Quality Envtl. Processes, Inc. v. I.P. Petroleum Co.

• Decision Date: 01 July 2014
• Docket Number: 2013–C–1588,2013–C–1703.,Nos. 2013–C–1582,s. 2013–C–1582
• Parties: QUALITY ENVIRONMENTAL PROCESSES, INC., Michael X. St. Martin and Virginia Rayne St. Martin v. I.P. PETROLEUM COMPANY, INC., International Paper Company, Montgomery, Barnett, Brown, Read, Hammond & Mintz, L.L.P., and John Y. Pearce.
• Court: Louisiana Supreme Court

144 So.3d 1011

QUALITY ENVIRONMENTAL PROCESSES, INC., Michael X. St. Martin and Virginia Rayne St. Martin

v.I.P. PETROLEUM COMPANY, INC., International Paper Company, Montgomery, Barnett, Brown, Read, Hammond & Mintz, L.L.P., and John Y. Pearce.

Nos. 2013–C–1582, 2013–C–1588, 2013–C–1703.

Supreme Court of Louisiana.

May 7, 2014.

Rehearing Denied July 1, 2014.

Harry T. Lemmon, New Orleans, LA, Saint Martin & Bourque, Michael X. St. Martin, Christopher John St. Martin, Houma, LA, The Gray Firm, APLC, A.J. Gray, III, Lake Charles, LA, for Applicant (No. 2013–C–1582).

Fishman Haygood Phelps Walmsley Willis & Swanson, Brent Bennett Barriere, Mayhall & Blaize, LLC, Jamie Scott Manuel, Montgomery Barnett, LLP, John Y. Pearce, Phelps Dunbar, LLP, Harry Alston Johnson, III, New Orleans, LA, Taylor, Porter, Brooks & Phillips, LLP, William Shelby McKenzie, Amy Collier Lambert, Shreveport, LA, for Respondent (No. 2013–C–1582).

Montgomery Barnett, LLP, John Y. Pearce, New Orleans, LA, Taylor, Porter, Brooks & Phillips, LLP, William Shelby McKenzie, Amy Collier Lambert, Baton Rouge, LA, for Applicant (No. 2013–C–1588).

Harry T. Lemmon, Fishman Haygood Phelps Walmsley Willis & Swanson, Brent Bennett Barriere, Mayhall & Blaize, LLC, Jamie Scott Manuel, Phelps Dunbar, LLP, Harry Alston Johnston, III, New Orleans, LA, Saint Martin & Bourque, Michael X. St. Martin, Christopher John St. Martin, Houma, LA, The Gray Firm, APLC, A.J. Gray, III, Lake Charles, LA, for Respondent (No. 2013–C–1588).

Fishman Haygood Phelps Walmsley Willis & Swanson, Brent Bennett Barriere, Mayhall & Blaize, LLC, Jamie Scott Manuel, Phelps Dunbar, LLP, Harry Alston Johnson, III, New Orleans, LA, for Applicant (No. 2013–C–1703).

Harry T. Lemmon, New Orleans, LA, Saint Martin & Bourque, Michael X. St. Martin, Christopher John St. Martin, Houma, LA, Taylor, Porter, Brooks & Phillips, LLP, William Shelby McKenzie, Amy Collier Lambert, Baton Rouge, LA, The Gray Firm, APLC, A.J. Gray, III, Lake Charles, LA, for Respondent (No. 2013–C–1703).

GUIDRY, Justice.^*

This case involves mineral rights and royalties associated with a production well located on a certain tract of land owned by the plaintiffs in Terrebonne Parish. Two conveyances are of importance to the resolution of this case: a 1966 mineral deed and a 1992 cash sale. The plaintiffs asserted the 1966 mineral deed did not create a valid mineral servitude and, consequently, sought to be declared as owning 100% of the mineral rights since their purchase of the subject property by act of cash sale in 1992, and demanded to be awarded the royalties due from June 29, 1997, until the well stopped producing sometime in 2001 or 2002. They also sought penalties, attorney fees, and interest. The plaintiffs further asserted a violation of the Louisiana Unfair Trade Practices Act based on the allegation that various acts of the defendants amounted to a tortious conspiracy to deprive the plaintiffs of the royalties due them. The trial court ruled in the plaintiffs' favor, finding the 1966 mineral deed did not create a valid servitude over the subject property, the plaintiffs were the owners of the mineral rights as of the 1992 purchase, and the defendants' conduct amounted to unfair trade practices. The appellate court reversed and vacated the judgment, finding that the 1966 mineral deed had created a valid mineral servitude and that the 1992 act of cash sale had placed the plaintiffs on notice that the mineral rights to the property had been previously conveyed. The appellate court then remanded the case for consideration of the remaining issues associated with any rights the plaintiffs may have acquired from settlements with predecessor mineral interest owners in 2001 and 2005.

For the reasons set forth below, we affirm the court of appeal's judgment. We hold that the 1966 mineral deed was sufficiently specific to identify the property to be conveyed and, thus, to create a valid mineral servitude and to place third parties on notice of the existence of that servitude. We thus conclude the plaintiffs did not acquire the mineral rights to the subject property via the 1992 warranty deed. We further find that the actions of the defendants did not rise to the level of an unfair trade practice within the meaning of the act. We also affirm the remand of the case to the trial court for consideration of any royalty payment issues stemming from the after-acquired rights, if any, arising out of the 2001 and 2005 settlements.

