Myrtie J. Shanks, James R. Peabody, F. S. Ambrose and Haney E. Ambrose, Jr. VS Exxon Corporation, TXP Operating Company and C. T. Carden

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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NUMBER 2007 CA 0852 MYRTlE J SHANKS JAMES R PEABODY F S AMBROSE AND HANEY E AMBROSE JR VERSUS EXXON CORPORATION TXP OPERATING COMPANY AND C T CARDEN Judgment v trv 6 Appealed Rendered December 21 2007 from the Nineteenth Judicial District Court In and for the Parish of East Baton Rouge Louisiana Docket Number 381 045 Honorable Kay Bates Judge Presiding Rudolph Estess Jr Baton Rouge LA Counsel for Ethel Shanks Haik Administratix of the Succession of Myrtie Shanks And Jack C Caldwell Baton Rouge Peabody Michael St Ambrose April Dawn James R LA Claire Ambrose Kenneth Scott Ambrose And Barbara B plaintiffs Appellants and Parsons Haney E Ambrose Jr Zachary LA Jude C Bursavich Counsel for Defendants Linton J Cuccia Administrator of the Morgan Baton Rouge LA Appellees Succession of C T Carden and Edna Mae Carden BEFORE If k4 y I WHIPPLE GUIDRY AND HUGHES JJ p C y C PP11 2 A PnC 2 I 3 vf WHIPPLE J This case is before which dismissed with and monetary relief Carden In the suit us on prejudice plaintiffs plaintiffs sought For the declaration that Carden to the release of mineral leases prior following Carden and Edna Mae T the amount of well costs plaintiffs land and for declaratory judgment claims for judicial a of the trial court judgment a the Estate of C against liable for well costs incurred production from appeal reasons we paid by plaintiffs was affecting of unit out affirm BACKGROUND FACTS The facts of this James R case are F Peabody S not in Ambrose and predecessors in title granted four oil covering property owned by them Carden in April of 1976 years annual and gas 10 5 So acre Exchange Oil Gas to 96 674 So Exchange interests with and J Shanks Jr or for a a one their the leases Rouge Parish to C primary term eighth royalty T often on oil Company on May eventually passed to 474 one a one half interest in the Corporation and Exchange 95 2164 remaining La App 30 1985 TXP acquired 1 st 679 writ denied 96 1475 La 9 20 96 September in all of and assumed all of the liabilities of Only this one half interest in the leases l half interests in the leases 13 and Exxon half interest in three of the a one Corporation Exxon to the leases appeal IThe remaining on v in the leases respect is involved in this conveyed 2d 473 Thereafter 2d 436 s Carden See Shanks Exchange Exchange Oil 5 00 per provided conveyed of 1976 September Cir in East Baton All of the leases rentals of Ambrose E and mineral leases gas of 1976 Carden May four leases to Haney Myrtie production In lease delay Plaintiffs dispute August Corporation 19 1976 as These sublessee 2 were assigned by one Carden to Daleo half interests in the leases On 12 July Strain No 1980 Exxon 1 Well leases and was on a not consent to Exxon depth 1981 February on 2 1981 in was was Febluary 1981 the purpose of drilling the tested and after the well establishing a well proposals paliicipate evidence or regarding in the unitization Exchange representative completed did attend the 1981 creating the included all or in any propeliy belonging to others Exxon The well remained shut in 1985 when production tracts The Exxon designated as the unit well and payments and their Once successors from were not an for present any and did However manner an 1124 production Reservoir A covered designated as April of gas and The unit by the leases J Strain No Tommy was effective as well 1 Well as was the unit operator until July of gas and condensate from the well commenced Exxon production began paid charged 27 LSA R S 30 9 awaiting marketing arrangements full royalties gas and minerals attributable to their costs to hearing a unitization Until that time the leases had been maintained in effect in May hearing Tuscaloosa Sand portions of each of the on did not proposed 18 000 TUSC RA SUA Unit for condensate from the 18 000 or Exxon filed requesting proceedings proceedings in participate 16 621 634 66 was the 1 any of the by then shut in was Tommy The well reached total Thereafter the Commissioner issued Order No 20 not unit for the well pursuant did not initiate the unitization Exchange not covered with the Commissioner of Conservation application counter 12 well the Exxon Exchange did by plaintiffs operations a The total well costs incurred amounted to On not s of land that tract owned began drilling to to on plaintiffs rather on tracts Exxon shut behalf of all of the lessees plaintiffs respective by rentals and as all production of oil within the unit Well