Continental Casualty Co. v. Associated Pipe & Supply Co.

• Decision Date: 18 October 1971
• Docket Number: No. 29157.,29157.
• Citation: 447 F.2d 1041
• Parties: CONTINENTAL CASUALTY COMPANY et al., Plaintiffs-Appellants-Cross Appellees, v. ASSOCIATED PIPE & SUPPLY CO., Inc., et al., Defendants, Thomas Jordan, Inc., Defendant-Appellee-Cross Appellant. TEXACO, INC., Plaintiff-Appellee-Cross Appellant, v. ASSOCIATED PIPE & SUPPLY CO., Inc., et al., Defendants, Thomas Jordan, Inc., Defendant-Appellant-Cross Appellee. UNITED TUGS, INC., Plaintiff-Appellant-Cross Appellee, v. CONTINENTAL CASUALTY COMPANY et al., Defendants-Appellees-Cross Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

447 F.2d 1041 (1971)

CONTINENTAL CASUALTY COMPANY et al., Plaintiffs-Appellants-Cross Appellees, v. ASSOCIATED PIPE & SUPPLY CO., Inc., et al., Defendants, Thomas Jordan, Inc., Defendant-Appellee-Cross Appellant.

TEXACO, INC., Plaintiff-Appellee-Cross Appellant, v. ASSOCIATED PIPE & SUPPLY CO., Inc., et al., Defendants, Thomas Jordan, Inc., Defendant-Appellant-Cross Appellee.

UNITED TUGS, INC., Plaintiff-Appellant-Cross Appellee, v. CONTINENTAL CASUALTY COMPANY et al., Defendants-Appellees-Cross Appellants.

No. 29157.

United States Court of Appeals, Fifth Circuit.

July 29, 1971.

Rehearing Denied October 18, 1971.

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Lawrence K. Benson, Jr., Milling, Saal, Benson, Woodward & Hillyer, New Orleans, La., for Associated Pipe and Supply Co., Inc., and Thomas Jordan, Inc.

A. Morgan Brian, Jr., Deutsch, Kerrigan & Stiles, New Orleans, La., for appellants; R. Emmett Kerrigan, Wiley G. Lastrapes, Daniel P. Hurley, New Orleans, La., of counsel.

Peter H. Beer, Daniel P. Hurley, Wiley G. Lestrapes, Richard Jurisich, E. Howard McCaleb, John M. Page, J. William Vaudry, Jr., New Orleans, La., Warren Rush, Bean & Bush, Lafayette, La., Joseph E. Friend, Emile Turner, New Orleans, La., Edward T. Diaz, Golden Meadow, La., Charles J. Hanemann, Jr., of O'Neal, Waitz & Henderson, Houma, La., A. D. Freeman, Robert E. Winn, Cicero C. Sessions, Richard L. Bodet, Walter M. Babst, New Orleans, La., for appellees.

Before RIVES, AINSWORTH and MORGAN, Circuit Judges.

RIVES, Circuit Judge:

This case comes to the federal courts by virtue of the federal jurisdiction over the outer continental shelf. Just under a decade ago, Texaco, Inc. (Texaco) entered into a contract with Offshore Gathering Corporation (Offshore) calling for Offshore to construct a pipeline to a Texaco oil and gas field off the coast of Louisiana. Offshore completed the construction and it was accepted by Texaco May 28, 1962.

Unfortunately, Offshore left unpaid numerous parties who had provided labor, material, equipment and services. Legal actions were soon initiated, an interpleader filed by Texaco, an interpleader filed by Offshore's surety, Continental Casualty Company (Continental), and several personal actions were consolidated in the district court for trial. Nearly seventy claimants were involved.

A bifurcated trial was held, dividing the issues, generally, into questions of law and factual issues on the merits of each claim. District Judge Fred T. Cassibry wrote two opinions, 279 F.Supp. 490; 310 F.Supp. 1207, which discuss the legal issues at length.

Because the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 et seq., makes the state law of Louisiana applicable in this case, the federal courts are presented with the task of resolving a great many issues of state law. We are in accord with Judge Cassibry's sentiments stated in a footnote in his second opinion:

"This case is replete with complex state law problems, concerning which Louisiana Courts have had little opportunity to address themselves. If this suit finds its way to the Court of Appeals, I am sure they will become keenly aware of the need for a certification procedure by which the Louisiana Supreme Court could determine these knotty legal issues."

310 F.Supp. 1216, 1217.

We will discuss the issues presented in the following order:

I. Whether the pipeline is a type of structure contemplated by and within the scope of the Louisiana Private Works Statute, L.S.A.-R.S. 9:4801, et seq.

II. Whether the bond given by Continental is a statutory one as contemplated by the Private Works Statute, L.S.A.-R.S. 9:4801, et seq. (particularly § 9:4802).

III. Whether the pipeline is a type of construction contemplated by and within the scope of the Louisiana Oil Well Lien Statute, L.S.A.-R.S. 9:4861 et seq.

IV. Whether recordation is essential to the enforceability of the lien created by the Oil Well Statute, L.S.A.-R.S. 9:4861, et seq.

