Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Superior Court County of Los Angeles Nos. NC037774, NC037785, Judith Vander Lans, Judge
Bergkvist, Bergkvist & Carter, Paul J. Carter and Richard J. Cowles, for Appellant.
William J. Sulentor, Maria M. Rohaidy, Michael M. Peters and Matthew D. Fischer; Taubman, Simpson, Young & Sulentor, for Respondents.
YEGAN, J.
Charles Stewart King and Juliene Joy King, trustees of the Charles Stewart King Intervivos Trust (King), Charles Stewart King individually, The Charles King Company, and Matthew and Stewart Company, Inc. (King), appeal from a summary judgment granted in favor of respondents Signal Hill Petroleum Inc. and Chevron Corporation (Signal Hill Petroleum) in a consolidated action to enforce an oil and gas lease. (Code Civ. Proc., § 437c, subd. (c).) The trial court concluded there were no material triable facts that the oil well on King's property (Unit Well C-47) was abandoned or that Signal Hill Petroleum lost the right to access and operate the well. We affirm. With respect to King's cross-complaint for abandonment of the well easement, Code of Civil Procedure section 772.030, subdivision (b) bars King from obtaining a judgment that changes or affects the terms or operation a "Unit Agreement" and Unit Operating Agreement for the well. (See Butcher v. Okmar Oil Co. (1977) 65 Cal.App.3d 972, 975-976 [summary judgment based on former Code Civ. Proc., § 751.3.)
Facts
This dispute involves an oil and gas lease. In this area of law an "operating oil lease is both a conveyance and a contract designed to fit the needs of the owner of the land and the operator of the oil properties in making them productive." (Montana-Fresno Oil Co. v. Powell (1963) 219 Cal.App.2d 653, 659.) The subject property, known as the Bush lease or Unit Well C-47, is located at 2841 Gardena Avenue, Signal Hill. It is part of the Long Beach/Signal Hill Oil Field, a 540 acre oil field with 229 tracts and 160 wells.
Signal Hill West Unit
In 1935 R.R. Bush, Ethel Bush, and Pauline B. Robb entered into an oil and gas lease with R.R. Bush Oil Company. Unit Well C-47 was developed on the property.
The Bush lease was later sold to Sun Exploration and Production Company (Sun).
In 1972, owners of oil and gas interests in the Long Beach/Signal Hill Oil Field entered into a Unit Agreement to create the Signal Hill West Unit (SHWU) for the cooperative development and operation of the wells. The Unit Agreement named Texaco, Inc. (Texaco) as unit operator and was approved by the State Oil and Gas Supervisor on February 8, 1972 pursuant to Public Resources Code section 3301.
"[U]nit operation is based on the scientific approach of treating the [oil] reservoir, rather than the lease, as the entity for planning production. In unit operation, all surface lessees over a given reservoir agree to treat their properties as a single lease, the project being carried out by a single operator responsible to a committee on which all lessees have representation. . . . Lease drainage is then disregarded; each lessee receives a proportion of the unit's total production determined by the amount of oil which originally underlay his lease. Unit operation makes possible the increase of recoveries up to the maximum possible with secondary recovery methods . . . ." (Jacobs, Unit Operation of Oil and Gas Fields (1948) 57 Yale Law Journal 1207, 1210-1211 fn. omitted.)
Public Resource Code section 3301 states in pertinent part: "Whenever the supervisor finds that it is in the interests of the protection of oil or gas from unreasonable waste, the lessors, lessees, operators or other persons owning or controlling royalty or other interests in the separate properties of the same producing or prospective oil or gas field, may, with the approval of the supervisor, enter into agreements for the purpose of bringing about the cooperative development and operation of all or a part of parts of the field . . . . Any such agreement shall bind the successors and assigns of the parties thereto in the land affected thereby and shall be enforceable in an action for specific performance."
In 1973, the owners of the Bush lease, which included the working interest owner (Sun), the royalty owners, and the surface fee owner (Robert C. Kohler), signed and recorded an Agreement To Become A Party To The Unit Agreement.
On April 15, 1982, the unit operator (Texaco), the working interest owner of Unit Well C-47 (Sun), and the surface fee owner (Kohler) entered into a Joint Use Agreement granting Kohler the right to use the property surface for parking, providing it did not interfere with the unit operator's use of the property for oil and gas operations.
