Theodore S. Carmichael v. the Bass Partnership and Bopco, L.P.

NOT DESIGNATED FOR PUBLICATION

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CA 12-10

THEODORE S. CARMICHAEL, ET AL.

VERSUS

THE BASS PARTNERSHIP AND BOPCO, L.P., ET AL.

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APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT
PARISH OF ACADIA, NO. 84,484
HONORABLE JOHN D. TRAHAN, DISTRICT JUDGE

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JIMMIE C. PETERS
JUDGE

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Court composed of Oswald A. Decuir, Jimmie C. Peters, and J. David Painter, Judges.

AFFIRMED IN PART; REVERSED AND
RENDERED IN PART; AND REMANDED.

Nancy Scott Degan
Roy Clifton Cheatwood
Adam Bennett Zuckerman
Baker, Donelson, Bearman
201 St. Charles Ave., #3600
New Orleans, LA 70170
(504) 566-5200
COUNSEL FOR DEFENDANT/APPELLEE:
Samson Resources Co.

Guy Earl Wall
Paul Edward Bullington
Jonathan R. Cook
Wall, Bullington & Cook, LLC
540 Elmwood Park Blvd
New Orleans, LA 70123
(504) 736-0347
COUNSEL FOR DEFENDANTS/APPELLANTS:
BOPCO, L.P.
The Bass Partnership

Gerald Francis Slattery, Jr.
David Stephen Landry
Colleen Carr Jarrott
Schully, Roberts, Slattery
1100 Poydras St., Ste 1800
New Orleans, LA 70163
(504) 585-7800
COUNSEL FOR DEFENDANT/APPELLEE:
Continental Land & Fur Company

David Lyman Browne
Attorney at Law
650 Poydras St., Suite 2150
New Orleans, LA 70130
(504) 648-0171
COUNSEL FOR DEFENDANT/APPELLEE:
Torch Energy Services, Inc.

PETERS, J.

The Bass Partnership and BOPCO, L.P. (collectively referred to as Bass) appeal

the trial court’s grant of a partial summary judgment in favor of Continental Land &

Fur Company, Inc. (Continental), finding that Bass was contractually obligated to

defend and indemnify Continental in this suit wherein the original plaintiffs, Theodore

S. Carmichael and Judy Chiasson Carmichael, sought location restoration of

immovable property used for oil and gas exploration and production. Additionally,

Bass appeals the trial court judgment denying its motion for summary judgment on

the issue of indemnity. For the following reasons, we affirm in part; reverse and

render in part; and remand for further proceedings.

OPINION

This litigation actually has as its origins a suit for personal and property

damages filed by the Carmichaels against numerous defendants, including Bass and

Continental. The Carmichaels are the owners of immovable property located in

Acadia Parish, Louisiana, upon which is situated an oil and gas well identified as the

Hebert No. 1 Well. In 2003, the Carmichaels acquired the immovable property,

which had been the subject of numerous mineral leases, commencing in 1984. In their

suit, they sought damages from the various defendants pursuant to various causes of

action, arising from the contamination and pollution of the surface and subsurface of

their property during the many years of oil and gas exploration and production carried

out pursuant to the enumerated mineral leases.

In partial response to the Carmichaels’ petition, Continental filed a cross claim

against Bass, asserting that Bass was obligated to indemnify Continental for litigation

expenses and any judgment that might be rendered against it. The indemnification,

according to Continental in its cross claim, arose from the terms of a January 18, 2000

letter which had been incorporated into the February 1, 2000 Assignment and Bill of

Sale transferring Continental’s interest in the Hebert No. 1 Well to Bass. Bass

responded to Continental’s cross claim by filing its own cross claim against

Continental asserting its own claim for indemnification pursuant to the terms of the

January 18, 2000 letter. In its cross claim, Bass asserted that it had plugged and

abandoned the Hebert No. 1 Well and had remediated and removed all oilfield

equipment from the site; that it was entitled to defense and indemnity pursuant to the

January 18, 2000 letter and the February 1, 2000 Assignment and Bill of Sale; and

that Continental was also liable to it for any damages arising from Continental’s

ownership interests in the Hebert No. 1 Well prior to 7:00 a.m. on February 1, 2000,

the effective date of its transfer to Bass.

Continental then filed a motion for partial summary judgment on the defense

and indemnity issue, and Bass reciprocated with a motion for summary judgment of

its own addressing its indemnity claims. After a hearing on the summary judgment

motions,1 the trial court granted Continental’s motion for partial summary judgment

finding that Bass was “obligated to defend and indemnify [Continental] in cross claim

for the claims in this lawsuit” pursuant to the terms of the letter agreement. In

granting relief to Continental, the trial court also denied Bass’s motion for summary

judgment.

