Nunez v. Superior Oil Co.

• Decision Date: 12 May 1978
• Docket Number: No. 76-3340,76-3340
• Citation: 572 F.2d 1119
• Parties: Adam G. NUNEZ, Plaintiff-Appellant, v. The SUPERIOR OIL COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1119

572 F.2d 1119

Adam G. NUNEZ, Plaintiff-Appellant, v. The SUPERIOR OIL COMPANY, Defendant-Appellee.

No. 76-3340.

United States Court of Appeals, Fifth Circuit.

May 12, 1978.

Adam G. Nunez, pro se.

Robert T. Jorden, Lafayette, La., Lawrence P. Simon, Jr., Willard B. Wagner, Jr., James M. Dunnam, Houston, Tex., for defendant-appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before, HILL, RUBIN and VANCE, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

This suit to cancel mineral leases and to obtain damages incurred as a result of their alleged breach was commenced in Louisiana state court, and removed by the defendant, Superior Oil Company, ¹ to federal court on the basis of diversity of citizenship. After a careful consideration of Louisiana law, the experienced trial judge rendered a summary judgment for the defendant. While we conclude that the trial court was correct in its analysis of Louisiana law, we reverse the summary judgment and remand because the plaintiff is entitled to a jury trial of a controlling issue. ²

I.

The objective facts are not in dispute. ³ Adam Nunez and his son, Adam G. Nunez, each owned an undivided one-fourth interest in a piece of property leased to Superior for mineral development. On May 2, 1971, the father died and the son began endorsing his father's royalty checks, with the added notation "by Adam G. Nunez, Administrator, for deposit only to the Estate of Adam Nunez." Over six months later, on October 21, 1971, K. R. Richardson, a senior clerk at Superior, discovered that the endorsement was executed in a representative capacity, and ordered royalty payments to the father stopped. He wrote the son, who is a lawyer, and asked for various documents relating to the father's succession. These documents were supplied, and the company's attorney approved further payments to the administrator of the succession.

Whenever there is any change in the division of the royalty from a lease, it is Superior's policy, in accordance with industry custom, to send an agreement to the royalty owners stating how the royalty is to be divided, and to ask them to sign it. The company recognizes that it is not necessary in many cases that a division order be executed- ; it was not considered necessary in this case, but it nonetheless follows the practice of mailing a division order in the hope that the lessees will sign it and thus ratify the proposed new apportionment of royalty. Adam G. Nunez stated at oral argument that he never signs division orders; he sees no advantage to him, as a lessor, in doing so and the company has no right to require it. Accordingly, Superior followed its procedure and sent a royalty division order to Adam G. Nunez, as administrator of his father's succession, but he neither signed it nor returned it to the company.

On April 6, 1972, Adam G. Nunez sent Superior a copy of a judgment of possession recognizing him as the sole heir of all his father's property, including the royalty interest, and a letter requesting that payments of his father's interest be made to him. On June 15, 1972, the company sent him a second royalty division order; this too was neither signed nor returned.

When the company mails a division order, it usually places a copy in its tickler system to remind its employees to check within 30 to 60 days to ensure that royalty payments are resumed even if the division order has not been returned. On this occasion, through oversight, the copy was not placed in the reminder system. Because of this failure, none of the company's employees became conscious of the fact that the division order had not been returned and that payments had not been resumed. The error was discovered during an internal audit on February 20, 1974; as a result, the company sent Nunez the unpaid royalties with interest computed at the rate of seven percent per annum. On March 14, 1974, he sent the company a letter demanding acknowledgement of cancellation of the lease. Following the company's refusal to oblige, this suit was filed. After the case was removed to federal court, the plaintiff demanded a jury trial.

II.

Under Louisiana law, the lessee's failure to pay production royalties for an appreciable length of time without justification amounts to an active breach which terminates the lease. Wilson v. Sun Oil Co., La.1974, 290 So.2d 844; Bollinger v. Texas Co., 1957, 232 La. 637, 95 So.2d 132; Melancon v. Texas Co., 1956, 230 La. 593, 89 So.2d 135; Alvord v. Sun Oil Co., La.App.1972, 271 So.2d 561; Sellers v. Continental Oil Co., La.App.1964,168 So.2d 435, aff'd, La.App.1966, 188 So.2d 466; Pierce v. Atlantic Refining Co., La.App.1962, 140 So.2d 19; Bailey v. Meadows, La.App.1961,130 So.2d 501. However, if the delay in payment was "justified," the failure to pay promptly is only a passive breach, and the lessor must accord the lessee a chance to remedy the violation. ⁴ Hibbert v. Mudd, La.1974, 294 So.2d 518; Alvord v. Sun Oil Co., supra; Hebert v. Sun Oil Co., La.App.1969,223 So.2d 897; Broadhead v. Pan American Petroleum Corp., La.App.1964, 166 So.2d 329; Fawvor v. U. S. Oil of La., Inc., La.App.1964, 162 So.2d 602.

