The Pennsylvania Superior Court upheld an award of US$250,000 in favor of the owner of subsurface rights, who claimed that those rights were drilled on without his permission.
The owner of the subsurface rights properly recorded his interest pursuant to state statute in 1997. Several years later, the defendants improperly leased the mineral rights from the surface owner without conducting a full title search, which would have disclosed the subsurface owner’s interest.
Instead, the defendants only conducted a “bring down” title search which did not disclose plaintiff’s interest. Thereafter, the defendants drilled several producing wells and paid royalties to those with whom they had entered into leases.
The subsurface owner, who did not have a lease with the defendants, later discovered the activity and initiated a claim in 2010 for ejectment, trespass, and conversion.
The trial court found in favor of the subsurface owner, determining that the trespass had been made in good faith until 2008, after which time the trespass was in bad faith due to a conversation between the parties that should have put the defendants on notice they may be trespassing on the plaintiff’s interest.
The Superior Court partially overturned the lower court’s decision, holding that Pennsylvania’s recording statute placed the defendants on constructive notice of the plaintiff’s interest and, consequently, defendants’ trespass was in bad faith for its duration.
The effect of this ruling is to open defendants up to additional damages as a result of the bad faith finding.
The court also addressed the issue of whether the plaintiff had a duty to inspect his property and discover the trespass sooner. Rejecting defendants’ claim that the statute of limitations should bar plaintiff’s claim, the Superior Court upheld the trial court’s determination that under an objective standard, a reasonable person would not have discovered the trespass.
Read the Pennsylvania Superior Court’s opinion of Dennis Sabella v. Appalachian Development.
This post was written by Michael Gaetani (michael.gaetani@nortonrosefulbright.com or 724 416 0400) from Norton Rose Fulbright's Energy Practice Group.
