Opinion
No. 639.
November 5, 1962. Rehearing Denied November 28, 1962. Certiorari Denied January 14, 1963.
Action to recover additional rentals assertedly due under surface lease. The Fourteenth Judicial District Court, Parish of Cameron, G. Wm. Swift, Jr., J., rendered judgments and plaintiffs appealed. The Court of Appeal, Frugé, J., held that lease granting right to use pipelines upon payment of certain rentals did not require payment of such rentals for use of pipelines on expropriated easement in favor of pipeline company.
Affirmed.
Jones Jones, by J.B. Jones, Jr., Cameron, Knight Knight, by Herschel N. Knight, Jennings, for plaintiffs-appellants.
Bailey Mouton, by Charles F. Bailey, Lafayette, for defendants-appellees.
Before FRUGÉ, SAVOY and CULPEPPER, JJ.
The heirs of B.F. Rutherford, plaintiffs herein, seek to recover from Phillips Petroleum Company, Kerr-McGee Oil Industries, Inc., and J. Ray McDermott Company, Inc., defendants, certain additional rentals under a surface lease granted by their ancestor in title, B.R. Rutherford to Phillips Petroleum Company on June 28, 1952. Judgment in the lower court was rendered in favor of the defendants and plaintiffs have appealed.
We quote in extenso from the written reasons assigned by the trial judge, since they succinctly and accurately set out and summarized the essential facts of this case, as follows:
"The lease affects Section 21, Township 15 South, Range 6 West, and other contiguous lands adjacent to the Gulf of Mexico in Cameron Parish, Louisiana, which have since been inherited by the plaintiffs from the lessor. It provides for a cash consideration of $15,000.00 for a primary term of one year, and that it may be extended from year to year up to fifty years upon payment of annual rentals. The purposes of the lease were to permit the lessee to directionally drill oil and gas wells from surface locations on the lessor's land to the bed of the Gulf of Mexico, and to use the leased premises to obtain, handle and transport the production derived from such wells, and also to use the leased premises to handle and transport production obtained from offshore wells having surface locations in the Gulf of Mexico.
"The rental provisions in the lease provide for the annual payment of a rental of $2,500.00, beginning with its first anniversary date, which covers the drilling of one directional well, and for $2,500.00 per annum for each additional directional well drilled from the plaintiffs' land, all payable in advance of the commencement of operations. In addition there is a provision for the payment of $1,250.00 per year per offshore well in order for the lessee to enjoy the rights and privileges granted therein with respect to the handling, storage and transportation on the leased premises of production obtained from wells having surface locations in the Gulf of Mexico.
"When the surface lease was executed Phillips Petroleum Company, the lessee, and Kerr-McGee Oil Industries, Inc., owned in equal proportions two mineral leases acquired from the State of Louisiana, one being State Lease No. 1170 covering a portion of the Gulf of Mexico immediately south of plaintiffs' lands, and the other being State Lease No. 1123 covering a portion of the bed of the Gulf in part adjacent to State Lease No. 1170 on the west. By agreement Phillips was then the operator of the two state leases.
"Phillips subsequently directionally drilled two wells in the bed of the Gulf of Mexico from surface locations on plaintiffs' lands, and drilled a third well from a surface location in the Gulf. All of these wells have continued to produce up to the present time. Phillips Petroleum Company has paid plaintiffs, as rental under the surface lease, $5,000.00 annually for the two directional wells and $1,250.00 each year for the offshore well.
"Through subsequent contracts Ray McDermott Company, Inc. acquired an interest in State Lease No. 1123 and was designated as the operator thereof. In 1958, 1959 and 1960 it drilled thereon offshore wells, A-1, B-1 and C-1, respectively, and these wells have produced gas and distillate up to the present time. This production is owned by the defendants in different proportions.
"Under a gas purchase contract dated as of November 14, 1958, the defendants agreed to sell Hope Natural Gas Company the gas produced from Lease No. 1123, but reserved the right to process the gas and extract therefrom certain components not desired by the purchaser. By act dated as of November 1, 1958, Hope contracted with Texas Gas Transmission Corporation for transportation of said gas through a pipeline to be constructed by Texas Gas. The defendants, Hope and Texas Gas, then executed a supplement to the gas purchase contract, also dated as of November 14, 1958, under which it was agreed that since it was impractical to process the gas and extract the heavier hydrocarbons at the drilling platforms in the Gulf of Mexico, the defendants could withdraw Hope's gas from the pipeline at a mutually agreeable location on the shore, extract the components therefrom and return the gas to Texas Gas' pipeline. In addition, Texas Gas agreed to transport to shore without cost to defendants the liquids that were separated from the gas by separators in the Gulf of Mexico prior to delivery of such gas to Hope.
"Under the contracts between defendants, Hope and Texas Gas, Title to the gas purchased passes to Hope at the production platforms on the lease. However, distillate is separated from the gas prior to said delivery, and title thereto remains in the defendants. Defendants have not yet constructed the necessary facilities on the shore to extract the components from the gas, and as a consequence Hope receives title to said components as well as the gas at the point of delivery at the production platforms in the Gulf.
"The defendants' distillate could be transported from the wells to the shore either by reinjecting same into the gas pipeline or in a separate liquid line. However, Texas Gas elected to transport the distillate separately, and constructed a 3 inch line for this purpose and a 12 inch line to transport the gas. Both of these pipelines run from the three wells on State Lease No. 1123 and across Section 21-15-6 to a point north of the plaintiffs' property. In addition, Texas Gas Transmission Corporation has laid another 12 inch and another 3 inch line across the plaintiffs' property through which it transports gas and distillate, respectively, from other leases in the Gulf of Mexico owned by other parties.
