The Cadle Company II, Inc. v. Reserves Management, L.C.and Destin Resources, L.L.C.

• Court: Louisiana Court of Appeal
• Decided: March 1, 2023
• Docket: CA-0022-0462
• Status: Unknown

Opinion

STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT

22-462

THE CADLE COMPANY II INC.

VERSUS

RESERVES MANAGEMENT LC AND DESTIN RESOURCES

************ APPEAL FROM THE FIFTEENTH JUDICIAL DISTRICT COURT PARISH OF ACADIA, DOCKET NO. 202110868 HONORABLE LAURIE A. HULIN, DISTRICT JUDGE ************ LEDRICKA J. THIERRY JUDGE ************

Court composed of Elizabeth A. Pickett, Jonathan W. Perry, and Ledricka J. Thierry, Judges.

AFFIRMED.

Mark C. Landry Newman, Mathis, Brady & Spedale, APLC 3501 N. Causeway Blvd., Suite 300 Metairie, LA 70002 (504) 837-9040 COUNSEL FOR APPELLANT: The Cadle Company II, Inc.

Tom St. Germain Weinstein & St. Germain, LLC 1103 West University Ave. Lafayette, LA 70506 (337) 235-4001 COUNSEL FOR APPELLEE: Thrall Texas Oil, LLC THIERRY, Judge.

This appeal involves the trial court’s grant of a preliminary injunction in favor

of appellee, Thrall Texas Oil, LLC (hereafter Thrall), that would prevent Appellant,

the Cadle Company II, Inc. (hereafter Cadle), from going forward with a sheriff’s

sale of pipe, tubing, and a Christmas tree located at the Melba Billeaud #1 wellsite

located in Acadia Parish. Cadle has timely appealed the trial court’s grant of the

preliminary injunction. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

Both Thrall and Cadle assert they are the rightful owners of the movable

property at issue in this appeal. The record establishes in 2014, Basin Louisiana,

LLC (hereafter Basin), entered into mineral leases with various landowners for

drilling and extraction of oil and gas from the property located in and around the

subject property. On March 30, 2016, the mineral leases were assigned by Basin

fifty percent each to Reserves Management, LC (hereafter Reserves) and Destin

Resources, LLC (hereafter Destin).

On April 12, 2016, Linder Oil Company (hereafter Linder) entered into a

surface lease (hereafter the Linder Surface Lease) for the wellsite with Gerard

Romero and his family for 3.5 acres of land, located in Acadia Parish in and around

the location of the Melba Billeaud #1 well. Linder was a partnership which had

operated oil and gas wells owned by Destin and Reserves. Linder, as operator,

drilled the Melba Billeaud # 1 in April of 2016. It ultimately produced very little oil

or gas for Linder, was deemed a non-producing well, and all activity was halted at

the site.

On April 22, 2016, Reserves and Destin executed a promissory note in favor

of First NBC Bank, which included a security agreement which encumbered

numerous mineral leases which included the 2014 Basin mineral leases. This

1 security agreement included a security interest in the “operating equipment” used in

connection with the leases. An accompanying UCC-1 financing statement was filed

with the mortgage on that date. Neither document included a legal description of

the Linder Surface Lease, but only recordation information for the various mineral

leases on the property.

By February of 2017, several oil well liens were filed against the Melba

Billeaud #1 wellsite, all of which were for unpaid equipment and services provided

to the wellsite, which was purported to total over $800,000.00. Linder, Destin or

Reserves never paid for these items. The liens eventually were assigned to Thrall.

On October 10, 2017, Linder filed for bankruptcy. Reserves and Destin also

filed for bankruptcy. The FDIC, acting as receiver, assigned the notes and mortgages

executed by Linder, Destin and Reserves, which were held by First NBC Bank, to

Cadle. It is contended by Cadle that as part of its collateral package, it had mortgages

on all oil and gas leases owned by Destin and Reserves, which included the grant of

a security interest in all movables that Destin and Reserves owned that were related

to these oil and gas leases.

