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Sabella v. Appalachian Dev. Corp.

Superior Court of Pennsylvania

October 20, 2014

DENNIS SABELLA, Appellee
v.
APPALACHIAN DEVELOPMENT CORPORATION AKA APPALACHIAN DEVELOPMENT CORP; AND BRIAN C. HANER AND LISA M. HANER, D/B/A PINE RIDGE ENERGY, Appellants; DENNIS SABELLA, Cross-Appellant
v.
APPALACHIAN DEVELOPMENT CORPORATION AKA APPALACHIAN DEVELOPMENT CORP; AND BRIAN C. HANER AND LISA M. HANER, D/B/A PINE RIDGE ENERGY, Cross-Appellees

Argued January 29, 2014

Page 84

[Copyrighted Material Omitted]

Page 85

Appeal from the Judgment of the Court of Common Pleas, Warren County, Civil Division at No(s): 2010-150. Before SKERDA, J.

Brian J. Pulito, Meadville, for Appalachian Development Corp.

Joseph E. Altomare, Titusville, for Sabella.

BEFORE: BOWES, J., WECHT, J., and STABILE, J.

OPINION

Page 86

WECHT, J.

In this oil and gas case, Dennis Sabella and the above-captioned Appellants/Cross-Appellees (hereinafter, the " Haners," except where context requires reference to Brian Haner individually) file cross-appeals challenging generally the judgment that the trial court entered in Sabella's favor. Each party challenges aspects of that learned court's entry of partial summary judgment, as well as that court's verdict entered after a bench trial addressing the issues not disposed of on summary judgment.

Following careful review, we affirm in part, but we vacate aspects of the trial court's judgment and remand for further proceedings.

BACKGROUND

The trial court has provided us a thorough summary of the facts and background of the case:

[Sabella] . . . obtained the oil, gas, and mineral rights (OGMs) to the subject property at a tax sale on September 8, 1997. . . . The property was . . . properly recorded . . . in the Warren County Register and Recorder's Office in 1997. [Sabella] did not own the surface rights to the property. However, there being a public road near the property, Keller Road, [Sabella] did drive the public road looking for any signs of development. Finding none, he operated under the assumption that there was no oil and gas development activity.
The piece of property at issue is a rural, wooded parcel of land, covered by trees and brush. The property is not on a main road. Also, there is just one home nearby the surface of the property at issue. Further, [Sabella] suffered from progressive macular degeneration. Eventually, [Sabella's] condition prevented him from driving a vehicle.
[Appalachian was] unrepresented in the instant action. Appalachian is and was at all times relevant, an oil and gas company operating in and around Warren, Pennsylvania. Appalachian was owned by Russell C. Southwell, Lee Borger, Jr., and Ted Carrington.

Page 87

On November 15, 2001, Mark and Virginia Harvey [" the Harveys" ] owned the surface rights to 104 acres above the 66 subsurface acres [that Sabella] owned. Appalachian signed an oil and gas lease with Mark and Virginia Harvey in 2001.1The lease was for production of the 104 acres of oil and gas rights underneath the Harvey surface tract. Appalachian called this lease the " Harvey lease," and duly recorded it at the Register and Recorder's Office . . . . However, unbeknownst to either party to the Harvey lease, 66 of those 104 subsurface acres were already owned by [Sabella].
1Mark and Virginia Harvey are not parties to the instant action. [The Haners] sought to interplead Mark and Virginia Harvey, but this Court denied the request as untimely.
Defendants Brian C. Haner and Lisa M. Haner are husband and wife, trading and doing business under the registered fictitious name Pine Ridge Energy (Pine Ridge). Pine Ridge is an unincorporated business association. On June 23, 2003, Appalachian, by and through three of its shareholders, signed a letter of agreement to sell some of its holdings to Defendant Brian Haner . .., operating as Pine Ridge. Pine Ridge then finalized the purchase of Appalachian in August 2003. As part of the agreement of sale, Appalachian warranted good, marketable title. Included in Pine Ridge's purchase was the Harvey lease, which included [Sabella's] 66 acres of OGMs.
In effectuating the purchase of Appalachian, Pine Ridge retained the services of local attorney Arthur Stewart. Mr. Stewart advised2 Brian Haner of his title search options when acquiring the Appalachian leases. Mr. Stewart informed Haner he could either (1) obtain no title search, (2) obtain a " bring-down" title search, [1] or (3) obtain a full title search. Stewart and Haner discussed approximate costs and risks associated with each of the options. Haner opted for the middle option, performing only a " bring-down" title search on the Harvey lease. Pine Ridge also acquired the drilling rights to adjacent properties, and began producing adjacent properties.
2Attorney-client privilege was waived for purposes of this testimony.
When [the Haners] obtained the subject property, there were two existing oil and natural gas wells on the subject property [denominated Wells H-1 and H-2] . . . . Subsequently, seven more wells were drilled by [the Haners] from 2004-2008 [denominated Wells H-3 through H-9] . . . . On March 8, 2008, [Sabella] met Brian Haner. Drilling was completed on Well H-7 on August 14, 2008. Drilling was completed on Well H-8 on August 20, 2008. And finally, drilling was completed on Well H-9 on August 26, 2008. In total, nine (9) wells were drilled on the Sabella subsurface property. Those nine wells produced both oil and gas.

