Pinnacle Operating Co. v. ETTCO ENTERPRISES

914 So. 2d 1144, 163 Oil & Gas Rep. 486, 2005 La. App. LEXIS 2240, 2005 WL 2757522
CourtLouisiana Court of Appeal
DecidedOctober 26, 2005
Docket40,367-CA
StatusPublished
Cited by7 cases

This text of 914 So. 2d 1144 (Pinnacle Operating Co. v. ETTCO ENTERPRISES) 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
Pinnacle Operating Co. v. ETTCO ENTERPRISES, 914 So. 2d 1144, 163 Oil & Gas Rep. 486, 2005 La. App. LEXIS 2240, 2005 WL 2757522 (La. Ct. App. 2005).

Opinion

914 So.2d 1144 (2005)

PINNACLE OPERATING COMPANY, INC., Plaintiff-Appellee
v.
ETTCO ENTERPRISES, INC., Defendant-Appellant.

No. 40,367-CA.

Court of Appeal of Louisiana, Second Circuit.

October 26, 2005.

*1145 Sinclair Law Firm, L.L.C., by Scott C. Sinclair, Shreveport, for Appellant.

Klotz, Simmons & Brainard, by David Klotz, Shreveport, for Appellee.

Before STEWART, CARAWAY and MOORE, JJ.

MOORE, J.

ETTCO Enterprises, Inc., defendant in the main demand and third party plaintiff herein, appeals the judgment of the trial court dismissing its third party claim against Jack T. Everett and Marcy G. Everett ("Everett"). ETTCO demanded that Everett honor a farmout agreement signed by his predecessors in title but never executed, or pay damages for unjust enrichment. We affirm.

FACTS

In 1994, ETTCO began operating the James Whitney Well which was producing oil and gas condensate from the James Lime Formation (sometimes hereinafter "the James") situated in Section 25, Township 10 North, Range 14 West, Sabine Parish, Louisiana. ETTCO believed it owned all the working interests[1] in the well that it had acquired from White & Ellis, who drilled the well in 1980 pursuant to a farmout[2] dated September 28, 1979 *1146 ("1980 Farmout"). The 1980 Farmout was not recorded. All but two small working interest owners, Jack T. Everett and Perry Holloway, signed the farmout agreement. Those two did not sign the farmout agreement as written because they wished to retain all their leasehold rights from the surface down to the top of the James, but apparently each expressed an interest in farming out the James Lime Formation to White & Ellis under those modified terms. Holloway subsequently signed a letter agreement that amended the farmout to assign his interest in the James Lime Formation only.

There is no document in evidence showing that Everett signed a similar letter agreement or the original farmout to White & Ellis. Everett testified that he did not remember ever signing the White & Ellis 1980 Farmout agreement or a letter agreement. On the other hand, Everett did receive overriding royalty[3] checks from ETTCO's James Whitney Well and he deposited those payments. One of ETTCO's contentions is that Everett acted as though he had farmed out his interest in the James formation, even though it could not produce a written document with his signature showing that he was also one of the original farmors or that he had assigned his interest in the James formation while reserving an overriding royalty.

By drilling and completing the James Whitney Well, White & Ellis earned the right to assignments[4] of the working interests in the James formation in Section 25, but, critically, those assignments were never executed and recorded, even though White & Ellis and ETTCO paid overriding royalties to the 1980 farmors pursuant to the farmout agreement as though the assignments had been made. Although ETTCO took over operation of the James Whitney Well in 1994, a written assignment from White & Ellis's (unrecorded) interest to ETTCO was not recorded until May 19, 2000.[5]

During the period from 1988 until 1998, Everett and his alter-ego corporation, the Ganja Corporation, acquired assignments of all the working interests of the three original mineral leases affecting the mineral rights in Section 25 which was owned by Everett and the other eight farmors of the 1980 Farmout, and he recorded these acquisitions. A review of those assignments show that the farmors' rights to the leases were conveyed without any depth delineations or reservations pertaining to their leasehold interests. ETTCO contends that when Everett acquired these assignments, he did not think he was acquiring the working interests to the James Lime Formation because he believed those leasehold rights had been assigned to White & Ellis *1147 pursuant to the 1980 farmout. ETTCO contends that Everett thought he was acquiring the rights to deeper geological strata or formations, including the Hosston Formation. At trial ETTCO adduced evidence that when Pinnacle Operating Company, Inc. ("Pinnacle") approached Everett about purchasing his leasehold interests in the James formation, Everett initially did not think he owned it. Ultimately, ETTCO contends, that when Everett assigned the leasehold interests that he had acquired from the 1980 farmors, he required Pinnacle to agree to indemnify him regarding any disputes as to the James.

On February 28, 2000, Everett and his wife and the Ganja Corporation executed two assignments to Pinnacle conveying all their working interests in the James Lime Formation in exchange for $80,000 and an overriding royalty. At the time when Pinnacle acquired the assignment, ETTCO was producing oil and gas condensate from the James Whitney well. The Shreveport District Office of Conservation refused to give Pinnacle a permit to drill a well to the James Lime Formation in Section 25 even though Pinnacle held the record title to the mineral leasehold rights. On February 7, 2003, after ETTCO refused to surrender possession of the mineral leasehold interests and the James Whitney Well and give an accounting of production from the time it (Pinnacle) acquired record title, Pinnacle filed suit against ETTCO.

ETTCO filed third party demands against Everett[6] alleging that, by virtue of the instruments by which he obtained assignments of the working interests in Section 25 of the original farmors of the White & Ellis Farmout agreement, Everett assumed the obligations of the original farmors or, alternatively, that Everett was liable for damages under a theory of unjust enrichment.

By partial summary judgment certified as a final, appealable judgment, the trial court held that Pinnacle was the owner of all the working interests in the James Lime Formation and the James Whitney Well, finding it was a good faith purchaser relying on the public records. ETTCO was ordered to pay $29,185 in net proceeds from production plus interest. ETTCO did not appeal this judgment and it is now a final judgment.

The third party demands were tried in a bench trial. After briefly taking the case under advisement, following which counsel simultaneously submitted proposed findings of fact and conclusions of law, the court rejected ETTCO's third party demands against Everett, holding that Everett did not assume the personal obligations of the original farmors in the White & Ellis Farmout. The trial court's well-reasoned opinion also held that ETTCO was not entitled to recover under a theory of unjust enrichment. ETTCO subsequently filed this appeal as to the judgment dismissing its third party demands only.

DISCUSSION

At the outset, we note that by virtue of the now-final partial summary judgment, Pinnacle was found to be the owner of the leasehold rights in question. ETTCO did not appeal that judgment nor did it argue that the judgment was in error or clearly wrong in this appeal. In that judgment the trial court found, and ETTCO concedes, that Pinnacle was a protected third party purchaser under the public records doctrine.

*1148 The legal principles expressed in the public records doctrine and the writing requirement regarding the transfer of immovables also govern ETTCO's third party demands against Everett. La. R.S. 31:18[7] defines mineral lease rights as incorporeal immovables subject to the laws of registry and La. C.C. art. 1839[8] requires that the transfer of immovable property be in writing.

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Bluebook (online)
914 So. 2d 1144, 163 Oil & Gas Rep. 486, 2005 La. App. LEXIS 2240, 2005 WL 2757522, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pinnacle-operating-co-v-ettco-enterprises-lactapp-2005.