Revised July 3, 2002
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 01-30266
ENERGY DEVELOPMENT CORPORATION
Plaintiff-Appellee
VERSUS
MICHAEL X. ST. MARTIN; VIRGINIA RAYNE ST. MARTIN;
QUALITY ENVIRONMENTAL PROCESSES, INC.
Defendant-Appellants
THE LOUISIANA LAND AND EXPLORATION COMPANY
Defendant - Counter Plaintiff
VERSUS
SAMUEL J. STAGG, III, M.D.; husband of; JULIE M. STAGG; JAMES G.
FISTER, husband of; LINDA F. FISTER; BAYOU AREA CHILDREN’S
FOUNDATION, INC.
Counter Defendants - Appellants
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ENERGY DEVELOPMENT CORPORATION
Plaintiff-Appellee
VERSUS
MICHAEL X. ST. MARTIN; VIRGINIA RAYNE ST. MARTIN;
QUALITY ENVIRONMENTAL PROCESSES, INC.
Defendant-Appellants
Appeal from the United States District Court
for the Eastern District of Louisiana
June 27, 2002
ON PETITION FOR REHEARING
Before GARWOOD, JOLLY, DAVIS, Circuit Judges.
PER CURIAM:
In response to the defendants’ petition for rehearing, we
substitute the following in place of the opinion as originally
issued:1
We AFFIRM the judgment of the district court essentially on
the basis of its careful Memorandum Opinion dated December 12,
2000.2 For the reasons stated below, we decline to consider the
res judicata defense which is raised for the first time on appeal.
I.
Energy Development Corporation (“EDC”) filed two actions
(later consolidated) seeking a declaratory judgment establishing
its ownership of mineral rights underlying property located in the
Lake Hatch - Sunrise Field area of Terrebonne Parish, Louisiana.
The defendants in only one of the cases - CA 98-3395 - have
asserted a res judicata defense. These defendants, the St. Martin
Group (Michael X. St. Martin; Virginia Rayne St. Martin; Quality
Environmental Processes, Inc.), who are surface owners of a 170
acre tract of land also claim ownership of minerals underlying that
property. The St. Martin Group conceded at trial the existence of
certain instruments filed of record upon which EDC bases its claim
1
This opinion does not resolve the petition for rehearing en banc
which is pending before the court.
2
Energy Development Corp. V. St. Martin, 128 F.Supp. 2d
368(E.D.La.2000).
2
of a mineral servitude. However, they disagree with EDC’s
interpretation of those instruments as to when and whether they
were effective to convey mineral servitudes to EDC. They also
argue that any mineral servitude conveyed has prescribed and the
minerals have reverted to them as surface owners of the land.
Plaintiff EDC’s claim of ownership of the minerals at issue is
based on a Mineral Conveyance dated May 3, 1971, effective January
1, 1971 (the “1971 Mineral Conveyance”), to its predecessor Pelto
Oil Company (“Pelto”). In that transaction, EDC contends that
Pelto acquired a single, large contiguous mineral servitude
covering the tracts at issue in this case and other lands and that
the servitude has been maintained by operations and production on
the contiguous acreage described in the 1971 Mineral Conveyance.
The defendant surface owners dispute EDC’s ownership of mineral
rights citing (1) a 1966 conveyance of minerals which they claim
included an area which severed the contiguity of any servitude
EDC/Pelto acquired in 1971, (2) ten year prescription of non-use,
and (3) their claim that the description in the 1971 Mineral
Conveyance was inadequate to convey anything to EDC’s predecessor
in title. EDC counters that the 1966 mineral conveyance, even if
effective as claimed by the St. Martin Group, does not sever the
servitude it acquired in 1971.
A brief history of the chain of title is required to
understand the issues. In 1966, Southdown, Inc. conveyed to
Southdown Exploration, Inc. a mineral servitude covering eight
3
tracts of land, one of which was an area designated as the
“Productive Area”, (the “1966 Mineral Conveyance”). In addition to
transferring title to the minerals in the Productive Area, the 1966
Mineral Conveyance obligated Southdown to convey to Southdown
Exploration mineral rights as to certain listed sands within an
area described as the “Protective Area” if production were achieved
from them (the “Protective Area Clause”).3 The Protective Area
surrounds the Productive Area on three sides. In 1970, Southdown,
Inc. conveyed to Southdown Lands, Inc. fee title to properties
listed on an Exhibit A to that instrument (the “1970 Mineral
Conveyance”). Exhibit A described the properties conveyed by
reference to previously recorded documents, including a 1944
Mortgage by a prior owner in the chain of title, Realty Operators,
Inc. The described property included the Productive Area, the
3
The Protective Area Clause reads as follows:
As an essential and integral part of the consideration paid
for this conveyance, Grantor binds and obligates itself to
convey to Grantee, from time to time as required, all of its
right, title and interest in and to the oil, gas and other
minerals in each Known Productive Sand when and if such sand
is established to be productive or capable of production in
the Protective Area. . . . If and when any Known Productive
Sand is established to be productive or capable of production
within the Protective Area as above provided, Grantor shall
then be obligated to convey to Grantee the mineral rights in
such Known Productive Sand as to the entirety of that
Protective Area. . . . Each obligation to make such additional
mineral conveyances as to Known Productive Sands shall arise
immediately and automatically whenever any Known Productive
Sand is established to be productive or capable of production
in any portion of the Protective Area as provided above . . .
