Lexington Land Dev., L.L.C. v. Chevron Pipeline Co.

• Decision Date: 25 May 2021
• Docket Number: NUMBER 2020 CA 0622
• Citation: 327 So.3d 8
• Parties: LEXINGTON LAND DEVELOPMENT, L.L.C. v. CHEVRON PIPELINE COMPANY, Chevron U.S.A., Inc., Dixon Management Corporation, Kenmore Oil Company, Inc., The Stone Petroleum Corporation, Zinn Petroleum Company, Shell Pipeline Company, L.P., Stone Energy Corporation, Michael Madden, Scott Anderson & Greg Southworth
• Court: Court of Appeal of Louisiana — District of US

327 So.3d 8

LEXINGTON LAND DEVELOPMENT, L.L.C.

v.CHEVRON PIPELINE COMPANY, Chevron U.S.A., Inc., Dixon Management Corporation, Kenmore Oil Company, Inc., The Stone Petroleum Corporation, Zinn Petroleum Company, Shell Pipeline Company, L.P., Stone Energy Corporation, Michael Madden, Scott Anderson & Greg Southworth

NUMBER 2020 CA 0622

Court of Appeal of Louisiana, First Circuit.

Judgment Rendered: MAY 25, 2021

Rehearing Denied July 13, 2021

Victor L. Marcello, John H. Carmouche, Donald T. Carmouche, William R. Coenen, III, John S. Dupont, III, Brian T. Carmouche, Todd J. Wimberly, Ross J. Donnes, D. Adele Owen, Caroline H. Martin, Leah C. Poole, Christopher D. Martin, Michael L. Heaton, Baton Rouge, LA, Counsel for Plaintiff/Appellant, Lexington Land Development, L.L.C.

Thomas M. McNamara, Amy E. A. Lee, Patrick W. Gray, Jessica T. Gachassin, Lafayette, LA, S. Suzanne Mahoney, New Orleans, LA, Nichole Martin Gray, Mandeville, LA, Counsel for Defendant/Appellee, Shell Pipeline Company, L.P.

John Michael Parker, Edward D. Hughes, Baton Rouge, LA, Counsel for Defendant/Appellee, Zinn Petroleum Co.

Victor Gregoire, Charles S. McCowan, III, Linda S. Akchin, Kimberly K. Hymel, Richard D. McConnell, Jr., Kristi D. Obafunwa, Baton Rouge, LA, Michael R. Phillips, Louis Grossman, Claudia Carrizales, New Orleans, LA, Counsel for Defendants/Appellees, Chevron U.S.A., Inc. & Chevron, Pipeline Co.

R. Benn Vincent, Jr., James P. Dore, Matthew B. Smith, Baton Rouge, LA, Dylan T. Thriffiley, New Orleans, LA, Counsel for Defendant/Appellee, Michael Madden

BEFORE: WHIPPLE, C.J., WELCH, AND CHUTZ, JJ.

WHIPPLE, C.J.

This matter is before us on appeal by plaintiff, Lexington Land Development, L.L.C., from a judgment of the trial court dismissing its claims against Chevron U.S.A., Inc. with prejudice. For the reasons that follow, we affirm.

FACTS AND PROCEDURAL HISTORY

This litigation involves claims by Lexington Land Development, L.L.C. ("Lexington") for damages caused by oil and gas operations to property known as the Sardine Point Field located in East Baton Rouge Parish between the Mississippi River and Louisiana Highway 30. In 1959, the owners of the property, referred to by the parties as "the Hoffman Heirs," granted a mineral lease of 343.254 acres to The California Company, predecessor-in-interest to Chevron U.S.A., Inc. ("Chevron"). Thereafter, Chevron and its assignees and sublessees conducted oil and gas exploration and production activities on the property. Shell Pipeline Company, L.P. ("Shell Pipeline") owns and operates a pipeline that traverses the property, which transports hydrocarbons.¹

That same year, the Hoffman Heirs also granted Chevron a surface lease of five acres, contained within the original leased property, for drilling, which included an option to lease an additional five-acre tract for the purpose of storing oil, gas, and minerals. The surface lease expired in July of 1962. In 1963, Chevron released, relinquished, and surrendered its rights and title under the mineral lease, except for three production units established by order numbers 527-A and 527-B of the Commissioner of Conservation, effective September 1, 1961 (hereinafter "the retained acreage"), and certain surface use rights pertaining to the retained units (hereinafter "the retained surface rights").

On November 1, 1990, Chevron assigned its rights, title, and interest in the mineral lease to Stone Petroleum Corporation ("Stone Petroleum") and thereafter ceased all operations in 1991. Stone Petroleum subsequently assigned its rights and interest in the mineral lease to Robert L. Zinn d/b/a Zinn Petroleum Company on December 1, 1991.

On June 10, 2005, Lexington purchased the property,² which had been subdivided into three parallel tracts, from the Hoffman Heirs for $6,900,000.00³ for the development of a residential subdivision on Tract 1. Tract 1 consists of 267.57 acres that lie east of Nicholson Drive (La. Hwy. 30), Tract 2 consists of 29.88 acres that lie west of Nicholson Drive and east of River Road (La. Hwy. 327), and Tract 3 consists of 46.59 acres that extend from River Road west across the levee and batture to the Mississippi River.