On May 17, 1982, Kohler sold the surface fee interest to H.W.A. Dawson but reserved all oil, gas, mineral, petroleum and hydrocarbon rights. In 1985, Dawson sold the surface fee interest, without mineral or oil or gas rights, to King.
Sun transferred the working interest in Unit Well C-47 to Signal Hill Petroleum on May 11, 1988. In 1994, Signal Hill Petroleum purchased Texaco's working interest in SHWU and became the unit operator of all SHWU wells including Unit Well C-47.
In 2004 and 2005, Signal Hill Petroleum contacted King about well maintenance and testing. King agreed to provide access and remove construction materials, dirt, and equipment on the property. On April 1, 2005, a Signal Hill Petroleum crew went to the property to perform well testing, maintenance and exploratory work. King denied access and blocked access to the well with stockpiles of dirt, equipment, construction materials, and vehicles.
Consolidated Complaints
On November 23, 2005, Signal Hill Petroleum sued for breach of contract, easement encroachment (nuisance/trespass), and injunctive relief. (Case No. 037774.) King filed a separate action the next day for quiet title, breach of written contract, unjust enrichment, declaratory relief, and abandonment of the well easement. (Case No. 037785). By stipulation, the actions were consolidated and King's complaint was treated as a cross-complaint.
Chevron Corporation answered the cross-complaint as the successor of Texaco.
Signal Hill Petroleum and King filed cross motions for summary judgment or, in the alternative, summary adjudication of issues. Briefly stated, King claimed the well was idle and the Bush lease had terminated pursuant to a lease habendum clause. (See e.g., Montana-Fresno Oil Co. v. Powell, supra, 219 Cal.App.2d at p. 660 [oil lease continues until oil is no longer produced].) Signal Hill Petroleum claimed the habendum clause was modified by the Unit Agreement and Unit Operating Agreement.
The Bush lease has a habendum clause for a primary lease term of 20 years and a secondary lease term for "so long thereafter as oil or gas or casing-head gas or other hydro-carbon substances . . . is produced therefrom in quantities deemed paying by Lessee." The lease requires that the lessee pay, each month, 14-1/6 percent of the proceeds received from the sale of oil produced by the well.
The trial court granted summary judgment on the ground that the "property and Unit Well C-47 are part of the Signal Hill West Unit and Signal Hill Petroleum and King, as parties to the Unit Agreement, are subject to the terms and conditions of the Unit Agreement and Unit Operating Agreement . . . ." Summary judgment was also granted in favor of Signal Hill Petroleum and Chevron on King's second amended cross-complaint.
Discussion
We review the grant of summary judgment de novo, applying the same rules and standards that govern the trial court's determination of a motion for summary judgment. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) "The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute. [Citation.]" (Ibid.)
King argues that summary judgment was improperly granted because of defects in the moving papers. Signal Hill Petroleum sought summary adjudication of issues but the notice of motion does not specify what issues, causes of action, or affirmative defenses are to be summarily adjudicated. Similar defects appear in the separate statement of undisputed facts. (Cal. Rules of Ct., rule 3.1350(b).) The motion, however, was for summary judgment or, in the alternative, summary adjudication of issues.
When the motions were argued, Signal Hill Petroleum agreed there were problems with the motion for summary adjudication and requested that the trial court rule on the motion for summary judgment. The trial court did not abuse its discretion in disregarding minor defects in the notice of motion and separate statement of undisputed facts. (See e.g., Parkview Villas Assn., Inc. v. State Farm Fire & Casualty Co. (2005) 133 Cal.App.4th 1197, 1212.) King's argument concerning the motion, which was opposed on the merits, is irrelevant to the order he is appealing from, i.e., the order granting summary judgment.
Trespass
King argues that the summary judgment must be reversed because the encroachment action is based on trespass/nuisance. King asserts that a trespass must be intentional and that any disagreement about his rights as a surface fee owner is not a trespass on the land of another. This misstates the law where the conduct (i.e., piling dirt, construction materials, and debris to prevent access to and use of an oil well) interferes with another person's mineral rights. (See e.g., Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1778.) "If the oil and gas lessee is not granted exclusive possession of the surface by the terms of the lease, he has nevertheless a right to such possession as is necessary and convenient for the exercise of the profit, which, in fact, may preclude any other surface possession." (Callahan v. Martin (1935) 3 Cal.2d 110, 122; see Wall v. Shell Oil Co. (1963) 209 Cal.App.2d 504, 511.)