unit operator withheld Exchange the monthly proceeds of unit production attributable 3 to Exchange leasehold interests in order s to well costs Exxon had recover previously incurred Approximately apparently made the value of a months SIX prediction that the production well would production from the unit would Exxon for all unit well costs 1986 after Thus by never Exchange title ie payout be sufficient instrument dated an Exchange released all of its right never began that to repay 13 January and interest in and the to leases As this court has as previously held plaintiffs have aclmowledged release of the leasehold interests a one 478 half interest in their Following proceeds of production of amount plaintiffs plaintiffs share of the leases the subject the unit to as of this began receiving as 2d of 474 at Exxon continued to withhold the remaining unpaid well amount of owners s of well These well costs costs production following costs in the attributable withheld to from the release of the appeal 1989 unleased land their interests less The proceeds As of October 21 plaintiffs the recover Exchange See Shanks 674 So tracts 303 509 77 was in this matter and became unleased land plaintiffs by Exchange 14 066 590 30 tracts are to prior litigation in their brief to this court upon respective the release in the well owners of a paid one from that time half interest in their tracts within proceeds eight eighths operating Thus out of production attributable costs PROCEDURAL HISTORY On May 14 1992 plaintiffs filed monetary relief against Exxon TXP the leases judicial C T Carden a suit for as successor declaratory judgment to Exchange s and his wife Edna Mae Assel Carden declaration that Exxon TXP and the Cm dens 4 were and interests in seeking a liable in solido for well costs incurred leases and that for the prior to the date plaintiffs were of each amount entitled parties agreed to the to principal sever original claim on the judgment determined that because drilling activities liability only to the leased This Thus to TXP costs was As noted plaintiffs court during as unleased became entitled 20ther to there as On was the lessee of all to s comi owners unitization and thus obligations the existence of the leases was this appeal liable a to the TXP s or as s Shanks release of to the land all well costs in the form of its lease interests it had were paid at 478 one upon termination of the leases half interest in the tracts at issue receive the full value of the minerals attributable incidental actions one Accordingly the judgment of the trial in Shanks of paid comi from the unit Exchange because TXP had to and the prejudice production fmiher determined that Shanks 674 So 2d by this it with Exchange owner production attributable for which it affinned against and judgment in proportionate share of production court concluded this hundred percent of court only prospectively relieved chargeable all well operating its plaintiffs as arguments by the pmiies plaintiffs appealed extent of trial to Authenticity Exchange had not consented of the 674 So 2d at 477 the leases claims all of the TXP 1994 the trial court rendered 19 for well costs accrued well and Prior and oral 2 costs was by and the Cm dens both of Facts and stipulation dismissing plaintiffs From that matter against Exxon withheld production recoupment of well Stipulation a By judgment dated September favor of TXP monetary judgment in their favor and the incidental claims submitted was a defendant in this their claims defendants entered into matter to released its interests in the share of unit plaintiff s Exxon after the release of the leases for Because the Exchange filed but 5 they are not the to the subject of this appeal one half interests in those in the leases Plaintiffs likewise became costs attributable to their interests future leases Shanks Corporation 674 cross liability Mrs plaintiffs for the well remaining Following for the same by this a hearing reasoning court in set on forth claims Carden with on v Exxon paid during court in its were T Carden the issue of the Cardens the motions the trial Shanks the Cardens dismissing plaintiffs Shanks 2d 436 judgment by the trial Court Supreme and the Estate of C costs not 3 leases Carden payment of date of release of the application 679 So motions for smmnary for the responsible The Louisiana writ La 9 20 96 eighth royalty specified one following the at 478 plaintiffs 96 1475 Thereafter 2d So denied subsequently filed instead of the tracts the existence of the determined that court dismissal of TXP and entitled to summary judgment 4 prejudice Plaintiffs then filed the instant erred in 1 holdingthat mineral lessee