Opinion
Civil Action No. 95-4128
August 8, 2002
Andrew J. Gray, III, [COR LD NTC], Anna R. Gray, [COR], Wade Thomas Visconte, [COR], Gray Law Firm, Lake Charles, LA, Nathan A. Levy, Jr., [COR], Nathan A. Levy, Jr., Attorney at Law, New Orleans, LA for plaintiffs.
John Burr Scofield, [COR LD], John Richard Pohorelsky, [COR], Scofield, Gerard, Veron, Singletary Pohorelsky, Lake Charles, LA, Miles Paul Clements, [COR], Robert B. McNeal, [COR LD NTC], William J. Furnish, Jr., [COR], Frilot, Partridge, Kohnke Clements, LC, New Orleans, LA, David Neale Schell, Jr., [COR LD NTC], Milling Benson Woodward, LLP, New Orleans, LA, Robert Timothy Lorio, [COR], Rabalais, Unland Lorio, Covington, LA for defendants.
In its June 7, 2002 Order and Reasons, this Court: (1) adopted, as modified, the special master's report which detailed the actions necessary to effectuate Judge Livaudais's original order requiring Mobil and Phillips to "repair and maintain" the Mobil canal system on plaintiffs' property and (2) requested parties to provide additional briefing regarding the allocation of responsibility for removing the Southdown Sugars No. 10 well ("A-10 well") and the PPOC No. 1 well ("IP well") from the Mobil canal system under the applicable mineral lease and any related law. As to the latter issue, parties were directed to include all documentation and evidence supporting their positions
After reviewing the memoranda pertaining to the removal of the wells, the Court convened a status conference to discuss what it considered a novel issue raised therein — namely, the alleged solidary liability between Mobil and Phillips, and the effect, if any, of Phillips' settlement with plaintiff on Mobil's liability throughout the remainder of the proceedings. During the conference. counsel for Mobil and St. Martin indicated that the issue of solidarity had been briefed in earlier memoranda and explained that by not specifically addressing the issue, they assumed that the Court had ruled in plaintiffs' favor. The Court noted that its silence on the issue was not to be construed as a ruling in favor of either party and indicated that it would squarely address the issue. Accordingly, the Court permitted parties to submit additional arguments regarding the issue of solidarity as they related to these proceedings.
See Court's Minute Entry dated July 10, 2002 (rec. doc. 139).
The issues presently before the Court are: (1) whether the 1956 servitude agreement entered into by Southdown Sugar (predecessor to St. Martin) and Superior Oil (predecessor to Mobil) and the subsequent assignment of that agreement to Phillips by Mobil created a "solidary relationship" between Mobil and Phillips as to plaintiff; (2) if so, what were the effects of plaintifFs settlement with Phillips on Mobil's continuing obligations under the servitude agreement and judgment; and (3) which party should be required to remove the existing structures from the A-10 and IP well? The Court has reviewed the memoranda and relevant law and reasons as follows.
Background Facts
Through Judge Livaudais' Partial and Final Findings and Conclusions and the parties' memoranda addressing this court distills the following chronology as it is relates to the issues presently before it.
Rec. docs. 64 and 68.
On March 31, 1954, Southdown Sugars, Inc. and Superior Oil Co. entered into an Oil, Gas, and Mineral Lease ("1954 lease") and on May 20, 1966 and December 10, 1966, Superior acquired two servitudes permitting it to dredge canals through the leased property in order to access the Southdown Sugar #10 well (A-10 well). While the lease recognized the right of the lessee to assign the lease, in whole or part, it provided that no assignment was effective as to the lessor until and unless the lessee supplies the lessor with a copy of the assignment.
Mobil replaced Superior as the "operator of record" of the lease on May 1, 1986 and on June 23, 1992, St. Martin became "owner of record" of the property burdened with the Superior-Southdown lease.
In 1994, Mobil granted a farmout, pursuant to the 1954 lease, to IP Petroleum Co ("IP"). IP proceeded to drill the PPOC #1 well (IP well).