Page 88

The " Harvey wells" (producing from [Sabella's] OGMs) were not separately metered from surrounding wells. Rather, to collect the oil and gas from the wells, the wells were connected with wells producing [on] nearby properties. Royalty checks were disbursed by tallying the number of wells producing in the area, and dividing the total wells by each OGM lessor's wells.
As Pine Ridge continued to expand its operations, [the Haners were] considering selling ash timber and leasing more OGMs. In early 2008, [Brian] Haner was attempting to get in touch with a potential business contact who[] he knew used to work for someone of the last name " Sabella." So, [Brian] Haner began calling " Sabellas" in the phone book. Ultimately, he reached [Sabella] . . . and the two individuals planned to meet to discuss business opportunities. On March 8, 2008, [Brian] Haner met Sabella at his house and the two drove to McKean County to examine a lease Sabella owned. The parties then examined another property that Sabella owned in Frewsburg, New York, had lunch, and returned to Sabella's house to continue discussing the oil and gas business.
Upon arrival at Sabella's house, the two parties discussed the 66 acres that Sabella owned in Warren County. [Brian] Haner also began discussing with Sabella other locations where [the Haners], doing business as Pine Ridge Energy, [were] operating. [Brian] Haner told Sabella he operated " between Irvine Run and Keller Road" in Conewango Township. Sabella responded that he owned [OGMs] there. Sabella then produced a map of the area. [Brian] Haner recognized the map as the area [the Haners were] then currently producing. However, [Brian] Haner did not explicitly tell Sabella that [the Haners were] on the property.
There was conflicting testimony about precisely what was said as the parties examined this map at the meeting of March 8, 2008. This [c]ourt, after observing the witnesses, assessing the witnesses' credibility, and examining the totality of the circumstances, determines that [Brian] Haner did not tell [Sabella] that Pine Ridge was operating on [Sabella's] property. In fact, [Brian Haner] made statements to [Sabella] that would have indicated to a reasonable person that there was no oil and gas activity occurring on the property but that he was very close to [Sabella's] property. Furthermore, the effect of [Brian] Haner's statements to Sabella were such that Sabella believed he did not need to worry about that piece of property being developed, even if Sabella did not know precisely where the boundary lines were drawn. On the other hand, Sabella assured [Brian] Haner they would work out something with respect to royalties and not to worry in the event [that the Haners were] on the land.
Rather than speak with his attorney regarding title, [Brian Haner's] immediate response was to meet with Appalachian's partners who assured him he had good title. However, [the Haners] did not obtain a title search on the property after this meeting. [The Haners] did not escrow the funds of the oil and gas proceeds after this meeting. [The Haners] did not pay royalties to [Sabella]. [The Haners] even continued to develop the property. Following the March 8, 2008[] meeting, [the Haners] expanded production on the Harvey lease, drilling an additional three (3) wells on the property in August 2008 to bring the total [number of] wells on Sabella's OGMs to nine (9).
[The Haners] continued to produce oil and gas from the 66 subsurface acres.

Page 89

On March 10, 2010, this suit in ejectment, trespass and conversion was filed by [Sabella].

Trial Court Opinion (" T.C.O." ), 1/25/2013, at 3-8 (record citations and one footnote omitted; emphasis in original).

The trial court also has provided the following procedural history:

