The United States District Court for the Western District of Louisiana recently examined whether a real right in property could be enforced against third parties, absent a formal recorded instrument evidencing same. The Court determined that, in the absence of a recorded instrument, an oral or written agreement creates only a personal obligation (here, a limited wellbore interest), and not a real right in the underlying immovable property interests, enforceable solely against the grantor/obligor for a ten-year prescriptive period.
In Donald Zadeck Succession v. Treme,[1] Zadeck Energy, Inc. (“Zadeck Energy”) owned a fifty percent working interest in certain Mineral Leases (the “Zadeck Leases”), all containing pooling and unitization provisions. Some of the Zadeck Leases were forced pooled into a unit, and Zadeck Energy, as operator, completed a unit well for the unit (the “Brown well”). By 1992, production from the Brown well had ceased.
In May 1993, Zadeck Energy allegedly conveyed to Douglas Vandiver, and his heirs (collectively, the “Vandivers” or “Defendants”), as its operations manager, a five percent working interest in the Zadeck Leases as partial compensation for his participation in the recompletion of the Brown Well; however, no assignment of this instrument was drafted or recorded in the public records. Vandiver was added to the paydeck of the Brown well and began receiving his five percent interest, less his proportionate share of the costs.
In 1994, Zadeck Energy conveyed its fifty percent working interest to Comstock Oil & Gas Louisiana, LLC (“Comstock”), reserving an overriding royalty interest in the transfer.
After 1994, Comstock drilled several wells on the land covered by the Zadeck Leases and paid Zadeck Interests, (formerly known as Zadeck Energy) their overriding royalty interest. Neither Comstock nor Zadeck Interests paid the Vandivers any further compensation. In 2009, Douglas Vandiver consulted an attorney on this matter but elected not to file suit. On October 1, 2019, the Brown well was plugged and abandoned, and the issue was not raised again until the following year.
On June 4, 2020, the Vandivers’ heirs sent Donald Zadeck a letter, regarding the 1993 conveyance of what they asserted was a five percent working interest in the Zadeck Leases. Unfortunately, Mr. Zadeck died shortly thereafter in 2020.
Defendants filed a proof of claim in Donald Zadeck’s succession on January 26, 2021, asserting recognition as working interest owners in the Zadeck Leases, demanding a formal assignment of their five percent alleged working interest by the estate and remuneration of all past-due sums since 2007. The Donald Zadeck Succession filed a counterclaim, seeking a judgment that the Vandivers had no valid interests in the estate.
The Donald Zadeck Succession filed a motion for Summary Judgment on the issue of prescription, alleging that the Vandivers’ claim was a personal action for breach of contract against Zadeck Energy, which had been prescribed under Louisiana’s ten-year prescriptive period.[2]
The Court examined whether Defendants’ claims constituted a personal action directly against Donald Zadeck, or a real action seeking recognition of ownership or enforcement of the rights in immovable property, which is imprescriptible.[3]
While the Court recognized that Defendants’ claims appeared to be a real action-seeking recognition of their ownership in the Zadeck Leases, the interest was now outstanding in a third party (Comstock), and there was no recorded instrument reflecting their grant of working interests, as required under La. C.C. 3338. The Vandivers’ claims amounted to a personal action prescribed in 2019, ten years after Douglas Vandiver first consulted his attorney.
Zadeck reiterates the importance of proper recordation of all interests in mineral rights, including leases, in the parish conveyance or mortgage records where the immovable is located. These are real property rights, which require purchasers to establish either privity of contract, assignment of rights, or a stipulation pour autrui as outlined in La. Rev. Stat. Ann. § 31:16. The Louisiana public records doctrine denies the effect of rights unless they are recorded.[4] Moreover, once recorded, deeds cannot be reformed to the disadvantage of third parties who relied on public records showing that the property belonged to the party from whom they acquired title.[5]
[1] 2022 U.S. Dist. LEXIS 167122, 2022 WL 4280296.
[2] See La. C.C. art. 3499; State v. Stewart, 2022 La. App. LEXIS 2162, *4, 2022 0574 (La.App.1 Cir. 12/15/22), 2022 WL 17688412.
[3] See Boone v. Conoco Phillips Co., 2013- 1196, p. 21 (La. App. 3 Cir. 5/7/14); 139 So.3d 1047, 1060-61; Songbyrd, Inc. v. Bearsville Recs., Inc., 104 F.3d 773, 779 (5th Cir. 1997).
[4] See TSS Props., LLC v. Ray-Bayou, LLC, 329 So. 3d 411, 413, 2021 La. App. LEXIS 1320, *1, 20-533 (La.App. 3 Cir. 09/22/21), 2021 WL 4303332.
[5] See Covey Park Gas, LLC v. Bull Run Acquisitions II, LLC, 310 So. 3d 777, 2021 La. App. LEXIS 14 (La.App. 2 Cir. 2021), writ denied, 2021 La. LEXIS 811 (La. Apr. 7, 2021).
Note: The following legal update was featured in NADOA’s 2023 Q2 Magazine.
Brad represents clients in connection with upstream energy transactions, complex mineral titles, pooling issues, lease analysis, joint operating agreements, surface use issues, title curative and general oil and gas business matters.