Coyle v. North American Oil Consolidated , 201 La. 99 ( 1942 )

A rehearing was granted in this case on the application of the plaintiffs and the application of the defendants. Both, the plaintiffs and the defendants, applied for a rehearing solely and only as to that part of our decree relating to the plaintiffs' alternative demand, seeking to have the leases canceled insofar as the Travis Peak sand or stratum is concerned on the ground that the defendants have abandoned this sand or stratum. The plaintiffs and defendants have raised no complaint as to our holding herein in other respects. In fact, all the parties to this suit concede that the holding is correct except as to the alternative demand. All the parties to this suit contend that there is no necessity for the remanding of the case for the purpose of making those who have acquired interests in the leases as a result of the unitizing and pooling agreements involved herein parties to this suit. After the rehearing was applied for the various parties who had acquired interests in the leases, as a result of the unitizing and pooling agreements, appeared herein by way of answer to the appeal, urging this court to pass on the alternative demand. The plaintiffs have objected to this answer on the ground that they are not necessary parties to the suit. Under the circumstances, we granted a rehearing in this case in order that the alternative demand might be considered. The matter has been submitted, on rehearing, for our determination.

The plaintiffs contend that the lessees' failure and refusal to develop the Travis Peak sand or stratum operated as an abandonment, and that the leases should be canceled insofar as this sand or stratum is concerned. They argue that inasmuch as it is shown from the tests made in the two wells drilled by the defendants that the Travis Peak sand or stratum would not produce oil on this property, that the actions of the defendants in making no other effort to produce oil from this sand or stratum amounted to an abandonment of it.

The position taken by the plaintiffs is predicated on the ground that when there are two or more separate or distinct strata of oil bearing sands in lands, each should be considered a separate and distinct oil field. While we did not pass on this question on the original hearing of the appeal, yet we stated in the opinion handed down by us that the respective litigants conceded that the Travis Peak stratum and the Lower Marine stratum were separate fields. The defendants have taken exception to this statement and have strenuously argued that it was never their intention to convey to this court the idea that they in any way concede that the different levels of production constitute separate and distinct oil fields. They contend that it is only one oil field, irrespective of the level from which the oil is produced.

We have to look to the leases to ascertain just what the intentions of the parties were in this respect.

The rule is well established that mineral leases must be construed as leases, and that the codal provisions applicable to ordinary leases must be applied. Tyson v. Surf Oil Co.,195 La. 248, 196 So. 336.

"The duration and the conditions of leases are generally regulated by contract, or by mutual consent." Article 2684, Revised Civil Code.

"Agreements legally entered into have the effect of laws on those who have formed them." Article 1901, Revised Civil Code.

Under the provisions of Article 1945 of the Revised Civil Code, dealing with the interpretation of contracts, legal effect must be given to the contract according to the intent of the parties, and the intent is to be determined by the words of the contract, when these are clear and lead to no absurd consequences.

"When the intent of the parties is evident and lawful, neither equity nor usage can be resorted to, in order to enlarge or restrain that intent, nor can any law operate to that effect, unless it be some prohibition or other provision, which the parties had no right to modify or renounce." Article 1963, Revised Civil Code.

Under the terms of the leases involved herein, the defendants were granted the exclusive right of investigating, exploring, prospecting, and drilling for and producing oil, gas, and other minerals on these lands. The leases contain a stipulation to the effect that in case oil, distillate or gas is discovered or produced within the primary term of the leases, if they have been kept in effect, then the leases shall remain in force and effect so long as any one of those commodities is produced.

Under the plain and unequivocal terms of the lease contracts, the leases are to remain in full force and effect as long as oil is produced. Oil is now being produced in paying quantities under the leases from the Lower Marine stratum. There is no language used in the lease contracts to indicate that it was ever intended that different strata or levels were to be considered separate oil fields. Undoubtedly these lease contracts contemplate that they shall remain in force and effect as long as oil is produced from the lands, irrespective from what level or stratum it is found. If it had been otherwise, some provision to that effect would have been written in the contracts. Moreover, there is no evidence in this record going to show that the defendants ever had any intention of abandoning the Travis Peak stratum. The mere fact that the defendants drilled through the Travis Peak stratum, where no oil was found, to the Lower Marine stratum in order to find oil would not indicate any intention on their part to abandon the Travis Peak stratum. The defendants have complied with their lease contracts by producing oil on the lands from the level or stratum where the oil was found. Under the plain terms of their contracts, nothing more could be required of them.

For the reasons assigned, our original decree is amended by striking out that part of it which sets the judgment aside insofar as the issue of abandonment is concerned and ordering the case to be remanded to cite and serve, according to law, all parties who had acquired interests in the leases as a result of the pooling agreements. The judgment is further amended by rejecting the plaintiffs' alternative demand of abandonment. As thus amended, the judgment is affirmed at appellants' cost.