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RDG Oil & Gas, LLC v. Jayne Morton Living Trust

Supreme Court of Wyoming

August 15, 2014

RDG OIL & GAS, LLC, a Nevada limited liability company, Appellant (Defendant),
v.
JAYNE MORTON LIVING TRUST, Appellee (Plaintiff)

Appeal from the District Court of Johnson County. The Honorable William J. Edelman, Judge.

Representing Appellant: Patrick G. Davidson and Matthew R. Sorenson of Daly Davidson & Sorenson, LLC, Gillette, WY. Argument by Mr. Sorenson.

Representing Appellee: Anthony T. Wendtland of Wendtland & Wendtland, LLP, Sheridan, WY.

Before BURKE, C.J., and HILL, KITE [*], DAVIS, and FOX, JJ.

OPINION

Page 1200

HILL, Justice.

[¶1] Dan C. Morton, predecessor in interest to the Jayne Morton Trust, successfully bid on several federal oil and gas leases in Natrona and Johnson counties. To develop these leases Morton sought the assistance of RDG Oil and Gas, LLC and in 2005 the parties entered into two agreements for the development of the leases. In 2012 the Jayne Morton Living Trust filed a breach of contract claim against RDG to which it did not respond. The district court entered a default judgment against RDG which it eventually moved to set aside. The district court denied its motion and this appeal followed.

ISSUE

[¶2] RDG presents one issue for our review:

Whether the district court abused its discretion in denying RDG's motion to set aside the entry of default and the entry of default judgment?

FACTS

[¶3] Dan C. Morton successfully bid on several federal oil and gas leases in Natrona and Johnson counties. To develop these leases he sought the assistance of RDG Oil and Gas, LLC. The parties entered into two separate agreements to further develop the leases.

[¶4] The first agreement pertained to federal oil and gas lease WYW 141812 (Agreement 1). This agreement required RDG to re-complete three wells (Blough 1, Blough 2, and Catterson). RDG also agreed to drill one horizontal well in the Ten Sleep formation in 2005. After the re-completion, and in the event the horizontal well resulted in production, RDG and Morton would determine how to proceed. If RDG chose not to continue with development, RDG agreed to assign all undeveloped acreage back to Morton and RDG would then retain all interest in those lands where production was obtained.

[¶5] The second agreement is referred to as the " Tisdale Prospect Agreement." Under this agreement RDG agreed to purchase the prospect acquired by Morton. RDG was to reimburse Morton for his costs in acquiring the Tisdale lease and RDG agreed to drill one well and " fully develop" the Tisdale prospect. Development was to occur unless one of two conditions existed: (1) the inability to secure adequate access and surface rights, or (2) the economic viability of the field.

[¶6] In 2012 Morton's successor in interest, the Jayne Morton Living Trust (" the Trust" ), filed a complaint in the district court for an alleged breach of contract of both agreements. Morton Trust alleged that as to Agreement 1, RDG failed to re-complete the Blough 2 and Catterson wells, failed to obtain production from the leases in question, failed to pursue a continuous drilling program, and failed to drill the Horizontal Well. The Trust also alleged that RDG failed to tender taxes to the State of Wyoming which in turn created a risk that the leases could be lost to foreclosure. As to the Tisdale Agreement the Trust asserted that RDG " lost" certain leases involved by virtue of nonpayment of rentals and non-development. Also, the

Page 1201

Trust alleged that RDG failed to drill and develop the Tisdale Prospect as contemplated under the agreement and allowed certain leases to revert back to the federal government.

[¶7] The complaint that alleged breach of contract was served on RDG's registered agent, WyomingRegisteredAgent.com, Inc. A return of service indicates that service was obtained on Sarah Garcia on November 2, 2012 at a place of business called WyoRegisteredAgent, located at 1621 Central Avenue, Cheyenne, Wyoming. The complaint and summons were not forwarded to RDG. RDG's answer was due, in accordance with W.R.C.P. 12(a), on or before November 26, 2012. That day came and went without any response from RDG and on November 28, 2012 the clerk made an entry of default. Notice of entry of default was served on RDG by mailing the notice to RDG's same record agent for service ...


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