Ironwood Resources, Ltd v. Baby Oil, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CW 05-467
consolidated with 05-910

IRONWOOD RESOURCES, LTD., ET AL.

VERSUS

BABY OIL, INC., ET AL.

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SUPERVISORY WRITS AND APPEAL FROM THE
FIFTEENTH JUDICIAL DISTRICT COURT,
PARISH OF LAFAYETTE, NO. 2005-0160,
HONORABLE PATRICK L. MICHOT, DISTRICT JUDGE

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MICHAEL G. SULLIVAN
JUDGE

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Court composed of Marc T. Amy, Michael G. Sullivan, and Billy Howard Ezell,
Judges.

WRIT DENIED; JUDGMENT AFFIRMED.

Patrick S. Ottinger
Herman E. Garner, Jr.
Ottinger, Hebert, L.L.C.
Post Office Drawer 52606
Lafayette, Louisiana 70505-2606
(337) 232-2606
Counsel for Plaintiffs/Applicants/Appellants:
Gary B. Strong, M.D.
Estate of Paul F. O’Brien, Jr.
Ernest Obering O’Brien
T. E. Dawkins
Alden Obering O’Brien
Petroco, L.L.C.
Grace Woolley Gowan
Paul Francis O’Brien, III
Starfish Energy, L.L.C.
Priscilla Alden O’Brien Haass
Triax, Ltd.
Franks Petroleum, Inc.
Obieco, L.L.C.
Estate of John P. Strong
Ironwood Resources, Ltd.

Raymond A. Beyt
Beyt & Beyt
Post Office Box 52157
Lafayette, Louisiana 70505
(337) 233-6771
Counsel for Defendants/Respondents/Appellees:
Suard Barge Service, Inc.
Baby Oil, Inc.

Joseph L. Waitz, Jr.
Waitz & Downer
Post Office Box 7015
Houma, Louisiana 70361-7015
(985) 876-0807
Counsel for Defendants/Respondents/Appellees:
Baby Oil, Inc.
Suard Barge Service, Inc.

SULLIVAN, Judge.

Plaintiffs seek review of a judgment, which granted Defendants’ declinatory

exception of improper venue.1 We deny the writ and affirm the trial court’s judgment.

Facts

Plaintiffs are the owners of undivided working interests in and to certain oil,

gas, and mineral leases, which cover and affect lands in the Deer Island Field of

Terrebonne Parish, Louisiana. The leases are governed by a Model Form Operating

Agreement. American Explorer, Inc. was the original operator under the Operating

Agreement. American Explorer, Inc. changed its name to PetroQuest Corporation

and sometime thereafter conveyed its interests in and to the leases to Suard Barge

Service, Inc. (Suard).

Plaintiffs filed suit in Lafayette Parish, alleging violations of and/or seeking

enforcement of various provisions of the Operating Agreement, as well as damages

and attorney fees. Plaintiffs seek:

1) A judicial declaration that Defendants were not properly selected
as the operator under the Operating Agreement;

2) Alternatively, removal of Defendants as operator under the
Operating Agreement; and

3) Damages for Defendants’ breach of the Operating Agreement and
reimbursement and restitution of all funds improperly withheld
from them.

Plaintiffs assert the Operating Agreement was executed in Lafayette Parish, the last

duly designated operator is domiciled in Lafayette Parish, and the assignment

whereby Defendants acquired their interests in the subject oil, gas, and mineral leases

was executed in Lafayette Parish.

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Plaintiffs filed an appeal and a writ application, seeking review of the judgment. The writ
was granted for the limited purpose of consolidating the writ application with the appeal.

Defendants filed an exception of improper venue, asserting that, pursuant to

La.Code Civ.P. art. 80(A)(1), this matter should proceed in Terrebonne Parish, not

Lafayette Parish. Plaintiffs contend Lafayette Parish is proper venue pursuant to

La.Code Civ.P. art. 76.1.

Discussion

Article 80(A)(1) of the Code of Civil Procedure provides:

A. The following actions may be brought in the parish where the
immovable property is situated or in the parish where the defendant in
the action is domiciled:

(1) An action to assert an interest in immovable property, or a
right in, to, or against immovable property, except as otherwise provided
in Article 72[.]

