Tlapek v. Chevron Oil Company

• Decision Date: 06 March 1969
• Docket Number: No. 18908.,18908.
• Citation: 407 F.2d 1129
• Parties: John W. TLAPEK, Appellant, v. CHEVRON OIL COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

407 F.2d 1129 (1969)

John W. TLAPEK, Appellant, v. CHEVRON OIL COMPANY, Appellee.

No. 18908.

United States Court of Appeals Eighth Circuit.

March 6, 1969.

Bernard Whetstone, El Dorado, Ark., for appellant, James E. Stein, El Dorado, Ark., on the brief.

Frank E. Chowning, of Chowning, Mitchell, Hamilton & Burrow, Little Rock, Ark., for appellee.

Before VOGEL and LAY, Circuit Judges, and BECKER, Chief District Judge.

BECKER, Chief District Judge.

General Statement of Facts

In February 1962, appellant, John W. Tlapek, was employed as a full-time geologist by appellee, Chevron Oil Company, a corporation (whose corporate name then was California Oil Company). Appellant was first assigned to the North Louisiana and Arkansas exploration department of appellee, in which he worked until July 15, 1963, when he was transferred as a matter of routine practice, to appellee's development department for overall training.

While employed in the exploration department, Tlapek was assigned the task of work and study of the Smackover Formation in Southern Arkansas, and other areas in the North Louisiana and Arkansas area. In this work and study Tlapek was given by appellee the use of confidential information of the appellee, including maps, data, analyses, studies, interpretations and other relevant data, acquired over a period of years from appellee's private investigation, research, work and studies, from intercompany exchanges of information, from collected public sources, and from independent commercial services.

With the use of this confidential information relating to the Smackover Formation, and while in the employ of appellee, Tlapek developed a unique theory that oil in excess of twenty million barrels could be found, and recovered under favorable economic conditions, in a part of the Smackover Formation, in Columbia County, Arkansas, which became known as the McNeil Prospect. Tlapek prepared a master map which he used in support of his oral presentations of his theory and which became and remained part of the files of appellee.

In 1963, while in the exploration department of appellee, Tlapek revealed his unique theory to his superiors, and on many occasions enthusiastically recommended that appellee immediately begin leasing in the McNeil Prospect, for the purpose of drilling for commercial production. The superiors of Tlapek in the exploration department were interested in Tlapek's theory but were unwilling to disapprove, or approve and transmit, his recommendations for immediate development of the prospect until additional geophysical data were secured through an intercompany exchange of information, which was finally accomplished in the first quarter of 1964.

In the meantime Tlapek was transferred to the development department in July 1963, as stated above.

In his enthusiasm for his theory, and in his impatience, Tlapek became very dissatisfied with the failure of his superiors to act favorably on his recommendations. His original interest and motives in pressing for action by appellee were free of any desire for, or intention to seek, any personal pecuniary interest in the development of the McNeil Prospect. Until his resignation in October 1963, Tlapek urged development of the McNeil Prospect for the profit solely of appellee, his employer.

After his transfer to the development department in July 1963, and through the summer and early fall, Tlapek continued openly to express his disappointment with appellee's failure to proceed immediately to develop the McNeil Prospect, and continued to advocate the development of the prospect by appellee.

In October 1963 Tlapek's immediate superior, District Development Geologist Lane, reported to appellee's District Development Geologist Jackson that he had heard Tlapek intended to resign. Jackson called Tlapek to his office for an explanation. Tlapek reiterated his dissatisfaction with the failure of appellee to develop the McNeil Prospect, and expressed his wish to return in February 1964 for postgraduate work at the University of Missouri, from which he had graduated. In this conference Tlapek informed Jackson, in substance, that the McNeil Prospect should be drilled, and if appellee did not drill it he would see that it was drilled. At Jackson's suggestion Tlapek tendered a written "letter of intent" to return to the University of Missouri February 1, 1964, agreeing to termination of his employment at any time before February 1, 1964, and expressing a preference to continue in appellee's employ until February 1, 1964. Appellee promptly elected to terminate Tlapek's employment effective November 1, 1963, on the grounds of lack of maturity and good judgment.

