In Lexington Land Development LLC v. Chevron Pipeline Company et al, a Louisiana landowner’s suit for damages to land alleged to have been caused by oil and gas operations failed to survive exceptions of prescription and the subsequent purchaser rule.
In 1959 the Hoffman heirs granted a mineral gas lease on 343 acres in East Baton Rouge Parish to Chevron’s predecessor. Shell Pipeline owns and operates a pipeline across the property. Hoffman also granted surface leases to Chevron. In 1962 the surface leases expired and in 1963 Chevron relinquished its rights in the mineral lease except for three production units. The lease was assigned to Stone Petroleum and, in 1991, to Zinn Petroleum. Lexington purchased the property in 2005 from the Hoffman heirs for development of a subdivision.
Lexington sued Chevron, its successors, and Shell in 2007 after being notified of a rupture in the Shell pipeline. After adverse rulings, Lexington obtained assignments of rights from the Hoffman heirs and amended its petition.
In evaluating the defendants’ peremptory exceptions of prescription the court noted:
- Prescription for claims arising out of tortious conduct causing damage to immovable property is one year and commences to run from the day the owner acquired or should have acquired knowledge of the damage.
- Constructive knowledge is whatever notice is enough to excite attention and put the injured party on guard or call for inquiry. That notice is tantamount to knowledge or notice of everything to which a reasonable inquiry might lead.
- The plaintiff cannot rely on ignorance attributable to its own willfulness or neglect. A plaintiff need not have knowledge of the nature and extent of the damage for prescription to run.
- A court’s consideration in determining the reasonableness of the plaintiff’s action or inaction in light of the surrounding circumstances includes the plaintiff’s education and intelligence and the nature of the defendant’s conduct. (You watch Justified? As plaintiffs the Bennetts would have lots of extra time).
- Under the doctrine of contra non valentum, prescription does not run against one who is ignorant of the facts upon which its cause of action is based when in fact and for good cause a plaintiff is unable to exercise its cause of action when it accrues.
So how did Lexington fail?
The claims had prescribed on the face of the pleadings so the burden shifted to Lexington to show that its claims were not prescribed. The court denied Lexington’s claim that Chevron breached its restorative obligations under the mineral lease (which would trigger the 10-year prescriptive period) because there were no specific contractual obligations for Chevron to have breached.
The court found that Lexington possessed sufficient knowledge to begin the running of prescription in 2005, when it acknowledged disclaimers of liability in the Act of Sale by which it acquired the property for all pollutants and contaminants, including petroleum and natural gas. Prior to 2005 a Phase 1 environmental site assessment and Phase 2 site investigation showed tanks, a number of wells, pits and tank batteries and other evidence of contamination. The Phase 2 site inspection disclosed compounds indicating impact from hydrocarbons. The environmental consultant recommended a monitor well and further site evaluations. Lexington elected to perform some but not all of the recommended evaluations.
Lexington contended that the disclaimer language was “boilerplate” and the deficiencies in the Phase 1 and Phase 2 reports were not sufficient to put Lexington on notice of extensive hidden subsurface contamination. The death knell was that the test was not whether Lexington knew of the substantial damage but whether it had sufficient information to put it on guard or call for inquiry.
The subsequent purchaser rule
Lexington relied on the Hoffman heirs’ assignment of their rights under the expired 1959 mineral lease to support their claims. But Lexington had no right to sue based on assignments from mineral owners after the lease had expired. An owner of property is deemed to have no right or actual interest in recovering from a third party for damage inflicted on the property before his purchase the absence of an assignment or subrogation of rights belonging to the owner of the property with the damage was inflicted.
Charlie Watts, RIP