AMY, Judge.
The plaintiffs filed suit, seeking payment of overriding royalty interests they assert were owed on three subject oil wells. The defendants, the well operator and a partial working interest and net revenue interest owner, rejected the plaintiffs' demand, citing a defense under the public records doctrine. On cross motions for summary judgment, the trial court ruled in favor of the plaintiffs, finding the public records doctrine inapplicable in this case. Instead, it found that the plaintiffs' overriding royalty interests were created from a retained leasehold interest which was, in fact, commemorated in the public records. The defendants appeal. For the following reasons, we affirm.
The plaintiffs, Joseph B. Freeman, Jr., Mabel T. Freeman, John T. Block, and Sally G. Block, allege that Kurios Oil & Gas, LLC assigned overriding royalty interests in three oil wells to each of them by virtue of December 2008 assignments. The Assignments of Overriding Royalty
By a March 1, 2010 Assignment and Bill of Sale, Kurios conveyed to Block "T" Operating, LLC, a 20% working interest and a 14% net revenue interest in the Thibodeaux No. 1 Well and a 20% working interest and a 14% net revenue interest in the Domingue No. 1 Well. Additionally, Kurios assigned to Block "T" Operating a 45.9294% working interest and a 31.623975% net revenue interest in the Victory Financial No. 1 Well. The assignments and bills of sale were recorded in their respective parishes on March 3, 2010. Various other parties also received working interests in the subject wells by those assignments.
Beginning in October 2010, Block "T" Operating assumed payment of the plaintiffs' overriding royalty interests. It distributed those payments until April 2011. In July 2011, the assignments of overriding royalty interests to the plaintiffs (and others) were recorded in the public records. Thereafter, the plaintiffs made demand on Block "T" Operating for the royalties pursuant to La.R.S. 31:212.21,
Thereafter, the plaintiffs filed this matter, naming Block "T" Operating and
The defendants responded to the petition with an exception of nonjoinder of a party. They alleged that the overriding royalty interests claimed by the plaintiffs arise from the working interests of the wells' lessees. Block "T" Operating noted that it is only one such working interest owner and that any ruling would affect all of the working interest owners. It asserted that payment of an overriding royalty would decrease the working interest of each of the working interest owners, and, therefore, the plaintiffs' claimed relief could not be accorded without the inclusion of all of the owners. The plaintiffs opposed the exception, denying the existence of a dispute that would require the joinder of all working interest owners. Rather, the plaintiffs argued that the public records verified its contention that they were owed an overriding royalty interest, that the working interest owners' participations were similarly fixed in the public record, and that Block "T" Operating was the appropriate obligor for those royalties pursuant to La.R.S. 31:212.21, et seq. The trial court denied the exception of nonjoinder.
The plaintiffs and Block "T" Operating filed motions for summary judgment, advancing the above theories. Block "T" Petroleum also filed a motion for summary judgment asserting that it is not an obligor of the plaintiffs. Instead, Block "T" Petroleum contended that it is only the contract operator of the wells pursuant to a 2007 Operating Agreement entered into with the wells' working interest owners. Noting that the plaintiffs are not working interest owners, Block "T" Petroleum argued that it had no contractual relationship with the plaintiffs and did not have any other legal obligation to the plaintiffs as alleged.
Following a hearing on the three motions for summary judgment, the trial court granted summary judgment in favor of the plaintiffs and against Block "T" Operating. The trial court denied the motions of the defendants.
Block "T" Operating and Block "T" Petroleum appeal and present the following issues for review in their brief to this court:
Largely, this appeal addresses the trial court's rulings on three motions for summary judgment. Accordingly, we begin our consideration of those matters in reference to La.Code Civ.P. art. 966(B)(2), which provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions, together with the affidavits, if any, show that there is no genuine issue of material fact, and that mover is entitled to judgment as a matter of law." As for the burden of proof on the motion, Article 966(C)(2) indicates that:
On appeal, an appellate court reviews a summary judgment de novo using the same criteria that governed the trial court's consideration of whether summary judgment is appropriate. Louisiana Safety Ass'n of Timbermen-Self Insurers Fund v. Louisiana Ins. Guar. Ass'n, 09-0023 (La.6/26/09), 17 So.3d 350.
