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Sapphire Land Co., L.L.C. v. Chesapeake La., L.P.

Court of Appeals of Louisiana, Second Circuit

May 20, 2015

SAPPHIRE LAND COMPANY, L.L.C., Plaintiff-Appellant
v.
CHESAPEAKE LOUISIANA, L.P., ET AL, Defendant-Appellee

Page 123

Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana. Trial Court No. 547511. Honorable Scott J. Crichton, Judge.

DAVID M. TOUCHSTONE, Counsel for Appellant.

MICHAEL B. DONALD, Counsel for Appellee, Chesapeake Louisiana, L.P. and Chesapeake Operating, Inc.

HENRY M. BERNSTEIN, DONNA Y. FRAZIER, Counsel for Appellee, Parish of Caddo.

Before WILLIAMS, MOORE and LOLLEY, JJ.

OPINION

Page 124

[49,712 La.App. 2 Cir. 1] WILLIAMS, J.

 Plaintiff, Sapphire Land Company, LLC, appeals a trial court judgment in favor of defendants, the Parish of Caddo, Chesapeake Louisiana, L.P. and Chesapeake Operating, Inc. The trial court found that the tax collector complied with all notice requirements; therefore, the tax adjudications were valid. The court also found that any interest plaintiff may have acquired in the property in question is subject to defendants' recorded lease. For the following reasons, we affirm.

FACTS

The property in question consists of approximately two acres of land located in Caddo Parish. It is described as Lot 7 of Golden Place Subdivision and is situated within the Haynesville Shale, an area known for extensive oil and gas exploration.

On April 3, 1986, James William Ebey purchased the property from Preferred Properties of Shreveport, Inc. (" Preferred Properties" ).[1] The credit sale deed was recorded in the Caddo Parish Conveyance Records on April 14, 1986. Thereafter, the 1986 taxes due on the property were not paid. Consequently, the Caddo Parish Sheriff and Ex-Officio Tax Collector for the Parish of Caddo (" tax collector" ) recorded a proces verbal, dated June 2, 1987, in which he certified as follows:

That the attached list is a true and complete list of all tax debtors owing delinquent taxes on immovable property [49,712 La.App. 2 Cir. 2] for the year of 1986.
That I have mailed certified notices, with return receipt requested, to each delinquent tax debtor on March 4, 1987 as required by R.S. 47:2180.
That the taxes for 1986 on the attached list of assessments are still due and unpaid.
***

Page 125

Preferred Properties, which owned the property in January 1986, was listed as a tax debtor.[2]

Subsequently, a tax sale was held at which the property was sold to " Smith, Bill W., husband of Dorothy W. Smith." The tax collector executed a tax deed conveying the property to Smith; this deed was recorded in the Caddo Parish conveyance records on the day of the tax sale. The deed also indicated that an announcement had been placed in the Shreveport Journal for 30 days, beginning April 1, 1987, notifying the public that the property would be offered for sale at a tax sale on May 6, 1987.

Following the sale, the tax collector sent notice to Ebey, via certified mail, return receipt requested, that the property had been sold at a tax sale. The notice also informed Ebey of his right to " redeem the property at any time within three years of the date of the recordation of the sale." The computer-generated address on the notice indicated that it was mailed to Ebey at " 708 West 70th Street" Shreveport, Louisiana, the address listed on the credit sale deed from Preferred Properties to Ebey. However, the [49,712 La.App. 2 Cir. 3] documents introduced into evidence reveal that an unidentified person handwrote " 71st" over the " 70th" in the address portion of the mailing. Robert Williams testified that he was not employed in the tax division at the time of these events; therefore, he had no personal knowledge of whether or not the notice that the property had been sold was, in fact, mailed to 708 West 70th Street or 708 West 71st Street.

The 1987 taxes were not paid. The tax collector mailed a certified notice of delinquency to James William Ebey at " 708 West 70th St. Shreveport, LA." The notice was returned undeliverable. The notice of delinquency also shows that, in the address portion of the notice, someone handwrote " Bill W. Smith" and the address listed for him in the 1987 tax deed.[3] Subsequently, the tax collector executed a proces verbal, dated June 8, 1988, in which he certified as follows:

That the attached list is a true and complete list of all tax debtors owing delinquent taxes on immovable property for the year of 1987.
That I have mailed certified notices, with return receipt requested, to each delinquent tax debtor on March 4, 1987 as required by R.S. 47:2180.
That the taxes for 1987 on the attached list of assessments are still due and unpaid.
***

James William Ebey was listed as a tax debtor, and his address was listed as " 708 West 70th Street."

