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Comet Energy Services, LLC v. Powder River Oil & Gas Ventures

June 23, 2010

COMET ENERGY SERVICES, LLC, A NEVADA LIMITED LIABILITY COMPANY, APPELLANT (DEFENDANT),
v.
POWDER RIVER OIL & GAS VENTURES, LLC, A COLORADO LIMITED LIABILITY COMPANY, APPELLEE (PLAINTIFF).



Appeal from the District Court of Campbel County The Honorable Dan R. Price, II, Judge.

The opinion of the court was delivered by: Kite, Justice.

Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.

[¶1] This matter is before this Court for a second time. In Comet Energy Servs., LLC v. Powder River Oil & Gas Ventures, LLC, 2008 WY 69, 185 P.3d 1259 (Wyo. 2008) (Comet I), we reversed the district court‟s order granting summary judgment for Powder River Oil & Gas Ventures, LLC (Powder River) and remanded the matter for trial, concluding that the term "leasehold estate" as used in the oil and gas assignment at issue was ambiguous, and a question of fact existed as to the extent of Powder River‟s ownership interest in the well and/or lease it had purchased from Forcenergy Onshore, Inc. (Forcenergy). On remand, the district court concluded after a bench trial that Powder River owned the lease at issue in full and Comet Energy Services, LLC (Comet) had no interest in the lease. Comet appealed. We affirm.

ISSUES

[¶2] Comet presents two issues for this Court‟s determination:

A. Does the District Court‟s admission of and reliance on testimony of the parties‟ own extrinsic expression of intent as to the meaning of a contract constitute reversible error?

B. Is the District Court‟s holding that the Assignment, Bill of Sale and Conveyance from Forcenergy to Appellee satisfies the Statute of Frauds reversible error?

Powder River asserts the district court correctly found the intent of the assignment was to convey all of the assignor‟s interest in the well and associated lease to Powder River and that the assignment does not fall within the statute of frauds.

FACTS

[¶3] In August of 1998, Powder River purchased Forcenergy‟s interest in an oil and gas well located on a federal oil and gas lease in Wyoming. The granting clause of the assignment from Forcenergy to Powder River (1998 Assignment) stated as follows:

Assignor hereby transfers, grants, conveys and assigns to Assignee all of Assignor‟s right, title and interest in and to the following (all of which are herein called the "Interests"):

1. The oil and gas well(s) described on Exhibit "A" attached hereto ("Wells"), together with all equipment and machinery associated therewith;

2. The leasehold estate created by the lease(s) upon which the Wells are located and/or pooled/unitized therewith ("Leases") and all licenses, permits and other agreements directly associated with the Wells and/or Leases;

3. All the property and rights incident to the Wells, and the Leases, including, to the extent transferable, all agreements, surface leases, gas gathering contracts, salt water disposal leases and wells, equipment leases, permits, gathering lines, rights-of-way, easements, licenses and all other agreements directly relating thereto; and

4. All of the personal property, fixtures and improvements appurtenant to the Wells or used or obtained in connection with the operation of the Wells.

Comet I, ¶ 7, 185 P.3d at 1262. Exhibit A to the 1998 Assignment stated:

This Exhibit "A" contains the description of the wells/units with such description intended to incorporate all of Seller‟s/Assignor‟s interest in such wells/units and is not intended to be limited to Assignor‟s/Seller‟s interest in the geographic boundaries of the specific spaced/drillsite unit description therein.

State/County Location Well/Unit Name Field Black

Wyoming/Campbell 4-53N-75W Federal 44-4 Hill

Id.

[¶4] Over six years later, in January 2005, Comet contacted Powder River to inquire about purchasing its interest under the 1998 Assignment. At some point during the discussions between Comet and Powder River concerning the sale, a question arose in Comet‟s view as to the nature and extent of the interest Forcenergy had conveyed to Powder River. Despite Powder River‟s position that it owned the lease and the well in full, Comet conducted additional investigation in an attempt to ascertain what interest Powder River held as a result of the 1998 Assignment.

[¶5] In June of 2005, Comet contacted Forcenergy to determine what interest it had conveyed to Powder River in the 1998 Assignment. Forcenergy advised Comet that it had no records of the lease or any ownership of it. Comet did further checking with the Bureau of Land Management (BLM) and the county and then suggested to Forcenergy that it had conveyed only a wellbore interest and retained the balance of the 760-acre lease. Comet asked Forcenergy to quitclaim the remaining interest to Comet. On August 2, 2005, on the basis of Comet‟s suggestion, Forcenergy conveyed to Comet any remaining interest it had in the lease without warranting title. In August of 2005, Comet recorded this assignment with the BLM and subsequently informed Powder River of the assignment.

[¶6] On November 3, 2005, Powder River filed a declaratory judgment action seeking a determination that "as between Powder River and Comet, Powder River owns all right, title, and interest to the Subject Interest conveyed by [Forcenergy] and that Comet does not own any right, title or interest in the same." On December 29, 2005, Comet filed its answer and a counterclaim seeking a counter-declaration that Powder River obtained only a wellbore interest under the 1998 Assignment, and that Comet acquired the balance of Forcenergy‟s interest in the lease in 2005. Powder River filed a motion for summary judgment on September 14, 2006. Comet responded to Powder River‟s motion and filed a cross-motion for summary judgment on November 1, 2006. The district court held a summary judgment hearing on November 6, 2006, and entered an order granting summary judgment in favor of Powder River on February 6, 2007.

[¶7] Comet appealed to this Court, claiming the district court incorrectly interpreted the 1998 Assignment as conveying all interest in the lease to Powder River. We concluded:

[T]he district court improperly determined that summary judgment was appropriate under the facts of this case. The term "leasehold estate," as used in the 1998 Assignment, is ambiguous. This ambiguity gives rise to a genuine issue of material fact concerning the intent of the parties to the assignment.

We reversed the summary judgment order and sent the matter back to the district court for trial.

[¶8] Back in the district court, Powder River submitted evidence to show that Forcenergy intended the 1998 Assignment to convey all of its right, title and interest in the Federal 44-4 well and the federal lease on which it was located. Comet countered with evidence intended to show that Forcenergy only conveyed a wellbore/drilling unit and not the balance of the lease. After considering all of the evidence, the district court found that Forcenergy intended to convey all of its interest in the well and the lease to Powder River and Comet had no remaining ownership interest in the lease. The district court entered judgment for Powder River. Comet appealed.

STANDARD OF REVIEW

[¶9] Our review of a district court‟s ruling after a bench trial is governed by the following standards:

The factual findings of a judge are not entitled to the limited review afforded a jury verdict. While the findings are presumptively correct, the appellate court may examine all of the properly admissible evidence in the record. Due regard is given to the opportunity of the trial judge to assess the credibility of the witnesses, and our review does not entail re-weighing disputed evidence. Findings of fact will not be set aside unless they are clearly erroneous. A finding is clearly erroneous when, although there is evidence to ...


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