Catahoula Lake Investments, LLC v. Hunt Oil Company

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CW 17-649

CATAHOULA LAKE INVESTMENTS, LLC

VERSUS

HUNT OIL COMPANY, ET AL.

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ON SUPERVISORY WRIT FROM THE
TWENTY-EIGHTH JUDICIAL DISTRICT COURT
PARISH OF LASALLE, NO. 40076
HONORABLE J. CHRISTOPHER PETERS, DISTRICT JUDGE

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PHYLLIS M. KEATY
JUDGE

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Court composed of Shannon J. Gremillion, Phyllis M. Keaty, and D. Kent Savoie,
Judges.

WRIT GRANTED AND MADE PEREMPTORY.
JUDGMENT REVERSED IN PART AND RENDERED.

Gladstone N. Jones, III
Bernard E. Boudreaux, Jr.
Kevin E. Huddell
Eberhard D. Garrison
H. S. Bartlett, III
Emma Elizabeth Daschbach
John T. Arnold
Lindsay E. Reeves
Jones, Swanson, Huddell & Garrison, LLC
601 Poydras Street, Suite 2655
New Orleans, Louisiana 70130
(504) 523-2500
Counsel for Plaintiff/Relator:
Catahoula Lake Investments, LLC

Jennifer Jones
Jones Law Firm
Post Office Box 1550
Cameron, Louisiana 70631
(337) 775-5714
Counsel for Plaintiff/Relator:
Catahoula Lake Investments, LLC

William Michael Adams
Paul M. Adkins
Stacey Denise Williams
Brian C. Flanagan
Blanchard, Walker, O’Quin
P. O. Drawer 1126
Shreveport, LA 71163-1126
(318) 221-6858
Counsel for Defendant/Respondent:
Petro-Hunt, LLC

Jamie D. Rhymes
April L. Rolen-Ogden
Hunter A. Chauvin
Liskow & Lewis
Post Office Box 52008
Lafayette, Louisiana 70505-2008
(337) 232-7424
Counsel for Defendant/Respondent:
XH, LLC

Joseph I. Giarrusso, III
Liskow & Lewis
701 Poydras Street, Suite 5000
New Orleans, Louisiana 70139
(504) 581-7979
Counsel for Defendant/Respondent:
XH, LLC

Michael P. Cash
Liskow & Lewis
1001 Fannin Street, Suite 1800
Houston, Texas 77002
(713) 651-2900
Counsel for Defendant/Respondent:
XH, LLC

Matthew Joseph Randazzo, III
Christopher B. Bailey
Charles W. Montz, Jr.
Jackson D. Logan, III
Randazzo, Giglio & Bailey, LLC
P. O. Box 51347
Lafayette, LA 70505
(337) 291-4900
Counsel for Defendant/Respondent:
Kingfisher Resources, Inc.

KEATY, Judge.

Plaintiff-Relator, Catahoula Lake Investments, LLC, seeks supervisory writs

from a judgment which granted, in part, an exception of no right of action filed by

Defendants-Respondents, XH, LLC; Kingfisher Resources, Inc.; and Petro-Hunt,

L.L.C. In Docket Number 17-651 with this court, Defendants-Relators, XH, LLC;

Kingfisher Resources, Inc.; and Petro-Hunt, L.L.C., seek supervisory writs from

the same judgment which denied, in part, their exception of no right of action.

FACTS AND PROCEDURAL HISTORY

Plaintiff filed suit against Defendants claiming that their operations on

Plaintiff’s property under mineral leases and a mineral servitude caused damage to

the property. Defendants filed exceptions of no right of action, asserting that

because all mineral operations had ceased prior to Plaintiff’s purchase of the

subject property, 1 the subsequent purchaser doctrine 2 prohibited Plaintiff from

recovering against Defendants since Plaintiff’s contract purchasing the property

did not expressly pass the seller’s personal rights of action to Plaintiff. The trial

court granted the exception of no right of action in part, stating:

IT IS HEREBY ORDERED, ADJUDGED AND DECREED
that the Exceptions of No Right of Action filed by Defendants are
hereby GRANTED IN PART and DENIED IN PART. In particular,
those exceptions are GRANTED as to the pre-acquisition damages
claims made against Defendants by the Plaintiff, and those claims are
dismissed. Defendants’ exceptions are DENIED as to plaintiff’s post-
purchase claims for regulatory mediation pursuant to Louisiana
Revised Statute[s] 30:29 (Act 312).

