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McCausland v. Wagner

Superior Court of Pennsylvania

September 20, 2013

RONALD McCAUSLAND, Appellant
v.
ROBERT N. WAGNER, ESTATE OF HOMER M. WAGNER, AND DELORES WAGNER, Appellees

Appeal from the Order Entered July 23, 2012, In the Court of Common Pleas of Armstrong County, Civil Division, at No. 2009-1365-Civil.

BEFORE: SHOGAN, LAZARUS and MUSMANNO, JJ.

OPINION

SHOGAN, J.

Appellant, Ronald McCausland ("Ronald"), appeals from the order of July 23, 2012, which granted the motion for summary judgment of Appellee, Robert N. Wagner ("Robert").[1] We affirm.

The trial court summarized the protracted history of this case as follows:

Elmer McCausland, [Ronald's] predecessor in interest, owned approximately 65 acres of land in Cowanshannock Township, Armstrong County, Pennsylvania (the McCausland Property).
On or about February 4, 1964, Elmer McCausland, as lessor, entered into an oil and gas lease (the McCausland Lease) with Frank Wagner, Homer [M.] Wagner and Robert N. Wagner (the Wagners). Frank N. Wagner was the father of Homer [M.] Wagner and Robert N. Wagner.
The McCausland Lease read in pertinent part as follows: "It is further understood and agreed by and between the parties hereto that a failure to make any one of such payments, or to complete one well on the premises, shall render this lease null and void, and the same shall be fully ended and determined by and between the parties, and the party of the first part [McCausland] shall have no right, nor right of action in law and equity against the party of the second part [the Wagners], the recovery of any rent, damages or otherwise thereafter." (emphasis added).
Pursuant to the McCausland Lease, Elmer McCausland was entitled to receive royalty payments equal to 1/16 of the production of natural gas from the McCausland Property. The McCausland Lease was later orally-modified to provide Elmer McCausland with a 1/8 royalty on the production of natural gas from the McCausland Property.
On September 29, 1965, the Wagners, as vendors, entered into Gas Purchase Agreement No. 6078 with Equitable Gas Company, as buyer, pursuant to which Equitable agreed to buy all gas produced under the McCausland Lease for the life of the lease and or wells for 25 cents per thousand cubic feet.
Paragraph 14 of GPC No. 6078 stated as follows: "All payments that may become due under and by virtue of the terms of this contract may be made, without liability on the part of [Equitable] to see to the application thereof, by check or voucher to the order of Robert N. Wagner, Agent … ."
On December 30, 1965, Elmer McCausland conveyed the McCausland Property to Walter McCausland and Bertha McCausland. Walter and Bertha McCausland in turn conveyed the McCausland Property to plaintiff Ronald McCausland on April 29, 1979.
On or about February 1, 1986, Homer M. Wagner and Robert N. Wagner entered into a Joint Operating Agreement (JOA) with respect to the McCausland Lease. This JOA provided each man with a 50% interest in the McCausland Lease.
On February 5, 1990, Homer M. Wagner and Robert N. Wagner executed an assignment in which they assigned each other an undivided 50% working interest in the McCausland Lease (the Assignment Agreement). The Assignment Agreement stated that it "shall extend to each assignee, their heirs, successors and assigns." By this time, Frank N. Wagner had died, leaving all his interest to his two sons, Homer and Robert.
The McCausland Lease, GPC No. 6078, the JOA and all applicable modifications cover three wells on the McCausland Property (the McCausland Wells). At least one of the wells is still producing marketable quantities of natural gas.
In exchange for the gas produced by the McCausland Wells during part of 2005 and part of 2006, Equitable made six payments payable to Robert Wagner, Agent, and the checks were cashed by Robert N. Wagner as agent for all parties with an interest in the McCausland Lease. These checks were cashed in November and December of 2005 and in January, February, March and April of 2006. Robert N. Wagner did not pay the parties in interest, including Ronald McCausland, their full shares of these checks which he had cashed. The majority of the money simply lay in a checking account. (See Stipulation of Facts, ¶ 13.)
