J-A23034-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

BETSY STULL AND MOLLY NELSON, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellants
v.

ARMSTRONG GAS COMPANY, LLC,
EXCO RESOURCES (PA), LLC
ASSIGNEE; MARY JO SMAIL, DELLA
KATHY MARCINEK, ROBERT W.
LAMBING, PATRICIA L. BUSH, GAIL Y.
TURNER, GLORIA J. WALKER, AND
ARTHUR W. BUSH,
Appellees : No. 1952 WDA 2015
Appeal from the Order Entered November 16, 2015,
in the Court of Common Pleas of Armstrong County,
Civil Division, at No(s): 2015-O493-Civi|
BEFORE: LAZARUS, STABILE, and STRASSBURGER,* JJ.
MEMORANDUM BY STRASSBURGER, J.: FILED: October 24, 2016
Betsy Stull and Molly Nelson (Appellants) appeal from the order
entered November 16, 2015, which sustained the preliminary objections filed
by EXCO Resources (PA), LLC, and joined by Armstrong Gas Company, LLC
(AGC), Mary Jo Smail, Della Kathy Marcinel<, Robert W. Lambing, Patricia L.
Bush, Gail Y. Turner, Gloria J. Wall<er, and Arthur W. Bush (Appellees),1 and

dismissed Appellants' complaint in its entirety with prejudice. We affirm.

The trial court summarized the underlying facts as follows.

 

1 We Will refer to Mary Jo Smail, Della Kathy Marcinek, Robert W. Lambing,
Patricia L. Bush, Gail Y. Turner, Gloria J. Wall<er, and Arthur W. Bush as
“Individual Appellees."

*Retired Senior Judge assigned to the Superior Court.

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[Appellants], together with [Individual Appellees], are part
owners of the mineral rights underlying a parcel of real property
located in Manor Township, Armstrong County, Pennsylvania,
identified as tax parcel number 131.00-01-48 (the “Property").1

1 [Appellants] refer to themselves and [Individual
Appellees] as the “Joseph A. Lambing Heirs.”

On or about April 12, 2011, [Appellants] and [Individual
Appellees] entered into an oil and gas lease with [AGC] (the
“Lease”). The Lease refers to [Appellants] and [Individual
Appellees] collectively as the “Lessor." The Lease also indicates
that [Appellants] each individually own a one-sixth interest in
the mineral rights underlying an 82.6-acre parcel. It has a
primary term of five (5) years, with a secondary term extending
as long as “oil and gas, or either of them, and/or their
constituents, is produced in paying quantities..., or this Lease is

maintained in full force pursuant to any of its other provisions...."
The Lease states further:

This lease shall terminate on December 31, 2011,
unless Lessee shall pay to Lessor a bonus
consideration of Thirty Five Hundred Dollars
($3,500.00) per acre. In consideration of the bonus
consideration paid by Lessee, Lessor agrees that
Lessee shall not be obligated to commence or
continue any operations during the primary term....

>l<>l<>l<

. Should it be determined that Lessor owns less
than the entire interest in the tract described above,
Lessor shall receive only that portion of the rentals
and royalties hereinbefore provided which Lessor's
interest bears to the entire interest [T]he rentals
and royalties shall be divided among and paid to
such several owners in the proportion that the
acreage owned by each such owner bears to the
entire leased acreage.

(Lease, 1111 4, 11).

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The Lease also contains the following additional material
provisions:

5). All money due under this lease shall be paid or
tendered to the Lessor by check at the address set
forth above, regardless of changes in ownership in
the premises, or in the oil or gas or their
constituents, or in the rentals or royalties accruing
hereunder until delivery to the Lessee of notice of
change of ownership as hereinafter provided.

