Judge: Gail Killefer, Case: 21STCP02927, Date: 2025-01-14 Tentative Ruling

Case Number: 21STCP02927    Hearing Date: January 14, 2025    Dept: 37

HEARING DATE:                 Tuesday, January 14, 2025

CASE NUMBER:                   21STCP02927

CASE NAME:                        AllenCo Energy, Inc. v. Uduak-Joe Ntuk, et al.  

MOVING PARTY:                 Plaintiff/Cross-Defendant AllenCo Energy, Inc.

OPPOSING PARTY:             Defendant/Cross-Complainant, Roman Catholic Archbishop of Los Angeles

TRIAL DATE:                        Not Set

PROOF OF SERVICE:           OK

PROCEEDING:                      Demurrer to First Amended Cross-Complaint

OPPOSITION:                        31 December 2024

REPLY:                                  7 January 2024

TENTATIVE:                         The demurrer to the FACC is sustained without leave to amend.

Background

Plaintiff Allenco Energy, Inc. (“AllenCo” or “Plaintiff”) formerly operated a facility of oil and gas production in the University Park community of Los Angeles (the “Facility”), starting in September 2009, pursuant to an assignment of leases with the Roman Catholic Archbishop of Los Angeles (“RCALA”), which owns the property. The Facility is comprised of 21 oil and gas production wells. Because three of the twenty-one wells extended into property owned by the City of Los Angeles (“City Wells”), these wells are subjected to a separate Lease with the City of Los Angeles, which was also assigned to AllenCo in 2009. Two of the three City Wells were considered the highest-producing wells. AllenCo operated the facility for four years until November 2013 when the surrounding community raised odor and health concerns, prompting a response from regulators and public officials.

In 2019, the City of Los Angeles advised AllenCo that the assigned lease had expired in 2014 because of AllenCo’s inactivity, and the correspondence was sent by Respondent and Defendant Uduak-Joe Ntuk (“Ntuk”), who was the City’s then-Petroleum Administrator and is currently the State Oil and Gas Supervisor in charge of California’s Geologic Energy Management Division (“CalGEM”). Consequently, AllenCo claims that this termination frustrated the purpose the lease with the defendant by making it impossible and financially infeasible for AllenCo to operate the Facility. Thus, AllenCo alleges that both leases were terminated simultaneously. As a result of the termination of both leases, AllenCo asserts that it is not the current operator of the Facility, as defined by Public Resources Code § 3009. Instead, RCALA and City of Los Angeles became the de facto operators pursuant to Public Resources Code § 3016. However, AllenCo asserts that it became a “captive holdover tenant” because both the RCALA and the City of Los Angeles refused to comply with their obligations as owners/operators of the Facility.

On April 14, 2021, AllenCo informed the RCALA of its intention of abandoning the Facility and ceasing any further maintenance. The parties disagreed and contested the issue of who was the proper operator of the Facility based on the termination of the subsurface leases. To date, CalGEM treats AllenCo as the current operator of the subject lease, requiring AllenCo to abide by inspection demands and to maintain the subject facility. On September 3, 2021, AllenCo sued for: (1) writ of mandate; (2) declaratory relief; (3) injunctive relief; (4) breach of contract; (5) breach of implied covenant of good faith and fair dealing; (6) intentional interference with contract and conspiracy to interfere with contract; (7) intentional interference with prospective economic advantage and conspiracy to interfere with prospective economic advantage; (8) negligent interference with prospective economic advantage; and (9) inverse condemnation and violation of the Takings Clause of the Fifth and Fourteenth Amendments of the United States Constitution and Article 1, Section 19 of the California Constitution.

On December 9, 2021, RCALA filed a Cross-Complaint (“CC”) against AllenCo and Chevron U.S.A, Inc. (“Chevron”) as successor-in-interest to Standard Oil of California. The Cross-Complaint alleges four causes of action: (1) Declaratory Relief; (2) Breach of Contract; (3) Damage to Real Property, and (4) Trespass.

On September 14, 2024, the court granted AllenCo’s motion for judgment on the pleadings with leave to amend.

