State ex rel. Muslow v. Louisiana Oil Refining Corporation

• Decision Date: 01 June 1937
• Docket Number: 5467
• Citation: 176 So. 686
• Court: Court of Appeal of Louisiana — District of US
• Parties: STATE ex rel. MUSLOW v. LOUISIANA OIL REFINING CORPORATION

176 So. 686

STATE ex rel. MUSLOW v. LOUISIANA OIL REFINING CORPORATION

No. 5467

Court of Appeal of Louisiana, Second Circuit

June 1, 1937

Blanchard, Goldstein, Walker & O'Quin and Robert Roberts Jr., all of Shreveport, for appellant.

John B Files, of Shreveport, for appellee.

OPINION

TALIAFERRO, Judge.

The constitutional integrity of Act No. 64 of 1934 is squarely put at issue in this case. The act was upheld by the lower court and defendant has appealed.

Arthur C. Best and Sherman G. Spurr, on April 28, 1927, purchased from the Ackerman Oil Company by warranty deed several tracts of land in Caddo parish, including that of 37.50 acres described in plaintiff's petition. This deed expresses a price of "one dollar and other good and valuable consideration" received by the grantor. It is executed on behalf of the corporation by Paul Mlodzik, president, and by Jerome C. Dretzka, secretary. It is verified by the joint affidavit of these two officers who therein declare that they acted "by its (the Company's) authority." Several nonproducing oil wells were on the tract on February 17, 1933, and the casing therefrom, owned by the plaintiff, was sold by Best and Spurr. However, on that date plaintiff procured their consent in writing to temporarily leave the casing in one of the wells to the end that he might make further tests to ascertain if profitable production could be had.

An informal written contract of lease to evidence the agreement was signed by them and placed on record. It is stipulated therein that plaintiff should receive seven-eighths of production, if any, and Best and Spurr one-eighth thereof. The effort was in a measure successful. Oil was produced. The output was sold to the defendant and piped by plaintiff into its carrier lines. The first run was made in September, 1933, and the last in August, 1934. The net amount due therefor and for which plaintiff sues is $ 445.55. Payment of this amount was refused on demand. Judgment was rendered therefor. As is authorized by the 1934 act, an alternative writ of mandamus was sued out.

Defendant excepted to the petition on the ground that it did not disclose a cause or right of action, and by formal plea attacked the 1934 act as being unconstitutional, void, and of no effect, in the following language: "The said statute, if enforced in this cause, in the manner relied upon by relator, would require respondent to pay to relator the value of property which did not belong and never has belonged to plaintiff, thereby leaving respondent responsible and liable to the true owner of said property for the value thereof, and in that manner depriving respondent of its property without due process of law, and denying to it the equal protection of the laws contrary to the provisions and requirements of the Constitutions of the United States and of the State of Louisiana."

The exception and plea were tried with the merits. Defendant denies that plaintiff has a valid lease of said land and denies that he ever has been the owner of the crude oil produced therefrom. It denies also that the deed to Best and Spurr is translative of property for two reasons, viz.: (1) That no serious consideration is therein expressed; and (2) that the officers of the Ackerman Oil Company who signed said deed are not alleged either in the deed or the petition to have been authorized by the corporation to execute the deed. It also avers that, in keeping with the uniform rule and practice of oil companies, its own counsel examined the abstract of title to said 37.50-acre tract and made criticism thereof and recommended that certain information be procured and curative work done in order to put said title in condition to be favorably passed, all of which were made known to plaintiff; and that none of these suggestions and recommendations were complied with and for this reason the price of the oil was withheld from plaintiff.

