Title: C.E. CARLSON and IRIS M. CARLSON; MICHAEL H. SAMUELS; WILLIAM SAMUELS; BABIT LIMITED PARTNERSHIP; ESTATE OF FRANK L. SHOGRIN, by and through GAY WOODHOUSE; JAMES D. MEDEMA and MILLIE. M. MEDEMA; EDNA MAE WALKER; VALORIE WALKER; PETER T. BALOG; and LOWELL A RASMUSSEN V. FLOCCHINI INVESTMENTS; THE BUD AND MARY LOU FLOCCHINI FAMILY PARTNERSHIP; BUD FLOCCHINI; MARY LOU FLOCCHINI; THE RICHARD J. AND PARTRICIA FLOCCHINI FAMILY PARTNERSHIP; RICHARD J. FLOCCHINI; PATRICIA FLOCCHINI; THE ARMANDO AND LENA FLOCCHINI FAMILY PARTNERSHIP; LENA FLOCCHINI; ARMANDO J. FLOCCHINI, JR., a/k/a A. J. FLOCCHINI, JR.; and DURHAM RANCHES, INC

State: wyoming

Issuer: Wyoming Supreme Court

Document:

C.E. CARLSON and IRIS M. CARLSON; MICHAEL H. SAMUELS; WILLIAM SAMUELS; BABIT LIMITED PARTNERSHIP; ESTATE OF FRANK L. SHOGRIN, by and through GAY WOODHOUSE;  JAMES D. MEDEMA and MILLIE. M. MEDEMA; EDNA MAE WALKER; VALORIE WALKER; PETER T. BALOG; and LOWELL A RASMUSSEN V. FLOCCHINI INVESTMENTS; THE BUD AND MARY LOU FLOCCHINI FAMILY PARTNERSHIP; BUD FLOCCHINI; MARY LOU FLOCCHINI; THE RICHARD J. AND PARTRICIA FLOCCHINI FAMILY PARTNERSHIP; RICHARD J. FLOCCHINI; PATRICIA FLOCCHINI; THE ARMANDO AND LENA FLOCCHINI FAMILY PARTNERSHIP; LENA FLOCCHINI; ARMANDO J. FLOCCHINI, JR., a/k/a  A. J. FLOCCHINI, JR.; and DURHAM RANCHES, INC2005 WY 19106 P.3d 847Case Number: 04-49Decided: 02/15/2005
 
 
OCTOBER 
TERM, A.D. 2004

 
 
                                                                                                             

C.E. 
CARLSON and IRIS M. CARLSON,

Trustees 
of the Carlson Family 1982 Trust;

MICHAEL 
H. SAMUELS; WILLIAM SAMUELS;

BABIT 
LIMITED PARTNERSHIP; ESTATE OF

FRANK L. 
SHOGRIN, by and through

GAY 
WOODHOUSE, Personal Representative;

JAMES D. 
MEDEMA and MILLIE M. MEDEMA,

Trustees 
of the Medema Family Trust; EDNA MAE

WALKER, 
Trustee of the Edna Mae Walker

Revocable 
Trust; VALORIE WALKER, Trustee

of the 
Jack V. Walker Revocable Trust; PETER

T. 
BALOG; and LOWELL A. RASMUSSEN,

 
 
Appellants

(Plaintiffs) 
,

 
 
v.

 
 
FLOCCHINI 
INVESTMENTS, a California

Partnership; 
THE BUD AND MARY LOU

FLOCCHINI 
FAMILY PARTNERSHIP, a

California 
Partnership; BUD FLOCCHINI;

MARY LOU 
FLOCCHINI; THE RICHARD J.

AND 
PARTRICIA FLOCCHINI FAMILY

PARTNERSHIP, 
a California 
Partnership;

RICHARD 
J. FLOCCHINI; PATRICIA

FLOCCHINI; 
THE ARMANDO AND LENA

FLOCCHINI 
FAMILY PARTNERSHIP;

FLOCCHINI, 
JR., a/k/a A.J. FLOCCHINI, JR.;

and 
DURHAM RANCHES, INC., a Wyoming

Corporation,

 
 
Appellees

(Defendants) 
.

 
 
 
 

Appeal 
from the DistrictCourtofCampbellCounty

The 
Honorable John Perry, Judge

 
 

Representing 
Appellants:

            
Drake D. Hill and Timothy M. Stubson of Brown, Drew & Massey, 
LLP,

            
Casper, Wyoming.   

 
 

Representing 
Appellees:

            
Thomas Klepperich and David Smith of Lonabaugh & Riggs, 
Sheridan,

            
Wyoming. 

