Case Title: Bolack v. Chevron, U.S.A., Inc.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1998-08-17T00:00:00Z

Document:
Bolack v. Chevron, U.S.A., Inc.1998 WY 104963 P.2d 237Case Number: 97-58Decided: 08/17/1998Supreme Court of Wyoming

Tom 
BOLACK and Thomas Morgan, Appellants (Defendants),

v.

CHEVRON, U.S.A. INC., Appellee 
(Plaintiff).

 

Appeal from the United States District Court 
for the District of Wyoming, Alan B. Johnson, J.

 

Patrick J. Murphy of 
Williams, Porter, Day & Neville, P.C., Casper, for Appellant Tom 
Bolack.

 

Peter K. Michael and William 
M. McKellar of Boley & McKellar, P.C., Cheyenne, and H. Paul Cohen and 
Thomas W. Niebrugge of Weinman, Cohen & Niebrugge, P.C., Denver, for 
Appellant Thomas Morgan.

 

Morris R. Massey and Thomas 
F. Reese of Brown, Drew, Massey & Sullivan, Casper, for 
Appellee.

 

Before LEHMAN, C.J., and THOMAS, MACY, GOLDEN and 
TAYLOR,* JJ.

 * Chief Justice at time of oral 
argument.

 

TAYLOR, 
Justice.

 [¶1] Chevron, U.S.A. Inc. (Chevron) filed an action 
in the United States District Court for the District of Wyoming seeking payment 
from non-operating interest owners, Thomas Morgan (Morgan) and Tom Bolack 
(Bolack), under a Unit Operating Agreement. The amounts for which Chevron 
claimed arose from payments Chevron tendered in the settlement of four personal 
injury suits. Bolack and Morgan refused to pay, claiming that Chevron's demand 
was barred by Wyoming's anti-indemnity statute, Wyo. Stat. § 30-1-131 
(1997).  Pursuant to Wyo. Stat. §§ 
1-13-104 through 1-13-107 (1997) and W.R.A.P. 11, the United States District 
Court for the District of Wyoming presented the following certified question for 
review:

 

Whether the Unit Operating Agreement for the Painter 
Reservoir Unit is rendered void and unenforceable by application of W.S. §§ 
30-1-131, et. seq., to the extent that it requires non-negligent non-operators 
to contribute proportionately to the operator's settlements of claims for 
personal injuries to a well servicing contractor's employees where the 
operator's negligence caused or contributed to the cause of the personal 
injuries.

 

[¶2] We answer in the 
affirmative.

 

                                             
I. FACTS

 

[¶3] Chevron was the Unit 
Operator of the Painter Reservoir Unit Area in Uinta County, Wyoming in January 
1993. At that time, Chevron owned a 75.42% working interest in the participating 
area, Bolack was a 7.99% non-operating working interest owner, and Morgan owned 
an 11.99% non-operating working interest. The interests of Chevron, Bolack and 
Morgan were subject to the Unit Operating Agreement executed by the 
parties.

 

[¶4] As the Unit Operator, 
subject to limitations provided for in the Unit Operating Agreement, Chevron had 
the sole power to manage and conduct all operations in the unit. Morgan and 
Bolack, as non-operators under the Unit Operating Agreement, had no right to 
manage, control or supervise operations.

 

[¶5] In January 1993, 
Chevron contracted with Cannon Well Service to perform a recompletion operation 
on one of the wells in the unit for the purpose of establishing production from 
the Twin Creek formation. Bolack and Morgan elected to join and share the costs 
of recompleting the well. On January 29, 1993, during the course of that 
reworking operation, the well caught fire and four employees from Cannon Well 
Service suffered burns. It is uncontested that Morgan and Bolack were not in any 
way involved in the acts or omissions which caused the injury to the four Cannon 
Well Service employees, and no one asserts that Morgan and Bolack were 
negligent.

 

[¶6] Subsequently, all four 
employees filed personal injury lawsuits against Chevron in Uinta County. Those 
lawsuits were set for trial in February 1995. After extensive discovery, all of 
the claims were settled by Chevron before trial without the approval of Bolack 
and Morgan. Chevron elected to pay 2.61 million dollars of the settlement amount 
with its own funds.