Pursuant to the act of sale, the Hoffman Heirs reserved the mineral rights subject to prior leases, servitudes, and agreements of record, and the right to allow directional drilling from adjacent lands to extract oil, gas, or other minerals from the property.

Prior to its purchase of the property, Lexington, through its owner, Gregory Dean Flores, retained Conestoga-Rovers & Associates ("CRA") to perform an evaluation of the environmental conditions of the three tracts, which was required by the bank as a condition of its loan. CRA's Phase I Environmental Site Assessment identified certain conditions of environmental concern on Tracts 1 and 2. Lexington requested CRA to conduct a Phase II Site Investigation for further testing of the soil and groundwater to address the environmental concerns, which concluded that constituent concentrations in the groundwater samples above the Louisiana Department of Environmental Quality ("LDEQ") Risk Evaluation/Corrective Action Program ("RECAP") regulation screening standard were present at the site.⁴ CRA thus recommended that a permanent monitor well be installed and that a RECAP evaluation of the site be performed to develop site-specific RECAP standards and/or remedial standards. Lexington performed the remediation measures as recommended for Tract 1, but did not perform the RECAP evaluation recommended for Tract 2. Lexington thereafter submitted the Phase I and II evaluations to the bank, and financing to purchase the property was approved.

In early 2007, Lexington was notified that a rupture in Shell's pipeline on the property had occurred. Thereafter, on December 7, 2007, Lexington filed suit against various defendants, including Chevron, its assignees and sub-lessees, and Shell Pipeline, asserting claims for damages sustained by oil and gas exploration and production activities, including the negligent operation of a hydrocarbon pipeline.

Chevron filed a motion for partial summary judgment, seeking dismissal of all of Lexington's claims for damages as to Tracts 1 and 3 on the basis that: (1) Lexington could not establish damages to these Tracts; and (2) Lexington's claims for damages to Tract 2, resulting from any alleged breach of any express provisions of any mineral or surface lease, and for alleged damages that were sustained before Lexington purchased the property on June 10, 2005, were barred based upon the subsequent purchaser rule.⁵

In support, Chevron contended that Lexington was neither a lessor nor an assignee of the lessor under the mineral and surface leases, such that there was no privity of contract between Lexington and Chevron necessary to establish a breach of contract, there was no stipulation pour autrui in the mineral or surface lease in favor of Lexington, and the leases contained no express obligation to restore the leased premises.⁶ The trial court agreed with Chevron, and following a hearing, signed a judgment on November 16, 2009, granting Chevron's motion for partial summary judgment.⁷

Lexington subsequently obtained assignments of rights from the Hoffman Heirs, and on October 25, 2013, filed a fifth supplemental and amending petition for damages to the property extending from the Mississippi River to Nicholson Drive (La. Hwy. 30) (Tract 2),⁸ asserting claims in its own right and those assigned to it by the Hoffman Heirs, both as mineral servitude owners and former surface owners, in tort, property, contract, and mineral law.⁹

Chevron thereafter filed a peremptory exception of prescription, seeking dismissal of Lexington's remaining claims against Chevron, contending that Lexington's claims against Chevron are facially prescribed, where it is evident from the petition that Chevron's operations ceased in 1991. Chevron contended that even if not prescribed on the face of the petition, all of Lexington's claims against it were subject to liberative prescription of one year, and that Lexington had actual knowledge of the alleged damage no later than December 7, 2007, when it filed its original petition for damages. Chevron further averred that Lexington could not have been assigned any claims under the 1959 mineral or the surface lease because those leases expired prior to the assignments, and that even assuming Lexington could have been assigned any rights under those leases, claims for breach of an implied lease are subject to a one-year prescriptive period, unless a specific provision of the lease is breached. Chevron contended that Lexington had actual knowledge of the alleged damage nearly six years before the filing of its fifth supplemental petition on October 25, 2013, and that it could not avoid the accrual of prescription by obtaining assignments from the former property owners. Shell Pipeline filed a "Motion to Join and Adopt Chevron's Peremptory Exception of Prescription," seeking dismissal of Lexington's claims for pre-acquisition damages against Shell Pipeline.

In addition to the issue of prescription raised in its exception, Chevron also filed a motion for partial summary judgment as to Lexington's claims for post-acquisition damages and breach of lease. Therein, Chevron contended that it was impossible for the Hoffman Heirs to transfer rights to Lexington under the surface lease, which expired in 1962, or the mineral lease, which expired no later than 2011, where the leases had expired prior to the Hoffman Heirs's assignment of rights in 2012 and 2013. Thus, Chevron contended Lexington had no claim against Chevron for breach of any lease obligations.

Lexington filed a "Motion for Reconsideration" and order to show cause why the trial court's November 16, 2009 judgment granting Chevron's motion for partial summary judgment and dismissing Lexington's claims for pre-acquisition damages, should not be reversed.

These matters were each heard...