Barnes Dulac Litigation Team wins Summary Judgment in Wonsettler v. Range-Resources Appalachia, LLC

Recently in Wonsettler v. Range–Resources Appalachia, LLC, case no. 2014-3571 (unreported), the Court of Common Pleas of Washington County granted Range Resources–Appalachia, LLC (“Range”)’s motion for summary judgment holding that the three oil and gas leases at issue did not expire automatically at the end of their primary terms and that the leases’ primary terms were properly extended.  The Barnes Dulac litigation team represented Range in the matter.

In Wonsettler, the plaintiffs brought a quiet title action seeking to have the court invalidate three oil and gas leases under which the plaintiffs were lessors and, through an assignment, Range was the lessee.  Although the parties disagreed as to the effective dates of the leases, for purposes of summary judgment, Range accepted the lessors’ position that one of the leases was effective on March 2, 2009 and two were effective on March 3, 2009.  All three of the leases had 5 year primary terms which Range had the option of extending for an additional five years.  On March 4, 2014, more than five years after the time the leases were entered into, Range mailed checks to the lessors to extend all three of the leases. The plaintiffs received the checks, but rejected the payments claiming that the leases had expired.  The plaintiffs argued that the leases automatically terminated at the end of the five year primary terms and, therefore, could not be extended by the extension payments.  Range claimed that the leases were properly extended and refused to release the leases citing the Construction of Lease and Limitation of Forfeiture provisions in the leases.

The most important lease provisions in this case are the Lease Term, Construction of Lease and Limitation of Forfeiture provisions.  The leases’ Lease Term provision provided that the leases’ shall remain in force for primary terms of five years and shall continue beyond the primary terms if any one of six alternatives were satisfied.  One of the six alternatives listed was “if prescribed payments are made.”  The leases’ Construction of Lease provision stated, in pertinent part:

The language of this Lease . . . shall never be read as language of special limitation.  This Lease shall be construed against termination, forfeiture, cancellation or expiration and in favor of giving effect to the continuation of this Lease where the circumstances exist to maintain this Lease in effect under any of the alternative mechanisms set forth above [in the Lease Term provision]. . .

Additionally, the leases’ Limitation of Forfeiture provision provided that:

This Lease shall never be subject to a civil action or proceeding to enforce a claim of termination, cancellation, expiration or forfeiture due to any action or inaction by the Lessee . . . unless the Lessee has received written notice of Lessor’s demand and thereafter fails or refuses to satisfy or provide justification responding to Lessor’s demand within 60 days from the receipt of such notice.

Plaintiffs contended that any payments made after the last day of the leases’ primary terms were ineffective because the leases terminated automatically after the end of the primary terms. Therefore, the plaintiffs argued, they did not need to comply with the Limitation of Forfeiture provision’s notice and 60-day cure requirement because it only applied to leases currently in existence, not to leases which have expired by their own terms.

Contrary to the plaintiffs’ position, Range argued that because the extension payments were paid prior to receiving any notice from the plaintiffs in accordance with the Limitation of Forfeiture provisions, Range effectively renewed the leases for additional five-year terms.   Moreover, Range contended that the plaintiffs’ proposed reading of the leases ignored the plain language of the Construction of Lease provision, which provides that the leases’ language is not to be read as language of special limitation and the Limitation of Forfeiture provision which requires notice and 60 days to cure for a claim of termination of the lease.

The court in Wonsettler agreed with Range and held that the leases did not terminate and that they were properly extended.  Citing the Restatement of Property, the court explained that “the term ‘special limitation’ denotes that part of the language of a conveyance which causes the created interest automatically to expire upon the occurrence of a stated event . . .”  Id. §23.  The court concluded that if the lease expiration dates were special limitations, then the leases would have automatically terminated at the end of their primary terms.  However, since the leases expressly state that “no language in the lease is to be read as language of special limitation,” the court rejected the plaintiffs’ argument because it effectively reads out and gives no meaning to the Construction of Lease provision in the leases.  Additionally, the court stated that plaintiffs’ position that that no notice of their claim of termination was required before bringing a civil action renders the Limitation of Forfeiture provision meaningless.  Because Range’s reading of the leases gave effect to every provision of the leases, the court granted Range’s motion for summary judgment.