Louisiana Third Circuit Confirms Settled Application of Subsequent Purchaser Doctrine Where Expired Mineral Leases at Issue

Liskow & Lewis

As it “is impossible to transfer rights to an assignee under an expired mineral lease,” in a case where oil, gas and mineral leases had expired prior to plaintiff’s acquisition of the property, the Louisiana Third Circuit Court of Appeal in Litel Explorations, L.L.C. v. Aegis Development Company, L.L.C., et al. affirmed dismissal of claims pursuant to the subsequent purchaser doctrine, which provides that the right to sue for property damage is a personal right that belongs to the landowner who owned the property at the time the damage occurred, unless the right has been explicitly assigned or subrogated to the subsequent purchaser of the land.

Litel was a “legacy” lawsuit brought by a Jefferson Davis Parish landowner for alleged property contamination against defendant oil and gas companies, including Mobil Oil Exploration & Production Southeast, Inc. (“MOEPSI”), Apache Corporation (“Apache”), and BP America Production Company (“BP”).   Because their operations had ended and various oil, gas and mineral leases covering the property terminated prior to plaintiff taking ownership of the property, defendants MOEPSI, Apache, and BP filed motions for partial summary judgment on the issues of lease termination and plaintiff’s right to enforce obligations under the various expired leases.   The trial court granted the motions for partial summary judgment, although the judgments were not certified as final under La. C.C.P. art. 1915(B)(1).

Plaintiff thus filed an application for supervisory writs with the Louisiana Third Circuit, which MOEPSI, Apache, and BP all opposed.  On application for supervisory writs, The Louisiana Third Circuit first grappled with whether it should consider the merits of the writ application at all, since ordinarily writ applications involving the granting of partial summary judgments under article 1915(B) are “routinely denied.”  The Court recognized, however, that if the matter proceeded to trial without review of the partial summary judgments that affected the scope of the claims to be tried, a second trial could be necessary if the judgments were reversed on appeal.  The Third Circuit thus proceeded to consider the merits of the application to avoid judicial inefficiencies and appeal delays.

On the merits, although Litel stipulated that all oil, gas, and mineral leases at issue terminated prior to its taking ownership of the property, it argued that, even as a surface owner who did not possess mineral rights, it still had the right to seek restoration under the personal servitude articles of the Louisiana Civil Code.   Defendants countered that, under the subsequent purchaser doctrine, Litel had no right to recover damages from third parties such as defendants because there was no assignment or subrogation and the mineral leases expired prior to Litel taking ownership.  While Litel claimed that there was a conflict between the Third (as reflected in Grace Ranch, LLC v. BP Am. Prod. Co., 17-1144 (La. App. 3 Cir. 7/18/18), 252 So.3d 546) and Second Circuits (as reflected in Walton v Exxon Mobil Corp., 49,569 (La. App. 2 Cir. 2/26/15), 162 So.3d 490) on the application of the subsequent purchaser doctrine, the Third Circuit found no conflict.  The Court recognized that the Walton case dismissed all claims except those that involved existing mineral servitudes and leases. The Walton court, however, affirmed the dismissal of all claims seeking to enforce obligations under mineral leases that terminated prior to plaintiffs’ purchase of the property and for which there was no valid assignment, like the trial court did in Litel.   Finding no conflict, the Third Circuit therefore quickly dismissed plaintiff’s argument, holding that, as Third Circuit precedent applies the subsequent purchaser doctrine to mineral leases and states it is “impossible to transfer rights to an assigned under an expired mineral leases” such as the ones at issue in the writ application, the trial court did not err in granting the motions for partial summary  judgment.

Curiously, the Third Circuit did not “grant” the writ application and issue an opinion – noting instead that the writ was denied.   However, it is clear that the Third Circuit reviewed the merits of the trial court decision and affirmed.

A copy of the Third Circuit’s decision can be found here

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