On May 16, 2019, in the proceedings on the Linder bankruptcy, the lessors of

the Melba Billeaud wellsite sought a declaration that the Linder Surface Lease

between the lessors and Linder be deemed rejected. On September 11, 2019, the

bankruptcy court signed an order determining that the Linder Surface Lease was

deemed rejected, but the court also ruled Cadle “reserves its collateral rights in any

and all movable or immovable property which may be present on the Land.”

According to Thrall, once the Linder Surface Lease was rejected, any equipment

remaining on the surface or in the ground, such as the piping and tubing, were

abandoned and thus became the property of the landowners.

2 The Melba Billeaud #1 wellsite was placed into the Louisiana Orphan Well

program by the State of Louisiana on April 20, 2018. Thrall became the operator of

the Melba Billeaud #1 wellsite and began the process to acquire and remove the

wellsite from the orphan well program. To this end, it entered into a Cooperative

Agreement with the State of Louisiana on April 8, 2020. Thrall proceeded to add

production equipment, installed a sales line, and began production in June of 2020.

Thrall was able to use the existing piping and tubing that had already been placed at

the wellsite. Thrall then executed a cash sale with the landowners transferring any

ownership they had in the movable property located at the wellsite to Thrall.

On November 17, 2021, Cadle filed an executory proceeding to foreclose on

certain property located at the Melba Billeaud #1 wellsite in Acadia Parish. Named

as defendants in the executory proceeding were Reserves and Destin, based on the

promissory note Cadle held that it maintained was defaulted by Reserves and Destin.

On November 18, 2021, the trial court issued a writ of seizure and sale to the Sheriff

of Acadia Parish, instructing a seizure and sale of the property set out in the security

agreement.

On February 4, 2022, Thrall filed a “Petition for Intervention to Arrest

Foreclosure, for Injunction and for Damages.” The petition for intervention

requested the trial court “issue an order to stop the sheriff’s sale of pipe, tubing,

casing and other items located at the Melba Billeaud #1 gas well.” Thrall’s petition

for intervention maintained “these items are not owned by [Destin and Reserves], or

Cadle, nor are they subject to Cadle’s mortgage.” The petition also sought damages

if Cadle was successful in seizing the equipment.

Initially, Cadle filed an Exception of No Cause of Action, asserting Thrall had

not claimed any ownership interest in the property that Cadle was seeking to seize.

Cadle also filed an Exception of Improper Cumulation of Actions, contending in an

3 executory proceeding, a damage claim could not be cumulated with an injunction

petition that sought to enjoin the execution of a writ of seizure and sale. The trial

court granted the exception of no cause of action, but allowed Thrall thirty days to

amend the petition to state a cause of action. On March 7, 2022, Thrall filed an

amended petition asserting a claim of ownership and deleting the claim for damages.

The trial court held another hearing on the request for a preliminary injunction

on March 14, 2022. Both Thrall and Cadle presented testimony and documentary

evidence at the hearing. Thrall noted that although counsel for Cadle stated it was

only interested in seizing the pipe, tubing and Christmas tree, its Petition and the

Notice of Seizure contained a much broader property description. At the end of the

hearing, the trial court granted the preliminary injunction preventing Cadle from

instructing the sheriff to seize and sell any of the items at the wellsite. The trial

court gave the following oral reasons for its ruling at the conclusion of the hearing:

COURT: Obviously, no permanent – I mean, I am not – I am not confident in ruling on a permanent injunction here, without further review of the law and the exhibits that are before the Court.

MR. ST. GERMAIN (Counsel for Thrall): Right.

MR. LANDRY (Counsel for Cadle): Judge, I was –

COURT: Which I would need more briefing on.

MR. LANDRY: I would like the opportunity to brief the issue of why a preliminary injunction should not issue because, trust me, Judge, this is not the first one I have done. And there is a question –

COURT: But if you’re telling me that your – okay. Its just the reverse. If you’re telling me that your client is not ready to push for the sale, then what is the harm of granting the preliminary injunction to make sure that there is something – something in writing, saying, “Everybody, wait. We need to figure this out before there is any further action on this” – not well, but –

MR. ST. GERMAIN: Equipment.