On March 9, 2011, the Carmichaels and Continental filed a motion seeking

court approval of a compromise and settlement between the parties. The settlement

was eventually approved. On August 22, 2011, based upon a stipulation between

Bass and Continental, the trial court entered judgment in favor of Continental and

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Other defendants had raised similar indemnity issues during the litigation, and the
arguments on these issues were held the same day. However, the decisions on those issues are not
before us, and we will limit our review to the dispute between Bass and Continental.

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against Bass in the amount of $173,250.00. This amount represented the stipulated

amount of attorney fees incurred by Continental in defense of the Carmichaels’ suit.

Bass appealed this judgment, raising five assignments of errors:

A. The District Court Misinterpreted the Assignment in Granting
Continental’s Motion for Partial Summary Judgment and in
Denying Bass’ Motion for Summary Judgment.

B. The District Court Erred in Limiting Continental’s Indemnity
Obligation to Title Problems.

C. The District Court Erred in Failing to Distinguish Between
Location Restoration and Damages.

D. The District Court Erred in Ruling that Liability Could Only be
Imposed by “Operation” of the Property.

E. Alternatively, the District Court Erred in Granting a Summary
Judgment Because the Assignment was Ambiguous and the
District Court Decided Disputed Issues of Material Fact.

OPINION

The law pertaining to summary judgment is well settled:

Appellate review of a summary judgment is de novo, applying the same
standard as the trial court. Smith v. Our Lady of the Lake Hosp., Inc., 93-
2512 (La.7/5/94), 639 So.2d 730. Accordingly, we will review this
matter de novo.

As a general principle, Louisiana law favors the summary
judgment procedure as a vehicle by which the “just, speedy, and
inexpensive” determination of an action may be achieved. La.Code
Civ.P. art. 966(A)(2). The trial court is required to render summary
judgment “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.” La.Code Civ.P. art. 966(B). In a summary
judgment proceeding, the burden of persuasion remains always with the
mover to show that no material issues of fact exist. La.Code Civ.P. art.
966(C)(2). That is to say, the mover must present supportive evidence
that the motion for summary judgment should be granted. Hayes v. Autin,
96-287 (La.App. 3 Cir. 12/26/96), 685 So.2d 691, writ denied, 97-281
(La.3/14/97), 690 So.2d 41.

A fact is “material” when its existence or
nonexistence may be essential to plaintiff's cause of action
under the applicable theory of recovery. “[F]acts are
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material if they potentially insure or preclude recovery,
affect a litigant’s ultimate success, or determine the outcome
of the legal dispute.” Simply put, a “material” fact is one
that would matter on the trial on the merits. Any doubt as to
a dispute regarding a material issue of fact must be resolved
against granting the motion and in favor of a trial on the
merits.

Smith, 639 So.2d at 751 (citations omitted).

In determining whether a fact is material, we must consider the
substantive law governing the litigation. Davenport v. Albertson’s, Inc.,
00-685 (La.App. 3 Cir. 12/6/00), 774 So.2d 340, writ denied, 01-73
(La.3/23/01), 788 So.2d 427.

Glenn ex rel. Glenn v. Grant Parish Sch. Bd., 10-436, pp. 1-2 (La.App. 3 Cir. 11/3/10),
49 So.3d 1049, 1050 (alteration in original).

The apparent complexity of this litigation lies in the numerous parties involved

and the associated cross claims emanating therefrom. However, the issue now before

us is simply one of contract interpretation, and the rules pertaining to contract

interpretation were set out by the supreme court in Prejean v. Guillory, 10-740, pp. 6-

7 (La. 7/2/10), 38 So.3d 274, 279 (alteration in original):

“[W]hen a contract can be construed from the four corners of the
instrument without looking to extrinsic evidence, the question of
contractual interpretation is answered as a matter of law.” Sims v.
Mulhearn Funeral Home, Inc., 07-0054, p. 10 (La.5/22/07), 956 So.2d
583, 590. “Interpretation of a contract is the determination of the
common intent of the parties.” La. Civ.Code art. 2045. The reasonable
intention of the parties to a contract is to be sought by examining the
words of the contract itself, and not assumed. Sims, 07-0054 at p. 7, 956
So.2d at 589; McConnell v. City of New Orleans, 35 La. Ann. 273 (1883).
“When 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. Common intent is
determined, therefore, in accordance with the general, ordinary, plain and
popular meaning of the words used in the contract. Louisiana Ins. Guar.
Ass’n v. Interstate Fire & Cas. Co., 93-0911, p. 5 (La.1/14/94), 630
So.2d 759, 763. Accordingly, when a clause in a contract is clear and
unambiguous, the letter of that clause should not be disregarded under
the pretext of pursuing its spirit, as it is not the duty of the courts to bend
the meaning of the words of a contract into harmony with a supposed
reasonable intention of the parties. See Maloney v. Oak Builders, Inc.,
256 La. 85, 98, 235 So.2d 386, 390 (1970); McConnell, 35 La. Ann. at
275. Most importantly, a contract “must be interpreted in a common-
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sense fashion, according to the words of the contract their common and
usual significance.” Lambert v. Maryland Cas. Co., 418 So.2d 553, 559
(La.1982).

