Kem Res. v. Deer Park Lumber, Inc.

310 A.3d 142

KEM RESOURCES, LP

v.DEER PARK LUMBER, INC., Ryvamat, Inc., Ryan A. Andrews; Matthew R. Andrews; Vanessa K. Dimeolo; Ronald A. Andrews; Citrus Energy Corporation

Appeal of: Ryvamat, Inc.

No. 10 MAP 2023

Supreme Court of Pennsylvania.

Argued: October 18, 2023

Decided: February 21, 2024

Appeal from the Superior Court Order dated July 13, 2022 at Nos, 619 MDA 2021 and 645 MDA 2021 Affirming in part/Vacating in part the Wyoming County Court of Common Pleas, Civil Division, Judgment entered April 29, 2021 at No. 2014-CV-857 and Remanding. Dwight M. Stine, Senior Judge

Matthew Gerard Boyd, Esq., Blue Bell, Romilda Pia Crocamo, Esq., Thomas Joseph Elliott, Esq., Elliott Greenleaf, PC, John G. Dean, Esq., Scranton, Drew Patrick McLaughlin, Esq., Wilkes-Barre, for Appellant.

Daniel J. Clement, Esq., Lewisburg, Amil Michael Minora, Esq., Scranton, John J. Minora, Esq., Minora Krowiak Munley Batyko, Burt M., Rublin, Esq., Ballard Spahr LLP, Philadelphia, for Appellee KEM Resources, LP.

Jessica Lynn Harlow, Esq,, Gary L. Weber, Esq., Mitchell Gallagher PC, Williamsport, for Appellees Deer Park Lumber, Inc., Ryan A. Andrews; Matthew R. Andrews; Vanessa K. Dimeolo, Ronald A. Andrews.

TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, JJ.

OPINION

JUSTICE MUNDY

KEM, Resources, LP and Ryvamat, Inc. each own an undivided fifty percent interest in the oil, gas, and mineral rights of a property located in Wyoming County. Ryvamat entered a paid-up gas lease¹ with Unit Petroleum covering the entirety of the property’s oil and gas rights, including the fifty percent owned by KEM, receiving $12,644,512.00 as payment. KEM’s predecessors in interest filed an action against Ryvamat, which included a claim for an accounting requesting Ryvamat account for the portion of the lease payment it received attributable to KEM’s fifty percent interest. Ryvamat argues KEM’s action is barred by the statute of limitations. The Superior Court disagreed and found that the applicable statute of limitations for KEM’s accounting claim is six years, and the original complaint was timely filed. For the reasons that follow, we agree with the Superior Court and, thus, affirm its holding.

I. Background

Morris S. Kemmerer owned property in Wyoming County totaling 4,619 acres (the "Kemmerer properties"), which he sold in the 1950’s pursuant to deeds that reserved a one-half interest in the oil, gas, and mineral rights underlying the land. Deer Park Lumber, Inc. ("Deer Park") acquired the Kemmerer properties in 1987. In 2007, Deer Park filed a quiet title action with respect to the Kemmerer properties and obtained a default judgment that it was the sole owner of the oil, gas, and minerals located on the Kemmerer properties. Ryvamat, an entity owned by the same family that owns Deer Park, purchased the Kemmerer properties from Deer Park in March 2008, including the aforementioned oil, gas, and mineral rights. Shortly there- after, in July 2008, Ryvamat entered into a paid-up oil and gas lease (the "Lease") with Unit Petroleum Company ("Unit Petroleum"), under which Ryvamat received a $12,644,512.00 payment on July 21, 2008 for lease of the oil and gas rights on the Kemmerer properties.

In August 2008, Endless Mountains Hunting Club, Limited ("Endless Mountains") filed a petition to strike Deer Park’s quiet title judgment, claiming it was the rightful owner of the one-half interest in the oil, gas, and mineral rights that Morris Kemmerer had reserved with respect to the Kemmerer properties. Then in January 2009, the estates of Morris Kemmerer and his son Morris Kemmerer, Jr. (collectively the "Kemmerer estates") filed their own petition to strike the quiet title judgment claiming that they, not Endless Mountains, were the rightful owners of the same one-half interest in the oil, gas, and mineral rights that Morris Kemmerer had reserved. In September 2014, the trial court granted the motions to strike the quiet title default judgment. Tr. Ct. Op., 7/19/21, at 3. The trial court then granted summary judgment against Deer Park in the quiet title action and dismissed Deer Park’s quiet title complaint with prejudice. Id.

On July 18, 2014, Endless Mountains and the Kemmerer estates filed a complaint in the instant action against Ryvamat and numerous other defendants. The complaint included, inter alia, an action for accounting, asserting that Endless Mountains and the Kemmerer estates were tenants-in-common with Ryvamat with respect to the oil and gas rights of the Kemmerer properties. Complaint, 7/18/14, at ¶ 37. Endless Mountains and the Kemmerer estates asserted that:

[u]nder the law of the Commonwealth of Pennsylvania, it is the duty of a tenant-in-common of oil and gas rights to account to his co-tenant(s) for benefits received in the leasing or exploitation of the oil and gas rights owned as tenants-in-common for that portion of the benefits received by the tenant-in-common attributable to the interest of the other co-tenant(s), even where the leasing or other exploitation of the oil and gas rights occurs without the consent of the other co-tenants.