On December 1, 1995, Mobil assigned its right, title and interest in and to the 1954 Superior-Southdown lease, including all wells, equipment and facilities used in the operation of the property and all contract and agreements concerning the interest conveyed, including existing canal servitudes (including the A-10 and IP wells) to Phillips.
Defendant's Memoranda is Response to Court's Order Regarding Well Issues, Ex. E, pp. 1, A-3. Stating that through the Agreement Phillips was required to assume, be responsible for, and comply with all duties and obligations of [Mobil] . . . express or implied with respect to the interests . . . including without limitation, any governmental request or requirement to plug. re-plug or abandon any well of whatsoever type, status or classification, or take any clean-up. remedal or other action with respect to the Interests. . . .
On December 28, 1995, subsequent to plaintiffs' initiation of suit against Mobil and Phillips for damages caused to his property by the Mobil canal system, Mobil and Phillips entered into an through which Mobil assumed liability for the St. Martin lawsuit, reduced the purchase price for the assignment, and agreed to indemnify and hold Phillips harmless from third party claims relating to a contamination of property (not at issue before this Court).
Plaintiffs Memoranda Regarding Solidarity and Effect of Phillip's Settlement on Mobil's Liability, Exhibit A, p. 2.
On August 12, 1998, Judge Livaudais concluded that Mobil and Phillips had breached "their contractual obligation" to maintain the Mobil Canal system and on January 6, 1999, he ordered both parties to "maintain their canals and repair any existing breaks or cuts in the canal system in order to prevent any future damage to plaintiffs' property."
Partial Findings and Conclusions (rec. doc. 64), p. 27.
Findings and Conclusions (rec. doc. 68), p. 3-4.
On October 1, 2000, IP assigned its right title and interest in the Southdown-Superior lease, the 1994 Farmout agreement and the IP well to Pure Partners, L.P. ("Pure"). The assignment did not affect Phillip's ownership of the five percent override previously acquired from Mobil in the IP well.
On April 1, 2001, Phillips assigned its rights, title and interest in the 1954 lease to Mandalay Oil Gas L.L.C, Michael St. Martin, Virginia Rayne St. Mart in, Quality Environmental Processes, Inc. — specifically transferring Phillips' interest in the A-10 well.
Defendant's Supplemental Memorandum in Response to Court's Order Regarding Well Issues, (rec. doc. 138), p. 8, Ex. A.
Subsequently, St. Martin and Phillips entered into a settlement agreement which released Phillips from any obligations owed to St. Martin through the Court's judgment.[8] For example, the agreement released Phillips from:
[A]ny and all claims demands, causes of action, . . . or obligations of any character whatsoever that the St. Martin Group may have, if any, arising out of or relating in any way to any and/or all of the following:
(a) the Pending Litigation
(b) any and all obligations, including any related to surface clean up or restoration, Phillips may have on the St. Martin Property regardless of whether such obligations arise under Phillip's capacity as operator/assignee and/ or sublessee under the Mobil lease and related instruments or under Phillips's capacity as a claimed mineral owner or owner of contractual rights;
(c) any canals or other dredged water bodies affecting the St. Martin property. . . .
(f) the construction operation, maintenance, clean up or removal of any facility on the St. Martin property
Analysis
Solidary Obligors?The initial task before this Court is to determine: (1) whether the 1954 servitude agreement entered into by Southdown Sugar and Superior Oil and the subsequent assignment of that agreement by Mobil to Phillips made those parties solidarily liable to plaintiff, and (2) if so, what were the effects of plaintiffs' settlement with Phillips on Mobil's continuing obligations under the servitude agreement?
Parties' Arguments
It is defendant's position that the Court's January 6, 1999 judgment imposed a solidary obligation on Mobil and Phillips because: (1) both parties were liable for the "whole performance" of the obligations imposed and (2) the obligation to "maintain and repair" the Mobil canal system should be characterized as an indivisible obligation, and as such, the rules governing solidary obligations are applicable. Accordingly, defendant contends that plaintiff's settlement with Phillips releases Mobil from liability as to Phillips' share of the costs of any work Mobil performs in compliance with the judgment.