A trespass may occur where a party, entering land pursuant to a limited consent, i.e., limited as to purpose of place, proceeds to exceed those limits by divergent conduct on the land of another. (Mangini v. Aerojet-General Corp. (1991) 230 Cal.App.3d 1125, 1141.) The activity may be both a trespass and a nuisance. (Id., at p. 1136 & fn. 6.) "[S]ection 160 of the Restatement Second of Torts, provides in pertinent part: 'A trespass may be committed by the continued presence on the land of a structure, chattel, or other thing which the actor or his predecessor in legal interest has placed on the land [¶] "(a) with the consent of the person then in possession of the land, if the actor fails to remove it after the consent has been effectively terminated, . . .' " (Id., at pp. 1141-1142, fn. omitted.)
Here the mineral estate is the dominant estate. (See e.g., Callahan v. Martin, supra, 3 Cal.2d at pp. 122-126.) The Unit Agreement grants the working interest owner an easement "to use as much of the surface of the land within the Unit Area . . . to conduct any oil and gas operations thereon as Working Interest Owners may deem necessary for reasonable Unit Operations . . . ." The Joint Use Agreement defines the easement and permits the surface fee owner (i.e., King) to park on the property but provides that vehicles must be removed upon 48 hours notice so that a drilling rig or well equipment can be moved onto the property.
King argues that the summary judgment should be reversed because the moving papers do not address damages, a requisite element of trespass. Signal Hill Petroleum, however, waived compensatory damages and limited the action to nominal damages. (Civ. Code, § 3360; Staples v. Hoefke (1987) 189 Cal.App.3d 1397, 1406.) Every trespass imports an injury which the law gives nominal damages. (Davidson v. Devine (1886) 70 Cal.519, 520.) "By nominal damages is meant some trifling sum, [such] as a penny . . . . [Citation.]" (Ibid.) The failure to award nominal damages, i.e., a penny, is not grounds for reversal. (Staples v. Hoefke, supra, 189 Cal.App.3d at p. 1406.) "The law disregards trifles." (Civ. Code, § 3533.)
Termination of Lease: Habendum Clause
King argues that the lease terminated on its own terms after the well stopped producing and became idle. The Bush lease, however, was modified by the Unit Agreement and Unit Operating Agreement. After SHWU was created, the working interest owner (Sun), the royalty owners (Kohler, Dorothy C. Sturgess, and R. Robert Bush Jr.), and the surface fee owner (Kohler) signed an "Agreement to Become a Party to the Unit Agreement." stating that each party "confirms, ratifies, adopts and joins in the execution of said Unit Agreement as party thereof and agrees to be bound by all the terms and provisions thereof" and that "that no default exists under any oil and gas lease." The Unit Agreement provides that "each oil and gas lease . . . shall remain in force for the full term of this [unit] agreement for 90 days after the date on which this agreement terminates." Under the Unit Agreement, royalty owners and working interest owners receive a fractional share of unit production regardless of whether the owner's individual well (i.e., Unit Well C-47) is producing or idle. (See Pub. Resource Code, § 3641.)
Public Resource Code section 3641 states in pertinent part: "An agreement for the management, development, and operation of two or more tracts of land in the same field or in the same producing or prospective pool as a unit without regard to separate ownerships, and for the allocation of benefits and costs on a basis set forth in such agreement, shall be valid and binding upon those who consent thereto and may be filed with the supervisor for approval."
King complains that he received no royalties from Unit Well C-47 but that is consistent with his rights as a limited fee surface owner. The royalty interest was severed from the surface fee when Kohler sold the property to King's predecessor (Dawson) in 1982 without oil, gas, and mineral rights.
King argues that the Unit Agreement does not control because Unit Well C-47 has been idle for years. Kevin Laney, the operations manager for Signal Hill Petroleum, stated that SHWU has continuously operated the unit wells and continuously paid royalties. Laney declared that "each well is designed and utilized to produce the most effective and economic production scheme available. While a well might be designated as 'idle' and not being used as a producer or injector, it is still operating within the scope of the Unit operation plan and is held in reserve until such time as it is necessary for use as a producer and injector."
Royalty Payment Records
King complains that royalty payment records were not produced. Signal Hill Petroleum objected to the discovery request because the records were voluminous but agreed to make the documents available for inspection.
King argues that not a single royalty check has been produced and that the failure to attach all SHWU records to the moving papers raises the inference that Unit Well C-47 was abandoned. Laney, however, declared that SHWU has continuously maintained and operated the well under the unit operating plan and that Signal Hill Petroleum is required by the California Division of Oil, Gas and Geothermal Resources to conduct periodic well tests and assessments. Signal Hill Petroleum tested Unit Well C-47 in 1993, 1996, 2002, and 2004, using the well easement to gain access.
