Lapeze v. Amoco Production Company, Civ. A. No. 82-665-B.

• Decision Date: 03 March 1987
• Docket Number: Civ. A. No. 82-665-B.
• Citation: 655 F. Supp. 1
• Parties: Alice Shilling LAPEZE, et al. v. AMOCO PRODUCTION COMPANY.
• Court: U.S. District Court — Middle District of Louisiana

655 F. Supp. 1

Alice Shilling LAPEZE, et al. v. AMOCO PRODUCTION COMPANY.

Civ. A. No. 82-665-B.

United States District Court, M.D. Louisiana.

March 3, 1987.

Charles A. Landry, Gary & Field, Baton Rouge, La., for Hiram L. Shilling.

Ronald Causey, Baton Rouge, La., for Intervenor.

R. Gordon Kean, Jr., Leonard L. Kilgore, III, Kean, Miller, Hawthorne, D'Armoni McCowan & Jarman, Baton Rouge, La., for Amoco Production Co.

POLOZOLA, District Judge:

Alice S. Lapeze and Hiram L. Shilling have filed this suit seeking to cancel an oil, gas and mineral lease executed by their father, Eugene Shilling, in favor of Amoco Production Company (hereinafter "Amoco").¹ This lease was executed on March 3, 1976 and was for a term of five years. The lease contained a provision stating that it would terminate on March 3, 1977, unless Amoco either commenced operations for the production of minerals or paid a rental of $5.00 per acre for each acre it elected to hold under the lease.² The lease further provided that rental payments were to be made to the lessor or deposited in the Livingston State Bank of Denham Springs which was named the depository of the lessor and his successors and assigns.³ In accordance with paragraph 1 of the lease, Amoco presented annual rental checks, payable to Eugene Shilling, in the sum of $223.73⁴ to Livingston State Bank on February 14, 1977, 1978, 1979 and 1980.

The lease covered two tracts of land located in Livingston Parish. It contained an erroneous property description on one of the tracts. This tract, containing approximately 29.7 acres of land, was acquired by Eugene Shilling in a partition with his brother, Eddie Shilling. The Act of Partition, executed March 3, 1972, contained an error in the property description. The property description contained in the Act of Partition was used to describe the same tract in the lease. Thus, the erroneous land description was perpetuated in the lease.⁵ On January 17, 1980, Eddie Shilling, Alice S. Lapeze, Hiram L. Shilling, and Louisa C. Shilling, the surviving spouse of Eugene Shilling,⁶ executed an Act of Correction to the 1972 Act of Partition. In this Act of Correction, the erroneous property description was corrected.

Amoco filed suit on June 10, 1980 for the reformation of the 1976 lease to reflect the corrected property description which was set forth in the Act of Correction to the Act of Partition. After that suit was filed, a settlement was reached by the parties which resulted in an Act of Correction to the 1976 lease. This Act of Correction which was executed on September 24, 1980 by Amoco, Louisa C. Shilling and the plaintiffs, amended the 1976 lease to correctly describe the leased property and increased the royalty payments from 1/8 to 1/6. In reference to the 1976 lease, the Act of Correction expressly stated that "except as herein specifically amended and corrected, the Oil, Gas and Mineral Lease of March 3, 1976 and the amendment thereto, described above, shall remain in effect as originally executed."

On July 15, 1981, the plaintiffs petitioned for and were granted a judgment of possession by the state court which recognized their ownership of, and placed them in possession of Eugene Shillings' 1/2 undivided interest of the property belonging to the community of acquets and gains which formerly existed between Louis Eugene Shilling and Eva Louisa Comeaux Shilling subject to the usufruct of their mother. Plaintiffs were also placed in possession of the property belonging to the separate estate of their father.

During the primary term of the lease, Amoco began operations for the production of minerals on plaintiffs' property which had been unitized with the property of other landowners. The work of Miley Well No. 1 was completed on May 20, 1981. On the next day, the Miley Well was "shut-in." Under the terms of the lease, Amoco could maintain its rights after a well has been "shut-in" by the resumption of payments within ninety days of such "shut-in" at the rate and manner provided for rental payments on the lease.⁷ On August 5, 1981, the Livingston Bank and Trust Company, successor to Livingston State Bank, received and negotiated a check, dated August 3, 1981, numbered R1979354 which had been submitted by Amoco in accordance with the terms of the lease. The stub on the check stated that the check was "In Payment of Rental due party or parties named below ...;" The stub named "Eugene Shilling" as the payee of the check. The bank deposited the check into an account numbered No. XXX-XXX-X which was an account maintained by the bank in the name of "Mr. and Mrs. Eugene Shilling" or "M/M Eugene Shilling." In November or December of 1981, Lapeze discovered the payment while reconciling her mother's checks with a bank statement. In January of 1982, Amoco was contacted concerning this payment by Patrick Pendley who was then representing the plaintiffs. In response to Pendley's inquiry, Amoco identified the check as a "shut-in" payment due pursuant to the lease on February 8, 1982. In May of 1982, Lapeze requested the lease be cancelled because the aforementioned "shut-in" payment had not been paid to the proper persons. When Amoco refused her request, this suit was filed. Thereafter, Hiram L. Shilling was granted leave to intervene in the present suit after Amoco refused his request to cancel the lease.

