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Compass Energy Operating, LLC v. Robena Property & Royalty Co.

Court of Appeals of Louisiana, Second Circuit

February 27, 2019

COMPASS ENERGY OPERATING, LLC Plaintiff-Appellee
v.
ROBENA PROPERTY & ROYALTY COMPANY, LTD, ET AL. Defendants-Appellants

          Appealed from the Second Judicial District Court for the Parish of Jackson, Louisiana Trial Court No. 34, 971 Honorable Jimmy Cecil Teat, Judge.

          MAYHALL FONDREN BLAIZE Charles Gary Blaize, Jr. Counsel for Defendants Appellants, Robena Property & Royalty Co., Ltd; Comer Royalty & Property; Gilly Family Trust; Neal Family Trust

          DAVIDSON SUMMERS APLCW. Lake Hearne, Jr. Counsel for Defendants Appellees, Dynex Royalties “Ruston Joint Venture” and Dynex Royalties LLC, III

          THEUS, GRISHAM, DAVIS & LEIGH, L.L.C. Paul Denton Spillers Counsel for Defendants Appellees, Andrew O. Milstead, Jr. and Florentina R. Milstead

          BRADLEY, MURCHISON, KELLY & SHEA Scott Robison Patton Counsel for Plaintiff Appellee, Compass Energy Operating, LLC

          Before MOORE, COX, and McCALLUM, JJ.

          McCALLUM, J.

         Though somewhat diminished by the passage of time, the tsunami waves generated by an economic earthquake, consequent of an alleged attempt by Texas oil tycoons to corner the world market in silver, are still washing against distant shores. This now almost mythical silver seismic event, that once shook the very foundations of the great financial houses of Wall Street, again demonstrates its continuing effects by precipitating the litigation that currently lies before us.

         At issue in this concursus proceeding are mineral interests that were owned by a bankruptcy debtor. These interests were conveyed by the debtor to the bankruptcy trustee. The same interests were later conveyed to third parties outside the trustee's chain of title. The trial judge found that the bankruptcy trust agreement needed to be recorded in order to affect third parties, and that an omnibus property description in the trustee's deed did not give adequate notice to the third parties who later acquired adverse ownership interests. Those parties who trace their ownership of the mineral interests to the trustee's deed appeal the judgment.

         FACTS

         H.M. Lewis and his daughter Caroline Lewis Hunt were shareholders in Lewis Realty Corporation. When Lewis Realty was liquidated in 1951, H.M. Lewis and Caroline received undivided 93/440 and 5/440 interests respectively in various immovable property, including 20 acres in Jackson Parish described as the E/2 of SE/4 of SW/4 of Section 2 in T-16-N, R-2-W ("the property"). Caroline was married to Nelson Bunker Hunt at the time. Her interest in the property was her separate property.

          In an act of acknowledgement executed in 1970, H.M. Lewis, Caroline Hunt, and several others stated that they had conveyed the property to Jaclin Corporation in 1951 while reserving their mineral rights. The act was executed to recognize the ownership of the mineral interests in the property. H.M. Lewis was shown to have an 1860/8800 interest, while Caroline had a 100/8800 interest. An act of correction was executed in 1971 to reflect that H.M. Lewis's undivided mineral interest in the property was actually a 2045/8800, or 0.2323 interest.

         In 1977, Caroline received ownership of one-third of her father's 0.2323 mineral interest in the property through his succession. This was subject to a usufruct in favor of her mother, who received the remaining two-thirds ownership of the 0.2323 mineral interest.

         On October 1, 1980, Caroline Hunt and other mineral interest owners entered into a mineral lease with Jaclin Corporation regarding the property.

         Some eight years later, in the wake of the lingering aftermath of "Silver Thursday," Caroline and Nelson Bunker Hunt filed for Chapter 11 bankruptcy in Texas. In November of 1989, the parties to the bankruptcy proceedings entered into a Joint Plan. This Joint Plan was confirmed by order of the bankruptcy court in December of 1989, with the order approving the NBH Liquidating Trust Agreement ("Agreement") and establishing the NBH Liquidating Trust ("Trust"). The order also provided that on the effective date, all of the property of the debtors' estate except for retained assets would vest in the independent trustee in his capacity as trustee of the Trust.

         Effective January 8, 1990, Caroline Lewis Hunt and Nelson Bunker Hunt executed a deed and assignment of leases and bill of sale without warranty in favor of R. Carter Pate as trustee. This is known at the "Pate deed." At the time, Caroline owned a 0.08181 interest in the property comprising her own interest through the liquidation and the interest that she had acquired through her father's succession.

         The Pate deed was recorded in Jackson Parish on February 6, 1992. It conveyed (underlining in original):

(1)the wells described on Exhibit "A" attached hereto and incorporated herein by reference for all purposes (collectively, the "Wells" or singularly, a "Well"); and all mineral estates, mineral leases, oil and gas leases, oil, gas, hydrocarbons and mineral leases and other interests of any kind whatsoever in any mineral estate, together with all oil, gas and other minerals produced therefrom, whether known or unknown, metallic or nonmetallic, common or unique (and the proceeds of the sale thereof), including, without limitation, gravel, shale, lignite, sulphur, gold, silver, lead, zinc, copper, iron, coal, gas, oil, casinghead gas, other hydrocarbons, uranium, steam, geothermal energy and all other minerals or substances and all royalty interests, overriding royalty interests, net profits interests, production payments and similar interests described in Exhibit "A", any amendments, renewals, extensions, replacements or modifications thereof, and each and every kind and character of right, title, claim or interest which Grantors have in and to the interests, properties and lands set forth on Exhibit "A", and any other surface estates, in the above-referenced County and State as of the Effective Time (as hereinafter defined)(collectively, the "Leases"). The description of the Wells in Exhibit "A" and the description of the Leases in Exhibit "A" are not intended to limit each other, it being the intent of the Grantor and Grantee that this Deed convey every interest of Grantor in and to the Leases described in Exhibit "A" irrespective of whether the extent to which any Well is located on, includes or is related in any such Lease, and that this Deed convey every interest of Grantor in and to every Well described in Exhibit "A" irrespective of whether or the extent to which any such Well is located on or related to any Lease.
Collectively, all of the foregoing items being conveyed under this paragraph (1) are referred to as the "Lease Interests."
(2)The following properties and rights, or portions thereof, to the extent and only to the extent they relate to or cover the Lease Interests or the Wells:
(a) All unitization, unit operating, commuitization, and pooling agreements and orders directly relating to or appertaining to the Lease Interests or the Wells[.]
All of the rights, lands, and interests described in paragraphs (1) and (2) above are collectively referred to as the "Properties."
The Exhibit "A" referred to in the Pate deed and attached thereto stated:
Exhibit "A" to the certain Assignment from Nelson Bunker Hunt and Caroline Lewis Hunt, Debtors, to be effective January 8, 1990, pertaining to lands located in ...

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