Soon thereafter, the property was offered for bid at a tax sale. No bids were received at the tax sale; therefore, the property was adjudicated to [49,712 La.App. 2 Cir. 4] Caddo Parish. The certified tax adjudication deed was recorded on June 10, 1988. According to the attestation contained within the adjudication documents, the property had been advertised in the Shreveport Journal prior to the tax sale, as required by law. Additionally, Mr. Williams testified that it was

Page 126

the habit and custom of the Caddo Parish sheriff to advertise the property in the Shreveport Journal prior to a tax sale.

In October 2009, Caddo Parish, through the State Mineral and Energy Board, leased the property to Classic Petroleum, Inc. for exploration of oil, gas and other minerals. Classic Petroleum assigned its rights under the lease to defendant, Chesapeake Louisiana, LP (" Chesapeake Louisiana" ). Thereafter, the Louisiana Commissioner of Conservation created a unit known as " HA RA SUKK" for Section 31, Township 16 North, Range 15 West, Caddo Parish, Louisiana. This unit consists of 564.898 acres; Chesapeake Operating, Inc. (" Chesapeake Operating" ) was designated as operator of the unit. The property in dispute is located within this unit. In August 2009, Chesapeake Operating drilled and completed a unit well inside the unit.

In 2010, plaintiff, Sapphire Land Company, LLC, purchased the interests of the Ebey and Smith heirs by quit claim deeds; the deeds were recorded in August and September 2010.[4] The quit claim deeds stated that they were " made subject to all restrictions, right of way grants, and [49,712 La.App. 2 Cir. 5] servitudes of public record." [5] By the time plaintiff purchased its interest in the property, Caddo Parish's property rights had been recorded for nearly 22 years; the mineral lease was also recorded in the public records.

In the latter part of 2010, plaintiff paid the 1987 taxes on the property. On October 28, 2010, the tax collector issued a certificate of redemption to plaintiff for the amount of taxes, costs, penalties and interest for the year 1987.

On November 12, 2010, plaintiff sent to Chesapeake Operating and Chesapeake Louisiana letters in which it claimed to be an " unleased owner" of the property. Plaintiff also demanded that the property be partially released from the mineral lease and that it be sent certain accounting reports as an unleased mineral owner. Defendants did not release the property from the mineral lease and did not send the accounting reports.

On January 20, 2011, plaintiff filed this lawsuit, alleging that the mineral lease was absolutely null ab initio. Specifically, plaintiff alleged: (1) the tax sales were absolute nullities because the tax collector failed to send notice to Ebey and Smith prior to the sales; (2) defendant, Caddo Parish, was not judicially placed in possession of the property prior to granting the lease; (3) Caddo Parish failed to allocate any of the bonus revenue or royalty payments to the past due taxes, as required by LSA-R.S. 47:2233; (4) plaintiff's ancestors in title were entitled to receive notice before Caddo Parish transferred the mineral lease; and (5) plaintiff is an unleased owner of the minerals, thus it is entitled to a sworn, detailed [49,712 La.App. 2 Cir. 6] itemized statement of the costs of the drilling operations.[6]

Page 127

Following a trial on the merits, the trial court found that plaintiff failed to meet its burden of proof and dismissed the claims with prejudice. More specifically, the trial court stated:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Caddo Parish Sheriff and Ex-Officio Tax Collector complied with all notice requirements for the 1988 tax sale, resulting in a valid and enforceable tax adjudication; the mineral lease granted by the State Mineral and Energy Board of the State of Louisiana, on behalf of the Parish of Caddo, to Classic Petroleum, Inc. in 2009, and subsequently acquired by Chesapeake Louisiana, L.P. in 2009 is valid and enforceable; and any interest Sapphire Land Company, L.L.C. may have acquired in the subject property by redemption in 2010, is subject to the recorded lease.
Plaintiff appeals.

