McMurry Oil Co. v. Deucalion Research, Inc., s. 92-46
| Decision Date | 03 December 1992 |
| Docket Number | Nos. 92-46,92-47,s. 92-46 |
| Citation | 842 P.2d 584 |
| Parties | McMURRY OIL COMPANY, a Wyoming Corporation; John W. Martin; J.J. Meier; Fort Collins Consolidated Royalties, Inc., a Colorado Corporation; Hurley Oil Properties, a Wyoming Corporation; W.N. McMurry; Mountain States Exploration, Inc., a Colorado Corporation; Martin Properties, Ltd., an Alabama Domestic Partnership; Enervest of America, Inc., a New York Corporation; Rissler & McMurry Company, a Wyoming Corporation; Marion H. Rochelle; Weeks, Brewer & Associates, a California Corporation; and High Horizons, Phase II, a Washington Corporation, Appellants (Defendants), v. DEUCALION RESEARCH, INC., a North Dakota Corporation, Appellee (Plaintiff). DEUCALION RESEARCH, INC., a North Dakota Corporation, Appellant (Plaintiff), v. McMURRY OIL COMPANY, a Wyoming Corporation; John W. Martin; J.J. Meier; Fort Collins Consolidated Royalties, Inc., a Colorado Corporation; Hurley Oil Properties, a Wyoming Corporation; W.N. McMurry; Mountain States Exploration, Inc., a Colorado Corporation; Martin Properties, Ltd., an Alabama Domestic Partnership; Enervest of America, Inc., a New York Corporation; Rissler & McMurry Company, a Wyoming Corporation; Marion H. Rochelle; Weeks, Brewer & Associates, a California Corporation; and High Horizons, Phase II, a Washington Corporation, Appellees (Defendants). |
| Court | Wyoming Supreme Court |
Neil J. Short, Casper, for appellants in Case No. 92-46 and for appellees in Case No. 92-47.
Stephenson D. Emery of Williams, Porter, Day & Neville, Casper, for appellee in Case No. 92-46 and appellant in Case No. 92-47.
Before MACY, C.J., and THOMAS, CARDINE, URBIGKIT and GOLDEN, JJ.
McMurry Oil Company and associates (Sellers) entered into a written agreement to sell a collection of oil and gas properties to Deucalion Research, Inc. (Buyer). When the sale fell through, cross-suits followed seeking possession of $50,000 earnest money in addition to contesting fault in the sale agreement termination. The trial court found retention of the $50,000 an unjustified penalty and granted the return of the earnest money to the prospective Buyer while determining that the Sellers had not been in default. We reverse the liquidated damage decision and otherwise affirm the trial court through an analysis which enforces the contractual terms of the parties' sales agreement.
Sellers address for their concept of the issues on appeal:
1. Whether the district court erred in ruling that Paragraph 10 termination of the subject contract provided for a forfeiture.
2. In the alternative, whether the district court erred in ordering a return of the earnest money even in the face of finding a forfeiture.
(Emphasis in original.)
Buyer restates:
Whether the Trial Court correctly found that the amount of earnest money deposit was neither consistent with actual damages nor based upon any forecast of compensation for the harm done, and therefore properly concluded that the liquidated damages provision constituted a penalty or forfeiture.
In the Buyer's appeal, they contend:
I. Whether the Trial Court erred as a matter of law in finding that title was marketable.
II. Whether the Trial Court erred as a matter of law in concluding that Plaintiff breached the contract by failing to proceed with the purchase.
Again, Sellers, restate:
1. Whether the district court erred in ruling that title was marketable.
2. Whether appellant/plaintiff Deucalion Oil Company breached the contract in question and is denied any recovery.
3. Whether the claims of appellant/plaintiff Deucalion Oil Company are barred by its failure to mitigate damages and by the doctrine of laches.
The Sellers, entered into a rather normal executory contract to sell extensive oil interest property holdings to Deucalion Research, Inc. The purchase price was $950,000, with $50,000 "earnest money to bind" and the balance payable by cashier's check or wire transfer at closing. Execution of the agreement was attended by a cash down payment received by Sellers from Buyer of $50,000. The established closing date, as extended, came and went. Buyer, about three weeks after the initially established time, provided a written notice of contract rescission based on claimed title defects. This litigation followed to determine who receives the initial $50,000. The trial court found retention of the earnest money payment by Sellers would create an impermissible penalty and ordered repayment to the Buyer, while also determining that the Sellers were not in breach of the agreement by failure to tender merchantable title for the properties to be sold.
Specific title provisions included:
It is the intent of this instrument to deliver to Buyer 100% of the working interest ownership in the properties at an 80% Net Revenue Interest to the Buyer.
* * * * * *
3. Representation of Seller. Seller represents to Buyer as follows:
(a) That Seller is the owner of the properties described in Exhibit "A", but does not warrant title thereto.
(b) At Closing, Seller will have and will convey to Buyer all Seller's working interest in the Properties.
(c) Until closing, Seller will not take any action with respect to the Properties which would create any material liabilities or which would create any commitments other than those created in the ordinary course of business without Buyer's written consent.
(d) Seller has the right to sell and transfer the Properties to Buyer and all requisite corporate or other legal authorization to the execution and delivery of this Purchase and Sale Agreement hereunder have been duly obtained and do not conflict with any instrument to which it is a party or by which it is bound.