From February of 2008 until October of 2010, Equitable issued checks to Robert N. Wagner, Agent, in exchange for the gas produced by the McCausland Wells, but Wagner never cashed these checks nor distributed the proceeds thereof. (Id. at ¶ 14.)
Ronald McCausland initiated the instant action with the filing of a complaint on July 27, 2009 in which he alleged that he had not received a royalty payment for natural gas produced from the McCausland Wells since November of 2005. In the complaint, McCausland alleged that Robert N. Wagner, the Estate of Homer M. Wagner and Equitable had breached the McCausland Lease and GPC No. 6078 by failing to make the required natural gas royalty payments to him. Plaintiff sought an award of monetary damages and also a declaration that the McCausland Lease and GPC No. 6078 were null and void.
On January 15, 2009, Equitable filed an answer, new matter and cross-claim pursuant to Pa.R.C.P. 1031.1 in which it averred that it could not have breached the McCausland Lease since it was not a party to it, and that it did not breach GPC No. 6078 because, as required by the explicit terms of GPC No. 6078, all payments for natural gas purchased under GPC No. 6078 were made to Robert N. Wagner as agent.
On January 20, 2010, Equitable filed a petition for interpleader in this case pursuant to Pa.R.C.P. 2302. Equitable sought an order (1) permitting it to pay into court the amount of all checks which Robert N. Wagner as agent failed and/or refused to cash beginning in February 2008 for natural gas purchased under GPC Nos. 6078, 6056 and 7026, which amount was approximately $280, 000, (2) permitting it to pay into court all future payments for natural gas purchased under GPC Nos. 6078, 6056 and 7026, and (3) discharging it from all liability with respect to the monies it pays into court.
On September 16, 2010, Robert N. Wagner's attorney filed a petition for the appointment of a guardian ad litem in the litigation. On October 15, 2010, the Court entered an Order appointing Kevin S. Schrecengost as guardian ad litem for Robert N. Wagner.
An evidentiary hearing on the interpleader petition was scheduled. However, prior to the evidentiary hearing, Equitable, McCausland, various other claimants and Schrecengost reached a comprehensive settlement agreement.
On October 26, 2010, this Court issued an Order approving the settlement with respect to Equitable's interpleader petition, pursuant to which Robert N. Wagner, through Schrecengost, agreed to make all outstanding royalty payments to McCausland and others, as well as outstanding working interest payments to the working interest holders, plus interest at the rate of 3.5%.
On December 21, 2010 the parties entered a stipulated Order of Court and settlement agreement which memorialized the terms of the settlement reached on October 26, 2010. McCausland signed the agreement.
In pertinent part, the agreement states: "To Ronald McCausland: the total sum of $37, 258.94, representing the royalties owed to him on the gross production amounts paid on the McCausland Wells. This amount includes interest at the rate of 3.5% per annum, compounded monthly [emphasis added]."
The settlement agreement also states, "Exception from the Releases - Ronald McCausland specifically reserves the right and ability to seek a judicial declaration that the McCausland Lease is null and void. The releases contained in Paragraphs 9 and 10 above do not release any claim by Ronald McCausland that the McCausland Lease is null and void." Settlement Agreement, ¶ 11. Paragraph 12 of the settlement agreement states, "Should a court of competent jurisdiction determine that the McCausland Lease is null and void …, GPC No. 6078 shall automatically terminate and become null and void."
On January 6, 2011, pursuant to the October 26, 2010 Order and settlement agreement, Robert N. Wagner, through Schrecengost, issued a payment to McCausland in the amount of $37, 258.94 for past royalties plus 3.5% interest in lieu of checks from February 6, 2006 to October 11, 2010 inclusive. This payment included all monies owed to McCausland through October 11, ...

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