L.D. Oil & Gas Enterprises v. Loop, D.
1883 WDA 2016
| Pa. Super. Ct. | Sep 12, 2017Background
- L.D. Oil & Gas (Lessee) executed a 2006 oil-and-gas lease with Lessor for a five-year primary term covering ~157 acres; royalties set at one-eighth.
- The lease contained a "Limitation of Forfeiture" clause: lease "shall not terminate" nor be subject to a forfeiture action unless Lessor gives written notice and Lessee fails to cure within 180 days.
- No production occurred by the primary-term end (May 11, 2011); Lessee asserts it conducted operations searching for oil and attempted production of marginal wells.
- The parties executed an amendment in February 2012 (granting pooling rights); Lessor later contended the lease had already expired.
- L.D. Oil sued for declaratory judgment asserting it retained working interest; Lessor moved for judgment on the pleadings claiming automatic expiration at the end of the primary term.
- Trial court found the lease ambiguous, resolved ambiguity in Lessor’s favor (concluding lease expired at end of primary term despite the anti-forfeiture clause), and entered judgment for Lessor; Superior Court reversed and remanded.
Issues
| Issue | Plaintiff's Argument (L.D. Oil) | Defendant's Argument (Lessor) | Held |
|---|---|---|---|
| Whether lease terminated automatically at end of five‑year primary term despite the Limitation of Forfeiture clause | The anti‑forfeiture clause requires written notice and a 180‑day cure period before termination; thus lease did not automatically expire | The primary term is a finite window; absence of production at term end caused automatic expiration | Superior Court held the Limitation of Forfeiture clause and primary term are ambiguous and reversed judgment for Lessor — trial on facts/ambiguity required |
| Whether trial court properly granted judgment on the pleadings based on its contract interpretation | Entry of judgment on the pleadings was improper because ambiguity permits parol evidence and factual resolution | Trial court resolved ambiguity as a matter of law and granted judgment | Superior Court held it was improper to decide on judgment on the pleadings when ambiguity exists; remanded for further proceedings |
Key Cases Cited
- Altoona Reg’l Health Sys. v. Schutt, 100 A.3d 260 (Pa. Super. 2014) (standard and scope of review for judgment on the pleadings)
- Integrated Project Servs. v. HMS Interiors, Inc., 931 A.2d 724 (Pa. Super. 2007) (contract interpretation is a matter of law)
- Metzger v. Clifford Realty Corp., 476 A.2d 1 (Pa. Super. 1984) (when contract language is clear, intent is found in the instrument; ambiguity permits extrinsic evidence)
- Trombetta v. Raymond James Fin. Servs., Inc., 907 A.2d 550 (Pa. Super. 2006) (defines contractual ambiguity standard)
- Windows v. Erie Ins. Exch., 161 A.3d 953 (Pa. Super. 2017) (affirming denial of summary judgment where contract terms were ambiguous)