Morrison v. D & L PARTNERSHIP

499 So. 2d 988, 94 Oil & Gas Rep. 511, 1986 La. App. LEXIS 7791
CourtLouisiana Court of Appeal
DecidedOctober 8, 1986
Docket85-843
StatusPublished
Cited by7 cases

This text of 499 So. 2d 988 (Morrison v. D & L PARTNERSHIP) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morrison v. D & L PARTNERSHIP, 499 So. 2d 988, 94 Oil & Gas Rep. 511, 1986 La. App. LEXIS 7791 (La. Ct. App. 1986).

Opinion

499 So.2d 988 (1986)

James D. MORRISON, Plaintiff-Appellant,
v.
D & L PARTNERSHIP, et al., Defendants-Appellees.

No. 85-843.

Court of Appeal of Louisiana, Third Circuit.

October 8, 1986.

*989 Gaharan & Wilson, Donald R. Wilson, Jena, for plaintiff-appellant.

J.P. Mauffray, Jr., Patrick L. Durusau, Jena, for defendants-appellees.

Before LABORDE and KING, JJ., and PAVY[*], J. Pro Tem.

H. GARLAND PAVY, Judge Pro Tem.

Plaintiff appeals from a judgment which denied his claims for reformation of a mineral lease and its cancellation for failure to reasonably develop.

Plaintiff owned six residential lots in the Tullos community of LaSalle Parish. On July 13, 1981, he executed a mineral lease on three of the lots in favor of Shirley McLean Smith, wife of F.W. Smith. The printing of this lease provided a primary term of ten years. The words "ten years" were marked out and replaced by the words "six months." There is also in the record an unsigned lease by plaintiff dated the ________ day of August, 1981, to Floyd Smith, husband of Shirley McLean. This lease applied to the three residential lots not covered by the lease of July 13, 1981. It contained the same primary-term changes as the lease first described. On August 20, 1981, Mr. and Mrs. Smith, the lessees in the lease of July 13, signed a quit claim and release of the lease dated July 13, 1981. On the same day, plaintiff and his wife executed another mineral lease to Shirley McLean Smith, wife of F.W. Smith. This lease was on the same type form and is the lease in question. It applied to all six of the residential lots. The printed provision calling for a ten-year primary term was not changed. By typing "NA" in the blank for the delay-rental amount, the "drill or pay" clauses in all three leases were rendered ineffective.[1] It was admitted that no consideration was paid at the signing of the lease in question.

On August 25, 1981, lessee transferred a portion of her interest in the lease to D & L *990 Partnership composed of Huey P. Long and Ray Dudley. In late 1981, a producing well was brought in on one of the lots.

In the area, production was generally from very shallow reservoirs at about 2,000 feet. These were known as the upper or top Wilcox sand. Spacing regulations permitted one well per residential lot. Testimony indicates the wells could not pull oil from more than 50 feet. It appears that, because of this shallow production, leases in the area are usually granted for primary terms of one year or less.

On July 27, 1982, plaintiff's attorney addressed a letter to Mrs. Shirley McLean Smith and D & L Partnership demanding a reformation of the lease of August 20, 1981, so as to provide a six-month primary term and also demanding further development of the leased premises. In October, 1982, plaintiff sued the original lessee and the partnership for reformation and for cancellation based on failure to produce in paying quantities and failure to reasonably develop. The plaintiff's brief is confined to the question of reformation and cancellation based only on failure to reasonably develop.

A trial was held in March, 1985. At the conclusion of the taking of evidence, the trial judge held there was no evidence of fraud and denied reformation. Later, in a written opinion, he denied relief based on failure to develop because the demand for it was in the "... early stages of the primary term."

It is common knowledge that ten-year oil, gas and mineral leases in these times are unusual. The evidence shows that leases in this area were generally for a short primary term.

At the trial, plaintiff testified that he had no intention of signing a lease with a primary term of ten years and thought it had a primary term of six months. It was signed at his shop; he stated that he was under the impression that his lawyer had approved it. No one took the stand to contradict his testimony.

Accordingly, we are inclined to the conclusion that plaintiff has shown error, at least, in the confection of the lease and that there should be reformation. However, we are prohibited from doing so by the public records doctrine and the provisions of Louisiana Revised Statutes 9:2721. The latter provides as follows:

"No sale, contract, counter letter, lien, mortgage, judgment, surface lease, oil, gas or mineral lease or other instrument of writing relating to or affecting immovable property shall be binding on or affect third persons or third parties unless and until filed for registry in the office of the parish recorder of the parish where the land or immovable is situated; and neither secret claims or equities nor other matters outside the public records shall be binding on or affect such third parties."

There are many cases dealing with the right of a third party to rely on the public records. The pioneer case is McDuffie v. Walker, 125 La. 152, 51 So. 100 (1910). A case showing the strength and coverage of the rule is City Bank & Trust Co. v. Caneco Construction, Inc., 341 So.2d 1331 (La.App. 3d Cir.), writ denied, 345 So.2d 52 (La.1977). In that case, plaintiff executed a cash sale which was duly recorded. Thereafter, the vendee gave a mortgage. In a contest between the mortgagee and the plaintiff-vendor, the latter tried to assert a vendor's lien because the check given for the cash price was worthless. The court held that the public records doctrine prevented the vendor from asserting any claim prejudicial to the rights of the mortgagee who had relied on the public records.

There is no fraud by either of the defendants or collusion between them. Therefore, we merely hold that under the facts of this case, a third party taking rights on the faith of the public record is protected and cannot be held to provisions which might be contained in a document after it is reformed for simple error.

It being the rule of the case that the lease must be held to have a ten-year primary term, we are now presented with the *991 question whether, under the peculiar facts of this case, a lessee is under an obligation to reasonably develop the premises upon production but during the primary term.

The obligation to reasonably develop the leased premises has been long recognized in Louisiana. It is now part of the lessee's obligation "... to develop and operate the property leased as a reasonably prudent operator." See Louisiana Mineral Code Section 122 and comments thereunder.

The briefs present three Louisiana cases in which reasonable development was sought during the primary term. These are Caddo Oil & Mining Company v. Producer's Oil Company, 134 La. 701, 64 So. 684 (1914); Stubbs v. Imperial Oil & Gas Products, 164 La. 689, 114 So. 595 (1927); Risinger v. Arkansas-Louisiana Gas Company, 198 La. 101, 3 So.2d 289 (1941).

Stubbs and Caddo Oil both involved contracts with no initial consideration to the lessor. Lessees obligated themselves to drill wells within a certain time. There was a provision that, upon production, the lease would continue for ten or twenty years and as long thereafter as there was production. Both suits were instituted after production and within the designated terms. In one case, the court cancelled the lease for failure to develop. In the other, the evidence did not warrant cancellation. There was no express discussion of the question whether there could be cancellation within the primary term for failure to develop.

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Bluebook (online)
499 So. 2d 988, 94 Oil & Gas Rep. 511, 1986 La. App. LEXIS 7791, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morrison-v-d-l-partnership-lactapp-1986.