Opinion
No. 01-1156
February 6, 2002.
APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT PARISH OF LAFAYETTE, NUMBER 932,333 HONORABLE HAROLD J. BROUILLETTE
Carl David Rosenblum, Timothy Scott Cragin, Jones, Walker, McCollan, New Orleans, Louisiana, 70170, Counsel for Plaintiff/Appellee/Appellant: Lamson Petroleum Corporation.
Ewell Elton Eagan, Jr., Matthew Joseph Randazzo, III, Gordon, Arata, Waechter, et al., New Orleans, Louisiana, 70170, Counsel for Defendants/Appellants/Appellees: Arthur C. LeBlanc Jr. CPL Assoc., et al., Union Oil Company of California.
Arthur Daniel Mouton, Attorney at Law, Lafayette, Louisiana, 70505, Counsel for Plaintiff/Appellee/Appellant: Lamson Petroleum Corporation.
Richard Ferguson Price, Jr., Attorney at Law, Metairie, Louisiana, 70005-4331, Counsel for Defendants/Appellants/Appellees: J. H. Echezabel, Inc., James H. Echezabel.
Mark Harrison Tompkins, Attorney at Law, Lafayette, Louisiana, 70505, Counsel for Defendant/Appellant/Appellee: Union Oil Company of California.
Robin Daniel McGuire, Jones, Walker, et al., Lafayette, Louisiana, 70503, Counsel For Plaintiff/Appellee/Appellant Lamson Petroleum Corporation.
James Caffery Wilbourn, Pro Se for Defendant/Appellant/Appellee, Houston, TX, 77024.
James Cary Wilbourn, Pro Se for Defendant/Appellant/Appellee, Houston, TX, 77024.
Barbara D. Cowart, Pro Se for Defendant/Appellant/Appellee, Breaux Bridge, Louisiana, 70517.
Walter C. Flower, III, Pro Se for Defendant/Appellant/Appellee, Breaux Bridge, Louisiana, 70517.
Wilson A. Montgomery, Pro Se for Defendant/Appellant/Appellee, Lake Charles, Louisiana, 70601.
Stephen E. Montgomery, Pro Se for Defendant/Appellant/Appellee, Houston, Texas, 77090.
Court composed of Sylvia R. Cooks, Billie Colombaro Woodard, and Michael G. Sullivan, Judges.
Lamson Petroleum Corporation (Lamson) filed this petitory action against Hallwood Petroleum, Inc. (Hallwood), Union Oil Company of California (Union), James H. Echezabal, and J. H. Echezabal, Inc., and others, seeking recognition of four oil, gas, and mineral leases in which it is the lessee. These leases covered a road bed tract, containing 0.58 acres. The trial court ruled in Lamson's favor, recognizing the leases and ordering payment to Lamson, as well as an accounting and interest payments on proceeds which the Defendants received. Union, James H. Echezabal, and J. H. Echezabal, Inc. appeal. They contend that interest should run from the date of judicial demand, and they seek dismissal of the Lamson claims for execution of certain quitclaim deeds. Lamson appeals, as well. It maintains that the Defendants were in bad faith from the date of judicial demand and, thus, are not entitled to reimbursement of expenses after May 25, 1993. We affirm in part and reverse in part.
* * * * *
This is one of sixteen matters tried before the Honorable Judge Harold J. Brouillette, Judge Ad Hoc, whom the Louisiana Supreme Court appointed to preside over the matters entitled Lamson Petroleum Corporation v. Hallwood Petroleum, Inc., et al, pending in the Fifteenth Judicial District Court for the Parish of Lafayette under Dockets Numbers 93-2332 through 93-2345, 95-2601, and 96-2277.
Hallwood began drilling the G. S. Boudreaux Number1 Well in the Scott Field in Lafayette Parish on October 8, 1990. It successfully completed the well on April 20, 1991. Although, Lamson did not participate in the risk or expense of drilling this well, it researched the Lafayette Parish public records. This resulted in the discovery of potential claims, adverse to Hallwood and Union, for which it acquired mineral leases from those believed to be the owners. These leases purport to cover portions of the acreage, which Hallwood and Union previously leased, lying beneath roadbeds in the area.
Lamson filed a petitory action against Hallwood, an operator, and against all persons who claimed to own or to have received proceeds of oil, gas, and mineral production from a 0.58 acre roadbed tract, including Union, James H. Echezabal, and J. H. Echezabal, Inc. The Defendants included those persons who claim to own a fee title to the tract, as well as those who claim to own a leasehold or other mineral rights in the tract. Lamson had acquired oil, gas, and mineral leases in the mid-1990's. They covered lands which the Defendants claimed to own. Portions of the 0.58 acre tract are situated in the Office of Conservation Unit known as Bal Mex 3 RB SUB.
