# Petition for Writ of Certiorari — Moore v. Pennsylvania Department of Environmental Resources

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1996
- **Citation:** 519 U.S. 815

## Text

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951916 MAY 28 19%

No. Q6¢.0¢ OF THE CLERK

IN THE

Supreme Court of the United States
OCTOBER TERM, 1996

CLARENCE MOORE and
PENNLYCO, LTD.,

Petitioners,
V.
COMMONWEALTH OF PENNSYLVANIA,

DEPARTMENT OF ENVIRONMENTAL RESOURCES,
Respondent.

On Petition for a Writ of Certiorari
to the Supreme Court of
the Commonwealth of Pennsylvania

PETITION FOR A WRIT OF CERTIORARI

Cheryl Flax-Davidson
(Counsel of Record)

5441 Chevy Chase Parkway
Washington, D.C. 20015
(202) 363-9723

Attorney for Petitioners

QUESTION * RESENTED

Whether the Commonwealth of Pennsylvania, through its
Department of Environmenta! Resources, took Petitioners’ oil
“ad gas property without compe«:sation in violation of Petitioners’
ruith and Fourteenth Amzndment rights where:

The Commonwealth’s mistaken claim of title and its exer-
cise of dominion and control over Petitioners’ oil and gas property
substantially deprived Petitioners’ of their ability to lease, develop,
or derive any income from the proverty for a period of years.

TABLE OF CONTENTS
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CONSTITUTIONAL AND STATUTORY PROVISIONS
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SEAT PRE CU UN GPR doce nisciccccasicccvescadssncdconvenicevosioess 3
REASON FOR GRANTING THE WRIT.......0.0.......0.:cccceeeeeeees 5

I. THE COURT BELOW DECIDED AN IMPORTANT

AND SUBSTANTIAL QUESTION OF FEDERAL

LAW IN AWAY THAT CONFLICTS WITH THE

GOVERNING PRINCIPLES OF PRIOR DECISIONS

Be IOS Bid tin: decctheethivcidebenisbiritolbecakcissiceccens 5
A. The Commonwealth of Pennsylvania Unconstitu-

tionally Permits the Subjective Intent of the Govern-

ment to Determine Whether There Has Been a

"Compensable Taking" of Private Property................ 5
aa shi cannes AMS MS Gb thks seneneso> 11
ia a iat cntdesimentaiveinigsebentaiieaent gions ys la

APPENDIX A

Order of the Supreme Court of Pennsylvania............... la

APPENDIX B

Opinion of the Commonwealth Court of Pennsylvania. 2a
APPENDIX C

Order of the Commonwealth Court of Pennslyvania

Denying Application for Reargument.......................... 14a
APPENDIX D

Opinion of the Court of Common Pleas,

oh Sarin ec niaphacssceasen teoyscires 1Sa

iv
TABLE OF AUTHORITIES

Cases
Berman v. Parker, 348 U.S. 26 (1954)...............c.csesecseseecoeses 7
Chicago, B. & Q. R. Co. v. Chicago, 166 U.S. 226 (1897)... 6
Hughes v. Washington, 389 U.S. 290 (1967)..................2.8. 8
Jacobs v. United States, 290 U.S. 13 (1933).........00000 ee. 1]
Kaiser Aetna v. United States, 444 U.S. 164 (1979............... 8
Kirby Forest Indust., Inc. v. United States, 467 U.S. 1

CUI ois Fa ET eA A hs 11
Loretto v. Teleprompter Manhattan CATV Corp.,

QED LIB FAD CID ceicinreisicctetiie Seticnity NO. 429 M.C.
ALLOCATOR

PETITIONERS : DKT. 1995

Wa "
: Petition for Allowance of

COMMONWEALTH OF PENNSYLVANIA, : Appeal from the
DEPARTMENT OF ENVIRONMENTAL : Commonwealth Court
RESOURCES

ORDER
PER CURIAM:

AND NOW, this 26th day of February, 1996, the Petition for
Allowance of Appeal in the above matter is denied.

Madame Justice Newman did not participate in the consideration

of this matter.

2a

APPENDIX B

[IN THE COMMONWEALTH COURT OF PENNSYLVANIA

CLARENCE MOORE and PENNLYCO, LTD.

V. No. 348 C.D. 1994

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT
OF ENVIRONMENTAL RESOURCES,

Appellant.

The Commonwealth of Pennsylvania, Department of En-
vironmental Resources (DER), appeals from the order of the Court
of Common Pleas of Lycoming County dismissing DER’s prelimi-
nary objections to the petition for appointment of viewers, filed by
Clarence Moore and Pennlyco, Ltd. (collectively Moore) pursuant
to section 502(e) of the Eminent Domain Code, Act of June 22,
1964, Special Sess., P. L. 84, as amended, 26 P.S. §1-502(e).

Moore, an oil and gas developer, and Pennlyco, Ltd., a
Maryland corporation, are the owners as tenants-in-common of a
fee simple absolute interest in the oil and gas estate of certain real
property comprised of two contiguous parcels representing 6,84 |
and 18,780 acres located in Tiadaghton State Forest, Lycoming
County. In 1933, the Central Pennsylvania Lumber Company
conveyed the surface estate of this property to the Commonwealth,
but reserved the oil and gas estate with a fifty-year access for
development. In April 1975, Moore acquired from a successor to
the lumber company 50% of the oil and gas estate of the parcels,
and acquired the remaining 50% of the oil and gas estate in 1983

3a

from Mobil Oil Company. Mobil later conveyed a 50% interest in
the oil and gas estate to Kenneth Yates, who thereafter conveyed
that interest to Pennlyco.

In October 1979, DER asserted to Moore that it would
claim title to the oil and gas estate on March 28, 1983 because it
believed that the lumber company’s reservation of the estate was
an estate for years, terminating fifty years from the date of the 1933
conveyance and resulting in title reverting to the Commonwealth.
DER thereafter prepared maps outlining the subject rights as
reserved for the Commonwealth in 1983, and these maps were
made available to the public. In November 1983, DER publicly
advertised a lease auction of the interest, notice for which stated
that the Commonwealth considered itselfto be owner of the oil and
gas estate.