Carden trial reported in Shanks dealt with by this court distinction between the Carden to in plaintiff liability rem and 2 as Apparently at some counsel for the Cardens the as point during and began filing pleadings same failing in this case to already been recognize the of the mineral lessee liability proceedings on that the trial court situation has costs and the limited decided in Shanks these Carden and Mrs of sublessee TXP in the earlier 1 st Circuit contractual are payment of well drilling of sublessee TXP 3 case finding that this personal lessors for presented in the by the T appeal contending the issues against as Estate of C against the C T on the basis of oil Carden died Thus behalf of Mrs Carden and the Estate of C T Carden 4We note that defendant Exxon had also filed a motion for summary judgment contending that as a matter of law it had no liability to plaintiffs for the well costs it withheld from plaintiffs share of production Exxon s motion for summary judgment was granted and plaintiffs claims against Exxon were dismissed with prejudice Thus plaintiffs only remaining claims were their claims against the Cardens 6 and gas unitization law and 3 to failing and recognize apply the provisions of the Mineral Code in that the lessee sublessor Carden his obligations liabilities under or him discharged distinguished from lease and whose interest responsibility acquired in writing sublessee who assumed a LSA R S to not relieved of mineral lease unless the lessor has a and expressly is LSA R S only an in the lessor is limited rem to 31 129 as interest in the the extent of the 31 128 SUMMARY JUDGMENT A motion for summary judgment is depositions answers to that the is entitled to mover and admissions interrogatories affidavits if any show that there is properly granted if the pleadings issue genuine no judgment on as together with to material fact and matter of law as a file LSA C C P art 966 B Pursuant to LSA C C P bear the burden of proof on art 966 C the issue at absence of factual support for party claim action s or there is so granted 920 as on to one or more genuine Keller v the mere Case 99 0424 La non allegations or Home 32 217 that there is moving party art 967 App 770 So the 7 to produce satisfy judgment 2d 354 pleadings are 2nd Cir 10 27 99 his to do will be 757 So 2d Moreover cannot rest but must still at issue an the adverse must opposing party 754 So 2d 228 841 writ denied 99 3334 La 2 4 00 to 1st Cir 3 31 00 App denials of his La will not opponent of the motion fails La 9 29 00 noted in LSA C C P Nursing out elements essential evidence which will establish that material facts Tensas points issue of material fact and summary 922 writ denied 2000 1874 consistently moving party establish that he will be able burden of proof at trial Ifthe no if the trial and defense then the factual support sufficient evidentiary 2 present Hunter v 743 So 2d 839 In determining whether summary is judgment appropriate appellate courts review evidence de court determination of whether summary judgment is s it is the under the novo applicable substantive particular fact in dispute is substantive law applicable to same criteria that govern the trial law that determines material this can be Because appropriate materiality whether seen in only a of the light Keller 757 So 2d at 922 case DISCUSSION On Carden appeal plaintiffs as the contend that the lessee is original personally of contract and the Mineral Code for incurred costs different entirely According was to plaintiffs the well drilled which was liable under the leases to assert on court erred in plaintiffs seek while the leases 5 Although TXP the effective s issue were liability to claims recover were not for for well costs against in Carden only thus i e at are were an leases s personally was Plaintiffs costs provided that he and production they argue that judgment because the unit well costs that had accrued costs for which Carden plaintiffs apparently such costs could or of the time the motion for summary from the Cardens rem Thus the Cmdens of production because TXP did not participate in the under exploration drilling clear fi om their brief was to operating Shanks is time when Carden a Cardens in effect and entirely in incurred period of the leases granting the dismissing plaintiffs costs at liability s and fmiher contend that the protect plaintiffs against such costs and expenses chargeable during and Carden appeal that the mineral leases granted would bear all the trial They is that under the laws prior drilling production costs at also position plaintiffs previously adjudicated than nature of their liable to the terms of the leases of sub lessee