 
 
 
 
Before 
HILL, C.J., and GOLDEN, KITE, and VOIGT, JJ., and YOUNG, 
DJ.

 
 
KITE, 
Justice.

[¶1]      In this coalbed 
methane royalty dispute, the royalty owners1 filed an action against the mineral 
owners2 claiming they were entitled 
pursuant to a mineral lease executed by the parties' successors in interest to a 
share of an overriding royalty interest in minerals produced from certain ranch 
lands.  Prior to trial, the district 
court granted summary judgment for mineral owners on royalty owners' breach of 
contract claim.  The royalty owners' 
claims for breach of fiduciary duty and breach of the covenant of good faith and 
fair dealing proceeded to trial.  
After trial, the district court entered judgment for the mineral 
owners.  Royalty owners 
appealed.  We 
affirm.

 
 
 
 

 
 
[¶2]      Royalty owners 
present the following issues:

 
 
1.         
The district court erred in dismissing breach of contract claims against 
Flocchini Investments and its predecessors in interest when the undisputed 
evidence demonstrated that Flocchini Investments was the successor in interest 
to the initial signatories and where Flocchini Investments failed to share all 
royalties obtained on production in contravention of its contractual 
duties.

 
 
2.         
The district court's decision on Appellants' claim for breach of 
fiduciary duty erred by applying the wrong standard.

 
 
3.         
The district court erred in dismissing Appellants' claims for tort[i]ous 
interference given contested issues of fact surround[ing] Appellees' actions as 
they related to the contractual duty to pay a portion of all royalties to 
Appellants.

 
 
4.         
The court applied the erroneous standard for awarding damages where the 
Appellees were required to share all royalties obtained on the subject 
minerals.

 
 
Mineral 
owners restate the issues as follows:

 
 
A.        Did 
the trial court err in dismissing Appellants' breach of contract claim against 
Flocchini Investments?

 
 
B.        Did 
the trial court err in determining that A.J. ("Bud") Flocchini, Jr. did not 
breach any duty he owed to the Appellants?

 
 
C.        Did 
the trial court err dismissing Appellants' claims for tortious interference 
against business expectancy?

 
 
D.        Were 
the trial court's findings and conclusions in relation to damages 
correct?

 
 
 
 

 
[¶3]      In 1957, Robert 
and Velma Wright owned the surface estate of a large ranch in Campbell County, Wyoming.  
Mr. Wright's sister, Alice Spielman, owned some of the minerals 
underlying the ranch.  In May of 
1957, Ms. Spielman and the Wrights entered into a "Cross Conveyance and 
Stipulation of Interests" concerning the minerals underlying the ranch.  Pursuant to the stipulation, Mr. Wright 
acquired all of Ms. Spielman's interest in the minerals, including the executive 
right to lease the minerals, and Ms. Spielman retained a nonparticipating 
royalty interest in the minerals. 

 
 
[¶4]      Between 1957 and 
1979, Mr. Wright conveyed his interest in the ranch and minerals to the mineral 
owners and Ms. Spielman conveyed her royalty interest to the royalty 
owners.  In 1981, the royalty owners 
filed suit against the mineral owners, claiming they diverted royalty payments 
to themselves rather than sharing those payments with the royalty owners as 
required by the cross conveyance and stipulation.  The suit was settled when the parties 
reached an agreement, effective November 15, 1982, providing that the term 
"landowner's royalty" as used in the cross conveyance included all royalties 
acquired by the mineral owners for oil, gas and minerals produced from the 
subject ranch land, including overriding royalties, and in essence that, in 
exchange for dismissal of the suit, the mineral owners would divide royalty 
payments among the parties as intended by the cross conveyance.  The settlement agreement also 
provided:

 
 
The mineral owners shall negotiate all 
future oil and gas leases and other mineral leases in good faith and as ordinary 
prudent mineral owners. . . .  
Except as specifically hereinafter provided, should the Mineral Owners 
acquire an overriding royalty in the Subject Lands, the same shall be considered 
to be part of the "landowner's royalty."     