Pursuant to the auction, DER leased the oil and gas estate
to C.E. Beck/Pennzoil, which lease generated income for DER
from December 1984 through 1989 in the approximate amount of
$297,000. In May 1984, Moore instituted a quiet title action to
protect his ownership of oil and gas rights on the properties. In
October 1984, DER conceded that Moore was owner of the oil and
gas rights on the 6,841-acre parcel, but continued its claim of
ownership regarding the remaining larger parcel. However, this
Court in November 1989 held that Moore was the owner in fee
simple absolute of the oil and gas estate of the larger parcel. Moore
v. Department of Environmental Resources (Moore I), 129 Pa.
Commonwealth Ct. 628, 566 A.2d 905 (1989).

In October, 1992, Moore filed a petition for the appoint-
ment of viewers alleging that as a direct result of DER’s claim of
ownership, Moore was unable to lease, develop, or in any way
derive income from the property between 1979 and 1989. DER
filed preliminary objections to the petition averring that Moore
failed to state a cause of action and challenging the allegation of a
de facto taking. The trial court held hearings in May 1993 at which
several experts testified on behalf of Moore as to the desirable
nature of the property due to the proximity of large wells drilled by

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other major oil companies which produce large amounts of natural
gas, the value of the tract was due to the large area of land where
there were various unique geological structures indicative of the
entrapment of oil and gas, and the tracts of land had high potential
for oriskany, a formation known to be productive of oil and gas.

The trial court found that Moore actively undertook to
develop the oil and gas rights beginning in 1979 and always
disclosed to potential investors or lessees DER’s adverse claim to
ownership; Yates, a business associate of Moore, attempted to
market the property to potential investors starting in 1980, always
advising the investors of DER’s adverse claim; Moore, Yates, or
parties acting on their behalf contacted approximately fifty-one
companies involved in oil and gas development who were inter-
ested in the oil and gas interests but would not invest until title
problems were cleared up. Eventually, once DER’s adverse claim
was removed from the parcels and Moore regained clear title, he
was able to lease the oil and gas interests.

Based upon these findings, the trial court concluded that
DER’s assertion of an ownership interest in the gas and oil rights
directly caused potential investors to decline offers by Moore to
develop or lease the oil and gas, thus putting a cloud on Moore’s
title and effectively negating any business propositions to develop
the rights. The trial court found that DER is clothed with the power
of eminent domain, rejected the assertion that Moore failed to
prove DER ever acted under its power to condemn, and noted that
Pennsylvania courts have allowed landowners to recover for
intrusions and loss of use and enjoyment of property resulting from
government activity not done in the formal exercise of eminent
domain.

As a result, the court found that Moore sustained his
burden of proof through sufficient evidence to prove a taking of his
oil and gas interests in the smaller parcel from October 3, 1979 to
October 30, 1984, when DER conceded Moore’s ownership; and
in the larger parcel from October 3, 1979 until November 17, 1989,
when this Court adjudicated title in favor of Moore. Accordingly,

Sa

the trial court dismissed DER’s preliminary objections and DER
appealed to this Court.

On appeal, DER challenges the trial court’s determination
that Moore stated a cause of action for ade facto taking. DER also
contends that the trial court erroneously relied on inadmissible
hearsay in making those findings, leading to its conclusion that a de
facto taking had occurred. For the reasons which follow, we
conclude that Moore has not stated a cause of action based on ade
facto taking. We will therefore reverse.

In order to find a de facto taking, a court must consider
whether a governmental entity, clothed with the power of eminent
domain, has by its conduct substantially deprived the property
owner of the use and enjoyment of the property. Conroy-Prugh
Glass Co. v. Department of Transportation, 456 Pa. 384,321 A.2d
598 (1974); Elser v. Department of Transportation, ___
Pa.Commonwealth Ct. _, 651 A.2d 567 (1994).

DER contends that no de facto taking has occurred because
(1) Moore has not suffered substantial deprivation of the beneficial
use ofhis property, since no oil or gas has been removed; (2) Moore
did not establish exceptional circumstances that deprived him of
that beneficial use; and (3) DER was not acting while clothed with
the power of eminent domain when, purporting to be the owner of
the oil and gas estate, it granted a lease.

As this Court in Berk v. Department of Transportation,
168 Pa.Commonwealth Ct. 560, 566, 651 A.2d 195, 198 (1995)
has recently said:

There is no litmus formula to determine when

government action will be deemed to have the

effect of such taking. It has remained for the courts

to provide, with case by case development, the

needed doctrinal elaboration. Filbert Limited Part-

nership Appeal, 64 Pa. Commonwealth Ct. 605,

441 A.2d 1345 (1982). The United States Supreme

court has taken a similar case by case approach to

the question of what constitutes a taking within the

6a

meaning of the Fifth Amendment to the United
States Constitution, Penn Central Transportation
Co. v. City of New York, 438 U.S. 104, 98 S.Ct.
2646, 57 L.Ed.2d 631 (1978).

An analysis of the case law establishes that, in Pennsylva-
nia, government action has been found to effect a de facto taking
in limited and discretely defined circumstances. In defining those
circumstances, our courts have fixed their ‘‘focus . . upon the
nature of the complained of acts.’’ Enon Valley Telephone Co. v.
Market, 90 Pa. Commonwealth Ct. 53, 493 A.2d 800, 802 (1985)
(citing Condemnation of the Land and Property of Jacobs, 55 Pa.
Commonwealth Ct. 142, 423 A.2d 442 (1980)). In Enon Valley
and Jacobs weupheld preliminary objections to complaints brought
under the Eminent Domain Code. In Jacobs, the ‘‘[t]ownship
unlawfully issued the building permits, improperly approved the
subdivision, and wrongfully contributed to the design of the
drainage plans’’ which caused serious drainage damage to the
complaining property owners. We held these acts were not ‘‘ ur-
poseful and deliberate’ and were ‘‘in no manner related or
incidental to the Township’s condemnation powers.”’ /d. at 146,
423 A.2d at 443. As in Enon Valley, we quoted Lutzko v. Mikris,
48 Pa. Commonwealth Ct. 75, 79, 410 A.2d 370, 372 (1979) for
the ‘‘well established”’ principle that ‘‘acts not done in the exercise
of the right of eminent domain’’ and which ‘‘are not the immediate
and necessary consequence of exercising that right cannot’’ be the
basis of an action in eminent domain. !

