Gold Standard, Inc. v. Getty Oil Co.

• Decision Date: 11 January 1996
• Docket Number: No. 940234,940234
• Citation: 915 P.2d 1060
• Parties: GOLD STANDARD, INC., Plaintiff, Appellant, and Cross-Appellee, v. GETTY OIL COMPANY and Getty Mining Company, Defendants, Appellees, and Cross-Appellants.
• Court: Utah Supreme Court

Page 1060

915 P.2d 1060

GOLD STANDARD, INC., Plaintiff, Appellant, and Cross-Appellee, v. GETTY OIL COMPANY and Getty Mining Company, Defendants,

Appellees, and Cross-Appellants.

No. 940234.

Supreme Court of Utah.

Jan. 11, 1996.

Rehearing Denied May 7, 1996.

James S. Lowrie, Barry G. Lawrence, Deno G. Himonas, Salt Lake City, and Benard V. Preziosi, New York City, for plaintiff.

Carolyn B. McHugh, Jill A. Parrish, Brian J. Romriell, Mark F. James, and Steven G. Crockett, Salt Lake City, for defendants.

RUSSON, Justice:

Gold Standard, Inc. (GSI), appeals from (1) the trial court's entry of partial summary judgment in favor of Getty Oil Company and Getty Mining Company (collectively, Getty) on GSI's breach of contract and wrongful conversion claims, and (2) the trial court's entry of a judgment notwithstanding the verdict on GSI's fraud claim following a jury verdict in GSI's favor. Getty cross-appeals the trial court's entry of partial summary judgment in favor of GSI on Getty's breach of contract claim. We affirm.

FACTS

On appeal from a trial court's entry of a judgment notwithstanding the verdict, we view the evidence and all reasonable inferences therefrom in a light most favorable to On December 11, 1973, GSI and Getty Mining Company entered into an agreement entitled "Operating Agreement" (the Agreement). The Agreement concerned a joint mining venture on property in the Mercur area near Tooele, Utah, to which GSI had acquired mineral leases.

the party who prevailed at trial. Heslop v. Bank of Utah, 839 P.2d 828, 839 (Utah 1992); King v. Fereday, 739 P.2d 618, 620 (Utah 1987); Gustaveson v. Gregg, 655 P.2d 693, 695 (Utah 1982). We recite the facts accordingly. Heslop, 839 P.2d at 830.

Under the terms of the Agreement, Getty received a seventy-five percent interest in the project and GSI received a twenty-five percent interest. The Agreement further provided that the Mercur project was to be split into two phases: Phase I, which involved exploration and pre-development, and Phase II, which involved development and production. Phase I of the project was to be funded entirely by Getty, and Phase II was to be funded by the parties according to their proportionate interests. The Agreement specified that Phase II would begin after the parties formally approved an initial mine work plan following either an internal feasibility study funded entirely by Getty or an external feasibility study funded by the parties according to their proportionate interests. In addition, the Agreement provided that if either party failed to fund its relative share of Phase II, the other party would be entitled to convert the defaulting party to a net profits interest (NPI) holder with a reduced interest in the project.

Getty's top management decided to manage the Mercur project out of its Salt Lake City district office and assigned Robert Blanc as district manager, Robert Hautala as district production manager, and Joseph Berg as district in-house counsel in 1980. In late 1980, Getty gave GSI an engineering study prepared for Getty by Bechtel Corporation in an attempt to meet the feasibility study prerequisite of proceeding to Phase II. GSI protested that the Bechtel study was not a suitable feasibility study. In February 1981, GSI again requested a feasibility study. At some point prior to July 1981, Getty gave GSI a revised Bechtel engineering study, and GSI again objected that it was not a proper feasibility study within the terms of the Agreement.

In July 1981, Getty's district officials made a presentation to Getty's top management recommending that Getty proceed with Phase II of the Mercur project. Getty's top management responded by approving a limited financial commitment and deferring its final decision until a first quarter 1982 checkpoint.

At a meeting between the parties on July 21, 1981, Getty's district officials advised GSI that Getty's top management wanted GSI to pay its twenty-five percent share of future costs. GSI once again protested, citing the need for an appropriate feasibility study. That evening, Getty's district production manager, Hautala, told Scott Smith, the president of GSI, that if he did not sign a letter agreeing to fund GSI's share that evening, Getty would kill the project. In addition to confirming Smith's agreement to fund GSI's share, the letter also contained an agreement by Getty not to convert GSI to NPI holder status until January 1, 1982. Smith signed the letter.

In September 1981, the parties formally approved an initial mine work plan, which was required by the Agreement to begin Phase II of the Mercur project. Meanwhile, GSI made ongoing efforts to obtain more information on the project from Getty to enable it to obtain funding for its twenty-five percent share.

