Blanchard et al v. dudley et al

Filing 53

MEMORANDUM ORDER denying 42 Motion for Partial Summary Judgment; denying 43 Motion for Summary Judgment. Signed by Judge Elizabeth E Foote on 9/28/2012. (crt,Keifer, K)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
SHREVEPORT DIVISION

JAMES H. BLANCHARD, JR., ET AL.

CIVIL ACTION NO. 5:09-CV-858

VERSUS

JUDGE ELIZABETH ERNY FOOTE

MARGARET CORNELIA AGURS TUCKER,
ET AL.

MAGISTRATE JUDGE HORNSBY

MEMORANDUM ORDER
The parties have submitted Motions for Partial Summary Judgment on the issue of
damages.1

[Record Documents 42 and 43]. The dispute stems from the Plaintiffs’

purchase of land from the Defendants, where ultimately, the Plaintiffs only received a
13/16 interest in the oil and gas royalty. Thus, at the crux of the case lies the question of
to what damages are the Plaintiffs entitled, if any, for the reversionary interest to a 3/16
oil and gas royalty. The damage issue is also impacted by the undisputed fact that even

1

In the October 27, 2010 Status Conference in this matter, the parties informed
the Court that a major issue preventing the parties from engaging in meaningful
settlement negotiations is the parties’ divergent views of the appropriate calculation of
damages. The parties asked for permission from the Court to submit motions for partial
summary judgment on the issue of damages. Despite the highly unusual procedure of
asking a Court to decide damages before the issue of liability has been determined, this
Court, pursuant to that request, allowed the parties to submit cross-motions on the
issue of the proper calculation of damages assuming Plaintiffs succeed on their claims.
These cross motions are the subject of that Order. However, the procedural posture of
this case is problematic in that the ultimate damages determination cannot be made
due to the sheer number of fact issues in dispute.
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if the Plaintiffs were entitled to this interest, that interest was not due to them until May
1, 2006.2
The Plaintiffs have asserted three theories of liability. The first and most concrete
of the theories targets the breach of warranty against eviction, pursuant to Louisiana Civil
Code 2500, et seq. Under this claim, for the reasons that follow, the Court finds that the
Plaintiffs have no entitlement to damages measured by the actual royalties that they would
have received but for the eviction. Rather, under Louisiana Civil Code Articles 2506 and
2511, the damages on Plaintiffs’ breach of warranty claim allow only a reduction in
purchase price. In addition to the claim of breach of warranty against eviction, the
Plaintiffs have loosely argued they are entitled to damages for failure to deliver, pursuant
to Louisiana Civil Code 2475,3 and the sale of a thing belonging to another, pursuant to
Louisiana Civil Code Article 2452.

Ultimately, the Court finds that it lacks crucial

information necessary to a determination of damages on these causes of action.
I. Factual Background
The Plaintiffs, James H. Blanchard,4 Gary E. Patterson, and Melodye Tanner
Patterson, brought this action against the Defendants to recover damages for an alleged

2

The second half of the mineral interest was reserved by Defendants in the
transfer deed until May 1, 2006. Defendants dispute the obligation to obtain from third
parties the missing 3/16th interest.
3

The Court notes that any claim for failure to deliver would be subject to a oneyear prescriptive period. La. C.C. Arts. 2498 & 2534. This has been the subject of
previous discussion and motions, but the Court ultimately held there were factual issues
that precluded a finding. See Record Document 31.
4

Mr. Blanchard has since deceased.
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breach of the warranty against eviction, failure to deliver, and sale of the thing of another.
On May 1, 1996, the Defendants conveyed to the Plaintiffs over 1,000 acres of property
located in Caddo Parish (hereinafter the “Property”) in a Cash Sale Deed, “with full
guarantee of title.” Record Document 15-13, p. 1. The relevant terms of the Cash Sale
Deed are as follows:
Vendors hereby declare that they grant, bargain, sell, convey and deliver
unto vendees all right, title and interest they have in any tract or tracts of land
located in Sections 14 and 15, Township 1 North, Range 16 West, Caddo Parish,
Louisiana, subject only to the royalty reservation listed below, whether properly
described herein or not.
Vendors reserve unto themselves all of the oil and gas royalty in and under
the aforesaid tracts until May 1, 2001. Commencing at 12:01 a.m. on May 1, 2001,
vendors hereby transfer one-half (1/2) of the oil and gas royalty in and under the
aforesaid land unto vendees, their heirs and/or assigns, in the same proportion
vendees are purchasing the property. Commencing at 12:01 a.m. on May 1, 2006,
vendors hereby transfer unto vendees, their heirs, and/or assigns, the remaining
one-half (1/2) of all oil and gas royalty in and under the aforesaid property in the
same proportions as vendees are purchasing the property.
Id. at p. 2. The sale of the Property was made in consideration of $375,000 cash from the
Plaintiffs. On May 1, 2006, the Plaintiffs began receiving only 13/16ths of the total oil and
gas royalty in the Property. After making a demand on the Defendants for 100% of the
oil and gas royalty, the Plaintiffs learned that the “missing” 3/16ths of the oil and gas
royalty in the property is owned by third-parties pursuant to three deeds dating from 1941
(hereinafter the “1941 Deeds”).5

