Steve H. Crooks, Et Ux. v. Placid Oil Company

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

07-980

STEVE H. CROOKS, ET UX.

VERSUS

PLACID OIL COMPANY, ET AL.

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APPEAL FROM THE
TWENTY-EIGHTH JUDICIAL DISTRICT COURT
PARISH OF LASALLE, NO. 33,805
HONORABLE ALFRED A. MANSOUR, JUDGE AD HOC

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MARC T. AMY
JUDGE

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Court composed of John D. Saunders, Marc T. Amy, and Billy Howard Ezell, Judges.

AFFIRMED.

Saunders, J., dissents and assigns written reasons.

Donald R. Wilson
Gaharan & Wilson
Post Office Box 1346
Jena, LA 71342
(318) 992-2104
COUNSEL FOR DEFENDANT/APPELLEE:
Windham Oil Corporation

R. Joseph Wilson
Gaharan & Wilson
Post Office Box 1346
Jena, LA 71342
(318) 992-2104
COUNSEL FOR DEFENDANT/APPELLEE:
Hunt Petroleum Corporation

Robert G. Nida
Gold, Weems, Bruser, Sues & Rundell
Post Office Box 6118
Alexandria, LA 71307-6118
(318) 445-6471
COUNSEL FOR PLAINTIFFS/APPELLANTS:
Steve H. Crooks
Era Lea Henderson Crooks

Jimmy R. Faircloth, Jr.
Post Office Box 12730
Alexandria, LA 71315-2730
(318) 442-9533
COUNSEL FOR PLAINTIFFS/APPELLANTS:
Steve H. Crooks
Era Lea Henderson Crooks

Robert S. Rooth
Chaffe McCall, L.L.P.
1100 Poydras Street, Suite 2300
New Orleans, LA 70163-2300
(504) 585-7000
COUNSEL FOR DEFENDANTS/APPELLEES:
Kingfisher Resources, Inc.
Louisiana-Hunt Petroleum Corp.
Hunt Petroleum Corporation

J. Ralph White
The White Law Firm
Post Office Box 2246
Oxford, MS 38655
(662) 281-3940
COUNSEL FOR DEFENDANTS/APPELLEES:
Placid Oil Company
Petro-Hunt, LLC

Pamela R. Mascari
Kean Miller Hawthorne D’Armond McCowan & Jarman, L.L.P.
Post Office Box 3513
Baton Rouge, LA 70821
(225) 387-0999
COUNSEL FOR DEFENDANT/APPELLEE:
Oil & Land Enterprises

AMY, Judge.

The plaintiffs acquired property containing a salt water disposal well. They

alleged that the defendant oil companies injected salt water into the well from source

wells not anticipated by the agreement establishing the operation of the well. The

plaintiffs also named as defendants the oil companies operating the source wells. The

trial court granted summary judgment in favor of the defendants, finding that the

plaintiffs could not establish breach of contract or recover in tort. The trial court also

found that the plaintiffs’ claim against a source well operator had prescribed. The

plaintiffs appeal. For the following reasons, we affirm.

Factual and Procedural Background

At issue is a Salt Water Disposal System Agreement, Servitude and Damage

Release (hereinafter “the Agreement”) entered into between Emma Dee Webb Gray

and Placid Oil Company on September 29, 1981. In exchange for $5,000, Mrs. Gray

granted Placid the “privilege of maintaining a salt water disposal well and system”

on a one-acre portion of her property surrounding the location of a pre-existing oil

well. Mrs. Gray further granted a right of way across the remainder of her property

“to convey salt water and other materials from wells in the area to the salt water

injection well[.]” (Emphasis added.)

Placid began operation of the salt water disposal well in June 1982 and did so

until it sold its interest to Louisiana Hunt Petroleum Corporation. Louisiana Hunt

Petroleum Corporation’s successor, Hunt Petroleum Corporation, continues to operate

the salt water disposal well.

The plaintiffs, Steve H. Crooks and Era Lea Henderson Crooks, purchased Mrs.

Gray’s property, a 27 ¾ acre tract, in 1998. The plaintiffs filed suit in January 2004,

and alleged that, after purchasing the property, they discovered that Placid and its

successors had injected millions of barrels of salt water originating from wells located

outside of their property into the disposal well. As the plaintiffs asserted that the

Agreement did not authorize the injection of salt water originating outside of the 27

¾ acre tract, they advanced causes of action in breach of contract and tort. In

addition to Placid, LHPC, and HPC, the plaintiffs named as defendants several

entities that produced salt water injected into the disposal well.