The plaintiffs contend that Amoco failed to properly pay shut-in rentals which were due under the lease and that such failure automatically terminated the lease. Specifically, the plaintiffs contend that the shut-in rentals were incorrectly paid because Amoco instructed Livingston Bank and Trust Company, successor to Livingston State Bank, to deposit the rental check in question to Eugene Shilling's credit instead of to the credit of the plaintiffs. Amoco denies plaintiffs' contention and states that paragraph 9 of the lease authorized it to continue to pay monies due under the lease to the credit of Eugene Shilling after his death. Paragraph 9 of the lease provides, in pertinent part, as follows:

9. All provisions hereof shall inure to the benefit of and bind successors and assigns (in whole or in part) of Lessor and Lessee, (whether by sale, inheritance, assignment, sublease or otherwise), but regardless of any actual or constructive notice thereof, no change in the ownership of the land or any interest therein or change in the capacity or status of Lessor or any other owner or rights hereunder, whether resulting from sale or other transfer, inheritance, interdiction, emancipation, attainment of majority or otherwise shall impose any additional burden on Lessee, or be binding on Lessee for making any payments hereunder unless, at least forty-five (45) days before any such payment is due, the record owner of this lease shall have been furnished with certified copy of recorded instrument or judgment evidencing such sale, transfer or inheritance, or with evidence of such change in status or capacity of Lessor or other party owning rights hereunder.⁸

In response to Amoco's contention, plaintiffs argue that paragraph 9 is not applicable under the facts of this case because of an Act of Correction entered into by Amoco, Louisa Shilling and the plaintiffs on September 24, 1980. Furthermore, the plaintiffs assert that even if paragraph 9 of the lease is applicable, the lessee was furnished with the evidence required by paragraph 9 and, therefore, the rental payment should have been paid to them or their credit rather than to the credit of Eugene Shilling. The court will discuss each of the parties' contentions.

I. Has the Act of Correction of September 24, 1980 Abrogated the Provisions of Paragraph 9 of the Original Lease?

The plaintiffs contend that the Act of Correction entered into on September 24, 1980 by Amoco, Louisa Shilling and the plaintiffs rendered the provisions of paragraph 9 of the original lease inapplicable. In essence, the plaintiffs assert that the legal effect of the Act of Correction was to recognize them as the lessors in the lease. Since the plaintiffs were to be recognized as the lessors in the original lease as a result of the Act of Correction, plaintiffs argue that paragraph 9 is inapplicable except to authorize Amoco to make payments due under such lease to the plaintiffs' credit, despite changes in ownership or capacity, until proper notification has been given.

This contention is without merit. Plaintiffs seek to introduce parol evidence to support their interpretation of the various rights and agreements between the parties. Article 2276 of the Louisiana Civil Code⁹ provides that "neither shall parol evidence be admitted against or beyond what is contained in the acts, nor on what may have been said before, or at the time of making them, or since." The original lease and Act of Correction executed on September 24, 1980 are both authentic acts.¹⁰ Authentic acts have been held to be "acts" as that term is used in article 2276.¹¹ Therefore, since the contracts at issue in this case are authentic acts, the parol evidence rule applies.¹²

The prohibitions of articles 2276 against the admissibility of extrinsic evidence are applicable only when the evidence that is offered is "against or beyond the terms of the act."¹³ In the present case, the court finds that evidence has been submitted that is both "against" and "beyond" the terms of the Act of Correction. In Moore v. Hampton, 3 La.Ann. 192, 195 (1848), the Louisiana Supreme Court, in interpreting these phrases in Louisiana Civil Code article 2256 the precursor to article 2276, stated:

Under our rule, the evidence is said to be against the act, when it is introduced to prove the falsity of what is therein stated. It is said to be beyond the act, if the object of it be to add to the act a clause which it does not contain, or to enlarge those which it does contain.

The plaintiffs argue that the settlement agreement which was entered into by the plaintiffs, ...