>l<>l<>l<

12). No change in ownership of the land or
assignment of rentals or royalties shall be binding on
the Lessee until after Lessee ha[s] been furnished
with a written notice thereof and a certified copy of
the deed of conveyance or other documents as proof
to enable Lessee to identify the land conveyed as
being all or part of the leased premises and Lessee
shall then apportion all payments hereunder, in the
case of any division, according to acreage, [e]xcept
for claims arising from Lessee's failure to comply
with Lessor's notice, Lessor shall indemnify Lessee
from any claim that Lessee improperly paid any rents
or royal payable hereunder to Lessor. The privilege
of assignment in whole or in part is expressly
allowed to Lessor and Lessee.

13). In the event a party (non-defaulting party)
consider the other party (defaulting party) has not
complied with all its obligations hereunder, both
express and implied, the non-defaulting party shall
notify the defaulting party in writing setting out
specifically in what respects the defaulting party has
breached this contract. The defaulting party shall
then have thirty (30) days after receipt of said notice
within which to meet or commence to meet all or
any part of the breaches alleged by the non-
defaulting party....

(Lease, 1111 5, 12, 13).

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On August 17, 2011, after the Lease had been executed by
the parties but before any payments had been made, [AGC]
obtained a title report from its counsel stating that [Appellants]
did not, in fact, each own a one-sixth interest in an 82.6-acre
parcel. Instead, the report indicated that [Appellants] each
owned only a two-fifteenths (2/15) interest in the mineral rights
underlying a 50-acre parcel. [AGC] forwarded the title report to
[Appellants] and [Individual Appellees] on or about August 19,
2011, also notifying them that several curative items would need
to be completed. [AGC] obtained a second, “amended"
certificate of title on December 1, 2011, which it forwarded to
[Appellants] and [Individual Appellees] on December 7, 2011.
The original certificate was amended to include certain
assignments, but the fractional shares of [Appellants] and
[Individual Appellees] and the acreage descriptions from the
original remained unchanged.

The amended certificate also included certain additional
owners of the mineral rights under the Property, who together
were believed to hold approximately one-fifth (1/5) of the
mineral estate. Previously, on June 22, 2011, [AGC] had
entered into an oil and gas lease with [individuals] who appear
to be these same additional individuals (“the Boyer Lease"). The
Boyer Lease purports to encumber the same tract that is the
subject of [AGC's] lease with [Appellants] and Individual
[Appellees]. Despite the ownership and acreage discrepancies in
the amended title certificate, it does not appear that either the
Lease or the Boyer Lease [was] amended.

Between the time when [Appellants] received the title
certificates from [AGC] and the end of 2011, [Appellants]
prepared several documents summarizing what they believed to
be the correct fractional interest owned by them and [Individual
Appellees], including written communications to [AGC], EXCO,
and [AGC's] counsel. [Appellants] allege that [AGC] did not act
in due diligence prior to executing the Lease, namely, by not
inquiring into the actual acreage owned by the named lessors
and their correct and respective fractional interests.
[Appellants] further allege that, had [AGC] first conducted a title
search, it might have discovered that the lessors 1) owned 107
acres of mineral rights, 2) owned 57 acres of mineral rights, or
3) do not own any mineral rights at all. [Appellants] do not

J-A23034-16

allege a definitive alternative to the conclusions in [AGC's]
amended title certificate.

Prior to receiving any payments under the Lease,
[Appellant] Betsy Stull notified [AGC] that it should withhold
income taxes from her checl<, but not from [Appellant] Nelson's
checl<. Ultimately, pursuant to paragraph 4 of the Lease, and
based on information provided in the title report, [AGC] issued to
each [Appellant] a check in the amount of $23,333.33 on
December 28, 2011, calculated based on a two-fifteenths (2/15)
interest in a 50-acre parcel. On or about December 29, 2011,
[AGC] then assigned the working interest in the Lease to EXCO.
[Appellants] initially disputed the amount of the checks in
correspondence with [AGC] and its counsel. [Appellants]
contended that they each were entitled to a payment of one-
sixth (1/6) of the total amount of “bonus consideration" to be
paid on the original 82.6-acre parcel.