| Thus, we have refused to allow recovery through eminent domain for injuries
resulting from negligent acts and trespass committed by municipal bodies ‘‘clothed’’
with eminent domain powers. See also Steckley v. Department of Transportation, 46
Pa. Commonwealth Ct. 367, 407 A.2d 79 (1979), aff'd 494 Pa. 104, 429 A.2d 1112
(1981), Culver v. Commonwealth, 346 Pa. 262, 29 A.2d 531 (1943). Negligent acts,
even those done by agents of the body condemning the complainants’ property, are not
actionable in eminent domain proceedings. Culv-r. To this extent, the boundaries of
the Eminent Domain Code have been strictly circumscribed by our case law.

Ta

Other than where there has been physical intrusion into
property or government activities in anticipation of condemnation,
taxings have been found ‘‘[w]hen deprivation of property occurs
as a result of the enactment of laws,’’ Gardner v. Department of
Environmental Resources, 145 Pa.Commonwealth Ct. 345, 603
A.2d 279 (1992); that is, when ‘‘regulation goes too far, it will be
recognized as a taking.’” Pennsylvania Coal v. Mahon, 260 U.S.
393, 415, 43 S. Ct. 158, 160, 67 L.Ed. 322 (1922). Of course,
Moore does not complain that DER’s regulatory actions have
deprived him of property. He brings his petition to appoint viewers
pursuant to section 502(e) of the Code on the allegations that DER
held itself out to be the owner of the oil and gas estate.

We hold that these allegations do not state a cause of action
for ade facto taking because they do not make out a claim that DER
exercised its power of eminent domain over that property. As we
said in Darlington v. County of Chester, 147 Pa. Commonwealth
Ct. 177, 180, 607 A.2d 315, 320, appeal denied, 531 Pa. 657, 613
A.2d 562 (1992), ‘‘[t]o proceed under section 502(e) of the Code,
a de facto taking must result from a governmental body’s actual
exercise of the power of eminent domain ...”’

This proposition is not idly stated, because not all
compensable injuries suffered by property owners as the result of
government action are takings, and not all lawful exercises of
government power will suffice to state a de facto taking.2 While
it is true that the actual exercise of eminent domain is not a requisite
‘to ade facto taking, where de facto takings have been found, either
physical intrusion or the imminence or inevitability of the condem-
nation, as that term is statutorily defined, 3 has been an essential
element.

2 See Condemnation of 2719, 2721, and 2711 E. Berkshire Street, 20 Pa. Common-
wealth Ct. 601,605, 343 A.2d67,69 (1975)(*‘the landowners’ difficulties ... are more
basic. They have failed to allege that the Department’s actions are the result of the
lawful exercise of its eminent domain power. It is well settled that acts not done in the
exercise of eminent domain ... cannot be the basis of any claim in that proceeding.”’)
3«*Condemn’’ means to take, injure or destroy private property by authority of law for
a public purpose. 26 P.S. $1-201.

8a

In Conroy-Prugh, the Department of Transportation held
hearings and caused widespread publicity about its intended
condemnation of certain property. These activities caused the
landowners’ commercial property to become unprofitable due to
loss of tenants. Our Supreme Court found ade facto taking of these
properties, which were in the path in a highway construction
project. The Supreme Court termed it ‘‘a significant fact’’ that
‘the property owner alleges that the publicity about the inevitable
condemnation caused a loss of tenants. 456 Pa. at 389, 321 A.2d
at 600 (emphasis added).

Following Conroy-Prugh, in Department of Transporta-
tion v. Pastuszek, 55 Pa. Commonwealth Ct. 138, 141, 422 A.2d
1223, 1225 (1980), we quoted with approval the common pleas
court’s assessment of a de facto taking:

The actions of the Commonwealth in preparing

plans for the acquisition of properties in the bed of

ramp C, announcing its intentions over a period of

ten years, conducting meetings with affected prop-

erty owners, public officials and community lead-

ers, acquiring properties on either side of the

Petitioner’s property, making offers to other prop-

erty owners in the immediate area, physically in-

truding upon the property of the Petitioner, lead

this court to find that a de facto taking of the

Petitioner’s property had been damaged and a

cloud placed upon it so as to adversely affect the

Petitioner’s beneficial use and enjoyment of that

property.

In McCracken v. City of Philadelphia, 69 Pa. Common-
wealth Ct. 492, 498, 451 A.2d 1046, 1049 (1982), we turned to the
Filbert Limited Partnership case for guidance in deciding when a
de facto taking will be found:

[t]he theory of de facto taking has been developed

in response to the reality that activities carried on

9a

incident to massive, complex and time-consuming
programs launched by government may so substan-
tially interfere with one’s use and enjoyment of his
property, as to inflict a compensable injury in a
constitutional sense or as being within applicable
statutory law, even though the power of eminent
domain has not been formally exercised against the
property in question and there has been no physical
intrusion of it.

We held in McCracken that construction activities con-
nected to building an elevated train, denying access and impeding
access to properties, amounted to exceptional circumstances
depriving the owners of the beneficial use of those properties, and
a de facto taking had therefore occurred.

InMcGaffic v. Redevelopment Authority of the Cityof New
Castle, 120 Pa. Commonwealth Ct. 199, 548 A.2d 653 (1988),
appeal denied 523 Pa. 644, 565 A.2d 1168 (1989), the trial court
noted in its decision that this Court has found ‘‘activities incident
to government programs may so pervasively interfere with use and
enjoyment of property even where there has been no actual exercise
of the power of eminent domain nor [sic] physical intrusion.’’ /d.
at 206; 548 A.2d at 656.4 There, we concluded that thetrial court’s
finding of a de facto taking was proper based on the facts that the
authority publicized redevelopment of an area in which the com-
mercial rental property stood; the authority announced a clear
intention to acquire through eminent domain all the properties
listed in a public notice; and it conducted an appraisal of the

——property and entered into a contract for its sale five years before the
property was subsequently removed from the acquisition list.