Subsequent to filing this suit, the Louisiana Oil Refining Company availing itself of the benefits of section 77B of the United States Bankruptcy Act (U. S.Code, title 11, §207 11 U.S.C.A. 207), for the purpose of reorganization, etc., surrendered all its property, assets, and affairs to the United States District Court for the Western District of Louisiana and thereafter all of such property and assets were purchased and its liabilities assumed by the Arkansas Fuel Oil Company. This purchaser was substituted as defendant and the judgment herein rendered is against it. Section 1 of Act No. 64 of 1934 declares, inter alia, that it shall be unlawful for any person, firm, or corporation, or officer thereof, when such person, firm, or corporation has purchased oil, gas, or other minerals from the lessee in a mineral lease, holding under any instrument sufficient in terms to transfer title to the leased property or the mineral rights described therein, to withhold payment of the price of such purchase. Section 2 of the act, so far as is pertinent to the present discussion, reads: "That any person, firm or corporation that has actually drilled or opened on any land in this State, under a mineral lease granted by the last record owner, as aforesaid, of such land or of the minerals therein or thereunder if the mineral rights in and to said land have been alienated, who holds under an instrument sufficient in terms to transfer the title to such real property, any well or mine producing oil, gas or other minerals shall be presumed to be holding under lease from the true owner of such land or mineral rights and the lessor, royalty owner, lessee or producer, or persons holding from them, shall be entitled to all oil, gas or other minerals so produced, or to the revenues or proceeds derived therefrom, unless and until a suit testing the title of the land or mineral rights embraced in said lease is filed in the district court of the parish wherein is located said real property. A duly recorded mineral lease from such last record owner shall be full and sufficient authority for any purchaser of oil, gas or other minerals produced by the well or mine aforesaid to make payment of the price of said products to any party in interest under said mineral lease, in the absence of the aforementioned suit to test title or of receipt, by such purchaser, of due notification by registered mail of its filing, and any payment so made shall fully protect the purchaser making the same; and so far as said purchaser is concerned as against all other parties, the producer of such oil, gas or other minerals shall be conclusively presumed to be the true and lawful owner thereof." Section 3 of this act is as follows: "That notwithstanding the foregoing provisions, the purchaser, as respects any oil, gas or other minerals purchased prior to the date upon which this Act goes into effect, shall withhold payment of the purchase price until the lapse of sixty days from said effective date, or shall not be entitled to the protection said Act affords." We had occasion to study and analyze this act in State ex rel. Boykin v. Hope Producing Company, 167 So. 506, 510, and therein said: "We experience little difficulty in determining the legislative intent in adopting this act. It supplied a long-felt need, and in its operative effect will serve to prevent imposition upon and unjust discrimination against those whom it was intended to protect. The act establishes a rule of conduct for the protection of lessors, and their assignees under oil and gas leases, and also a rule of security and safety for lessees and those holding under or purchasing from them. The right to resort to mandamus to compel payment of rentals, royalties, or other sums due under the specific terms of the lease, is limited to demands which embrace an amount or amounts definitely fixed in the contract.

"The act was designed also to protect those persons whose rights arose from or are based upon contracts with the last record owner of the lands covered thereby, and to those who deal with or acquire from such persons. The last record owner is given the status of true owner, as related to all of said persons, and this status continues as to them until disturbed by filing of suit by an adverse claimant of the leased land or some real right concerning it. Under the act, royalty payments, definitely fixed in the lease, may not be legally withheld from those persons entitled to receive same, because of any defect in the title of the leased property or because of any threat or purpose on the part of third persons to involve the title or lease itself in litigation. Actual filing of suit by such third persons is necessary to stop the operative effect of the terms of the act."

Conditions precedent to a proper application of the protective provisions of this act are these: (a) That the lessee or other person from whom oil is purchased must trace his right to a lease or other contract with the last record owner holding title to the land or minerals sufficient in terms to transfer the res. In other words, a transfer or deed translative of property; and (b) that said mineral lease or other contract from such last record owner be duly registered in the parish wherein is located the land thereby affected.

Concurrence of these two conditions warrants and protects the purchaser in paying the price to the one from whom the oil has been purchased; and, under the express declarations of the act, no recourse may thereafter be had by any third person or adverse claimant against such buyer. A title to be translative of property need not be executed by the true owner. Civ. Code, art. 3485. It is only necessary to have such character that it be "a title which shall be legal, and...