(e) The representations of Seller set forth herein shall be true on and as of Closing and on and as of the Effective Date with the same force and effect as though made on each of said dates.
4. Title Examination. Buyer shall be entitled to perform, or cause to be performed, at Buyer's sole expense, any such title examination as Buyer deems necessary or appropriate. In the event Buyer determines that any title defects exist, Buyer shall notify Seller, in writing, on or before closing of Buyer's title objections; provided, however, Buyer shall notify Seller promptly of any title defects discovered by Buyer. As used in this paragraph, the term "title defect", shall include the failure of any working interest. Seller shall furnish to Buyer on or before closing such curative data as may be necessary to satisfy Buyer that such defects have been resolved. If Seller is unable to provide Buyer such curative data prior to closing, and Buyer is unwilling to waive any such defects, Buyer may so notify Seller and terminate this agreement.
5. Effective Date, Expenses and Accounting. The Effective Date of the sale of the properties shall be as of 7:00 A.M., Mountain Daylight Time, on January 1, 1990. Seller shall be responsible for, and pay, all expenses accrued or incurred in connection with the Properties prior to the Effective Date and shall be entitled to receive the proceeds of production lawfully produced from the Properties prior to the Effective Date, including oil in stock tanks and Seller's proportionate share of all production on hand from each well on each respective property as of the Effective Date. Tanks shall be gauged at 9:00 A.M. on January 1, 1990 and all saleable oil be credited to Seller's account. Buyer shall bear all reasonable expenses incurred and accrued in connection with the operation of the Properties in the ordinary course of business effective from the Effective Date and thereafter, and shall be entitled to the proceeds of production lawfully produced from or attributable to the Properties from the Effective Date, and thereafter.
6. Closing. Closing shall take place on or before January 1, 1990, unless extended by mutual agreement of the parties * * *[.]
Buyer obtained a title opinion dated December 15, 1989. That opinion found title satisfactory for acquisition purposes subject to certain normal transfer requirements, and then stated:
The records in the office of the Clerk of the District Court in Converse County, Wyoming reveal Civil Action No. 10,915 filed by McMurry Oil Company against Enervest of America, Inc., d.b.a. Independence 1986 Drilling Program and Independence 1987 Drilling Program. The action was filed November 22, 1989, seeking foreclosure of an oil and gas lien claimed by McMurry Oil Company on the South Cole Creek Dakota Sand Unit # 61 and # 62 wells and Campbell fee well. The action also seeks a judgment for unpaid operating expenses in the amount of $78,348.03. No answer has been filed to date. While Enervest does not own an interest of record in the subject lease, or in other leases in the South Cole Creek Dakota Sand Unit, it is entitled to certain revenues from these unit wells by virtue of an agreement with the working interest owners in the unit.
Requirement: None, but you should be aware that Enervest of America has a claim to certain unit revenues from these wells.
Buyer, in a communication dated January 17, 1990 and received by Sellers on January 26, 1990, gave notice of title rejection and sale agreement termination. The parties agree that the closing date was extended from January 1, 1990 to January 5, 1990 and then to January 12, 1990, but not thereafter. Factually, the record also establishes that the Buyer had been unable to adequately merchandize the project in order to obtain access to required funds to close by the date set in the last extension of January 12, 1990.
This court will apply a realistic standard to enforce the agreement of the parties as negotiated and settled. Rather than attempting, at this stage, to rewrite Buyer's "acceptable title opinion," we recognize that any rejection of title came too late and only constituted a subterfuge to attempt to reclaim the earnest deposit when funds had not been raised to complete the purchase. Notice of defect...
To continue reading
Request your trial
-
Amoco Production Co. v. EM Nominee Partnership Co.
...and so long as there is no ambiguity, we are bound to apply contracts as they have been scrivened. McMurry Oil Co. v. Deucalion Research, Inc., 842 P.2d 584, 588 (Wyo.1992) (citing Wyoming Machinery Co. v. United States Fidelity and Guaranty Co., 614 P.2d 716, 720 (Wyo.1980)); Kidd v. Kidd,......
-
Prudential Preferred Properties v. J and J Ventures, Inc.
...590 P.2d 1338, 1340 (Wyo.1979). In effect, an earnest money deposit operates as liquidated damages. McMurry Oil Co. v. Deucalion Research, Inc., 842 P.2d 584, 587 (Wyo.1992) (holding that the retention of an earnest money deposit was the only damage claimable by vendor when purchaser refuse......
-
Wilson v. Witt
...ground of equitable cognizance." Younglove v. Graham & Hill, 526 P.2d 689, 692-93 (Wyo.1974). See also McMurry Oil Company v. Deucalion Research, Inc., 842 P.2d 584, 589 (Wyo.1992). Under the default provision in this case, the buyer had thirty days from the the notice was mailed in which t......
-
Knapp v. Landex Corp., 05-154.
...waived by the party entitled to its benefits or is excused on some special ground of equitable cognizance." McMurry Oil Co. v. Deucalion Research, 842 P.2d 584, 589 (Wyo.1992) (emphasis added). We have noted that because forfeitures are not favored, "slight evidence of the ... intention to ......