DISCUSSION

Plaintiff contends the trial court erred in failing to find that the redemption of the 1988 tax adjudication rendered the mineral lease invalid. Plaintiff argues that the lease between Caddo Parish and Chesapeake dissolved when the past due taxes were paid and the tax collector issued a certification of redemption.

The property sold at a tax sale shall be redeemable for three years after the date of recordation of the tax sale, by paying the price given, including costs, five percent penalty thereon, and interest at the rate of one percent per month until redemption. La. Const. Art. VII, § 25(B). Redemption is subject to a three-year peremptive period that runs from the [49,712 La.App. 2 Cir. 7] date of recordation of the tax sale. Harris v. Estate of Fuller, 532 So.2d 1367 (La. 1988). Upon expiration of the three-year period without redemption, the tax title is valid and redemption is no longer available to the tax debtor, whose only recourse is to attack the validity of the tax sale as provided by law. Securities Mortg. Co. v. Triplett, 374 So.2d 1226 (La. 1979).

In the instant case, the tax adjudication to the parish occurred in 1988; the tax adjudication deed was recorded on June 10, 1988. More than 20 years after the adjudication, plaintiff acquired the property by obtaining quitclaim deeds from the heirs/legatees of Ebey and Smith, and purportedly " redeemed" the property by paying the taxes due. Plaintiff's act of " redeeming" the property did not affect the mineral lease because the period for redemption expired on June 10, 1991, three years after the tax adjudication deed was recorded. The tax debtor's failure to redeem the property within this three-year period limits plaintiff to an action to annul the tax sale. Thus, the assignment of error lacks merit.

Plaintiff also argues that because the 1988 tax sale was invalid, the subsequent tax adjudication to Caddo Parish was an absolute nullity. Specifically, plaintiff argues that the 1988 proces verbal was invalid because it did not identify Bill and Dorothy Smith as delinquent tax debtors, and it did not specify how service of the notice was made on Ebey.[7]

The sale of property for nonpayment of taxes is an action affecting a [49,712 La.App. 2 Cir. 8] property right protected by the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Therefore,

Page 128

as a minimum constitutional precondition to such a proceeding, notice must be sent by mail or other means certain to ensure actual notice if the party's name and address are reasonably ascertainable. Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983).

La. Const. Art. VII, § 25 also requires the tax collector to provide notice to a delinquent taxpayer. In former LSA-R.S. 47:2180, which was in effect at the time of the tax sale in this case, the legislature set forth the manner by which a notice of delinquency in immovable property taxes must be provided in compliance with La. Const. Art. VII, § 25 and Mennonite. Under the provisions of former LSA-R.S. 47:2180, the tax collector was required to provide a taxpayer, who has not paid all the taxes which have been assessed to him on immovable property, with a written notice specifying that the taxes are delinquent, the amount of taxes due, and the manner in which the property may be redeemed.[8] If a proces verbal is [49,712 La.App. 2 Cir. 9] properly executed and filed, then the burden of establishing that no notice was given rests on the tax debtor. Pardon v. Moore, 39,949 (La.App.2d Cir. 8/17/05), 908 So.2d 1253.

In the instant case, the record reveals that the tax collector mailed a certified notice of delinquency to James William Ebey at " 708 West 70th St. Shreveport, LA," notifying him that the 1987 taxes were delinquent. The record also demonstrates that the notice was sent to the same address that appeared on the credit sale deed from Preferred Properties to Ebey. The notice was returned undeliverable. The record further indicates that the notice of delinquency was mailed to Bill Smith, as his name and address appeared on a copy of

Page 129

the notice, albeit, handwritten. Thereafter, the tax collector executed a proces verbal, dated June 8, 1988, in which he certified as follows:

That the attached list is a true and complete list of all tax [49,712 La.App. 2 Cir. 10] debtors owing delinquent taxes on immovable property for the year of 1987.
That I have mailed certified notices, with return receipt requested, to each delinquent tax debtor on March 4, 1987 as required by R.S. 47:2180.
That the taxes for 1987 on the attached list of assessments are still due and unpaid.
***

The proces verbal also listed James William Ebey as a tax debtor, and his address was listed as " 708 West 70th Street," the address which appeared in the public records. The properly executed proces verbal creates a presumption that valid notice of the tax sale was given and, thus, the tax debtor has the burden of proving lack of notice. Additionally, the tax adjudication deed reveals that the property and pending tax sale had been advertised in the Shreveport Journal prior to the tax sale, as required by law.

