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Midstates Petroleum, LLC v. State Mineral & Energy Board

Court of Appeals of Louisiana, Third Circuit

April 15, 2015

MIDSTATES PETROLEUM, LLC
v.
STATE MINERAL AND ENERGY BOARD OF THE STATE OF LOUISIANA, ALVIN & LOUISE ALBRITTON MEMORIAL FUND, LLC, AND ASA PROPERTIES, LP

APPEAL FROM THE THIRTY-SIXTH JUDICIAL DISTRICT COURT PARISH OF BEAUREGARD, DOCKET NO. C-2012-1108-B HONORABLE C. KERRY ANDERSON, DISTRICT JUDGE

James D. "Buddy" Caldwell, Attorney General Ryan M. Seidemann, Assistant Attorney General Stephen B. Jones, Assistant Attorney General Megan K. Terrell, Assistant Attorney General Ethel S. Graham, Assistant Attorney General, ATTORNEYS FOR PLAINTIFF/APPELLANT State Mineral and Energy Board of the State of Louisiana

Jamie Manuel Mayhall Fondren Blaize, ATTORNEY FOR DEFENDANTS/APPELLEES ASA Properties, L.P., Alvin and Louis Albritton Memorial Fund, L.L.C.

Court composed of Sylvia R. Cooks, Shannon J. Gremillion and David Kent Savoie, Judges.

SYLVIA R. COOKS JUDGE

This appeal involves the title to minerals underlying a forty-acre tract of immovable property located in Beauregard Parish. Appellant in this matter argues the trial court erred in granting appellees' motion for summary judgment finding appellees were the legal owners of the minerals underlying the subject property. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

The underlying facts in this case are not in dispute. In 1858, the State of Louisiana sold a piece of land to John Laidlaw. The State later determined it did not own just title to the land sold to Laidlaw, as the property had previously been sold by the federal government. All parties agree the original sale was for both the land and the minerals underlying the property. In 1888, the State of Louisiana passed Act 104 of 1888, which allowed the State to keep money from the sale of property it did not own and in its place issue a land or lieu warrant. Upon presentation of this lieu warrant at a future date, suitable land would be found to satisfy the previous erroneous sale.

On August 28, 1919, Warrant No. 188 was issued by the State under Act 104 of 1888 to John Laidlaw. The heirs of John Laidlaw assigned their rights under the lieu warrant to Alvin R. Albritton. In 1943, Albritton applied for a patent to satisfy the rights acquired under the lieu warrant. The State Land Office then issued Patent No. 13651 in 1944 to Albritton. However, in the intervening years (after Warrant No. 188 was issued in 1919, but before Patent No. 13651 in 1943) the State passed the 1921 Constitution, which in Section 2, Article 4, contained a prohibition against the sale of mineral rights by the State, providing in pertinent part:

In all cases the mineral rights on any and all property sold by the State shall be reserved, except where the owner or other person having the right to redeem may buy or redeem property sold or adjudicated to the State for taxes.

The State argued any land transferred subsequent to the passage of the 1921 Constitution would be subject to the constitutionally imposed mineral reservation. Thus, the State contends the land acquired by Warrant No. 188 and Patent No. 13651 is subject to the above mineral rights reservation and the ancestors to Alvin Albritton did not, and could not, obtain the mineral rights on the property acquired from the State subsequent to the passage of the 1921 Constitution's prohibition against the sale of mineral rights.

In 2011, the ancestors in title to Alvin Albritton, ASA Properties, L.P., the Alvin & Louise Albritton Memorial Fund, L.L.C., and the Alvin & Louise Albritton Memorial Fund II, L.L.C. (hereafter "the Albrittons"), claiming to be an owner of the undivided interest in and to the minerals in and under the property in question acquired by Warrant No. 188, granted an Oil, Gas and Mineral Lease to MidStates Petroleum Company. However, in August 2012, also claiming to be the owner of the minerals in and under the same land, the State Mineral and Energy Board of the State of Louisiana (hereafter "the State") entered into an operating agreement with MidStates. In late 2011, MidStates drilled a well, which began producing oil and gas on the subject property. Given the confusion over the ownership of the minerals on the property, on December 18, 2012, MidStates filed a Petition for Concursus and deposited all proceeds earned up to that point into the registry of the court.

The present matter came before the trial court on a Motion for Summary Judgment filed June 17, 2013 on behalf of the State, asserting it should be declared the owner of 100% of the oil, gas and mineral rights situated in, on, or under the subject property. The Albrittons filed a cross Motion for Summary Judgment, contending they should be declared owners of the minerals underlying the subject property. The parties filed memoranda in support of their respective positions and a hearing was held. The trial court rendered judgment denying the State's motion for summary judgment and granting the Albritton's motion, providing the following written reasons for judgment:

The court finds in this instant matter, an obligation was created between the State of Louisiana and the Albritton's ancestor in title, John Laidlaw, in 1858 when the State sold him a tract of land, but could not transfer title. It is uncontested that the mineral rights to said property would have transferred with the surface had the State held title to the property involved in the original sale, so there is no evidence of a reservation made by the State in said sale. Act 104 of 1888 ratified this sale and acted as an acknowledgment of the obligation that existed between the State and John Laidlaw. The act allowed the Albrittons to be issued a lieu warrant in place of the tract of land erroneously sold by the State. Once the lieu warrant was applied for, an obligation was created for the State to issue property "of the same class as that originally entered under" in its place.
The State obligated itself to transfer a tract of land with minerals in lieu of returning money it had taken in a sale of land it did not own. The court agrees with the decision in Douglas [v. State, 23 So.2d 279 (La. 1945)] that property rights in a particularized piece of property vested only upon presentment of the lieu warrant; however an obligation or a contractual right to transfer a not-yet-identified tract of property with minerals existed in 1919 on the date the Albrittons were issued a lieu warrant. Because this obligation existed before the 1921 mineral sale prohibition, the prohibition could not impair this existing obligation.
Louisiana is a civilian state. La.[Civ.Code] Art. 3. Accordingly, this court is not bound by the decision of the Louisiana 2nd circuit Court of Appeal in [Justiss Oil Co., Inc. v. Louisiana State Mineral Bd., 45, 212 (La.App. 2 Cir. 4/14/10), 34 So.3d 507, writ denied, 10-1066 (La. 9/17/10), 45 So.3d 1044]. While this court has thoroughly reviewed and considered the 2nd Circuit's decision in Justiss, it ultimately finds that the Louisiana Supreme Court decision in [Stat ...

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