Shortly after notice of termination of his employment Tlapek came to the office of appellee's Exploration Superintendent Ramsden, the supervisor of exploration in appellee's Northern Division, consisting of 34 states. There Tlapek advised Ramsden of his intention to take some action in respect of the McNeil Prospect. Ramsden suggested that such action would be unethical and that Tlapek defer taking action for at least six months.

After termination of his employment by appellee, and without adequate capital in hand, Tlapek openly began a leasing program in the McNeil Prospect. With $1,600 borrowed from his father he financed the first lease payments. From his neighbors and others, whom he interested in lease speculation, he secured several thousand dollars for additional lease payments and expenses. Eventually about 2,600 acres were leased. Tlapek was named as lessor in each of the leases which were recorded without unusual delay. The leases were executed in the months of January, February and March 1964 and recorded in the months of March and April 1964. Some early leases were executed conditionally, with payment therefor dependent on assembly of an adequate block of leases. Various agreements concerning interests in the leases were negotiated by Tlapek with others to secure resources for drilling and production. Finally, a drilling contract was negotiated and the preliminary drilling work was in progress when the filing of the complaint herein, and subsequent filing of notice of lis pendens, caused a cessation of drilling.

During his efforts to develop the prospect Tlapek made no effort to conceal his activity. On more than one occasion Tlapek voluntarily informed appellee's Exploration Geologist Gunderson, then assigned to the Smackover area, of his leasing activities. Gunderson promptly reported this information to his superiors in appellee's organization. On several occasions in 1963 and 1964 Tlapek freely discussed his leasing intentions and activities with appellee's Senior Geologist Humphris, his former superior. In March 1964, Tlapek visited Ramsden and made a full disclosure of his activities. He then offered to sell appellee a half interest in the venture for money to finance the drilling. This offer was not accepted. Instead, at the suggestion of appellee's legal department, Ramsden sent to Tlapek a formal letter dated March 13, 1964, stating appellee's position, which was construed by Tlapek to be a "threatening letter".

When appellee learned of the intention of Tlapek and his associates to drill, it filed on May 8, 1964, this civil action in the nature of a suit in equity. At that time the McNeil Prospect was still under consideration by appellee, but its feasibility had been questioned in a recommendation by appellee's Geologist Andress, based on additional geophysical data recently secured by appellee. This recommendation dated May 4, 1964, was subject to further review by appellee. The filing of this action resulted in practical suspension of appellee's consideration of development activity concerning the McNeil Prospect, until the legal issues in the litigation should be determined.

Appellee elected to pursue this equitable claim for relief (against appellant, his assignees and privies) stating that a constructive trust existed in the leases secured by appellant Tlapek, because of the acquisition of the leases through the use by Tlapek of confidential information in violation of a fiduciary duty to appellee. (A non-competitive contract between Tlapek and appellee existed but is not relied on and was not preserved in the record before us.)

Appellant Tlapek filed a counterclaim against appellee based on alleged bad faith and lack of justification for filing the complaint. Several cross claims, not material here, were filed by defendants in this action.

The Decision of the Trial Court

After a trial before the Court, without a jury, the trial court decided all issues in favor of the appellee on appellant's claim for relief; impressed a constructive trust on all leases in question, and assigned interest therein (except fractional assigned interests of four bona fide purchasers for value without notice); cancelled all assignments by Tlapek and his wife to purchasers with actual or constructive notice; and rendered a money judgment against appellant for a net sum of $8,500.00 found to be appellant's net profit resulting from the consideration paid by the bona fide purchasers for value without notice. Further the Court found against appellant on his counterclaim, and against all cross-claimants. Only the appellant Tlapek appealed from the judgment of the trial court.

The findings of fact, conclusions of law and judgment of the trial court are contained in a lucid and detailed opinion by Chief Judge Harris, reported as Chevron Oil Company v. Tlapek (W.D.Ark.) 265 F.Supp. 598.

Disposition on Appeal

On all principal issues presented the judgment below is affirmed. Only on the issue of reimbursing appellant Tlapek for the original costs of the lease interests is the cause reversed and remanded.

Rulings on Assignments of Error

I

In his first assignment of error, the appellant contends, in substance, (a) that the trial court erred in concluding that a constructive trust existed,...