Ogden Oil Co. v. Servco, A Div. of Smith Intern., Civ. A. No. 83-1145-A.

• Decision Date: 04 June 1985
• Docket Number: Civ. A. No. 83-1145-A.
• Citation: 611 F. Supp. 572
• Parties: OGDEN OIL COMPANY v. SERVCO, A DIVISION OF SMITH INTERNATIONAL, INC.
• Court: U.S. District Court — Middle District of Louisiana

611 F. Supp. 572

OGDEN OIL COMPANY v. SERVCO, A DIVISION OF SMITH INTERNATIONAL, INC.

Civ. A. No. 83-1145-A.

United States District Court, M.D. Louisiana.

June 4, 1985.

Deborah C. Parker, Baton Rouge, La., for plaintiff.

M. Lizabeth Talbott, New Orleans, La., for defendant.

JOHN V. PARKER, Chief Judge.

This diversity case presents difficult, res nova issues involving the Louisiana Oil Well Lien Act, L.S.A.-R.S. 9:4861 et seq. Defendant has moved for summary judgment; both sides have submitted multiple briefs and the issues have been orally argued. The court apologizes to counsel and litigants for the length of time involved in coming forward with this opinion but, as noted, the issues are difficult and a searching examination of all Louisiana jurisprudence has been undertaken. The ultimate question to be resolved is which of two innocent creditors of the defaulting mineral lessee should suffer.

Both sides agree that the facts are undisputed. Plaintiff, Ogden Oil Company, is a corporate citizen of Mississippi with its principal office in that state and defendant, Servco, a division of Smith International, Inc., is a corporate citizen of California with its principal office in that state. In 1977 Shell Oil Company obtained an oil, gas and mineral lease on a tract of land in sections 49, 50 and 57 (the Comite Field) in East Baton Rouge Parish, Louisiana, and 1982 Shell assigned the lease to Workover One, Inc., which secured a state permit to drill for minerals at a well site commonly identified as the Petit No. 1. On October 8, 1982, Workover One assigned all of its right, title and interest in the lease to Workover One Alliance Group, a partnership. During the period of November and December, 1982, the defendant, Servco, furnished oil field drilling related equipment, supplies, labor and other services to Workover One totaling $145,476.54. Workover One having failed to pay, Servco ceased furnishing such supplies and equipment and on April 7, 1983, more than ninety days following the last performance of labor or services, Servco recorded a lien affidavit in the mortgage records of the Parish of East Baton Rouge.

In the meantime, Workover One contracted with plaintiff, Ogden Oil, to furnish a workover rig for use at Petit No. 1. Ogden's rig was apparently moved to the well site in mid-March, 1983 and on April 4, 1983, after Workover One had failed to pay Ogden some $250,000.00 representing labor, services, supplies and equipment furnished, Ogden began to rig down for removal of its equipment. On May 16, 1982, after Ogden's equipment had been removed from the well site, Servco secured a writ of sequestration from this court authorizing seizure of Ogden's workover rig. The sequestration was subsequently released and Ogden brought this action against Servco alleging wrongful seizure of the rig and claiming some $130,000.00 as damages for the period during which the rig remained under seizure.

The issue presented by Servco's motion for summary judgment is whether Ogden's workover rig was subject to the lien or privilege granted to Servco by the Oil Well Lien Act. If the property was subject to the lien then obviously the seizure was lawful and Servco is entitled to summary judgment. Servco argues that Ogden's workover rig was "located on the lease" and thus is subject to its privilege; Ogden argues that its rig was not "located on the lease" at anytime that Servco was furnishing labor, materials or services and that the rig is not subject to the privilege.

Since La.R.S. 9:4861.2 provides that it is unlawful for any person to remove property to which a privilege under § 4861 has attached and further provides that the privilege may nevertheless be enforced against any property which has been removed from the site "wherever the same may be located," it is apparent that Ogden's removal of the rig did not defeat the privilege, assuming that it had lawfully attached.¹ The privilege is created by La.R.S. 9:4861 which, prior to its amendment by Act 949 of 1984,² read as follows:

§ 4861. Privilege for labor, services or supplies. Any person who performs any labor or service in drilling or in connection with the drilling of any well or wells in search of oil, gas or water, or who performs any labor or service in the operation or in connection with the operation of any oil, gas or water well or wells, has a privilege on all oil or gas produced from the well or wells, and the proceeds there of inuring to the working interest therein, and on the oil, gas or water well or wells and the lease whereon the same are located, and on all drilling rigs, standard rigs, machinery, appurtenances, appliances, equipment, buildings, tanks, and other structures thereto attached or located on the lease, for the amount due for labor or service, in principal and interest, and for the cost of preparing and recording the privilege, as well as ten per cent attorney's fees in the event it becomes necessary to employ an attorney to enforce collection. Any person who does trucking, towing, or barging, or who makes any repairs or furnishes any fuel, drilling rigs, standard rigs, machinery, equipment, material or supplies for or in connection with the drilling of any well or wells in search of oil, gas or water, and for or in connection with the operation of any oil, gas, or water well or wells, whether or not a producing well is obtained and whether or not such materials, machinery, equipment, services and supplies are not incorporated in or become a part of the completed oil, gas or water well, has a privilege on all oil or gas produced from the well or wells and the proceeds thereof inuring to the working interest therein and on the oil, gas or water well or wells and the lease whereon the same are located, and on all drilling rigs, standard rigs, machinery, appurtenances, appliances, equipment, buildings, tanks and other structures thereto attached for drilling, equipment and operation of the well or lease, for the amount due for such trucking, towing, barging, repairs, fuel, drilling rigs, standard rigs, machinery, equipment, material, or supplies, in principal and interest, and for the cost of preparing and recording the privilege, as well as ten per cent attorney's fees in the event it becomes necessary to employ an attorney to enforce collection thereof. This privilege is second in rank only to the privilege granted in favor of laborers.

Thus, the statute grants a lien or privilege to any person who performs labor or services and to any person who furnishes trucking, towing, barging, repairs, fuel, drilling rigs, standard rigs, machinery, equipment, material or supplies, and the privilege extends to "all oil or gas produced from the well or wells ... and on the oil, gas or water well or wells and the lease whereon the same are located, and on all drilling rigs, standard rigs, machinery, appurtenances, appliances, equipment, buildings, tanks and other structures thereto attached for drilling, equipment and operation of the well or lease." Since Ogden Oil's workover rig was "thereto attached" to the Petit No. 1 drill site for drilling the well, Servco claims its privilege attached to the rig even though Servco had ceased furnishing materials and supplies more than three months before Ogden Oil moved its rig onto the site. Ogden Oil argues that the statute should be strictly construed so as to limit the privilege to equipment and machinery on the lease at the time that the services are performed.

Louisiana jurisprudence is of little assistance and in this diversity action the court must construe and...