“A contract is considered ambiguous on the issue of intent when it lacks a provision

bearing on the issue, its written terms are susceptible to more than one interpretation,

there is uncertainty as to its provisions, or the parties’ intent cannot be ascertained

from the language used.” Guest House of Slidell v. Hills, 10-1949, p. 4 (La.App. 1 Cir.

8/17/11), 76 So.3d 497, 499-500.

The January 18, 2000 letter agreement between Bass and Continental provided

in pertinent part:

This is to verify our conversation of this date whereby Bass
Enterprises Production Co. (hereinafter referred to as “Bass”) and
Continental Land & Fur Co., Inc. (hereinafter referred to as
“Continental”) have agreed that Continental will forfeit its interest in the
Hebert No. 1 Well and associated leasehold interest, as well as further
leasehold interests obtained by Bass and Davis Petroleum Corp., in the
above prospect, according to the following terms and conditions:

1. For Ten Dollars ($10.00) and other good and valuable
consideration, the receipt of which is hereby
acknowledged, Continental agrees to convey to Bass
all of its right, title and interests in and to the Hebert
No. 1 Well, the MT 3 RF SUA and the other
properties described in numerical paragraph five (5)
below and/or in Exhibit “A” hereto (hereinafter the
“Properties”). As to the Properties, Bass hereby
agrees to assume Continental’s share of plugging
liability and Continental’s share of the
responsibility for location restoration. As the term
is used in this agreement, location restoration shall
include but not be limited to removal and disposal
of any and all materials or substances including
naturally occurring radioactive material
(“NORM”) used in or produced in connection with
operations relating to the Properties.

2. The Effective Date of transfer will be 7:00 a.m. local
time on February 1, 2000.

....
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5. The transfer will include 100% of Continental’s right,
title and interests in the assets described on Exhibit
“A”, all associated leasehold, overriding royalty
interests and acreage, whether such interest or acreage
are located inside or outside of the MT 3 RF SUA, the
well, flowlines, downhole equipment, saltwater
disposal well(s) and facilities, gas gathering and
compression facilities and all other personal property
and rights-of-way affecting the leases and all oil and
gas produced after 7:00 a.m. on the Effective Date. In
addition, the transfer will include 100% of
Continental’s right, title and interest in and to
contractual and/or reversionary interests within the
area described on Exhibit “A-1”.

....

7. Within fifteen (15) days after the execution hereof,
Continental will pay Bass $15,232.00 (11.413868%
of $133,454) and will deliver to Bass a mutually
acceptable assignment and bill of sale of the
Properties. Payment of this sum shall relieve
Continental of any further payment obligations
relating to costs and expenses incurred with regard
to remediation on the Properties.

8. Bass shall assume all responsibility for the
Properties as of the Effective Date, and agrees and
covenants to protect, defend, release, indemnify
and save Continental harmless from and against
any and all costs (including court costs and
attorney fees), claims, demands, judgments, causes
of action and other liability of whatsoever kind
arising out of or incident to the ownership,
operation, plugging, abandoning and location
restoration of the Properties from and after the
Effective Date. In addition, Bass shall protect,
defend, release, indemnify and save Continental
harmless from and against any an [sic] all costs
(including court costs and attorney fees), claims,
demands, judgments, causes of action and other
liability of whatsoever kind relating to the demands
for releases of leases referred to in paragraph four (4)
above and to any additional demands pertaining to the
Properties and directed to the parties hereto.

9. Except as to the demands for releases of leases
referred to in paragraph four (4) above, Continental
agrees and covenants to protect, defend, release,
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indemnify and save Bass harmless from and
against any and all costs (including court costs and
attorney fees), claims, demands, judgments cause
of action and other liability of whatsoever kind
arising out of or incident to the ownership of
Continental of the Properties prior to the Effective
Date.

(Emphasis added).