Placid, LHPC, and HPC filed motions for summary judgment asserting that

their operation of the well was within the terms of the Agreement as it anticipated

injection of salt water from outside of the Gray/Crooks property insofar as it refers

to “wells in the area.” They argued that, absent this breach of contract, there could

be no related claims in tort for an action such as trespass. Oil & Land Enterprises, a

source well provider also filed a motion for summary judgment, alleging that it did

not have a contract with the plaintiffs or their predecessor in interest therefore

precluding a breach of contract claim. Oil & Land also asserted that the plaintiffs’

claims against it in tort were prescribed as it had not produced fluids allegedly

introduced into the well after 1999.

The trial court granted the motions for summary judgment, finding that the

Agreement expressly permitted Placid and its successors to bring salt water from

outside of the plaintiffs’ property on to the one-acre well site.1 The trial court further

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In denying the plaintiffs’ contract claim as to Louisiana-Hunt Petroleum Corporation, Hunt
Petroleum Corporation, Placid Oil Company, Petro-Hunt, L.L.C., and Oil & Land Enterprises, Inc.,
the trial court explained, in part:

Plaintiffs allege that the defendants’ interpretation of the phrase “in the area”
is too broad, and not what was intended by the contract. The plaintiffs allege that the
contract prohibits the disposal of saltwater from “non-revenue interest wells.” In the
alternative, the plaintiffs allege that because the phrase “in the area” is not defined
in the contract, it is ambiguous.

Ms. Gray testified by deposition in this case that at the time she signed the

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1981 agreement, she was an experienced businesswoman who owned and operated
an oilfield service business. She testified that when she saw the agreement she
recognized that she was granting a servitude and she went ahead and signed it and
accepted the consideration. She further testified that she believed she had her lawyer
review the 1981 Agreement for her before she signed it. The well was operated
consistently for at least 16 years with no complaint by Mrs. Gray, the landowner.
Thus, to the original parties to the 1981 Agreement there was no misunderstanding
as to the meaning of the contract.

Mr. Crooks, who at the time of his purchase of the property, was the Clerk of
the 28th Judicial District Court, was familiar with title issues and understood that
prior recorded agreements would affect his use of the property if he bought it. Mr.
Crooks had previously worked for many years as a petroleum landman. Prior to his
purchase of the land, Mr. Crooks knew that the salt water was produced in
connection with oil from wells in LaSalle Parish. He also knew that salt water was
produced in connection with oil from wells in LaSalle Parish. He also knew that
large volumes of salt water were being reinjected into the ground rather than being
trucked offsite. Before the purchase, Mr. Crooks performed a title search on the
property and located the 1981 Agreement, which he reviewed and discussed with
Mrs. Gray. He also learned that Hunt Petroleum Corporation was operating a
community saltwater disposal well on the Well Site. Mr. Crooks went to the
Conservation Office to review the public saltwater disposal records maintained by
that office for the well in question. He learned that the Conservation Office had
granted a permit to Hunt Petroleum Corporation to operate the saltwater disposal well
as a “community” disposal well.

Mr. Crooks also knew when he bought Mrs. Gray’s property that she
previously had granted pipeline rights of way to permit salt water and oil to be
transported across her property to a tank battery that was operated by Hunt Petroleum
Corporation and was located on the property he purchased from her. Further, Mr.
Crooks knew that three pipelines containing oil and salt water ran into this tank
battery, since these pipelines are mentioned in a surface use agreement Mrs. Gray had
granted to Placid for the use of that facility.

The title of the 1981 Agreement is indicative of the parties’ intent to enter
into both a saltwater disposal contract and a servitude agreement. The 1981
Agreement expressly allows Placid to dispose of salt water and to operate a saltwater
disposal and injection system on the Well Site. The 1981 Agreement expressly
allows Placid to bring salt water from outside the 27 ¾ acres of Mrs. Gray’s property
on to the one-acre Well Site. The 1981 Agreement neither restricts the number of
source wells no [sic] limits the quantity of salt water that can permissibly be injected
into the disposal well.