 
 
[¶5]      In 1994, interest 
began to grow in the production of methane gas from the ranch.  At that time, Durham Ranches, Inc.,3 owned a portion of the surface 
estate of the ranch, the mineral owners owned a portion of the mineral interest 
previously owned by Mr. Wright, and the royalty owners owned the 
non-participating royalty interest previously owned by Ms. Spielman.  The mineral owners were interested in 
investigating the possibilities of coalbed methane development while Durham 
Ranches was concerned with the effects such development would have on the 
ranch.  Mr. Flocchini was charged 
with negotiating mineral leases on behalf of the mineral owners and surface use 
agreements on behalf of Durham Ranches.  
Petrox Resources, Inc. approached Mr. Flocchini concerning the production 
of methane gas from beneath the ranch. Mr. Flocchini and Petrox negotiated an 
agreement whereby the mineral owners agreed to lease the minerals to Petrox in 
exchange for a 15% royalty interest and Petrox agreed to compensate Durham 
Ranches for surface use and damages by making a lump sum payment of $50,000, a 
producing well payment of $1,000 per well and a 3% overriding royalty interest 
in all minerals under the ranch.  On 
the basis of this agreement, the mineral owners and Petrox executed a mineral 
lease on August 3, 1994, providing for payment of the 15% royalty interest.  By separate letter agreement, Petrox and 
Durham Ranches set forth the terms for surface damage compensation, including 
the 3% overriding royalty interest Petrox agreed to pay to Durham Ranches.    

 
 
[¶6]      On August 24, 
2001, after learning of the letter agreement, the royalty owners filed suit 
against the mineral owners, alleging they had entered into an agreement having 
the effect of diverting to themselves royalty payments owed to the royalty 
owners.  Royalty owners claimed 
Durham Ranches was an alter ego for the mineral owners and by virtue of the 
letter agreement providing for payment of the 3% overriding royalty interest to 
Durham Ranches, the mineral owners acquired royalties that the 1982 settlement 
agreement required to be shared with the royalty owners.  Specifically, royalty owners claimed 
they received only their proportionate share of the 15% landowner's royalty 
interest when they also should have received their proportionate share of the 3% 
overriding royalty interest paid to the mineral owners alter ego, Durham 
Ranches.  Royalty owners alleged 
claims for breach of contract, breach of the covenant of good faith and fair 
dealing, breach of fiduciary duty, conversion, tort[i]ous interference, 
constructive fraud and fraud, alter ego liability, civil conspiracy, and 
attorneys fees and costs. 

 
 
[¶7]      On October 29, 
2002, mineral owners filed motions seeking summary judgment on all claims.  Royalty owners also filed a motion for 
summary judgment.  The district 
court conducted a hearing and, on February 21, 2003, issued a decision letter in 
which it held that summary judgment was appropriate for mineral owners on all 
claims except the claims against Mr. Flocchini for breach of fiduciary duty and 
breach of the covenant of good faith and fair dealing.

 
 
[¶8]      Royalty owners 
filed a motion for reconsideration and clarification.  Following a hearing, the trial court 
denied the motion as part of its order on summary judgment, which it issued the 
first day of trial.  The parties 
tried the breach of fiduciary duty and breach of the implied covenant claims to 
the court in a three and one-half day bench trial beginning October 20, 
2003.  On February 3, 2004, the 
trial court entered an order finding generally in favor of Mr. Flocchini.  Royalty owners timely appealed. 

 
 
 
 

 
 
[¶9]      Royalty owners 
seek review of the district court's order granting summary judgment on the 
breach of contract claim and its findings of facts and conclusions of law 
following trial on the breach of fiduciary duty and implied covenant 
claims.  Our standards for reviewing 
summary judgment orders are well established:

 
 
. . . we 
have the same duty, review the same materials, and follow the same standards as 
the district court. The propriety of granting a motion for summary judgment 
depends upon the correctness of a court's dual findings that there is no genuine 
issue as to any material fact and that the prevailing party is entitled to 
judgment as a matter of law. A genuine issue of material fact exists when a 
disputed fact, if proven, would have the effect of establishing or refuting an 
essential element of an asserted cause of action or defense. 

 
 
            
We view the record from the standpoint most favorable to the party 
opposing the motion, giving to that party all favorable inferences that fairly 
may be drawn from the record.   
We will uphold summary judgment on the basis of any proper legal theory 
appearing in the record.  We review 
a grant of summary judgment deciding a question of law de novo and afford no 
deference to the district court's ruling.  

 
 

Merrill 
v. Jansma, 2004 WY 
26, ¶¶ 6-7, 86 P.3d 270, ¶¶ 6-7 (Wyo. 2004) (citations 
omitted).

