11 F.3d 1298 (5th Cir. 1994), 92-5006, Mills v. Davis Oil Co.

Docket Nº92-5006.
Citation11 F.3d 1298
Party NameWilliam P. MILLS, III, John L. Robertson, Brenda Sue Harmon Robertson, Orel Bridges, Jr., and Ethyl Sue Hoffpauir Bridges, Plaintiffs-Appellants-Cross-Appellees, v. DAVIS OIL COMPANY, Saturn Energy Company, Vale & Company, Allen E. Paulson, NERCO Oil & Gas, Inc., and Exxon Corporation, Defendants-Appellees-Cross-Appellants.
Case DateJanuary 21, 1994
CourtUnited States Courts of Appeals, United States Court of Appeals (5th Circuit)

Page 1298

11 F.3d 1298 (5th Cir. 1994)

William P. MILLS, III, John L. Robertson, Brenda Sue Harmon

Robertson, Orel Bridges, Jr., and Ethyl Sue

Hoffpauir Bridges,

Plaintiffs-Appellants-Cross-Appellees,

v.

DAVIS OIL COMPANY, Saturn Energy Company, Vale & Company,

Allen E. Paulson, NERCO Oil & Gas, Inc., and Exxon

Corporation,

Defendants-Appellees-Cross-Appellants.

No. 92-5006.

United States Court of Appeals, Fifth Circuit

January 21, 1994

Page 1299

[Copyrighted Material Omitted]

Page 1300

Warren D. Rush, Rush, Rush & Calogero, Lafayette, LA, Robert E. Arceneaux, Mack E. Barham and Matthew K. Brown, Barham & Arceneaux, New Orleans, LA, for appellants.

Matthew J. Randazzo, III and F. Henri Lapeyre, Jr., Lapeyre, Terrell & Randazzo, New Orleans, LA, for Davis, et al.

E. Burt Harris, New Orleans, LA, for Exxon.

Appeal from the United States District Court for the Western District of Louisiana.

Before KING, and JOLLY, Circuit Judges, and PARKER, 1 District Judge.

ROBERT M. PARKER, District Judge:

In this diversity action, William P. Mills, III, John L. Robertson, Brenda Sue Harmon Robertson, Orel Bridges, Jr., and Ethyl Sue Hoffpauir Bridges (hereinafter referred to collectively as "Mills") are before this Court seeking review of a district court judgment granting summary judgment to defendants, Davis Oil Company, Saturn Energy Company, Vale & Company, Allen E. Paulson, and NERCO Oil & Gas, Inc. (hereinafter "Davis"). Davis has cross appealed, seeking to change the dismissal without prejudice of Mills claims for civil penalties under La.R.S. 30:18 to dismissal with prejudice.

We reverse in part and affirm in part.

FACTS

In 1977, Kenneth Upton purchased a 16.43 acre tract of land located in Lafayette Parish, Louisiana. In 1983, Upton mortgaged the land as collateral for a $500,000 loan from First National Bank of Lafayette ("FNB"). Later in 1983, Upton granted Louisiana Land Management ("LLM") a mineral lease on the land. Early in 1984, LLM assigned the lease to Davis Oil Company. (There is a fairly complicated history of assignments of the lease among various oil companies that has no relevance to the issues before us. All remaining interest holders will be referred to collectively as "Davis.") The lease was properly recorded.

Upton defaulted on the loan to FNB in 1984. FNB got a judgment against Upton and in execution of its judgment, obtained a writ of fieri facias. The local Sheriff seized the tract which is the subject of the suit and sold it at auction to FNB, in May 1984. Davis did not get notice of the sale and did not bid on the land.

On March 10, 1984, a Davis well located on property adjacent to the subject tract "blew out" indicating a significant hydrocarbon discovery. In September 1984, Davis gave notice that it planned to apply to the Louisiana Commissioner of Conservation (Commissioner) for the establishment of a production unit that would include the subject tract. Because Mills owned another tract nearby, he received notice of Davis' intent. In October, Mills entered into an agreement to buy the subject tract from FNB. During the ensuing negotiations on the specifics of the sale, Mills obtained a title opinion which specifically questioned the validity of the sale of the subject tract to FNB, based on the lack of notice to Davis.

On February 4, 1985, the Commissioner established a unit that included part of the subject tract, which guaranteed the tract a share in the production from the unit. On February 12, 1985 Mills purchased the tract from FNB for a price that reflected only the surface value of the tract.

On March 26, 1985, Mills made demand on Davis for a recordable release of the subject lease. Davis responded by filing an action for declaratory judgment, attempting to establish the validity of the lease. Mills brought the suit now before us in 1986 to recover damages Davis allegedly caused by refusing to provide a release of the lease. Mills also sought penalties and attorney's fees. The district court stayed this suit pending the outcome in Davis' declaratory judgment action. After lengthy litigation, the court found that the lease had been extinguished by the sheriff's sale to FNB. The holding of that companion case was appealed and affirmed earlier, and is not before

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us now. See Davis Oil Co. v. Mills, 873 F.2d 774 (5th Cir.1989).