Even if the ph[r]ase “in the area” could be viewed as somehow ambiguous,
this provision would have to be interpreted in light of the nature of the contract,
equity, usage, the conduct of the parties before and after the formation of the
contract, and of other contracts of a like nature between the parties. La.Civ.Code art.
2053. Jurisprudence has held that “one of the best ways to determine what the parties
intended in a contract is to examine the method in which the contract is performed,
particularly if performance has been consistent for a period of many years.” Total
Minatome, 766 So.2d at 689; Gamble v. D.W. Jessen & Assoc., 509 So.2d 1041, 1043
(La.App. 3rd Cir. 1987); Book v. Schoonmaker, 26 So.2d 366 (La.1946). “When the
true intent of the parties has been ascertained from their own actions, express or
implied, oral or written, or by judicial interpretation, nothing remains to be done save

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found that there was no restriction on the quantity of salt water that could be injected.

Due to its findings that the plaintiffs failed to establish a breach of contract claim, the

trial court determined that the plaintiffs’ tort claims for unjust enrichment and

trespass failed as well. The trial court also granted Oil & Land’s motion for summary

judgment finding that no contractual relationship between Oil & Land and the

plaintiffs and that any tort claim had prescribed. The trial court dismissed the

plaintiffs’ claims against Placid, LHPC, HPC, Petro-Hunt, L.L.C., and Oil & Land.

The plaintiffs appeal, assigning the following as error:

1. The trial court held that the 9/29/81 Agreement permits the
injection of an unlimited amount of saltwater from drilling fields

enforce them as found. When thus ascertained, the intentions become an integral part
of the contract to the same extent as though they had been originally expressed
therein in unequivocal or unambiguous words.” Shoreline Oil Corp. v. Guy, 189 So.
348, 352 (La.App. 2nd Cir. 1939). Where there is no issue of fact as to the past
conduct and course of dealing of the parties and their predecessors over many years,
the factual issue of intent in a contract may be resolved on summary judgment. See
Total Minatome, supra.

In this matter, the 16 year course of performance of the parties demonstrates
that the original grantor of the rights, Mrs. Gray, clearly contemplated the disposal
activities that actually occurred. The performance and conduct of the parties clearly
indicate that they never intended to limit the 1981 Agreement concerning the
geographical sources of the salt water, other than from “wells in the area.” The
contract plainly gives Placid the right to transport salt water across Mrs. Gray’s 27
¾ acres of property. The contract did not limit this right by stating that only Placid’s
salt water could be transported. From 1983 to 2003 (except in 1991 and 1992 when
it was not using the well for community purposes), Hunt Petroleum Corporation
transported salt water from wells operated by others for injection into the Webb State
SWD No. 1.

Not only did Mrs. Gray allow the well to be used for these purposes, but
similarly during the first five years that the Crooks owned the property they too
permitted the activities to continue. Thus, as a matter of law, even if the agreement
was deemed ambiguous, the parties’ course of performance demonstrates that they
intended the term “in the area” to encompass the West Catahoula Lake Field and the
adjacent Catahoula Lake Field. The Court, in light of the actions of the parties
through the years, does not find the contract to be vague or ambiguous. The Motions
for Summary Judgment are granted as the defendants on this issue.

Further, the Court finds that no contractual relationship exists between
plaintiffs and Oil & Land Enterprises, Inc., and therefore the Court grants the Motion
for Summary Judgment as to Oil & Land Enterprises, Inc. as to any cause of action
against it for breach of contract.

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not specified in the agreement. This was error.

2. The trial court held that since the 9/29/81 Agreement did not
restrict the source wells from which saltwater could be disposed,
there was no trespass involved in the disposal of saltwater. This
was error.

3. In dictum the trial court held that the plaintiffs’ claims against
Placid Oil Company (and presumably Oil & Land Enterprises,
Inc.) had prescribed. This was error.

Discussion

Summary Judgment

This matter was dismissed pursuant to motions for summary judgment. Article

966(B) of the Louisiana Code of Civil Procedure provides that summary judgment

“shall be rendered forthwith if the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to material fact, and that mover is entitled to judgment as a matter

of law.” A trial court’s grant or denial of a motion for summary judgment is reviewed

de novo by an appellate court. Schroeder v. Board of Supervisors of Louisiana State

University, 591 So.2d 342 (La.1991).

Scope of the Agreement

The plaintiffs question the trial court’s determination that the 1981 Agreement

permitted the introduction of salt water originating outside of the 27 ¾ acre tract

transferred by Mrs. Gray to the plaintiffs. They point out that two wells existed on

the property at the time the Agreement was executed, Webb State Unit No. 1 Well,

which was abandoned and was ultimately converted into the salt water injection well

at issue, and Webb State Unit No. 2 Well, which was in production until it was

plugged and abandoned in 1991. The plaintiffs contend that the Agreement only

permits the disposal of salt water originating from this latter well or other wells in

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drilling units including a portion of the 27 ¾ acre tract. The plaintiffs assert that it is

these revenue interest wells that the Agreement anticipated in its use of “wells in the

area.” and that the use of “the” immediately before “area” limits the agreement to the

property otherwise referenced in the Agreement.

