Advanced Dev. Holdings v. Brea Canon Oil Co. Inc

• Decision Date: 14 December 2010
• Docket Number: No. BC352166,B216117,BC352166
• Court: California Court of Appeals Court of Appeals
• Parties: ADVANCED DEVELOPMENT HOLDINGS, INC. et al., Plaintiffs and Appellants, v. BREA CANON OIL COMPANY, INC., Defendant and Respondent.

ADVANCED DEVELOPMENT HOLDINGS, INC. et al., Plaintiffs and Appellants,

v.BREA CANON OIL COMPANY, INC., Defendant and Respondent.

B216117

No. BC352166

COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

Filed: December 14, 2010

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

APPEAL from a judgment of the Superior Court of Los Angeles County, Joanne O'Donnell, Judge. Affirmed.

Law Offices of Kent Vallette and Kent Leeds Vallette; Ostergar Hunter Law Group and Treg A. Julander; Law Offices of Joel R. Bennett and Joel R. Bennett for Plaintiffs and Appellants.

Bright and Brown, Maureen J. Bright and Kristin G. Taylor for Defendant and Respondent.

Appellants Richard C. Jones, Smith Heavy Industrial Transit Corp. (Smith Heavy), and Advanced Development Holdings, Inc. (Advanced) own the surface rights to land on which respondent Brea Canon Oil Company, Inc. (Brea) conducts oil production operations and maintains a pipeline. In the underlying action, appellants alleged that the leases authorizing the presence of Brea's oil production operations and pipeline had expired. The trial court granted summary adjudication in favor of Brea on appellants' claims regarding the oil production operations and, after a trial, entered a directed verdict against appellants on their remaining claims regarding the pipeline. We affirm.

RELEVANT FACTUAL ANDPROCEDURAL BACKGROUND

There are no disputes regarding the following facts: Oil production operations have long existed in an area south of Los Angeles often called the "Joughin Ranch," after its original owner, Andrew Joughin. In 1921 and 1945, the ranch owners executed leases permitting oil and gas drilling operations on the ranch in exchange for the payment of royalties. The so-called "habendum" clauses of the leases established a 20-year primary term, but permitted the lessees to continue their operations "so long as" oil and gas "may be produced," subject to specified conditions.¹ In 1964, the ranch owners and oil companies operatingunder the 1921 and 1945 leases entered into an agreement that created the "Joughin Unit" (unit agreement) for purposes of regulating production activities. On July 29, 1964, the unit agreement was approved by the Oil and Gas Supervisor of the State of California pursuant to Public Resources Code section 3301. Brea is the successor in interest to the original lessees under the 1921 and 1945 leases and the oil companies that executed the unit agreement.

In the late 1950s, Ray Watt became interested in developing the Joughin Ranch for residential and commercial purposes. Following negotiations with Watt and other parties, the oil company lessees agreed to a plan that accommodated the subdivision of the ranch for development, yet permitted continued oil and gas operations. Under the plan, the lessees retained their subsurface mineral rights, but concentrated their surface operations on specific sites within the ranch and quitclaimed their rights to use the surface of other portions of the ranch.

The parties to the plan executed ground leases regarding several drill sites and other documents relevant to the oil companies' operations. Pertinent here are two ground leases regarding the A-4 drill site dated February 9, 1967, and the grant of a right-of-way executed by Watt on June 15, 1967. The ground leases gave the companies "sole and exclusive right to use and occupy the surface of' the A-4 drill site for a 35-year term--that is, until 2002--and further provided that the companies, upon "surrender or termination," were to quitclaim "full title" to the drill site to the lessors. The grant of the right-of-way permitted the companies to maintain a pipeline on another portion of the Joughin Ranch until January 2002.

Appellants initiated the underlying action in May 2006. Their second amended complaint (SAC) asserted claims for trespass, ejectment, and declaratory relief, alleging, inter alia, that Brea had continued its operations on the A-4 drill site, despite the expiration of the 1967 ground leases in 2002. On May 28, 2008, the trial court granted Brea's motion for summary adjudication on certain of the SAC claims, concluding that the expiration of the ground leases had not extinguished Brea's rights regarding the A-4 drill site under the 1921 and 1945 leases, and that appellants lacked standing to challenge these leases.

