Wells v. Zadeck

• Decision Date: 30 March 2012
• Docket Number: No. 2011–C–1232.,2011–C–1232.
• Citation: Wells v. Zadeck, 89 So. 3d 1145 (La. 2012)
• Parties: James P. WELLS, Jr. v. Donald J. ZADECK, Zadeck Energy Group, Inc., Oleum Operating Company, L.C., T.M. Hopkins Operating, Inc. and T.M. Hopkins, Inc.
• Court: Louisiana Supreme Court

89 So.3d 1145

James P. WELLS, Jr.

v.Donald J. ZADECK, Zadeck Energy Group, Inc., Oleum Operating Company, L.C., T.M. Hopkins Operating, Inc. and T.M. Hopkins, Inc.

No. 2011–C–1232.

Supreme Court of Louisiana.

March 30, 2012.

Talbot, Carmouche & Marcello, Victor L. Marcello, Baton Rouge, LA, for Applicant.

Shuey Smith LLC, John Miller Shuey, Jr., Wiener, Weiss & Madison, APC, Shreveport, LA, Franklin H. Spruiell, Jr., for Respondent.

JOHNSON, Justice.^*

[2011-1232 (La. 1]We granted this writ application to consider whether the doctrine of contra non valentem applies to suspend the ten year liberative prescriptive period applicable to an action by the mineral interest owners against the operator of a unit well who has failed to pay the owners their share of proceeds for mineral production.Wells v. Zadeck, 11–1232(La.10/12/11), 74 So.3d 212.

For the reasons that follow, we conclude the doctrine of contra non valentem applies to suspend the running of prescription because the mineral interest owners did not know nor reasonably should they have known of the mineral production until December 19, 2008.

FACTS

On September 17, 1949, James P. Wells and Olean Speights Wells executed a cash deed in favor of Paul and Cleo Holmes conveying 120 acres of property situated in DeSoto Parish, Louisiana.In the sale of the property to Mr. and Mrs. Holmes, Mr. and Mrs. Wells established a mineral servitude by reserving an undivided one-half interest in the mineral rights on the property.In the 1950s, James and Olean Wells divorced; and pursuant to their community property [2011-1232 (La. 2]settlement, they divided the servitude with each party retaining ownership of an undivided one-fourth mineral interest in the property.

On June 5, 1954, Mrs. Wells executed a mineral lease in favor of Z.T. Gallion, pursuant to which a well was drilled on the property.The lease was released on June 26, 1958 because the well resulted in a dry hole.In 1961, the Holmes family executed a mineral lease with Parnell, Inc., Zadeck's predecessor in interest, covering lessors' “entire undivided one-half interest in and to” the property.The property was then included in the Paluxy Sand Unit U, a unit in which the Shirey WellNo. 1 achieved production in January, 1965, and continued producing through 2007.

Mrs. Wells died in 2002, and her servitude was inherited by her son, the Plaintiff, James P. Wells, Jr., and his sister, Martha C. Perser, who is not a party to this lawsuit.On December 19, 2008, James P. Wells, Jr.(“Wells”) was contacted by Bill Dempsey, a landman representing Comstock Resources, concerning a lease of his mineral interest.Thereafter, Wells discovered the long history of production involving the servitude and filed this lawsuit.

On December 18, 2009, Wells filed suit against DefendantsDonald Zadeck and Zadeck Energy Group, Inc.(hereinafter referred to collectively as “Zadeck”), Oleum Operating Company, L.C., and T.M. Hopkins Operating, Inc. and T.M. Hopkins, Inc., who all allegedly conducted oil and gas exploration and production activities from his unleased unitized acreage, for their failure to tender unto him and/or his mother their rightful share of proceeds from the production.In response, Zadeck filed a Peremptory Exception of Prescription, urging that according to LSA–C.C. art. 3499, Wells' claim to recover payment is a claim in quasi contract that prescribed ten years from Zadeck's cessation of involvement [2011-1232 (La. 3]with the Shirey WellNo. 1.Zadeck admitted that it was the operator of the Shirey WellNo. 1, but contended its ownership interest ended on September 3, 1994, when it sold all of its rights in the well to T.M. Hopkins, Inc.It maintained that thereafter, it had no further involvement with the Shirey WellNo. 1.Zadeck maintained that Wells failed to file his suit until fifteen years after Zadeck ceased service as operator of Shirey WellNo. 1.It argued that any claims urged by Wells can only revert back to December 18, 1999; therefore, Wells' claims against Zadeck are prescribed.The present exception of prescription involves defendant Zadeck only.