The defendants' argument in opposition to the plaintiffs' motion for summary judgment and in support of the Block "T" Operating motion for summary judgment rests upon the public records doctrine. In this regard, Louisiana Civil Code Article 3338 provides:
In Cimarex Energy Co. v. Mauboules, 09-1170, pp. 19-20 (La.4/9/10), 40 So.3d 931, 944, the Louisiana Supreme Court noted that La.Civ.Code art. 3338 now generally sets forth the public records doctrine, and explained that the "doctrine has been described as a negative doctrine because it does not create rights, but, rather, denies the effect of certain rights unless they are recorded." It further stated that:
Id. (Citations omitted.)
In support of their argument, the defendants point out that the assignments of overriding royalty interests were confected between Kurios and the plaintiffs. The resulting assignments were not recorded in the public records until after Kurios transferred certain working interests and net revenue interests to various parties. Thus, the defendants contend, La.Civ.Code art. 3338 indicates that the overriding royalty interests are without effect to them, insofar as they are third parties. However, this argument wrongfully places the focus of this case on Block "T" Operating's role as an interest owner in the wells at issue.
Review of the plaintiffs' petition, their submission in support of their motion for summary judgment, and the hearing transcript reveals that this case is one directed to Block "T" Operating in its role as the party who distributes the revenues from wells. Block "T" Operating's role as one of the working interest and net revenue interest owners is largely relevant to its own motion for summary judgment, discussed below.
With regard to their motion for summary judgment, the plaintiffs submitted the various assignments at issue in this case, including the assignments of overriding royalty interests, the assignments of oil, gas and mineral leases to various leaseholders, and assignments and bills of sale executed between Kurios and Block "T" Operating. It is unquestioned that the assignment of overriding royalty interests were not recorded in the public records until after Block "T" Operating acquired its ownership interest. However, the recorded documents indicate that the net revenue interest owners received only a portion of the leasehold interest of each well. The retained leasehold, the assignments demonstrate, was sufficient so as to create the overriding royalty interest in the percentages claimed by the plaintiffs. The trial court recognized the retention of a sufficient leasehold by the plaintiffs so as to create the overriding royalty interests, and we do not find error in that recognition in light of the percentages assigned to the working interest owners.
Finally, we find no merit in Block "T" Operating's argument that the trial court erred in denying its own motion for summary judgment. As stated above, Block "T" Operating's argument is premised on the application of the public records doctrine and focuses on the recording date of the overriding royalty interests. However, as recognized by the trial court, the percentage of interests received by Block "T" Operating, in its capacity as an owner of the working interest and net revenue interest, is fixed by the various assignments at issue. Despite its assertion, there is no indication that payment of the plaintiffs' overriding royalty interest affects the percentage of net revenue interest ultimately received by Block "T" Operating which is, in fact, commemorated by the public records.
Accordingly, we find no merit in the defendants' contention that the trial court erred in granting the motion for summary judgment filed by the plaintiffs and in denying that filed by Block "T" Operating.
Block "T" Operating also questions the trial court's denial of its exception of nonjoinder of a party. In its motion, Block "T" Operating observed that it is only one of multiple working interest owners in the wells and attendant leases. As the overriding royalty claim burdens all of the working interest claims, Block "T" Operating claims, all working interest owners must be made party to the suit.
Louisiana Code of Civil Procedure Article 641 provides that:
In the event an adjudication is made without making a person described in La.Code Civ.P. art. 641 a party, the judgment is an absolute nullity. Avoyelles Parish Sch. Bd. v. Bordelon, 11-126 (La.App. 3 Cir. 10/5/11), 77 So.3d 985 (quoting Stephenson v. Nations Credit Fin. Servs. Corp., 98-1688 (La.App. 1 Cir. 9/24/99), 754 So.2d 1011).
