247 So. 3d 147
La. Ct. App.2018Background
- J & L (successor to Imperial) holds a 1951 oil, gas, and mineral lease (1951 Lease) on a 55-acre tract (Feist Land) containing an Article 6 "Pugh"-type clause requiring five wells drilled within tight timeframes and that all five remain producers in paying quantities to hold the entire lease; otherwise only 5-acre squares around producing wells remain held.
- KM (2008 lease, amended 2009) and assignees (Haymary, Big M) drilled and perforated wells in the 2,000–2,500 ft interval; two KM wells produced in paying quantities and overlapped the 5-acre squares claimed around certain J & L wells.
- J & L sued to nullify the 2008 lease/2009 extension as to 2,000–2,500 ft, claiming the 1951 Lease was held by production of the required five wells; both sides moved for summary judgment.
- J & L relied chiefly on two affidavits from Jerry Don Courtney (attesting historic continuous production into the 1970s) and a 1977 OGML acknowledgment; Defendants produced conservation office well records and an affidavit showing gaps in production and that some J & L wells were plugged or nonproducing.
- The district court denied J & L’s MSJ and granted Defendants’ MSJ, finding J & L failed to present prima facie proof the Pugh clause was satisfied (i.e., continuous paying production of the five wells), and that defendants showed absence of requisite factual support.
- On appeal the court applied de novo review and affirmed: the Article 6 language is clear/operative as a resolutory condition and J & L did not show continuous production since 1951, so defendants were entitled to judgment as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 1951 Lease’s Pugh clause was satisfied so the entire 55 acres remain held by production | Courtney affidavits and 1977 OGML show the required five wells were drilled and producing (continuous production preserves entire lease) | Records and affidavit show lack of continuous paying production; some J & L wells are plugged/nonproducing so Pugh clause was triggered and only 5-acre squares remain | Held for Defendants — J & L failed to produce prima facie evidence of continuous production; Pugh clause not satisfied to hold entire lease |
| Whether a genuine issue of material fact exists precluding summary judgment | J & L: affidavits, 1977 OGML, and alleged acknowledgments create triable factual disputes | Defs: conservation records and affidavits show absence of requisite continuous production; burden shifted to J & L to produce evidence and it did not | Held for Defendants — no genuine issue; J & L did not meet evidentiary burden to survive MSJ |
| Interpretation of Article 6 (ambiguity / parties’ intent) | J & L argues multiple reasonable interpretations exist and intent must be considered | Defs: Article 6 is clear and unambiguous; last sentence prevents reading that any five wells (not necessarily the initial five remaining) hold entire lease | Held: Article 6 is clear; court enforces the clause as written; it operates as a resolutory condition triggered when required wells cease producing in paying quantities |
| Admissibility/weight of evidence (Courtney affidavit vs. official records) | Courtney affidavits are competent to show production; 1977 OGML acknowledgement supports ongoing production | Defs: Official conservation records and McCormick affidavit rebut continuous production; J & L’s affidavit lacks detail (dates, continuous paying quantities) to meet burden | Held: Courtney affidavit insufficient as prima facie proof of continuous production; defendants’ evidence established absence of factual support |
Key Cases Cited
- Maloney v. Oak Builders, 235 So.2d 386 (La. 1970) (clear contract language must be enforced; no search for intent when no ambiguity)
- Justiss Oil Co., Inc. v. Monroe Air Ctr., L.L.C., 46 So.3d 725 (La. App. 2 Cir.) (definition of a genuine issue of material fact)
- Creek Mgmt., L.L.C. v. Unopened Succession & Unknown Heirs or Legatees of Williams, 223 So.3d 1194 (La. App. 2 Cir.) (de novo review on summary judgment)
- Barfield v. Diamond Constr. Inc., 217 So.3d 1211 (La. App. 2 Cir.) (materiality of facts and summary judgment principles)