McCausland v. Wagner
78 A.3d 1093
Pa. Super. Ct.2013Background
- 1964 oil & gas lease (McCausland Lease) granted royalties to lessor; lease contained a forfeiture clause stating that failure to make “such payments” or complete a well would render the lease null and void and that the lessor would have no right of action thereafter.
- Over time the Wagners operated the wells; royalties were payable to Robert N. Wagner as agent; some royalty checks (2005–2006) were cashed by Robert but not fully distributed; Equitable later issued checks it did not cash (2008–2010).
- Ronald McCausland sued (2009) claiming he had not received royalties since 2005 and sought damages and a judicial declaration that the lease was null and void for breach.
- Equitable interpleaded funds and parties settled in 2010; settlement provided Ronald $37,258.94 (including 3.5% interest compounded monthly) for past royalties through Oct. 11, 2010; a payment agent thereafter distributed ongoing royalties which Ronald accepted.
- Ronald moved for summary judgment seeking forfeiture (lease void) for failure to pay royalties; Robert moved for summary judgment. Trial court held Robert’s motion granted; appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Robert’s failure to pay royalties voided the lease | McCausland: withholding royalties for years was an uncured breach that renders the lease null and void under the forfeiture clause | Wagner: the forfeiture clause applies to delay rentals or failure to drill, not post-production royalty payments; Ronald accepted payments and a settlement | Held: Forfeiture clause did not apply to royalty payments after production; lease not voided |
| Whether Ronald’s acceptance of settlement/payment waives right to declare forfeiture | Ronald: settlement preserved his right to seek declaration that lease is null and void (express reservation in agreement) | Wagner: acceptance of the payments and the settlement (and prior cashed payments) amounted to election/waiver precluding forfeiture | Held: Acceptance of payments and settlement barred Ronald from successfully declaring forfeiture; he deprived himself of that right |
| Construction: does “such payments” in forfeiture clause mean royalties or delay rentals/drill-or-pay | Ronald: clause is broad and covers all payments including royalties | Wagner: clause follows the delay-rental paragraph; “such payments” refers to delay rentals/initial term obligations | Held: Court construed clause to refer to delay rentals/failure to complete a well (not royalties) based on placement and industry practice |
| Election of remedies / right to seek damages after declaring forfeiture | Ronald: may preserve breach remedy despite seeking forfeiture | Wagner: remedies inconsistent—one cannot rescind (forfeit) and also recover contract damages | Held: Under election-of-remedies principles and precedent, one cannot both accept monetary relief and insist on forfeiture; remedies here are inconsistent and Ronald cannot have both |
Key Cases Cited
- Wheeling & Belmont Bridge Co. v. Phillips, 10 Pa. Super. 634 (Pa. Super. 1899) (lessor’s acceptance of payments after default can waive forfeiture; one cannot both recover payments and insist on forfeiture)
- Jacobs v. CNG Transmission Corp., 332 F. Supp. 2d 759 (W.D. Pa. 2004) (oil and gas leases treated as conveyances with industry-specific principles and construed to promote development)
- Brown v. Haight, 435 Pa. 12 (Pa. 1969) (traditional oil and gas lease conveys an inchoate property right that vests on production)
- Calhoon v. Neely, 201 Pa. 97 (Pa. 1902) (if development during primary term is unsuccessful, no estate vests; production vests lessee’s property right)
- LJL Transp., Inc. v. Pilot Air Freight Corp., 599 Pa. 546 (Pa. 2009) (material breach excuses performance; nonmaterial breach does not)
- Smith v. Brink, 385 Pa. Super. 597 (Pa. Super. 1989) (a plaintiff cannot simultaneously seek rescission/restitution and damages for breach on the same contract)
- Wedgewood Diner, Inc. v. Good, 368 Pa. Super. 480 (Pa. Super. 1987) (doctrine of election of remedies bars asserting inconsistent remedial claims)