Board of Com'rs of Caddo Levee Dist. v. Pure Oil Co. , 167 La. 801 ( 1928 )

This suit is one for judgment against the Standard Oil Company of Louisiana, ordering and directing it to pay to plaintiff $13,663.46, the balance of the proceeds of royalty oil, held by it, and against the Pure Oil Company for $18,625.48, with legal interest from July 1, 1921, the judgment prayed for against the latter company to be credited with the amount held by the Standard Oil Company, in the event that that amount should be ordered paid to plaintiff.

The suit is a sequel to State v. Standard Oil Co. of Louisiana et al., reported in 164 La. 334, 113 So. 867. In that case the state was seeking to recover the proceeds of seven-eighths of the oil produced on the same land as was the one-eighth, or royalty interest, involved in this case. In that case the plaintiff herein, by intervention, sought to recover the proceeds of the one-eighth royalty interest, sued for herein, but its intervention, in that respect was dismissed, because the one-eighth royalty was not involved in the main demand, as the state had sued only for seven-eighths of the total oil produced on the land.

The case comes before us by appeal from a judgment sustaining a plea of prescription of three years, filed by the Pure Oil Company, under article 3538 of the Civil Code. This article provides that actions for arrearages of rent, annuities, and alimony, or of the hire of movables and immovables, are prescribed by three years. The plea was tried on the face of the papers. We must therefore look to the petition for the facts necessary to decide the plea.

It appears from that source that on October 10, 1910, plaintiff leased to the Pure Oil Producing Company, one of defendant's ancestors in title, portions of sections 3 and 4, township 20 north, range 16 west, not already leased, lying in Caddo parish, below the banks of Ferry Lake or Jeemes bayou in ordinary stages of highwater, declared in the lease to be (presumably with that already leased) all of the lands owned by plaintiff in the subdivisions aforesaid.

When this lease was granted, a survey of the land leased was made, to serve as a basis for ascertaining the bonus the lessee was to pay, and the surveyor reported that the land contained 50.922 acres. The survey made, however, was erroneous, for it omitted 30.838 acres, which, it is alleged, belonged to plaintiff, and which, at the time of the lease, was not under lease, executed by plaintiff to others. It was the intention of plaintiff and the Pure Oil Producing Company to include in the lease, executed by them, all its unleased land in the subdivisions mentioned above, including the 30.838 acres omitted by the survey, as if the omitted area had been fully described in the lease, which intention was fully recognized by the Pure Oil Company, one of the defendants herein, in the suit of the State v. Standard Oil Co., cited supra.

Some three months after plaintiff had executed the lease, the Pure Oil Producing Company, the lessee, transferred it to the Pure Oil Operating Company, and that company, soon after the transfer, entered upon that part of the land not described in the lease, and drilled thereon three wells from which large quantities of oil were produced by it and its assignees until the latter part of June, 1921.

Although plaintiff was the owner of the area not described in the lease, but unintentionally omitted therefrom, during the entire period in which oil was produced from it, plaintiff has not received the royalty due, under the lease, from that part of the land, nor has the royalty oil been delivered to any pipe line for its account. From the wells drilled on the omitted area 137,357 barrels of oil were delivered to the Standard Oil Company of Louisiana, and the value of seven-eighths of it has been paid by that company to the Pure Oil Operating Company, and to its successor, the Pure Oil Company, the latter company being the defendant herein. As to the remaining one-eighth, or the royalty interest, the Standard Oil Company had in its possession at the time this suit was filed, $13,662.46, representing the value of the greater part thereof, holding the same for the rightful claimant thereof, but, it may be said, that, since the filing of this suit, the Standard Oil Company has deposited this money in court, to be paid to whom it may be found to belong.

The total value of the one-eighth royalty interest, it is alleged, was $18,625.48. It is for that sum that plaintiff asks for judgment against the Pure Oil Company, which, if obtained, is to be credited with the $13,663.46, deposited in court by the Standard Oil Company, should that sum be directed by the court to be paid to plaintiff.

