Hazel Wood Farm, Inc. v. Liberty Oil & Gas

Decision Date20 June 2001
Docket NumberNo. 01 0345-CA.,01 0345-CA.
Citation790 So.2d 93
PartiesHAZELWOOD FARM, INC. v. LIBERTY OIL AND GAS CORPORATION, et al.
CourtCourt of Appeal of Louisiana — District of US

Stephen Edward Ramey, Hargrove, Guyton, et al., Shreveport, LA, Counsel for Hilliard Petroleum, Inc.

Mark D. Sikes, Ottinger, Hebert, Sikes & Hebert, L.L.C., Lafayette, LA, Counsel for International Petroleum & Exploration Royalty Corporation, International Petroleum and Exploration Operating Corp.

Michael Gregory Cordes, Hoffman, Siegel, etc., New Orleans, LA, Counsel for Meyers—Lasher, Inc.

James Paul Doherty Jr., Opelousas, LA, Counsel for Hazelwood Farm, Inc.

Stephen Craig Carleton, Simoneaux, Ryan, etc., Baton Rouge, LA, Counsel for Chevron U.S.A., Inc.

Gladstone N. Jones III, Smith, Jones & Fawer, L.L.P., New Orleans, LA, Counsel for Hazelwood Farm, Inc.

John H. Smith, McKernan Law Firm, Baton Rouge, LA, Counsel for RPS Energy, Inc., Reliable Production Services, Inc., Liberty Oil and Gas Corporation.

Michael Gregory Stag, Sacks & Smith, New Orleans, LA, Counsel for Hazelwood Farm, Inc.

David Garland, Smith, Jones & Fawer, L.L.P., New Orleans, LA, Counsel for Hazelwood Farm, Inc.

Gerald Whitton, In Proper Person, Homer, LA, Counsel for The Whitton Company.

Court composed of ULYSSES GENE THIBODEAUX, JOHN D. SAUNDERS, and MICHAEL G. SULLIVAN, Judges.

SAUNDERS, Judge.

On appeal, Hazelwood Farm, Inc. (Hazelwood) seeks review of a motion to strike which eliminated its ex contractu claims and its allegations of solidary liability against the Defendants from its pleadings. For the reasons that follow, we reverse.

FACTS

Hazelwood, a Louisiana Corporation, owns approximately six hundred eighty-six acres of agricultural land (the Property) located in St. Landry Parish. Hazelwood acquired the Property by an act of exchange between the Succession of Ernest E. Edmundson, Jr. and Hazelwood, dated December 6, 1991. Ernest E. Edmundson, Jr., Hazelwood's immediate predecessor in title, purchased the Property from John E. Wells on December 27, 1968. Mr. Wells reserved the oil, gas, and mineral rights to himself. Hazelwood acknowledges that it is only the owner of the surface of the Property and that it does not own the minerals beneath the surface of the Property.

The Property has long been the site of oil and gas exploration and production activities. On August 10, 1926, Wilson & Cochran and J.B. Ferguson executed a lease contract, granting the latter the exclusive right to explore the land for the production of minerals. Under the terms of the Wilson & Cochran Lease, the parties maintained the right to assign the Wilson & Cochran Lease to a third party or to third parties. The lease also provided that it would bind the parties' successors and assigns. The Wilson & Cochran Lease, under which all of the Defendants in this litigation have explored for and produced oil and gas on the Property, also provides, "[t]he use of the surface of the land is granted only for the purposes hereof. Grantee shall be responsible for all damages caused by his operations."

The rights granted to the lessee in the Wilson & Cochran Lease, and its attendant obligations, were subsequently assigned, either wholly or partially, to the Defendants in this litigation, including Chevron U.S.A., Inc. (Chevron)1, Liberty Oil & Gas Corporation (Liberty), Meyers Lasher, Inc. (Meyers Lasher), and International Petroleum and Exploration Royalty Corporation (International Royalty). All of the Defendants to this lawsuit have, at various times since 1926, operated oil and gas wells on the Property pursuant to the rights granted to the lessee and its assignees under the Wilson & Cochran Lease. International Royalty, which assumed the rights of the lessee in 1990, is the current assignee of the Wilson & Cochran Lease, and an entity related to International Royalty, which is also a Defendant herein, International Petroleum and Exploration Operating Corporation (International Operating), is currently operating oil and gas wells on the Property pursuant to the rights and obligations set forth in the Wilson & Cochran Lease. These current operations include entry onto and use of the surface of the Property for the purposes of maintaining and operating wells and other production facilities.

