Fontenot v. Humble Oil & Refining Co.
210 So.2d 340, 30 Oil & Gas Rep. 551, 1968 La. App. LEXIS 5118 (1968)
Rule of Law:
When multiple lessors, owning different interests in separate tracts, join in a single oil, gas, and mineral lease that describes all their property and treats it as one, the lease is considered a joint lease as between the lessor and lessee, meaning production from any part of the leased land maintains the lease as to all parts, regardless of an individual lessor's ownership in the producing tract.
Facts:
- Agnes Landreneau Fontenot, Semanthe Vidrine Landreneau, Calvin Landreneau, Gibbons Landreneau, Annabelle Landreneau, and Charles Landreneau (lessors) executed an oil, gas, and mineral lease with Warren L. Brown (lessee) on January 3, 1962, which was subsequently assigned to Humble Oil & Refining Co.
- The lease covered three separate, non-contiguous tracts of land, described collectively as '132.8 acres in three tracts,' without specifying the individual interests owned by the various lessors in each tract.
- Mrs. Fontenot owned a one-half interest in tracts 2 and 3 but no interest in tract 1, on which the well was ultimately located.
- Lessees commenced drilling a well on December 9, 1962, on tract 1.
- The well on tract 1 was completed as a shut-in gas well on February 9, 1963.
- Within 90 days of the well being shut in, lessees deposited the correct amount of shut-in royalty payment to the credit of all lessors in the designated bank, sufficient to maintain the lease until its next anniversary date.
- Mrs. Fontenot and her husband sent a letter to lessees stating that they owned no interest in tract 1 and did not intend to communitize or pool their share of royalties with the other lessors.
- A conservation unit was created effective August 1, 1963, and production from tract 1 has continued since September 4, 1963.
Procedural Posture:
- Agnes Landreneau Fontenot (plaintiff) filed a suit for cancellation of an oil, gas, and mineral lease against Humble Oil & Refining Co. (lessee) in the district court (trial court).
- The district court rendered judgment in favor of defendants, rejecting Fontenot's demand and dismissing her suit.
- Fontenot (plaintiff) appealed the district court's judgment.
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Issue:
Does an oil, gas, and mineral lease, executed by multiple lessors owning different interests in separate, non-contiguous tracts but treated as a single lease, constitute a joint lease between lessor and lessee, such that production from one tract maintains the lease for all tracts, even those where a specific lessor owns an interest but has no interest in the producing tract?
Opinions:
Majority - Savoy, Judge
Yes, the lease constitutes a joint lease between lessor and lessee, such that production from one tract maintains the lease for all tracts, even those where a specific lessor owns an interest but has no interest in the producing tract. The court affirmed the trial court's decision, concluding that the subject lease was a joint lease as between the lessor and lessee, and therefore, payment of the annual rental was not required because Mrs. Fontenot's interest in tracts 2 and 3 was held by production from tract 1. The court cited well-settled Louisiana law (e.g., Nabors v. Producers’ Oil Co., Ardis v. Texas Co., A. Veeder Co. v. Pan American Production Co., Farrell v. Simms) which consistently holds that where several lessors, owning different interests in separate tracts, join in a single lease describing all their property and giving a total acreage figure, the lease is considered joint 'quoad the lessee.' This principle means that regardless of the severability of the lease among lessors for royalty distribution, it remains joint concerning the lessee's rights and the lease's perpetuation. The court found that Mrs. Fontenot's letter only addressed the severability of the lease as between lessors, not its joint status between lessor and lessee. The language of the lease, referring to 'lessor (whether one or more)' and requiring drilling 'a well on the land' or 'on some part of the land embraced herein,' clearly indicated an intent to treat all described tracts as a single unit for lease maintenance. The court further rejected arguments of insufficient consideration, error as to the contract's nature, and the expiration of the conservation unit, finding that defendants had complied with all lease terms.
Analysis:
This case clarifies and reinforces the long-standing legal distinction between the jointness of an oil and gas lease as it relates to lessors' sharing of royalties among themselves, and its jointness 'quoad the lessee,' which governs the lease's perpetuation. It establishes that even if lessors have separate ownership interests and the tracts are non-contiguous, a single lease instrument typically binds all parties and tracts as one unit for the lessee. This precedent makes it significantly more challenging for an individual lessor to seek cancellation of their portion of a lease based on a lack of production from their specific acreage, as long as there is production from any part of the larger, jointly leased property. The ruling emphasizes the importance of contract language in determining the intent to treat leased property as a single unit.
