Scurlock Oil Co. v. Getty Oil Co.

• Decision Date: 29 April 1974
• Docket Number: Nos. 53795--53797,s. 53795--53797
• Citation: 294 So.2d 810
• Parties: SCURLOCK OIL COMPANY v. GETTY OIL COMPANY et al. LOUISIANA INTRASTATE GAS CORPORATION v. Robert L. WATERBURY et al.
• Court: Louisiana Supreme Court

Page 810

294 So.2d 810

SCURLOCK OIL COMPANY v. GETTY OIL COMPANY et al.

LOUISIANA INTRASTATE GAS CORPORATION v. Robert L. WATERBURY et al.

Nos. 53795--53797.

Supreme Court of Louisiana.

April 29, 1974.

Rehearing Denied June 7, 1974.

Lucius F. Suthon, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, for defendants-applicants in 53797, and plaintiffs-respondents in 53795 and 53796.

Duncan M. Smith, Jr., Lafayette, Carl W. Cleveland, C. Ellis Henican, Henican, James & Cleveland, New Orleans, for plaintiffs-respondents in 53797, and defendants-applicants in 53795 and 53796.

SUMMERS, Justice.

Two concursus proceedings are involved here. Scurlock Oil Company instituted the proceeding to determine entitlement to funds representing purchases of oil, while Louisiana Intrastate Gas Corporation seeks by concursus to ascertain whom it should pay for gas purchased from the same productive units. The competing and conflicting claims to these funds arise from the fact that certain owners of lands included in these producing units granted leases affecting these lands and later leased the same lands to another. The object of this concursus is to determine and settle the claims of the parties asserting rights under these leases. This is the second time the validity of these leases has been litigated.

These are the facts which present the problems: On July 29, 1954 Burice C. Bihm, as lessor, executed an oil, gas and mineral lease in favor of F. J. Muller, as lessee, applying to and affecting six acres of land in St. Landry Parish, Louisiana. On the next day, July 30, 1954, Adler V. LeDoux and James Pitre, as lessors, executed an oil, gas and mineral lease also in favor of F. J. Muller, as lessee, applying to and affecting 152 acres, adjacent to the six-acre tract leased from Bihm. These leases were for primary terms of five years and provided that they could be maintained in effect beyond the primary terms by operations and production in accordance with other lease terms and conditions. Muller assigned the leases to Tidewater Oil Company (now Getty Oil Company).

Effective March 1, 1959 the Commissioner of Conservation created a drilling unit known as the 'Cockfield No. 2 Sand Unit No. 21--2'. This unit, consisting of 320 acres, included portions of the lands leased to Muller by the above leases. The unit applied only to the Cockfield No. 2 Sand, a gas sand defined in the Commissioner's order as that gas-condensate bearing sand encountered between 10,376 feet and 10,410 feet in the Tidewater Oil Company-Jeanne R. Haas Well No. 1 located in Section 10, Township 6 South, Range 5 East.

Early in 1960 Tidewater completed a well in the Cockfield No. 2 Sand within the boundaries of the Cockfield No. 2 Sand Unit No. 21--2 on the lands of Robert L. Waterbury. The well, known as Tidewater-Waterbury #1, produced until August 6, 1960, at which time production ceased. Robert L. Waterbury then acquired the right, and did undertake, to restore production from the well. Accordingly, he began reworking operations and successfully restored production in November 1960.

Apparently believing that the acreage outside the unit boundaries was no longer of value, Tidewater, by instrument duly acknowledged on June 5, 1961, released the mineral leases insofar as the acreage outside the unit was concerned, retaining its rights to the acreage inside the unit. Shortly thereafter, on June 23, 1961, the landowners granted two oil, gas and mineral leases to Vernon J. Main affecting the identical property which was the subject of the Muller leases. The leases to Main affected the acreage inside and outside the unit; they affected the lands which Tidewater retained and that which it had released on June 5, 1961. By subsequent transfers these leases to Main were acquired by R. L. Bauman, Jon Rogers, Bauman Trust Estate, Michael Collins Bauman Trust Estate, Jim Braden, Mrs. Mildred Bollman, Donald S. Bollman, Vernon J. Main, Jr., and Mrs. Betty Jane Garber Ellis. All parties acquiring rights from the Main leases we shall refer to as the Bauman Group.