Hazelwood brought this lawsuit seeking to recover damages for environmental contamination and other damages that the Defendants' oil operations have caused to the surface and subsurface of the Property. The Defendants' operations included the construction of numerous earthen pits, including a twelve-acre evaporation pond in which Hazelwood alleges that the Defendants dumped oil, grease, salt water, and other hazardous and/or toxic oil production waste. As a result of such operations, Hazelwood asserts that the surface, surface soils, and groundwater on and beneath the Property have become contaminated with hazardous and toxic wastes consisting of oil and grease, heavy metals, chlorides, and other by-products and constituents of oil and gas production. Hazelwood also shows evidence that the Property is contaminated with radioactive materials and asserts that the Defendants failed to properly plug and abandon wells there. Finally, Hazelwood seeks recovery of revenue lost because it was unable to use the Property for the development of a profitable natural gas salt dome cavern storage facility underneath the Property due to damages caused by the Defendants' operations.

PROCEDURAL FACTS

Hazelwood's suit alleges two different theories of liability, one in tort and one in contract. In its allegations regarding its ex contractu claims, Hazelwood asserts that the Defendants breached their contractual obligations under the Wilson & Cochran Lease to be responsible for all damages caused by their operations. In late 1998, Defendants, Chevron and Liberty, filed separate exceptions of no right of action, arguing in part that Hazelwood was never a party to the Wilson & Cochran Lease; therefore, Hazelwood had no right to assert a contractual claim against them arising out of that lease. The trial court overruled the exceptions. This court and the Louisiana Supreme Court denied both Defendants' applications for supervisory writs of review from that ruling. The thrust of the Defendants' exceptions was that the purchaser of a property has no claim, whether in tort or in contract, for damage to its property that occurred prior to its acquisition of the property. In overruling the exceptions, the trial court stated there was a host of disputed factual and legal issues that precluded maintaining the exceptions:

It all boils down to when, where and what type of damage was done to the property, who owned it at that particular time and how each owner was affected by the delictual activity in question. Was it continuing damage? Did the parties have constructive or actual knowledge of the damage? Has the cause of action prescribed? Was there solidary liability? There is a smorgasbord of legal issue issues to be decided in a case such as this. Defendants' exception does not address this. Plaintiff may not be able to prove his case, but at least has the right to pursue it.

More recently, Hazelwood filed a motion for partial summary judgment that, if contractual liability for damages was established at trial, the liability of the Defendants would be solidary and would include liability for consequential damages stemming from Hazelwood's loss of use of the Property. Then, all of the Defendants filed motions for partial summary judgment seeking dismissal of Hazelwood's contractual claim for breach of the 1926 mineral lease. The trial court denied Hazelwood's motion for partial summary judgment. The trial court also rejected the Defendants' motions for partial summary judgment; however, on its own motion, the court struck Hazelwood's claim for breach of contract and its prayer for solidary liability pursuant to La.Code Civ.P. art. 964.

In his reasons for judgment, the trial judge gave the reasons that follow for using a motion to strike:

[T]he court also knows that there is a Motion for Summary Judgment on the issue of the defendants seeking a dismissal of all contractual claims sought by Hazelwood. The court finds that counsel for plaintiff argues that there is a question of fact regarding contractual claims, and it's such a hazy area as to what is meant by contractual claims that that would not be an appropriate—summary judgment would not be an appropriate procedural tool for that either. And that's why the court makes reference to the fact that the appropriate— the court feels the appropriate procedural tool would be the Motion to Strike in that particular regard, and the court is going to make a determination regarding the issue of contractual claims.

On the merits of the contractual claim, the trial judge stated:

The court finds that the plaintiffs remedies in this particular case sound in tort and not in contract. Though there are property rights involved and these property rights are affected by an oil, gas and mineral lease which the court acknowledges is a contract; however, the breach of the contract by parties to whom the plaintiff is not privy would allow the plaintiff to seek a remedy in tort, not in contract. Though there is a contract involved and there is an alleged breach of a contract, that breach is between parties of whom the plaintiff has no control over except to seek a tort remedy because the plaintiff has no mineral rights as he acknowledges or as Hazelwood acknowledges that they are strictly surface owners. And because they have no mineral rights involved, are not involved in the mineral contracts and subcontracts, they are not a party to these contract and they are—they cannot make claims for breach of those contracts because they are not parties or privy to those contracts.

They are, however, the property owner with surface rights; and, since plaintiff is a property owner with surface rights, the...

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