On October 8, 2024, AllenCo’s filed the operative First Amended Cross-Complaint (“FACC”) alleging nine causes of action:

1)     Declaratory Relief;

2)     Breach of Contract;

3)     Breach of Contract (Implied Duty to Perform with Reasonable Care);

4)     Breach of Contract (Implied Covenant of Good Faith and Fair Dealing);

5)     Breach of Contract (Specific Performance);

6)     Damage to Real Property (Nuisance);

7)     Trespass (Injunction Against Trespass);

8)     Waste; and

9)     Reparation (Unjust Enrichment).

Plaintiff/Cross-Defendant AllenCo now demurs to the FACC. RCALA opposes the Motion. The matter is now before the court.

request for JUDICIAL notice

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).) “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)

Cross-Complainant AllenCo requests judicial notice of the following:

Exhibit A: A true and correct copy of the June 20, 1964 Drill Site Agreement (“DSA”).

Exhibit B: A true and correct copy of the April 14, 2021 letter from the Company to the Archdiocese (4-14-21 Letter), referenced in Paragraph 47 of the FACC.

Exhibit C: A true and correct copy of the Order to Plug and Abandon Wells, Decommission Attendant Facilities, and Restore Wells Site, No. 1174, issued by the California Department of Conservation’s Geologic Energy Management Division (“CalGEM”) on March 5, 2020, available at www.conservation.ca.gov/calgem/Documents/ Orders/1174.pdf (last visited Nov. 9, 2024).

Exhibit D: A true and correct of the March 19, 2020 California Department of Conservation Acknowledgement of Appeal.

Exhibit E: A true and correct copy of the Amended Order to Plug and Abandon Wells, Decommission Attendant Facilities, and Restore Wells Site, No. 1174A, issued by CalGEM on May 26, 2023.

Exhibit F: A true and correct copy of the June 7, 2023 Notice of Appeal of Order No. 1174A.

Exhibit G: A true and correct copy of the July 17, 2023 Stipulation Resolving Appeal of CalGEM Orders Nos. 1174 and 1174A.

Exhibit H: A true and correct copy of the August 2023 CalGEM report entitled, Idle Well Program Legislative Report: An Overview of Idle and Orphaned Wells in California, available at www.conservation.ca.gov/calgem/Documents/ Idle%20Well%20Program%20Report%20for%202021.pdf (last visited Nov. 9, 2024).

Exhibit I: A true and correct copy of the CalGEM webpage entitled, Idle Well Program, available at www.conservation.ca.gov/ calgem/idle_well (last visited Nov. 9, 2024).

Exhibit J: A true and correct copy of the October 2023 CalGEM report entitled, State Oil and Gas Well Abandonment Expenditure Plan, available at www.conservation.ca.gov/calgem/Documents/state_abandonment_expenditure_final. pdf (last visited Nov. 9, 2024).

Exhibit K: A true and correct copy of the CalGEM webpage entitled AllenCo Oil Production Facility (Los Angeles), available at www.conservation.ca.gov/calgem/Pages/AllenCo.aspx (last visited Nov. 9, 2024).

Exhibit L: A true and correct copy of the 9-9-24 Joint Status Report on CalGEM’s Abandonment and Restoration Work filed with the Court by the parties to this action, including the Company, the Archdiocese, the City of Los Angeles, and Chevron U.S.A. Inc.

Exhibit M: A true and correct copy of the CalGEM webpage entitled Secretary Haaland Announces $35 Million from President Biden’s Investing in America Agenda to Clean Up Orphaned Wells in California, New Guidance for Next Phase of the Program, available at www.conservation.ca.gov/news (last visited Nov. 9, 2024).

Cross-Complainant’s request for judicial notice is granted.

Demurrer[1]

I.         Legal Standard

Where pleadings are defective, a party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.¿ (CCP, § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s properly pled facts as true and ignores contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider whether a plaintiff will be able to prove the allegations or the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.) 

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)

II.        Discussion

RCALA owns a real property (the “Property”) that has an oil and gas production facility (the “Facility”). (FACC, ¶¶ 6-9.) The FACC alleges that AllenCo and Chevron had the exclusive right to maintain and control the Facility pursuant to a Drill Site Agreement (“DSA”). (Id. ¶¶ 14, 24.) AllenCo and Chevron breached the DSA when they failed to plug and abandon the oil wells, decommission the Facility, and return the Property to its original condition. (Id. ¶ 24.)

