Hawthorne Oil & Gas Corp. v. Continental Oil Co., 6725

Decision Date05 February 1979
Docket NumberNo. 6725,6725
Citation368 So.2d 726
CourtCourt of Appeal of Louisiana — District of US
PartiesHAWTHORNE OIL & GAS CORPORATION et al., Plaintiffs and Appellants, v. CONTINENTAL OIL COMPANY, Defendant and Appellee.

Taylor Caffery, New Orleans, for plaintiffs and appellants.

Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell by Lawrence E. Donohoe, Jr., Lafayette, for defendants and appellees.

Before CULPEPPER, FORET and CUTRER, JJ.

CULPEPPER, Judge.

This action arises from a contract entered into on June 1, 1971 between the plaintiff, Hawthorne Oil & Gas Company, Inc. (hereinafter "Hawthorne"), and the defendant, Continental Oil Company (hereinafter "Continental"). The plaintiff contracted to sell to defendant gas produced from certain lands upon which plaintiff held mineral leases. The contract provides that delivery of the gas occur at specific metering stations constructed by the defendant on the land affected by the plaintiff's mineral leases. In furtherance of this provision, plaintiff also assigns to defendant all "easements and rights-of-way" held by the plaintiff under its leases.

A dispute arose between the parties as to the price which Continental was obligated to pay Hawthorne for the gas. Plaintiff now contends that Continental failed to pay the price agreed upon in the contract and, consequently, seeks to terminate the gas-purchase agreement. This action was filed in Vermilion Parish, where the wells producing the gas under the contract are located. Defendant filed a declinatory exception of improper venue, asserting that since Continental is a foreign corporation, the suit should have been brought in Calcasieu Parish, where its principal place of business is located. The trial court sustained defendant's exception and dismissed plaintiff's suit. Hawthorne appeals.

The central issue presented on appeal is whether venue in this action is governed by the general provisions of LSA-C.C.P. Art. 42(4) or by the mandatory requirement of LSA-C.C.P. Art. 80 that a suit involving an interest in immovable property be brought in the parish where the property is located. Resolution of this question depends upon the scope afforded to Art. 80 in applying that provision and, more particularly, whether the incorporeal right asserted by the plaintiff in this action should be classified as a movable or immovable.

The questions raised by the issue include the following:

(1) By what method is an incorporeal right classified as a movable or an immovable?

(a) What is the test for classification under the Louisiana Civil Code?

(b) How has the jurisprudence of this state affected the utility of the Code's classification in light of certain decisions equating real rights with immovable rights?

(c) Has the Louisiana legislature created a species of incorporeal immovable rights separate from that envisioned under the Civil Code?

(d) Can parties create incorporeal immovable rights by contract in contravention of that system designated by the Civil Code?

(2) When determining venue in an action brought upon rights created by contract, is there a distinction to be made between the object of the right asserted under the contract and the object of the contract?

(3) If there are multiple objects of a right which are both movable and immovable, which category will control when applying LSA-C.C.P. Art. 80?

Continental asserts that venue in this action should be in Calcasieu Parish under the provisions of LSA-C.C.P. Art. 42(4) 1. Hawthorne contends that LSA-C.C.P. Art. 80 controls and dictates that this suit be brought in Vermilion Parish.

LSA-C.C.P. Art. 80 states in part:

"The following actions shall be brought in the parish where the immovable property is situated:

"(1) An action to assert an Interest in immovable property, or a right in, to, or against immovable property, except as otherwise provided . . . ." (Emphasis added)

Under the express terms of this article, the resolution of this case will depend upon whether plaintiff's action asserts such an interest in immovable property as to be governed by Art. 80. If this is the case, Art. 80 requires that the suit be filed in Vermilion Parish.

It is undisputed that plaintiff seeks to assert incorporeal rights as defined by LSA-C.C. Art. 460 2. What is at issue is to determine the classification of these incorporeal rights as movable or immovable.

In an excellent post-argument brief, Continental accuses Hawthorne of equating "real rights" with "immovable rights" as these terms are used in certain statutes and jurisprudence. Continental emphasizes the distinction between the classification of rights as real or personal and the classification as movable or immovable, citing Yiannopoulos, Civil Law of Property, Chapter 4, Sec. 60, pgs. 178-179. Because of the importance of these distinctions in deciding the present case, it is necessary to discuss them at some length.