On January 10, 2012, [Appellant] Nelson advised [AGC]
that she would return her check because the amount was
incorrect, that the Lease expired by its own terms, and that she
no longer had any obligations under the lease. [Appellant]
Nelson returned the check on February 21, 2012. She later
requested that [AGC] advise the IRS that she had not in fact
received any rental monies and issue a corrected form 1099.
[AGC's] counsel advised that the funds would be held in escrow,
but that the income would be reported to the IRS. Despite the
initial dispute, however, both [Appellants] ultimately cashed the
checks received from [AGC], each indicating on [her]
endorsement[] that the amount [she] had received was less
than what [she] believed was owed under the Lease.
[Appellants] allege that they had no choice but to cash the
checks because of the income tax liability incurred from the
payments.

[Appellants] filed their first lawsuit on September 18,
2012, at No. 2012-1450-Civil. The [trial court] dismissed the
complaint on July 17, 2013, due to [Appellants'] failure to join
indispensable parties to the action. [Appellants] then filed their
second lawsuit on October 18, 2013, at No. 2013-1372-Civil, in
which they brought claims for breach of contract and trespass
against [AGC] and EXCO [(Second Complaint)]. EXCO filed
preliminary objections to [the Second Complaint] on January 28,

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2014. The [trial court1 sustained preliminary objections [in

the nature of a demurrer as to Appellants' claims for breach of

contract and trespass] and dismissed the entirety of [the Second

Complaint] on March 20, 2014. [Appellants] then filed the

instant lawsuit, their third, on April 10, 2015 [(Third

Complaint)].

Trial Court Opinion, 11/16/2015, at 3-9 (unnecessary capitalization
omitted).

EXCO filed preliminary objections to the Third Complaint, which were
joined by AGC and Individual Appellees. Those preliminary objections
included, inter alia, the contention that this action is barred by the doctrine
of resjudicata. On November 16, 2015, the trial court entered an order and
opinion sustaining Appellees' preliminary objections in part, holding that this
action was indeed barred by the doctrine of res judicata. Thus, the trial
court dismissed the Third Complaint with prejudice. Appellants timely filed a
notice of appeal, and both Appellants and the trial court complied with
Pa.R.A.P. 1925.

On appeal, Appellants set forth the following issues for our review.

1. Whether the trial court erred in finding that the defense
of res judicata was properly before the [trial court1 during

preliminary objections.

2. Whether the trial court erred in applying the merits of
res judicata to [the Third Complaint].

3. Whether the trial court erred in dismissing [the Third
Complaint] due to the [trial court's] interpretation of the doctrine
of res judicata.

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Appellants' Brief at 8 (unnecessary capitalization and suggested answers
omitted).

Appellants first argue that because preliminary objections are the
procedurally improper method for asserting a substantive defense such as
res judicata, the trial court should not have considered this issue.
Appellants' Brief at 14-16. Thus, Appellants claim that order of the trial
court should be reversed on this basis.2

“Rule of Civil Procedure 1030 provides that all affirmative defenses,
including res judicata, shall be pleaded in a responsive pleading under

the heading new matter....” Duquesne Slag Prod. Co. v. Lench, 415 A.2d

 