Id. at ¶ 38. As such, the Complaint asserted that Ryvamat was required to account to Endless Mountains and the Kemmerer estates for the amount of money Ryvamat received under the Lease attributable to Endless Mountains and the Kemmerer estates’ interest in the Kemmerer properties’ oil, gas, and mineral rights. Id. at ¶¶ 40-42.

In January 2015, Endless Mountains and the Kemmerer estates settled their dispute, conveyed to KEM Resources, LP ("KEM") their rights to the one-half interest in the oil, gas, and mineral rights that Morris Kemmerer had reserved with respect to the Kemmerer properties, and assigned their claims in this action to KEM. KEM was substituted as the plaintiff in this action in February 2015, and filed two amended complaints. In its Second Amended Complaint, KEM brought an "action in equity for an order requiring [Ryvamat] to account … for the cash bonus/rents received by Ryvamat under the Lease in excess of its proportionate share[.]" Second Amended Complaint, 9/28/15, Count I. As part of its accounting claim, KEM made the following averments:

44. Under the Pennsylvania law, it is the duty of a tenant-in-common of real estate to account to his co-tenant(s) for rent or other lease benefits received from a third party in excess of the just or proportionate share that is due him according to his interest in the real estate. It is also the law in Pennsylvaniathat a tenant-in-common of oil, gas or mineral rights has the right to explore for and produce or authorize another to explore for and produce the oil, gas or minerals owned as tenants-in-common, without the consent of the other co-tenant(s), but he must account to the other co-tenant(s) for any and all rents, profits or other benefits received from third parties in excess of his just or proportionate share.

45. Ryvamat received the sum of $12,644,512 cash bonus/rents under the Lease from Unit Petroleum for the right to explore for and produce oil and gas from the premises owned as tenants-in-common by Ryvamant and [KEM] (then owned by [KEM’s] predecessors in title, Endless Mountains and/or [the Kemmerer estates])…[.] [T]he amount of cash bonus/rents received by Ryvamat in excess of its proportionate share [one-half (1/2)] being $6,322,256.

46. The Lease covered the entirety of those oil and gas rights owned in common by [KEM] and Ryvamat, and the cash bonus/rent of $12,644,512 was paid to Ryvamat in consideration for the right to explore for and recover the whole of the oil and gas produced from the common property, including the one-half (1/2) owned by [KEM].

47. Ryvamat has the duty under Pennsylvania [ ] law to account to [KEM] for the sum of $6,322,256 received from Unit Petroleum attributable to [KEM’s] share of the oil and gas lights owned in common by Ryvamat and [KEM].

Id. at ¶¶ 44-47.

On December 3, 2018, KEM filed a motion for partial summary judgment against Ryvamat and other defendants, seeking, inter alia, judgment against Ryvamat in the amount of $6,322,256.00 plus interest on its accounting and other claims and seeking dismissal of Ryvamat’s affirmative defenses. On January 28, 2019, Ryvamat and other defendants filed a motion for summary judgment asserting that all of KEM’s claims were barred by the statute of limitations. On October 24, 2019, the trial court ruled on the summary judgment motions, rejecting Ryvamat’s argument that the statute of limitations barred KEM’s accounting claim against it and granted KEM’s motion for partial summary judgment with respect to its right to an accounting from Ryvamat and Ryvamat’s affirmative defenses to liability, but concluded that there were disputed issues of fact with respect to the amount that Ryvamat owed. Tr. Ct. Order, 10/24/19. As to Ryvamat’s statute of limitations argument, the trial court found that KEM’s predecessors in interest filed their original complaint raising an action for accounting within six years from Ryvamat receiving the funds for the lease. Tr. Ct. Opinion, 10/24/19, at 6. Relying on, inter alia, Ebbert v. Plymouth Oil Co., 348 Pa. 129, 34 A.2d 493 (1943), and Sheridan v. Coughlin, 352 Pa. 226, 42 A.2d 618 (1945), the trial court determined that "an action exists for an accounting between co-tenants, and that the applicable statute of limitations is six (6) years." Id. at 9. The trial court also granted summary judgment in favor of Ryvamat’s co-defendants, dismissing KEM’s complaint as to them.

On January 19, 2019, the trial court ordered Ryvamat to file an accounting with respect to the Lease payments it received attributable to the Kemmerer properties. Ryvamat complied and filed an accounting with certain deductions claimed against KEM’s portion of the Lease payment. KEM filed objections to the accounting contending Ryvamat was not entitled to most of its asserted deductions. On June 22 and 23, 2020, the trial court held a nonjury trial on Ryvamat’s...