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L.L.C. v. Tauren Exploration, Inc.

Court of Appeals of Louisiana, Second Circuit

August 7, 2017

GLORIA'S RANCH, L.L.C. Plaintiff-Appellee

         Originally Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Lower Court Case No. 541768 Honorable Ramon Lafitte, Judge

          KEVIN W. HAMMOND, APLC By: Kevin W. Hammond, Counsel for Appellant(s) Tauren Exploration, Inc. & Cubic Louisiana, LLC

          LISKOW & LEWIS By: Kelly B. Becker Kathryn Z. Gonski Michael D. Rubenstein Counsel for Appellant Cubic Louisiana, LLC

          KEAN MILLER, LLP By: Linda S. Akchin Richard D. McConnell, Samuel O. Lumpkin Richard S. Pabst Scott L. Zimmer William R. Huguet Counsel for Appellant Wells Fargo Energy Capital, Inc.

          WALL, BULLINGTON & COOK, L.L.C. By: Guy E. Wall Paul E. Bullington Philip M. Wood Jonathan R. Cook Counsel for Appellee Gloria's Ranch, L.L.C. WEINER, WEISS & MADISON, A PROFESSIONAL CORPORATION By: Jeffrey W. Weiss

          Before BROWN, MOORE, STONE, COX, and BLEICH (Pro Tempore), JJ.

          BROWN, C.J., dissents from the denial of rehearing and strongly agrees with the written reasons assigned by J. Bleich.

          BLEICH, J. (Pro Tempore)

         Devastating economic repercussions might possibly develop throughout the lending industry if the original opinion of this court is maintained. Serious and harmful impact on the oil and gas industry is foreseeable. At a minimum, confusion will develop inside the legal community, as well as to other advisors to the respective companies within those industries if the original pronouncement of this court is maintained. Notwithstanding a generally well written and analyzed original opinion and the instructive language therein that this is a somewhat isolated fact setting, cautious managers and decision makers within those industries will incur a most chilling effect on their businesses. All of these developments can be potentially harmful in a broader sense; e.g. the potential impact on the financial condition of this state resulting from lost revenue. Additionally, the excessive awards of attorney fees in the original opinion could produce inappropriate precedent for other cases.

         I, therefore, with the highest degree of respect, dissent from the decision to deny rehearing. This dissent is not only based upon public policy but also because of legal error.

         The majority imposes solidary liability on the mortgagee Wells Fargo Energy Capital, Inc. ("Wells Fargo"), in its capacity as a mortgage lender which had only a security interest in a mineral lease. The majority finds Wells Fargo solidarily liable with its borrowers, Tauren Exploration, Inc. ("Tauren") and Cubic Energy, Inc. ("Cubic") (the "mineral lessees"), for a breach of the mineral lessees' contractual and statutory obligations to produce in paying quantities, pay royalties, and respond to the mineral lessor's demands relating to those obligations. Relying on the proposition stated in La. C.C. art. 1797 ("[a]n obligation may be solidary though it derives from a different source for each obligor"), Wells Fargo was determined to be solidarily liable with Tauren and Cubic arising out of their actions as to the landowner, Gloria's Ranch.

         I believe this determination was legal error. Solidary liability is never presumed and arises only from a clear expression of the parties' intent or from law. La. C.C. art. 1796; Berlier v. A.P. Green Indus., Inc., 2001-1530 (La. 04/03/02), 815 So.2d 39.

         The majority opinion has far-reaching implications on the banking industry as well as the oil and gas industry. It is wholly reasonable for a lender to impose certain safeguards to ensure that its collateral is protected, and the responsibilities of an owner should not be imposed on a lender for taking such measures. Solidary liability between a lender and its borrower/owner for its actions will have a calamitous effect in Louisiana on banking and the relationship between creditors and debtors. I agree with Wells Fargo's assertion that the opinion will have a most chilling effect on the financing of oil and gas operations, which in turn will have an adverse economic effect on government and business in our state.

         I further would grant rehearing concerning the issue of the award of attorney fees, both at the trial level ...

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