4 City of Hazleton v. Hudock, 2 Pa. Commonwealth Ct. 670, 281 A.2d 914 (1971) was
cited for this proposition. We held in that case that the approval and funding of an urban
renewal project followed by notices to and negotiations with property owners, and
acquisition by agreement of some parcels were not sufficient in themselves to establish

a de facto taking.

10a

By contrast, in //lorek v. Department of Transportation, 89
Pa. Commonwealth Ct. 483, 493 A.2d 133 (1985), we held that no
de facto taking occurred when the Department of Transportation
exercised its rights as an easement holder by re-installing a drain
pipe to a different depth within its easement over the property
owners’ land. We noted that if a taking occurred at all, it occurred
when the drainage pipe was originally placed on the property then
owned by a predecessor. In Capece v. City of Philadelphia, 123 Pa.
Commonwealth Ct. 86, 552 A.2d 1147 (1989), we held that a
residential property owner did not state a cause of action for a de
facto taking because mere unmarketability is not a substantial
deprivation ‘‘unless that unmarketability is aresult of the property's
inevitable condemnation such that would place a cloud on the
property’s title.’’ Jd. at 90, 552 A.2d at 1149 (Emphasis added).

It can be seen, then, that in those cases where de facto
takings have been found absent physical invasion or appropriation
of property, the government body either exercised legislative or
regulatory powers or engaged in activities that anticipated the
acquisition or destruction of property for a public purpose;® that
is, for ‘‘activities . . . incident to massive complex and time
consuming programs launched by government to solve ... the
problems that beset our society....’” Hudock, 2 Pa. Commonwealth
Ct. at 675, 281 A.2d at 917. These anticipatory activities-- for

5 In Borough of Boyertown Appeal, 77 Pa. Commonwealth Ct. 357, 466 A. 2d 239
(1983) we affirmed a trial court decision in which the court found an actual taking
where the municipality made an unauthorized connection to privately owned water
mains and supplied water to borough customers through those mains. We held that
there was no showing of a de facto taking, although we agreed with the trial court’s
determination that the private water main owner suffered an ‘‘actual’’ taking, which
we defined as that which occurs ‘‘when an entity having the power of eminent domain
physically appropriates the possession or use of private property.”” Id. at 369, 466 A.2d
at 245.

6 Black’s Law Dictionary defines public purpose as a term of classification to
distinguish the objects for which the government is to provide from those which are left
to private interest. A public purpose has as its objective the promotion of the public
health, safety, morals, general welfare, security, prosperity and contentment of all the
inhibitors or residents [of a] political subdivision. Black’s Law Dictionary 1107 (5th
ed. 1979).

lla

example, notice and publicity ofintent to condemn, actual condem-
nation of surrounding properties or prolonged restriction of access
to property-- amounted to exceptional circumstances depriving an
owner of some of the value of his property.”

In the conduct which gives rise to the instant dispute, DER
did not have as its object a government service or public improve-
ment promoting the health, safety and welfare of Commonwealth
residents. DER did not acquire or destroy Moore’s subsurface
rights for the purpose of leasing those rights, since the commercial
development of oil and gas fields is not a government function.
Rather, DER claimed albeit mistakenly an ownership interest in
those rights which it believed had reverted to it as the surface
owner. Hence, DER did not (and, indeed, could not) act as a
condemner under these circumstances. With regard to its mandate
to protect Commonwealth forests as a natural resource, DER is
chartered with certain powers, Section 1902-A of The Adminis-
trative Code of 1929, Act of April 9, 1929, P.L. 177, added by Act
of December 3, 1970, P.L. 834, as amended, 71 P.S. § 510-2(1).
§ 510-2. Forest powers and duties

The Department of Environmental Resources shall have
the power, and its duty shall be:

(1) To acquire, in the name of the Commonwealth

7 That non-regulatory de facto takings have not been contemplated outside the context
of formal Condemnation or public improvements is illustrated by the following
statement from Filbert Limited Partmership:

An ascertainable legal pattern emerges.... That pattern,

translated into a working principle, may be stated thus: Where a

property is designated for formal condemnation pursuant to a

planned prospective public improvement, adverse interim conse-

quences caused to the property by the prospect of condemnation

will not constitute a de facto taking unless those interim conse-

quences are that the owner is deprived of the use and enjoyment

of the property or is subjected to the loss of property before formal

condemnation can provide compensation. If there has been such

an interim deprivation of use or exposure to loss then the principle

of de facto taking becomes applicable to accelerate the time when

the governmental authority must make compensation.

12a

by purchase, gift, lease, or condemnation, and hold
as State forests, subject to the conditions of any
such lease, and subject to such reservations, if
encumbrances, as the department deems to be
consistent with such holding, any lands ... which,
in the judgment of the department, the Common-
wealth should hold, manage, control, protect,
maintain, utilize and regulate, as State forests or for
reforestation, and adding to and extending the
existing State forests. (emphasis added.)

DER is also given the power to purchase vacant or unappropriated
lands to hold as state forests, 71 P.S. § 510 2(2); to hold, manage,
develop and regulate state forest land for reforestation, soil
conservation, and for water flow and fire control purposes. 71 P.S.
§ 510-2(3); to dispose of state forest land:

and the said department is hereby empowered, to

make and execute contracts or leases, in the name

of the Commonwealth, for the mining or removal

of any valuable minerals that may be found in said

State forests ... whenever it shall appear to the

satisfaction of the department that it would be for

the best interests of the State to make such dispo-

sition of said minerals...
71 P.S. §510-2(6). DER’s eminent domain powers as to state
forests are limited to those circumstances found in section 510-
2(1). While DER has the power under that subsection to acquire
land by condemnation to hold as a state forest, it is not given the
power to acquire land in order to develop oil and gas leases. Thus,
DER did not “‘take’’ anything in the exercise of eminent domain
power, it attempted to lease subsurface mineral mining rights. Such
an attempt cannot constitute a de facto taking. See Golding v.
Township of New Britain, 33 Pa. Commonwealth Ct. 635, 382
A.2d 509 (1978) (an entity without express or necessarily implied
condemnation powers cannot effect a de facto taking).

iim i i

13a

Hence, we disagree with the trial court’s staement that

‘‘DER does not act as any private landowner when it mikes a claim
to oil and gas interests under state forest land’’ because that
statement is grounded on the incorrect premise that “‘DER was the
specific agency granted by law the responsibility for acyyisition of
oil and gas land [and is] authorized to assert its power of eminent '
domain to acquire such interests’. Jn Re: Inverse Cotdemnation
of 25,621 Acres of Oil and Gas Rights (No. 92-0222, filed
January 11, 1994), slip op. at 11. Simply put, DER wa; not acting
as a condemner; it was acting as an owner.

