Gloria's Ranch, L.L.C. v. Tauren Exploration, Inc., Cubic Energy, Inc., Wells Fargo Energy Capital, Inc., and Exco USA Asset, Inc.
252 So. 3d 431
La.2018Background
- Gloria's Ranch granted a 2004 mineral lease to Tauren covering ~1,390 acres; lease continued while production existed in paying quantities.
- Tauren transferred 49% working interest to Cubic; Cubic mortgaged its interests to Wells Fargo as loan collateral; Wells Fargo received security interests, overriding royalty and net profits interests; Tauren later conveyed Deep Rights to EXCO.
- Gloria's Ranch demanded a recordable instrument evidencing lease expiration in Jan. 2010, asserting the lease had ceased producing in paying quantities; defendants did not release the lease.
- Trial court found the lease expired (no paying production), awarded lost-leasing damages and unpaid royalties, and held Tauren, Cubic, and Wells Fargo solidarily liable; EXCO settled and was dismissed.
- Court of appeal affirmed and awarded $125,000 appellate attorney fees; the Louisiana Supreme Court granted writs to resolve ownership/mortgagee liability, divisibility of obligations, interpretation of La. Mineral Code art. 140 damages, and appellate fee amount.
Issues
| Issue | Gloria's Ranch (Plaintiff) Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether Wells Fargo (mortgagee) is an “owner” under La. Mineral Code art. 207 and thus solidarily liable for failing to furnish a release | Wells Fargo exercised control and held overriding royalty/net-profits, so it effectively owned the lease and is liable | Wells Fargo was only a secured creditor; mortgage/credit provisions are security rights, not an assignment or ownership | Reversed as to Wells Fargo — mortgagee was not an owner; security rights do not create owner liability |
| Whether the obligation to furnish a recordable release is divisible among lessees after horizontal/depth conveyance | Plaintiff: all lessees liable for whole damages because release is indivisible and one unreleased interest blocks re-leasing | Tauren: after conveying Deep Rights, obligations should be allocated by depth; liability should be proportionate | Affirmed as to Tauren — obligation to release was indivisible under facts; Tauren solidarily liable |
| Proper measure under La. Mineral Code art. 140 for unpaid royalties (double as maximum or royalties plus double penalty) | Gloria's Ranch: court may award unpaid royalties plus an additional double-royalty penalty (treble total) | Tauren: statute authorizes at most double the unpaid royalties (not royalties + double penalty) | Amend: art. 140 authorizes a maximum award equal to double the unpaid royalties (not treble) |
| Whether $125,000 appellate attorney fee award was excessive and attributable to defending Wells Fargo | Plaintiff sought appellate fees including defense against Wells Fargo; argued fees justified by complexity | Defendants (Cubic) argued award excessive and partly for defending Wells Fargo, which should not have been liable | Reduced appellate fee award from $125,000 to $50,000 because Wells Fargo liability reversed and part of appellate work related to Wells Fargo |
Key Cases Cited
- Roberson v. Pioneer Gas Co., 137 So. 46 (La. 1931) (assignment transfers entire interest; mortgagor retaining working interest means no assignment to mortgagee)
- M.J. Farms, Ltd. v. Exxon Mobil Corp., 998 So.2d 16 (La. 2008) (principles of statutory interpretation and legislative intent)
- Frith v. Riverwood Inc., 892 So.2d 7 (La. 2005) (availability of appellate attorney fees when trial award exists and appellant unsuccessfully defends appeal)
- Nassif v. Sunrise Homes, Inc., 739 So.2d 183 (La. 1999) (remedies between contracting parties and third-party relations; contractual recourse among debtor and lender)
- Cimarex Energy Co. v. Mauboules, 40 So.3d 931 (La. 2010) (discussion on interpretation of Mineral Code damages provisions)
- Dixie Roofing Co. of Pineville, Inc. v. Allen Parish Sch. Bd., 690 So.2d 49 (La. App. 3 Cir. 1996) (measure of damages to put plaintiff in position as if obligation performed)