Article 76.1 provides:

An action on a contract may be brought in the parish where the
contract was executed or the parish where any work or service was
performed or was to be performed under the terms of the contract.

Article 80 governs if it conflicts with Article 76. La.Code Civ.P. art. 45.

Plaintiffs urge that they “do not assert any right or interest in any immovable

property in their Petition” but simply seek to enforce the terms of a contract.

Therefore, their suit is personal in nature, and Article 80 does not apply. Defendants

contend that, because Plaintiffs’ claims arise out of the Operating Agreement, a

contract affecting oil, gas, and mineral leases, their claims are immovable in nature

and Article 80 governs venue.

Pursuant to the Mineral Code, oil, gas, and mineral leases are mineral rights.

La.R.S. 31:16. Mineral rights are incorporeal immovables; they are situated “in the

parish in which the land burdened is located.” La.R.S. 31:18.

2

By definition, Plaintiffs, as working interest owners, own “a working interest

in [an] oil or gas well or unit.” La.R.S. 31:212.31. The Operating Agreement they

contend has been violated and seek to enforce is “a contract for the exploration,

development, or operation of mineral rights.” La.R.S. 31:215.

Plaintiffs allege Defendants failed and/or refused to perform their duties under

the Operating Agreement in the following respects:

(a) Refusal to allow an audit of the books and records
pertaining [to] operations and activities on the Contract
Area, as required by the Operating Agreement;

(b) “Netting” expenses attributable to Petitioners, against
revenue due and owing Petitioners, when such is not
authorized by the Operating Agreement;

(c) Charging the Non-Operators costs and expenses which are
unauthorized and not valid and which, if authorized or
valid, are in excess of customary costs and charges which
might be charged in the premises;

(d) Failing to communicate with the Non-Operators and to
provide them with information as to activities connected on
the Contract Area;

(e) Refusing to authorize the direct payment of revenues to
Petitioners;

(f) The actions and inactions of Baby Oil and/or Suard, in its
purported or assumed capacity as operator of the Contract
Area, constitute gross negligence or willful misconduct.

In their Petition, Plaintiffs define the Contract Area as the oil, gas, and mineral

leases in which they own undivided working interests. Any income, costs, expenses,

and/or revenues referenced by Plaintiffs in these allegations necessarily refer to

income, costs, expenses, and revenue generated and/or incurred as a result of the

exploration, development, or operation of the mineral leases under the terms of the

Operating Agreement. Considered in this light, it is clear that Plaintiffs are asserting

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their rights in incorporeal immovable property and seek to protect their interests in

this incorporeal immovable property by enforcing the terms of the Operating

Agreement. Therefore, venue is governed by Article 80.

Our conclusion is based in part on the court’s analysis of the plaintiff’s claims

in CLK Co., L.L.C. v. CXY Energy, Inc., 98-802 (La.App. 4 Cir. 9/16/98), 719 So.2d

1098, writ denied, 98-3146 (La. 2/12/99), 738 So.2d 574. In CLK, the plaintiff filed

suit to enforce the terms of a Confidentiality Agreement, which provided for the

conveyance of a royalty interest to it in return for services rendered to the defendant.

The plaintiff filed suit in Orleans Parish. Pertinent operating agreements had been

recorded in Vermilion Parish, and the plaintiff filed a notice of lis pendens in that

parish. CXY excepted to venue, arguing venue was proper in Vermilion Parish,

where the immovable property subject to the royalty interest was located, or Lafayette

Parish, where its principal business establishment was located, not Orleans Parish.

The plaintiff opposed the exception, arguing, as Plaintiffs do here, that its claim was

based on a contract and, therefore, La.Code Civ.P. art. 80 did not apply. The court

concluded that the plaintiff sought the conveyance of the overriding royalty interest,

an incorporeal immovable, and Article 80 was applicable.

In reaching this conclusion, the court discussed at length Louisiana’s treatment

of personal and real rights and actions and movable and immovable rights and

actions, observing: “The ‘nature’ of a personal right is an obligation, whereas the

‘nature’ of a real right is one of ownership and its dismemberments. This is to be

distinguished from the ‘object’ of those rights which may be either movables or

immovables depending on to what the right pertains.” Id. at 1104.