The trial court did not err in overruling objections to Laney's declaration. The content of a writing may be proved by otherwise admissible secondary evidence. (Evid. Code, § 1523, subd. (d); see e.g., Heaps v. Heaps (2004) 124 Cal.App.4th 286, 293-294.) " '[W]here the question is not as to the contents of a writing, but as to whether one has been made or not, and the question comes collaterally in issue, it may be proved by parol.' [Citations.]" (Ponce v. Marr (1956) 47 Cal.2d 159, 162.) We reject the argument that Signal Hill Petroleum's discovery responses are contradictory or constitute a judicial admission that royalty payments were not paid. (See e.g., Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1522.)
The Texaco Letter
King claims that Unit Well C-47 was abandoned in 1993 when Texaco, the SHWU unit operator, agreed to abandon the well. "To reach that conclusion would be to 'fling a plank of hypothesis over an abyss of uncertainty.' " (Gradus v. Hanson Aviation, Inc. (1984) 158 Cal.App.3d 1038, 1056.) In 1993, King met with Texaco representatives to discuss remediating the property. Texaco advised King orally and in a 1993 letter that abandonment of the well would require approval of SHWU owners and Texaco's Denver Producing Division management. It was undisputed that SHWU and Texaco's Denver office did not approve abandonment of the well.
The Texaco letter states: "As was discussed with you on April 22, 1993, the approval of this project requires the approval of the owners of the Signal Hill West Unit and Texaco's Denver Producing Division management.
The trial court found that King could not have reasonably relied on the letter. We concur. King's action for breach of written contract is contrary to the Texaco letter and declarations of Texaco employees.
King argues that he relied on another Texaco employee, Robert Vincent, Ventura Area Supervisor for Texaco Exploration. Vincent, however, declared there was no promise or agreement to abandon the well. This was confirmed by Vincent's supervisor who met with King and told him that any plan to abandon the well had to be approved by SHWU owners and Texaco's upper management. The conversation occurred in 1990, three years before the Texaco letter.
King was deposed about the letter and admitted that the contract to abandon the well was contingent upon Texaco quitclaiming its interest in the well. "I decided to go ahead and do [the] remediation ahead of them moving in to abandon" the well. Where, as here, there is a clear and unequivocal admission by the defendant in his deposition, "'we are forced to conclude there is no substantial evidence of the existence of a triable issue of fact.' [Citation.]" (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 21.)
Promissory Estoppel
The promissory estoppel claim, asserted as a defense and as a cause of action in the cross-complaint, is based on King's conclusory statements which are insufficient to raise a triable issue of fact. (C.L. Smith Co. v. Roger Ducharme, Inc. (1977) 65 Cal.App.3d 735, 743; McIvor v. Savage (1963) 220 Cal.App.2d 128, 134.) Like the trial court, we must utilize common sense in drawing inferences from the undisputed facts. (Visueta v. General Motors Corp. (1991) 234 Cal.App.3d 1609, 1615.) The trial court was not required to make a strained and improbable inference that there was a binding promise to abandon the well. (See e.g., Hoover Community Hotel Development Corp. v. Thomson (1985) 167 Cal.App.3d 1130, 1141.) King's self-serving statements raise no triable material facts. (Code Civ. Proc., § 437c, subd. (e); Butcher v. Gay (1994) 29 Cal.App.4th 388, 404-405; FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 400 [defendant's state of mind evidence, is not, per se, a basis for denying summary judgment].)
Second Amended Cross-Complaint
King argues that the trial court erred in granting summary judgment in favor of Signal Hill Petroleum and Chevron on his second amended cross-complaint for quiet title, breach of written contract, unjust enrichment, declaratory relief, and abandonment of the well easement. (Civ. Code, § 877.040.) The cross-complaint mirrors the claims already discussed but alleges two more theories.
The first cause of action for quiet title states that King acquired title by adverse possession but is not discussed in King's moving papers or his opposition to Signal Hill Petroleum's summary judgment motion. We are not surprised. The adverse possession claim (i.e., that King maintained open, notorious, exclusive, hostile and adverse possession of the property for five years preceding commencement of the action) is contradicted by King's testimony that Texaco agreed to abandon the well and quitclaim the property to him. In 2004, Kevin Laney asked King to move equipment and dirt so that his crew could access the well. King testified that he agreed to give Laney "straight access, and . . . move all the equipment out of his way and grade it smooth. And apparently that wasn't good enough for what they needed to do."