 
 
[¶10]   Our review of a district court's 
findings of fact and conclusions of law is governed by the following 
standards:

 
 
We 
review the trial court's conclusions of law de novo.  The trial court's findings of fact are 
subject to the clearly erroneous standard:

 
 
The 
factual findings of a judge are not entitled to the limited review afforded a 
jury verdict.  While the findings 
are presumptively correct, the appellate court may examine all of the properly 
admissible evidence in the record.  
Due regard is given to the opportunity of the trial judge to assess the 
credibility of the witnesses, and our review does not entail re-weighing 
disputed evidence.  Findings of fact 
will not be set aside unless they are clearly erroneous.  A finding is clearly erroneous when, 
although there is evidence to support it, the reviewing court on the entire 
evidence is left with the definite and firm conviction that a mistake has been 
committed.

 
 
Also, in 
reviewing a trial court's findings of fact, 

 
 
we 
assume that the evidence of the prevailing party below is true and give that 
party every reasonable inference that can fairly and reasonably be drawn from 
it.  We do not substitute ourselves 
for the trial court as a finder of facts; instead, we defer to those findings 
unless they are unsupported by the record or erroneous as a matter of 
law.

  

We 
affirm the trial court's findings if there is any evidence to support them. 

 
 
 
 
 
 

Life 
Care Centers of America, Inc. v. Dexter, 2003 
WY 38, ¶ 7, 65 P.3d 385, ¶ 7 (Wyo. 2003) (citations 
omitted).

 
 
 
 

 
 
 
 
1.         
Breach of Contract

 
 
[¶11]   The royalty owners claim the 
district court erred in granting summary judgment for the mineral owners on the 
breach of contract claim.  
Specifically, they claim Mr. Flocchini negotiated the mineral lease with 
Petrox so as to divert a portion of the royalties to Durham Ranches rather than 
sharing all royalties proportionately with the royalty owners as required by the 
1982 settlement agreement.  They 
assert the district court dismissed the claim on the sole basis that Durham 
Ranches was not a party to the agreement without ever addressing the real breach 
of contract issue, i.e., the mineral owners' liability under the 1982 settlement 
agreement.  They agree that Durham 
Ranches was not a party to the 1982 agreement but contend that does not resolve 
the issue of whether the mineral owners, who were bound by the agreement as 
successors in interest to Mr. Wright's mineral interests, were in breach.  They contend the agreement clearly and 
unambiguously obligated the mineral owners to share with the royalty owners 
all royalties paid on the oil, gas and minerals produced from the ranch 
lands and that by entering into a lease with Petrox that paid them more and the 
royalty owners less, the mineral owners violated the agreement. Specifically, 
the royalty owners assert Petrox initially offered to pay a royalty of 16 or 
16-2/3%, meaning they would have received a higher proportionate payment.  However, Mr. Flocchini countered with an 
offer resulting in a lower royalty payment to them and a separate royalty 
payment to Durham Ranches.  As a 
result of these negotiations, royalty owners allege they obtained only a 
proportionate share of the 15% landowners' royalty and Mr. Flocchini's company 
received a 3% overriding royalty interest.  
They claim the 3% overriding royalty interest was not disclosed to or 
shared with the royalty owners and that violated the 1982 settlement agreement. 

 
 
[¶12]   The mineral owners assert the 
district court properly dismissed the breach of contract claim against both 
Durham Ranches and the mineral owners, the former because Durham Ranches was not 
a party to the 1982 settlement agreement and the latter because the mineral 
owners did not acquire an overriding royalty interest that they refused to share 
in violation of the agreement.  The 
mineral owners assert that Durham Ranches, not the mineral owners, acquired the 
3% overriding royalty interest.  
Quoting the 1982 settlement agreement, they contend royalty interests 
acquired by others, who are not party to the settlement agreement, are not 
royalties "reserved to or acquired by mineral owners" as the agreement 
provides.  Therefore, they argue, 
the mineral owners did not breach the 1982 settlement agreement.      

 

[¶13]   Of the various mineral owners named 
as defendants in royalty owners' complaint, only three, A.R. Flocchini, Sr., 
A.R. Flocchini, Jr. and Richard J. Flocchini, were actual parties to the 1982 
settlement agreement.  Flocchini 
Investments, the Bud and Mary Lou Flocchini Family Partnership and the Richard 
J. and Patricia Flocchini Family Partnership were successors in interest to 
parties to the agreement so they also were bound by the agreement.  The remaining parties named as 
defendants, including Durham Ranches, were not parties to the settlement 
agreement.  Because a breach of 
contract claim lies only against contracting parties, the royalty owners stated 
a valid claim for breach of contract only against the mineral owners who were 
parties to the 1982 settlement agreement or successors in interest to those 
parties.  The breach of contract 
claim did not apply to the other mineral owners named as defendants.  Thus, the district court properly 
granted summary judgment to all those defendants not a party to the 1982 
settlement agreement, including Durham Ranches.4