The principle just stated includes two general terms that require further amplification: what length of time is appreciable, and, under what circumstances is a breach justifiable. The Louisiana cases indicated that each issue must be considered in the context of the unique facts and circumstances of the case in which it arises. Fawvor, supra. Because Superior concedes that its delay was appreciable, we focus on justifiability. Delay has been considered "justifiable" when the lessor shows that it is due to "adequate reason," Fontenot v. Sunray Mid-Continent Oil Co., La.App.1967, 197 So.2d 715, or "inadvertence" and "clerical error" in the context of otherwise reasonable conduct. Alvord, supra; Hebert, supra. These terms provide semantic amplification but insufficient definition for drawing precise lines. Discriminating judgment is required before their conceptual significance yields a decision.

The trial court granted summary judgment on the basis that the delay was attributable to, and "justified" by, the administrative procedures designed to reflect the change in ownership and the subsequent inadvertent error in filing; hence, the delay constituted only a passive breach. The court also concluded that the letter of April 6, 1972 did not constitute a demand or "putting in default" because it did not put the defendant on notice that the plaintiff considered the lease terminated. Because Superior had not been put in default for the passive breach, the plaintiff was not entitled to cancellation.

There can be little doubt that the trial court's factual conclusions were not clearly erroneous; the question is whether the court was correct in rendering summary judgment determining that Superior's delay was justifiable, or whether that issue required resolution by a jury.

III.

Our appraisal must follow the commandment that summary judgment is appropriate only when no material issues of fact are in dispute. A. M. R. Enterprises, Inc. v. United Postal Savings Assoc., 5 Cir. 1978, 567 F.2d 1277, 1279; Ralli-Coney v. Gates, 5 Cir. 1976, 528 F.2d 572, 574; Greenberg v. General Mills Fun Group, Inc., 5 Cir. 1973, 478 F.2d 254, 256. ⁵ Summary judgment, we have frequently reminded, is not only an instrument of " just, speedy and inexpensive" resolution, Albatross Shipping Corp. v. Stewart, 5 Cir. 1964, 326 F.2d 208, but also a "lethal weapon" capable of " overkill," Brunswick v. Vineberg, 5 Cir. 1967, 370 F.2d 605, 612. See Bruce v. Travelers Insurance Co., 5 Cir. 1959, 266 F.2d 781, 786, where Judge Wisdom documents this court's expressions of favor and admonitions of caution. See generally Louis, Federal Summary Judgment Doctrine: A Critical Analysis,83 Yale L.Rev. 745 (1974); Bauman, The Evolution of Summary Judgment Procedure, 31 Ind.L.J. 329 (1956).

There is no litmus that infallibly distinguishes those issues that are "factual" from those that are "legal" or "mixed." When all those material facts susceptible of objective determination are known, there may be inferences or conclusions to be drawn from them. Many observations that may appear superficially to be factual are the result of inference, viewpoint, and judgment. At ends of the spectrum, it may be relatively easy to separate fact and law, but, as we approach the point where facts and the application of legal rule to them blend, appraising evidentiary facts in terms of their legal consequences and "applying" law to fact become inseparable processes. In some instances where facts may assume infinite variety, legal rules are deliberately stated in a fashion calling for the application of judgment. Thus, in a suit for personal injury from an automobile accident, it might be ascertained, or even stipulated, that the defendant was driving at 50 miles per hour on a certain road at 6:00 p. m. on a rainy January day. The trier of fact must still decide whether this is "negligence." Therefore, the availability of summary judgment depends upon more than an abstract denomination of disputed material issues as "factual" or "legal" or "mixed;" it may turn on whether the application of legal criteria necessarily require judgmental evaluation by the trier of fact, or, to put it another way, whether the trial will require a judge/jury separation of issues.

If decision is to be reached by the court, and there are no issues of witness credibility, the court may conclude on the basis of the affidavits, depositions, and stipulations before it, that there are no genuine issues of material fact, even though decision may depend on inferences to be drawn from what has been incontrovertibly proved. Under those circumstances, which may be rare, the judge who is also the trier of fact may be warranted in concluding that there was or was not negligence, or that someone acted...