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CLEARFIELD DEVELOPMENT CORPORATION v. DEVONIAN GAS & OIL COMPANY (05/21/56)

May 21, 1956

CLEARFIELD DEVELOPMENT CORPORATION
v.
DEVONIAN GAS & OIL COMPANY, APPELLANT.



Appeal, No. 127, Jan. T., 1956, from judgment of Court of Common Pleas of Clinton County, Oct. T., 1954, No. 37, in case of Clearfield Development Corporation v. Devonian Gas & Oil Company. Judgment affirmed.

COUNSEL

William F. Beatty, with him Henry M. Hipple and James F. Smith, for appellant.

Morris Klewans, with him Saylor J. McGhee, Jr., for appellee.

Before Stern, C.j., Bell, Chidsey, Musmanno and Arnold, JJ.

Author: Arnold

[ 385 Pa. Page 250]

OPINION BY MR. JUSTICE ARNOLD

In this action of assumpsit founded upon written contracts, defendant appeals from judgment entered for plaintiff upon the pleadings.

Prior to entering into these contracts, defendant had leased from the Commonwealth certain lands for production of oil and gas. In compliance with a requirement of the lease, defendant had filed bond for performance and also had deposited with the bonding company as collateral the sum of $25,000.

Defendant had commenced drilling operations when it entered into the contracts with plaintiff. They recited that defendant was the "owner"*fn1 of the oil and gas, and provided, inter alia, that for a consideration plaintiff purchased from defendant "an undivided one-eighth (1/8) interest in the net proceeds from the sale of any oil or gas"; and that the "net proceeds shall consist of the sums received from sales of oil or gas ..., less ... royalties ... and the cost of managing, operating and marketing the same." They also provided that defendant would "undertake to drill this well at its own cost and expense."

The wells having produced, defendant proceeded to make payments, but deducted from gross receipts the sum which it had deposited as collateral to the performance bond. The share thus withheld from plaintiff was $3,125, for which this suit was brought.

With some exceptions, we must construe the written contract to give it the meaning that would be attached to it by a reasonably intelligent person acquainted with all operative usages, and knowing all the circumstances prior to and contemporaneous with the making of the contract: Markides v. Soffer, 172 Pa. Superior Ct. 215, 218, 93 A.2d 99; Restatement, Contracts, ยง 230. Where

[ 385 Pa. Page 251]

    the words bear more than one reasonable meaning they shall be interpreted most strongly against the one from whom they proceed,*fn2 unless their use by him is prescribed by law: Markides v. Soffer, supra; see also Kormuth v. United States Steel ...


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