Lamson sought a judgment: (1) recognizing the validity of four oil, gas, and mineral leases, in which it is lessee, covering a roadbed tract containing 0.58 acres; (2) ordering the payment of 100% of the oil, gas, and mineral production attributable from the roadbed tract to Lamson and its lessors; and (3) ordering a report of all sums, attributable to the property alleged to be due Lamson from the sale of production.
The Defendants claim ownership of the property and/or the underlying minerals, either, as landowners, mineral lessees, royalty owners, or overriding royalty owners. Some of the Defendants failed to answer the petition, prompting the trial court to enter preliminary defaults. It dismissed some of the Defendants following compromise agreements. Other Defendants actively opposed Lamson's claims, specifically, Union, Mr. James H. Echezabal, and J. H. Echezabal, Inc.
After a trial in which the parties introduced many documents, the trial court issued a judgment (1) recognizing the Lamson leases as valid and as covering the 0.58 acre tract; (2) decreeing that, effective as of January 1, 1990, all of the oil, gas, and other mineral production, attributable to the Lamson's interest and the Lamson's lessors in the 0.58 acre tract, were due and payable to Lamson; (3) ordering that, within sixty days of the judgment, the Defendants had to make a full report and an accounting and payments to Lamson of all proceeds which the Defendants or others on their behalf, received from the sale of any oil, gas, or other mineral production attributable to Lamson's interest and lessors of the 0.58 acre tract; ordering that the proportionate share of the actual reasonable expenditures, allocable to Lamson's interest in the 0.58 acre tract, which the Defendants incurred and paid for the drilling, testing, completing, equipping, and operation of the Unit, be deducted from the proceeds; and, (4) ordering that, within the same sixty day period, the Defendants pay legal interest to Lamson for past oil, gas, and production proceeds which pertain to the 0.58 acre tract. The latter is to be at the legal rate of interest, which La.R.S. 13:4802 provides for, and it is for all amounts which the Defendants received. It accrues from the time that each amount was received until paid to Lamson. To the extent that the Defendants or anyone on their behalf deposited such proceeds into the escrow accounts, which contestants set up, the interest due and payable to Lamson and the Lamson lessors shall be the interest actually accruing to such funds while on deposit in the escrow accounts.
Union, Mr. James H. Echezabal, and J. H. Echezabal, Inc. appealed the trial court's decision. They contend that it erred in awarding legal interest to Lamson on all amounts, which they received, from the time that each amount was received until paid to Lamson. Second, they claim that the trial court erred in failing to dismiss Lamson's claim. They urge that because the obligation to them, which was assumed when Lamson took the Defendants' lessor's position through the acquisition of the quitclaim deeds, Lamson was estopped from interfering with Defendants' possession of the Union lease.
Lamson also filed an appeal, arguing that the trial court erred in finding the Defendants to be in good faith under La.Civ. Code art. 488 and, thus, that they have the right to reimbursement for their expenses concerning the production of oil and gas, attributable to the 0.58 acre tract. On the contrary, it maintains that the Defendants were bad faith possessors under La.Civ. Code art. 487 and are not entitled to recover any expenses.
* * * * * Legal Interest
The trial court ruled in its judgment that:
Within sixty (60) days of the entry of this judgment, the Defendants shall pay to Lamson legal interest on all amounts due to Lamson and its lessors for past oil, gas, or other mineral production attributable to the 0.58 acre tract at the legal rate of interest provided for under La.R.S. 13:4202 for all amounts received by Defendants, or others on their behalf, accruing from the time each amount was received until paid to Lamson.
We must determine whether the Defendants should be obligated to pay legal interest on funds which they received on production proceeds prior to the judgment date.
La.Civ. Code art. 488 states: "Products derived from a thing as a result of diminution of its substance belong to the owner of that thing. When they are reclaimed by the owner, a possessor in good faith has the right to reimbursement of his expenses. A possessor in bad faith does not have this right." Under this article, Lamson and the Lamson lessors were entitled to receive the oil and gas proceeds from their interests in the 0.58 acre tract at the time that the Defendants received them.
According to La. Code Civ.P. art. 1921 and La.Civ. Code art. 2000, which provide for legal interest on debts from the time that they are due, interest shall be awarded as prayed for or as provided by law. La.Civ. Code art. 2924 allows for legal interest on all sums that are the object of a judicial demand. In Thomas B. Catchings Assoc. v. City of Baton Rouge, the Louisiana Supreme Court held that legal interest runs from the date that the monies become due to the plaintiff. The instant case is similar to Wurzlow v. Placid Oil Co. In that case, the plaintiffs sought a declaratory judgment, seeking to be recognized as owners of a 1/48th overriding royalty interest in certain oil, gas, and mineral leases. They requested that the defendants be ordered to account for all monies and interest attributable to the overriding royalty interests, dating from first production. The trial court agreed. The defendants appealed. They claimed that the trial court erred in allowing such interest because the claim was unliquidated. The first circuit affirmed, saying "we believe that the trial judge properly awarded interest on all sums received by defendant for which an accounting was due to plaintiffs from the date of receipt." Also in Menefee v. Pipes, which was a petitory action similar to the case at bar, the second circuit ordered the defendants to pay legal interest from the date of first production on the oil and gas received from the sale.