 
 
[¶14]   The royalty owners correctly assert 
that the district court held only that Durham Ranches did not breach the 1982 
settlement.  The district court did 
not address the validity of the breach of contract claim against the other 
mineral owners named as defendants who were parties or successors to parties to 
the 1982 agreement.  Therefore, the 
royalty owners asked the district court for reconsideration of its ruling.  Both parties again thoroughly briefed 
the issue.  Royalty owners 
reiterated their argument that mineral owners breached the 1982 agreement by 
acquiring a royalty interest and not sharing it with them; mineral owners 
claimed the only named defendant to acquire a royalty interest was Durham 
Ranches, which was not a party to the 1982 agreement.  The district court summarily denied the 
motion for reconsideration without explanation in its summary judgment order. 
The question for our consideration, therefore, is whether the district court 
properly granted summary judgment on the contract claim given that it addressed 
the claim only in the context of Durham Ranches and not as to the mineral owners 
who where bound by the 1982 agreement. 

 
 
[¶15]   In resolving that question, our 
inquiry focuses on whether the evidence, viewed in the light most favorable to 
the royalty owners, demonstrated a genuine issue of material fact as to whether 
the mineral owners who were parties to the 1982 settlement agreement breached 
the agreement, or whether they were entitled to judgment as a matter of law on 
the breach of contract claim.  We 
hold the district court properly granted summary judgment as to the royalty 
owners' claim because the terms of the 1982 agreement clearly and unambiguously 
provided the royalties to be shared were those "acquired" by the mineral owners, 
and the evidence was undisputed that the only party to acquire the 3% royalty 
interest was Durham Ranches, which was not a mineral 
owner.

 
 
. . . 
[W]hen the terms of [a contract] are unambiguous, the interpretation is a 
question of law . . . .  Whether a 
contract is ambiguous is a question of law for the reviewing court. We review 
questions of law de novo without affording deference to the decision of 
the district court. 

        
According to our established standards for interpretation of contracts, 
the words used in the contract are afforded the plain meaning that a reasonable 
person would give to them. When the provisions in the contract are clear and 
unambiguous, the court looks only to the "four corners" of the document in 
arriving at the intent of the parties. In the absence of any ambiguity, the 
contract will be enforced according to its terms because no construction is 
appropriate. 

. . 
.

Our 
primary focus in construing or interpreting a contract is to determine the 
parties' intent, and our initial inquiry centers on whether the language of the 
contract is clear and unambiguous.  If the language of the contract is 
clear and unambiguous, then we secure the parties' intent from the words of the 
agreement as they are expressed within the four corners of the contract. Common 
sense and good faith are leading precepts of contract construction, and the 
interpretation and construction of contracts is a matter of law for the courts. 
We have also recognized that the language of a contract is to be construed 
within the context in which it was written, and the court may look to the 
surrounding circumstances, the subject matter, and the purpose of the contract 
to ascertain the intent of the parties at the time the agreement was made. 

Wadi 
Petroleum, Inc. v. Ultra Resources, 2003 
WY 41, ¶¶ 10-11, 65 P.3d 703, ¶¶ 10-11 (Wyo. 2003) (citations omitted).   In interpreting unambiguous 
contracts involving mineral interests, we look to surrounding circumstances, 
facts showing the relationship of the parties, the subject matter of the 
contract, and the apparent purpose of making the contract.  Id.

 
 
[¶16]   The 1982 settlement agreement 
provided in pertinent part as follows:

 
 

1.                  
Mineral 
Owners hereby expressly accept, approve, confirm and ratify that the term 
"landowner's royalty", as used in the Cross Conveyance, shall include all 
royalties paid upon the oil, gas and minerals produced, saved and marketed from 
the Subject Lands including all overriding royalties, production payments and 
other cost free interests based upon or measured by the production of 
hydrocarbons or other minerals which have been or are hereafter reserved to or 
acquired by Mineral Owners, except as hereinafter specifically provided. 

 
 
The 
agreement later reiterates:

 
 
7.         
. . . should the Mineral Owners acquire any overriding royalty in the 
Subject Lands, the same shall be considered to be part of the "landowner's 
royalty".   

