Reagan v. Murphy

105 So. 2d 210, 235 La. 529

• Court: Supreme Court of Louisiana
• Decided: July 7, 1958
• Docket: 43553
• Status: Published

Opinions

McCALEB, Justice.

This suit and its companion, Jones v. Sun Oil Company (Murphy), 235 La. 554, 105 So.2d 219, present for determination the question whether the liberative prescription of 10 years can be properly applied to a mineral lease. There is no dispute as to the salient facts of the cases, which have been stipulated by the parties and are identical.

On December 11, 1941, J. E. Holt granted a mineral lease to Murphy covering some 19,281 acres of land owned by him in Franklin Parish for a consideration of $5,000 cash and certain royalties to be paid by the lessee (%th on oil and gas) on any production which might be obtained from the contemplated explorations. Murphy subleased a portion of the lands to American Liberty Oil Company on September 25, 1945 and transferred an undivided interest in the lease, covering other lands, to Sun Oil Company on January 20, 1945 and August 28, 1945. The lease was for a primary term of 10 years and thereafter for an indefinite time, as long as production would continue. During the primary term, production was obtained on a portion of the leased lands, which presently forms part of the Delhi Oil Field. These wells, which are situated on lands not contiguous to the tracts involved herein, are likely to continue in production for many years.

After granting the lease, specifically on March 23, 1942, Holt sold a 40-acre tract (SEy4 of the SW14, S. 18, T. 15 N., R. 8 E.) to plaintiff Reagan and, on September 3, 1943 sold another 40-acre tract (SWJ4 of the NWJ4, S. 30, T. 15 N., R. 8 E.) to plaintiff, Jones. These lands were covered by the mineral lease and were also included in the lands Murphy subleased to Sun Oil Company. In each of the sales to plaintiffs, Holt reserved all of the minerals, the deeds also reciting that the sales were made subject to the mineral lease dated December 11, 1941.

No drilling operations have ever been conducted on either one of the 40-acre tracts and, following the expiration of the ten year period, the mineral servitudes in favor of Holt became extinguished, these real rights being formally released by him in favor of each plaintiff at their respective ■ requests.

Following acquisition of the minerals, plaintiffs made demand for cancellation of the mineral lease insofar as it affected their respective properties and, upon the failure of Murphy and Sun Oil Company to comply with their request, these suits were instituted for a partial cancellation of the mineral lease on the ground that it has prescribed as to these two parcels by reason of the failure of defendants to explore for minerals on each respective non-contiguous tract for a period of ten years.

The defense to the cases is that, since oil and gas leases are governed by the laws applicable to ordinary leases and regulated by contract of the parties, the liberative prescription of ten years is inapplicable as a mineral lease is an indivisible contract maintained by the development of any portion.

The plaintiffs, on the other hand, declare, in the main, that a mineral lease is similar to a mineral servitude and, therefore, becomes extinguished by the prescription of ten years nonusage; that, since their tracts are not contiguous to the tracts on which production has been obtained, the lease is not a single lease, but separate leases or servitudes covering each non-contiguous tract and that, accordingly, the production obtained from other lands covered by the lease was not a user of their lands and did not affect their liberation from the burden of the lease by the ten-year prescription.

The trial judge sustained plaintiff’s contention on the authority of Arent v. Hunter, 171 La. 1059, 133 So. 157. Defendants have appealed.

It cannot be gainsaid that Arent v. blunter is indistinguishable from the cases at bar. In that matter, Hunter and McCormick leased to Producers Oil Company five non-contiguous parcels of land, the contract containing provisions quite similar to those of the mineral lease involved herein. This lease was assigned to The Texas Company and a producing well was secured by the latter on one of the five tracts. Subsequently, Arent acquired title to the five tracts through mesne conveyances in which Hunter and McCormick had reserved all minerals. More than ten years afterwards, Arent filed a jactitation suit against The Texas Company and Hunter and McCormick for cancellation of the mineral lease and the mineral servitudes held by the latter on the ground that they had become extinguished by the ten-year prescription for nonusage. The Court, applying the rule enunciated in Lee v. Giauque, 154 La. 491, 97 So. 669 and Keebler v. Seubert, 167 La. 901, 120 So. 591, that a mineral servitude established on non-contiguous tracts created separate servitudes on each tract, sustained plaintiff’s plea of prescription as to four of the five tracts involved, defendants’ rights to the other tract having been preserved by user and production. In so concluding, the Court treated the mineral servitudes and the lease as one and the same as to their legal effect and, hence, the holding therein fully supports the position of the plaintiffs in these cases.