The only issue before us, which we decide atversely to
Moore, is whether DER, for a closed period of time, tyok the oil
and gas estate of Moore. We neither decide nor express any
opinion herein as to whether Moore has an action, Orthe nature
thereof, against DER and/or its lessee for its asserted OWnership of
the subject property.

Accordingly, we will reverse the trial court’s order dismiss-
ing DER’s preliminary objections, sustain the prelimitary objec-
tions of the DER and dismiss the petition of MoGe for the
appointment of viewers.

ORDER
AND NOW, this 6th day of June, 1995, the order of the_ ycoming
County Common Pleas Court at No. 92-02222, dated January 11,
1994, is reversed, the preliminary objections of the Department of
Environmental Resources are sustained and the petitinn for the i
appointment of viewers by Clarence Moore and Pennl},9 Ltd. is
dismissed. | .

ee

l4a
APPENDIX C
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
CLARENCE MOORE and PENNLYCO, LTD.
v. No. 348 C.D. 1994

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT
OF ENVIRONMENTAL RESOURCES,

Appellant.

ORDER .
NOW, July 19, 1995, having considered appellees' application for
reargument and appellant’s answer in opposition, the application

is denied.
BY THE COURT:

JAMES GARDNER COLINS, President Judge

15a

APPENDIX D

IN THE COURT OF COMMON PLEAS OF LYCOMING
COUNTY, PENNSYLVANIA

IN RE: Inverse Condemnation : No. 92-02222

of 25,621 Acres of Oil and

Gas Rights, Clarence W. Moore

and Pennlyco, Ltd.,
Petitioners/Plaintiffs :

VS. : CIVIL ACTION - LAW

Department of Environmental

Resources of the Commonwealth
of Pennsylvania,
Respondent/Defendant : Preliminary Objections

OPINION AND ORDER

This matter is before the court for decision after an
evidentiary hearing to determine whether a de facto taking by
Respondent Department of Environmental Resources has oc-
curred. The procedural background is as follows. Petitioners filed
a Petition to Appoint a Board of Viewers on October 27, 1992,
averring that as a direct result of DER’s claim of ownership of
Petitioners’ oil and gas interest, they were unable to lease, develop
or in any way derive income from that interest. DER filed prelimi-

l6a

On March 31, 1992, this court ordered a hearing to
establish whether Petitioners’ averments, if true, established a de
facto taking under the Eminent Domain Code, 26 P.S. Section 1-
101 et seq. A hearing was held before this court on May 20 and 21,
1993, to allow Petitioners to prove the allegations of their petition.

FINDINGS OF FACT

1. Petitioner Clarence W. Moore is an adult individual,
residing at 5055 Northwest Seventh Street, Miami, Florida. Peti-
tioner Pennlyco, Ltd., is a corporation organized and existing
under the laws of Maryland, with offices at 117 West Patrick
Street, Suite 300, Frederick, Maryland.

2. The Respondent is the Pennsylvania Department of
Environmental Resources, hereinafter DER.

3. Petitioners are the one hundred (100%) percent owners,
as tenants-in-common, of a fee simple absolute interest in 25,62!
acres of the oil and gas estate of certain real property located in
Tiadaghton State Forest, Lycoming County. The property is
comprised of two contiguous parcels representing 6,841 acres and
18,780 acres.

4. Petitioners’ ownership interest is evidenced by deeds
recorded among the land records of Lycoming County at Book No.
755 Page 3, Book No. 1063 and Book No. 1953 Page 155.

5. DER is the owner of the surface estate of the same real
property referred to in paragraphs three and four.

6. DER, acting in the name of the Commonwealth of
Pennsylvania, is responsible for acquisition, management and
regulation of lands and the oil and gas rights under those lands, as
part of the state forest system for the public benefit. 71 P.S.
Sections 510-2, 510-2(1).

7. DER is vested with power of eminent domain under
Pennsylvania law. 71 P.S. Sections 510-2, 510-2(1).

8. In. 1975, Clarence Moore acquired ownership in fee
simple absolute of fifty (50%) of the mineral estate of the oil and

17a

gas for the subject tracts by deed from Mobil Oil Company.

9. In 1983, Mr. More acquired ownership in fee simple
absolute to the remaining fifty (50%) percent of the mineral estate
of the oil and gas for the subject tracts by deed from Mobil Oil
Company.

10. Mr. Moore conveyed a fifty (50%) percent interest in
the mineral estate of the oil and gas to Kenneth Yates, deed
recorded among Lycoming County Land Records at Book No.
1550, Page 283.

11. Kenneth Yates conveyed a fifty (50%) percent interest
in the mineral estate of the oil and gas to Petitioner Pennlyco, Ltd.,
deed recorded among Lycoming County Land Records at Book
No. 1959, Page 167.

12. At a meeting at DER’s offices on October 3, 1979,
DER, through its representative John Walker, first asserted to Mr.
Moore that pursuant to its lawful authority, on March 28, 1983, it
would be the owner of Petitioners’ oil and gas rights as part of its
state forest system. On that date, all of Petitioners’ ownership
interest in the subject rights would be extinguished and DER would
have the sole right to develop these nights as the exclusive owner
thereof.

13. Mr. Walker told Mr. Moore that DER’s records
showed that the Commonwealth would become owner of the oil,
gas and coal on March 28, 1983, and it would be a fee ownership.