 

[¶7] In May, 1995, Chevron 
mailed billing invoices to Bolack and Morgan for their asserted percentage share 
of the 2.61 million dollars, plus attorneys fees paid to outside counsel. The 
Unit Operating Agreement provisions relied upon by Chevron in its demand are as 
follows:

 

1.4 "Costs" means all costs and expenses 
incurred in the development and operation of the Unit Area pursuant to this 
agreement or the Unit Agreement and all other expenses that are herein made 
chargeable as Costs, determined in accordance with the accounting procedure set 
forth in Exhibit 2 attached hereto, which shall govern in all matters covered 
thereby, except that in event of inconsistency between said accounting procedure 
and this agreement, this agreement shall control.

 

          
* * *

 

16.5 Uninsured Losses. Any and all payments 
made by Unit Operator in the settlement or discharge of any liability to third 
persons (whether or not reduced to judgment) arising out of an operation 
conducted hereunder and not covered by insurance herein provided to be 
maintained by Unit Operator shall be charged as Costs and borne by the Party or 
Parties for whose account such operation was conducted.

 

Exhibits 2 and 5 as attached 
to the Unit Operating Agreement state:

 

          
II. DIRECT CHARGES

 

          
Operator shall charge the Joint Account with the following 
items:

 

          
* * *

 

          
9. Legal Expense

 

Expense of handling, investigating 
and settling litigation or claims, discharging of liens, payment of judgments 
and amounts paid for settlement of claims incurred in or resulting from 
operations under the agreement or necessary to protect or recover the Joint 
Property, except that no charge for services of Operator's legal staff or fees 
or expense of outside attorneys shall be made unless previously agreed to by the 
Parties.
 

                                            
INSURANCE

 

Except as otherwise provided in Section 16.2, 
Operator shall not carry any other insurance for the joint account. The 
liability, if any, of the parties hereto in damages for claims growing out of 
personal injury to or death of third persons or injury or destruction of 
property of third parties resulting from the operation and development of the 
premises covered hereby shall be borne by the parties hereto in the proportions 
of their respective interests in the production therefrom; and each party 
individually may acquire such insurance 
as it deems proper to protect itself against such claims.

 

[¶8] When Bolack and Morgan 
refused to pay any part of the invoices, Chevron filed this suit in the United 
States District Court for the District of Wyoming. Finding that there is a 
question of Wyoming law which may be determinative of the claim for relief 
asserted by Chevron, and finding no controlling precedent in Wyoming case law, 
the United States District Court certified the present question to this court 
pursuant to Wyo. Stat. §§ 1-13-104 through 1-13-107 and W.R.A.P. 
11.

 

                                      
II. STANDARD OF REVIEW

 

[¶9] The certified question 
requires interpretation of Wyo. Stat. §§ 30-1-131 and 30-1-132 (1997)1 to determine whether these 
provisions apply to the Unit Operating Agreement. Statutory interpretation 
begins by looking at the plain and ordinary meaning of the words contained 
therein to determine whether a statute is ambiguous. Parker Land and Cattle Co. 
v. Wyoming Game and Fish Com'n, 845 P.2d 1040, 1042-43 (Wyo. 
1993).

 

A 
"statute is unambiguous if its wording is such that reasonable persons are able 
to agree as to its meaning with consistency and predictability." * * * "[A] 
statute is ambiguous only if it is found to be vague or uncertain and subject to 
varying interpretations." * * * "[W]hether an ambiguity exists in a statute is a 
matter of law to be determined by the court."

 

Id. at 1043 (quoting 
Allied-Signal, Inc. v. Wyoming State Bd. of Equalization, 813 P.2d 214, 219-20 
(Wyo. 1991)). If we find the statute is unambiguous, we apply its plain meaning. 
Parker Land and Cattle Co., 845 P.2d  at 1043.

 

[¶10] We read a statute so 
that every word, clause and sentence is given effect so, if possible, no part of 
the statute is rendered inoperative or superfluous. State Dept. of Revenue and 
Taxation v. Pacificorp., 872 P.2d 1163, 1166 (Wyo. 1994); Reliance Ins. Co. v. 
Chevron U.S.A. Inc., 713 P.2d 766, 770 (Wyo. 1986). In construing the statute, 
our main objective is to effectuate the intent of the legislature. Moncrief v. 
Harvey, 816 P.2d 97, 105 (Wyo. 1991).

