Wasatch Oil & Gas Llc v. Reott

• Decision Date: 28 November 2011
• Docket Number: No. 20090749–CA.,20090749–CA.
• Citation: 2011 UT App 152,263 P.3d 391,682 Utah Adv. Rep. 50
• Parties: WASATCH OIL & GAS, LLC, Plaintiff and Appellee,v.EDWARD A. REOTT; Key Energy Services, Inc.; J–West Oilfield Services, Inc.; and Mission Energy, LLC, Defendant and Appellant.Goal, LLC; and Regoal, Inc., Counterclaim, Third-party and Crossclaim Plaintiffs, and Appellants,v.Wasatch Oil & Gas, LLC; Mission Energy, LLC; Wasatch Oil & Gas Production Corporation; Wasatch Gas Gathering, LLC; and Bill Barrett Corporation, Counterclaim, Third-party and Crossclaim Defendants, and Appellees.
• Court: Utah Court of Appeals

263 P.3d 391

682 Utah Adv. Rep. 50

2011 UT App 152

WASATCH OIL & GAS, LLC, Plaintiff and Appellee,

v.EDWARD A. REOTT; Key Energy Services, Inc.; J–West Oilfield Services, Inc.; and Mission Energy, LLC, Defendant and Appellant.Goal, LLC; and Regoal, Inc., Counterclaim, Third-party and Crossclaim Plaintiffs, and Appellants,

v.Wasatch Oil & Gas, LLC; Mission Energy, LLC; Wasatch Oil & Gas Production Corporation; Wasatch Gas Gathering, LLC; and Bill Barrett Corporation, Counterclaim, Third-party and Crossclaim Defendants, and Appellees.

No. 20090749–CA.

Court of Appeals of Utah.

May 12, 2011.Rehearing Denied Nov. 28, 2011.

J. Craig Smith, D. Scott Crook, and Bryan C. Bryner, Salt Lake City, for Appellants.Eric C. Olson and Matthew K. Richards, Salt Lake City; Nick Sampinos, Price; and Carolyn L. McIntosh and Donna Vetrano Pryor, Denver, Colorado, for Appellees.Before Judges DAVIS, ORME, and VOROS.

MEMORANDUM DECISION

DAVIS, Presiding Judge:

¶ 1 Edward A. Reott; Goal, LLC; and Regoal, Inc. (collectively, Reott) appeal from the trial court's judgment quieting title to certain properties in Wasatch Oil & Gas, LLC; Wasatch Gas Gathering, LLC; Wasatch Oil & Gas Production Corporation; and Bill Barrett Corporation (collectively, Wasatch). Reott also appeals from the trial court's order denying his request for an award of damages. We affirm.

I. Oral Authorization

¶ 2 Reott argues that the June 2000 transfer from Mission Energy, LLC (Mission) to Wasatch was not effective because Mission did not orally authorize the transfer of the Section 32 leases. Reott makes three arguments, each in the alternative: (1) that Colorado law should have been applied here; (2) that even if Utah law applies, the oral authorization exception to the statute of frauds is no longer good law; and (3) that even if Utah law does still provide for an oral authorization exception, the trial court's factual findings do not support the application of the exception. Each of these issues is a question of law, which we review for correctness. First, “the question of which state's law should apply to a case or to a particular issue is a question of law, and we ... accord no deference to the trial court's conclusion.” Records v. Briggs, 887 P.2d 864, 867 (Utah Ct.App.1994). Second, “it is our role as an appellate court to define what the law is, and we never defer to any degree to a trial court on that count.” State v. Pena, 869 P.2d 932, 937 (Utah 1994). Third, “[w]hether the district court made the necessary factual findings to support its determination is a question of law that we review for correctness.” Robinson v. Robinson, 2010 UT App 96, ¶ 7, 232 P.3d 1081, cert. denied, 241 P.3d 771 (Utah 2010).

¶ 3 Reott correctly asserts that because Mission was organized under the laws of Colorado, those laws should govern Mission's “organization and internal affairs.” See Utah Code Ann. § 48–2c–1601(1) (2010) (“The laws of the state or other jurisdiction under which a foreign company is organized govern its organization and internal affairs and the liability of its managers, members, and assignees of members.”); see also Atherton v. FDIC, 519 U.S. 213, 224, 117 S.Ct. 666, 136 L.Ed.2d 656 (1997) (“States normally look to the State of a business' incorporation for the law that provides the relevant corporate governance general standard of care.”). But the issue of whether there is an oral exception to the statute of frauds is not an issue of corporate organization or internal affairs. See generally Atherton, 519 U.S. at 224, 117 S.Ct. 666 (defining internal affairs as “matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders” (internal quotation marks omitted)). Thus, we apply Utah law to the oral authorization question.

