Molero v. California Co.

• Decision Date: 04 September 1962
• Docket Number: No. 745,745
• Citation: 145 So.2d 602
• Parties: Manuel MOLERO v. The CALIFORNIA COMPANY.
• Court: Court of Appeal of Louisiana — District of US

Page 602

145 So.2d 602

Manuel MOLERO v. The CALIFORNIA COMPANY.

No. 745.

Court of Appeal of Louisiana, Fourth Circuit.

Sept. 4, 1962.

Rehearing Denied Oct. 29, 1962.

Certiorari Denied Nov. 27, 1962.

Wilkinson & Wilkinson, James Wilkinson, III, New Orleans, for plaintiff-appellant, Camille Silvera Molero, testamentary exrx. of Manuel Molero.

Milling, Saal, Saunders, Benson & Woodward, Lawrence K. Benson and Joseph E. Friend, New Orleans, for defendant-appellee, California Co.

Before LANDRY, RUSSELL and HUMPHRIES, JJ.

PAUL B. LANDRY, J.r., Judge.

The instant appeal is by plaintiff herein, Manuel Molero, who thusly contends he was aggrieved by the judgment of the trial court rejecting his claim for $37,500.00 in liquidated damages against defendant-appellee, The California Company, allegedly due pursuant to a written contract entered into by and between appellant and appellee under date of May 21, 1959.

Subsequent to the filing of this appeal, appellant, Manuel Molero, died and by proper motion before this court, his widow and Testamentary Executrix, Camille Silvera Molero, has been substituted as appellant in his place and stead.

The negotiations, facts and circumstances which transpired between the parties and terminated in the institution of this action are somewhat detailed and involved. Nevertheless, their narration is indispensable to a proper understanding and disposition of the issues herein presented for resolution.

On August 1, 1956, Delacroix Corporation (a Louisiana corporation) granted to decedent, Manuel Molero, its President, an oil, gas and mineral lease on a tract of land owned by said corporation and containing approximately 8500 acres situated in Plaguemines and St. Bernard Parishes. The lease in question provided for the payment of one-quarter royalty to the said lessor Delacroix Corporation. Its primary term was for a period of three years from its date and it contained the other usual clauses customarily found in such instruments. The validity and merchantability of said lease has never been questioned and is not an issue herein.

On or about April 20, 1959, defendant, The California Company, (hereinafter sometimes referred to simply as 'California' for purposes of brevity) through its duly authorized employees, commenced negotiations with Molero with the view of obtaining all said lessee's rights under the lease which Molero held from Delacroix Corporation, Molero being the sole possessor thereof by virtue of his ownership of the lease in its entirety. It suffices to say that the negotiations which took place between Molero and California were conducted both verbally and in writing. The initial offers to Molero were contingent upon the procurement from the Lessor, Delacroix Corporation, of an extension of the primary term of the lease for an additional period of one year which extension was declined by said original Lessor. Shortly after the refusal of Delacroix Corporation to accede to an extension of the initial lease, California offered to acquire the lease from Molero in its then existing form (without extension of its primary term) under terms and conditions including, inter alia: (1) a consideration to Molero of the sum of $25,000.00 cash for an option extending through the primary term of the lease; (2) additional consideration of a selection bonus of $25.00 per acre for any portion of the tract with respect to which California might exercise the option granted; and (3) a minimum selection of 3000 acres of the 8500 acre tract or a minimum selection bonus of $75,000.00.

The foregoing offer and proposal was rejected by Molero on the ground that the selection clause being optional with California, the proposition would in effect limit Molero's return under the lease to the sum of $25,000.00 option consideration therein stipulated in the event that California did not exercise the selection right at expiration. In this connection it appears that Molero pointed out to California that such an agreement would in substance deprive him of all his rights under the lease for a maximum consideration of $25,000.00 with the right and privilege of California (during the remaining term of the lease) to acquire invaluable geophysical information regarding such a large tract of land. It further occurred to Molero that following termination of the lease, California, with the knowledge thus acquired, would be in a position to deal directly with Delacroix Corporation for an entirely new lease on all or any portion of the acreage involved. Upon rejection of the aforesaid proposal California subsequently offered the same proposal modified to provide that in the event California permitted the lease to expire without selection and without payment to Molero of the minimum selection bonus of $75,000.00 then and in that event, California agreed to pay Molero liquidated damages in the sum of $37,500.00 should California acquire from Delacroix Corporation a new lease within a year of the expiration date of the original lease to Molero.