1
In its written reasons for ruling, the trial court noted that “the parties stipulated for
purposes of the hearing on the exceptions, that all oil and gas activity ceased on the property in
question no later than 1992, when CLI’s predecessor in title owned the property.”
2
The subsequent purchaser rule is a jurisprudential rule which holds that an
owner of property has no right or actual interest in recovering from a third party
for damage which was inflicted on the property before his purchase, in the
absence of an assignment or subrogation of the rights belonging to the owner of
the property when the damage was inflicted.

Eagle Pipe & Supply, Inc. v. Amerada Hess Corp., 10-2267, 10-2272, 10-2275, 10-2279, 10-
2289, p. 8 (La. 10/25/11), 79 So.3d 246, 256-57.

Ordinarily, we would deny Plaintiff’s writ application as the judgment at

issue dismisses portions of Plaintiff’s claims and, therefore, falls under La.Code

Civ.P. art. 1915(B). As such, Plaintiff could obtain review of the judgment by

having the trial court designate the partial judgment as final and immediately

appealable. However, in this instance, Defendant has filed a writ application

seeking the granting of the remainder of their exception of no right of action.

Plaintiff’s opposition to Defendants’ writ application is based on the same

arguments made in support of Plaintiff’s writ application. Thus, in ruling on

Defendant’s properly-filed writ application, we will necessarily need to address

whether Plaintiff’s arguments are meritorious. Therefore, judicial efficiency

mediates toward considering the merits of both writ applications at this time.

STANDARD OF REVIEW

“The function of the exception of no right of action is to
determine whether the plaintiff belongs to the class of persons to
whom the law grants the cause of action asserted in the suit.” Hood v.
Cotter, 2008-0215, p. 17 (La.12/2/08), 5 So.3d 819, 829. An
appellate court reviewing a lower court’s ruling on an exception of no
right of action should focus on whether the particular plaintiff has a
right to bring the suit and is a member of the class of persons that has
a legal interest in the subject matter of the litigation, assuming the
petition states a valid cause of action for some person.

The determination whether a plaintiff has a right to bring an
action raises a question of law. A question of law requires de novo
review.

Eagle Pipe, 79 So.3d at 255-56 (citations omitted).

DISCUSSION

Plaintiff contends that the trial court was incorrect in finding that the

contract by which Plaintiff obtained ownership of the property did not also transfer

the seller’s personal rights to sue Defendants to demand restitution for damages

caused to the property prior to when Plaintiff obtained ownership. Plaintiff

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submits that such incorrect finding led the trial court to wrongfully conclude that

the subsequent purchaser doctrine was inapplicable to its claims. Alternatively,

Plaintiff argues that the obligations arising from a mineral servitude provide an

independent basis for seeking damages from the servitude owner that are not

subject to the limitations arising from the obligations established by the mineral

leases.

Plaintiff and Defendants do not contest that the statutory laws of this state

provide that in order for a vendee to obtain the personal rights of action belonging

to its vendor, the contract must expressly provide that the vendor is assigning these

personal rights to the vendee. Where the parties disagree, however, is whether the

original transfer of the property to Plaintiff from its vendor, Red Mountain

Timberco III, LLC, in 2007 included this express provision. 3 That contract

provides, in pertinent part (emphasis added):

3
The contract by which Red Mountain obtained ownership from its vendor, Sustainable
Forests, LLC, is substantially the same as that in the contract between Plaintiff and Red
Mountain. Additionally, there is a second contract between Plaintiff and Red Mountain that was
executed in 2011, several years after the original contract. However, Defendants do not raise any
issue as to the contracts transferring ownership to the other ancestors in title as they apparently
acquiesce in the finding that those contracts did successfully transfer the personal rights of the
vendors to the vendees.