AllenCo now demurs to the FACC on the basis that the DSA does not impose on it any obligations and the California Department of Conservation’s Geologic Energy Management Division (“CalGEM”) has issued Orders and undertaken the task to plug and abandon the wells, decommission the Facility, and restore the Property its original condition.

            A.        The Doctrine of Judicial Abstention

AllenCo asserts that the 1st and 3rd through 9th causes of action should be dismissed under the doctrine of judicial abstention because the equitable relief requested by the RCALA would require the Court to assume and interfere with the functions of CalGEM. “Under the abstention doctrine, ‘a trial court may abstain from adjudicating a suit that seeks equitable remedies if ‘granting the requested relief would require a trial court to assume the functions of an administrative agency, or to interfere with the functions of an administrative agency. [Citations.]” (Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal.App.4th 124, 147 [internal citations omitted].) “[A]bstention is generally appropriate only if there is an alternative means of resolving the issues raised in the plaintiff's complaint.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1369 .)

The Parties do not dispute that CalGEM is the administrative agency responsible for ordering and overseeing the plugging and abandonment of oil and gas wells in California. CalGEM has issued two orders directing AllenCo to plug and abandon the wells, decommission the Facility, and restore the Property. RCALA does not dispute that the regulatory process overseen by CalGEM, which is actively remediating the Property, provides it with an alternative means for resolving the claims raised in the FACC, and that once CalGEM completes the remedial work, the RCALA will recoup its land as in its original condition.

While RCALA maintains that issues related to AllenCo’s willful breach of contract, damage to real property, waste, trespass, reparation, and declaratory relief all require judicial intervention, RCALA fails to show (1) that judicial intervention as to each of those issues is needed because there are issues left unresolved by CalGEM’s Orders ;(2) that judicial intervention would not interfere with CalGEM’s regulatory functions, and (3) how asking the court to oversee these tasks would not require the court to take on a regulatory role.

“Judicial abstention is appropriate in cases where granting injunctive relief would be unnecessarily burdensome for the trial court to monitor and enforce given the availability of more effective means of redress.”(Alvarado v. Selma Convalescent Hospital (2007) 153 Cal.App.4th 1292, 1298 (Alvarado).) Here, RCALA fails to explain why CalGEM’s Orders would be inadequate to redress the injuries it seeks to resolve in the FACC. The FACC asserts there are 21 wells that need to be plugged and abandoned. (FACC, ¶ 21.) RCALA fails to show that it would not be burdensome for this court to monitor and ensure the plugging and abandonment of the 21 wells or that CalGEM is ill-suited to supervise and enforce the plugging and abandonment of the oil wells. Furthermore, RCALA  fails to show how its request for declaratory relief will persist even after CalGEM finishes restoring the Property.

“Judicial abstention is appropriate when granting the requested relief would require a trial court to assume the functions of an administrative agency or to interfere with the functions of an administrative agency.” (Alvarado, supra, (2007) 153 Cal.App.4th at p. 1298.) RCALA fails to explain how the court overseeing this action through to judgment would not in any way assume or interfere with the functions of CalGEM. In opposition, RCALA takes the position that judicial abstention is not appropriate because CalGEM has not “completed” the restoration of the Property. Specifically, “RCALA is still restricted from use of its property, and requires judicial intervention and determination of particular contract provisions in order to recoup its land and unpaid annual fees.” (Opposition, at p. 13:1-2.)

However, AllenCo points out that judicial abstention calls for deference to regulatory agencies when the Legislature has expressly assigned them the task. (See Center for Biological Diversity, Inc. v. FPL Group, Inc. (2008) 166 Cal.App.4th 1349, 1371 [“[I]t would be appropriate for the court to abstain from adjudicating it in deference to the regulatory oversight being provided by public authorities.”].) Where “[t]he Legislature's expressed intent to address these issues, both now and in the future, mandates judicial restraint as much if not more so than had it refused to do so.” (Wolfe v. State Farm Fire & Casualty Ins. Co. (1996) 46 Cal.App.4th 554, 568.)

CalGEM has been assigned and taken on the task of not only plugging the oil wells, but also restoring the Property to its original condition. RCALA fails to show how such a judicial determination as to all the issues raised in the FACC would not interfere with CalGEM’s regulatory oversight nor require the court to assume a regulatory function. The court fails to see how it can order AllenCo to begin plugging the wells and restoring the Property, while CalGEM is in the process of doing the same. Nor has RCALA shown how such an order would not interfere with CalGEM’s Orders.