Arent -v, Hunter was decided in 1931, during the period in which the mineral law which has been developed by this Court was still in its formative stage. At that timq the members of the Court, while being in agreement that a sale of minerals constituted the creation of a real right in the nature of a servitude (See Frost-Johnson Lumber Co. v. Sailing’s Heirs, 150 La. 756, 91 So. 207) had not yet reached any definite conclusion as to the true nature of a mineral lease and, consequently, expressions can be found in the jurisprudence in which a mineral lease is regarded as a sale or considered, as in Arent v. Hunter, to be in the same category as a mineral servitude.¹

It was not until 1936, in its decision in Gulf Refining Co. of Louisiana v. Glassell, 186 La. 190, 171 So. 846, that the Court swept away the confusion evoked by the ■earlier cases ² respecting the genuine character of a mineral lease. It was held there that'a'mineral lease did not create a real right,in favor of the lessee; that the contract produced merely personal rights and obligations between the parties, the lessee being limited to a personal action against his lessor for delivery of possession and could not maintain a petitory action against a third person. This pronouncement was not well received by the oil industry and, through its efforts, the Legislature, at its regular session of 1938, enacted Act 205 which classified oil and gas leases as real rights and provided that they may be asserted, protected and defended in the same manner as may be the ownership or possession of other immovable property without the concurrence of the landowner in any action or by any procedure available to the owner of land.

But this Act has never been regarded by the Court as creating a real right in its true sense. On the first occasion in which its constitutionality was assailed, Tyson v. Surf Oil Co., 195 La. 248, 196 So. 336, the Court held that the 1938 Act was intended to grant mineral lessees the advantage of maintaining real actions in protection of their interests and was merely procedural in character. Finding that the Act was not designed to alter the substantive nature of a mineral lease, its constitutionality was upheld as against the contention that to apply it retrospectively would impair the obligation of the contract. See also Allison v. Maroun, 193 La. 286, 190 So. 408 and Amerada Petroleum Corporation v. Reese, 195 La. 359, 196 So. 558.

Thus it is clear, at this point of the discussion, that the Glassell decision and the cases above referred to construing Act 205 of 1938, which hold that a mineral lease is like any other predial lease and creates merely a personal right, are in direct conflict . yith Arent v. Hunter. Hence, although the latter has never been specifically overruled in terms, its doctrine has been 'rejected necessarily by implication.

An examination of all subequent jurisprudence serves to verify the Court’s adherence to the views expressed in the Glassell case and its insistence in keeping mineral leases within their proper legal sphere.

In Arnold v. Sun Oil Co., 218 La. 50, 48 So.2d 369, 390, the defendant mineral lessees contended that they were entitled to rely on the law of registry and that, by virtue of it, had acquired a greater right than an ordinary lessee in view of Act 205 of 1938. But the Court, citing the rulings in the Allison, Tyson and Amerada Petroleum cases and also Coyle v. North American Oil Consolidated, 201 La. 99, 9 So.2d 473, rejected the contention and reiterated that Act 205 of 1938 is “remedial and procedural in character, and that it has not affected or changed any of the substantive rights flowing from the execution of mineral leases.”

Immediately after the Arnold case became final, the oil fraternity sought to obtain for mineral lessees by legislative enactment the special consideration denied them in that decision and was successful in having the 1938 statute amended by Act 6 of the Second Extra Session of 1950. This amendatory act, which has been incorporated in the Revised Statutes as R.S. 9:-1105, retains the provisions of the 1938 Act³ and adds a sentence thereto reading as follows:

“This Section, shall be considered as substantive as well as procedural so that the owners of oil, gas and other mineral leases and contracts within the purpose of this Section shall have the benefit of all laws relating to the owners of real rights in immovable property or real estate.”

It has been contended by counsel for appellees, and particularly by the amicus curiae who is aligned with appellees, that this amendatory provision, that the law classifying mineral leases as real rights is to be considered as substantive as well as procedural, has the effect of changing the essence of the mineral lease contract.

This proposition cannot be sustained as there is nothing contained in the amendatory section to indicate such an aim. It is to be noted, imprimis, that the original law does not say that mineral leases are real rights. It declares, in substance, that they are to be classified as real rights and “may be asserted, protected, and defended in the same manner” as may be the ownership or possession of other immovable property. And the amendment does not say that the statute created substantive real rights. It merely provides that the law shall be considered as substantive, in order that the owners of mineral leases “shall have the benefit” of real property laws.

Indeed, it is perfectly evident from even a casual reading of the amendment that the Legislature did not intend to change the essence of the contractual rights and obligations between mineral lessees and lessors but only that it sought to place mineral lessees on the same level as landowners by conferring on them “benefits” of the laws relating to owners of immovable property. This, the Act spells out in no uncertain terms for, after classifying a mineral lease as a real right, it is declared that the law shall be considered as substantive as well as procedural for a special purpose, i. e., “ * * * so that the owners of * * * mineral leases * * * shall have the benefit of all laws relating to the owners of real rights * * * ”.