As heretofore provided, conveyances shall be made from time to
time whenever the conditions set forth above shall occur . .
.
4
Protective Area and surrounding areas.
Southdown Lands, Southdown, Inc., and Realty Operators (but
not Southdown Exploration, the transferee in the 1966 Mineral
Conveyance) are all predecessors in title to all parties to this
litigation. In 1971, Southdown Lands conveyed to EDC’s
predecessor, Pelto Oil Company (“Pelto”), a mineral servitude which
EDC asserts covers a large contiguous tract which surrounds the
Productive Area, includes the Protective Area and encompasses all
tracts in this case (the “1971 Mineral Conveyance”). The conveyance
excepted interests that had been previously conveyed. St. Martin
Group contends that the servitude in the Protective Area was
conveyed in 1966 and therefore that property was excepted from the
1971 conveyance. The 1971 Mineral Conveyance contained no property
description, but rather incorporated by reference the 1970
Conveyance, which as stated above incorporated the description from
the 1944 Mortgage. The 1944 Mortgage describes the tracts at issue
by section, township, plantation name, and by frontage on the bayou
and adjacent lands.
EDC contends that the large contiguous mineral servitude it
acquired in 1971 covering the Protective Area, the tracts at issue
in this case and other lands has been maintained by operations and
production on the acreage described in the 1971 Mineral
Conveyance.4 The defendant surface owners (including the St.
4
Under Louisiana law, operations anywhere on a servitude will
maintain the entirety of a contiguous servitude. La. R.S. 31:63.
5
Martin Group) dispute EDC’s ownership of mineral rights on a number
of grounds. First, they argue that EDC did not acquire any
minerals in the Protective Area in the 1971 Mineral Conveyance,
based on their conclusion that the Protective Area had been
previously conveyed to others in the 1966 Mineral Conveyance.
Second, they argue that excepting the Protective Area from the area
conveyed to EDC / Pelto in 1971 severs the area into two
noncontiguous mineral servitudes: an area to the south of the
Protective Area on which mineral operations were conducted and an
area to the northeast of the Protective Area on which the
defendants’ surface tracts are located. According to St. Martin,
this is significant because once the Protective Area is excluded
from EDC’s servitude and the servitude is severed, mineral
operations on the southern portion of the tract could not maintain
the servitude on defendants’ acreage located to the northeast of
the Protective Area. Third, the defendants argue that the property
description in the 1971 Mineral Conveyance was inadequate to convey
anything to EDC’s predecessor in title.
Assuming that defendants are correct that the Protective Area
was conveyed to others in 1966, so that the Protective Area is
excluded from the 1971 Mineral Conveyance, EDC argues that its
servitude remains intact and is not severed. EDC argues that it
established a 41 foot corridor along the section line between
A mineral servitude prescribes after ten years of non-use. La.
R.S. 31:27.
6
Sections 59 and 60 that connects the northeastern part of the
larger servitude with the southern portion. All parties agree that
if EDC establishes a single contiguous servitude, operations on the
southern portion of the servitude would be sufficient to maintain
the entire servitude. The first important issue presented to the
district court was whether the 1966 Mineral Conveyance conveyed the
property it described as the Protective Area.
The district court found that the language of the 1966 Mineral
Conveyance created a contingent obligation to convey, not a present
conveyance of a mineral interest. Thus, it found that no mineral
interests were conveyed in the Protective Area by the 1966 Mineral
Conveyance and the Protective Area was included within the area
conveyed to EDC / Pelto in the 1971 Mineral Conveyance. The
district court also found that the description in the 1944
mortgage, which description was incorporated by reference into the
May 3, 1971 Mineral Conveyance, was sufficient to convey immovables
under applicable Louisiana law. Based on this premise, the court
found that mineral activities in the southern portion of the
contiguous tract maintained the servitude on the entire tract,
including the St. Martin Group’s property. Accordingly, it awarded
judgment in favor of EDC on all issues. The defendants appeal and,
relevant to our discussion here, raise the defense of res judicata
for the first time on appeal.