5

Factual disputes also exist regarding whether the Plaintiffs knew or should have
known of the 1941 Deeds before May 1, 2006. For purposes of the present motions,
the Court assumes the Plaintiffs only discovered the interests represented by the 1941
Deeds after May 1, 2006.
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The parties dispute whether, in the Cash Sale Deed, the Defendants sold only their
interests in the Property or if Defendants sold in excess of their interests in the Property.
For purposes of these motions, the Court must assume that the Plaintiffs’ interpretation of
the contract, that Defendants sold all of the oil and gas royalty in the Property, not just the
oil and gas royalty owned by Defendants as of May 1, 1996, is correct.
II. Law and Analysis
In their complaint, the Plaintiffs assert that they “are entitled to damages in the
amount of the lost royalty production to date for the 3/16's of the royalty production that
they have not received since May 1, 2006.”6 Both parties focus attention on the breach of
warranty against eviction, found in Louisiana Civil Code Articles 2500, et seq. The Civil
Code defines the scope of the warranty against eviction as follows:
The seller warrants the buyer against eviction, which is the buyer's loss of,
or danger of losing, the whole or part of the thing sold because of a third
person's right that existed at the time of the sale. The warranty also covers
encumbrances on the thing that were not declared at the time of the sale,
with the exception of apparent servitudes and natural and legal nonapparent
servitudes, which need not be declared.
If the right of the third person is perfected only after the sale through the
negligence of the buyer, though it arises from facts that took place before,
the buyer has no claim in warranty.

6

Plaintiffs argue in their present motion on the issue of damages that the proper
measure is “the value of the undelivered mineral royalty interest, subject to the cap of
[$375,000], the price paid under the Cash Sale Deed.” Record Document 43-2, p. 10.
If Plaintiffs’ argument is that the damages equal the time-of-sale value of the purchased
mineral royalty interest, then Plaintiffs argument would be consistent with Defendant’s
argument and the Court’s ultimate conclusion. However, the Court interprets Plaintiffs’
argument to be, in effect, that damages equal the May 1, 2006 value of the mineral
royalty interest, which includes the post-sale increase, from May 1, 1996 to May 1,
2006, in the value of the 3/16ths oil and gas royalty.
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La. C.C. Art. 2500. Louisiana Civil Code Articles 2506 and 2511 state the proper measure
of damages for a breach of the warranty against eviction under Article 2500:
A buyer who avails himself of the warranty against eviction may recover from the
seller the price he paid, the value of any fruits he had to return to the third person
who evicted him, and also other damages sustained because of the eviction with the
exception of any increase in the value of the thing lost. La. Civ. Code Art. 2506.
When the buyer is evicted from only a part of the thing sold, he may obtain
rescission of the sale if he would not have bought the thing without that part. If the
sale is not rescinded, the buyer is entitled to a diminution of the price in the
proportion that the value of the part lost bears to the value of the whole at the time
of the sale. La. Civ. Code Art. 2511.
Thus, the “price paid” by the buyer, in the case of either a complete or partial eviction,
drives the damages calculation.7
The profit that a purchaser could have made had the eviction not occurred is not the
type of damages to which Articles 2506 and 2511 refer. See, e.g., Lockwood Oil Co. v.
Atkins, 104 So. 386 (La. 1925); Burrows v. Pierce, 6 La. Ann. 297 (La. 1851); Leon
McQueen Lumber Co., Inc. v. Baer, 391 So. 2d 1198 (La. App. 1 Cir. 1980). Article 2506
expressly exempts the post-sale “increase in the value of the thing lost” from inclusion in
the damages calculation. The basis for exclusion of profit is the principle that damages on
a breach of the warranty against eviction claim “must be based on the value of the land
at the time of its sale . . ., and not at the time of eviction.” Crowell & Spencer Lumber Co.,
Ltd., 179 So. 21 (La. 1938). The price at the time of sale includes a present valuation of
future expected revenues.

7

Later-realized increases in these revenues constitute an

The Plaintiffs seemingly concede they were not fully evicted from the property.
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increase in the value of the thing lost, and under Article 2506 must be excluded. Thus,
damages do not equal, as Plaintiffs argue, the profit lost or the “[May 1, 2006] value of the
undelivered mineral royalty interest.”8
Further, it must be noted that the thing sold by Defendants but unavailable due to
the 1941 Deeds is not simply a “3/16ths oil and gas royalty.” Rather, the thing sold by
Defendants on May 1, 1996 was a reversionary interest to the 3/16ths oil and gas royalty
reserved by Defendants, where the reserved oil and gas royalty had a term of ten years.9
Therefore, assuming Plaintiffs’ success on the breach of warranty against eviction claim,
Plaintiffs are entitled to damages equal to the proportional value of this reversionary