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The court then observed that Article 80 applies to “ all immovable actions” and

is concerned with the object of the action, movable or immovable, not the nature of

the action, personal or real. With this in mind, the court considered La.Code Civ.P.

art. 422’s definition of personal and real actions. Article 422 provides:

A personal action is one brought to enforce an obligation against
the obligor, personally or independently of the property which he may
own, claim, or possess.

A real action is one brought to enforce rights in, to, or upon
immovable property.

A mixed action is one brought to enforce both rights in, to, or
upon immovable property, and a related obligation against the owner,
claimant, or possessor thereof.

The court observed that Article 422 makes no distinction between the terms “real”

and “immovable.” Continuing, the court quoted Professor Yiannopoulos’ observation

that “actions for the enforcement of the right of ownership, dismemberments of

ownership [e.g., usufruct, etc.] and real security are real actions—movable or

immovable.” CLK, 719 So.2d at 1105, quoting YIANNOPOULOS, 2 LOUISIANA CIVIL

LAW TREATISE: PROPERTY, § 201 at 476 (3d ed. 1991). Restating its earlier

observation regarding La.Code Civ.P. article 80’s treatment, the court noted that for

“venue purposes all rights with an immovable object are to be treated as immovable

real rights,” and mixed actions are treated like immovable actions. Id. at 1106.

Accordingly, the court concluded that the object of the action, not the nature of the

action, determines venue.

Applying this analysis to Plaintiffs’ claims, we find that, even if their claims

are personal in nature, the object of them, their interests in oil, gas, and mineral

leases, is incorporeal immovables, and Article 80 governs venue.

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Plaintiffs urge that Defendants’ reliance on CLK is misplaced because they do

not seek title to immovable property. Our decision is not based on the similarity of

Plaintiffs’ position to that of the plaintiff in CLK but on the court’s discussion of

Louisiana law and its treatment of personal, real, and immovable rights and actions

for venue purposes.

Plaintiffs point to the decisions in Petro Point 5000 v. deGraauw, 520 So.2d

1025 (La.App. 3 Cir. 1987), Grezaffi v. Smith, 572 So.2d 183 (La.App. 1 Cir. 1990),

and Rock Energy, Inc. v. Equity Oil Co., 01-1005 (La.App. 1 Cir. 5/10/02), 818 So.2d

920, as support for their position. In Petro Point and Grezaffi, the courts determined

that Article 80 did not apply to an optionor/vendor’s action for specific performance

against an optionee/purchaser who was not domiciled in the parish where the

immovable property, which was the subject of a purchase agreement, was situated,

because the primary purpose of the suit was recovery of the purchase price not the

transfer of the title to the immovable property.

In Rock, the plaintiff assigned an option to acquire oil, gas, and mineral leases

situated in Pointe Coupee Parish to defendant. Payment for the assignment was other

valuable consideration and one-half of any proceeds the defendant received for

seismic options that it might negotiate. After learning that the defendant had assigned

the option for $1.2 million, the plaintiff filed suit in Pointe Coupee Parish, seeking

one-half of the proceeds the defendant received for the seismic options it assigned.

The court determined that the object of the plaintiff’s claim was one-half of the

proceeds received by the defendant for the assignment of the options, not the seismic

operations2.

2
For the purposes of its discussion, the court assumed the seismic operations were incorporeal
immovables.

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The plaintiffs in these cases were not similarly situated to Plaintiffs here, and

their claims were not the same. In Petro Point and Grezaffi, the plaintiffs sought to

divest themselves of their interests in immovable property, and in Rock, the plaintiff

had already divested the immovable property at issue, whereas Plaintiffs sub judice

seek to protect their interests in immovable property by enforcing a contract under

which Defendants operate and manage their interests in that immovable property.

Disposition

Plaintiffs’ writ application is denied, and the trial court’s judgment, granting

Defendants’ declinatory exception of improper venue and transferring this matter to

Terrebonne Parish is affirmed. All costs are assessed to Plaintiffs.

WRIT DENIED; JUDGMENT AFFIRMED.

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