II.
During the pendency of this case in the district court, two
7
suits between some (but not all) of the parties in this suit were
proceeding in two separate Louisiana state courts, one in
Terrebonne Parish and one in Jefferson Parish.5 The St. Martin
Group asserts the judgment in the Jefferson Parish suit as res
judicata over this federal action. EDC and the St. Martin Group
were parties to the Jefferson Parish case. The Jefferson Parish
court was presented with the question of mineral ownership of
property different from the property at issue in these consolidated
cases. The mineral servitude in question in that suit was located
entirely within the Protective Area. The Jefferson Parish Court’s
decision differed with the court below in three important respects.
The Jefferson Parish court concluded that: (1) The 1966 mineral
conveyance effectively conveyed to third parties a mineral
servitude and other mineral rights in the Protective Area of the
Sunrise Field, (2)the mineral servitudes or mineral rights conveyed
by the 1966 Mineral Conveyance have been extinguished by
prescription based on ten (10) years nonuse, and these interests
have reverted to the surface owners, and (3) the omnibus property
description based on the 1944 mortgage and attached as Exhibit ‘A’
5
Prior to the institution of these suits in federal court,
Energy Development corporation initiated a suit captioned Energy
Development Corporation v. Quality Environmental Processes, Inc.,
Michael X. St. Martin and Virginia Rayne St. Martin, No. 511546,
24th Judicial District Court, Jefferson Parish Louisiana. Energy
Development Corporation and the St. Martin Group were also named as
defendants in a concursus proceeding filed by Mandalay Oil & Gas,
L.L.C. and Voyager Petroleum, Inc., No. 123320, 32nd Judicial
District Court, Terrebonne Parish, Louisiana.
8
to the May 3, 1971 mineral conveyance was not an adequate
description to effect a conveyance of the property described in the
1944 mortgage. (The Terrebonne Parish Court reached the opposite
conclusion in the suit proceeding in that jurisdiction; it agreed
with the decision in the federal district court.)6
In contrast to the final judgment in the Jefferson Parish
case, initial proceedings were in favor of EDC. In June 1998, the
Jefferson Parish court found in favor of the St. Martin Group on
6
Judgment in the Terrebonne Parish suit was entered in favor of
EDC on September 29, 2000. That case is currently on appeal to the
Louisiana 1st Circuit Court of Appeal. The Terrebonne Parish case
was a concursus proceeding to resolve the ownership of minerals as
to a tract of land located partially within and partially outside
the Protective Area. EDC and the St. Martin Group were among the
parties to that litigation. The Terrebonne Parish court held that
the Protective Area Clause created a conditional obligation to
convey mineral rights subject to a suspensive condition, not a
present transfer of a mineral servitude or other mineral right as
to the Protective Area. Accordingly, in the 1966 Mineral
Conveyance, it held that Southdown, Inc. received a mineral
servitude on the Protective Area subject to the obligation to make
conveyances of mineral rights as to the listed sands to Southdown
Exploration if the listed conditions were met. Southdown, Inc.
could then convey its servitude, subject to the obligation, to
Pelto by the 1971 Mineral Conveyance. The Terrebonne Parish court
also noted that even if the 1966 Mineral Conveyance created a
mineral servitude or other mineral right within the Protective
Area, it was clear that any such servitude or right would be
limited to the twenty “Known Productive Sands” listed in the 1966
Mineral Conveyance as to which the Protective Area Clause applied.
Such horizontal division would not prevent the 1966 Mineral
Conveyance from conveying a mineral servitude as to all other
horizons within the Protective Area to Southdown, Inc. Horizontal
stratification of the servitude within the Protective Area would
not prevent contiguity with the remainder of the servitude conveyed
in the 1971 Mineral Conveyance. It also rejected the St. Martin
Group’s claim that the 1971 Mineral Conveyance failed to create a
mineral servitude in favor of Pelto / EDC for lack of an adequate
property description.