Lastly, RCALA asserts that judicial abstention is not appropriate because it pled violations of Public Resources Code §§ 3206 and 3208, but AllenCo is correct in asserting that those sections do not confer a private right of action on RCALA to enforce those provisions. (See Animal Legal Defense Fund v. Mendes (2008) 160 Cal.App.4th 136, 144 [“[I]n  the absence of an intent to provide a private right of action, that the courts were not to create such a right.”]; United States v. Presbyterian Camp and Conference Centers, Inc. (C.D. Cal., May 19, 2020, No. 2:19-CV-07182-RGK-SS) 2020 WL 6193639, at *6 [finding Public Resource Code does not create a private right of action].) Therefore, any allegations that AllenCo breached certain sections of the Public Resource Code are irrelevant as there is no private right of action and the enforcement of those provisions are left to regulatory agencies like CalGEM.

            B.        RCALA Fails to Show the DSA Imposed Obligations on AllenCo

The court further finds that RCALA fails to allege facts showing it can prevail on its claims:

i.          1st Cause of Action for Declaratory Relief

To state a claim for declaratory relief, the plaintiff must allege a proper subject of declaratory relief and an actual controversy involving justiciable questions relating to the party’s rights or obligations.  (See CCP, § 1060; Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.) RCALA fails to explain what actual controversy exists now that CalGEM has undertaken the task of plugging the wells and restoring the Property to its original condition. Moreover, CalGEM has designated AllenCo as the “Operator” under Public Resource Code § 3206 and the entity responsible for abounding and plugging the wells. (RJN, Ex. C, E , G.)

ii.         3rd, 4th, 5th Causes of Action - Breach of Contract - Implied Duty to Perform with Reasonable Care & Implied Covenant of Good Faith and Fair Dealing, and Breach of Contract – Specific Performance)

“[A] court will construe the language of the contract on its face to determine whether, as a matter of law, the contract is reasonably subject to a construction sufficient to sustain a cause of action for breach.” (Hayter Trucking, Inc. v. Shell Western E&P, Inc. (1993) 18 Cal.App.4th 1, 18.)

The FACC fails to state what specific provision of the DSA imposes on AllenCo the obligations to use reasonable care to operate and maintain the facility, to remove equipment and improvements from the Property, and to plug the wells and restore the Property to its original condition. Paragraph 1 of the DSA outlines the AllenCo’s rights, but not its obligations:

Lessee shall have the further sole and exclusive right to use said land for any purpose connected in any way with the exploration, drilling for and production of oil, gas, asphaltum and other hydrocarbons from said land or form other lands, including without limiting the generality of the foregoing, the right to construct, erect, maintain, use, operate and remove all pipe lines, power lines, telephone lines, machinery and other facilities which Lessee may desire in connection with such operations . . .

(RJN Ex. A at pp. A-001-A-002 [italics added].)

RCALA fails to cite any case law supporting the proposition that when a contract grants a party certain rights, those rights result in a reciprocal contractual obligations. (See Sexton v. Nelson (1964) 228 Cal.App.2d 248, 263 [Lease giving lessor right to remove all improvements made under lease did not obligate lessee to remove improvements he had placed on the land].)

RCALA also fails to show that AllenCo was not released from its contractual obligations when it terminated the DSA or that AllenCo did not have the contractual right to terminate the DSA. Paragraph 21 expressly states:

Lessee may, at any time, or from time to time, surrender or terminate this agreement as to all or a portion of said land, and Lessee thereupon shall be relieved of any obligations hereunder with respect to such land, except obligations theretofore accrued; provided, however, Lessee may not terminate its obligations under Paragraph 4 hereof unless it surrenders all its rights in and to[] the lands described in Exhibits A and B hereof.

(RJN Ex. A at pp. A-008-A-009 [italics added].)

The court agrees that RCALA fails to show it can prevail on its breach of contract claims because the DSA imposed no contractual obligation on AllenCo to remove equipment, remove improvements, or plug the wells and restore the Property. The court further finds that AllenCo’s obligation to plug and abandon the well does not stem from the DSA but from the Public Resources Code and CalGEM’s finding that AllenCo was the operator. (PRC, § 3009; RJN Ex. C, E, G.) Accordingly, RCALA fails to show that AllenCo’s obligation to plug and abandon the well stemmed from the DSA, rather from Public Resource Code § 3009, such that it is entitled to contractual damages and remedies.