The hypothesis upon which plaintiff seeks to recover the sum representing the entire one-eighth royalty from the Pure Oil Company, instead of looking to that company for that part of the royalty oil delivered by it to the Standard Oil Company, and to the Pure Oil Operating Company for that part of the royalty delivered by the Pure Oil Operating Company to the same corporation, is that the Pure Oil Company, then known as the Ohio Cities Gas Company, by consolidation and reorganization, became the successor of the Pure Oil Operating Company, and liable for all its obligations; and, in the transfer by the Pure Oil Operating Company to it, in 1918, of the lease involved herein, expressly obligated itself in the transfer, under the name it then bore of the Ohio Cities Gas Company, to discharge all the terms and conditions of the lease involved in this case in the following terms, to wit:

"To have and to hold all of the said leases and leasehold estates and other property referred to or described, unto the Ohio Cities Gas Company, its successors and assigns forever, as of midnight on December 31, 1917, upon condition that the Ohio Cities Gas Company will assume and discharge all the terms and conditions of said leases and all accounts, obligations and contracts of the Pure Oil Operating Company as of said day and hour."

The issues presented by the filing of the plea of prescription herein and in the urging of it are: (1) Whether or not prescription runs against plaintiff in an action arising out of the management and control of lands conveyed to it for a public purpose; (2) whether the prescription of three years, established by article3538 of the Civil Code, relative to arrearages for rent, is applicable to this case; and (3) the effect of the assumption by the Pure Oil Company, then known as the Ohio Cities Gas Company, of all the terms and conditions of the lease, involved herein, which includes the payment of royalties, and of all the accounts and obligations of the Pure Oil Operating Company, as of date December 31, 1917, at midnight, on this case, as relates to the plea of prescription filed.

The theory upon which plaintiff bases its contention that prescription does not run against plaintiff is that plaintiff is an agency of the state, created for the purpose of discharging public duties.

There can be no serious question that plaintiff is a state agency, brought into existence for the purpose of discharging public duties, incumbent primarily upon the state, consisting of the protection of lands in the district from damage by flood and of the drainage of such lands, as are the remaining levee districts in the state. Section 4 of Act 74 of 1892; Const. of 1879, arts. 213, 214; Const. of 1898, arts. 238, 239; Const. of 1921, art. 16; State ex rel. Board of Commissioners of Tensas Basin Levee District v. Grace, 161 La. 1039, 109 So. 830. In fact, that such districts are state agencies has been repeatedly recognized in the jurisprudence of this state. Fisher v. Steele, Auditor, 39 La. Ann. 447, 1 So. 882; Peart v. Meeker, President, 45 La. Ann. 421, 425, 12 So. 490; Koerber v. New Orleans Levee Board, 51 La. Ann. 523, 534, 25 So. 415; Atchafalaya Land Co. v. F.B. Williams Cypress Co., 146 La. 1047, 1061, 84 So. 351; State v. Standard Oil Co., 164 La. 334, 357, 113 So. 867.

The land leased herein was conveyed to plaintiff by Act 74 of 1892 or by that act as amended by Act 160 of 1900. The certificate required by these acts was issued to plaintiff by the register of the state land office and the auditor of state on July 6, 1901, and was promptly recorded in the conveyance records of Caddo parish. Under the terms of the acts making the grant, the title to the land was, after the issuance and registry of the certificate, vested absolutely in plaintiff. Section 9 of Act 74 of 1892; section 2 of Act 160 of 1900; State v. Standard Oil Co., 164 La. 334, 350,113 So. 867. But the expression, "absolutely vest," used in these and similar acts, in connection with the title given, must be interpreted with reference to the nature or character of the grantee. The grantee, under these and similar acts, is an artificial person, created for the accomplishment of public purposes, devolving primarily upon the state. The Legislature, having created plaintiff for public purposes, may revoke the grants made to it, notwithstanding the declaration as to the absolute vestiture of title, by abolishing plaintiff, or by withdrawing the grants, provided that, in doing so, it does not interfere with rights acquired by third persons. State v. Standard Oil Co., 164 La. 334, 357, 113 So. 867.