COURT: -- equipment – thank you; equipment attached to the well.

4 MR. LANDRY: If I may –

COURT: So you know –

MR. LANDRY: If I may, in order to demonstrate the entitlement to a preliminary injunction, there has to be demonstrated irreparable injury. And until such time as irreparable injury is demonstrated, the Court cannot issue a preliminary injunction. The permanent injunction is teed up and we can try that. However, I could, with the mere swipe of a pen, create irreparable injury by instructing the sheriff to seize. What I am telling you is there is currently no irreparable injury, because I have not done that. And I would like the opportunity to address a brief to the Court to demonstrate that that’s why it is not. And I will warrant to the Court that I will not take action to enforce the writ until such time as I have had the opportunity to brief it and Your Honor has the opportunity to decide.

COURT: I think what would be appropriate is a court order agreed upon by – like a consent judgment ordering that the sale is ceased until the permanent injunction can be tried, which is the preliminary injunction.

MR. LANDRY: But there is no sale set.

MR. ST. GERMAIN: Your Honor, I don’t think he’s going to agree on a preliminary injunction. If the Court could just issue the order, that would – I think that would be helpful and we can move forward.

COURT: I think the best security at this particular point – when this preliminary injunction, when this application or petition for preliminary injunction had filed, there was a sale set.

MR. LANDRY: No. There was not.

COURT: We had an emergency hearing in Lafayette.

MR. ST. GERMAIN: We had – we had a –

MR. LANDRY: There was no –

MR. ST. GERMAIN: We had a date. And I called the Sheriff’s Office. They said the sale was set. Mr. Landry indicated – before or after – I think it was after –

COURT: Wait, y’all had a gentleman’s agreement. But that – we go back to this every single time. A gentleman’s agreement does not cut it for me.

5 MR. LANDRY: Judge, if I may, in order for a sheriff’s sale to be scheduled, items must be seized. He can tell you, I have not seized anything. Therefore, as a matter of law, no sale can be set until, one, the items are seized and a notice of seizure is properly served. Okay, so there was never a sale date. And I don’t know how many times I can say that. I would love to call a witness from the Acadia Parish Sheriff’s Office and put that person on the stand and have her say we couldn’t go to sale. We may have put it on a computer, but that’s not it.

COURT: Where did the description of the sale come from?

MR. ST. GERMAIN: The Sheriff’s Department, but –

MR. LANDRY: The sheriff’s website, which is not a public record in any way, shape, or form. Okay. That’s – I mean, if I was objecting to him as testifying to hearsay.

COURT: Well, there was executory process done, right? There was executory process that was completed. And at that stage, the Court ordered seizure and sale.

MR. ST. GERMAIN: Yes.

COURT: Okay.

MR. LANDRY: But the sheriff had not accomplished it.

COURT: But the sheriff can.

COURT: I mean, it’s an order telling them. There’s an order telling them to go seize and sell. But there’s no order telling them, “Hang on. We got to figure this out.” So I think in the interest of justice, to make sure it’s absolutely crystal clear, until ownership of the equipment can be established, that a preliminary injunction does need to be ordered so that the sheriff is crystal clear that the executory process order, he needs to hang on, because we got to figure some stuff out. Because if he seizes and however he does it, with his operator agreement or his without a permit, with a permit, whatever, it’s – it can cause irreparable damage to Thrall as well as to – I mean, we heard testimony of possible environmental damage as well. So with that being said, I’m going to issue the preliminary injunction at this point.

6 Cadle filed a motion for devolutive appeal, which was granted on March 28,

2022. On appeal, Cadle contends the trial court improperly granted the Motion for

Preliminary Injunction.