The proposal of California as thus revised was rejected by Molero on the ground that it acceptance would place his personal interests in conflict with the interest of the Delacroix Corporation of which he was president inasmuch as he would then be faced with the prospect of negotiating on behalf of the corporation a lease which would or could concurrently earn his individual interest the penalty sum of $37,500.00. Molero then parried the aforesaid counter offer with his own proposal to option the lease to California on the initial basic proposition provided that the penalty stipulated, rather than accruing by the execution of a lease between Delacroix Corporation and California, would become exigible in the event of the unilateral action of California in making an offer to Delacroix Corporation, within a year, for a new lease. The proposal of Molero was then accepted by California and the terms of the agreement reduced to writing with the following penalty provision being inserted therein:

'V. It is further agreed by and between Manuel Molero and California that should the lease first above described expire of its own terms because of the failure of California to select and commence operations for the drilling of a well on the lease premises or on acreage pooled or unitized therewith timely to maintain the lease beyond the primary term hereof, and should California subsequent to such expiration, but on or before August 1, 1960, make an offer to Delacroix Corporation to obtain a new lease covering the land, or any part of same, described in the presently effective lease, California shall thereupon be obligated to pay to Manuel Molero Thirty-Seven Thousand and Five Hundred Dollars ($37,500) as liquidated damages for failure to maintain the present lease beyond its primary term.'

Defendant failed to exercise a selection during the primary term of the lease and accordingly, said lease, as to all acreage included therein, terminated August 1, 1959.

Approximately three weeks following termination of the lease, namely, on or about August 24, 1959, two of defendant's representatives, Jack Desmond and Philip Groves (the same representatives and employees of defendant who negotiated with plaintiff the contract herein sued upon) contacted plaintiff at the office of Delacroix Corporation and presented to plaintiff a verbal offer to lease a certain portion of the 8500 acres included in the then expired lease from Delacroix to Molero dated August 1, 1956. More precisely, defendant's said agents presented Molero with a map including the 8500 acres contained in the original lease on which map defendant's said agents had marked and delineated a certain tract of 150 acres which California wished to lease from Delacroix Corporation. At this time Desmond and Groves proposed to pay Delacroix Corporation a lease bonus of $50.00 per acre for an oil, gas and mineral lease covering the identified 150 acres of land. During the course of discussing the proposition, Molero, acting as the representative of the owner, Delacroix Corporation, expressed doubt that said corporation's Board of Directors would entertain an offer to lease such a small portion of its property and suggested that California make an offer on a larger tract while at the same time indicating that a tract of 1500 acres would probably be acceptable to the owner. Within a day or two following this discussion, Desmond left on a two weeks vacation and during his absence his assistant, Philip Groves continued negotiations with Molero by telephone and at least one personal visit to the latter's office, repeating the offer of $50.00 per acre. Eventually, to the knowledge of defendant's Division Exploration Superintendent, a Mr. Funkhouser, the lease bonus offered by California was increased to the sum of $75.00 per acre for the 150 acres desired. No agreement was reached between the negotiating parties and upon Desmond's return from vacation in early September, 1959, Desmond contacted plaintiff stating that he was prepared, on behalf of California, to make Delacroix Corporation an offer covering 1200 acres of the 8500 acre tract involved. A meeting of the parties was held in the offices of Delacroix Corporation attended by Desmond, Molero and Molero's personal attorney who was also attorney for Delacroix Corporation. On this occasion Desmond spoke of paying Delacroix a lease bonus of $25.00 per acre for a tract covering some 1200 acres and upon being queried by plaintiff's attorney regarding other terms of a lease answered that he, Desmond, would recommend a one-quarter royalty and in effect further stated that he felt the terms of a lease could be worked out between California and Delacroix Corporation. At this juncture plaintiff's attorney suggested to Desmond that the action of defendant in conducting the prior negotiations and in making the current proposal constituted a violation of the agreement between plaintiff and defe...