forfeiture clause?
L.D. Oil’s Brief at 4.
We address this claim mindful of the following.
Our scope of review on an appeal from the grant of
judgment on the pleadings is plenary. Entry of judgment on the
pleadings is permitted under Pennsylvania Rule of Civil
Procedure 1034, which provides that after the pleadings are
closed, but within such time as not to unreasonably delay trial,
any party may move for judgment on the pleadings.
A motion for judgment on the pleadings is similar to a
demurrer. It may be entered when there are no disputed issues
of fact and the moving party is entitled to judgment as a matter
of law. In determining if there is a dispute as to facts, the court
must confine its consideration to the pleadings and relevant
documents. On appeal, we accept as true all well-pleaded
allegations in the complaint.
On appeal, our task is to determine whether the trial
court’s ruling was based on a clear error of law or whether there
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were facts disclosed by the pleadings which should properly be
tried before a jury or by a judge sitting without a jury.
Neither party can be deemed to have admitted either
conclusions of law or unjustified inferences. Moreover, in
conducting its inquiry, the court should confine itself to the
pleadings themselves and any documents or exhibits properly
attached to them. It may not consider inadmissible evidence in
determining a motion for judgment on the pleadings. Only when
the moving party’s case is clear and free from doubt such that a
trial would prove fruitless will an appellate court affirm a motion
for judgment on the pleadings.
Altoona Reg’l Health Sys. v. Schutt, 100 A.3d 260, 265 (Pa. Super.
2014) (citations and quotation marks omitted).
As the issue on appeal involves contract interpretation, we set forth
the following principles. “The interpretation of a contract is a matter of law
and, as such, we need not defer to the trial court’s reading of” it.
Integrated Project Servs. v. HMS Interiors, Inc., 931 A.2d 724, 732
(Pa. Super. 2007) (internal quotation marks omitted). “Where the words of
the contract are clear and unambiguous, the intent of the parties must be
determined exclusively from the agreement itself.” Metzger v. Clifford
Realty Corp., 476 A.2d 1, 5 (Pa. Super. 1984). “Where the language of the
written contract is ambiguous, extrinsic or parol evidence may be considered
to determine the intent of the parties.” Id. “While courts are responsible for
deciding whether, as a matter of law, written contract terms are either clear
or ambiguous; it is for the fact finder to resolve ambiguities and find the
parties’ intent.” Id.
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Instantly, the trial court concluded that the Lease was ambiguous as a
matter of law. See Trial Court Opinion, 4/22/2016, at 7 (“In this case, the
[trial c]ourt finds the Limitation of Forfeiture clause does present an
ambiguity open to interpretation.”). The trial court then went on to resolve
the apparent ambiguity. Specifically, the trial court concluded that “the
primary term provides a finite window during which [L.D. Oil] has the
exclusive right to explore and develop a leasehold.” Id. at 8. According to
the trial court, L.D. Oil’s interpretation of the Limitation of Forfeiture clause,
which requires notice of termination by Lessor, “would be contrary to public
policy.” Id. at 9. “Allowing a contract which imposes no duty to develop and
ties up the natural resources indefinitely is clearly against the public
interest.” Id. at 12. The trial court then offered its interpretation of the
contract.
In this instance, the only way [the trial c]ourt sees that the
primary term can be given meaning, while still allowing [L.D.
Oil’s] interpretation of the Limitation of Forfeiture clause to
control, would be to frame the “breach” as the failure to produce
during the primary term. Otherwise, the primary term would be
almost entirely eviscerated. Since the breach would be the
failure to produce during the primary term, this would effectively
cause the Limitation of Forfeiture clause to be a six-month notice
to vacate the premises, since it would be impossible to cure the
breach…. The Lease expired at the end of the primary term, and
by virtue of failing to be in production at that time, [L.D. Oil’s]
interests in the land expired along with it.
Id. at 12-13.
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On appeal, L.D. Oil first argues that the trial court erred in finding the
language of the Limitation of Forfeiture clause of the lease ambiguous. L.D.
Oil’s Brief at 11. Additionally, L.D. Oil contends that even if the provision is
ambiguous, it was improper to grant a motion for judgment of the pleadings
based upon such ambiguity, as any interpretation requires factual findings
which are impermissible for such a motion.
We first must determine if the trial court erred in concluding that the
terms of the contract are ambiguous. “A contract is ambiguous if it is
reasonably susceptible to different constructions.” Trombetta v. Raymond
James Fin. Servs., Inc., 907 A.2d 550, 562 (Pa. Super. 2006). “A contract
is not ambiguous if the court can determine its meaning without any guide
other than knowledge of the simple facts on which, from the nature of the
language in general, its meaning depends.” Id. “A contract is not rendered
ambiguous by the mere fact the parties do not agree on the proper
construction.” Id.
Instantly, we agree with the trial court that there is an ambiguity in
the Lease. While the primary term of the Lease is for five years, the
limitation of forfeiture clause appears to extend that term for an additional
180 days. Because of this ambiguity, the parties would be permitted to
present parol evidence; accordingly, it was improper for the trial court to
enter judgment on the pleadings. See Windows v. Erie Ins. Exch., 161
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A.3d 953, 958 (Pa. Super. 2017) (holding that the trial court did not err in
denying motion for summary judgment where the terms of a contract were
ambiguous). Thus, we reverse the order of the trial court.
Order reversed. Case remanded for further proceedings. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/12/2017
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