Cimarex Energy Co. v. Mauboules, CA 2008-452.

Citation6 So.3d 399
Decision Date11 March 2009
Docket NumberNo. CA 2008-452.,CA 2008-452.
PartiesCIMAREX ENERGY CO., et al. v. Katherine D. MAUBOULES, et al.
CourtCourt of Appeal of Louisiana (US)

George Jeanmard Tate, Attorney at Law, Abbeville, LA, for Defendant Appellant, Zeneco, Inc.

Steven Bernard Rabalais, Rabalais, Hanna, Lafayette, LA, for Defendant Appellee, Essex Royalty Joint Venture II.

Cheryl Mollere Kornick, Attorney at Law, New Orleans, LA, for Plaintiff Appellant, Ceniarth, Ltd. Cimarex Energy Co.

J. Clemille Simon, Attorney at Law, Lafayette, LA, for Intervenor Appellee, Ereunaco Oil.

Barry Louis Domingue, Simon Law Offices, Lafayette, LA, for Intervenor Appellee, Ereunaco Oil.

Michael Howard Landry, Attorney at Law, Crowley, LA, for Defendant Appellee, Jack W. Larimer, Cimarex Energy Co., Floyd Trahan, Valerie Mocek Trahan.

Kyle M. Bacon, Longman Russo, Lafayette, LA, for Defendant Appellee, Patrick and Kathy Mauboules.

Matthew R. Lynch, Milling, Benson, Woodward, Lafayette, LA, for Defendant Appellant, Palace Exploration Co.

Jed Mestayer, Laborde & Neuner, Lafayette, LA, for Intervenor Appellee, Orange River Royalties, LLP.

Collette Ross Gordon, Liskow & Lewis, PLC, New Orleans, LA, for Plaintiff Appellant, Cimarex Energy Co. Ceniarth, Ltd.

Diversified Energy Investments, Jack W. Larimer.

John Michael Gottesman, Essex Royalty Joint Venture II.

Court composed of JOHN D. SAUNDERS, OSWALD A. DECUIR, and ELIZABETH A. PICKETT, Judges.

SAUNDERS, Judge.

FACTS AND PROCEDURAL HISTORY:

This appeal arises from an Amended Final Judgment by the Fifteenth Judicial District Court, in which the trial court found that Appellants1 (hereinafter collectively referred to as "Cimarex") brought a concursus proceeding, under La.Code Civ.P. art. 4658, without having a legitimate basis to do so, thereby unreasonably withholding royalty payments from Appellees2 (hereinafter collectively referred to as "Orange River"). A review of the facts leading up to this appeal is instructive.

In 1997, Katherine Daigle Mauboules and other members of her family sold royalty interests in their land to Ereunao Oil & Gas, Inc. (hereinafter "Ereunao"). This royalty deed contained an "Off Tract Production Clause" that would later become the source of Mauboules' assertion that she might be entitled to the royalty interests she had sold to Ereunao. Years after Ereunao's purchase of royalty interest from Mauboules, Orange River made three different purchases of royalty interests from Ereunao's assignees, Lawrence and Lorena Brock, in April 2004, August 2004, and February 2005.

Meanwhile, during February of 2003, Cimarex acquired a mineral lease from Maboules and drilled a well, which began production in January 2004. The Cimarex lease agreement had been reached after a year of unsuccessful negotiations with Mauboules and only after the addition of three key provisions: (1) Cimarex would pay Kenneth Privat (hereinafter "Privat"), Maboules' attorney, $7,500.00 in legal fees to offset future legal expenses incurred by filing suit against a royalty purchaser known as Ereunao Oil & Gas, Inc. et al.; (2) Cimarex would place the royalties in suspense until the suit against Ereunao was over; and (3) Cimarex would pay Maboules $75,000.00 if (a) her lawsuit against Ereunao was unsuccessful and (b) a successful well was drilled and the well reached 150% payout.

On March 26, 2004, Privat sent Cimarex a letter, claiming that Ereunao's royalty interest had prescribed. In a follow-up phone conversation, Privat spoke to Cimarex attorneys and asserted that a clause in the Maboules-Ereunao deed might have been procured by fraud. On June 9, 2004, Cimarex advised Orange River that Cimarex would be suspending Orange River's royalty payments. Later, on November 16, 2004, Orange River's attorney, Kerry Kilburn (hereinafter "Kilburn") made written demand for payment. In his letter, Mr. Kilburn noted that Orange River is a, "good faith purchase[r] relying on the public record for the validity of [its] title and there can be no reasonable claim against [Orange River] by the Mauboules Family members." On December 20, 2004, a little over a month after Orange River's demand, Cimarex filed the concursus proceeding which forms the central focus of this appeal.

