Ogden Oil Co., Inc. v. Venture Oil Corp.

• Decision Date: 13 June 1986
• Docket Number: No. 85-403,85-403
• Citation: 490 So.2d 725
• Parties: OGDEN OIL COMPANY, INC., Plaintiff-Appellee, v. VENTURE OIL CORPORATION, Defendant, Callon Energy Services, Inc., Intervenor-Appellant.
• Court: Court of Appeal of Louisiana — District of US

Page 725

490 So.2d 725

OGDEN OIL COMPANY, INC., Plaintiff-Appellee, v. VENTURE OIL CORPORATION, Defendant Callon Energy Services, Inc., Intervenor-Appellant.

No. 85-403.

Court of Appeal of Louisiana Third Circuit.

June 13, 1986.

Writ Denied Oct. 3, 1986.

Simon, Peragine, etc. (Juyd, Martinez & John C. Herbert, New Orlean, for defendant.

J. Payton Parker and Deborah P. Gibbs, Baton Rouge, for plaintiff-appellee.

Before FORET, KNOLL and MOUSER ^*, JJ.

FORET, Judge.

This case involves the constitutionality and interpretation of the Oil, Gas, and Water Well Act, LSA-R.S. 9:4861 et seq.

Plaintiff, Ogden Oil Company, Inc. (Ogden), sued defendant, Venture Oil Corporation (Venture), for the balance due Ogden for workover services performed under contract with Venture. Venture reconvened, claiming a setoff.

The trial court rendered judgment in favor of Ogden in the amount of $133,386.61, plus legal interest from date of demand until paid and 10% attorney's fees. The judgment also ordered the seizure and sale, in satisfaction of Ogden's judgment against Venture, of a workover rig leased by Callon Energy Service, Inc. (Callon) and certain Callon equipment.

Callon intervened in the proceeding, alleging that the sequestration of the Callon rig and equipment was unconstitutional. Callon appeals the trial court judgment which held that the sequestration pursuant to LSA-R.S. 9:4861 et seq. was constitutional.

The issues before us are:

(1) The constitutionality of the provisions of LSA-R.S. 9:4861 et seq.; and

(2) Whether the recognition of Ogden's lien on Callon's equipment was erroneous.

FACTS

Ogden contracted to perform certain workover services for Venture on the Wilson-Johnson # 2 well situated on certain leased premises in Rapides Parish. Ogden began work on May 23, 1983, and continued to perform services and provide equipment through June 24, 1983. Venture refused to pay sums due on their open account after demand by Ogden. On September 26, 1983, an Affidavit of Statement of Claim and Privilege was filed by Ogden in the mortgage records of Rapides Parish, alleging Venture's indebtedness unto Ogden, in order to preserve the lien and privilege granted by LSA-R.S. 9:4861 et seq. ¹ Ogden then filed a suit on open account with a writ of sequestration upon all property located on the leased premises, including one Callon Energy workover rig. Callon's workover rig was sequestered by the Rapides Parish Sheriff.

The undisputed facts are that on or about July 25, 1983, Callon contracted with Venture to perform certain workover services on the same well Ogden had worked over. On August 1, 1983, Callon moved a workover rig onto the well site. ²

Venture answered Ogden's suit and also brought a reconventional demand against Ogden alleging that Ogden destroyed or damaged some of Venture's equipment at the well site. Callon intervened, as aforementioned.

DUE PROCESS

A statute is presumed to be constitutional; therefore, the party attacking its constitutionality has the burden of proving otherwise. All doubt is to be resolved in favor of the constitutionality of the statute.

No authority directly on point has been cited by Callon in support of its contention that the subject statute constitutes a "taking" without just compensation, and this Court has been unable to find such a precedent.

The Louisiana Legislature has the authority to enact legislation to protect laborers and materialmen from insolvent contractors. This statute was apparently enacted in order to attract the attention of the property owner and hasten negotiable resolution, in consideration of the enormous cost of daily operations of workover services. Any other interpretation would limit this protective lien of laborers and deprive materialmen and those providing services and supplies of the basic protection which the statute was designed to provide. By its very structure, this statute demonstrates the legislature's intent to provide these parties with a remedy against both the leaseholder and the third parties who bring the well to completion. The legislature's intent would be frustrated if we were to limit the application of the statute to equipment on the leased premises at the exact instance services are rendered or supplies delivered.

Callon contends that it had no contractual or debtor/creditor relationship with Ogden and that, therefore, this constitutes an unconstitutional "taking" by the State of Louisiana for which no compensation is provided.

