Alvord v. Sun Oil Co.
| Decision Date | 22 June 1971 |
| Docket Number | No. 11640,11640 |
| Citation | 251 So.2d 659 |
| Parties | Horace H. ALVORD, III, Plaintiff-Appellant, v. SUN OIL COMPANY et al., Defendants-Appellees. |
| Court | Court of Appeal of Louisiana — District of US |
Bethard & Bethard, by Henry W. Bethard, III, Coushatta, for plaintiff-appellant.
Oliver & Wilson, by C. McVea Oliver, Monroe, for Sun Oil Company, R. O. Roy, Robert Roy, Mrs. Corinne Roy Kelly, Charles T. McCord, Jr ., Jack W. Grigsby, Jane H. Grigsby, William T. Murphy, III, and Marlin Risinger, Jr., defendants-appellees.
Shuey, Smith & Carlton, by John M. Shuey, Shreveport, La., for Anthony Oil Company and Morgan W. Walker, defendants-appellees.
Before AYRES, PRICE and HALL, JJ.
By this action plaintiff seeks to have decreed null and void a series of three oil, gas and mineral leases and, because of their nullity, to have them canceled and erased from the public records. The basis of this action is sefendants' failure to pay royalty as specified in the leases.
Plaintiff is the owner of one-half the minerals under, and which may be produced from, a described 282.54-acre tract of land in the Red River-Bull Bayou Field of Red River Parish, which interest was acquired subject to the aforesaid leases executed by plaintiff's predecessors in title. The land under which plaintiff owns the aforesaid minerals is designated by an order of the Department of Conservation as Tract 13 of the aforesaid oil field. Under the order, defendant Sun Oil Company is designated as operator and is producing oil from the lands covered by the order. Plaintiff was paid royalties due him under the leases to January 31, 1969, since when, however, no further royalty payments have been made.
Defendants, in addition to Sun Oil Company, as operator of the unit, are certain named lessees, sublesses, and/or assigns under the aforesaid leases.
Under dates of February 4 and 6, 1970, as to Sun Oil Company, and under date of March 3, 1970, as to Authony Oil Company and Morgan W. Walker, demands were made by plaintiff for a cancellation of the leases and their erasure from the public records because of the defendants' failure to pay royalties. No demand was made upon the remaining defendants. Sun Oil Company responded to plaintiff's request by executing a partial release dated February 11, 1970. No response was made by any other defendant. These demands were, as already noted, for a cancellation of the leases and not for payment of royalties. Nevertheless, on March 4, 1970, after receipt of these demands, Sun Oil Company issued and forwarded to plaintiff's attorney its check in the sum of $846.16, representing the proceeds of production it had sold for plaintiff's account from February 1, 1969, through January, 1970. This tender was refused and the check was returned, as were subsequent tenders. This action was instituted August 18, 1970.
The matter is before us on plaintiff's appeal from a judgment sustaining defendants' pleas of prematurity. These pleas are predicated upon the fact that plaintiff did not give defendants notice that their Operations were not being conducted in compliance with the terms of the leases, which notice, it is claimed, is prerequisite to the institution and maintenance of this action. These pleas are based upon identical provisions of the three leases which recite that:
'* * * in the event lessor considers that Operations are not being conducted in compliance with this contract, lessee shall be notified in writing of the facts relied upon as constituting a breach hereof and lessee shall have sixty (60) days after receipt of such notice to comply with the obligations imposed by virtue of the instrument.' (Emphasis supplied.)
In a recent case, Bouterie et al. v. Kleinpeter et al., 258 La. 605, 247 So.2d 548, the Supreme Court, in reviewing, under certiorari, the decision of the First Circuit Court of Appeal (234 So.2d 812 (1970)), had before it for interpretation a Similar provision in a Similar lease. The recitals of the clause there under consideration and referred to as Paragraph 11 are:
'In the event that Lessor at any time considers that Operations are not being conducted in compliance with this lease, Lessor shall notify Lessee in writing of the facts relied upon as constituting a breach hereof, and Lessee, if legally required to conduct operations in order to maintain the lease in force, shall have sixty (60) days after receipt of such notice in which to commence the necessary operations to comply with the requirements hereof.' (Emphasis supplied.)