The Agreement provides:

For and in consideration of the sum of FIVE THOUSAND AND
NO/100 DOLLARS, cash in hand paid, the receipt and adequacy of
which is hereby acknowledged, the undersigned EMMA DEE WEBB
GRAY, a widow of Charles E. Gray, does by this act and these presents
GRANT AND CONVEY unto PLACID OIL COMPANY, the right and
privilege of maintaining a salt water disposal well and system, as
hereinafter described, on the following described land, to-wit:

One acre of land, more or less, around the location of the
oil well known as the No. 1 Webb-State, said acre being
more particularly described as follows:

One acre of land, with well location being in the center of
said acre, well location being 706 feet from North line and
418 feet from West line, NW 1/4 of NW 1/4 of Section 11,
T6N, R3E, LaSalle Parish, Louisiana.

The above described tract being hereinafter referred to as the well
site.

In addition to the uses hereinafter granted insofar as the well site
is concerned, grantor hereby conveys to the grantee sufficient rights of
way across grantor’s property, being the fractional Section 11, T6N,
R3E, LaSalle Parish, Louisiana, less tracts previously sold, being same
land acquired from INEZ WEBB FRAZIER, Conveyance Book No. 82,
Page No. 361, records of LaSalle Parish, Louisiana, to convey salt water
and other materials from wells in the area to the salt water injection
well, it being agreed that said rights of way will be used in such a way
as to inconvenience the grantor in her use of the property as little as
possible. It is further agreed that when necessary the pipes conveying
said salt water will be buried below plow depth. It is also agreed that
the existing road to well site may be used by grantee as needed, and
improved by grantee at grantee’s expense, as grantee sees fit.

This grant shall be for a period of ten years beginning on the date
of this grant, and for so long thereafter as grantee uses the property
described herein without interruption of more than twelve (12) months.

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The terms and conditions of this grant are as follows:

1.

Operator is given the use of the above described property for the
purpose of constructing, operating and maintaining thereon a saltwater
injection and disposal system including expressly, but not by way of
limitation, the right to conduct any form of work thereon necessary or
convenient to the construction, maintenance and operation of a saltwater
injection and disposal system and pipelines and the full right of ingress
and egress to and from the property, for men, materials and equipment
which may be deemed necessary, in Operator’s sole discretion, for
construction, maintenance and operation of the saltwater injection and
disposal system and pipelines, and transportation of any and all liquids,
gases, solids, and any combination thereof.

2.

Grantor agrees to pay all taxes against the premises during the
term hereof, provided, however, that the grantee shall be responsible for
all taxes assessed against any improvements or equipment it places or
causes to be placed on said premises.

3.

Upon termination of this agreement for any cause, grantee shall
have twelve (12) months from the date of said termination to remove
any improvements or equipment it has located thereon. Grantee further
agrees to back fill pits and to return the premises in as near the condition
as it received them as is practical under the circumstances.

4.

This consideration paid for this grant covers the ordinary use of
the land for the purposes stated. Any damages caused by grantee’s
future operations other than the use of the land on which grantee’s
pipelines or appurtenances are located shall be paid to grantor at fair
value.

(Emphasis added.)

Article 2045 of the Louisiana Civil Code provides that “[i]nterpretation of a

contract is the determination of the common intent of the parties.” If the “words of

a contract are clear and explicit and lead to no absurd consequences, no further

interpretation may be made in search of the parties’ intent.” La.Civ.Code art. 2046.

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Furthermore, “[t]he words of a contract must be given their generally prevailing

meaning.” La.Civ.Code art. 2047. In the event that the contract includes words of

art or technical terms, these provisions “must be given their technical meaning when

the contract involves a technical matter.” Id. Finally, “[e]ach provision in a contract

must be interpreted in light of the other provisions so that each is given the meaning

suggested by the contract as a whole.” La.Civ.Code art. 2050. When a contract can

be interpreted by reference to its four corners alone, without consideration of extrinsic

evidence, its interpretation is a matter of law and renders summary judgment

appropriate. Sims v. Mulhearn Funeral Home, Inc., 07-0054 (La. 5/22/07), 956 So.2d

583.