On review, we do not disturb the trial court's denial of the exception of nonjoinder. We first point out that the plaintiffs' suit was not directed to Block "T" Operating in its capacity as a working interest owner, although it held this status as well. Rather, the action, and resulting judgment, was directed to Block "T" Operating as the party responsible for properly distributing the revenues from the well, as
This argument lacks merit.
Finally, Block "T" Petroleum contests the trial court's denial of its motion for summary judgment. It further notes that, in reasons for ruling, the trial court stated that "Block "T" Petroleum has an obligation, as the contract operator, to account for and pay for production from the well to the rightful owners." Block "T" Petroleum objects to such a determination, pointing out that any duties it owes are to the working interest owners. Insofar as the plaintiffs are not working interest owners and allege only that they are overriding royalty interest owners, Block "T" Petroleum argues, it has no legal or contractual obligations to the plaintiffs. Thus, Block "T" Petroleum asserts that the trial court erred in failing to grant its motion for summary judgment.
In discussion of this aspect of the defendants' appeal, we first point out that a trial court's reasons for ruling form no part of the judgment and are not reviewed by an appellate court. Wooley v. Lucksinger, 09-0571 (La.4/1/11), 61 So.3d 507. Instead, appeals are taken from a judgment only. Id.
Additionally, consideration of the complained of statement within a larger context is helpful for discussion purposes. First, the trial court's judgment did not impose duties or obligations on Block "T" Petroleum. Rather, and although the judgment denied the defendant's motion for summary judgment, the judgment entered ordered only Block "T" Operating to take any action. Second, the context of the complained of statement in the reasons for ruling confirms that the focus of the trial court's ruling was only Block "T" Operating. The trial court stated, in part:
While the trial court references Block "T" Petroleum within the parenthetical comment, it included no similar determination within the judgment. Again, it is the judgment that is on appeal and reviewed,
Finally, and with regard to Block "T" Petroleum's contention that the trial court erred in denying its motion for summary judgment, we find no merit in this claim. Certainly, Block "T" Petroleum's submission in support of its motion indicates that it is the contract operator of the well. Also, the president of Block "T" Petroleum states in his affidavit that the corporation owns no interest in the leases covering the wells. However, beyond those statements and the excerpt from an operating agreement entered into evidence, the relationship between Block "T" Petroleum and Block "T" Operating is ill-defined in the record. Accordingly, we find the trial court acted appropriately in rejecting Block "T" Petroleum's motion for summary judgment.
This argument lacks merit.
For the foregoing reasons, the judgment entered by the trial court is affirmed. All costs of this proceeding are assessed to the appellants, Block "T" Operating, LLC and Block "T" Petroleum, Inc.
SAUNDERS, J., dissents and assigns written reasons.
SAUNDERS, J., dissents and assigns written reasons.
In my view, the pivotal issue before us is whether plaintiffs overriding royalty interests burdened Block "T" Operating's interests. Plaintiffs point to no evidence in the record that proves that their interests are mutually exclusive from those of Block "T" Operating.
Clearly, an issue of fact exists as to the effect of paying plaintiffs' overriding royalty interests. Whether plaintiffs' overriding royalty interests burden Block "T" Operating's or any working interest holder's interest is determinate of whether the public records doctrine is applicable. If plaintiffs' interests have no effect on Block "T" Operating's interests, then who recorded their real right first is irrelevant. Conversely, if plaintiffs' overriding royalty interests affect Block "T" Operating's interests, then who recorded their real right first is dispositive between them.
As such, I would find that a material fact exists on this issue and reverse the trial court's grant of plaintiffs' motion for summary judgment. Further, I would order that all entities having a working interest in the wells be joined in the litigation.