 
 
[¶17]   The evidence presented was 
undisputed that the only entities that "acquired" a royalty interest in mineral 
production from the ranch lands were the mineral owners and Durham Ranches.  The mineral owners received a 15% 
landowners' royalty interest. Durham Ranches received a 3% overriding royalty 
interest along with other payments for surface damage done to the property from 
coalbed methane production.  The 
royalty owners received their proportionate share of the 15% landowners' royalty 
interest acquired by the mineral owners under the terms of the mineral 
lease.  What they did not receive a 
share of was the 3% overriding royalty interest described in the letter 
agreement.  However, Durham Ranches, 
not the mineral owners, acquired that royalty. Thus, it was not a royalty 
acquired by the mineral owners and they were not required under the clear terms 
of the 1982 settlement agreement to pay a proportionate share of it to the 
royalty owners.  Because these facts 
were undisputed, we hold summary judgment was proper on the breach of contract 
claim. 

 
 
 
 
2.         
The Applicable Standard For Measuring the Duty Owed by Mr. 
Flocchini

 
 
[¶18]   The royalty owners contend the 
district court applied the wrong standard for measuring the duty owed to them by 
Mr. Flocchini as a successor to the executive right under the original agreement 
between Mr. Wright and Ms. Spielman.  
They claim the court erred in relying on True Oil Co. v. Sinclair Oil 
Corporation, 771 P.2d 781, 793 (Wyo. 1989) to conclude that the fiduciary 
duty was defined by the 1982 agreement and was limited to acting in good faith 
and as a prudent mineral operator.  
They argue the district court's reliance on True Oil was misplaced 
because in that case True's relationship with Sinclair as agent and trustee 
arose from the contract itself, warranting the conclusion that the contract 
alone defined the obligations between the parties.  In contrast, the royalty owners argue, 
the relationship between themselves and Mr. Flocchini arose not from the 1982 
settlement agreement, but from Mr. Flocchini's position as executor of the 
royalty owners' interest.  Thus, the 
royalty owners assert, the district court erred in concluding that the 1982 
settlement agreement defined the relationship between the parties.  The mineral owners respond that the 
parties' agreement controls the relationship and, therefore, Mr. Flocchini's 
duty as holder of the executive rights was to act in good faith and as an 
ordinary prudent mineral owner. 

 
 
[¶19]   In its summary judgment decision 
letter, the district court stated:

 
 
The 1982 
Agreement and Assignment expressly provided for and defined the duty of the 
Defendant as to executory authority and good faith. When parties express a 
standard of care, the existence and extent of their duties is controlled by that 
contractual expression. See, True Oil Co. v. Sinclair Oil Corp., 771 P.2d 781 (Wyo. 
1989). In this case [royalty owners] have attempted to separate good faith and 
fair dealing out of an argued fiduciary duty. As these are intertwined, and 
because of questions of fact relating to the question of good faith and fair 
dealing, Counts 2 [breach of covenant of good faith and fair dealing] and 3 
[breach of fiduciary duty] present issues proper for hearing. The existence of 
duty is a question of law for the court to decide and, finding that a duty is 
present, Counts 2 and 3 should proceed.

 
 
We hold 
that the district court correctly concluded the 1982 settlement agreement 
defined the standard of care Mr. Flocchini owed to the royalty 
owners.

 
 
[¶20]   We have recognized in a number of 
cases that contracting parties may incorporate express terms varying the 
standards that would otherwise govern their relationship.  Kemper Architects, P.C. v. McFall, 
Konkel & Kimball Consulting Engineers, Inc., 843 P.2d 1178, 1185 (Wyo. 
1992).  Where express terms are 
contractually agreed upon, they control the relationship of the parties.  Id.  Consistent with this general principle, 
we concluded in True Oil Co., 771 P.2d  at 793, that the rights and duties 
of the parties were controlled by their agreement.  We cited Tenneco Oil Co. v. 
Bogert, 630 F. Supp. 961, 967 (W.D. Okla. 1986) for the principle, 
applicable in joint ventures to develop oil and gas properties, that the 
existence and extent of fiduciary duties is controlled by the terms of the 
agreement between the parties.  
True Oil Co., 771 P.2d  at 793.   Although Tenneco Oil Co. 
involved a joint operating agreement, the principle we cited from the case is 
equally applicable to the agreement at issue here in which the parties expressly 
agreed that mineral owners would "negotiate all future oil and gas leases and 
other mineral leases in good faith and as ordinary prudent mineral owners."  That was the standard the parties agreed 
to and that was the standard that governed Mr. Flocchini's conduct.5  Consistent with our longstanding 
principles of contract interpretation, we will not rewrite the parties' express 
and unambiguous agreement. 