9
Summary Judgment. The Louisiana 5th Circuit reversed and remanded
in May, 1999. In its first opinion in this case, 734 So. 2d 965
(La. Ct. App. 5 Cir. 1999), the Louisiana 5th Circuit found the
1966 Mineral Conveyance conveyed only “a conditional future
interest in the listed sands” and that because “the 1966 obligation
was limited to specific sands in the Protective Area,” it found
that “there still existed mineral rights capable of being alienated
in the Protective Area by the 1971 conveyance.” However, it
remanded for further proceedings to resolve “questions of material
fact as to the nature, extent and prescription of EDC’s mineral
rights in the Protective area (the St. Martin’s Tract) pursuant to
the 1971 conveyance,” more specifically, “whether the drilling
activity described in the Hebert affidavit (the 36 wells) over the
whole of the 1971 conveyance area interrupts prescription of the
mineral rights granted by the 1971 conveyance on the St. Martin
tracts.” On remand, the Jefferson Parish court heard additional
evidence and entered the judgment described above on December 17,
1999. EDC appealed and the Louisiana Fifth Circuit affirmed on
December 4, 2000, 777 So. 2d 481 (La. Ct. App. 5 Cir. 2000). This
was eight days before the district court issued its Memorandum
Opinion in this case on December 12, 2000 and over a month before
it entered judgment on January 17, 2001. The Louisiana Supreme
Court denied EDC’s application for writs on March 9, 2001. 786 So.
2d 734 (La. 2001)
Based on this chronology, the St. Martin Group could clearly
10
have raised their res judicata defense before the district court.
Comment (d) to Louisiana’s res judicata statute, La.R.S. 13:4231,
states that a final judgment is one which disposes of the merits of
the case in whole or in part. Therefore, “the preclusive effect of
a judgment attaches once a final judgment has been signed by the
trial court and would bar any action filed thereafter unless the
judgment is reversed on appeal.” La.R.S. 13:4231, comment(d).
Case law applying this concept appears to distinguish between when
a judgment is final for res judicata purposes and when it acquires
the authority of a thing adjudged. See Avenue Plaza, L.L.C. v.
Falgoust, 676 So.2d 1077 (La. 1996) (“The appellate court judgment
. . . affirmed the defendant’s eviction. That judgment was a final
judgment which became res judicata and conclusive between the
parties when it was rendered, with the exception of appeal or other
direct review. LSA-R.S. 13:4231. The judgment acquired the
authority of the thing adjudged and became final and definitive
when this court denied certiorari. La. C.C.P. art. 2166D.”) See
also Tolis v. Board of Supervisors, 660 So. 2d 1206, 1207 (La.
1995). Accordingly, the judgment in the Jefferson Parish suit
appears to have been final for res judicata purposes as early as
December 17, 1999, when the Jefferson Parish court entered judgment
in favor of the St. Martin Group and certainly no later than
December 4, 2000, when the Louisiana 5th Circuit Court of Appeals
affirmed the judgment of the district court. Both of these dates
precede the federal district court’s decision in this case.
11
III.
Although the district court record is replete with references
to both the Jefferson Parish suit and the Terrebonne Parish suit,
the defendants do not argue that they raised the defense of res
judicata or collateral estoppel before the district court. Rather,
they carefully avoid making this argument and assert that res
judicata may properly be considered for the first time on appeal,
relying on Jackson v. North Bank Towing Corp., 213 F.3d 885 (5th
Cir. 2000); Russell v. Sunamerica Secur., Inc., 962 F.2d 1169 (5th
Cir. 1992); and American Furniture Co. v. International
Accommodations Supply, 721 F.2d 478 (5th Cir. 1981).
Federal Rule of Civil Procedure 8(c) lists res judicata as one
of the defenses that must be affirmatively pled. Our decisions in
the above cases start from the premise that failure to raise this
defense in the district court generally precludes the district
court and appellate courts from considering the defense. Id. and
Exxon Corp. v. Texas Motor Exchange, Inc., 628 F.2d 500, 507 (5th
Cir. 1980). However, these cases also recognize that in a narrow,
well-defined class of cases, the defense of res judicata may be
considered for the first time on appeal. These cases hold that an
appellate court can address res judicata for the first time on
appeal, but only to affirm the district court’s judgment and only
if all of the relevant facts are contained in the record and are
uncontroverted. Jackson, 213 F.3d at 890-891; Russell, 962 F.2d at
1172. St. Martin asserts the defense to reverse the district
12
court.
One decision of this court has allowed a party to assert res
judicata for the first time on appeal to reverse a district court
judgment. American Furniture, 721 F.2d at 482. However, it
reiterated the rule that this can only be done “where all of the
relevant facts are contained in the record before us and all are
uncontroverted.” Id. American Furniture addressed the conflict
between judgments in parallel proceedings in state and federal
courts.7 The Louisiana state court held that one party’s mortgage
primed the claims of all intervenors. The judgment of the federal
district court held that the vendor’s lien of a party, who was also
an intervenor in the state suit, primed the mortgage being
foreclosed upon in the state court suit. Today’s case is
distinguishable from American Furniture in a number of respects.8
For reasons we explain below, the most obvious reason American
Furniture does not require us as an appellate court to apply res
judicata when the defense was not asserted in the district court is
that facts necessary for the application of the defense are not
7
In American Furniture, the state court held the American
Furniture’s asserted vendor’s lien on furniture and carpet
installed in a hotel ranked after the chattel mortgage on that
hotel. American Furniture, 721 F.2d at 481. The federal district
court held that American Furniture’s vendor’s lien primed the
mortgage. Accordingly, this court was faced with rulings that
directly conflicted as to a single property.