After a thorough and detailed analysis of the many and varied provisions of the lease in the cited case relating to Operations under the terms of the lease, Mr. Associate Justice Summers, for the court, pointed out:
'Paragraph 11 () refers to 'operations' which are not 'conducted' in compliance with the lease, and to a situation where lessee is legally required to 'conduct operations.' Where these situations exist, lessee is given sixty days after written notice to 'commence the necessary operations' to comply with the requirements of the lease. Considering Paragraph 11 in the context of the lease, with particular reference to the use of the word 'operations' as it occurs throughout the text, it is apparent that Paragraph 11 does not contemplate, either by its express terms or by implication, that lessor should give written notice to lessee of failure to pay royalties and allow sixty days to comply before suit can be instituted for cancellation.
'Payment of royalties is not an 'operation conducted' by lessees; nor is it correct to say that the renewal of the obligation to pay royalties is the same as saying, 'commence the necessary operations' as those terms are used in Paragraph 11.' (Emphasis supplied.)
In reviewing the jurisprudence applicable to the question presented there, the same question as now before us, the court further pointed out that:
'In this State we have likened the payment of royalties to rent. Melancon v. Texas Company, 230 La. 593, 89 So.2d 135 (1956); Milling v. Collector of Revenue, 220 La. 773, 57 So.2d 679 (1952); and Logan v. State Gravel Co., 158 La. 105, 103 So. 526 (1925). And the cases have recognized that the codal provisions applicable to ordinary leases must be applied to oil and gas leases. Melancon v. Texas Co., supra; Coyle v. North American Oil Consolidated, 201 La. 99, 9 So.2d 473 (1942); Tyson v. Surf Oil Co., 195 La. 248, 196 So. 336 (1940).
'The pertinent provisions of the Civil Code concerning leases provide that 'The lessee is bound: * * * To pay the rent at the terms agreed on.', Article 2710, And if he fails to pay the rent when due, he 'may be expelled from the property.' Article 2712.
'Courts have, moreover, been substantially unanimous in holding that if the lessee fails to pay or tender the rental on or before the due date, the lease terminates automatically regardless of the fact that subsequent to the due date the lessee may tender the rental payment. Johnson v. Smallenberger, 237 La. 11, 110 So.2d 119 (1959); Clingman v. Devonian Oil Co., 188 La. 310, 177 So. 59 (1937); 3 Williams, Oil and Gas Laws, § 606.2 (1969) .
'Where royalties are concerned, since no stipulated date for payment is set, the jurisprudence is to the effect that failure to pay production royalties for any appreciable length of time without justification amounts to an active breach which terminates the lease without the necessity of putting in default. Bollinger v. Texas Co., 232 La. 637, 95 So.2d 132 (1957); Melancon v. Texas Co., 230 La . 593, 89 So.2d 135 (1956); Sellers v. Continental Oil Co., 168 So.2d 435 (La.App.1964); Pierce v. Atlantic Refining Co., 140 So.2d 19 (La.App.1962), cert. denied; and Bailey v. Meadows, 130 So.2d 501 (La.App.1961), cert. denied.
'In this and similar oil leases, lessee may escape termination of his lease by paying rentals or paying royalties. He may escape forfeiture by conducting operations. It is with reference to the latter method of maintaining the lease that Paragraph 11 deals. Such a notice provision is understandably included in the lease because (Emphasis supplied.)
The court cited many examples of Operations and concluded that:
'As used in the lease, the word 'operations' contemplates drilling or reworking the wells and use of the surface of the land for all purposes incident to the exploration for and production,...
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Lafayette Airport Com'n v. Roy
...526 (1925) it was said that: 'the rent is always sufficiently certain if it can be readily ascertained.' See also Alvord v. Sun Oil Company, 251 So.2d 659 (La.App. 2 Cir. 1971) and Bouterie v. Kleinpeter, 258 La. 605, 247 So.2d 548, 553 The erroneous ruling prohibiting evidence of the incre......
- Alvord v. Sun Oil Co.