FACTS AND PROCEDURAL HISTORY

The subject property, hereinafter the St. Martin Property, consists of certain sections and portions thereof located in Townships 17 and 18 South, Range 16 East, all in Terrebonne Parish. The tract was acquired by Michael X. St. Martin and Virginia Rayne St. Martin by act of cash sale dated June 23, 1992. The vendor was Contran Realty Corporation, which had acquired the property from Southdown, Inc., in 1987. In pertinent part, the 1992 act of cash sale provided as follows:

VENDOR and VENDEE acknowledge, with the exception of [the] tract more particularly described on Exhibit “B”, and without intending to interrupt any prescriptive periods which may presently be accruing, that the oil, gas and other minerals lying in, on or under the subject property have been previously conveyed, and that the existence of mineral servitudes shall not constitute a failure of title under the limited warranty set forth hereinabove.

VENDOR specifically reserves all of the oil, gas and other minerals situated on or under [the] tract described on Exhibit “B”....

....

VENDOR and VENDEE agree that the act of sale herein is made subject to all such servitudes and/or pipeline rights of way, canal servitudes, and other noncancelable surface leases, as are in actual existence, or of record, including without limitation, the following, to-wit:

(a) Canal Use Agreement dated January 26, 1970, by and between Southdown, Inc. and Union Oil Company of California, recorded in COB 489, Folio 685, under Entry No. 376196, records of Terrebonne Parish, Louisiana.

(b) Surface Lease dated April 6, 1983, by and between Contran Corporation and The Superior Oil Company, recordedin COB 919, Folio 627, under Entry No. 703480, records of Terrebonne Parish, Louisiana.

....

In pertinent part, Exhibit “B” to the 1992 cash sale stated:

A tract of land comprising 105 acres, more or less, being the Southwesternmost 105 acres more or less in the SW/4 of Section 3, T18S–R16E, Terrebonne Parish, Louisiana, a plat of which is attached as Exhibit “D” to that certain Mineral Conveyance from Southdown, Inc. to Southdown Exploration, Inc., dated August 31, 1966, recorded under Entry No. 315794, Records of Terrebonne Parish, Louisiana.

On August 15, 1994, the St. Martins conveyed a 10% mineral interest in their property to Quality Environmental Processes, Inc. (hereinafter “Quality”), and then on March 1, 2001, another 20%. Although the St. Martins and Quality, hereinafter the plaintiffs, acknowledge that the 1992 cash sale states “that the oil, gas and other minerals lying in, on or under the subject property have been previously conveyed,” they claim there was no valid mineral servitude encumbering the property at the time of the 1992 purchase and, thus, they acquired 100% of the mineral rights in the subject property as a result of the 1992 cash sale.

The validity of their claim, all parties agree, turns on whether a 1966 mineral deed, also referred to as the 1966 agreement, purporting to identify and convey a mineral servitude from the then owner of the property, Southdown, Inc., created a valid mineral servitude.¹ That 1966 mineral deed was created by instrument dated August 31, 1966, recorded at COB 433, Folio 128 of the records of Terrebonne Parish, in which Southdown, Inc. conveyed to Southdown Exploration, Inc. all of its rights title and interest in and to the oil, gas and other minerals located in, on or under the lands outlined in blue on the plats marked Exhibits “A” through “H” and attached to the 1966 agreement. These plats marked as Exhibits “A” through “H” to the 1966 agreement covered eight separate, non-contiguous areas located in four different parishes. As previously noted, on each of the plats attached to the 1966 agreement is an area outlined in blue reflecting the boundaries of the particular “Productive Area” within which Southdown, Inc. was conveying a mineral servitude to Southdown Exploration, Inc.

Exhibit “I” to the 1966 agreement lists and describes the “Known Productive Sands” within the various tracts identified in the exhibits. These sands are described by depth and geographical location, or as defined by Louisiana Department of Conservation orders.

The 1966 mineral deed provides in pertinent part as follows:

SOUTHDOWN, INC., a Louisiana corporation, hereinafter referred to as “Grantor”, does hereby grant, bargain, sell, convey, set over and deliver unto SOUTHDOWN EXPLORATION, INC., a Louisiana corporation, hereinafter referred to as “Grantee”, all of Grantor's right, title and interest in and to the oil, gas and other minerals located in, on or under the lands outlined in blue on the plats marked Exhibits “A” through “H”, which said Exhibits are attached hereto and made a part hereof in full by reference, covering lands located in St. James, Terrebonne, Ascension and Lafourche Parishes, Louisiana. The lands outlined in blue on Exhibits “A” through “H” are herein sometimes referred to as “Productive Area”.

Grantor and Grantee herein agree to execute such further instruments as may be necessary or desirable to effect the conveyance set out hereinabove; in this connection, the parties agree forthwith to cause an accurate survey to be made of each of the areas outlined in blue, and the detailed survey plats, when approved by the parties and filed of record, shall be substituted for Exhibits “A” through “H” and shall constitute a part of this agreement. It is agreed particularly that if the area...