Similarly, the contract by which Red Mountain obtained ownership of the property from
Sustainable Forests in 2006 provided (emphasis added):

Vendor is selling the Premises without any warranties whatsoever as to
fitness or condition, whether expressed or implied, and Vendee expressly waives
the warranty of fitness and the guarantee against hidden or latent vices (defects in
the Premises sold which render it useless or render its use so inconvenient or
imperfect the Vendee would not have purchased it had he known of the vice or
defect) under Louisiana Civil Code Article 2475 et seq., and more specifically,
that warranty imposed by Louisiana Civil Code Articles 2520 through 2548,
inclusive, with respect to Vendor’s warranty against latent or hidden defects of
the Premises sold, or any other applicable law, not even for a return of the
purchase price. Vendee forfeits the right to avoid the sale or reduce the purchase
price on account of some hidden or latent vice or defect in the Premises sold.
Vendor expressly subrogates Vendee to all rights, claims and causes of action
Vendor may have arising from or relating to any hidden or latent defects in
the Premises. This provision has been called to the attention of the Vendee and
fully explained to the Vendee, and the Vendee acknowledges that he has read and
understands this waiver of all express or implied warranties and accepts the
Premises without any express or implied warranties.
3

Vendor is selling the Property “AS IS, WHERE IS” without
any warranties whatsoever as to fitness or condition, whether
expressed or implied, and Vendee expressly waives the warranty of
fitness and the guarantee against hidden or latent vices (defects in the
Property sold which render it useless or render its use so inconvenient
or imperfect the Vendee would not have purchased it had he known of
the vice or defect) provided by law in Louisiana, more specifically,
that warranty imposed by Louisiana Civil Code 2520 et seq[.] with
respect to Vendor’s warranty against latent or hidden defects of the
Property sold, or any other applicable law, not even for a return of the
purchase price. Vendee forfeits the right to avoid the sale or reduce
the purchase price on account of some hidden or latent vice or defect
in the Property sold. Vendor expressly subrogates Vendee to all
rights, claims and causes of action Vendor may have arising from
or relating to any hidden or latent defects in the Property. This
provision has been called to the attention of the Vendee and fully
explained to the Vendee, and the Vendee acknowledges that he has
read and understands this waiver of all express or implied warranties
and accepts the Property without any express or implied warranties.

The trial court’s written reasons in this matter provide as follows:

The instant parcel of property is the subject of a long line of
title between Bodcaw Corporation, International Paper, Inc., its
several affiliated companies and Red Mountain Timber Company
prior to CLI acquiring ownership of the impacted property.
Throughout the early chain of title between Bodcaw and International
Paper until the final transfer to Sustainable Forests, language appeared
in the acts of conveyance that conceivably could have transferred the
litigious rights to their successor in interest. However, in the transfer
between Sustainable Forests and Red Mountain Timber Company, no
such language exists. The only language found is the broad, general,
and “non-explicit” language as follows:

Vendor expressly subrogates Vendee to all rights, claims
and causes of action Vendor may have arising from or
relating to any hidden or latent defects in the Property.

While this language would seem broad enough to transfer “any” cause
of action to a Vendee, it is this breadth that the Court believes is its
death knell. Application of this language to “any” right leads to
absurd consequences, such as claims for the destruction of structures
or the unauthorized cutting of timber. The lack of specificity does not
indicate to third parties that the personal right to sue for
environmental damages caused by oil and gas operations was
transferred to Red Mountain Timber.

This same broad general language appears in the original deed
from Red Mountain Timber Company and CLI. However, this Court
finds it interesting and persuasive that the parties to this instrument
(presumably CLI) caused to be executed in July, 2010, a document
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entitled “Ratification and Clarification” to the August 27, 2007 deed,
specifically explaining the subrogation and transfer language to
include:

all rights to seek damages to cleanup and or restore all
soils, surface waters and ground waters where oilfield
waste, pollutants, contaminants, or products were stored
or disposed of or where such oilfield substances are or
may be found on or in the Property …. Also conveyed
was the right for recovery of any damages resulting from
the storage, disposal or presence of oilfield related
substances on the Property conveyed.

Even if this language is accepted as being the true intent between Red
Mountain Timber Company and CLI, no such language is evident
providing the intentions of the parties in the deed between Sustainable
Forests and Red Mountain Timber Company. Obviously, this
ratification and clarification cannot operate retroactively to provide
and (sic) interpretation of the rights transferred in the act of
conveyance entered between Sustainable Forests and Red Mountain
Timber Company.

