Phillips Petroleum Co. v. Best Oilfield Services, Inc.

United States Court of Appeals,

Fifth Circuit.

No. 94-30250.

PHILLIPS PETROLEUM COMPANY, Plaintiff-Appellee,

v.

BEST OILFIELD SERVICES, INC., Defendant-Appellant.

April 4, 1995.

Appeal from the United States District Court for the Eastern
District of Louisiana.

Before REAVLEY, DUHÉ and PARKER, Circuit Judges.

DUHÉ, Circuit Judge:

Best Oilfield Services, Inc. (Best) appeals the district

court's judgment in favor of Phillips Petroleum Company (Phillips).

Phillips asserted three liens against Best's workover rig and

sought to recover damages for breach of contract and indemnity.

The district court held all three liens valid against Best's rig.

On appeal, Best maintains that the liens are invalid because of

prescription, inadequate description of the leased premises and

wells, and confusion. We affirm in part and reverse in part and

remand.

BACKGROUND

Best contracted with Phillips to perform workover services on

certain oil wells located on property Phillips leases in the

Bastian Bay Field, Plaquemines Parish, Louisiana. The contract

contained an indemnity provision which required Best to pay all

suppliers claims, allow no lien to be placed on the wells, and hold

Phillips harmless against any claims or liens. Pursuant to a

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letter agreement dated October 4, 1991 that extended the contract,

Best performed workover services on the Fasterling B No. 1 and

Fasterling No. 3 wells and converted the LL & E Fee 9 No. 10 well

into a saltwater disposal well. After Best completed its work,

Phillips paid Best in full.

Best, however, did not pay three of its suppliers. Best owed

$32,830 to Diamond "B" Marine Services, Inc. (Diamond), which

supplied crew boats to Best. It owed $63,251.12 to T.L.C. Marine

Services, Inc. (TLC), which provided towing and barging services to

Best. Lastly, it owed $21,239.59 to Gulf Seafood Company of

Empire, Inc. (Gulf), which furnished fuel to Best. On April 9,

1992, Phillips was notified that Diamond had recorded a lien in

Plaquemines Parish under the Louisiana Oil, Gas, and Water Wells

Lien Act, La.Rev.Stat.Ann. §§ 9:4861-:4867 (the "Act").1 Phillips

paid the suppliers in full in exchange for an assignment of their

1
The Act provides a privilege for contracted services:

Any person who does any trucking, towing or barging, or
who makes any repairs, or furnishes any fuel, drilling
rigs, standard rigs, machinery, equipment, material, or
supplies for or in connection with the drilling of any
well or wells in search of oil, gas or water, or for or
in connection with the operation of any oil, gas or
water well or wells ... has a privilege on all oil or
gas produced from the well or wells and the proceeds
thereof inuring to the working interest therein and on
the oil, gas or water well or wells and the lease
whereon the same are located, and on all drilling rigs,
standard rigs, machinery, appurtenances, appliances,
equipment ... for the amount due for such [services] in
principal and interest, and for the cost of preparing
and recording the privilege as well as ten percent
attorney's fees....

La.Rev.Stat.Ann. § 4861.B.

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rights against Best. On June 8, 1992, Phillips recorded the TLC

and Gulf liens in Plaquemines Parish. On July 9, 1992, Phillips

commenced this action against Best seeking $117,320.71 plus costs

and ten percent attorney's fees.

At trial, Best did not contest liability on the debts.

Rather, it asserted three defenses to the applicability of the

liens to its rig. First, Best contended that the TLC and Gulf

liens were not recorded within the required 180 days and thus were

prescribed under La.Rev.Stat.Ann. § 9:4862.A.2 Second, Best

contended that the descriptions in the lien affidavits filed in the

parish records were inaccurate and legally inadequate under id. §

9:4862.C. Third, it contended that the liens were extinguished by

confusion because Phillips asserted privileges against property

that it leases.

After a bench trial on briefs and stipulated facts, the

district court granted judgment for Phillips. The court rejected

each of Best's defenses. On prescription, the court found that TLC

last provided services to Best on January 8, 1992, and that Gulf

had last provided fuel to Best on January 3, 1992. Consequently,

the court held that Phillips had recorded the liens before the 180

day periods had run. On description, the court held that the

2
Before 1986, a person could assert a privilege under the
Act even if he had not recorded within 180 days so long as he
filed suit within a year. See Louisiana Materials Co. v.
Atlantic Richfield Co., 493 So.2d 1141, 1147-48 (La.1986). Now,
a person must record in accordance with § 9:4862 in order to
preserve his privilege. See La.Rev.Stat.Ann. § 9:4865; St. Mary
Iron Works v. McMoran Exploration Co., 809 F.2d 1130, 1135 n. 5
(5th Cir.1987).