2 Appellees argue, in response, that Appellants have waived any objection in
this regard because they did not file preliminary objections to Appellees'
preliminary objections. “[W]here a party erroneously asserts substantive
defenses in preliminary objections rather than to raise these defenses by
answer or in new matter, the failure of the opposing party to file preliminary
objections to the defective preliminary objections waives the procedural
defect and allows the trial court to rule on whether the affirmative defense
defeats the claim against which the defense has been invoked." DeMary v.
Latrobe Printing & Pub. Co., 762 A.2d 758, 762 (Pa. Super. 2000)
(internal quotation marks omitted). Here, Appellants raised the issue of
Appellees' defective preliminary objection in its brief in response to
Appellees' preliminary objections. See Brief in Response, 7/16/2015, at 10.
Thus, we agree that Appellants have arguably waived the issue of Appellees'
procedural error. However, under these circumstances, we decline to find
waiver because the trial court considered the underlying issue of whether res
judicata could be raised by preliminary objection. See Farinacci v. Beaver
Cty. Indus. Dev. Auth., 511 A.2d 757 (Pa. 1986) (holding that where
preliminary objection to preliminary objection is the proper method for
challenging a preliminary objection, raising the issue in a brief will not result
in waiver, despite the erroneous procedure, where the trial court considered
the underlying issue).

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53, 54 (Pa. 1980) (internal citations and quotation marks omitted).
However, our courts have recognized an exception to this rule for res
judicata. “Where the complaint makes repeated references to the prior
action and contains facts and issues pleaded by the prior action, the
affirmative defense of res judicata is properly raised by preliminary
objections." Del Turco v. Peoples Home Sav. Ass’n, 478 A.2d 456, 463
(Pa. Super. 1984). Cf. MacNeal v. I.C.O.A., Inc., 555 A.2d 916 (Pa. Super.
1989) (holding that where the complaint mentions the prior action, but does
not plead the same or similar facts or issues pled in the prior action, res
judicata must be raised by new matter).

Instantly, Appellants argue that the Third Complaint “does not make
repeated references to [the Second Complaint]." Appellants' Brief at 15.
They suggest that their one reference to “honestly show the procedural
history of their arguments with [Appellees]" along with “some facts that are
similarly referenced" does not meet the requirements. Id.

Our review of the Third Complaint reveals that there can be no doubt
that it was formulated on the same facts and issues as set forth in prior
actions.3 The overriding issue in this matter is Appellants' contention that
they are entitled to more money under the oil and gas lease with AGC. For

example, in sustaining the preliminary objection in the nature of demurrer to

 

3 In fact, in its argument on the merits of res judicata, Appellants concede
that this case deals with identical parties and the same subject matter as the
prior suit. See Appellants' Brief at 16.

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the Second Complaint, the trial court summarized the facts pled in the
breach of contract action as follows. “[Appellants] allege in their complaint
and now argue in opposition to [Appellees'] preliminary objections that each
of them remains entitled to collect one-sixth (1/6) of $3,500.00 per acre for
the entire 82.6-acre parcel[, or $48,183.33 each]." Trial Court Opinion,
3/20/2014, at 11. Appellants set forth the same contention in the Third
Complaint. See Complaint, 4/10/2015, at 11 42 (“[Appellants] were each
issued checks for an incorrect amount of $23,333.33 when their
contractual portions were $48,183.33 each.”).4

Moreover, Appellants do not argue they were surprised or prejudiced
in any way by litigating res judicata as a preliminary objection rather than
through a motion for judgment on the pleadings. Accordingly, we conclude
that Appellants are not entitled to relief on the basis of Appellees' pleading a
substantive defense as a preliminary objection.

We now turn to Appellants' final issues wherein they argue that the
trial court erred in granting Appellees' preliminary objection as to res
judicata on the merits. “[O]ur standard of review of an order of the trial

court overruling or granting preliminary objections is to determine whether

 

4 Appellants' trespass claim was premised on the fact that because the Lease
was null and void due to the breach, AGC and EXCO were not allowed to drill
on the property. Second Complaint, 10/18/2013, at 1111 47-50. A trespass
claim is also included in the Third Complaint, but it merely repeats the claim
that AGC and EXCO had breached the Lease. See Third Complaint,
4/10/2015, at 1111 76-80.

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the trial court committed an error of law. When considering the
appropriateness of a ruling on preliminary objections, the appellate court
must apply the same standard as the trial court." Richmond v. McHale, 35
A.3d 779, 783 (Pa. Super. 2012).