14. In 1979, DER prepared maps that outlined the subject
rights as reserved for the Commonwealth in 1983. These maps
were available to the public.

15. After March 28, 1983, DER took control of the
property and conducted itselfas exclusive owner of Petitioners’ oil
and gas rights as part of the state forest system.

16. Petitioners’ names were removed as owners of the
property rights on the tax rolls of Lycoming County as of Decem-
ber 20, 1983.

17. In November 1983, DER publicly advertised a lease/
auction of the interest.

18a

18. DER’s Notice to Bidders for the auction states that the
Commonwealth considered itself to be the owner of the oil and gas
rights.

19. DER leased the oil and gas interest to C.E. Beck/
Pennzoil.

20. Income was generated from December 1984 until 1989
in the amount of approximately $297,000.00.

21. InMay of 1984, Petitionersinstituted litigation to Quiet
Title to protect and vindicate their ownership of oil and gas rights.

22. DER’s claim of ownership to the 6,841 acres of oil and
gas rights continued until October 30, 1984, when DER conceded
that petitioners were the owners in fee simple absolute of the 6,841
acres.

23. DER’s claim of ownership to the 18,780 acres contin-
ued until November 17, 1989, when, as a result of the litigation to .
quiet title, the Commonwealth Court of Pennsylvania declared and
upheld that petitioners were owners in fee simple absolute of
18,780 acres of oil and gas.

24. Various experts testified, at the hearing and by depo-
sition, as to the valuable nature of the subject tract of land.

25. Clarence Moore has been actively engaged in the oil and
gas business since 1950, and is experienced in oil and gas develop-
ment.

26. C. David Rainey is the president of IDC Drilling
Company, an independent oil and gas production and exploration
company that is active in Pennsylvania. He testified to the desirable
nature of the property due to the proximity of two big wells drilled
by other major oil companies which produce large amounts of
natural gas.

27. Jack Crichton is an expert in oil and gas development,
leasing and production. He testified that the large area of land was
important to the value of the tract, since there was the possibility
of several geological structures indicative of the entrapment of oil
and gas.

28. Mark Cable, an oil and gas geologist, testified to the
unique geologic structure of the Lycoming County land.

19a

29. George Kubisty is the vice-president of Berea Oil and
Gas Company, an independent oil and gas production company
active in Pennsylvania. He testified that the Lycoming County
tracts of land had high potential for oriskany, a formation known
to be productive of oil and gas.

30. Mr. Moore actively undertook to develop the oil and
gas rights starting in 1979.

31. Mr. Moore always disclosed to potential developers or
lessees DER’s adverse claim to ownership beginning in 1983.

32. Kenneth Yates is an attorney with a focus on represen-
tation of real estate and oil and gas ventures. He is also a business
associate of Mr. Moore. Mr. Yates attempted to market the
property to potential investors starting in 1980, always advising the
investors of DER’s adverse claim.

33. Mr. Moore and Mr. Yates, or parties acting on their
behalf, contacted some fifty-one(5 1) companies involved in oil and
gas development who were ready and willing to invest in oil and gas
development. See Plaintiff Exhibit 29, 86, 87, and 90 for a
comprehensive list of companies contacted.

34. Mr. Yates testified that almost all the companies were
interested in the subject oil and gas interests.

35. Potential investors declined to go forward on any
development of leasing deals upon hearing of DER’s claim.

36. William Thomas is an independent consultant active in
oil and gas leasing for numerous companies. He testified that he
tried to market the rights to Equitable, Texaco, Fairway Produc-
tion, Douglas Energy, Exxon, Miller Drilling Company, and Ray
Petroleum, however, the title problem concerned these companies,
so they lost interest.

37. IDC Drilling Company was interested in drilling a well .
subject to an agreement that a sufficient amount of time would be
available to explore and develop potential oil reserves beyond
March 28, 1983.

38. The offer from IDC never resulted in the leasing or
development due to DER’s adverse claim.

TN nn mT NTR TT Ne ee

20a

39. Mark Cable testified that the oil and gas business is a
long-term proposition and 2, 3, or 4 years is too short a time to get
any drilling done.

40. Mr. Cable stated that whenever there was anything less
than clear title, no company will invest until title is cleared.

41. Jack Crichton testified that clear title to ownerships of
oil and gas is very important, and given the adverse claim of DER,
he would not lease tracts from Petitioners.

42. Mr. Yates testified that every company he contacted
that initially showed interest declined to go forward after advise-
ment of the adverse claim. The companies invited him to resubmit
the tracts for review after the title problem was cleared.

43. Once DER’s adverse claim was removed from the
6,841 acre parcel and Petitioners regained clear title, Petitioners
were able to lease that oil and gas interest to Pennzoil.

DIS I

To find a de facto taking in Pennsylvania, the court must
consider whether the governmental entity, by its conduct, has
substantially deprived the property owner of the use and enjoyment
of his or her property. Conroy-Prugh Glass Company v. Common-
wealth, 321 A.2d 598 (Pa. 1974). The deprivation must be the
direct and necessary consequence of the actions of the entity having
the power of eminent domain. McCracken v. City of Philadelphia,
451 A.2d 1046 (Pa. Comwith. 1982). Substantial interference with
property rights by the government is sufficient to constitute a de
facto taking without an actual exercise of eminent domain, physical
intrusion, or any precondemnation activity. McGaffic v. Redevel-
opment Authority, 548 A.2d 653 (Pa. Comwith. 1988). When the
actions of the government result in the property owner’s inability
to dispose of commercial property or realize any income from it,
there has been a de facto taking. Jn re Department of Transporta-
tion of Right-of-Way, 455 A.2d 229 (Pa. Comwith. 1983). See
Conroy-Prugh Glass Company, 321 A.2d at 598.

The burden of proof is on the Petitioners. Each case turns

| a i

2la

on its unique factual matrix. Specifically, Petitioners must show
that there are exceptional circumstances which substantially de-
prive them, as owners, of the beneficial use and enjoyment of their
property, that the substantial deprivation was occasioned by
actions of an entity clothed in the power of eminent domain, that
the substantial deprivation was the result of the exercise of that
power, and damages occurred which are the immediate, necessary
and unavoidable consequence of the exercise of that power.
Darlington v. County of Chester, 607 A.2d 315 (Pa. Cmwith.
1992).