 

                                          
III. DISCUSSION

 

[¶11] Bolack and Morgan 
assert that Wyo. Stat. §§ 30-1-131 and 30-1-132 render the provisions of the 
Unit Operating Agreement unenforceable to the extent that Chevron seeks 
indemnity for its own negligence. Chevron denies that these statutory provisions 
apply to the Unit Operating Agreement for several reasons.

 

[¶12] First, Chevron 
contends that the Unit Operating Agreement does not fall within the purview of 
Wyo. Stat. § 30-1-132 because it is not a contract for services. Relying on our 
holding in Reliance Ins. Co., 713 P.2d 766, Chevron maintains that the Unit 
Operating Agreement does not require Bolack or Morgan to perform services 
relating to the well, and, therefore, the Unit Operating Agreement is not an 
agreement governed by the anti-indemnity prohibitions. Although Chevron 
recognizes that our decision in Reliance Ins. Co. did not turn on whether 
services were being performed, Chevron asserts that the decision clearly 
determined "that an agreement which is voidable under § 30-1-131 must be one 
relating to the rendition of services * * * by the party from whom indemnity is 
sought." (Emphasis added.) Interestingly, Chevron does not point to where that 
requirement is found in our decision, and we have searched in vain for such 
implication. Rather, we find that our discussion in Reliance Ins. Co. was 
limited to "rendering services" simply because that was the term in the statute 
relevant to the facts of that case.

 

[¶13] Wyo. Stat. § 30-1-132 
defines the agreements to which Wyo. Stat. § 30-1-131 will apply. The plain 
language of the statute states that "any agreement * * * concerning any 
operations related to [listing of specific activities], or otherwise rendering 
services in or in connection with any well * * *" are subject to the 
anti-indemnity provision. Wyo. Stat. § 30-1-132. We find no language which 
limits the application of Wyo. Stat. § 30-1-131 only to agreements where the 
"party from whom indemnity is sought" will provide 
services.

 

[¶14] In this case, the Unit 
Operating Agreement clearly contemplates that Chevron will perform operations 
relating to a well. In Reliance Ins. Co., we noted that "[t]he catchall phrase, 
'rendering services * * * in connection with any well,' follows a list of 
specific activities which are closely related to well drilling." Reliance Ins. 
Co., 713 P.2d  at 770. It is precisely these listed operations which Chevron 
agreed to perform under the Unit Operating Agreement and from which its 
liability arose. Consequently, we see no basis for Chevron's contention that the 
Unit Operating Agreement is not an agreement within the definition of Wyo. Stat. 
§ 30-1-132.

 

[¶15] Chevron next argues 
that the Unit Operating Agreement is not governed by Wyo. Stat. § 30-1-131 
because its provisions do not "by its terms, purport to indemnify Chevron 
against anything" for its own negligence. Chevron avers that its claim is not 
one for indemnity, but for the enforcement of a contract to pay costs of a well 
completion operation. To support this position, Chevron cites to Centric Corp. 
v. Drake Bldg. Corp., 726 P.2d 1047 (Wyo. 1986).

 

[¶16] Chevron's reliance on 
our holding in Centric Corp., however, is misplaced. In Centric Corp., we did 
not reach the anti-indemnity issue because we found that the contract on which 
Centric claimed "is not one which indemnifies Centric against the consequences 
of its own negligence." Id. at 1053-54. Here, Chevron boldly claims that it is 
"entitled to recover on its contract claims, even though it is an accepted fact 
that its own negligence caused or contributed to the injuries of the well 
servicing contractor's employees." This statement unabashedly expresses Chevron's intent to 
enforce the Unit Operating Agreement to recover its losses stemming from its own 
negligence. The fact that the terms of the contract do not mention indemnity is 
not dispositive. Merely because words such as "negligence" or "indemnity" are 
absent does not change the result that Chevron demands. Indeed, no case could 
teach more clearly that such precise terms will not avoid a claim that a party 
is obligated to protect against injuries resulting from the other party's 
negligence based upon general contractual language.

