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Masciantonio v. Swepi LP

United States District Court, Middle District of Pennsylvania

July 21, 2014

JANICE E. MASCIANTONIO, et al., Plaintiffs,
v.
SWEPI LP, Defendant.

CONNER, C.J.

REPORT AND RECOMMENDATION

KAROLINE MEHALCHICK United States Magistrate Judge

This is a breach of contract action, brought before this Court pursuant to its diversity jurisdiction under 28 U.S.C. § 1332. The matter is now before the Court upon the Defendant’s Rule 12(b)(6) motion to dismiss the complaint for failure to state a claim. (Doc. 6). For the reasons stated herein, it is recommended that the Defendant’s motion be DENIED.

I. Background

The Plaintiffs in this case are (a) Janice E. Masciantonio and Martin J. Masciantonio, husband and wife, and (b) Paul R. Latshaw and Paul B. Latshaw, father and son co-trustees of the Phyllis E. Latshaw Residuary Trust. Together the Plaintiffs jointly own two parcels of land in Jackson Township, Lycoming County. The Plaintiffs are all residents of Pennsylvania.

The Defendant in this case is SWEPI LP, a Delaware limited partnership with its principal place of business in Houston, Texas. The complaint does not specifically allege the citizenship of SWEPI for diversity jurisdiction purposes, but none of its constituent partners appears to be a citizen of Pennsylvania. See Notice of Removal ¶¶ 6–8, Messner v. SWEPI, LP, No. 4:13-CV-00014 (M.D. Pa. filed Jan. 3, 2013) (Doc. 5).

According to the complaint, in late 2011, the Plaintiffs entertained two financially similar offers to lease oil and gas rights with respect to their Lycoming County property, one from Andarko E&P Company, LP, and the other from SWEPI. On November 5, 2011, the Plaintiffs accepted SWEPI’s offer and each pair of plaintiffs executed a substantively identical lease. (Doc. 1-2; Doc. 1-3).

In essence, the SWEPI lease provided for each set of plaintiffs to receive a 15% net royalty on any oil or gas production from the property and bonus consideration in the amount of $4, 000 per net mineral acre. The royalty was set forth in paragraph 4 of the lease. Both leases included an identical lease addendum, paragraph 22 of which set forth the bonus consideration.

Paragraph 22 provided as follows:

In consideration for the attached paid-up Oil and Gas Lease, Lessee hereby agrees to pay Lessor: FOUR THOUSAND and 00/100 dollars ($4000.00) per net mineral acre. Payment shall be due within ninety (90) banking days of the Lessor presenting the Bank Draft to the financial institution of his/her/their choosing. All payment obligations are subject to title verification by Lessee. Said title verification shall be completed within the aforementioned ninety (90) banking day period.

(Doc. 1-2, at 9; Doc. 1-3, at 9).

The leases also each contained an identical surrender provision:

Lessee at any time, and from time to time, may surrender this lease as to all or any part thereof by recording an appropriate instrument of surrender in the proper county and thereupon this lease and the rights, rentals and obligations of the parties hereunder shall terminate as to the part so surrendered....

(Doc. 1-2, at 2; Doc. 1-3, at 2).

The Plaintiffs also executed substantively identical memoranda of lease, which SWEPI subsequently recorded with the Lycoming County Rec of Deeds. (Doc. 1-4; Doc. 1-5). The Masciantonio memorandum of lease was recorded on November 11, 2011. (Doc. 1-4). The Latshaw memorandum of lease was recorded on January 10, 2012. (Doc. 1-5). The leases themselves were not recorded.

The acreage on the leases was originally listed as 1, 036 acres. Prior to executing the leases, the Plaintiffs provided SWEPI with a recent survey and the parties agreed to adjust the acreage upward to reflect the surveyed acreage of 1, 144 acres, which was done by handwritten amendment to the preprinted leases. The bonus consideration due to each set of plaintiffs under each of the leases was therefore Two Million Two Hundred Eighty-Eight Thousand Dollars ($2, 288, 000.00).

On November 17, 2011, SWEPI tendered a “payable through” draft[1] in the amount of $2, 288, 000.00 payable to Janice and Martin Masciantonio. (Doc. 1-6). The draft designated Amegy Bank N.A. as the collecting bank, and it further provided that payment of the draft was due ninety banking days after its receipt by the collecting bank for presentment, during which time any title examination would be completed. (Doc. 1-6). The Masciantonios delivered the draft to their bank, Univest Bank & Trust Co., for collection, and Univest forwarded the draft to Amegy for presentment. On December 1, 2011, Amegy sent a domestic collection letter to the Masciantonios, acknowledging receipt of the draft and advising them that settlement under the terms of the draft was due on April 11, 2012. (Doc. 1-7).

On December 29, 2011, SWEPI tendered a “payable through” draft in the amount of $2, 288, 000.00 payable to the Latshaw Residuary Trust. (Doc. 1-8). The draft was otherwise identical to the one issued to the Masciantonios. The Trustees delivered the draft to their bank, Univest, for collection, and Univest forwarded the draft to Amegy for presentment. On January 8, 2014, Amegy sent a domestic collection letter to the Trustees, acknowledging receipt of the draft and advising them that settlement under the terms of the draft was due on May 24, 2012. (See Doc. 1-12).[2]

On January 23, 2012, at SWEPI’s request, the Plaintiffs agreed to revise the leased acreage downward to match the original assessed acreage of 1, 036 acres, which was accomplished by the execution of an Amendment and Correction to Oil and Gas Lease with respect to each lease. (Doc. 1-9; Doc. 1-11). These written amendments were subsequently recorded by the Lycoming County Recorder of Deeds on April 3, 2012. (Doc. 1-9; Doc. 1-11).

On January 23, 2012, SWEPI tendered a new “payable through” draft in the amount of Two Million Seventy-Two Thousand Dollars ($2, 072, 000.00) payable to the Latshaw Residuary Trust. (Doc. 1-15). The draft was otherwise identical to the one previously tendered to the Trust. The Trustees delivered this second draft to their bank, Univest, for collection, and Univest forwarded it to Amegy for presentment. On January 30, 2012, Amegy sent a domestic collection letter to the Trustees, acknowledging receipt of the second draft and advising them that settlement under the terms of this draft was due on June 6, 2012. (Doc. 1-16).

On January 27, 2012, SWEPI tendered a new “payable through” draft in the amount of $2, 072, 000.00 payable to Janice and Martin Masciantonio. (Doc. 1-13). The draft was otherwise identical to the one previously tendered to the Masciantonios. The Masciantonios delivered this second draft to their bank, Univest, for collection, and Univest forwarded it to Amegy for presentment. On January 30, 2012, Amegy sent a domestic collection letter to the Trustees, acknowledging ...


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