It appears, therefore, from the foregoing, that the plea of prescription presented is one pleaded against an agency of the state, created by the Legislature, to accomplish certain public purposes, devolving primarily upon the state, in bar of a demand for royalties, under a mineral lease, granted by that agency, on land conveyed to it by the state, to aid it in accomplishing those purposes. It also appears that the first question presented is whether prescription runs against an agency of the state on such a demand. If the question presented involved the loss by prescription of the mineral rights themselves, on land conveyed or certified to a levee district, under the Constitution of 1921, we should most likely hold, in view of the conclusion reached in State ex rel. Board of Commissioners of Tensas Basin Levee District v. Grace, 161 La. 1039, 109 So. 830, that, as the levee district must retain such mineral rights, it could not lose them by prescription, for a state agency cannot lose by prescription that which it must retain, and cannot alienate. Mayor v. Magnon, 4 Mart. (O.S.) 2, 9; City of New Orleans v. Salmen Brick Lumber Co., 135 La. 828, 868, 66 So. 237; State v. New Orleans Land Co.,143 La. 858, 867, 79 So. 515. But no such question is presented here, but only the question as to whether the demand of a levee district for certain royalties, under a lease, granted in 1910 on land certified to it by the state in 1901, is prescribed.

Article 3521 of the Civil Code provides that "prescription runs against all persons, unless they are included in some exception established by law." We know of no exception to the general rule, above established, that includes a levee district or other state agency with reference to such a demand as the one here made. In the recent case of Board of Commissioners of Port of New Orleans v. Toyo Kisen Kaisha, 163 La. 865, 113 So. 127, the question whether prescription liberandi causa ran against a state agency was considered. The plaintiff in that case was a state agency. The cause of action was one for damages alleged to have been caused one of the wharves of the port by the defendant's negligence. It was there urged that, as the defendant was a state agency, prescription did not run against it, because prescription does not run against the state in civil matters, and that, if it did, the prescription there pleaded had been interrupted. The court held that the prescription of one year there pleaded ran against the plaintiff in the case, but also held that it had been interrupted. In passing upon the first question presented, the court said:

"In view of R.C.C. art. 3521, which declares that prescription runs against all persons unless they are included in some exception established by law, we are not prepared to hold that the exception thus established in favor of the state applies to any or all other public corporations or agencies; for this constitutional provision is only the reduction to statutory form of a principle of public law already long established by universal jurisprudence, which principle has very generally been confined to actions brought by and in the name of the State itself. 17 R.C.L. 973."

Plaintiff has, and always has had, the right to sue and to be sued in its corporate name. It is a separate entity from the state, created by the state, it is true, to accomplish certain public purposes, but is nevertheless distinct from it. We think that the foregoing excerpt from the case last cited is applicable here, and we therefore rule that the prescription pleaded runs against plaintiff.

The next question to be considered is whether the prescription pleaded, which is a prescription relating to arrearages of rent, is applicable to this case. In the case of Logan v. State Gravel Co., 158 La. 105, 103 So. 526, which involved a mineral lease, as does the present case, this court said:

"Our conclusion is that a mine or quarry, or land adapted to mining or quarrying, may be leased for a certain portion of the produce of such mine or quarry, and the fact that said portion is called ``royalty,' instead of rent, is not of the least consequence. For ``rent (by whatever name called) is a certain profit in money, provisions, chattels, or labor, issuing out of lands and tenements in retribution for the use.' [Citing] King v. Harper, 33 La. Ann. 496, citing Bouv. Law Dict. verbo, ``Rent.'"