V. Whether crewboat services create liens under the Oil Well Statute, L.S.A.-R.S. 9:4861, et seq.

VI. Whether catering and housekeeping services create liens under the Oil Well Statute, L.S.A.-R.S. 9:4861, et seq.

VII. Whether manned equipment rentals are covered by a bond under Private Works Act, L.S.A.-R.S. 9:4801, et seq.

VIII. Whether claimant United Tugs, Inc., is a subcontractor or mere renter of equipment.

IX. Whether Texaco is liable for claims of United Tugs, Inc., and Thomas Jordan, Inc., by virtue of representations made to them or by assignments of the contract funds executed by Offshore.

X. Whether the judgment awarding Ellzey Marine Supplies 25 per cent of its claim was correct.

XI. Whether the judgment holding that Golden Meadow Oil Company, Inc., had failed to prove its claim was correct.

XII. Whether Texaco was correct in deducting amounts owed it by Offshore from the contract funds it retained and deposited in the registry of the court pursuant to its interpleader.

XIII. Whether the 10 per cent attorney\'s fees provided for by the Oil Well Statute, L.S.A.-R.S. 9:4861, should be calculated on the original debt or the original debt plus interest.

XIV. Whether successful claimants are entitled to have their judgments increased by virtue of Act No. 315 of 1970, Louisiana session laws, which increased the rate of legal interest.

A brief physical description of the pipeline is required here.¹ Four offshore well sites are involved. Pipelines were constructed leading directly from each of three sites to the fourth site, and from this site leading inland to a plant called the Garden Island Bay facility. Thus the fluid product of the wells, a combination of oil, gas and water, was transported inland through this system. As aptly described by one of the parties, it resembled roughly "a long leg with a three-toed foot at its end."

The system, some ten miles in length, was embedded in the Gulf bottom, emerging up into and above the water only where it connected to the well sites and inland facility. The fluids move from the bottom of the wells to the inland facility by the original pressure from the wells. Some metering is done at the central well site, but no separating or anything which could be termed "processing" is done until the fluids reach the inland facility.

At the inland facility, the first permanent separation of oil, gas and water occurs, and oil is moved on in the system through a common carrier pipeline by pressure injected by devices located there.

I. Applicability of Louisiana Private Works Statute.

The Private Works Act, La.Rev.Stats. 9:4801² establishes a lien for those who provide labor, materials, machinery, or fixtures, exclusive of those who rent or lease out movable property, "for the erection, construction, repair or improvement of immovable property," as well as for those who provide materials or supplies "for use in machines used in or in connection with the erection, construction, repair or improvement of any building, structure or other immovable property." On its face, the statute would seem to cover the pipeline here, whether it is considered a "structure" or an "improvement." A question of the statute's applicability is presented, however, by language used in two Louisiana cases, Calatex Oil & Gas Co. v. Smith, 1932, 175 La. 678, 144 So. 243, and Hayes Lumber Co. v. H. M. Jones Drilling Co., 1933, 177 La. 626, 148 So. 899, which at least provide a basis for the argument that the Private Works Act applies only to structures located above ground.

These cases were studied in depth by the district court, and little can be added to the well-reasoned treatment of them below. However, since their interpretation is critical to this issue of this litigation, and since the appellees feel that the district court overstepped its bounds in construing state law, further discussion is required.

In Calatex a contractor who drilled an oil or gas well failed to pay claims for labor and materials. The claimants asserted liens under a 1926 Public Works Act which did not require filing of liens. The surety of the contractor asserted that the only applicable statute was the 1916 Oil Well Lien Statute,³ which did require filing and notice to the owner. The state court held that it made no difference which statute applied, since language in both statutes placed the surety in the shoes of the contractor, and neither statute required notice or filing to secure claims against the contractor (as opposed to the owner). The court went on to hold, what the district court below considered dictum, that the 1926 statute dealing with private works did not repeal the 1916 oil well lien statute.

The court in Calatex, supra, held that the 1916 Oil Well Lien Act protected those who aided in the construction of oil, gas and water wells, but did not protect those who contributed to buildings and other improvements on a leased well site. It felt that the 1926 Public Works Act sought to protect this latter class of persons, stating:

"It is therefore clear enough that this section of the act has no reference to liens and privileges against oil, gas, or water wells drilled on leased premises, but relates only to liens and privileges against such buildings or improvements as the lessee may erect on the leased premises."

144 So. 243, 245.

Hayes Lumber Co., supra is the real basis for appellants' argument that the pipeline is not covered by § 9:4801 because it is located beneath the surface of land and water. The plaintiff in Hayes had supplied materials for the drilling of a well and repair thereto. The legal dispute was between the supplier and the mortgagee of the well site leasehold as to which had priority for the proceeds from a sheriff's sale of the lease and materials. The part of the court's opinion which gives rise to the instant controversy is as follows:

"The only act pertinent to the privilege, asserted by plaintiff, is Act No. 298 of 1926, pertaining to the construction, repair, and improvement of

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