THE CIVIL CODE

Under the Civil Code, the test to determine whether an incorporeal is a movable or immovable is to look to the object of the right asserted. This is clearly provided for in LSA-C.C. Art. 470:

"Incorporeal things, consisting only in a right, are not of themselves strictly susceptible of the quality of movables or immovables; nevertheless They are placed in one or the other of these classes according to the object to which they apply and the rules hereinafter established." (Emphasis added)

See also LSA-C.C. Art. 463 3.

In applying this article, if the object of the right is a movable, the right itself is classified as a movable and if the object is an immovable, the right asserted becomes an immovable.

The jurisprudence has applied the test provided in Civil Code Art. 470 on numerous occasions. In perhaps one of the best analyses of the application of this article, the Fourth Circuit, in Succession of Simms, 175 So.2d 113 (La.App., 4th Cir. 1965), reversed on other grounds, 250 La. 177, 195 So.2d 114, held that rights are to be classified according to their object. The court affirmed its earlier ruling that a mineral lease constituted an immovable right because the object of the lease in question was immovable property. The court determined that the object of the incorporeal classifies it as a movable or immovable in labeling the right in question immovable, but noted that had the object of the lease been movable property, then rights asserted in such a lease would have been classified as movables.

Similarly, the Louisiana Supreme Court has classified incorporeal rights derived from mineral leases and drilling contracts as immovables according to the object to which these rights applied, i. e., the land affected by the lease agreement and the drilling contract. Wilkins v. Nelson, 155 La. 807, 99 So. 607 (1924); St. Charles Land Trust, Achille Guibet v. St. Amant, 253 La. 243, 217 So.2d 385 (1969). In an earlier Supreme Court case, the court had also classified a mineral lease as an incorporeal immovable since the object of the lease was an immovable. The lease and contract involved in that suit was for the sale of gas located beneath the surface, and the court labeled those rights as incorporeal immovables. However, by specifically structuring its decision on the fact that the gas in question was located Beneath the surface, the court seemed to imply that a contract which had as its object gas reduced to the possession of some third party would create incorporeal movable rights, since the gas itself is classified as a movable. Vander Sluys v. Finfrock, 158 La. 175, 103 So. 730 (1925). Such reasoning supports the defendant in the case at bar because an object of the contract in dispute is gas reduced to the possession of the plaintiff, a movable. 4

Clearly, the statutory and jurisprudential classifications reveal that in compliance with the Civil Code, the test to determine whether an incorporeal is a movable or immovable is to discover the object of the right asserted. However, although the jurisprudence lends positive support to the application of Civil Code Art. 470, the courts have inconsistently utilized this article, thus creating confusion by misapplying the dichotomy between real and personal rights and the division of things into movables and immovables.

LOUISIANA JURISPRUDENCE: THE CONFUSION BETWEEN REAL RIGHTS AND IMMOVABLE RIGHTS

Professor Yiannopoulos, in his discussion of Civil Code Art. 470, notes that the classification of rights into movables and immovables should not be confused with the parallel classification into personal and real rights. Yiannopoulos states: "The first distinction is based on the object of the rights while the second is grounded on their nature." Yiannopoulos, Civil Law of Property, Chapter 4, Sec. 60, p. 178. Under this analysis, as supported by the Civil Code, both personal and real rights can thus be either movable or immovable, depending on their object.

Although the classification of rights into movables and immovables is clear theoretically, the interpretation the courts have given to the Civil Code has created a difficulty in the practical application of the Code. The source of the trouble, as Yiannopoulos notes, is that the term "incorporeal immovables" has been equated in the jurisprudence with a "real right", and both concepts have been regarded as exclusively applicable to real rights over immovables. Yiannopoulos, Civil Law of Property, Chapter 4, Sec. 61, p. 180. The effect of such confusion is that some courts, in classifying a right as "real" have erroneously equated that right with immovables. Such an interpretation ignores the test of Civil Code Article 470 to look to the object of the right, not to whether the right is "real."

Yiannopoulos believes that much of the confusion has been created by different interpretations given to LSA-C.C. Art. 471, which enumerates several incorporeal real rights considered immovable from the object to which they apply. 5...

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