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descriptions on file were sufficient to put third parties on notice

as to the property affected by the liens. Finally, on confusion,

the court held that confusion was inapplicable because Phillips did

not acquire full ownership of both sides of the lien obligations.

Best raises these same three arguments on appeal.

DISCUSSION

We review a district court's findings of fact from a bench

trial for clear error. Fed.R.Civ.P. 52(a); Verrett v. McDonough

Marine Serv., 705 F.2d 1437, 1441 (5th Cir.1983). We review the

court's legal conclusions de novo.3

I. Prescription

Best contends that the district court's findings are clearly

erroneous because TLC and Gulf provided no services or fuel to Best

within the confines of the Bastian Bay Field after December 7,

1991. Best contends that the next day should count as the first

day of the 180 day periods. Starting on December 8, 1991, the last

day to record would have been June 4, 1992, making Phillips's

3
Because the Louisiana Legislature now requires a person who
asserts a privilege under the Act to record it in order to
preserve it, we have reservations whether such a privilege
applies to movable property removed from the lease before the
privilege is recorded. See La. Const. art. 19, § 19 (1921)
(allowing privileges on movable property to exist without
recordation except when prescribed by law), continued as
statutory authority by La. Const. art. 14, § 16;
La.Rev.Stat.Ann. § 9:4861.2 (allowing seizure of movable property
removed from the lease only if the property was removed after the
lien attached); Ogden Oil Co. v. Servco, 611 F.Supp. 572, 575
(M.D.La.1985) (noting in pre-1986 case that a privilege asserted
under the Act attaches to movable property without recordation).
Nevertheless, because the issue is not before us, we will not
address it.

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recordation on June 8 too late.4

At oral argument, Phillips conceded that the district court

erred in finding that the last day of services occurred in January

1992. As an alternative argument, Phillips seeks to construe the

"in connection with" language in § 9:4861.B to include services up

through December 10, 1991. If the first day to count is December

11, 1991, then Phillips's recordation is timely.5

A. The TLC Lien

TLC provided towing and barging services to Best. TLC towed

Best's rig from the Field to Empire, Louisiana, where it arrived on

December 7, 1991. A barge, the SUARD VIII, was towed back to

4
The Act's prescription statute provides:

A. (1) To preserve the privilege granted by R.S.
9:4861, a notice of such claim or privilege, setting
forth the nature and amount thereof, shall be filed for
record and inscribed in the mortgage records of the
parish where the property is located:

....

(b) Within one hundred eighty days after the last
day of the doing, making or performing of such
trucking, towing, barging, or repairing, in the case of
claimants doing, making, or performing such services;
and

(c) In the case of furnishers of fuel, ... within
one hundred eighty days from the last date of the
delivery of such fuel ... to the well or wells.

La.Rev.Stat.Ann. § 9:4862.A.
5
Actually, day 180 would be June 7, 1992 because of the leap
year. Nevertheless, June 7 was a Sunday; in Louisiana, as under
the Federal Rules of Civil Procedure, the 180 day period carries
over to Monday, June 8. See La.Civ.Code Ann. art. 3454 (West
1994); La.Rev.Stat.Ann. § 1:55.A(1) (West 1987); Lagniappe
Constr. Co. v. Montecino, 525 So.2d 693, 694 (La.Ct.App. 1st
Cir.1988); cf. Fed.R.Civ.P. 6(a).

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Lockport, Louisiana, where it arrived on the same day. When it

arrived in Lockport, however, the barge was still loaded with

Best's equipment. The equipment had to be unloaded and the barge

cleaned. The cleanup operation concluded on December 10, 1991,

when Best redelivered the SUARD VIII to TLC. The question is

whether the unloading and cleanup of the barge delays the start of

the 180 day period until December 11.

Because TLC provided towing and barging services, we look to

§ 9:4862.A(1)(b). The statute describes the last day before the

180 day period begins as the last day such services were performed.

The word "such" refers to § 9:4861.B, which describes services

rendered "in connection with" the drilling or operation of any oil

well. Best would have us limit "in connection with" to services

rendered in the Bastian Bay Field. Phillips promotes a broader

construction that would cover services between the Field and Best's

base in Lockport where it redelivered the barge.

Best asks us to construe the statute stricti juris. When in

doubt, Louisiana courts construe privileges strictly. Amoco Prod.