Appellants' third amended and first supplemental complaint (TAC), filed October 21, 2008, alleged that Smith Heavy owned the A-4 drill site and Jones owned a lot on Oakhorne Drive on which Brea operated a pipeline (Oakhorne lot). Smith Heavy asserted claims for trespass, quiet title, nuisance, ejectment, and injunctive and declaratory relief against Brea, alleging that after the ground leases regarding the A-4 drill site expired in 2002, Brea never removed its production facilities and quitclaimed its rights to the site.² Jones asserted similar claims against Brea, alleging that Brea had maintained its pipeline on the Oakhorne lot after January 1, 2002, despite the expiration of the right-of-way granted by Watt.³

Following a jury trial, the trial court directed a verdict in favor of Brea on Jones's claims, and otherwise resolved appellants' remaining claims withoutsubmitting them to the jury. In the statement of decision, the court found that the 1921 and 1945 leases authorized Brea to maintain its operations on the A-4 drill site and its pipeline on Jones's lot, notwithstanding the expiration of the 1967 ground leases and Watt's grant of a right-of-way. On March 10, 2009, judgment was entered in Brea's favor. This appeal followed.

DISCUSSION

Appellants contend the trial court erred in granting Brea's motion for summary adjudication and for a directed verdict. We disagree.

A. Summary Adjudication

We begin with appellants' challenges to the summary adjudication on the SAC claims. Generally, "[a] summary adjudication motion is subject to the same rules and procedures as a summary judgment motion. Both are reviewed de novo. [Citations.]" (Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819.) "Summary judgment is proper if there is no triable issue of material fact and the moving party is entitled to summary judgment as a matter of law. (Code Civ. Proc., § 437c.)" (National Auto. & Cas. Ins. Co. v. Underwood (1992) 9 Cal.App.4th 31, 36.) Generally, "„[r]eview of a summary judgment motion by an appellate court involves application of the same three-step process required of the trial court. [Citation.]'" (Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1662.) The three steps are (1) identifying the issues framed by the complaint, (2) determining whether the moving party has made an adequate showing that negates the opponent's claim, and (3) determining whether the opposing party has raised a triable issue of fact. (See ibid.)

Although we independently review the grant of summary judgment, our inquiry is limited to the contentions adequately raised in appellants' opening brief. (Christoff v. Union Pacific Railroad Co. (2005) 134 Cal.App.4th 118, 125-126.) Appellants maintain that the trial court erred in ruling (1) that Smith Heavy lacked standing to assert its claims related to the 1967 ground leases, and (2) that the expiration of the 1967 ground leases did not extinguish Brea's surface rights regarding the A-4 drill site under the 1921 and 1945 leases. At the outset, we note that appellants have provided a limited record upon which to raise their challenges: they have failed to provide the second amended complaint, their opposition to the summary adjudication motion, or the parties' separate statements. To support their contentions of error, they rely on the 1921, 1945, and 1967 leases and a declaration from Watt they submitted in opposition to the motion. As Brea does not suggest that appellants' record is inadequate for purposes of our review of the summary adjudication, we examine appellants' contentions in light of these materials.

1. Standing

In seeking summary adjudication, Brea successfully contended that Smith Heavy's SAC claims amounted to a challenge to the 1921 and 1945 leases that Smith Heavy lacked standing to assert. Brea argued that Smith Heavy could not attack the 1921 and 1945 leases, notwithstanding its purported status as owner of the A-4 drill site, because Smith Heavy was neither a party to the leases nor their intended beneficiary. The trial court agreed. As explained below, we conclude that Smith Heavy had standing to assert the SAC claims as a successor in interest to the parties to the 1967 ground leases, which are tied to the interests created by the 1921 and 1945 oil and gas leases.

An owner of real property in fee simple may transfer the oil and mineral rights in the property by a lease while retaining the "remaining general estate in the land." (Wall v. Shell Oil Co. (1962) 209 Cal.App.2d 504, 510 (Wall).) "An oil and gas lease is both a conveyance and a contract. [Citation.] The conveyancing elements are the granting and habendum clauses, and the contractual elements include the provisions that pertain to the lessee's obligations with respect to exploring, drilling, and producing operations. [Citation.]" (San Mateo Community College Dist. v. Half Moon Bay Limited Partnership (1998) 65 Cal.App.4th 401, 409 (San Mateo Community College).)

As our Supreme Court explained long ago, the effect of the granting and habendum clauses in an oil and gas lease is to create "an interest or estate in real property in the nature of a profit a prendre." (Callahan v. Martin (1935) 3 Cal.2d 110, 118.) The lessee's rights include "a right to remove a part of the substance of the...