¶ 4 We are not convinced, despite Reott's assertion, that the oral authorization exception to the statute of frauds is no longer recognized in Utah. The statute of frauds provides,

No estate or interest in real property, other than leases for a term not exceeding one year, ... shall be created, granted, assigned, surrendered or declared otherwise than by act or operation of law, or by deed or conveyance in writing subscribed by the party creating, granting, assigning, surrendering or declaring the same, or by his lawful agent thereunto authorized by writing.

Utah Code Ann. § 25–5–1 (2007). “Naturally, that section is applicable to agents of corporations, but the courts in interpreting similar provisions have adopted an exception when the person who acts under an oral authorization is either a general agent or executive officer of the corporation.” Mathis v. Madsen, 1 Utah 2d 46, 261 P.2d 952, 956 (1953). The reasoning behind this exception is that “[t]he executive officer of a corporation is something more than an agent. He is the representative of the corporation itself.” Id. (internal quotation marks omitted). And although Reott cites to several cases that do not recognize the oral authority exception, none of these cases involve a situation in which the exception could possibly apply, that is, where the actor was acting on behalf of a corporation. See Williams v. Singleton, 723 P.2d 421, 423 (Utah 1986) (per curiam) (husband acting under his wife's oral authorization); Cady v. Johnson, 671 P.2d 149, 150 (Utah 1983) (son apparently acting under his mother's oral authorization); Frandsen v. Gerstner, 26 Utah 2d 180, 487 P.2d 697, 698 (1971) (real estate broker acting on behalf of his clients). We therefore see nothing indicating that Utah courts have abandoned the oral authorization exception to the statute of frauds.

¶ 5 When looking at the facts found by the trial court, we are convinced that they were sufficient to support the application of the oral authorization exception under the circumstances of this case. Reott argues that the trial court determined that Fred Jager was not a manager of Mission, but we see no such unequivocal determination. Although the findings indicate that Jager may not have known that he was a manager of Mission, that Jager was not heavily involved in the management of Mission, and that Justin Sutton “acted as a sole manager” of Mission, these facts are not necessarily inconsistent with Jager actually being a manager of Mission.¹ Moreover, we do not see that an exact determination of Jager's status is necessary under the facts and circumstances of this case. We see nothing in our case law that says the oral authorization must come from a manager. The rule simply requires that the company authorize the action. In this case, the trial court's findings make clear that everyone at all involved with Mission's management and operations was in agreement with the actions taken by Sutton. Obviously Sutton approved, and as the trial court found, “Sutton discussed both the May and June 2000 transactions with Jager, who did not at the time or subsequently express any opposition to the sale of the leases or the terms of the sale and, at all times, manifested support for the actions taken by Sutton.” Considering that Sutton and Jager represented all possible managers of Mission and the majority ownership of Mission,² we think the trial court's findings are sufficient to support the application of the oral authorization exception to the statute of frauds in this case. We therefore affirm the trial court on this issue.

II. Fraudulent Transfer

¶ 6 Reott contests the trial court's determination that the June 2000 transfer was not a fraudulent conveyance under Utah Code section 25–6–6, which provides that a transfer is fraudulent when “(a) the debtor made the transfer ... without receiving a reasonably equivalent value in exchange for the transfer ... and (b) the debtor was insolvent at the time or became insolvent as a result of the transfer,” Utah Code Ann. § 25–6–6(1) (2007). Reott specifically contests the trial court's determinations that Mission received reasonably equivalent value for the leases and that Mission was not insolvent.

These issues present mixed questions of fact and law. We review factual questions under the clearly erroneous standard and legal questions under the correctness standard. Although questions of law are reviewed for correctness, we may still grant a trial court discretion in its application of the law to a given fact situation. Questions of statutory interpretation are questions of law that are reviewed for correctness and no deference is given to the trial court's determination.

Tolle v. Fenley, 2006 UT App 78, ¶ 11, 132 P.3d 63 (citations and internal quotation marks omitted). Because we affirm the trial court's determination that Mission was not insolvent at the time of or as a result of the transfer, we affirm on the court's ultimate determination as to fraudulent transfer. ³

¶ 7 The Uniform Fraudulent Transfer Act provides that “[a] debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation.” Utah Code Ann. § 25–6–3(1) (2007). It also states that a debtor is presumed insolvent when the debtor “is generally not paying his debts as they become due.” Id. § 25–6–3(2). The trial court determined that “Mission was not able to pay its debts as they became due” and that the evidence therefore supported a presumption of insolvency. But the trial court also determined that the presumption of insolvency was “rebutted by the undisputed testimony that the ‘fair value’ of all of the assets of Mission exceeded the sum of its debts as of May and June 2000.” The trial court specifically pointed to the testimony of both Reott and Sutton that valued the Lavinia well “at an amount in excess of the total of all outstanding Mission liabilities.” Reott argues that the evidence was insufficient to support this finding. We disagree. Sutton testified that the well had “more than significant value than the amount of debt, lien, and judgments against [Mission],” and Reott testified...