TXP liability well during hemi only be consent to unitization argue that recouped out They fuliher argue however that Carden s lack of pmiicipation in unitization is of no moment because he personally obligated himself by virtue of the leases to indelllilify plaintiffs against all well costs incuned during the existence of the leases 8 personally guaranteed payment Plaintiffs further contend that in the leases did not R S to relieve him of his 31 128 Carden discharge LSA R S 31 129 provides under obligations him discharged personal obligations a that s this assignment under the leases See LSA personal liability an s release of the leases in owed to and in plaintiffs because Carden herein is not relieved of assignor mineral lease unless the lessor expressly his interests assigned in title to TXP predecessor They further contend that Exchange 1986 did not his the Exchange Carden although Thus writing plaintiffs remained liable for the full amount of unit well costs has plaintiffs herein Carden assert ultimately charged to the tracts that had been under lease to Carden Because the mineral lease is the law between the Kelly Oil Company begin to the payment of royalties the payment of Lessor La 6 29 99 737 free costs the leases of expense As to plaintiffs provide that noted in that from the time the well stipulated the leases plaintiffs 2d Carden obligated himself beyond the payment personally obligated himself incuned on someone unitization arose the became during else the leases chargeable i e to pay all well costs s to land not subject to plaintiffs Carden were granted and was for until termination of plaintiffs incuned albeit by any well contend that in fact because a third they pmiy prior obligation for all well to costs still in effect when all costs the date the unitization became effective 9 With herein have the leases herein and s we obligation of those costs and the existence of the leases According day Nonetheless at 477 v shall be delivered to plaintiffs began producing issue at s 1262 paid royalties without being charged for were 674 So Shanks Shanks Exxon 2d 1257 and Carden royalties costs were So analysis by considering the language of the leases our regard 98 1193 pmiies Caskey Thus when as was the for well liability incurred for costs unitization to property prior in Shanks the case becomes who did not consent to unitization to or a primary well drilled to chargeable the issue drilling now before on someone an owner or activities of the us is else s lessee operating 6 owner As this comi noted in Shanks the leases the lessee with the exclusive right described for the exploration other minerals in Pursuant to law mining or pariies and LSA R S and period a relative However the leased tracts were to are lessee granted by and production the effective mere fact that 7 herein the unit during existence of the leases did not render Carden liable for well costs for 6 At the time the Conservation Statute defined from produce a pool LSA R S 30 3 8 Exchange and TXP Carden was an and to prior owner as appropriate to amendment had the owner unitization compulsory right the remained liable for all compulsory drilling a free of delivered to Lessor drilling plaintiffs arguments included in to be of at 476 production chargeable during 31 129 2d expressly qualified by exploration See LSA R S So 674 eighth one stated above the leases original leased land sulfur and all royalty of unless royalties as to relating contrary as the land hereinafter of oil gas Shanks tracts costs that oil use to share in gross Moreover to the of the leases a right Thus Carden expenses operations mineral is plaintiffs specifically provide costs for production 31 80 free of expense production the leased royalty a drilling to to enter upon and for and exchange production attributable granted by plaintiffs provided order was rendered the a well herein the the person who has the right to drill into and to production either for himself or for others the by Acts 1993 No to drill on plaintiffs 113 9 1 Carden and then tracts under the leases for purposes of the Conservation Statute when the leases thus were executed 7Louisiana Revised Statute 31 129 provides that a n assignor or sublessor is not obligations or liabilities lmder a mineral lease unless the lessor has expressly and in writing Thus because there is no evidence of a written discharge of Carden by plaintiffs Carden remained liable to plaintiffs under the mineral relieved of his discharged him leases while those leases were in effect 10 drilled on someone else land s which Carden did not lease unitization order which included the leased in the compulsory unit did affect Carden of owner