Aladdin Oil Co. v. Rayburn Well Service, Inc.

• Decision Date: 17 July 1967
• Docket Number: No. 2269,2269
• Citation: 202 So.2d 477
• Parties: ALADDIN OIL COMPANY, Inc., et al. v. RAYBURN WELL SERVICE, INC., et al.
• Court: Court of Appeal of Louisiana — District of US

Page 477

202 So.2d 477

ALADDIN OIL COMPANY, Inc., et al. v. RAYBURN WELL SERVICE, INC., et al.

No. 2269.

Court of Appeal of Louisiana, Fourth Circuit.

July 17, 1967.

Rehearing Denied Oct. 4, 1967.

Ernest Carrere, Jr., New Orleans, for Aladdin Oil Co., Inc., plaintiff-appellee-appellant.

John F. Fox, Jr., New Orleans, and John J. Maxwell, Metairie, for Rayburn Well Service, Inc., and others.

P. A. Bienvenu, and Robert N. Ryan, Bienvenu & Culver, New Orleans, for Employers Mutual Liability Insurance Co., third party defendant-appellant.

Before REGAN, YARRUT, and CHASEZ, JJ.

CHASEZ, Judge.

This case arises out of an oil well casualty which occurred on or about June 26, 1961. The well, known as Waterford No. 1, was located in Bayou Couba Field in St. Charles Parish, Louisiana. The plaintiffs are Aladdin Oil Company, Inc., the operator of the well, Aladdin Exploration Company, Inc., Hershey Oil Corporation and United States Fidelity and Guaranty Company as subrogee for the damages it had reimbursed the plaintiffs. Named defendants were the Rayburn Well Service, Inc., Johnnie S. Rayburn, Lawrence D. Rayburn, Donald Rayburn and Harold Barrios.

At the time of the casualty the defendants, Rayburn Well Service, Inc., its employees and Johnnie S. Rayburn and Donald Rayburn were engaged in re-work activities upon the well. The plaintiffs alleged that Hershey Oil Corporation and Aladdin Oil Company, Inc. were granted a 'farm-out' by written agreement of May 2, 1960, covering a mineral lease dated June 10, 1959 between Waterford Oil Co. lessor and the California Co., lessee. On May 9, 1960, Aladdin Oil Company, Inc. assigned all rights, title and interest in the farmout agreement to Aladdin Exploration Company, Inc. On that same date Aladdin Oil Company, Inc., as operator, and Hershey Oil Corporation and Aladdin Exploration Company, Inc., as non-operators, entered into an operating agreement covering drilling operations on the farmout.

It was alleged that in 1961 Aladdin Oil Company, Inc. negotiated with Johnnie S. Rayburn and Rayburn Well Service, Inc. to rework an oil well in St. Charles Parish for the account of the parties to the operating agreement, and that this contract was intended to be reduced to writing, but was acted on by the defendants before the contract was actually signed. The plaintiffs alleged that Johnnie S . Rayburn and Donald Rayburn and other representatives of the defendants had complete and exclusive control of the re-work operations. The plaintiffs pleaded 'res ipsa loquitur' and, alternatively, alleged various acts of negligence; and alleged that all of the named defendants participated jointly in all acts of commission or omission with Rayburn Well Service, Inc.

In their answer, the defendants filed what amounted to a general denial, and by third-party petition sued Employers Mutual Liability Insurance Company, its agent, Herbert Rodrigue, Surplus Insurance Underwriters of Dallas, Texas and certain underwriters at Lloyd's London under a policy issued by Employers Mutual Liability Insurance Company which allegedly provided 'a legal defense and protection' which defense was refused to defendants, and under a policy issued by Surplus Insurance Underwriters by which they and the London underwriters covered the liabilities alleged by the original plaintiffs. It was also alleged by this and a supplemental third-party petition that Employers Mutual Liability Insurance Company and Herbert Rodrigue, if not liable in contract, were liable in tort for not actually providing coverage as represented by them.

The defendants of the original petition also reconvened against the original plaintiffs (except United States Fidelity and Guaranty Company) alleging that Aladdin Oil Company, Inc. verbally accepted an offer to re-work certain wells after receiving such from Johnnie S. Rayburn together with an inventory schedule of Barge Rig No. 5 to be used in the re-work job. It was alleged that the re-work of Waterford No. 1 Well began under the supervision of the Chief Petroleum Engineer of Aladdin Oil Company, Inc. who supplied, as customary, the mud program necessary to prevent the well from kicking and blowing out; that while taking the 'Christmas tree' down Rayburn Well Service Inc's employee noticed that the short string back pressure valve was defective and this was called to the attention of the defendants in reconvention (the Aladdin group), but they said the manual valve on the short string of tubing could be used. It was also alleged that damage of $100,000 to equipment and its use were sustained due to the negligence of the Aladdin Oil Company, Inc., defendants in reconvention, in failing to provide a proper mud program, back pressure valves, and a competent supervisory engineer, and in insisting that operations proceed without delay and that a manually operated safety valve be placed on top of the short string of tubing.

