No. 299 Pittsburgh, 1982, Appeal from Judgment of the Court of Common Pleas, Civil Division, of Westmoreland County, No. 11068 of 1980.
James R. Cascio, Somerset, for appellants.
James R. Mall, Pittsburgh, for appellees.
Rowley, Wieand and Hester, JJ.
[ 330 Pa. Super. Page 249]
The decision in this case rests upon the interpretation to be placed upon paragraph 6 of an oil and gas lease covering 13,604 acres of land in Clinton and Centre Counties. The lease, negotiated by C.E. Beck, agent for Amoco Production Company (Amoco), and executed on October 26, 1977, required Amoco to pay an initial consideration therefor of $13,604. In addition, Amoco was to pay royalties consisting of one-eighth (1/8) of the net proceeds derived from extracting
[ 330 Pa. Super. Page 250]
and marketing certain enumerated minerals. Although the term of the lease was stated to be ten years, paragraph 6 provided:
If operations for drilling are not commenced on the leased premises, or on acreage pooled therewith as above provided, on or before one year from this date, this lease shall then terminate as to both parties unless Lessee on or before the expiration of said period shall pay or tender to Lessor, or to the credit of Lessor in Mellon Bank at Ligonier, Pennsylvania 15658 or any successor bank, the sum of Thirteen Thousand, Six Hundred and Four Dollars ($13,604.00), hereinafter called the "delay rental" which shall extend for twelve (12) months the time within which drilling operations or mining operations may be commenced. Thereafter, annually, in like manner and upon like payments or tenders the commencement of drilling operations or mining operations may be further deferred for periods of twelve (12) months each during the primary term. Drilling operations or mining operations shall be deemed to be commenced when the first material is placed on the leased premises or when the first work, other than surveying or staking the location, is done thereon which is necessary for such operations. (Emphasis added)
It is undisputed that neither drilling nor mining operations were commenced within the first year. It is also clear that a "delay rental" was not paid before the expiration of the first year.
The owner of the demised premises was B & R Lumber Company, a corporation owned by Ailsa P. Rugh (53.846%) and the Estate of Edgar Rugh, deceased (46.154%). On November 18, 1977, Dante G. Bertani became receiver of the corporation by agreement. Because the lease had been negotiated and executed on behalf of the corporation by Ailsa Rugh alone prior to appointment of the receiver, Bertani determined that he should obtain from the Court of Common Pleas of Westmoreland County a decree confirming the lease. This caused delay. While the confirmation
[ 330 Pa. Super. Page 251]
proceedings were pending, the first year of the lease expired without the commencement of drilling or mining by the lessee. The court, when it ultimately decreed confirmation, left it to the parties to make their own agreement regarding the uncertainty and delay which had been caused by Bertani's refusal to proceed without court confirmation. The corporation's interest in the lease was subsequently assigned to Ailsa Rugh and the Estate of Edgar Rugh, deceased, in shares consistent with their ...