As evidenced by the tax sale adjudication in the record, and confirmed by the testimony of the tax department's director, after the initial mailing to Ebey was returned, further notice of the impending sale appeared in the local newspaper in compliance with LSA-R.S. 47:2180(B).[9] Plaintiff failed to rebut the presumption that the tax sale was valid. Accordingly, we find that this record supports the trial court's determination that the tax collector took steps reasonably calculated to apprise the owners of the tax delinquency and the impending tax sale.

Plaintiff further contends Caddo Parish failed to commence proceedings to be placed in actual possession of the property, as required by [49,712 La.App. 2 Cir. 11] LSA-R.S. 47:2231-2233. Therefore, plaintiff claims to be the unleased owner of the property and the lease granted by the parish to Classic Petroleum, which was later assigned to Chesapeake, is an absolute nullity.

Page 130

The Revised Statutes, Title 47, relative to the collection of delinquent ad valorem taxes, authorizes a political subdivision to take ownership of property adjudicated to it following a tax sale. Pursuant to the statutes, a political subdivision may file a petition and obtain a judgment to be placed in actual possession of the property. Thereafter, the political subdivision may lease the adjudicated property and collect rent therefor. [10] Additionally, [49,712 La.App. 2 Cir. 12] when property is adjudicated to the state for delinquent taxes, title passes to the state, subject to the right of redemption; and if the right is not seasonably exercised, the title to the state becomes absolute. Wood v. Board of Com'rs for Pontchartrain Levee Dist., 338 So.2d 744 (La.App.4th Cir. 1976), writ denied, 341 So.2d 5 (La. 1977).

In the instant case, it is undisputed that Caddo Parish did not institute a lawsuit to take possession of the property prior to entering into the mineral lease. Under the provisions set forth in LSA-R.S. 47:2231 and 2233, the filing of a lawsuit to be placed in possession is discretionary. Also, these provisions do not prohibit the state from leasing the minerals under the more specific provisions of the Mineral Code.[11] We note that the parish did not lease the property itself; it merely leased the mineral rights,[12] which are [49,712 La.App. 2 Cir. 13] neither assessable nor taxable. See, La. Const. Art. VII § § 4 and 21. Therefore, we find that the trial court did not err in concluding that the provisions set forth in Title 47 of the Revised Statutes do not apply to the mineral lease. Accordingly, we find that the parish's failure to institute an action to take possession did not affect the adjudication of the property to the parish, nor did it affect the parish's right to enter into the mineral lease.

Additionally, we find no error in the trial court's conclusion that any interest plaintiff may own in the property is subject to the mineral lease recorded on January 27, 2010. LSA-RS. 9:2721(C) provides that anyone who acquires immovable property encumbered by a recorded lease " shall take the property subject to all of the provisions of the lease," provided that the lease was recorded prior to the deed of the person who acquires the property. Sparks v. United Title & Abstract, LLC, 45,766 (La.App.2d Cir. 12/15/10), 56 So.3d 302, writ denied, 2011-0030 (La. 2/18/11), 57 So.3d 337. The quit claim deeds between plaintiff and the heirs of Ebey and Smith specifically provide that the heirs sold their interests in the property " [s]ubject to all restrictions, right of way grants, and servitudes of public record."

Page 131

Both the Classic Petroleum lease and the assignment to Chesapeake were recorded in the public records prior to plaintiff's recordation of its deed. Therefore, the trial court did not err in determining that plaintiff acquired the property subject to the Chesapeake lease.

CONCLUSION

[49,712 La.App. 2 Cir. 14] For the reasons set forth herein, the trial court's judgment in favor of defendants, the Parish of Caddo, Chesapeake Louisiana, L.P. and Chesapeake Operating, Inc., is hereby affirmed. Costs of the appeal are assessed to plaintiff, Sapphire Land Company, LLC.

AFFIRMED.


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