In that case, the court recognized a lessor's privilege for the unpaid royalty or rent, thus giving the lease the effect of an ordinary lease. It is true that the royalty or rent charge involved in that case was an amount in money, based on the quantity of gravel removed from the land, whereas in this case the royalty or rent charge under the lease is one-eighth of the oil produced. That difference, however, is of no consequence, nor is the ruling in the case cited based on any such distinction. The rent charge "may consist in a certain quantity of commodities, or even in a portion of the fruits yielded by the thing leased." C.C. art. 2671. But counsel for plaintiff urge that the case cited is not applicable, because plaintiff was the owner of one-eighth of the oil produced from the moment of its production, and therefore that the obligation to deliver the one-eighth, as royalty, cannot be considered as a rent charge, but merely as an obligation to deliver property belonging to plaintiff. However, it may be noted that the case cited makes no such distinction, but expressly says that land adapted to mining may be leased for a certain portion of the produce of the mine. Moreover, the lease in this instance treats the lessee as the owner of all oil produced, and imposes upon it the obligation of delivering one-eighth of it as royalty. We think that the decision cited is applicable to this case, and that the demand for the royalty or rent is governed by the prescription applicable to arrearages of rent, which is the one pleaded here.

The last question to be disposed of is the effect of the assumption, made in 1917, by the Ohio Cities Gas Company, now the Pure Oil Company, on the prescription pleaded by it. For convenience we quote the assumption again, which is as follows:

"To have and to hold all of the said leases and leasehold estates and other property referred to or described, unto the Ohio Cities Gas Company, its successors and assigns forever, as of midnight on December 31, 1917, upon condition that the Ohio Cities Gas Company (now the Pure Oil Co.) will assume and discharge all the terms and conditions of said leases [which includes the present lease] and all accounts, obligations and contracts of Pure Oil Operating Company as of said day and hour."

We gather from plaintiff's petition, especially from articles 7, 8, and 9 thereof, that the foregoing assumption was made in effecting a consolidation of the Pure Oil Operating Company with the Ohio Cities Gas Company by which the former became merged into the latter, and that the name of the Ohio Cities Gas Company was thereafter changed, by amendment to its charter, to the Pure Oil Company, the defendant herein, pleading the prescription under consideration.

In these circumstances the Ohio Cities Gas Company, now the Pure Oil Company, became liable, by reason of the consolidation, for the obligations and indebtedness of the Pure Oil Operating Company. Wolf v. Shreveport Gas, Electric Light Power Co.,138 La. 743, 759, 70 So. 789, L.R.A. 1916D, 1138. In fact, plaintiff alleges this, as the result of the consolidation, in article 11 of its petition.

The contention of plaintiff is that the contractual assumption, quoted above, constitutes a stipulation pour autri, and a new or additional obligation prescriptible only by ten years, and cites, in support of its contention, Levy v. Deposito, 133 La. 126, 62 So. 599. But the case cited is not applicable here. In the present case, the Ohio Cities Gas Company, which is now the Pure Oil Company, was assuming, in effecting the consolidation and reorganization, liabilities and obligations which, by reason of the consolidation, it could not escape. In short, it was assuming, in effect, its own liabilities and obligations. To constitute a new or additional obligation, in such an instance, the assumption should be distinctly that of the debt of a third person. It will be noted also that the assumption acknowledges no specific liability, nor any liability for a specific amount, and therefore it cannot be said to change any liability into an account stated, and thereby make it, from that standpoint, subject to the prescription of ten years.

Nothing appears on the face of the papers, on which the plea of prescription was tried, that shows that the prescription pleaded is not effective here, because of its interruption. More than six years elapsed between the time the last oil was produced and the filing of this suit. We therefore think that the trial judge was correct in sustaining the plea of prescription filed, and in dismissing, as to the Pure Oil Company, plaintiff's suit.

For the reasons assigned, the judgment appealed from is affirmed.

ROGERS, J., concurs in the decree.