As previously stated, the legislature has the authority to enact laws to protect laborers and materialmen by creating liens in their favor on machinery and equipment used in well drilling in connection with which their labor and services are performed. The fact that these liens may affect the drilling equipment of a third person who permits his property to be placed on the leased premises and used by the lessee, his agent or his employee in drilling operations, does not alter the legal situation. Sargent v. Freeman, 204 La. 997, 16 So.2d 737 (La.1943).

The Oil, Gas, and Water Wells Act protects all suppliers and laborers in the oilfield industry. Callon too would be entitled to the protective lien and privilege granted by the statute had it not been paid for its services. Its right could have been exercised against any equipment found on the premises, regardless of ownership, as well as against the products of the well itself. We must presume that Callon was aware of this statute and was aware that there existed the possibility that its property might become subject to another's lien. With this knowledge, albeit imputed, Callon voluntarily put its property on the leased premises. Admittedly, the statute is harsh, but Callon cannot plead ignorance of its existence.

Although, as a general rule, a "taking" can occur where the government makes it possible for someone to obtain the benefits of another's property, the question of whether there is a "taking" cannot turn simply on legal principles of law; it must be based on the particular circumstances of each case. Aris Gloves, Inc. v. United States, 190 Cl.Ct. 367, 420 F.2d 1386 (1970). Cases cited by Callon to support its contention that the seizure of the Callon rig was a taking without just compensation are factually distinguishable from the instant case and inapposite. Those cases represent situations whereby a legislative regime takes property of one party in order to protect the financial interest of a private citizen. This statute protects all laborers and suppliers, Callon as well as Ogden.

Louisiana has had a special lien for suppliers in the oilfield since 1916. Repeated attacks on the constitutionality of the statutes creating the lien have been unsuccessful. Sargent v. Freeman, supra, and cases cited therein; "Mechanics and Materialmen's Liens in the Louisiana Oil Patch", Steven J. McGarry, 29 La.Bar J. 67 (1981); "The Privilege for Drilling and Operating Expenses", Robert L. Cabes, 23rd Annual Institute on Mineral Law.

After assessing Callon's loss and the protection given to Callon, as well as any other supplier of materials and/or services in the oilfield, we conclude that no "taking" has occurred under this statute.

EQUAL PROTECTION

Callon additionally contends that the Oil, Gas, and Water Well Lien Statute denies it equal protection of the laws under Art. 1, Sec. 3 of the Louisiana Constitution and the 14th Amendment of the United States Constitution. ³

The function of the equal protection clause is to measure the validity of classifications created by state laws. Rudolph v. Massachusetts Bay Insurance Co., 472 So.2d 901 (La.1985). Callon contends that it is entitled to equal protection under LSA-R.S. 9:4861 which has not been afforded it. We note at the outset that Callon, although a corporation, is entitled to equal protection under the law. Lewis K. Liggett Co. v. Lee, 288 U.S. 517, 53 S.Ct. 481, 77 L.Ed. 929 (1933). Callon further argues that a statutory classification of a member of a non-suspect class, such as itself, must bear a rational relationship to the legislature's objective in enacting the statute. R.J. D'Hemecourt Petroleum, Inc. v. McNamara, 444 So.2d 600 (La.1983); Williams v. Lallie Kemp Charity Hospital, 428 So.2d 1000 (La.App. 1 Cir.1983), writ denied, 434 So.2d 1093 (La.1983); Carbonell v. Dept. of Health & Human Resources, 444 So.2d 151 (La.App. 1 Cir.1983).

In its brief, Callon contends that the intent of the Oil Well Lien Statute is to protect laborers and materialmen by giving them a lien on equipment with which they are associated or to which their work is connected. Callon argues that the lien on its rig bears no rational relationship to the legislative purpose and that the statute is arbitrary and capricious. Furthermore, it argues that third party contractors in no other industry are subjected to the risk that their property will be seized and sold to satisfy the debt owed by a fellow contractor. We do not find Callon's contentions meritorious.

Equal protection does not mandate equal treatment. The legislature may normally discriminate in its regulatory schemes, but it cannot run afoul of equal protection. Classifications cannot be based on impermissible criteria or arbitrarily used to burden a particular group. Whether a classification can be said to meet the equal protection guarantee depends upon the purpose one attributes to the act and the degree of relationship between the end sought and the group affected. Ledet v. Fischer, 548 F.Supp. 775 (D.C.La.1982). In our analysis of this statute, we will use the "rational basis" test.

Under the "rational basis" test, we presume that the challenged statutory distinctions are constitutional. Town of Ball v. Rapides Parish Police Jury, 746 F.2d 1049 (5th Cir., 1984). Because states are afforded a wide scope of discretion under the "rational basis" test, the 14th Amendment safeguard of equal protection is offended only if the classification rests on...