Upon review of all testimony and other evidence submit-
ted during the hearing, the court concludes that there is sufficient
evidence to support a finding of a de facto taking by Respondent
DER. The facts support the finding that in October of 1979, DER
informed Petitioner Clarence Moore that it owned a reversionary
interest in Petitioners’ oil and gas interest. Pursuant to that
reversionary interest, DER claimed it would own, and take full
control of, this interest in fee simple absolute on March 28, 1983.
Petitioners disputed DER’ s interpretation of its reversionary claim.
DER thus asserted an ownership interest in the gas and oil rights,
directly causing potential investors to decline offers by Petitioners
to develop or lease the oil and gas. Due to DER’s actions, a cloud
was put on Petitioners’ title, effectively negating any business
propositions to develop the rights and provide Petitioners with any
income from their interest.

The bases for this court’s conclusions are set forth below.

I. Power of Eminent Domain

First, the court finds DER to be clothed with the power
of eminent domain. Pursuant to public law, DER is vested with
authority to acquire lands by condemnation and manage and
develop the oil and gas under those lands, all as part of its duties
to hold state forests in the name of the Commonwealth. 71 P.S.
Section 510-2, 510-2(1), 510-6(1). DER states that it was not
acting in the exercise of eminent domain, but rather, as an owner

22a

by way of sale. The language of the Eminent Domain Code defines
eminent domain simply as that which occurs when an entity clothed
with power of eminent domain takes, injures or destroys private
property for publicuse. 71 P.S. Sections 1-207(3), 1-201(5). Inthe
instant case, DER was not merely any governmental agency
claiming title to Petitioners’ oil and gas rights, but the specific
agency granted by law the responsibility for acquisition of oil and
gas, and of state forest lands, authorized to assert its power of
eminent domain to acquire such interests. DER certainly may act
as any other proprietary owner when seeking to buy a building for
its offices, for instance, however DER does not act as any private
landowner when it makes a claim to oil and gas interests under state
forest lands.

DER argues Petitioners failed to prove the Department
ever acted under its power to condemn or ever planned or
announced plans to exercise its power to condemn. Case law does
not require a formal condemnation. Pennsylvania courts have
allowed landowners to recover for intrusions, interferences, and
loss of use and enjoyment of property resulting from government
activity not done in the formal exercise of eminent domain.
McCracken, 451 A.2d at 1046, McGaffic, 548 A.2d at 653.

“! ived of neé

Petitioners, as owners, have demonstrated that DER’s
conduct, in asserting an ownership interest in their oil and gas
rights, destroyed the potential for income and investment. For the
6,841 acre parcel, the time frame is 1979-1984, when DER
conceded Petitioners’ ownership. For the 18,780 acre parcel, the
time frame is 1979-1989, when the Commonwealth Court adjudi-
cated title in favor of Petitioners.

Petitioners have produced credible evidence to the effect
that the subject oil and gas interests are a valuable commercial
property right, for the reasons that they are below the surface of a

23a

large contiguous tract of land located in Pennsylvania that contains
potentially substantial reserves of oil and gas. Experts in oil and gas
development and potential investors testified to the desirability of
the acreage for commercial uses.

C. David Rainey, president of IDC Drilling Company
testified that this acreage was a very desirable piece of property,
since nearby there were two wells drilled by other major oil
companies, both of which produce enormous quantities of natural
gas. N.T. 5/20/93 p. 57, 99-100. Jack Crichton, oil and gas
development expert, testified that the geology of the land showed
a number of anticlines, which entrap oil and gas. N.T. 5/21/93 p.
5. Mark Cable, an oil and gas geologist, testified this area was a ripe
piece of property. The Lycoming County land is a unique geologic
structure with prolific production immediately to the north. Depo-
sition of Cable, p. 22, 10. Mr. Cable expressed his opinion that
there were high hopes for the subject acreage, as it had potential
for oil and gas production. Deposition of Cable at p. 10, 11.

George Kubisty, vice-president of Berea Oil and Gas
Company, testified that the area of Lycoming County had high
potential for oriskany, a formation of rocks underground known to
be productive of oil and gas development. Deposition of Kubisty,
p. 10. Clarence Moore testified that he focused on the acreage in
Lycoming County due to the fact it was a huge tract structured
along certain anticlines, and was of interest to persons involved in
the oil and gas business. N.T. 5/20/93, p. 18.

These witnesses are found by the court to be credible as to
the valuable nature of the subject acreage.

Petitioners have demonstrated by substantial evidence they
were not able to cultivate interest in investors to make a deal to
develop the oil and gas, due to DER’s asserted ownership claim.

Clarence Moore testified that after October 1979, when he
was informed of DER’ s claim of ownership, he was obligated to tell
any contacts he made about the shadow on the title. N.T. 5/20/93
p. 26. Mr. Moore stated that no one was interested in working on
a property if they were going to lose it in two or three years. N.T.

~~

2Aa

5/20/93 p. 26. He said he found that people he dealt with simply said
in the face of the claimed reservation from DER, they had no
interest. N.T. 5/20/93 p. 33. Mr. Moore personally contacted
approximately fifteen (15) companies and made efforts to develop
the property before 1983. N.T. 5/20/93 p. 33.

Kenneth Yates testified he contacted thirty-six (36) differ-
ent companies regarding development or leasing of the oil and gas.
N.T. 5/21/93 p.32. In November 1984, after DER withdrew its
adverse claim of title to the 6,841 acre parcel, Mr. Yates success-
fully leased property to Pennzoil Company. N.T. p. 39, 40. He was
never able to accomplish a lease or development of any of the
parcels contained in the 18,780 acre tract. N.T. p. 39.

Jack Crichton testified that title to ownership of oil and gas
is vital, because if clear title does not exist substantial investment
of money could be lost upon discovery of less than sole ownership.
N.T. 5/21 p. 6. Mr. Crichton stated he would absolutely not lease
tracts from Petitioners given the adverse claim of DER. N.T. p. 7.
In addition, Mr. Crichton testified that no company would be able
to do all the work necessary to produce anything in the time period
that was left before DER would take control in March 1983. N.T.
p. 6.