There was no hostile, adverse, and exclusive possession. Signal Hill Petroleum continuously operated the well, paid royalties, tested Unit Well C-47, maintained a fence around the well, and posted a sign on the well. King filed the cross-complaint after he learned that Signal Hill Petroleum planned to turn Unit Well C-47 into an injection well. King testified that "I was of the understanding that [the] well was going to be abandoned" but was told "that wasn't in the cards."
Abandonment of Easement
King's fifth cause of action for abandonment of the well easement is based on Code of Civil Procedure section 877.010 and alleges that Unit Well C-47 has not been used for 20 years. We doubt the statute applies to the right to extract oil and gas which is a profit a prendre in the nature of an incorporeal hereditament. (Gerhard v. Stephens (1968) 68 Cal.2d 864, 878-879.) In contrast to an easement, which is a right of use, a profit gives a person the right to take part of the soil or its products from the land of another. (6 Miller & Starr (3rd ed 2006) Cal. Real Estate, Easements § 15.1, p. 15-6.)
Assuming, arguendo King can sue for abandonment of the well easement, he must show that the easement was not used for a continuous period of years, there has been no separate property tax assessment for the easement, and "[no] instrument creating, reserving, transferring, or otherwise evidencing the easement is recorded." (Civ. Code, § 877.050, subd. (c).) But here, the Unit Agreement, the State's approval of the SHWU Unit agreement, Sun's agreement to be a party to the Unit Agreement, and the Joint Use Agreement were all recorded. The Joint Use Agreement required that Kohler (King's predecessor) construct and maintain "a parking lot and driveway approach, sufficient for proper access to existing Unit facilities and existing Unit Well C-47. Such parking lot and driveway approach shall be constructed so as to accommodate a minimum load of 80,000 pounds and be of such quality that use thereof by all vehicles and equipment necessary for the proper operation, maintenance, or abandonment of said well shall be in compliance with all pertinent governmental regulations and requirements."
An action for abandonment of an easement must be brought in the same manner as an action to quiet title. (Civ. Code, § 887.040. subd. (c).) King's cross-complaint, however, fails to name as cross-defendants all interested persons, including SHWU royalty interest owners and working interest owners. (Code Civ. Proc., §§ 762.010, 762.020.)
The more specific statute is Code of Civil Procedure section 772.030 [formerly section 751.3] which permits an action to terminate right of entry or occupation for the production of oil or gas. It provides: "No judgment rendered pursuant to this article shall change or affect the terms of operation of any valid unit agreement or valid operating agreement which comes within the provision of Sections 3301 or 3321 of the Public Resources Code." (§ 772.030, subd. (b).)
King's cross-complaint seeks a judgment that would change or affect the terms of the Unit Agreement and Unit Operating Agreement. The action is barred by Code of Civil Procedure section 772.030, subdivision (b). (See e.g., Donlon v. Weaver (1981) 118 Cal.App.3d 675, 678 [applying section 772.030 to oil and gas lease executed in 1926]; Butcher v. Okmar Oil Co., supra, 65 Cal.App.3d at p. 975 [summary judgment based on former Code Civ. Proc., § 751.3].) The trial court reasonably concluded that King's limited rights as a surface fee owner do not trump well established principles governing the unitization of oil and fields to prevent waste, to increase the recovery of oil and gas, and to minimize land subsidence. (Pub. Resource Code, §§ 3301; 3315, subd. (d); 3630; 3640; see City of Long Beach v. Vickers (1961) 55 Cal.2d 153, 155-156 [discussing unitary operation of Wilmington Oil Field to arrest and ameliorate subsidence].)
Our Legislature has declared "that the management, development and operations of lands as a unit for the production of oil and gas aids in preventing waste, increases the ultimate recovery of oil and gas, and facilitates increased concurrent use of surface lands for other beneficial purposes." (Pub. Res. Code, § 3630.) The Legislature has also declared that the unit operation of underground oil and gas pools is necessary in order to repressure or maintain pressure "in said pool or pools in order to arrest or ameliorate subsidence." (Public. Res. Code, § 3315, subd. (d).).)
The judgment (order granting summary judgment) is affirmed. King is ordered to pay costs on appeal.
We concur: GILBERT, P.J., PERREN, J.