Co. v. Horwell Energy, 969 F.2d 146, 148 (5th Cir.1992). The

reason for strict construction is that privileges often derogate

the rights of innocent parties. Id. Nevertheless, courts have

construed § 9:4861.B in a liberal and nontechnical way because they

consider its "in connection with" language to be "broad" and "all

encompassing." See Ogden Oil Co. v. Servco, 611 F.Supp. 572, 576

(M.D.La.1985); Ogden Oil Co. v. Venture Oil Corp., 490 So.2d 725,

730 (La.Ct.App. 3d Cir.), writ denied, 494 So.2d 328 (La.1986).

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Consequently, we apply a reasonable construction to § 9:4861.B, but

if we are left in doubt, we will construe it stricti juris. See

Continental Casualty Co. v. Associated Pipe & Supply Co., 310

F.Supp. 1207, 1217-18 (E.D.La.1969) (applying stricti juris

construction to Act only when its terms are not clear and

unambiguous), aff'd in part and vacated in part, 447 F.2d 1041 (5th

Cir.1971).

The question is whether the cleaning and redelivery of a

barge used to provide services to oil wells is performed in

connection with the operation of the oil wells. We believe that it

is. "Connection" means a logical interrelationship, and it is

synonymous with "nexus" or "link." United States v. Condren, 18

F.3d 1190, 1195, 1196 n. 18 (5th Cir.) (citing Webster's Ninth New

Collegiate Dictionary 278, 797 (1990)), cert. denied, --- U.S. ----

, 115 S.Ct. 161, 130 L.Ed.2d 99 (1994). A connection exists

between the cleaning and redelivery of the SUARD VIII and the

operation of the oil wells because Best used the barge to perform

its services on the wells. The barge carried Best's equipment.

The equipment had to be unloaded and the barge cleaned before it

could be redelivered.

Best contends that our construction of "in connection with"

makes § 9:4861.B overly broad. The example it offers is that if

the barge had been towed from the well site around the world, under

our construction that towing would be covered by the statute.

Rather, Best would limit "in connection with" to services offered

within the oilfield. Such a construction, however, is technical

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and not supported by the language of the statute. "Connection"

does not suggest any geographical boundary; rather, a connection

exists if there is a logical interrelationship or a link with the

drilling or operation of the well. We determine that the cleaning

of the barge and its immediate redelivery are services performed

"in connection with" the operation of the oil wells. We conclude

that the last day TLC performed services in connection with Best's

reworking of the wells was December 10, 1991. Because Phillips

recorded the TLC lien on June 8, 1992, the TLC lien did not

prescribe.

B. Gulf Lien

Gulf furnished fuel to Best's rig during its work in the

Bastian Bay Field. Its last delivery to Best's rig in the Field

occurred on December 6, 1991. Still, Phillips urges its same

argument that we construe the Act broadly. Phillips argues that

Best consumed the fuel provided by Gulf by having the SUARD VIII

towed back to Lockport. Since Best used the fuel until December

10, Phillips contends that the Gulf lien has not prescribed.

Section 9:4862.A(1)(c) applies to furnishers of fuel. The 180

day period starts to run after the last day such fuel is delivered

"to the well or wells." La.Rev.Stat.Ann. § 9:4862.A(1)(c). Under

this subsection, the description of the last day of services is

specific; the last day is the last day fuel is delivered to the

leased property. Gulf last delivered fuel to the wells in the

Bastian Bay Field on December 6, 1991. Consequently, the Gulf lien

prescribed before Phillips recorded it.

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 Section 9:4862.B does not save the Gulf lien from

prescription.6 That Section provides a continuing operations

exception to the beginning of the 180 day period. Patrick H.

Martin & J. Lanier Yeates, Louisiana and Texas Oil & Gas Law: An

Overview of the Differences, 52 La.L.Rev. 769, 848 (1992). The 180

day period does not begin to run if the person entitled to the

privilege continues to perform services in the same oil field for

the same contractor. Because Gulf did not furnish fuel to Best in

the Bastian Bay Field after December 6, 1991, the continuing

operations exception does not apply.

II. Description

Best's next argument addresses the sufficiency of the

descriptions in the lien affidavits. "The notice of such claim or

privilege shall contain a description of the leased property of

such nature as to make the leased property reasonably subject to

identification." La.Rev.Stat.Ann. § 9:4862.C. The question is

whether the descriptions are sufficient to reasonably identify for

third persons the leased property affected. Dooley Tackaberry,

6
That Section reads as follows:

The one hundred eighty day period shall not commence to
run, and shall be suspended, so long as the person
entitled to the privilege shall continue to furnish
labor, services, fuel, materials, and supplies, or any
of those things in the same oil field in which the well
or wells subject to the privilege are located, to the
same owner, operator, producer, or driller of the well
or wells, and whether the labor, services, fuel,
materials, and supplies, or any of those things are
furnished to the well or wells subject to such
privilege or to other well or wells.