8
Significantly, our district court found that neither the
Jefferson Parish suit nor the Terrebonne Parish suit were parallel
actions to this proceeding.
13
found in the trial court record and are not uncontroverted.
The record in the district court reveals that the Jefferson
Parish suit adjudicated the ownership of minerals underlying a
tract of land that the parties stipulated was located entirely
within the Protective Area. The tracts at issue in this case lie
entirely outside the Protective Area. The 1966 Mineral Conveyance
and the 1971 Mineral conveyance appear in the chain of title of all
tracts in both cases. Accordingly, the federal action and the
Jefferson Parish action have two potential common issues: (a)
whether the Protective Area was conveyed in the 1966 Mineral
Conveyance, and (b) whether the 1971 Mineral Conveyance has an
adequate property description.9 Although the St. Martin Group
asserts both claim and issue preclusion, the essence of their
request is to have the Jefferson Parish court’s interpretation of
the 1966 Mineral Conveyance and the 1971 Mineral Conveyance applied
to the distinct tracts of land that are the subject of this case.
This argument triggers section (3) of the Louisiana statute, which
provides:
Issue preclusion applies only to an issue actually
litigated and determined and then only if the
determination of that issue was essential to the
judgment.
La. R.S. 13:4231.
The Jefferson Parish court addressed both common issues noted
9
It appears that the Terrebonne Parish suit has the same common
issues.
14
above. However, it is apparent from the face of the Jefferson
Parish Judgment and Reasons for Judgment that the only issue
essential to the judgment was the court’s conclusion that the
mineral rights burdening the Protective Area arose from the 1966
Mineral Conveyance, rather than the 1971 Mineral Conveyance. Once
that decision was made, the Jefferson Parish court was able to
conclude that the mineral rights at issue had prescribed based on
ten years of nonuse and award judgment to the St. Martin Group.
This is true because of two uncontroverted facts: (1) the property
in the Jefferson Parish case was located entirely within the
Protective Area, and (2)no production or drilling activity had been
conducted between 1966 and 1976 to interrupt prescription of the
servitude within the Protective Area. The Jefferson Parish court’s
interpretation of the 1971 Mineral Conveyance was therefore
unnecessary to its conclusion.
Accordingly, in this case, the only potential preclusive
effect of the Jefferson Parish judgment is its conclusion that the
1966 Mineral Conveyance conveyed mineral rights in the Protective
Area. Applying that determination to this case would require us to
treat that area as excepted from the servitude conveyed in the 1971
Mineral Conveyance. But accepting this determination does not
clearly change the result reached by the court below, because a
factual dispute remains as to whether removing the Protective Area
from EDC’s servitude severs the servitude into two noncontiguous
tracts. EDC produced evidence that contiguity was maintained
15
because a narrow 41 foot corridor connects the southern and
northwestern portions of the property subject to the servitude.
EDC argued in the district court (and in this court) that
contiguity between these tracts was maintained by this corridor.
This argument is based on evidence that the western boundary of
Waterproof Plantation, which is also the western boundary of EDC’s
servitude in that area, extends 41 feet to the west beyond the west
section line of Section 60, Township 17, Range 16 East into Section
59, Township 60, Range 16 East. Because the district court found
that no transfer was effected by the 1966 instrument it was
unnecessary for the district court to resolve this issue. The
district court’s opinion observes, however, that this boundary,
(though not the depth of the extension into Section 59), was
established by the testimony of the defendant’s expert. The
defendants counter that their expert provided actual surveys
negating plaintiff’s claims of one contiguous property. As far as
we can tell from the various opinions issued in the Jefferson
Parish case, this issue was never presented or considered in that
lawsuit.
This factual dispute precludes application of issue preclusion
in this case. Our cases allowing consideration of res judicata or
collateral estoppel on appeal do so only if “all of the relevant
facts are contained in the record and are uncontroverted.” As that
is not the case here, we decline to consider the defendants’
assertion of res judicata or collateral estoppel at this stage of
16
the litigation.
The petition for panel rehearing and all other outstanding
motions in this case are DENIED.
AFFIRMED.
17