Pierce v. Goldking Properties, Inc.

396 So. 2d 528, 69 Oil & Gas Rep. 263, 1981 La. App. LEXIS 3722
CourtLouisiana Court of Appeal
DecidedMarch 11, 1981
Docket8125
StatusPublished
Cited by14 cases

This text of 396 So. 2d 528 (Pierce v. Goldking Properties, Inc.) 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
Pierce v. Goldking Properties, Inc., 396 So. 2d 528, 69 Oil & Gas Rep. 263, 1981 La. App. LEXIS 3722 (La. Ct. App. 1981).

Opinion

396 So.2d 528 (1981)

Joseph Maxie PIERCE, Plaintiff-Appellant,
v.
GOLDKING PROPERTIES, INC., Defendant-Appellee.

No. 8125.

Court of Appeal of Louisiana, Third Circuit.

March 11, 1981.
Writ Denied May 18, 1981.

*529 Broussard, Broussard & Moresi, Marcus A. Broussard, Jr., Abbeville, for plaintiff-appellant.

Gordon, Arata & McCollam, John M. McCollam, New Orleans, for defendant-appellee.

Before GUIDRY, CUTRER and LABORDE, JJ.

GUIDRY, Judge.

In this suit the plaintiff-lessor, Joseph Maxie Pierce, seeks damages and cancellation of an oil, gas and mineral lease held by the defendant-lessee, Goldking Properties, Inc. (hereafter Goldking). In support of his demand plaintiff contends that Goldking breached its contractual obligations under the lease in failing and refusing to pay him royalties on pre-unit production resulting from a lease well situated on the property of an adjacent landowner; and, in failing to protect his land from uncompensated drainage. Plaintiff further urges that the defendant had an obligation to represent the lessor fairly and completely before the Commissioner of Conservation and failed to do so. The defendant filed a dilatory exception of prematurity grounded upon plaintiff's failure to place the defendant in default prior to the filing of the instant suit as required by La.R.S. 31:135 and 136, infra. Defendant's exception was referred to the merits by the trial court. The trial court held that Goldking acted reasonably and prudently in its dealings with the plaintiff *530 and denied plaintiff's demands. Plaintiff appeals from that judgment. We affirm.

FACTS

The facts of the instant case are undisputed. On November 13, 1973, plaintiff entered into two mineral lease agreements with J. W. Rettig, Jr. Through a series of assignments, these leases were ultimately acquired by the defendant, Goldking. On or about August 21, 1974, Goldking drilled and completed a gas well, referred to as the Bernard No. 1 well, which was physically located on land owned by Raywood Bernard et al., which lands are situated adjacent to the lands owned by the plaintiff.[1] The well was initially shut-in because of non-availability of a reasonable market. Approximately one month later, Goldking retained the services of Ted Hoz, a consulting geologist, for the purpose of determining the advisability of creating producing units for the productive sands found in the Bernard No. 1 well. At some time in late December 1974 or early January, 1975, Mr. Hoz advised Goldking to file an application with the Commissioner of Conservation requestion the creation of drilling and producing units for the Siphonia Davisi No. 3 Sand (referred to as SD-3) and the shallower Cristelleria No. 6 Sand (referred to as Crist-6) pursuant to the provision of LSA-R. S. 30:9. On January 4, 1975 Goldking filed its initial notice of intent to apply for the aforementioned units. Subsequently, a pre-application hearing was scheduled for February 4, 1975 to be held in Lafayette, Louisiana. Following the pre-application hearing, on February 7, 1975, Goldking filed its formal application for a public hearing before the Commissioner of Conservation. The Commissioner set the hearing for April 8, 1975, thus, allowing sufficient time to provide the thirty day public notice and advertisement as mandated by statute.

While the aforesaid unitization procedure was ongoing, defendant was actively engaged in the search for a reasonable market for the gas to be produced from the Bernard No. 1 well. On February 16, 1975, after a market was located, the Bernard well was put on production. All lease royalties resulting from the gas produced from the subject well were paid to Raywood Bernard et al. Subsequently, the public hearing, scheduled by the Commissioner, was held resulting in the issuance of Department of Conservation Orders Nos. 367-D1 and 367-E which created producing units for the SD-3, Reservoir B, and the Crist-6 Sand, Reservoir B, as requested by the defendant. These units included substantial portions of the plaintiff's lands which were leased to defendant. The Commissioner of Conservation, despite opposition, set the effective date of the unitization order as May 1, 1975. Commencing as of that date, royalties were ultimately paid to those lessors who contributed lands to the aforesaid units, including plaintiff.

On or about June 25, 1975, Pierce, through his attorney, wrote J. W. Rettig, Jr. stating his concern that he had not received any royalty payments despite information indicating that his leased lands were included within the confines of a producing unit. On June 30, 1975, W. E. Pittman, Exploration Land Manager for Goldking, responded to plaintiff's inquiry that royalty payments would be forthcoming following the Commissioner of Conservation's approval of the preliminary survey of the subject unit and completion of title examinations on each unit tract. On July 2, 1975, plaintiff's attorney in a letter to Mr. Pittman expressed for the first time his contention that plaintiff's royalty should be computed and paid from the date of first production of the Bernard No. 1 well. Mr. Pittman replied that plaintiff would receive all royalties due from the effective date of the unit. On October 27, 1975, plaintiff in a letter to Goldking officials expressed his intent to seek cancellation of the oil, gas and mineral lease applicable to his lands unless royalties were paid to plaintiff dating *531 from the time of first production of the Bernard No. 1 well, i. e., February 16, 1975. On November 11, 1975, plaintiff's counsel sent a letter to counsel for the defendant which contained plaintiff's allegations that Goldking was guilty of failing to protect plaintiff's lands from drainage. Goldking refused to tender royalty payments as requested by the plaintiff, thereafter the present litigation ensued.

Plaintiff-appellant specifies as error the holding of the trial court that he is not entitled to royalty payments for alleged drainage of his lands resulting from pre-unit production obtained from a lease well located on the property of an adjacent landowner. In addition, appellant urges that the trial court erred in failing to hold that the defendant breached its obligation to represent the plaintiff's interests before the Commissioner of Conservation.

As we understand appellant's principal argument, he contends that the defendant, Goldking, was obligated to delay production of the Bernard No. 1 well until unitization of the lands subject to the oil, gas and mineral leases at issue or pay him for the pre-unit production allocable to the unitized portions of his leased lands, and when it failed to do either, the lessee breached its obligation under the leases to protect the leased lands from drainage. Considering the provisions of the leases in question, specifically paragraph 5 thereof,[2] and mindful of the sequence of events as disclosed by the record as well as the custom and practice of the mineral industry, we conclude that Goldking acted at all times as a reasonable and careful operator and did not breach its obligation to protect the leased land from drainage.

Louisiana R.S. 31:122 provides the duty owed by the mineral lessee to the lessor, to-wit:

"A mineral lessee is not under a fiduciary obligation to his lessor, but he is bound to perform the contract in good faith and to develop and operate the property leased as a reasonably prudent operator for the mutual benefit of himself and his lessor. Parties may stipulate what shall constitute reasonably prudent conduct on the part of the lessee."

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Bluebook (online)
396 So. 2d 528, 69 Oil & Gas Rep. 263, 1981 La. App. LEXIS 3722, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pierce-v-goldking-properties-inc-lactapp-1981.