 

[¶17] Wyo. Stat. § 30-1-131 
precludes the enforcement of contracts which "purport to indemnify" an 
indemnitee against the consequences of its own negligence "to the extent" that 
the terms relieve the indemnitee from loss or liability for his own 
negligence.  While the contractual 
provisions at issue may be enforceable under other circumstances, in this 
instance they are being used to enforce the Unit Operating Agreement in a manner 
which patently violates Wyo. Stat. § 30-1-131. Thus, to the extent that Chevron 
seeks to charge the non-negligent interest owners its "costs" to compensate 
workers who were seriously injured by Chevron's negligence, Chevron's claim must 
fail.

 

[¶18] To otherwise hold 
would ignore the strong public policy which supports the anti-indemnity statute. 
We have long recognized that the primary purpose of the anti-indemnity provision 
is to promote safe working conditions for Wyoming's workers. In pursuing this 
purpose, the anti-indemnity provisions are designed to " 'insure a continuing 
motivation for persons responsible * * * to take accident prevention measures * 
* *.' " Mountain Fuel Supply Co. v. Emerson, 578 P.2d 1351, 1356 (Wyo. 1978) 
(quoting Davis v. Commonwealth Edison Co., 61 Ill. 2d 494, 336 N.E.2d 881 
(1975)). Were we to condone Chevron's attempt to recover for losses brought 
about by its own negligence, we would thwart the purpose of the anti-indemnity 
provision. Thus, recognition of the legislature's purpose in enacting Wyo. Stat. 
§ 30-1-131 compels our restriction on Chevron's use of the Unit Operating 
Agreement.

 

                                          
IV. CONCLUSION

 

[¶19] The Unit Operating 
Agreement for the Painter Reservoir Unit is rendered void and unenforceable by 
application of Wyo. Stat. §§ 30-1-131, et. seq., to the extent that it requires 
non-negligent non-operators to contribute proportionately to the operator's 
settlement of claims for personal injuries where the operator's negligence 
caused or contributed to the cause of personal injuries.

 

          

FOOTNOTES

  1Wyo. Stat. § 30-1-131 provides as 
follows:

 

(a) 
All agreements, covenants or promises contained in, collateral to or 
affecting any agreement pertaining to any well for oil, gas or water, or mine 
for any mineral, which purport to indemnify the indemnitee against loss or 
liability for damages for:

 

          
(i) Death or bodily injury to persons;

 

          
(ii) Injury to property; or

 

          
(iii) Any other loss, damage, or expense arising under either (i) or (ii) 
from:

 

(A) 
The sole or concurrent negligence of the indemnitee or the agents or 
employees of the indemnitee or any independent contractor who is directly 
responsible to such indemnitee; or

 

(B) From 
any accident which occurs in operations carried on at the direction or under the 
supervision of the indemnitee or an employee or representative of the indemnitee 
or in accordance with methods and means specified by the indemnitee or employees 
or representatives of the indemnitee, are against public policy and are void 
and unenforceable to the extent that such contract of indemnity by its terms 
purports to relieve the indemnitee from loss or liability for his own 
negligence. This provision shall not affect the validity of any insurance 
contract or any benefit conferred by the Worker's Compensation Law [§§ 27-14-101 
to 27-14-805] of this state.

 

(Emphasis 
added.) The above provisions are applied to agreements "pertaining to any well 
for oil, gas, or water" as that phrase is defined in Wyo. Stat. § 
30-1-132:

 

The term 
"agreement pertaining to any well for oil, gas, or water, or mine for any 
mineral" as used in section 1 hereof [§ 30-1-131], means any agreement or 
understanding, written or oral, concerning any operations related to 
drilling, deepening, reworking, repairing, improving, testing, treating, 
perforating, acidizing, logging, conditioning, altering, plugging, or 
otherwise rendering services in or in connection with any well drilled for 
the purpose of producing or disposing of oil, gas or other minerals, or water, 
and designing, excavating, constructing, improving, or otherwise rendering 
services in or in connection with any mine shaft, drift, or other structure 
intended for use in the exploration for or production of any mineral, or an 
agreement to perform any portion of any such work or services or any act 
collateral thereto, including the furnishing or rental of equipment, 
incidental transportation, and other goods and services 
furnished in connection with any such service or 
operation.

 

(Emphasis 
added.)