"All of these pipelines were laid by Texas Gas on an easement which it acquired from the plaintiffs through expropriation. That suit was filed in this court on August 20, 1959, and judgment was rendered on September 22, 1959, granting Texas Gas Transmission Corporation a right-of-way and easement 150 feet in width, running from the north line of Section 21-15-6 almost due south to the shore line of the Gulf of Mexico, for the purpose of constructing thereon pipelines for the transportation of natural gas and all by-products. The plaintiffs were awarded $4,728.00 as just compensation for this servitude.
"The plaintiffs here contend that, despite the award of the servitude to Texas Gas in the expropriation proceedings, the defendants, through Hope Natural Gas Company and Texas Gas Transmission, are using the premises covered by the surface lease between B.F. Rutherford and Phillips of June 28, 1952, for the transportation of their distillate from off-shore wells A-1, B-1 and C-1 on State Lease No. 1123, and therefore plaintiffs are entitled to the annual rental of $1,250.00 for each such well as provided in said surface lease. * * *" (Tr. 289-292)
The relevant provisions of the Rutherford lease that require consideration by this Court in the disposition of the case at bar provide:
"As long as the basic portion of this lease is kept in force by any method herein provided, Second Party shall have the right, privilege and option to use the leased premises and all of the rights, privileges, easements, servitudes, installations, machinery, pipe lines, tanks, pits, roads, injection wells, and all other equipment, on the leased premises, for the handling, storage, treatment transportation, and disposal of all of the oil, gas or other minerals produced by Second Party from any well or wells with off shore surface locations in the Gulf of Mexico, whether now being drilled or hereafter drilled, and for storage and disposal of salt water produced therefrom; and shall also enjoy the right to construct, maintain, operate and use any additional equipment, machinery, tanks, pits, pipe lines, and other installations and facilities for that purpose.
* * * * * *
"In order to enjoy such rights and privileges as to production from any off shore well, Second Party shall pay or tender in advance of the use of the premises to First Party or to the credit of First Party in the depository bank hereinabove named, in the same manner as is provided for the payment of the rentals set forth in this lease, the amount and sum of $1250.00, which payment shall entitle Second Party to the rights herein granted for one off shore well for one year from such payment. And Second Party shall have the same rights for the full period of one year from the date of payment as to any additional off shore well or wells upon making a similar payment in advance of the use of the premises for each such well. * * *" (Tr. 49-50.)
Learned counsel for the plaintiffs contends that nothing is said in the contract about who owns the pipeline being used, how the owner of the pipeline acquired the right to lay the line on the premises, who built the line, or who operated or maintains it. Furthermore, it is argued that since the Texas Gas expropriation could not divest from Phillips the right to use pipelines on the premises, Phillips still has this right and therefore Rutherford must necessarily still have the right to collect the rent. With these contentions we cannot agree.
[1-3] A condemnation proceeding is a proceeding in rem. It is not a taking of rights of persons in the ordinary sense but an appropriation of the land or property itself. When the property is conveyed by judgment, all previous existing estates or interests in the land are extinguished. A. W. Duckett Co., Inc. v. United States, 266 U.S. 149, 45 S.Ct. 38, 69 L.Ed. 216; United States v. Dunnington, 146 U.S. 338, 13 S.Ct. 79, 36 L.Ed. 996; United States v. Certain Lands in Borough of Brooklyn, 2 Cir., 129 F.2d 577. Accordingly it seems clear that Phillips' rights under the Rutherford lease could not extend to the easement and right-of-way conveyed to Texas Gas by virtue of the expropriation.
[4-6] It is elementary under our jurisprudence that in the construction of contracts a court must, if possible, ascertain and give effect to the mutual intention of the parties. LSA-C.C. art. 1950; Cooley v. Meridian Lumber Co., 195 La. 631, 197 So. 255; Hunt Trust v. Crowell Land Mineral Corp., 210 La. 945, 28 So.2d 669. Also well settled is the rule that in construing the terms of an agreement, the fact that informed and experienced persons do not customarily bind themselves to unjust and unreasonable obligations must be considered. Oil Field Supply Scrap Material Co. v. Gifford Hill Co., 204 La. 929, 16 So.2d 483. Under the provisions of the lease in question Phillips Petroleum Company was granted the right to use pipelines which ran across the lands of the plaintiff upon its payment of certain rentals. Certainly it must be presumed that the parties intended that the right of use be in existence at the time use was desired by the defendants. Indeed we find it inconceivable that Phillips would have agreed to pay a considerable sum of money for a right which plaintiffs' ancestor in title could not possibly convey. As previously concluded the easement and right-of-way which Texas Gas obtained by expropriation was not burdened by any rights conveyed by the Rutherford-Phillips lease. Thus if we adopt the contention set forth by the plaintiffs herein we must conclude that the defendant agreed to pay valuable consideration for a right that does not exist, since it was extinguished by the expropriation judgment.
In addition, the lease provides for the payment of rent upon the exercise by Phillips of the right to use pipelines on the plaintiffs' property. In the case at bar Hope Natural Gas Company contracted with Texas Gas for the transportation of the production from the defendants' wells as well as the production of others from other wells in the area. Texas Gas is acting in its own behalf in its business as a common carrier in transporting Hope's gas and the defendants' distillate through its pipelines located on its own easement and right-of-way on the plaintiffs' property. All of the products are being transported by it for the single consideration paid by Hope Natural Gas Company. Thus the defendants are not using any pipelines located on the plaintiffs' property.
We therefore conclude that the defendants are not using pipelines located on the plaintiffs' property, within the meaning of the terms of the surface lease and therefore are not liable for any rent in this regard.
For the reasons assigned, it is ordered that the judgment appealed from is affirmed; the plaintiffs to pay all costs of this appeal.
Affirmed.
On Application for Rehearing.
En Banc. Rehearing denied.