Shedden v. Anadarko E. & P. Co.

Decision Date29 March 2016
Docket NumberNo. 103 MAP 2014,103 MAP 2014
PartiesLeo E. SHEDDEN and Sandra L. Shedden, Appellants, v. ANADARKO E. & P. COMPANY, L.P., Appellee.
CourtPennsylvania Supreme Court

136 A.3d 485

Leo E. SHEDDEN and Sandra L. Shedden, Appellants
v.
ANADARKO E. & P. COMPANY, L.P., Appellee.

No. 103 MAP 2014

Supreme Court of Pennsylvania.

Argued Oct. 7, 2015.
Resubmitted Jan. 20, 2016.

Decided March 29, 2016.


136 A.3d 486

Kevin Jon Moody, Esq., Pennsylvania Independent Oil and Gas Association, for Pennsylvania Independent Oil & Gas Association, Amicus Curiae.

David Jonathan Brann, Esq., for Leo Shedden and Sandra L. Shedden.

Jared Dimock Bayer, Esq., Stephen A. Cozen, Esq., Cozen O'Connor, Philadelphia, Andrea Emilie Hammel, Esq., Cozen O'Connor, West Conshohocken, for Anadarko E & P Company, LP.

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

136 A.3d 487

OPINION

Justice TODD.

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.

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

136 A.3d 488

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:

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, 196 Pa. 349, 46 A. 553 (1900), and its own decision in Hennebont Co. v. Kroger Co., 221 Pa.Super. 65, 289 A.2d 229 (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 bonus payment of only one-half of the agreed-

136 A.3d 489

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., 606 Pa. 294, 997 A.2d 1152, 1159 (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., 592 Pa. 458, 926 A.2d 899, 902 (2007). The issue as to whether there are genuine issues as to any 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...

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