 
 
 
 
3.         
Evidence that Mr. Flocchini Violated the Good Faith, Prudent Mineral 
Owner Standard

 
 
[¶21]   Royalty owners argue next that even 
if the 1982 settlement agreement established the duty owed by Mr. Flocchini as 
that of a good faith, prudent mineral owner, the evidence presented at trial 
showed that he violated the duty.  
Essentially, royalty owners contend the undisputed evidence showed that 
Mr. Flocchini was guilty of self-dealing in negotiating the lease terms with 
Petrox.  Mineral owners respond that 
the facts as found by the district court clearly demonstrate that Mr. Flocchini 
acted in good faith and as an ordinary prudent mineral owner in negotiating the 
lease with Petrox.  

 
 
[¶22]   The district court made the 
following findings of fact relevant to the issue of Mr. Flocchini's 
conduct:

 
 
20.       After 
Petrox had completed its negotiations with [Mr.] Flocchini, it proceeded to 
negotiate leases with other mineral owners in the area of the proposed 
development. Because of their collective 50% mineral interest, the Wright family 
had greater negotiating strength than any other mineral owner. The Wright family 
was therefore able to negotiate a 16% lease with Petrox. All other mineral 
owners that executed leases in favor of Petrox agreed to leases with landowners 
royalties equal to, or less than, the landowners royalty negotiated by [Mr.] 
Flocchini.

 
 
21.       Two of the 
mineral owners that negotiated leases in favor of Petrox with respect to 
minerals underlying the Durham Ranch . . . are Plaintiffs in this action, and 
several others were professionals who purchased and sold minerals as a regular 
course of their business. Each of these leased their mineral interests to Petrox 
with landowners royalties that were equal to, or less than, the landowners 
royalty negotiated by [Mr.] Flocchini.

 
 
22.       What a 
lessee would be willing to offer, and what a lessor would be willing to accept, 
in terms of a reserved landowners royalty in a mineral lease can vary depending 
upon such factors as the time of the lease, the location of the minerals, the 
type of mineral that the lessee intends to produce, the existence or absence of 
lease depth restrictions, the speculative nature of the proposed development, 
and other economic conditions at the time.

 
 
23.       The amount 
of the landowners royalty reserved in oil leases, conventional gas leases, 
leases in other locations, and leases executed at other times not illustrative 
of the amount that an ordinary prudent mineral owner would have accepted in 
negotiating a lease of the type, in the location, and at the time of the 
Flocchini/Petrox lease.

 
 
24.       The leases 
[Mr.] Flocchini negotiated and executed in this case were reasonable and fair to 
all those mineral owners and nonparticipating royalty owners that were entitled 
to share in the proceeds thereof. Further, the leases contain terms which an 
ordinary prudent mineral owner would have negotiated.

 
 
25.       The effect 
of the methane production activity on the Durham Ranch has been profound:  Fences have been broken, gates have been 
left open, livestock has been injured and lost, the land has been disturbed, 
there has been flooding during the winter, gates have frozen shut, and increased 
roads, traffic, dust, and debris have seriously altered the aesthetics of the 
ranch.

 
 
26.       Given the 
impact of the methane production activities on Durham Ranch, and the contingent 
and speculative nature inherent in accepting an overriding royalty as 
compensation for surface use, access, and damages, the compensation [Mr.] 
Flocchini negotiated on behalf of Durham Ranches, Inc., in 1994 was fair and 
reasonable.

 
 
The 
district court also reached the following conclusions of law relevant to this 
issue:

 
 

33.             
By 
virtue of the 1982 Settlement Agreement, the Plaintiffs and the Defendant 
established the standard of care that would govern all negotiations between 
[Mr.] Flocchini and prospective mineral lessees. [Mr.] Flocchini was, pursuant 
to that agreement, obligated to negotiate "in good faith and as [an] ordinary 
prudent mineral owner."

 
 

34.             
In 
addition to the duties [Mr.] Flocchini owed to the Plaintiffs by virtue of the 
1982 Settlement Agreement, he also owed corresponding duties to Durham Ranches, 
Inc.  These mutual and corresponding 
duties prohibited [Mr.] Flocchini from using the bargaining advantages possessed 
by the mineral owners to the benefit of the surface owner, and likewise 
prohibited him from using the bargaining advantages possessed by the surface 
owner to the benefit of the mineral owners. 

 
 

35.             
To the 
extent that [Mr.] Flocchini had greater bargaining power during his negotiations 
with Petrox than did other minority mineral owners, that greater bargaining 
power was derived from his ability to convey access to the surface estate. [Mr.] 
Flocchini owed the plaintiffs no duty to exercise that greater bargaining power 
for their benefit. Moreover, had [Mr.] Flocchini used his greater bargaining 
power to obtain a higher landowners royalty for the mineral owners than the 
mineral owners could have obtained for themselves, [Mr.] Flocchini would have 
breached his duty to Durham Ranches, Inc.

