Southwestern Energy Production Co. v. Forest Resources, LLC
83 A.3d 177
| Pa. Super. Ct. | 2013Background
- Appellants (PHT and MPT) appeal December 19, 2012 orders granting judgment on the pleadings to Lancaster and sustaining Southwestern's and Lancaster's preliminary objections, which dismissed counterclaims for declaratory judgment on GMRA validity.
- Southwestern and Lancaster acquired interests via leases and letter agreements related to PHT's oil and gas rights on warrants 1621/1622 in Lycoming County, with 2002 lease, 2002 letter, 2005 letter, and 2005 extension forming the relevant framework.
- Southwestern sued to quiet title and for declaratory relief; PHT and MPT counterclaimed seeking invalidity of the PHT/Lancaster lease under GMRA.
- The trial court held the GMRA did not bar the amended agreements and that the assignment-back provision did not violate GMRA; this Court reverses and remands.
- The core issue is whether the lease scheme, read as a whole, guarantees at least an one-eighth royalty to the lessor under GMRA and thus is valid.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| GMRA viability of assignment-back | PHT/MPT: assignment-back reduces net royalty below 1/8, violating GMRA | Lancaster/Southwestern: assignment-back does not affect guaranteed 1/8 royalty; the GMRA is not violated | GMRA violated; the lease as a whole fails to guarantee 1/8 royalty |
| Consolidation of documents as a single lease | PHT/MPT: 2002 Lease and 2002/2005 Letter Agreements must be read together as one agreement | Lancaster/SW: letter agreements are collateral and distinct from the lease | Documents must be construed together as a single lease to interpret terms |
| Effect of GMRA on read as a whole vs. facial language | Even if nominally 1/8, the overall structure reduces net royalty below 1/8 | GMRA applies to the face term; assignment-back not barred if 1/8 remains | Read as a whole, the arrangement violates GMRA and is invalid |
| Remedial posture on appeal | Reverse the challenged orders and remand for further proceedings |
Key Cases Cited
- T.W. Phillips Gas and Oil Co. v. Jedlicka, 42 A.3d 261 (Pa. 2012) (contract interpretation and integration principles for leases)
- Pennsylvania Bankers Ass'n v. Pennsylvania Dept. of Banking, 948 A.2d 790 (Pa. 2008) (finality of declaratory judgments and partial resolutions)
- Wickett v. Nationwide Mut. Ins. Co., 763 A.2d 813 (Pa. 2000) (partial judgments in declaratory actions may be final under certain conditions)
- Humberston v. Chevron U.S.A., Inc., 75 A.3d 504 (Pa. Super. Ct. 2013) (contract interpretation and integration principles; read contracts as a whole)
- Trombetta v. Raymond James Financial Services, Inc., 907 A.2d 550 (Pa. Super. 2006) (read writings as part of one transaction; contract integration)