                        iii.       6th and 7th  Cause of Action – Nuisance and Trespass

The nuisance claim related to AllenCo’s and Chevron’s “failure to remove their oil and gas extraction and production equipment, materials, property and improvements from the PROPERTY, failure to plug and abandon their WELLS, failure to decommission their FACILITY and failure to return the PROPERTY to its original condition[.]” (FACC, ¶ 106.) However, RCALA consented to the nuisance because the DSA gave Lessee the right to construct and erect production equipment and improvements. Moreover, RCALA failed to show the DSA imposed on AllenCo and affirmative obligation to remove any equipment and improvements, as wall as plug the wells and restore the Property.

RCALA also fails to show that its nuisance claim will survive after CalGEM finishes restoring the Property to its original condition. RCALA fails to show that the court, rather than CalGEM, can provide the requested remedy of abating the nuisance caused by the oil and gas extraction and production equipment, as well as AllenCo’s failure to plug and abandon the well.

As to the trespass claim, RCALA claims “ALLENCO and CHEVRON have intentionally failed and refused to remove their oil and gas extraction and production equipment, materials and other personal property and improvements.” (FACC, ¶ 114.) However, as stated above, RCALA fails to show that under the DSA, AllenCo was obligated to remove its equipment and improvements. RCALA also fails to show that the trespass claim did not become moot when AllenCo terminated the DSA or by CalGEM’s Orders to plug and abandon the wells and restore the Property.

                        iv.        8th and 9th Causes of Action – Waste and Reparation

RCALA argues that AllenCo’s waste has diminished the value of the Property. But RCALA fails to show that after CalGEM restores the Property to its original condition, RCALA’s waste claim continues to be viable and why the court, rather than CalGEM, is better suited to provide the requested remedy of returning the Property to its original condition. (FACC, ¶ 127.)

As to the unjust enrichment claim, the claim fails as pled because an express agreement exists between the Parties. “As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 137.)

While RCALA requests leave to amend, RCALA fails to explain how its claims for breach of contract, damage to real property, waste, trespass, reparations, and declaratory relief will survive after CalGEM finishes plugging the wells and restoring the Property. RCALA fails to allege what damages or remedies it is entitled to after CalGEM plugs the oil wells and restores the Property. Absent a showing that issues asserted in the FACC will remain viable after CalGEM Orders are executed, the court fails to see why this demurrer should not be sustained without leave to amend.

C.        2nd Cause of Action – Breach of Contract

The 2nd cause of action alleges that “ALLENCO was obligated under Paragraph 3 of the DRILL SITE AGREEMENT to make annual payments of five thousand ($5,000.00) dollars to RCALA” and RCALA was injured due to AllenCo’s failure to pay the annual fees. (FACC, ¶¶ 69-72.)

AllenCo does not dispute that it was required to pay an annual fee of $5,000 but asserts that the claim is time-barred. RCALA is barred from recovery of any annual payment owed before October 8, 2020, because the second cause of action was not asserted until October 8, 2024, and breach of contract claims have a four-year statute of limitation. (CCP, § 337(a).)

Second, AllenCo asserts under Paragraph 8 of the DSA, its obligation to pay was excused because AllenCo’s contractual rights were prevented or hindered by laws or restrictions.  The FACC confirms that in June 2016, the Los Angeles Superior Court ordered AllenCo to not resume operations at the Facility until it came into compliance. (FACC, ¶¶ 41-42.) Similarly, under Paragraph 21 of the DSA, AllenCo’s obligation to pay was also excused it chose to terminate the Agreement. AllenCo asserts that no later than April 2021, it informed the RCALA that it intended to withdraw from the Property and cease maintaining the facility. (FACC, ¶ 47; RJN Ex. B.)

RCALA’s opposition rebuts the assertion that the 2nd cause of action is time-barred or that AllenCo’s performance was not excused under Paragraph 8 and Paragraph 21 of the DSA. Consequently, RCALA fails to show that the second cause of action is capable of successful amendment. The demurrer to the second cause of action is sustained without leave to amend.

Conclusion

The demurrer to the FACC is sustained without leave to amend.