621 So.2d 768 (La. 1993).
279 So.2d 749 (La.App. 1 Cir.), writ refused, 282 So.2d 140 (La. 1973).
Id. at 774.
159 So.2d 439 (La.App. 2 Cir. 1963), writ denied, 245 La. 798, 161 So.2d 276 (La. 1964).
We find no error in the trial court's decision, awarding legal interest from the date that the Defendants received the oil and gas proceeds from the 0.58 acre tract, and, thus, affirm this part of the trial court's decision.
Quitclaim Deeds
The Defendants contend that the matter should be dismissed, because, when Lamson assumed their lessor's obligation to them through the acquisition of certain quitclaim deeds, it became precluded from having its lease interest recognized in the disputed tract.
During the litigation, some of the Defendants decided to amicably settle with Lamson. They quitclaimed to it the rights, if any, that they may have had in the disputed 0.58 acre tract. However, the trial court's ruling rendered these quitclaims without legal significance. The result of the ruling was to confirm Lamson's position that the Lamson lessors, and not the Defendants, owned the disputed 0.58 acre tract. Had the trial court found that the title, quitclaimed to Lamson, was valid, then the quitclaimed interest would have been subject to any leases which the settling Defendants granted. Instead, the trial court held title to be in the Lamson lessors and in Lamson under the their leases.
An acquisition through a quitclaim deed does not preclude the acquirer from asserting ownership of the property through a separate chain of title. As part of the settlements with the settling defendants, Lamson contested their title to the 0.58 acre tract and asserted its own title through the Lamson lessors. Nothing in the settlements or quitclaim deeds derogates from that position. Clearly, the quitclaim deeds recognize Lamson's direct claims to the 0.58 acre tract. The trial court's ruling that, neither, the settling defendants, nor the Defendants, owned title in the 0.58 acre tract means that Lamson's and the Lamson lessors' interests are not subject to any leases except for the Lamson leases.
Holmes v. Wyatt Lumber Co., 139 So.2d 96 (La.App. 3 Cir. 1962).
This assignment is without merit.
Bad Faith
Lamson filed an appeal, claiming that the trial court erred in failing to find that the Defendants were in bad faith and, thus, not entitled to reimbursement for expenses of production from the date of Lamson's filing of this action. At trial, Lamson attempted to convince the trial court that the Defendants were in bad faith under La.Civ. Code art. 487 and, therefore, not entitled to recover expenses under La.Civ. Code art. 488. Notwithstanding, the court rejected Lamson's position and ruled that the Defendants had a right to reimbursement for their expenses, concerning the production of oil and gas, attributable to the 0.58 acre tract. In so doing, it erred.
In Edmundson Bros. Partnership v. Montex Drilling Co., we held that a mineral lessee ceases to be in good faith under Civil Code articles 487 and 488 at the time of judicial demand and ceases to be entitled to recover the costs of production regarding his lease and that although the defendant/lessee was in good faith prior to judicial demand, it ceased to be in good faith after filing of the petitory action. Furthermore, La.Civ. Code art. 487 provides, in part, "[h]e [the possessor] ceases to be in good faith when the defects are made known to him or an action is instituted against him by the owner for the recovery of the thing." (Emphasis added).
98-1564 (La.App. 3 Cir. 5/5/99); 731 So.2d 1049.
Accordingly, in the instant case, even if the Defendants were in good faith prior to judicial demand, the judicial demand changed that on May 25, 1993. They were in bad faith because, despite the suit, they maintained possession of the proceeds to the oil and gas in the 0.58 acre tract after judicial demand. Thus, since La.Civ. Code art. 488 provides that, "[a] possessor in bad faith does not have this right[to reimbursement of expenses]," the defendants are not entitled to expenses which they incurred after May 25, 1993. Accordingly, we reverse this part of the trial court's decision.
CONCLUSION
We affirm the trial court's legal interest award and reject the Defendants' argument that Lamson's case should be dismissed because of the quitclaim deeds. We reverse the trial court's finding that the Defendants were in good faith and hold that they were in bad faith from the date of judicial demand — May 25, 1993. Accordingly, the Defendants are not entitled to reimbursement of expenses for production attributable to the 0.58 acre tract from that date. We cast the Defendants with all of the costs of the appeal.
AFFIRMED IN PART; REVERSED IN PART.