ANALYSIS

“An appeal may be taken as a matter of right from an order or judgment

relating to a preliminary or final injunction.” La.Code Civ.P. art. 3612(B).

judgment. In Deshotels Plantation, LLC v. Torrent Gulf Coast, LLC, 19-750, p. 3

(La.App. 3 Cir. 4/22/20), 297 So.3d 1034, 1038-39, this court discussed the standard

of review applicable to preliminary injunctions:

A trial court has broad discretion in its decision to grant or deny a preliminary injunction and that decision will not be disturbed on review absent an abuse of that discretion. Yokum v. Pat O’Brien’s Bar, Inc., 12-217 (La.App. 4 Cir. 8/15/12), 99 So.3d 74. “That broad standard is, of course, based upon a conclusion that the trial court committed no error of law and was not manifestly erroneous or clearly wrong in making a factual finding that was necessary to the proper exercise of its discretion.” Id. at 80. When errors of law are involved in the granting of a preliminary injunction, a de novo standard of review is applied. Meredith v. I Am Music, LLC, 18-659 (La.App. 4 Cir. 2/13/19), 265 So.3d 1143.

Having found no error of law, the applicable standard of review here is whether the

trial court committed manifest error.

Cadle’s lone assignment of error asserts the trial court erred in granting the

preliminary injunction without making a determination that Thrall presented

evidence demonstrating it was likely to succeed on the merits. The trial court’s oral

reasons for granting the preliminary injunction reveal the trial court determined that

it needed more evidence regarding the ownership of the property in question, and

therefore granted a preliminary injunction to prevent the property from being seized.

Cadle argues this was error because “Thrall came forward with no evidence as to

their claim that Destin and Reserves did not own the property.”

7 Initially, we note the trial court’s granting of the preliminary injunction gives

Thrall no more relief than what counsel for Cadle repeatedly stated he was offering.

Specifically, as set forth above, counsel for Cadle affirmatively stated he would

“warrant to the Court” that no attempt to enforce the writ of seizure would be taken

until the trial court had “the opportunity to decide” the issue of ownership. The trial

court noted this “gentleman’s agreement” between the parties, but stated such a non-

binding, gentleman’s agreement did “not cut it” for the court. The trial court

reasoned what “would be appropriate is a court order . . . ordering that the sale is

ceased until the permanent injunction can be tried, which is the preliminary

injunction.” As the granting of the preliminary injunction effectively provides no

greater relief than counsel for Cadle attested he was offering, we find no error in the

trial court granting the preliminary injunction.

Cadle also argued below that “in order to demonstrate the entitlement to a

preliminary injunction, there has to be demonstrated irreparable injury. And until

such time as irreparable injury is demonstrated, the Court cannot issue a preliminary

injunction.” We find the evidence in the record establishes if the court would allow

Cadle to seize and sell the pipe, tubing, and Christmas tree, that irreparable injury

would be demonstrated. The evidence was clear that at the time of trial, Thrall, as

the operator, was producing gas and a minor amount of oil from the wellsite. Mark

Barton, a petroleum engineer for Thrall, offered uncontradicted testimony that Thrall

was producing “about 400,000 cubic feet (of gas) and seven barrels of oil a day.”

Mr. Barton noted you “would have to plug [the] well properly to be able to pull the

tubulars.” He further testified if the equipment were to be removed “without the

proper procedures . . . Thrall could be terribly damaged.” He noted that pulling the

tubulars would necessarily “involve shutting down the well and therefore royalty

interest owners would lose their income. The State of Louisiana would lose tax

8 revenue from this well, and Thrall would lose revenue as well.” The trial court also

noted in its oral reasoning for granting the preliminary injunction that the seizure

“can cause irreparable damage to Thrall as well as to – I mean, we heard testimony

of possible environmental damage as well.” Thus, we find Thrall made a showing

of irreparable injury which the trial court noted in its granting of the preliminary

injunction.

DECREE

For the foregoing reasons, we affirm the trial court’s granting of Thrall’s

request for a preliminary injunction. All costs of this appeal are assessed to

appellant, the Cadle Company, II, Inc.