Citing La. C.C. art. 1794 which states, "An obligation is solidary for the obligors when such obligor is liable for the whole performance. A performance rendered by one of the solidary obligors relieves the others of liability toward the obligee . . .".
Citing La C.C. art. 1815 which provides that, "[a]n obligation is indivisible when the object of the performance, because of its nature or because of the intent of the parties, is not susceptible of division providing that an indivisible obligation with more than one obligor or obligee is subject to the rules governing solidary obligations" and reasoning that the obligation in the case at bar would be "nonsensical" if it were interpreted as providing that Mobil and Phillips were only required to perform part of the ordered maintenance.
Also citing La. C.C. art. 1818 which states that an "indivisible obligation with more than one obligor or obligee is subject to the rules governing solidary obligations."
Citing La. C.C. art. 1803 which provides, in part, that "[r]emission of debt by the obligee in favor of one obligor, or a transaction or compromise between the obligee and one obligor, benefits the other solidary obligors in the amount of the portion of that obliger."
It is plaintiffs' position, however, that the Court's January 6, 1999 judgment did not impose a solidary obligation on Mobil and Phillips because it was silent as to the "nature of the obligation" and under Louisiana law, solidarity between parties can not be presumed. Further, plaintiff argues that regardless of the nature of the relationship between Phillips and Mobil, Mobil is not entitled to a reduction in the amount owed to plaintiff because it did not prove Phillips' degree of fault during any of the proceedings. Finally, plaintiffs contend that because Mobil did not raise the issue of solidarity in the trial court or on appeal, it is precluded from raising that argument under Louisiana law of res judicata and the doctrine of "law of the case."
See Plaintiffs Memoranda Regarding Solidarity and the Effect of Phillips Settlement on Mobil's Liability, (rec. doc. 94), p. 20, arguing that [a]s numerous Louisiana decisions have clarified, a defendant is not entitled to a reduction in the amount he owes due to plaintiff's settlement with a co-defendant unless he has proven at trial that the settling defendant was a join tortfeasor solidarily liable to the plaintiff and further has prove the degree of fault of the settling defendant. (citations omitted).
Court's Application of Law to Facts
The Court is manifestly aware that under Louisiana law, solidarity in contractual relations shall never be presumed. However, the facts of this case and applicable law require this Court to find that Mobil and Phillips are solidary obligors.
La C.C. Art. 1796 (West 1987).
First, the Court notes that La. C.C. art. 1821, not cited by either party in their memoranda, provides:
An obligor and a third person may agree to an assumption by the latter of an obligation of the former. To be enforceable by the obligee, against the third person, the agreement must be in writing.
The obligee's consent to the agreement does not effect a release of the obligor.
The unreleased obligor remains solidarily bound with the third person.
As applied to the case at bar, when Phillips (the third party) assumed Mobil's (unreleased obligor) obligations to the landowner, St. Martin (obligee), the original relationship between Mobil and St. Martin was not affected. Rather, according to Art. 1821, the contract of assumption made Mobil (the unreleased obligor) and Phillips (the third party) solidarily bound to perform any obligations owed to St. Martin. This Court's holding is analogous to the court's rationale in Joslyn Mfg. Co. v. Koppers Co., 40 F.3d 750, 759 (La. 5th Cir. 1994) that under Louisiana law, a written assumption agreement between an assignee of real property leases and lessor rendered assignee solidarily liable with the assignor for the whole performance under the lease. Therefore, the lessor could, at its option, demand performance from the assignee or the assignor.
The assumption agreement between Mobil and Phillips, completed on December 1, 1995, was in writing.