Shanks within operating owner or unit compulsory drilling of and development 8 So by unit a 2d at 476 consenting arises non or accrues as there is 1139 operating non Moreover the inclusion even unit did not compulsory under the leases or accrue at of the leased lands Company v Thus 1991 costs only at 476 costs at of share for well the lessee the time the as an operations his La Shanks 674 So 2d production necessarily of 1143 owner As this comi fmiher concluded in Shanks well costs does not costs liability for the Davis Oil citing thereof court noted in this no out except the a as operator has Corporation 583 So 2d of pOliions lessee who does not consent to Steamboat Petroleum liability or obligation for well However operations 674 Shanks production s included within the unit tract a non a costs a tracts at issue the Clearly s for liability incuned are issue within 9 the of itself render Carden liable for all well costs by operation of law Pursuant to Davis and Shanks 8In order to prevent waste in the recovery of oil and gas from a producing formation located beneath separately owned or leased tracts of land and to protect the rights of each separately owned leased tract of land the or granted the compulsory drilling legislature has Commissioner of Conservation the statutory authority to establish units LSA RS 30 4 LSA R S 30 9 LSA RS 30 10 As a result ofthese drilling non units a need arose operating parties for a rule allocating costs between the unit who share in the unit s Steamboat Petroleum Corporation production 2d 1139 583 So Davis 1141 1142 compulsory operator and all Oil Company 1991 La v Thus the Louisiana Supreme Court pronounced that a non operating owner or lessee who does not operations within a compulsory drilling unit by a unit operator has no liability for the costs of development and operations except out of his share of production Davis Oil Company 583 So 2d at 1143 On the other hand where an owner or lessee consents to the unit operator s development and operations or takes the initiative to form an consent to operating unit that owner or lessee will be liable for cash payment in full for his regardless of proceeds from production Davis 583 So share of well costs proportionate 2d at 1144 Superior 910 910 911 246 La 842 9 As that we although were Oil Company Humble Oil v per curiam on application for 167 So 2d 668 1964 noted in Shanks this the well costs at issue incurred for a well drilled Refining Company 165 So 2d 905 principle becomes were on La rehearing incuned land not clearer when during subject App 4th Cir considering clearly had incurred either by no liability virtue of law or to the leases herein 11 they and before compulsory whatsoever for well costs at the time the leases the fact the existence ofthe leases issuance ofthe unitization order which included the leased lands in the Thus Carden writ refused they unit were Carden had recouped no out for well costs liability of production activities of the operating accrued there extent of as given the complete lack of evidence Thus owner was Accordingly or attributable to payment the payment of all became due ie to these tracts to the We find As other than production and have plaintiffs 2 to pay obligation s tracts extent of the no plaintiffs their existence of the leases royalties fi ee of expenses conclude that Carden had paid out plaintiffs of during no were never Moreover we tracts was sublessee share of was expense those costs production to support applied and share of payment of plaintiffs the existence of the leases as of expense to the costs costs that accrued proportionate liability for well paid were Thus we other than those costs for which held responsible find no merit to plaintiffs somehow remained liable for additional well released as the existence of the leases further production during of royalty free the entire well the plaintiffs of land to pay those costs acknowledged to greater liability for well to the during tracts at issue language in the leases to any 1 leased the to under the leases to pay obligation production attributable costs drilling for well costs free royalties for these plaintiffs asseIiion that Carden agreed under the facts herein of them costs the 674 So 2d at 477 fulfilled the free of expense royalties Shanks pursuant to the leases Carden fulfilled upon the was liability s or even to the or the proportionate share of production for the leased Moreover there Carden could be production from the unit well and only Davis 583 So 2d at 1143 1144 accrued costs that any way consented to unitization suggestion that Carden in only except for such by Exchange Pursuant costs to LSA R S Exchange herein