Employers Mutual Liability Insurance Company and Herbert Rodrigue denied liability and asserted that it was not the intent of the parties that claims as alleged in the original petition be covered. Various exclusionary clauses of the policy were also plead whereby it was alleged that there was no liability for loss due to underground damage, damage to property over which the insured had control or owned or occupied or rented, and damage to property on or about the surface of the earth caused by blowout or cratering.

A supplemental petition of the third-party plaintiffs asked for attorney's fees from Employers Mutual Insurance Company for failure to defend them, which claim was rejected by the insurance company.

The original plaintiffs, of course, denied the claims of the plaintiffs in reconvention.

An answer by Jack Creswell, representative of certain underwriters at Lloyd's London, was filed, which answer amounted to a general denial. A stipulation was filed whereby any judgment affecting Jack N. Creswell was to have the same effect upon the subscribing underwriters at Lloyd's London.

Surplus Insurance Underwriters of Dallas, Texas excepted to the jurisdiction of the lower Court over it on July 30, 1962. At a hearing in which other exceptions not pertinent here were disposed of, the Court stated that this exception to jurisdiction was considered abandoned. Subsequently, an identical exception was filed on April 1, 1963.

Employers Mutual Liability Insurance Company and Herbert Rodrigue also filed exceptions of no right of action and no cause of action.

On October 19, 1964 the trial Court rendered judgment with reasons . The Court found that the real parties at interest among the plaintiffs were Aladdin Exploration Company, Inc., Hershey Oil Corporation, and United States Fidelity and Guaranty Company, and that Aladdin Co. Inc. was merely the operator of the well, and its demand was dismissed. It was further found that no right or cause of action was made out against Harold Barrios and Lawrence D. Rayburn and the claims against them were dismissed.

The Court found Rayburn Well Service, Inc. and its officers and employees to be negligent and liable for the damages incurred to the plaintiffs. As to quantum, the Court found that well and fire control costs were proved to the extent of $16,372.58, and repairs to the surface equipment damaged by fire to the extent of $20,912.32 . The additional cost of reworking the well caused by the fire was found to be $28,141.49. The trial Court also felt that the plaintiffs' claim for oil or damage to the underground oil sand should be denied as being too speculative.

The reconventional demand against the original plaintiffs was considered as not having been proved, and it was likewise stated that there was no right or cause of action made out against third-party defendants, Herbert Rodrigue, Surplus Insurance Underwriters of Dallas, Texas and certain underwriters of Lloyd's London. However, Employers Mutual Liability Insurance Company of Wisconsin was found to be liable unto third-party plaintiffs under its policy.

The Court in its judgment held as follows:

'Accordingly, there is judgment herein in favor of plaintiffs Aladdin Exploration Co. Inc., and Hershey Oil Corp. in the amount of $44,514.07 and in favor of plaintiff United States Fidelity & Guaranty Co. in the amount of $20,912.32, all against defendants Rayburn Well Service, Inc., Johnnie S. Rayburn and Donald Rayburn in solido, together with legal interest thereon from date of judicial demand until paid.

'Further, the demands of plaintiff Aladdin Oil Co., are dismissed and all demands of plaintiffs against defendants Harold Barrios and Lawrence D. Rayburn are dismissed.

'Further, the reconventional demands of Rayburn Well Service, Inc., Lawrence D. Rayburn and Harold Barrios against Aladdin Oil Co., Aladdin Exploration Co. and Hersey (sic) Oil Corp. are dismissed.

'Further, there is judgment herein in favor of third-party plaintiffs Rayburn Well Service, Inc., Johnnie S. Rayburn and Donald Rayburn and against third-party defendant Employers Mutual Insurance Co. of Wisconsin in the amount of $65,426.39, together with legal interest thereon from date of judicial demand until paid.

'Further, that all demands against third-party defendants Herbert Rodrigue, Surplus Insurance Underwriters of Dallas, Texas and Certain Underwriters at Lloyd's, London, are dismissed.

'Further, that the demand of third-party plaintiffs for attorney fees from third-party defendant Employers Mutual Insurance Co. of Wisconsin is denied.

'All costs to be shared equally among defendants Rayburn Well Service, Inc., Johnnie S. Rayburn, Donald Rayburn and third-party defendant Employers Mutual Insurance Co. of Wisconsin.'

From this judgment there are several appeals. Rayburn Well Service, Inc. and Johnny S. Rayburn and Donald Rayburn appealed from the judgment against them and in favor of the plaintiffs, Aladdin Exploration Company, Inc., Hershey Oil Corporation and United States Fidelity and Guaranty...