Thus, regardless of what CLI and Red Mountain Timber
Company understood was transferred in their act of conveyance, no
evidence is presented that clarifies what Sustainable Forests intended
to transfer to Red Mountain Timber Company. As a result, since Red
Mountain Timber Company never had the right to sue for damages
related to oil and gas operations, it is axiomatic that it cannot transfer
to CLI those rights which it did not possess. Since the plaintiff is not
asserting a real right, but rather a personal right for pre-acquisition
damages, the court finds that the subsequent purchaser doctrine is
applicable to the instant litigation. As a result, the Exceptions of No
Right of Action filed by defendant[s] is granted as to the pre-
acquisition damages, and plaintiff’s petition is dismissed as to those
claims.

Defendants cite three Louisiana Supreme Court cases in support of the trial

court’s reasoning on this point: Eagle Pipe, 79 So.3d 246; Bradford v. Richard, 46

La.Ann. 1530, 16 So. 487 (1894); and Matthews v. Alsworth, 45 La. Ann. 465, 12

So. 518 (1893). In Eagle Pipe, 79 So.3d at 281, the contract at issue was quoted as

follows:

. . . [the sellers] do by these presents sell, transfer and deliver, with
full guarantee of title and free from all encumbrances, and with full
subrogation to all their rights and action of warranty against previous
owners . . .

5

The supreme court found that this provision did not transfer the sellers’ personal

rights of action to the purchaser; therefore, the court held that the subsequent

purchaser doctrine acted to bar the plaintiff’s claims for hidden environmental

damage to the subject property which had occurred prior to the plaintiff’s purchase

of the land. However, in reaching this conclusion, the Eagle Pipe court noted:

We find these provisions are substantially similar to those found in
Prados [v. South Central Bell Tel. Co., 329 So.2d 744 (La.1975)(on
rehearing)], in which we stated the subrogation clause in the act of
sale was directed to the rights and actions of warranty against
previous owners, and not an express assignment or subrogation of
personal rights to the new owner.

Id. Because the provision in the contract at issue herein is significantly different

from the one in Eagle Pipe, we agree with Plaintiff’s contention that Eagle Pipe

does not dictate the result in this matter.

In Bradford, 16 So. at 487, the purchaser of land filed suit against a

defendant who had allegedly “cut from said land a large number of cypress trees,

and made the same into boards and shingles, staves and wood” prior to the

plaintiff’s purchase of the land. The plaintiff “allege[d] that said staves now are,

and always have been, the sole, lawful property of [the plaintiff], and that he is

entitled to recover possession of the same, or the value thereof, with full damages

for their conversion.” Id. In support of his subrogation argument, the plaintiff

relied upon the following contractual provision in the purchase agreement, “‘With

full substitution and subrogation in and to all the rights and actions of warranty

which said board has or may have against all preceding owners and vendors, and to

all other rights and actions against all other persons.’” Id. at 488. The supreme

court held that this language was too ambiguous to be construed as having

conveyed to the purchaser the personal rights belonging to the seller. Furthermore,

the court noted that the plaintiff had paid less for the property because of the

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claimed damages as he was suing the defendant for damages totaling almost three

times more than what he had paid for the property. As such, we conclude that

Bradford is factually distinguishable from this case.

In Matthews, 12 So. at 518, the plaintiff, who purchased property subject to

an existing lease, sued the defendant/lessee “for a dissolution of the lease for

alleged violation, for compensation for diminution in the value of the plantation,

and for the rent of the year 1891.” The property had been sold to the plaintiff in

January 1892 “free from incumbrances, ‘except the lease to the defendant of

October, 1890.’” Id. The act of sale in which the plaintiff acquired the property

provided:

“Said lease and all the aforesaid conveyors’ rights in, to, or under the
same are transferred hereby, and simultaneously herewith, to the
conveyee herein. This conveyance is made with complete transfer
and subrogation of all rights and all actions of warranty or otherwise
against all former claimants, proprietors, tenants, or warrantors of the
property herein conveyed.”

Id. The supreme court held that the above provision did not transfer to the plaintiff

the seller’s personal right to recoup against the defendant for damages caused by

the defendant’s actions under the prior lease that had terminated before the sale of

the property to the plaintiff. Discussing Matthews, the Eagle Pipe court, 79 So.3d

at 266, noted:

The personal right of the owner to sue for damages was not
explicitly assigned in the act of sale, and additionally was not an
accessory right which passed with the title without description of, or
reference to, the claim. In the act of sale, the property was
specifically described, and there was no mention of a claim for
damages. . . . Matthews reinforces the proposition that personal rights
of the former owner do not pass with the property in an act of sale
unless specifically assigned or subrogated to the new owner.

