Broadhead v. Pan Am. Petroleum Corp.

• Decision Date: 10 July 1964
• Docket Number: No. 1220,1220
• Parties: Sam BROADHEAD, Plaintiff-Appellant, v. PAN AMERICAN PETROLEUM CORPORATION et al., Defendants-Appellees.
• Court: Court of Appeal of Louisiana — District of US

Page 329

166 So.2d 329

Sam BROADHEAD, Plaintiff-Appellant, v. PAN AMERICAN PETROLEUM CORPORATION et al., Defendants-Appellees.

No. 1220.

Court of Appeal of Louisiana, Third Circuit.

July 10, 1964.

Rehearing Denied July 30, 1964.

Writ Refused Oct. 14, 1964.

Robert J. Moffatt and Noel L. Adams, Jr., Shreveport, for plaintiff-appellant.

Gaharan & Richey, by Leonard W. Richey, Jena, for defendants-appellees.

Before TATE, FRUGE and SAVOY, JJ.

SAVOY, Judge.

On April 28, 1961, plaintiff granted to Pan American Petroleum Corporation, hereinafter referred to as 'Pan Am', an oil, gas and mineral lease covering a contiguous tract containing in excess of 23,000 acres of land. The lease granted by plaintiff was the ordinary commercial lease form used by the oil and gas industry. Under the terms thereof, plaintiff received a cash bonus and 1/6 of any oil or gas recovered from said property. There were no drilling operations conducted on the property during the primary term of the lease. Shortly before the expiration of the first year of the primary term of the lease, Pan Am paid delay rentals in accordance with the provisions of said lease. This had the effect of maintaining the lease for an additional one-year period.

In the year 1962, Pan Am sublet to Justiss-Mears Oil Company, Inc., a portion of the land which it has leased from plaintiff. Pan Am, or its assignee, Justiss-Mears, drilled 17 wells on said land in controversy. All of said wells were non-productive.

On or about September 26, 1962, Justiss-Mears made a discovery well on some of the property owned by plaintiff and sublet to it by Pan Am.

On October 24 and November 16, 1962, Pan Am completed two producing oil wells on a portion of the land under lease.

On the second anniversay date of the lease, namely, April 28, 1963, Pan Am was drilling a well on the instant property, which well was completed as a producer on May 7, 1963.

On the latter date, neither Pan Am nor Justiss-Mears had paid any royalties to plaintiff.

On May 31, 1963, plaintiff filed suit against Pan Am, Justiss-Mears, and several assignees of Justiss-Mears, for a cancellation of the lease dated April 28, 1961, for the reason that defendants did not pay plaintiff the royalties due him within a reasonable time after the discovery of oil on his land, and, consequently, they violated said lease, and he is entitled to a cancellation thereof. Plaintiff prayed alternatively for cancellation for non-payment of delay rentals.

To this suit defendants filed numerous exceptions and pleas, some of which were granted and others of which were overruled. Plaintiff filed several supplemental petitions. After all the preliminary matters were disposed of by the trial judge, defendants filed answers and a motion for a summary judgment. Supporting affidavits were attached to the motion. Plaintiff did not contradict material allegations attached to said motion. Plaintiff then filed a motion for a judgment on the pleadings.

After a hearing on the summary judgment, the trial judge maintained same and dismissed plaintiff's suit. This appeal followed.

MAIN DEMAND

Although defendants have advanced several grounds in resisting the efforts of plaintiff to cancel the lease, this Court will discuss the main demand of plaintiff, namely, that defendants did not pay him royalties on his land within a reasonable time after discovery of oil thereon.

The record reflects that the land involved in the instant suit was in wildcat territory. There had never been any production on the acreage leased at the time of the execution of the lease in the instant case.

The trial judge, in his written opinion, made the following finding of fact:

'This lease covered a large tract of land, almost twenty-four thousand (24,000) acres. At the time the lease was executed, the lessee borrowed from lessor his abstracts of title--some twelve books or volumes containing over two thousand (2,000) pages. Early thereafter, Pan Am satisfied itself on its working interest title as lessee but it pointed out to lessor, the plaintiff, as early as May 16, 1961, that there were serious title problems on the ownership of the royalties which would become payable under the lease. Title requirements, as to the royalty interests were against brought to the attention of plaintiff in the early part of 1963. It does not appear that plaintiff took any action on his part to clear up his royalty interest title or that he ever cooperated with defendants to do this, other than lending his title abstracts as aforesaid. And, of course, it must be noted and pointed out that the abstracts were not up to date at the time of production. When they were loaned, it was in April of 1961.' (Nor did plaintiff put the defendants on notice that he did not intend to cooperate in clearing his title as requested. In fact, in a conference with lessee's counsel, he indicated he would furnish assistance by Louisiana counsel, following which lessee heard nothing further until a month later when they received a formal demand for cancellation of said lease.)

'The record shows, too, that after production, an outlet had to be found to market the oil. This land is a low swamp area. Pipelines has to be constructed in this terrain to Red River, and Indiana Oil Purchasing Company, became ultimate purchaser of the oil production on December 22, 1962. Pan Am, Justiss-Mears and their attorneys, immediately undertook curative work to clear up the royalty interests of some forty odd owners, still without the help or co-operation of plaintiff, himself a purchaser of these questioned royalty interests, at the instance of this pipeline purchaser.

'On May 10, 1963, a letter from Pan Am was sent to the various royalty owners--including plaintiff, and a division order from Indiana Oil Purchasing Company, accompanied same, for the signatures of the various royalty owners. But the day before, May 9, 1963, plaintiff had mailed to defendants, a letter demanding cancellation of the lease. Of course, he did not even sign the division order and persisted in his demand for cancellation of the lease and suit was filed for that purpose on May 31, 1963. * * *'

As a basis for the cancellation of the lease, plaintiff relies on the cases of Melancon v. Texas Company, 230 La. 593, 89 So.2d 135; Bollinger v. Texas Company, 232 La. 637, 95 So.2d 132; Bailey v. Meadows (La.App., 2 Cir., 1961), 130 So.2d 501, cert. den.; and, Pierce v. Atlantic Refining Company (La.App., 3 Cir., 1962), 140 So.2d 19, cert. den.

This Court has carefully examined the above cases and finds that they are distinguishable from the case at bar.

In the Melancon and Bollinger cases, supra, the Supreme Court held that failure to pay royalties to the lessors 15 months after production was not reasonable where there were no title questions involved, but the lessee was attempting to have the lessors...