Joint Operating Agreements: Fiduciary Duty

摘要

The original oil and gas leasehold owners in the subject unit entered into a joint operating agreement (JOA) covering 680-acres of land, and a well is drilled pursuant to that JOA. Valence succeeds to the rights of the Operator under the JOA. Sonat succeeds to 17.58407% of the non-operating working interest in the unit. HL&P is the surface owner. In 1993, HL&P, with the goal of enlarging its ash disposal area, begins negotiations with Valence to acquire access rights to a tract of land within the unit. When those negotiations are unsuccessful, HL&P offers Sonat $204,000 for the release of Sonat's surface rights to a 91-acre tract at the well site. Sonat accepts drat offer and executes a release on November 14, 1994, which, among other things, (a) releases Sonat's right to directly or indirectly utilize or authorize the utilization of any portion of me surface of the 91-acre tract for the exploration, development or production of the underlying mineral estate, and (b) assigns to HL&P me right of Sonat under me JOA to cause or authorize the existing oil and gas well to be plugged and abandoned, provided mat me well would not be plugged prior to a little over a year from the date the release is signed. The release expressly excludes any release or assignment of any interest in the oil, gas or other minerals. In a letter dated August 12, 1996, Valence advises Sonat that, in view of the release it executed in favor of HL&P, Valence is of the view that Sonat no longer has an interest in production from the existing well. Valence further advises mat it intends to workover the well, but that Sonat has no right to participate in the workover. Sonat sues Valence asserting causes of action for conversion, breach of contract, breach of fiduciary duty, money had and received, unjust enrichment, fraud, misapplication of fiduciary property and theft, in addition to requesting an accounting. Valence counterclaims for breach of contract, tortious interference, breach of fiduciary duty, unjust enrichment, money had and received and conspiracy to defraud, and also requested an accounting and declaratory relief. The trial court grants a directed verdict in favor of Sonat on all of Valence's claims against Sonat, based on me expiration of the statute of limitations, except for Valence's request for declaratory relief. The trial court also grants a directed verdict in favor of Valence on all of Sonat's claims against Valence except for Sonat'sbreach-of-contract claim. The case is tried to a jury, which finds that (1) Valence breached the agreement, (2) Sonat repudiated the agreement and waived its right to enforce the agreement, (3) Valence is excused from further performance under the agreement, and (4) Sonat failed to consent to workover operations on me well. The jury finds that a negative $66,192 would compensate Sonat for damages resulting from Valence's breach and awards $25,000 in reasonable and necessary attorney's fees for each party. Sonat, now El Paso, appeals. Held: reversed and remanded. With regard to the finding that Sonat repudiated the contract, the release did not convey Sonat's interest in the mineral estate and did not in any way interfere with Valence's activities as Operator. The release is not a repudiation of the JOA by Sonat. With regard to the issue of whether Sonat's release waives its right to demand compliance with the JOA, the release does not surrender any right to participate in the oil and gas production from the well, and only theOperator needs surface access to the well. The release does not relinquish Sonat's right to demand that Valence comply with the JOA. With regard to the jury's finding that Sonat failed to consent to the 1996 workover operations, Valence admitted that it did not give Sonat the notice required under the JOA, and Valence asserts that Sonat has no right to participate in the proposed operations. Because Valence had failed to give the required notice, it was error to submit to the jury the ques