The Court notes that the December 1, 1995 agreement between Mobil to Phillips, whereby Mobil decreased the purchase price of the assumption in exchange for certain promises by Phillips, has no effect on this Court's reasoning because that agreement dealt with issues irrelevant to the case at bar.
According to Civil Code art. 1804, "[a]mong solidary obligors, each is liable for his virile portion. If the obligation arises from contract or quasi-contract, virile portions are equal in the absence of an agreement or judgment to the contrary. . . ." Because this Court has concluded that the solidary relationship between Mobil and Phillips arose out of contract, each party is responsible for 50% of the costs imposed to effectuate Judge Livaudais' order.
Civil Code art. 1803 provides that, "[r]emission of debt by the obligee in favor of one obligor. or a transaction or compromise between the obligee and one obligor, benefits the other solidary obligors in the amount of the portion of that obligor." Accordingly, plaintiffs' settlement with Phillips, releasing it from all liability imposed by Judge Livaudais' order, requires this Court to decrease any amount spent by Mobil to effectuate that judgment by 50%.
The Court disagrees with plaintiffs' contention that "Mobil is not entitled to a reduction in the amount owed to plaintiff because it did not prove Phillips' degree of fault during any of the proceedings." While plaintiff correctly notes that numerous courts have held that when an obligee settles with one solidary obligor, any recovery against the unreleased obligor is reduced by the percentage of the proportionate fault of the released obligor — only upon proof by the unreleased obligor of the degree of fault of the released obligor, those cases are distinguishable from the case at bar as the solidary obligations therein arose out of tort — not contract. La. C.C. Art. 1804 requires proof of a released obligor's proportion of fault when the solidary obligation arises out of tort, but clearly specifies that when the obligation arises out of contract, the proportion owed by each obligor is equal (in the absence of agreement or judgment to the contrary). Because the solidary relationship between Mobil and Phillips was contractual, they were each responsible for 50% of any costs imposed by the court's judgment. Accordingly, Mobil shall be required to pay 50% of any costs expended to effectuate the court's judgment.
See for example Bridges v. State, 738 So.2d 1149 (La.App. 2 Cir. 6/16/99).
The Court also acknowledges that this conclusion achieves the most equitable result Plaintiff chose to settle with one of its solidary obligors and benefitted from that arrangement Plaintiff should not be now permitted to reap a windfall by requiring Mobil to pay 100% of all costs imposed subsequent to its settlement with Phillips.
Finally, the Court notes that while no order or judgment has specified that Mobil and Phillips are solidary obligors, that relationship arose by operation of law (CC. art. 1821) and existed without any special declaration from this, or any, court. Further, Judge Livaudais' characterization of the obligation imposed on Mobil and Phillips as arising from the breach of "their contractual obligations to maintain their canals" (without assigning any proportion of fault) begs the conclusion that these parties were solidarily bound to plaintiff — in equal proportions.
Similarly, the Court rejects plaintiffs' argument that it is prohibited from holding Mobil and Phillips solidarity liable because it would "constitute a material alteration of the 1996 Judgment." Mobil and Phillips were solidarily liable to plaintiff by operation of law and this Court is not restrained from "naming" that which already existed.
As noted above, plaintiff has also contended that this Court is prohibited from declaring Mobil and Phillips solidary obligors under the principles of res judicata and the doctrine of "law of the case" and has emphasized that, "this Court has retained jurisdiction only to enforce the [1996] Judgment." However, the Court finds that the issue of res judicata — including law of the case, issue preclusion, and claim preclusion — is not applicable in the ease at bar.
Memoranda in Response to Mobil's Memoranda Regarding Solidarity, (rec. doc. 149). p. 2.
The Court acknowledges that:
The rule of res judicata . . . actually comprises two doctrines concerning the preclusive effect of a prior adjudication. The first such doctrine is "claim preclusion," or true res judicata. It treats a judgment, once rendered, as the full measure of relief to be accorded between the same parties on the same "claim" or "cause of action". . . . The second doctrine, collateral estoppel, or "issue preclusion," recognizes that suits addressed to particular claims may present issues relevant to suit on other claims . . . issue preclusion bars the relitigation of issues actually adjudicated, and essential to the judgment, in a prior litigation between the same parties.
Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure, Vol. 18, § 4402, p. 8 citing Kaspar Wire Works, Inc. v. Leco Engr'g Mach., Inc., ( 575 F.2d 530 (5th Cir. 1978).
Because there has been only one — ongoing — cause of action in the case at bar, any argument urged by plaintiff based on "claim preclusion" is inappropriate. Thus, this Court is only required to determine whether Mobil's assertion of solidarity is barred by "issue preclusion." First, the Court notes that it has been requested to determine the effect of a settlement reached between parties, after the original judgment was rendered. Obviously, until the settlement between plaintiff and Phillips was created, no court had had any reason to examine or articulate the nature and effect of Mobil and Philips' obligations. Further, as is mentioned elsewhere in this opinion, Judge Livaudais' order, holding both defendants liable to plaintiff through the breach of their contractual obligation (without further elaboration) weighs in favor of solidarity. Thus, the Court concludes that Mobil is not prohibited from raising the issue of solidarity in this forum — as it has not been litigated in any court.
Removal of A-10 and IP wells and the Surrounding Structures
There is no dispute that Mandalay is the operator of the A-10 well and Mobil has no responsibility to plug and abandon that site. Accordingly, Mandalay shall proceed to plug and abandon the A-10 well.
Plaintiffs Brief Submitted in Response to this Court's June 7, 2002 Order and Reasons, (rec. doc. 135), p. 7 stating, "Mandalay is the operator of the A-10 Well. Regardless of its legal obligations to do so, St. Martin does not consider Mobil responsible for the A-10 Well."
The chronology of the IP well is more extensive and includes the following pertinent events: (1) lease of the property burdened with the IP well was assigned by Mobil to Phillips on December 1, 1995 — subject to the earlier farmout agreement between Mobil and IP, (2) IP assigned its interest in the 1954 lease, its farmout, and the IP well to Pure Partners ("Pure") in October 2001, (3) in April, 2001 Phillips assigned its interest in the 1954 lease to Mandalay Oil Gas — subject to the Mobil-IP farmout agreement. At oral argument plaintiff clarified that Pure is the current operator of record for the IP well and advised the Court that its production had ceased and was ready to be plugged and abandoned.
According to defendant, at that point, Phillips became the owner of any interest Mobil had in the IP well — including the responsibility to plug and abandon.
Under prevailing Louisiana law, (1) the original lessee/assignor of a mineral lease is not relieved of its obligations or liabilities owed to the lessor unless the latter has discharged him expressly and in writing and (2) the original lessor can request an assignee or sublessee to perform responsibilities under the lease. However, La. R.S. 30:4 provides that the party responsible for proper plugging and abandonment of an oil and gas well is the "owner" defined elsewhere as including "the person who has or had a right to drill into and to produce a pool and to appropriate the production therefrom, along with operators and producers acting on his behalf."24
La. R.S. 31:129 (West 1989). See also Chevron USA, Inc. v. Traillour Oil Co. 987 F.2d 1138 (5th Cir. 1993).
La. R.S. 31:128 (West 1989).
Thus, the Court finds that in the case at bar there are several parties, some of which are not before this court, that could be obligated to plug and abandon the IP well including: Mobil, Phillips. Mandalay and Pure. This is not the appropriate forum to make a determinations as to the responsibilities of plugging and abandoning the IP well. However, because removal of the IP well is not quintessential to effecting the special master's report at this time, the Court encourages parties to resolve this issue on their own. In the event the well is not plugged and abandoned before the canal is closed, the Court has been advised that the canal could be temporarily re-opened to accommodate this procedure.
Accordingly,
IT IS ORDERED that Mobil shall be required to pay 50% of all costs imposed to implement the plan of the special master which was adopted as modified by this Court.