Res judicata, or claim preclusion, prohibits parties involved

in prior, concluded litigation from subsequently asserting claims

in a later action that were raised, or could have been raised, in

the previous adjudication. The doctrine of res judicata

developed to shield parties from the burden of re-litigating a

claim with the same parties, or a party in privity with an original

litigant, and to protect the judiciary from the corresponding
inefficiency and confusion that re-litigation of a claim would
breed.
Wilkes ex rel. Mason v. Phoenix Home Life Mut. Ins. Co., 902 A.2d
366, 376 (Pa. 2006) (internal citations omitted).

“There must be a concurrence of four conditions in order for [a party]
to prevail on [its] res judicata claim. The doctrine of res judicata applies
when there exists an identity of issues, an identity of causes of action,
identity of persons and parties to the action, and identity of the quality or
capacity of the parties suing or being sued." Levitt v. Patrick, 976 A.2d
581, 589 (Pa. Super. 2009). Here, Appellants concede that the first, third,
and fourth elements have been satisfied, and limit their argument only to
the fact that the causes of action identified in this complaint are different
than those presented in the prior complaint. See Appellants' Brief at 16.

Specifically, Appellants suggest that the facts pled in the instant action prove

that Appellees “are, in fact, mistaken as to who owns the subject gas and oil

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rights.... [They] present additional evidence that shows that [Appellees] are
mistaken and that both title opinions issued to [AGC] are faulty."Id. at 19.
The trial court offered the following.

In their [prior] complaint, [Appellants] made the very
same material allegations that they do in the instant case.
[Appellants] alleged that [AGC] failed to pay them according to
the fractional interests indicated on the face of the Lease, that
the Lease expired on its own terms on December 31, 2011, and
that [Appellees] “breached" the Lease by failing to pay the
amounts that [Appellants] contend were due. [Appellants]
requested in their [prior] action a declaration that the Lease is
null and void, damages in excess of $50,000.00, attorneys' fees,
and other appropriate relief. They also requested in their
trespass claim an injunction preventing [Appellees] from
infringing on [Appellants'] mineral rights and damages in an
amount “contracted for" in the Lease, plus interest. Although
[Appellants'] instant complaint contains more factual allegations,
legal argument, and seemingly extraneous material, [Appellants]
nevertheless assert the same claims, based on the same Lease,
against the same [Appellees], on virtually identical theories. For
that reason, we conclude that the entirety of [Appellants'] action
is [barred by the doctrine of] res judicata.

Trial Court Opinion, 11/16/2015, at 13.

With respect to the purported addition of a claim as to mistake,
Appellants do not explain why these facts were not included in their prior
complaint. “[R]es judicata will bar subsequent claims that could have been
litigated in the prior action, but which actually were not.” Chada v. Chada,
756 A.2d 39, 43 (Pa. Super. 2000). As the trial court acknowledged:

In sum, we find this case to be the clearest of instances
where the doctrine of res judicata bars the re-litigation of issues

that largely were, and certainly could have been, raised and

decided in the prior action in [the trial court], before the same
judge, involving the same parties, concerning the exact same

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subject matter and cause of action. Although [Appellants]

previously styled their claims as ones for breach of contract and

trespass, their re-casting of them in this lawsuit as ones for

“breach of contract/loss of lease/mistake” does not change the

fact that the substance of all of the claims already has been

adjudicated.

Trial Court Opinion, 11/16/2015, at 16.

Based on the foregoing, we are convinced that Appellants “previously
had a full and fair opportunity to pursue the claims [they] now raise[], and
although [they] may have failed to do so, the doctrine of res judicata bars
re-litigation of those claims." Chada, 756 A.2d at 44. Thus, we affirm the

order of the trial court.

Order affirmed.

Judgment Entered.

AF

 

Joseph D. Seletyn, Esq.

Prothonota ry

Date: 10/24/2016

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