After Mills prevailed in the declaratory judgment action, he filed a motion for partial summary judgment seeking to recover from Davis his share of the oil and gas revenues produced from the property. The district court granted the motion and Davis paid Mills approximately $400,000. Davis then filed its own motion for summary judgment seeking a dismissal of Mills' remaining claims for penalties, damages and attorney's fees. On August 6, 1992, the district court granted Davis' motion for summary judgment, dismissing all of Mills' claims against Davis with prejudice, except for Mills' claim for additional production revenues and Mills' claim for civil penalties under La.R.S. 30:18, which claims were dismissed without prejudice.

Mills now appeals the dismissal of his claims, and Davis appeals the district court's decision to dismiss some of Mills' claims without prejudice.

STANDARD OF REVIEW

In this diversity case decided on summary judgment, the controlling law is that of Louisiana. Appellant's arguments challenge the district court's application of Louisiana law. We must review de novo the district court's determination of state law. Salve Regina College v. Russell, 499 U.S. 225, 238, 111 S.Ct. 1217, 1225, 113 L.Ed.2d 190 (1991) ("The obligation of responsible appellate review and the principle of a cooperative judicial federalism underlying Erie [ R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ] require that courts of appeals review the state-law determination of district courts de novo.")

The standard of review at the appellate level of a district court's grant of summary judgment requires the same analysis as employed by the trial court. See Federal Rules of Civil Procedure 56(c). Legal questions raised by a grant of summary judgment are reviewed de novo. The determination of whether there exist genuine issues of material fact, although considered de novo, requires deference to the nonmoving party. Jones v. Southern Marine & Aviation Underwriters, 888 F.2d 358, 560 (5th Cir.1989).

FAILURE TO FILE OR PROVIDE A RELEASE

Mills' first point of error challenges the district court's denial of his claim for damages and attorney's fees for Davis' refusal to record a release of the subject lease within ninety days of Mills written demand, dated March 26, 1985. Mills' claim is bottomed on Sec. 206-209 of the Louisiana Mineral Code 2.

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The district court granted summary judgment for Davis on this issue, finding that "although on first blush it may seem that damages and attorney's fees may be owed to Mills [ ] by Davis [ ], with a literal reading of the statute, however, the underlying rationale of La.R.S. 31:206, et seq. does not dictate such an award." District Court Memorandum Ruling at 10. The district court reasoned that since the Sheriff's sale that extinguished the lease was recorded in the public records, both Mills and the general public knew that the lease was extinguished and that Mills was not entitled to any further documentation under the statute.

The district court further found that since Mills knew that the title was in controversy when he purchased the property, and because the purchase price was less than the appraised value of the surface of the Subject Tract, Davis' actions cause Mills no damage.

The district court specifically declined to reach the question of whether Mills had standing to seek extinguishment of the Subject Lease and subsequent damages and attorney's fees.

La.R.S. 31:206(B) gives any person in whose favor a mineral lease has expired or been extinguished, the right to demand that the former lessee record an act evidencing the extinction or expiration or the lease in the public records. La.R.S. 31:207 provides that if the former lessee refuses to record such an act within ninety days of the lease's extinguishment, then the person in whose favor the mineral lease has expired or been extinguished may recover damages and attorney's fees he has incurred as a result of that refusal. The former owner of a mineral right other than a mineral lease is not liable for damages or attorney's fees if there is a good faith dispute as to the extinction or expiration of the right. However, the good faith defense is not available to a former mineral lessee such as Davis. Webb v. Hardage Corp., 471 So.2d 889, 894 (La.App.2d Cir.1985).

There is no dispute that Davis did not record in the public records or provide to Mills a release of the Subject Lease within the time frame allowed in the statute. We are in agreement with the district court that a literal reading of the statute indicates that Davis owes Mills damages and attorney's fees. After examining Louisiana law, we conclude that a Federal District Court cannot sidestep the literal wording of the statute and go in search of the Louisiana legislature's underlying rationale in enacting of La.R.S. 31:206, et seq.

Under Louisiana law, where the statutory language is unambiguous, inquiry into legislative intent in improper. La.Civ.Code, art. 9; Broussard v. Sears, Roebuck, & Co., 568 So.2d 225, 228 (La.App.3d Cir.1990) (When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written, and no further interpretation may be made in search of the intent of the Legislature.)

To locate the statute's underlying rationale, the court below, looked to the comments to La.R.S. 31:206, which stated that Articles 206 through 209 are a redraft of former R.S. 30:101-102(d) and did not change the substance of...

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