8

The Plaintiffs seemingly acknowledge the state of the law, but advocate for a
different result: “The remedy set forth for an action for breach of warranty of title by
La. Civ. Code. Ann. Art. 2506 is the price paid. This lends little in the way of guidance
due to the fact that at the time of the sale, the mineral royalty interest was not valued
separately from the Property. Moreover, the fact remains that Defendants did deliver
part of the thing that they promised, and thus return of the entire purchase price is
admittedly not a feasible remedy for numerous reasons. Plaintiffs submit that the
correct measure of damages in this instance is the value of the undelivered mineral
royalty interest, subject to a cap of [$375,000], the price paid under the Cash Sale
Deed.” Record Document 43-2, p. 10.
9

When an individual sells land subject to a reservation of mineral rights, the
individual creates a mineral servitude, lease, or royalty depending on the terms of the
reservation. La. R.S. § 31:16. Mineral rights are real rights, La. R.S. § 31:16; see La.
C.C. Art. 476, which operate as burdens on the property, La. C.C. Art. 478. With the
transfer of the Property, Defendants necessarily transferred the reversionary interests in
the outstanding 1941 Deeds and the reversionary interest to the oil and gas royalty
reserved by Defendants. See La. R.S. §§ 31:76 & 31:104; Hicks v. Clark, 72 So. 2d 322
(1954). The rights to the oil and gas royalty reserved by Defendants, pursuant to the
Cash Sale Deed, would revert to the landowners, naturally, at the end of the terms
stated in the Cash Sale Deed. Similarly, the interests represented by the 1941 Deeds
will revert back to the landowner of the Property upon their extinction due to
prescription for non-use or due to confusion by unity of ownership by the landowner.
See La. R.S. §§ 31:74; 31:76; 31:103; 31:104.
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interest as a part of the whole of the thing sold at the time of sale.9 For obvious reasons,
the Court cannot specify a dollar value, but rather leaves that determination to the parties.
The two remaining theories of liability are more problematic insofar as a damages
determination is concerned. As previously mentioned, the Plaintiffs have only loosely
argued entitlement to damages for failure to deliver and the sale of the thing of another.
With respect to the failure to deliver, the Civil Code provides that damages are available
on this cause of action. See La. Civ. Code art. 2485; Nelson v. Holden, 52 So. 2d 240 (La.
1951) (holding that the purchaser was entitled to damages, as stipulated by the contract
of sale, when seller refused to comply with her contractual obligation to transfer title to
property to the purchaser). However, there remains outstanding the question of whether
damages include lost royalty payments. More importantly, the parties debate what the
Defendants “failed to deliver.” The Defendants submit that all they were required to
deliver was the land itself, which was done. The Plaintiffs, on the other hand, believe the
Defendants had a duty to deliver 100% of the royalty interests. This distinction is crucial
to any damages finding, and precludes a meaningful analysis by the Court. With respect
to the theory of sale of a thing of another, the Plaintiffs fail to analyze or even effectively
discuss the damages available under this Civil Code Article. The Court’s dilemma is only
increased by the fact that they neglected to provide the Court with any authority to make
the damages calculations that are requested for these two causes of action. Rather, they
simply cite the damages available for eviction, arguing that said damages are not

9

Although the Plaintiffs could pursue rescission of the sale, they have shown no
interest in this form of relief.
Page 7

satisfactory under the facts of this case. And, in addition to that, they supply their own
model for damages, which is not a true formulation of damages, but rather a conclusion
that they are entitled to the lost royalty payments they would have obtained if they had the
3/16 royalty interest.
Despite the parties’ wishes and this Court’s best effort to provide guidance on the
damages available, the issues presented to the Court are too unclear and in such a state
of contention that the Court cannot meaningfully analyze the latter two theories of liability.
In other words, the Court cannot speculate on what possible damages could be awarded,
due to the number of variables presented by the parties’ briefing: the variety of legal
scenarios, the possibility that one of these claims is prescribed, and the number of
disagreements the parties have as to the controlling law, the facts, and the legal import of
the language in the Cash Sale Deed. This conclusion only serves to reinforce the necessity
of determining liability before considering damages, as a damages finding is unquestionably
affected by every significant fact in a case.
III. Conclusion
For the foregoing reasons, assuming the Plaintiffs’ success on their breach of
warranty against eviction claim, the Plaintiffs’ damages are limited to a diminution of the
purchase price. With respect to the allegations of failure to deliver and sale of the thing
of another, the Court will not make a damages determination because there are a host of
factual and legal issues left to be resolved, and the state of the briefing fails to significantly
shed light on a reliable method of making a damages calculation in light of the issues
above.
Page 8

Accordingly,
IT IS ORDERED that the Defendants’ motion for partial summary judgment
[Record Document 42] be and is hereby DENIED.
IT IS FURTHER ORDERED that the Plaintiffs’ motion for partial summary
judgment [Record Document 43] be and is hereby DENIED.
THUS DONE AND SIGNED in Shreveport, Louisiana, this 28th day of September,
2012.

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