This has been our expressed view of the 1950 amendatory act in the two recent cases in which we have had occasion to consider it. See Dixon v. American Liberty Oil Company, 226 La. 911, 77 So.2d 533 and Perkins v. Long-Bell Petroleum Company, 227 La. 1044, 81 So.2d 389, 393.

In Perkins v. Long-Bell Petroleum Co., we said:

“A mineral lease, though characterized as a real right under LSA-R.S. 9:1105, is, as stated in the last cited case (Dixon vs. American Liberty Company), ‘merely a contract which permits the lessee to explore for minerals on the land of the lessor in consideration of the payment of a rental and/or bonuses.’ To this, we may add that the lessee is not only accorded the right to explore but is obliged to do so in most cases or pay a delay rental if he does not explore within the primary term of the lease. In a mineral lease, the lessor, b'eing entitled to royalties in the event of production, is interested in requiring his lessee to explore. Not so with a landowner whose property is subjected to a mineral servitude. Being without interest in the minerals, he is without right, during the existence of the servitude, to insist upon development, and the only duty required of him is to permit the servitude owner to explore as long as the servitude remains in esse. The grant of the servitude ‘ * * * does not oblige the owner of the estate subject to it to do anything * * * Article 655 of the LSA-Civil Code.”

That a lease is not in essence a real right under the civil law is well settled. In In re Morgan R. & S. S. Co., 32 La.Ann. 371, it was said:

“The rights of use, enjoyment, and disposal are said to be the three elements of property in things. They constitute the jura in re. The right of a lessee is not a real right, i. e., a jus in re. In other words, the lessee does not hold one of the elements of property in the thing. His right is a jus ad rem, a right upon the thing * * * J>

Accordingly, it is clear that the term “real right” under the civil law is synonymous with proprietary interest, both of which refer to a species of ownership. Ownership defines the relation of man to things and may, therefore, be declared against the world. A personal right, on the other hand, defines man’s relationship to man and refers merely to an obligation one owes to another which may be declared only against the obligor.

Viewed in this light and applied to mineral leases, it is seen that to say that the Legislature intended to change the true essence of a mineral lease from a personal contract into a real right would necessarily require the conclusion that the mineral lessee owns the right to explore for the minerals. The correlative of this proposition is that a mineral lessor divests himself of all proprietary interest in the minerals and has only. a personal right to enforce the terms of the lease. This, for the reason that the same thing may not be owned by two persons at the same time. Civil Code, Article 494.

It becomes obvious, then, that to uphold plaintiffs’ claims would serve only to confuse the fundamental law and, perhaps, place many contractual obligations and rights in a state of uncertainty. This we will not do.

Moreover, the plaintiffs ip this case have an available adequate remedy by which defendants may be required to either develop the properties or release them from the effect of the 1941 mineral lease. It is the established jurisprudence that full development of the property on which a mineral lease is given is implicit in the lease contract, it being an implied condition of every lease that the lessee will test every part of the land subject to it with reasonable diligence or suffer a partial cancellation. See Caldwell v. Alton Oil Co., Inc., 161 La. 139, 108 So. 314; Stubbs v. Imperial Oil & Gas Products Company, 164 La. 689, 114 So. 595; Logan v. Tholl Oil Co., Inc., 189 La. 645, 180 So. 473; Carter v. Arkansas Louisiana Gas Co., 213 La. 1028, 36 So.2d 26 and Wier v. Grubb, 228 La. 254, 82 So.2d 1.

Since we are of the opinion that R.S. 9:1105 did not have the effect of changing the true nature of real rights as defined and und.rstood under the civil law, it follows that Article 3529 of the Civil Code, pertaining to the prescription of real rights and Article 3546, providing that the rights of usufruct, use and habitation, and servitudes are lost by ten years nonuse, are inapplicable to the cases.

The judgment appealed from is reversed and the suit is dismissed at plaintiff’s costs.

SIMON, J., absent.

1 . This "is illustrated by the view of the late ' Chib®'-'Justice Charles1 A. O’Niell, who concurred in the result .of Arent v. Hunter but said that he did not “ * * * approve of calling a lease a servitude”. [171 La. 1059, 133 So. 163],

2 . Such as Rives v. Gulf Refining Co. of Louisiana, 133 La. 178, 62 So. 623.

3 . Except that it eliminates Section 2 of the 1938 Act which specifically provided that it “ * * * shall apply to all such transactions whether entered into prior to the passage of this Act or not.” It is probable that the provision was deliberately excluded to avoid any idea of an intent to impair contractual obligations, in view of the legislative pronouncement of a creation of substantive rights. Unconstitutionality was not made an issue in this case but it might well have been, since the contract was confected in 1941, prior to the passage of the Act.