acquires 12 the contention that Carden rights after the leases 31 128 an were aSSIgnee or and powers of the lessee AddItionally Carden herein that a sublessee may as to the leases themselves in provide the Lessor exercise the paragraph 9 rights and discharge the obligations of the Lessee without joinder of any sublessor One such pursuant to the right granted terms of these leases release of the leases at any time all obligations provision 3 as to production Lessor was the sublessee or to right See Shanks in specifically provides assignee or execute unilaterally thereby prospectively relieving the land leased of the leases Lessee the lessee to 674 So the lessee of 2d at 478 pertinent part as This follows may at any time prior to or after the discovery and of minerals on the land execute and deliver to file for record release releases of any portion or pOliions of the lands or any stratum or strata and be relieved all requirements hereof as to the land stratum or strata released Emphasis added Thus of or had the Exchange the leases and the lessee Gas or right sublessee under the leases obligations or to its herein then neither under the leases assignor or another see rights nor future produced and only v to was for these tracts of land once i e a 13 Exchange as 31 128 and under the leases not continuing obligations yet become due Inasmuch liability only to the extent of the relieved of release these interests in the as costs attributable to the tracts of land obligation not act of conveying his 31 129 Carden had any that had to Cir 1989 sublessor LSA R S subject International Oil and by the mere under LSA R S to pay well costs production was a to Exchange remaining unpaid well leases App 2nd liabilities under the leases so continuing obligations of See Willis assignee exercised the right leases pursuant continued as any 334 La 541 So 2d 332 interests in the leases or or thereby prospectively release Corporation sublessee a under the leases to release the lands Notably while Carden his a incuned propOliionate liability covered as out of for the by the the unit well share of production Carden was relieved of this future obligation by accordance with the provisions of the leases As stated in through Exchange at issue Shanks and right to release the plaintiffs became unleased landowners of a This release entitled them tracts See Shanks 674 So 2d obligated them chargeable See Shanks 2d half interest in their one eight eighths of production but also share proportionate 674 So interests in the leases prospectively accruing well to pay any from their to at 478 The as costs that the well continued to released seven Carden s or eighths Exxon of production Corporation 43 F 3d 668 well a as we 1241 this Clearly did with costs upon Carden than the Pursuant to the leases the leases and to pay Carden was nor leases its were only proportionate contractual s as right to by the described chargeable to cannot s obligation for Exchange paid by liability costs to pay costs previously paid during the term of Moreover consented to unitization owner Carden prior to 14 aff d in Shanks that free of such costs the as costs original TXP in the form of share of production Browning prevail one or to the arising during the lessee by virtue of its acquisition of Exchange those See greater obligation for payment of obligated drilling activities of the operating sublessee and TXP no the former U S D C M D La to TXP plaintiffs royalties because neither Carden existence of the leases position regard granted by plaintiffs imposed 1247 would treat proposition previously Supp produce but would costs Carden s to as Heads I win Tails you lose as 848 F 5th Cir 1994 We conclude the leases drilling terminated the fonner lessee United States District Comi v for responsibility s became position taken by plaintiffs require post tennination enforcement of the released leases lessee at 478 in brief acknowledged by plaintiffs as exercise of the s execution of the release in s Exchange as interests in the hundred percent of termination of these interests in the leases Thus TXP has have been held liable see additional well well costs for which it Shanks 674 So 2d the Estate of C T Carden entitlement to summary paid all at 478 accordingly established as or Carden could and Mrs Carden and a matter of law their claims for any judgment dismissing plaintiffs costs CONCLUSION For the above and of the trial court foregoing reasons dismissing plaintiffs claims Carden and Edna Mae Carden is affirmed against plaintiffs AFFIRMED 15 the January 25 against the Costs of this 2007 judgment Estate of C appeal are T assessed

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