David Rainey testified that his partners were very substan-
tial European investors, interested in oil and gas rights in the United
States, N.T. 5/20/93 p. 65, however, no deal came to fruition due
to DER’s adverse claim. N.T. p. 84. In October of 1981, Mr.
Rainey’s company, IDC Drilling, offered to Mr. Moore to move a
rig on the property and drill at least one well, subject to an
agreement that a sufficient period of time would be available to
develop the property, beyond the period that remained until March
1983. Plaintiff Exhibit No. 40. Mr. Moore testified it was clear that
IDC required more time than the limited time that remained and so
the offer from IDC never resulted in any leasing or development
due to DER’s position that Mr. Moore did not own the property.
N.T. 5/20/93, p. 34, 36-37.

John Page, vice-president of IDC, testified that one of the

25a

conditions for a project to move forward was clear title to interest.
n.T. 5/20/93 p. 105. If DER had not placed a claim against Mr.
Moore’s interest, the project would have gone forward if Mr. Page
had anything to do with it, due tothe fact it wasa good project. N.T.
p. 107.

Mark Cable testified that whenever there is anything less
than clear title nobody is going to invest a dime until title is cleared.
Deposition of Cable, p. 11. Mr. Cable touched base with several oil
and gas development parties, but they did not pursue any further |
because of the cloud. Cable, p. 33. Mr. Cable’s interest in the
property moved to the bottom of his list as to any interest in
approaching investors. Cable, p. 11. The short time period left
before DER’s adverse claim took effect was not good for the oil
and gas business. In the oil and gas business, it is very difficult to
gain back the large investment of capital necessary to develop oil
and gas in that three (3) year space of time. Cable, p. 11. N.T. 5/
21/93 p. 4-6.

George Kubisty, who leases oil and gas interests, testified
that a title problem would have deterred further investigation into
the project and further review. Deposition of Kubisty, p. 23. Other
deals were coming together elsewhere, and he did not liketo pursue
title problems, as a rule. Kubisty, p. 29.

William Thomas, active in leasing oil and gas rights for
independent oil and gas companies, testified he had some compa-
nies interested, but when he advised them of the adverse claim, they
were no longer interested. The fact that the title problem could not
be solved killed Mr. Thomas’ ability to lease the property to the
companies. Deposition of Thomas, p. 15, 16.

Accepting the testimony of the witnesses as credible, it is
the court’s conclusion that Petitioners were substantially deprived
of the use and enjoyment of the property. After October 3, 1979,
Petitioners tried to market and develop their oil and gas interest, but
were unable to do so. Approximately fifty (50) companies refused
to participate in any lease or development of the oil and gas, after
being informed of DER’s adverse claim and prospective taking of

i ateiaeeiitaaiitiiiatiiiiliiiiidhiiditiilaal

26a

Petitioners’ property, on March 28, 1993. Clear title to these rights
appears to be an important factor for consideration for the various
oil and gas companies, who go through much time and expense
when embarking on a venture such as that proposed by Petitioners.

DER argues that Petitioners cannot meet their burden of
proving substantial deprivation, since Petitioners could have found
a lessee before March 28, 1983. However, the testimony is clear
that the time frame October 1979 to March 1983 was not long
enough for potential investors to perform all the studies that were
necessary before coming to a decision whether to go forward with
a project. In addition, these companies would be unable to realize
a return of the investment in that limited time period. Companies
were not interested in any title entanglements. Due to DER’s
adverse claim, Petitioners lost their potential investors. The court
finds sufficient evidence of substantial deprivation.

III. Substantial Deprivation Resulted in D es Which

are the Immediate, Necessary and Unavoidable Conse-
quence of DER’s Eminent Domain Power.

After March 28, 1983, DER divested Petitioners of title to
their oil and gas interest, and thereafter exercised control over it as
the exclusive owner. Petitioners were removed as owners from the
tax rolls of Lycoming County as of December 20, 1983. The
Commonwealth held itself out to be the owner of the oil and gas
interest, publicly advertising a lease auction of the rights. Testi-
mony of John Walker, N.T. 5/21/93, p. 109-110. DER sent out a
bid notice requesting interested bidders to submit bids on the tracts.
n.T. 5/21/93, p. 109-110. DER leased the oil and gas interest of
C.E. Peck/Pennzoil. N.T. 5/21/93, p. 112-113, 155-156. DER
generated income by receiving payments from December 1984
until 1989 from leasing the subject oil and gas interest in an amount
of approximately $297,000. N.T. 5/21/93, p. 165.

In May of 1984, Petitioners instituted a quiet title action to
ascertain the rightful ownership of the interest. Petitioners sug-

27a

gested the proceeds from the leasing of the interest of Pennzoil be
placed in escrow pending outcome of the action, however DER did
not acquiesce to this suggestion. N.T. 5/21/93, p. 59-61, Deposi-
tion of Beck, p. 30-31. Ultimately, the Commonwealth Court
found title in favor of Petitioners. Moore v. Commonwealth,
Department of Environmental Resources, 566 A.2d 905 (Pa.
Comwith. 1989).

Based on these facts, the court finds that Petitioners
suffered damages as a direct consequence of DER’s actions.
Petitioners were unable to realize any income from their property
interest during this time DER claimed ownership, and during the
time DER took control of the property, Petitioners were unable to
use or enjoy their property in any manner.

In summation, based on the whole of the testimony and
evidence presented at the hearing, the court finds Petitioners have
sustained their burden of proof through sufficient evidence to
prove a taking of Petitioners’ oil and gas interest from October 3,
1979 to October 30, 1984, for the 6,841 parcel, and from October
3, 1979 until November 17, 1989, for the 18,780 acre parcel. For
these reasons, the preliminary objections of Respondent DER are
dismissed.

ORDER

AND NOW, this 11th day of January, 1994, the Prelimi-

nary Objections of Respondent DER are DISMISSED.

By The Court,

Kenneth D. Brown, J.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386002_1397%3A1. Public record. Not legal advice.