In a letter dated December 17, 1981, the parties agreed to extend the deadline for GSI to secure funding from January 1, 1982, to February 1, 1982. When Smith was reluctant to sign this letter, Getty's district officials offered Smith a meeting with Getty's top management and Chase Manhattan Bank, a potential funding source to GSI. Smith signed the letter, but the meeting never transpired.

By early February 1982, GSI still had not obtained funding for its twenty-five percent share. Consequently, Getty exercised its contractual right under the Agreement to convert GSI to NPI holder status. However At a meeting between the parties on March 2, 1982, Getty's district officials formally advised GSI that Getty was converting GSI to NPI holder status. However, Getty's district manager, Blanc, informed Smith that "nothing was really changing" and that GSI could reenter as a twenty-five percent interest holder if it acquired financing.

no written notice of conversion to NPI holder status was given to GSI at that time.

Correspondence subsequent to this meeting indicated that the agreement to let GSI reenter had to be reduced to writing, which never occurred. Numerous letters to GSI from Getty stated that the promise made at the March 2 meeting was not a firm commitment, but only an agreement to consider allowing GSI to reacquire its twenty-five percent participating interest. Meanwhile, GSI continued to seek financing but was unable to do so. Texaco, Inc. (Texaco), purchased Getty in 1984 and later sold the Mercur project to American Barrick Resources Corporation (Barrick).

On December 8, 1986, GSI brought this suit against Getty, Texaco, and Barrick. ¹ On July 3, 1989, GSI filed its third amended complaint, which asserted fourteen claims against defendants. Ten of these claims were dismissed by the trial court prior to trial, including GSI's breach of contract claims. The trial court also granted Getty's motion for partial summary judgment on GSI's wrongful conversion claim. GSI dismissed three of the four remaining claims prior to or during trial, leaving fraud as the only claim tried to conclusion.

Beginning on July 19, 1993, GSI's fraud claim was tried to a jury. At the close of GSI's case, Getty moved for a directed verdict, but the trial court reserved its decision on the motion. On September 3, 1993, the jury rendered its verdict in GSI's favor, awarding GSI $154,161,000 in actual damages and $250,000,000 in punitive damages. On September 13, the trial court reversed the jury verdict and granted Getty's motion for a judgment notwithstanding the verdict (j.n.o.v.).

On April 8, 1994, the trial court ruled on all post-trial motions and, on April 13, entered a judgment reflecting its rulings. Included in its April 13 judgment was a conditional grant of a new trial on the issue of punitive damages, which was made contingent on a successful outcome of GSI's appeal of the j.n.o.v. The trial court also dismissed Getty's counterclaim for breach of contract.

GSI appeals, asserting that the trial court erred in (1) granting Getty's motions for summary judgment and thereby dismissing GSI's wrongful conversion and breach of contract claims, (2) granting Getty's motion for a j.n.o.v., (3) striking the jury's award of punitive damages, and (4) making certain rulings related to its conditional grant of a new trial. Getty cross-appeals, challenging the trial court's dismissal of its breach of contract claim against GSI.

SUMMARY JUDGMENT

GSI argues that the trial court erred in granting two summary judgment motions: (1) Getty's motion for a summary judgment declaring that GSI was properly converted from a participating party to NPI holder status, and (2) Getty's motion for summary judgment on GSI's claim for breach of contract regarding Getty's duty to provide GSI with a proper feasibility study within the terms of the Agreement.

Summary judgment is appropriate only where "there are no issues of genuine fact and the moving party is entitled to a judgment as a matter of law." Billings v. Union Bankers Ins. Co., 819 P.2d 803, 805 n. 2 (Utah 1991). Thus, on appeal from the trial court's entry of summary judgment, "we determine only whether the trial court erred in applying the governing law and whether the trial court correctly held that there were no disputed issues of material fact." Rocky Mountain Thrift Stores, Inc. v. Salt Lake City Corp., 887 P.2d 848, 851 (Utah 1994).

As to GSI's first claim, that the trial court erred in concluding that it was properly Upon review of the briefs and the record, it is readily apparent that GSI's argument that Getty should have acted as its fiduciary but failed to do so is without merit. Under Utah law, a fiduciary or confidential relationship will be found only "when one party, having gained the trust and confidence of another, exercises extraordinary influence over the other party." Von Hake v. Thomas, 705 P.2d 766, 769 (Utah 1985). Moreover, when the parties deal "at arm's length" or in an adversarial relationship, no fiduciary relationship can be said to exist. Accord Sugarhouse Fin. Co. v. Anderson, 610 P.2d 1369, 1373 (Utah 1980); see Ong Int'l (U.S.A.) Inc. v. 11th Ave....