We conclude that Matthews is also distinguishable from this matter.

The contractual provision at issue herein reads, “Vendor expressly

subrogates Vendee to all rights, claims and causes of action Vendor may have
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arising from or relating to any hidden or latent defects in the Property.” The

supreme court’s opinion in Eagle Pipe, 79 So.3d 246, extended the application of

the subsequent purchaser doctrine, which previously had been limited to overt or

obvious damage to property, to hidden or latent defects in property. Thus, we view

the use of the terms “hidden or latent defects” as an intentional attempt by the

parties to this contract to protect the purchaser of this property by transferring any

rights the seller might have against a third party for “hidden or latent” damages to

the property, the very damages at issue in this case. 4 Thus, we find merit to

Plaintiff’s logic that the paragraph of the contract where this provision is found

indicates that, in exchange for passing these rights on to the purchaser, the seller

was obtaining the purchaser’s waiver of any right to seek rescission of the sale or a

diminution in the price paid for the property for these same hidden or latent defects.

As quoted above, the trial court’s written reasons indicate why it reached the

conclusion that the contract did not subrogate Plaintiff to the seller’s rights to sue

for property damages caused prior to Plaintiff’s ownership:

Application of this language to “any” right leads to absurd
consequences, such as claims for the destruction of structures or the
unauthorized cutting of timber. The lack of specificity does not
indicate to third parties that the personal right to sue for
environmental damages caused by oil and gas operations was
transferred to Red Mountain Timber.[5]

We disagree with that rationale because the examples given by the trial court, i.e.,

“destruction of structures” on the property or “unauthorized cutting of timber”

from the property, would have been open and obvious at the time that those

4
In its petition for damages, Plaintiff sought, among other things, compensatory, punitive,
and stigma damages and remediation of its property which was allegedly contaminated by
Defendants’ oil and gas operations.
5
While the trial court was discussing the provision in the contract between Sustainable
Forests and Red Mountain whereby the latter obtained ownership of the property which it would
then later sell to Plaintiff herein, we note that the language of that prior contract is identical to
the language in the contract between Red Mountain and Plaintiff.
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damages occurred and the rights of the seller to sue a third party for those damages

would not have been passed on to the purchaser under this provision which was

limited to “hidden or latent defects.” Thus, those types of damages are the very

type of open and obvious damages for which the subsequent purchaser doctrine

was created, i.e., the purchaser of property from which structures or timber has

been removed is going to reduce the amount that the purchaser is willing to pay to

the seller for the property, and permitting the purchaser then to recover against the

third party that removed the structures or timber will result in the purchaser

receiving a windfall at the seller’s expense. Additionally, the damage sustained by

the seller from the open and obvious damage to the property is realized in the

reduced price that the seller must take from a willing buyer for the property. Thus,

we conclude that the trial court’s erroneous examples provide the clearest

explanation for why the contractual provision in the instant case is legally

distinguishable from the earlier cases applying the subsequent purchaser doctrine.

After having performed a de novo review, we find that the contract at issue

operated to subrogate Plaintiff to the seller’s personal rights to seek damages for all

hidden, latent defects in the property caused by Defendants. Accordingly, the trial

court erred in granting, in part, Defendants’ exception of no right of action.

DECREE

The writ application filed by Plaintiff-Relator, Catahoula Lake Investments,

LLC is granted and made peremptory. We reverse the portion of the trial court

judgment which granted, in part, the exception of no right of action filed by

Defendants-Respondents, XH, LLC; Kingfisher Resources, Inc.; and Petro-Hunt,

L.L.C., reinstate all of Plaintiff-Relator’s claims against Defendants-Respondents

and remand this matter to the trial court. All costs associated with this matter are

9

assessed against Defendants-Respondents, XH, LLC; Kingfisher Resources, Inc.;

and Petro-Hunt, L.L.C.

WRIT GRANTED AND MADE PEREMPTORY. JUDGMENT
REVERSED IN PART AND RENDERED.

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