[Sabella] filed a Complaint on March 10, 2010 asserting three causes of action: Count I--Ejectment; Count II--Conversion; and Count III--Trespass. [The Haners] filed an Answer and New Matter to Complaint on June 17, 2010. [Sabella] responded by filing an Answer to New Matter on June 25, 2010. On the same date, [Sabella] filed a Motion for Partial Summary Judgment seeking judgment as a matter of law as to [ejectment] and judgment [only] on the issue of liability . . . on Counts II and III.
[The Haners] filed a Motion for Leave to Join Additional Defendants [ i.e., the Harveys] on June 30, 2010. On September 13, 2010, this [c]ourt issued a Memorandum Opinion and Order denying [the Haners'] Motion for Leave . . . and granting [Sabella's] Motion for Partial Summary Judgment.
One week later, on September 20, 2010, [Sabella] filed a Motion for Entry of Final Appealable Order Pursuant to Pa.R.A.P. 341, which sought the entry of a final order regarding Count I--Ejectment. On the same date, this [c]ourt granted said Motion and judgment in ejectment was entered in favor of [Sabella] and against [the Haners]. No appeal of that Order was taken by either [Sabella] or [the Haners].
* * * *
On June 29, 2012, [the Haners] filed a Motion for Summary Judgment. This [c]ourt denied [the Haners'] Motion for Summary Judgment by Order dated August 27, 2012 . . . .
A three-day bench trial on the merits of the case commenced on August 29, 2012. At trial, the sole remaining issue[s] for this [c]ourt's consideration [were] damages as to Counts II and III, Conversion and Trespass, respectively.
At the bench trial, no separate witnesses were presented on behalf of [Sabella]. [Sabella] was called as on cross-examination by [the Haners]. [The Haners] called Brian Haner, . . . Ted Carrington, Arthur J. Stewart, John M. Sveda, and Lauri L. Sekerak. At the conclusion of the trial, the [c]ourt directed the parties to file written closing statements along with proposed findings of fact and conclusions of law for this Court's consideration. Each party filed [proposed findings and conclusions] by November 15, 2012.

T.C.O., 1/25/2013, at 2-3.

Thereafter, for reasons set forth in a detailed and comprehensive thirty-four-page memorandum opinion, the trial court found the Haners liable for trespass (both good-faith and bad-faith) and conversion, and entered judgment on April 8, 2013, in favor of Sabella in the amount of $249,972.30. Both parties filed post-trial motions, which the trial court denied in material part in a memorandum opinion and order entered on April 2, 2013. On April 25, 2013, the Haners filed the instant appeal. On May 6, 2013, Sabella filed the instant cross-appeal. The trial court directed the parties to file concise statements of errors complained of on appeal pursuant to Pa.R.A.P. 1925(b), and the parties timely complied. On June 20, 2013, the trial court filed its Rule 1925(a) opinion addressing the parties' respective issues, primarily by reference to its earlier opinions in this matter. The case now is ripe for our review.

Page 90

DISCUSSION

The respective parties to this cross-appeal raise more issues than warrant verbatim reproduction. Taken in sum, they may be grouped into several categories, which, in service of clarity and expedience, we will address in turn by topic rather than by the party raising the particular issue, although the Haners raise considerably more issues than Sabella. Thus, we begin by addressing those arguments that would entirely invalidate the underlying judgment. First, we must address the Haners' challenge to the trial court's subject matter jurisdiction for Sabella's failure to join an indispensable party. Second, we will address the Haners' contention that the statute of limitations barred Sabella's claims in their entirety. Next, we take up other issues, including the Haners' challenge to the trial court's grant of summary judgment in favor of Sabella on his claims for ejectment. Once we have explained why these issues do not warrant relief, we address each party's challenges to the results of the trial in this matter, which encompass liability, damages, and other matters.

I. Subject Matter Jurisdiction

Taking the Haners' last issue first, we consider their claim that the Harveys, as parties who purported to lease Sabella's now-undisputed rights to the oil and gas in question, were indispensable parties. See Brief for the Haners at 67-69. The Harveys were the undisputed owners of the surface rights over Sabella's OGMs, and mistakenly purported to lease those rights to the Haners.

Under Pa.R.C.P. 2227, a " [p]erson[] having only a joint interest in the subject matter of an action must be joined on the same side as plaintiffs or defendants."

As a general rule, an indispensable party is one whose rights are so connected with the claims of the litigants that no decree can be made without impairing its rights. Appellate courts have consistently held that property owners are indispensable parties in lawsuits concerning the owners' property rights.
The absence of an indispensable party goes absolutely to the court's jurisdiction. If an indispensable party is not joined, a court is without jurisdiction to decide the matter. The absence of an indispensable party renders any order or decree of the court null and void. The issue of " the failure to join an indispensable party" cannot be waived.

Hart v. O'Malley, 436 Pa.Super. 151, 647 A.2d 542, 549 (Pa. Super. 1994) (citations omitted).[2]

The trial court rejected the Haners' contention upon the basis that " the only necessary or indispensable party defendant to an ejectment action is the person in actual possession, and, where such land is under lease, it is the tenant, not the landlord, who constitutes the only necessary or indispensable party." T.C.O., 6/20/2013, at 4 (citing Bannard v. N.Y. State Natural Gas Co., 404 Pa. 269, 172 A.2d 306, 310 (Pa. 1961)). Noting that the parties in possession of the oil and gas estate at issue in this case were the Haners, not the Harveys, the court found that the Harveys were not indispensable parties to ...


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