La.Rev.Stat.Ann. § 9:4862.B.

9
Inc. v. Freeport McMoran Oil and Gas Co., 802 F.Supp. 1438, 1439

(E.D.La.1992). The district court found that the lease

descriptions satisfied the statute because they were sufficient to

satisfy the third party standard.7

Best initially argues that the descriptions are faulty in two

ways. First, Best points out that Diamond's description of the LL

& E well actually describes another well. Second, Best notes that

the Fasterling No. 3 well is located in Range 28 East, not in Range

29 East as both affidavits allege. Best contends that the faults

in the descriptions make them misleading. Best, however, alleges

no faults with the description of the Fasterling B No. 1 well. The

Best rig performed work at all three wells. Assuming arguendo that

the descriptions of the LL & E well and the Fasterling No. 3 well

are misleading, we determine that the affidavit descriptions are

7
The property description on the Diamond affidavits reads:

LL & E FEE # 10, Well No. 030082, located in Section
44, Township 20 South, Range 28 East, and on the
Fasterling B # 1, Well No. 073712, located in Section
47, township 20 South, Range 29 East and on the
Fasterling B # 3, located in Section 47, Township 20
South, Range 29 East all located in the Bastian Bay
Field, Plaquemines Parish, Louisiana.

1 Record 291. The affidavit filed by Phillips for the TLC
lien describes the leased property as follows:

LL & E FEE 9 No. 10, located in Section 44, Township 20
South, Range 28 East, on the Fasterling B No. 1,
located in section 47, Township 20 South, Range 29
East, and on the Fasterling B No. 3, located in Section
47, Township 20 South, Range 29 East which wells are
owned by Phillips Petroleum Company and located in
Bastian Bay, Plaquemines Parish.

1 Record 273.

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not misleading because they correctly describe the Fasterling B No.

1 well.

Best then argues that the descriptions of the wells by

section are not legally adequate. It reasons that the section

information in the affidavits is insufficient to identify the

relevant well because more than one well occupy each range

description. We disagree. Although Section 47, Township 20 South,

Ranges 28 and 29 East contain about thirty wells total, each well

is located on a particular lease and has a number. In addition to

providing the section information, the affidavit descriptions

provide the lease name and the well number. The lease's name and

the well's number given within a range would allow a third party to

identify the well affected by the privilege. We conclude that the

descriptions within the Diamond and TLC affidavits are legally

sufficient to provide a third party with reasonable notice of the

leased property affected by the lien.

III. Confusion

Best's final argument is that the privileges were

extinguished by confusion when they were assigned to Phillips. A

privilege becomes extinct when the creditor acquires the thing

subject to the privilege. La.Civ.Code Ann. art. 3277(2) (West

1994). Because the privileges that Phillips acquired act against

its leased property, Best contends that the privileges were

extinguished by confusion. The district court rejected Best's

argument because Phillips did not own both sides of the lien

obligations. Best argues that a privilege affecting both immovable

11
and movable property extinguishes the obligation by confusion when

the creditor acquires the immovable property. We disagree.

Article 3277(2) refers to the thing subject to the privilege,

which in this case means both movable and immovable property, the

leases, wells and the workover rig and related equipment.

Nevertheless, confusion is the theory on which Article 3277 is

based. John E. Peltier, Jr., Comment, Extinguishment of

Obligations by Confusion, 36 Tul.L.Rev. 521, 534 (1962).

Obligations are extinguished by confusion "[w]hen the qualities of

obligee and obligor are united in the same person." La.Civ.Code

Ann. art. 1903 (West 1987). Best is obligated to pay for the

subcontractor services. Its rig is subject to the privileges.

Phillips does not own Best's rig. Because the obligor's property

giving rise to the privileges is movable property and not land, the

cases cited by Best are distinguishable. See Ranson v. Voiron, 176

La. 718, 146 So. 681, 682 (1933); Griffin v. His Creditors, 6 Rob.

216, 223-24 (La.1843). Because Phillips does not own Best's rig,

the privileges are not extinguished by confusion.

CONCLUSION

For the foregoing reasons, we reverse the district court's

judgment as to the application of the Gulf lien and affirm the

judgment as to the application of the TLC and Diamond liens.

AFFIRMED IN PART, REVERSED IN PART and REMANDED.

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