Tidewater then transferred its retained rights in these leases to Aladdin Oil Company, Inc., on November 20, 1961. This document, referred to as a 'Partial Assignment of Oil, Gas and Mineral Leases' purported to 'grant, bargain, sell and assign unto Aladdin Oil Company, Inc., all of its (Tidewater's) right, title and interest' in the leases. However, the transfer only related to the land within the unit and 'INSOFAR AND ONLY INSOFAR as said leases cover and affect the Cockfield No. 2 Sand . . ..' By virtue of subsequent transfers from Aladdin, in which it retained overriding royalty, William L. Waterbury became the owner of the leases in sofar as they covered property within the unit and insofar as the leases affected the Cockfield No. 2 Sand. He, in turn, also retaining overriding royalty, assigned the leases to Robert L. Waterbury. In time Aladdin transferred interests to John F. Fitzhugh, Frank G. Weiner and Indger Properties, Inc. All of these parties, including Robert L. Waterbury, deriving interest from the Muller-Tidewater leases we shall refer to as the Waterbury Group.

By virtue of an order of the Commissioner of Conservation subsequent reformation of units involving the Cockfield No. 2 Sand resulted in the establishment of three units involving all or parts of the 158 acres leased to Muller and later leased to Main. The funds in concursus are derived from production from these units.

The owners of the lands affected by these leases instituted suit on September 6, 1962 against Tidewater, Robert L. Waterbury and Aladdin Oil Company, Inc., seeking a judicial cancellation of the Muller lease then held by Waterbury. The suit was based upon the contentions that: 1) royalties were not timely paid; 2) production from the unit well in question could not be attributed to the Waterbury leases because the unit was a gas unit and produced only oil; 3) the termination of the prior unit cut off production attributable to the leases and terminated them; and 4) a lease provision required that after cessation of production the lease would terminate 'unless Lessee resumes or restores such production, or commences additional reworking or mining operations within ninety (90) days.' Principally the contention was that there was no restoration of production or commencement or reworking operations during the nienty-day period following the cessation of production on August 6, 1960.

On June 13, 1963 attorneys for the landowners wrote to Tidewater referring to the pending suit. The letter proposed: 'In consideration of your payment of $2,750.00 to the undersigned attorneys for the plaintiffs in the above-captioned case and a release of your retained rights in the oil, gas and mineral leases involved in the said case, we do hereby agree . . .' that in the event a judgment is awarded in favor of the plaintiffs no attorneys' fees would be collected against Tidewater. Within a month thereafter, on July 12, 1963, Tidewater executed a document in which it did 'release, relinquish and quitclaim all of its right, title and interest in and to' the oil, gas and mineral leases acquired by Muller in July 1954. (This document was not recorded until May 7, 1968, after judgment denying cancellation of the lease.)

The suit for cancellation of the leases proceeded to trial on September 16, 1964. Judgment was rendered in the trial court on March 6, 1968 in favor of the defendants, dismissing the suit and upholding the validity of the leases. The landowner-lessors appealed the judgment to the Court of Appeal, Third Circuit, and on January 29, 1969 that court rendered its opinion affirming the trial court judgment upholding the leases. House v. Tidewater Oil Company, 219 So.2d 616 (La.App.1969). (The entire record of these proceedings was introduced as evidence at the trial in the instant concursus proceeding.) We denied certiorari on April 25, 1969. 253 La. 1081, 221 So.2d 516.

Meanwhile, as already noted, production was restored in the Tidewater-Waterbury Well No. 1 in November 1960, the lands affected by the leases to Muller being part of this unit. Louisiana Intrastate Gas Company, as the purchaser of gas from this unit and from subsequently formed units involving these same lands, and Scurlock Oil Company, as the purchaser of oil from these units, held the money due for this production in suspense pending a final judgment in the lease cancellation suit. When that suit was resolved, however, the Bauman Group advised Louisiana Intrastate Gas Corporation and Scurlock Oil Company that they considered the November 20, 1961 transfer by Tidewater to Aladdin to be a sublease and not a partial assignment as it purported to be. Thus, according to the Bauman Group, the July 12, 1963 release by Tidewater had the effect of releasing not only the retained interest of Tidewater in the leases, but also all other rights under the leases, including those previously transferred by Tidewater to Aladdin as sublessee. The Waterbury Group, on the other hand, were contending that their lease was in full force and effect and they were entitled to the funds held in subpense by the purchaser of production.

Confronted with these conflicting claims, Louisiana Intrastate Gas and Scurlock instituted these separate concursus proceedings, citing the Waterbury Group and the Bauman Group to assert their respective claims to the disputed funds.

Motions for summary judgment and exceptions of res judicata were filed by Robert L. Waterbury and John F. Fitzhugh, Frank G. Weiner, Indger Properties, Inc., and Aladdin Exploration Co., Inc., in support of their claim to the validity of the leases and the disputed funds. Tidewater (Getty Oil Co.) asserted its claim to $21,139.98 expended by it as operator of the fieldwide unit in which the disputed acreage is located, that amount being the proportionate share of costs attributable to the disputed...