In its written reasons for judgment, the trial court stated:

The defendants in cross-claim argue that when considered in
context of the entire agreement, the only logical interpretation of this
paragraph, is that their indemnity obligation is only for claims arising out
of their ownership or title to the interest they conveyed. They point out
that Bass’ indemnity obligations specifically apply to “location
restoration” as well as to claims “arising out of or incident to the
ownership, operation, plugging, abandoning” of the property, whereas
defendants’ in cross-claim indemnity obligations are only for claims
arising out of or incident to the ownership prior to the effective date.
Had the parties intended that the defendants in cross-claim be responsible
for location restoration or obligations arising out of operation of the
property, they could have included that language in the contract.

The Court finds that under the Letter Agreements, Bass is
obligated to defend and indemnify the defendants in cross-claim for the
claims of this lawsuit.

Accordingly, the Motions of Continental, Plains, Torch and Cullen
are granted, and the Bass Motions for Summary Judgment are denied.

(Emphasis in the original.)

After reviewing the above stated terms, we agree with the trial court that there

is no ambiguity in terms of the contract pertaining to the reciprocal obligations of

defense and indemnity. However, our interpretation leads us to find that Bass was

entitled to defense and indemnity from Continental for any liability incurred by Bass

arising from Continental’s ownership of the mineral lease, including those relating to

the remediation of the property prior to February 1, 2000.

Paragraph 1 of the letter clearly states that Bass is assuming any liability

Continental has for plugging the Hebert No. 1 Well and its share of responsibility in

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restoring the location, including but not limited to the removal and disposal of

materials and substances used in the production of oil and gas. Paragraph 7 provides

for the payment by Continental to Bass of its share of the $133,454.00 remediation

costs, $15,232.00, based on its 11.413868% interest in the property. The terms state

that the payment of this amount will relieve Continental of “any further payment

obligations relating to costs and expense incurred with regard to remediation on the

Properties.”

The next two paragraphs, 8 and 9, contain the reciprocal defense and

indemnification obligations. In assuming all responsibilities for the subject properties,

Bass agrees to:

[P]rotect, defend, release, indemnify and save Continental harmless from
and against any and all costs (including court costs and attorney fees),
claims, demands, judgments, causes of action and other liability of
whatsoever kind arising out of or incident to the ownership, operation,
plugging, abandoning and location restoration of the Properties from and
after the Effective Date.

Likewise, Continental agrees to:

[P]rotect, defend, release, indemnify and save Bass harmless from and
against any and all costs (including court costs and attorney fees), claims,
demands, judgments cause of action and other liability of whatsoever
kind arising out of or incident to the ownership of Continental of the
Properties prior to the Effective Date.

The only difference between the two paragraphs is the fact that Continental’s

obligation does not include the language “operation, plugging, abandoning and

location restoration.” However, we do not find that the absence of this language leads

to a finding that Continental’s obligation arises only “out of their ownership or title to

the interest they conveyed,” as is espoused at the trial court level.

Pursuant to the terms of the letter, Continental transferred all of its interest in

the Hebert No. 1 Well as of 7:00 a.m., February 1, 2000. Subsequent to that time and

date, it no longer had an interest in the operation of the well, and Bass agreed, for a
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sum, to assume its percentage of liability for plugging and abandoning the well and in

restoring the property. Thus, reading the terms of Paragraphs 8 and 9 in light of

Paragraph 1, it is clear that Continental still agreed to defend and indemnify Bass for

any “liability of whatsoever kind arising out of or incident to the ownership of

Continental of the Properties prior to the Effective Date.” The suit by the

Carmichaels seeking damages pertaining to the restoration of their property, if any,

arose prior to February 1, 2000, fits within the description of liability arising out of or

incident to Continental’s ownership of the mineral lease affecting the property upon

which the Hebert No. 1 Well was situated.

Based on this finding, we affirm the trial court judgment in favor of Continental.

However, we reverse the trial court judgment denying Bass’s motion for summary

judgment and render judgment in its favor finding that it was owed defense and

indemnification from Continental for any cause of action arising out of its ownership

of the subject mineral lease prior to February 1, 2000. We remand the matter to the

trial court for a determination on these issues.

DISPOSITION

The judgment of the trial court denying summary judgment in favor of Bass

Partnership and BOPCO, L.P. is reversed, and judgment is rendered in favor of Bass

Partnership and BOPCO, L.P., finding that they are owed defense and indemnification

from Continental Land & Fur Company, Inc. for any damages to the subject property

arising prior to February 1, 2000. The trial court judgment finding that Continental

Land & Fur Company, Inc. is owed defense and indemnity by Bass Partnership and

BOPCO, L.P. for any damages to the subject property arising subsequent to February

1, 2000 is affirmed. The matter is remanded to the trial court for further proceedings

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on the issue of the amounts owed pursuant to both parties’ obligations. Costs of this

appeal are assessed equally between the parties.

AFFIRMED IN PART; REVERSED AND RENDERED IN PART; AND

REMANDED.

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