We find no error in the trial court’s determination that the Agreement did not

preclude Placid and its successors from injecting salt water originating outside of the

27 ¾ acre tract into the well. Simply, the Agreement does not limit the salt water to

that tract. The wording of the Agreement is clear, explicit, and unambiguous in its

lack of restriction on the source of the salt water to revenue interest wells and in its

lack of limitation on the quantity of salt water to be introduced. Instead, the property

descriptions are limited to the well site and to the entirety of the acreage for

establishment of the right of way across the property “to convey salt water and other

materials” to the well. No language couples “wells in the area” to the property

descriptions, to any particular well, or to any existing mineral leases. We find no

merit in the argument that the use of “the” before “area” limits the Agreement to

property otherwise described. While that construction may be appropriate in other

contracts, it is not relevant to the phrase at issue in this Agreement.

Although the Agreement is clear and explicit on its face as to whether the salt

8

water must originate on the Gray/Crooks property, we observe that, to the extent the

parties offered evidence and arguments outside of the four corners of the contract,

these too support the defendants’ position. The operation of the well, for more than

two decades, indicates that the parties had no intent to limit the source or quantify of

salt water. No evidence in the record points to any other intent. Although the

property was burdened by a pre-existing mineral lease, no language in the Agreement

ties the disposal well to production related to that lease. Moreover, the plaintiffs

lacked compelling evidence to support their position that payment for each barrel of

salt water injected into the disposal well is the industry practice or the failure to do

so resulted in an inequity. The Agreement instead provided consideration of an initial

lump sum payment for the right to maintain the well. In short, the evidence as to

industry practices was insufficient to point out genuine issues of material fact that

would have precluded summary judgment.

This assignment lacks merit.

Remaining Assignments

Beyond the question of whether the Agreement is ambiguous, the plaintiffs’

assignments relate to the use of extrinsic evidence in the interpretation of the contract,

the tort claim for trespass due to the wrongful disposal of saltwater, and the trial

court’s observation that any claim against Oil & Land was prescribed. Each of these

assignments, however, was contingent upon a preliminary determination that the

Agreement was ambiguous as to the term “wells in the area.” These remaining

assignments are rendered moot by the above determination that the Agreement is

clear and explicit on this point.

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DECREE

For the foregoing reasons, the judgment of the trial court is affirmed. All costs

of this proceeding are assigned to the appellants, Steve H. Crooks and Era Lea

Henderson Crooks.

AFFIRMED.

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NUMBER 07-980

COURT OF APPEAL, THIRD CIRCUIT

STATE OF LOUISIANA

STEVE H. CROOKS, ET UX.

VERSUS

PLACID OIL COMPANY, ET AL.

Saunders, J., dissents and assigns written reasons.

The majority finds that the wording of the Agreement is clear, explicit, and

unambiguous in its lack of restriction on the source of the salt water to revenue

interest wells and in its lack of limitation on the quantity of salt water to be

introduced.

I agree with the majority that the language in the contract does not restrict the

amount of saltwater that can be injected into the well. I also agree with the majority

that the language in the contract does not restrict the number of wells that can be a

source for saltwater to be deposited into the well with the obvious limitation of the

number of actual wells that can be erected “in the area.” This interpretation of the

clear language of the contract leads to no absurd consequences. As such, per

La.Civ.Code arts. 2045 and 2046, no further interpretation as to the meaning of the

provision in this regard may be made.

However, the majority also found that the provision allows Placid to bring

saltwater from outside the 27¾ acres of Mrs. Gray’s property on the one-acre

saltwater injection well site. With this finding, I do not agree.

The determination of what the parties intended the phrase “in the area” is the

seminal issue that must be decided by this court and the court below. “In the area” is

not defined in the Agreement. The contract before us refers to an “area,” but it is

silent to what that “area” entails.

Because we are given no guidance from the instrument as to what “in the area”

might be, we should first look to La.Civ.Code 2045 arts. and 2046 to determine if

there is a clear and explicit meaning of the language that does not lead to absurd

consequences. I think the majority’s finding that the words in the provision were clear

and explicit as to the source of the saltwater and materials leads to the absurd

consequence of allowing saltwater and other materials to be shipped in and injected

into the well from anywhere on Earth or even beyond. Thus, I think that “in the area”

is ambiguous as used in the provision. As such, I would reverse the trial court’s ruling

and remand the case for further proceedings.