In that proceeding, the trial court made a factual finding that Cimarex had no legitimate basis on which to file a concursus and rendered judgment, awarding damages to Orange River. Cimarex appeals, asserting five assignments of error.

ASSIGNMENTS OF ERROR:

1. Must a stakeholder in a concursus proceeding have a legitimate basis to bring the concursus proceeding?

2. Does La.Code Civ.P. art. 4658 provide stakeholders in a concursus with absolute immunity from liability related to alleged nonpayment of funds deposited into the registry of the court?

3. Did the trial court correctly calculate "double" damages for purposes of Mineral Code Article 212.23(C)?

4. Did the trial court correctly calculate the date from which judicial interest became due on statutory damages awarded pursuant to Mineral Code Article 212.23(C)?

5. Must a royalty owner provide notice to the working interest owner before the royalty owner may seek a judicial award of penalties under Mineral Code Article 212.23?

ASSIGNMENT OF ERROR # 1:

Cimarex asserts that Mauboules' claim against Ereunao was sufficient to form the legitimate basis of a concursus proceeding, which would prevent Orange River from receiving its royalty payments timely. We disagree.

"The purpose of a concursus proceeding is equitable in nature, meaning to protect a person finding himself in possession of money which is not his from having to referee the rights of rival claimants and risk paying same to the wrong party." Bank of Sunset & Trust Co. v. A.J. Charlot, 614 So.2d 1386, 1388 (citing Transo Investment Corporation v. Oakley, 37 So.2d 560 (La.App. 2 Cir.1948). Furthermore, concursus proceedings developed "in order to curtail lengthy, vexatious and expensive litigations." Leon Sarpy, Concursus: Interpleader in Louisiana, 35 Tul. L.Rev. (1961). For that reason, our supreme court has encouraged the institution of concursus proceedings, even when the competing claim is "an inchoate interest in ... royalties," but only if the plaintiff "actually fear[s] that the payment [to another] might be hazardous." Irion v. Standard Oil Co. of Louisiana, 199 La. 363, 371, 6 So.2d 143, 146 (1942) (emphasis added). The requirement of an actual concern exists, lest the concursus itself become "vexatious," thereby re-creating the problem it was designed to remedy.

The trial court found that Cimarex failed to meet the minimum threshold for initiating a concursus proceeding. Cimarex's concursus proceeding was orchestrated as a condition to Mauboules granting Cimarex a mineral lease, rather than as a result of an actual concern about a competing claim.

This case is similar to another case involving a baseless concursus proceeding, that being Bank of Sunset & Trust Co. v. A.J. Charlot, 614 So.2d 1386 (La.App. 3 Cir.1993). In Bank of Sunset & Trust Co., this court found that a bank presented with a foreign judgment that had not been made executory in Louisiana was not presented with a legal competing claim, but rather was confronted with "nothing more than a man off the street ... who said, I have a claim...." Id. at 1388. In that case, we noted that "with a little cursory examination and investigation ... the bank would have alerted itself ... that ... the judgment ... [was] nothing more than a man off the street." We then defined the "threshold element for the initiation of a concursus proceeding" to be "the existence of at least two persons who have competing or conflicting claims to money." Id. at 1388-89.

Cimarex points out, in brief, that it was advised to institute the concursus by its attorney, an oil and gas lawyer with over thirty years experience practicing law. Cimarex asserts that their attorney had no way of "going behind" the Maboules' claim to test its legitimacy. However, the record indicates that Cimarex did not advise its attorney of the special agreement with Mauboules, nor of the extensive history with Mauboules' amorphous claim. The "clean hands doctrine" states: "He who comes into a court of equity must come with clean hands."

This doctrine universally affects the entire administration of equity jurisprudence as a system of remedies and remedial rights.

It is likewise fundamental that equity imperatively demands of suitors in its courts fair dealing and righteous conduct with reference to the matters concerning which they seek relief. One who has resorted to injustice, unfairness and unrighteous dealing, which it is the purpose of courts of equity to suppress, will appeal in...

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    • Court of Appeal of Louisiana — District of US
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    • 27 Junio 2018
    ...royalty interests," (citing the court of appeal's holding in Cimarex Energy Co. v. Mauboules , 08-452, p.9 (La. App. 3 Cir. 3/11/09), 6 So.3d 399, 407 ).14 Under this argument, La. Mineral Code art. 140 authorizes a "penalty" or "additional damages" of double that amount. Thus, Gloria's Ran......

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