In response to Zadeck's exception, Wells argued that the doctrine of contra non valentem applies to suspend the running of prescription since he had no knowledge of the existence of the mineral interests or production until December 19, 2008.Wells contended that his ignorance was not attributable to any fault of his own, and he clearly exercised due diligence in discovering the relevant facts once he learned that he owned the mineral interests.

On May 11, 2010, at the hearing on the Exception of Prescription, the parties stipulated that Zadeck ceased ownership and service as operator of the Shirey Well on September 3, 1994.Since the lawsuit was filed more than fifteen years after the cessation of that service as operator, the burden then shifted to the Plaintiff to overcome the presumption of ten year liberative prescriptive, based on the stipulation.At the hearing, Wells testified that he was unaware of the mineral reservation until he received a phone call from a landman for Comstock Resources.He immediately traveled to Shreveport, Louisiana, researched the records at the Office of Conservation, and discovered that there had been production on the subject property.Wells also testified that after his parents' [2011-1232 (La. 4]divorce in the 1950s, his mother raised him and his sister as a single parent on a minimum wage salary while riding the trolley to work, as she could not afford an automobile.He testified that had his mother been receiving additional income from the mineral interest, it would have been an event of significance in his household and he surely would have been aware of it.He further testified that at the time of the hearing, both his parents were deceased.His father's one-fourth interest had been conveyed to Stan Lewis; thus, only his mother's one-fourth interest is at issue.Wells testified that after his parents divorced his mother remarried twice, first to John Morris and then to Lewis English.Mrs. Wells died intestate.Her survivors are her son, the Plaintiff, and his sister, who is not a party to this suit.

After hearing the arguments from both sides, the trial court granted Zadeck's peremptory exception of prescription and dismissed Wells' claims against Zadeck with prejudice.The court of appeal summarized the trial court's reasoning as follows:

[The Court] granted Zadeck's peremptory exception of prescription on two bases: 1) as a result of Wells' mother's failure to monitor her mineral interests, which in effect is a finding that the Wells family (including Plaintiff) failed to exercise reasonable diligence regarding the mineral activity on the Property, and 2) Wells' failure to prove that some reason external to his own will led to his or his mother's ignorance of the fact that they had a cause of action they could pursue.

The trial court accepted that Plaintiff“had no knowledge of the unrecognized mineral interest until December 19, 2008, and that there was no reason for him to suspect he had mineral rights that were not being recognized.”The court reasoned that Mrs. Wells leased the property in 1954, and “[h]er failure to monitor her own mineral rights has passed to her son.”Wells' present claim is the same claim his mother could have brought in 1965 when the Shirey Well was [2011-1232 (La. 5]producing.The trial court noted that Wells failed in his burden to present evidence that Zadeck intentionally deprived his family of the knowledge of the mineral interests.The trial court also reasoned:

Presumably, there was an assumption by the original operator or producer of the Shirey Well that James P. Wells' and Olean Speights Wells' mineral interests reverted to the surface owner because of 10 years without production in paying quantities.This court's presumption further assumes that the original operator was not aware of the P.F. Holmes dry hole well which interrupted the 10 year prescription period of non-use.R.S. 31:29 The court is making these assumptions to explain the lack of evidence as to the original operator's bad faith.

Relying on LSA–C.C. art. 3499, the trial court found this to be a personal action subject to a liberative prescription period of ten years.The court granted Zadeck's Exception of Prescription and dismissed Wells' claim against Zadeck.

The court of appeal agreed that Wells failed to present any evidence that his mother, who executed the mineral lease of 1954, and later released that lease, exercised due diligence to protect her mineral interest.Wells v. Zadeck, 46,138(La.App. 2 Cir.4/13/11), 62 So.3d 861.The court reasoned that Mrs. Wells was familiar with leasing and drilling activity based on the fact that she signed a single mineral lease in 1954, yet she remained silent and inactive for more than 40 years.The court attributed the ignorance of a potential claim to Mrs. Wells' own neglect and reasoned that Mrs. Wells could have learned of the mineral production by exercising reasonable diligence in protecting her interests, i.e., some reasonable inquiry or action was required from her.The court“decline[d] to create a brightline rule regarding what actions might be considered reasonably diligent in protecting such interest.”Id. 46, 138 at p. 7, 62 So.3d at 866.

Judge Brown, in his dissent, took issue with the majority's repeated characterization of Mrs. Wells as someone who was familiar with the exploration, [2011-1232 (La. 6]leasing, and drilling processes as a result of her one-time execution of a mineral lease.

Not only did she execute the lease contemporaneously with Mr. Wells, which could indicate her reliance on his mineral leasing knowledge, but the particular well drilled as a result of the lease was actually drilled on the Property.Meanwhile, in the present case, the completed well was not on the 120 acres in which Mrs. Wells had an interest,...