 
 

36.             
Throughout 
his negotiation, execution, and implementation of the leases at issue in the 
present action, [Mr.] Flocchini: (a) acted in good faith; (b) acted as an 
ordinary prudent mineral owner; and (c) fulfilled all duties he owed to the 
Plaintiffs, including those duties both expressed and implied in the 1982 
Settlement Agreement.

 
 

37.             
[Mr.] 
Flocchini did not divert royalties from the mineral owners to the surface estate 
owner. Rather, he simultaneously negotiated separate agreements for both the 
mineral owners and the surface estate owner which were unbiased and fair to 
each. 

 
 
[¶23]   After examining all of the properly 
admissible evidence in the record, we are unable to conclude the district 
court's findings of fact were clearly erroneous.  Giving due regard to the trial court's 
opportunity to assess the credibility of the witnesses, assuming Mr. Flocchini's 
evidence is true and giving to him every fair and reasonable inference and 
keeping in mind that we do not substitute ourselves for the trial court as 
finder of fact, we are compelled to affirm.

 
 
[¶24]   In reaching this conclusion, we are 
cognizant of the fact that Petrox's initial offer included a higher royalty 
payment -- 16 or 16-2/3% as opposed to the 15% ultimately paid.  Had Mr. Flocchini accepted this initial 
offer, royalty owners' proportionate share would have been greater.  However, after hearing the testimony and 
weighing all of the evidence the district court was persuaded that Mr. Flocchini 
fulfilled his duty to negotiate in good faith and as an ordinary prudent mineral 
owner.  That we might have reached a 
different result based upon our review of a cold record is not sufficient 
grounds to warrant reversal.

 
 
 
 

4.         
Damages

 
 
[¶25]   In its findings of fact and 
conclusions of law, the district court included the measure of damages in the 
event its findings on liability were in error.  Royalty owners assert that the district 
court's use of the wrong legal standard to measure Mr. Flocchini's conduct led 
to the erroneous conclusion that the percentage interest in the override to 
which they were entitled should be reduced to their proportionate interest share 
in the underlying minerals. Having affirmed the district court's findings on 
liability, any discussion by this Court of the proper measure of damages would 
be purely advisory.  We, therefore, 
decline to address the proper measure of damages.

 

 
 
5.         
Intentional Interference With a Contract

 
 
[¶26]   In their last issue, royalty owners 
claim the district court erred in granting summary judgment on their 
interference with a contract claim because genuine issues of material fact 
existed showing "certain mineral owners" intentionally interfered with the cross 
conveyance and 1982 settlement agreement by entering into the agreement with 
Durham Ranches that diverted royalties owed to them.  This claim by royalty owners is simply 
another way of stating the other claims alleged, claims upon which we have 
concluded the district court properly found against royalty owners on summary 
judgment and after a full opportunity to present evidence over the course of the 
three and one-half day trial. We find nothing in the record supporting the 
claim.

 
 
[¶27]   Affirmed.    

 
 
      

FOOTNOTES

1C.E. 
Carlson and Iris M. Carlson, Trustees of the Carlson Family 1982 Trust; Michael 
H. Samuels; William Samuels; Babit Limited Partnership; Estate of Frank L. 
Shogrin, by and through Gay Woodhouse, Personal Representative; James D. Medema 
and Millie M. Medema, Trustees of the Medema Family Trust; Edna Mae Walker, 
Trustee of the Edna Mae Walker Revocable Trust; Valorie Walker, Trustee of the 
Jack V. Walker Revocable Trust; Peter T. Balog; and Lowell A. Rasmussen. 

 
 

2Flocchini 
Investments, a California Partnership; the Bud and Mary Lou Flocchini Family 
Partnership, a California Partnership; Bud Flocchini; Mary Lou Flocchini; the 
Richard J. and Patricia Flocchini Family Partnership, a California Partnership; 
Richard J. Flocchini; Patricia Flocchini; the Armando and Lena Flocchini Family 
Partnership; Lena Flocchini; Armando J. Flocchini, Jr., a/k/a A.J. Flocchini, 
Jr.; and Durham Ranches, Inc., a Wyoming Corporation.

3A.J. 
Flocchini, Jr., was the president of Durham Ranches, Inc., a "separate, 
distinct, duly formed, and validly existing corporation."  According to Mr. Flocchini, Armand Agra, 
Inc., a Nevada 
corporation, owned all of the Durham Ranches stock, and none of the individual 
Flocchinis or Flocchini family partnerships named as defendants owned any 
interest in, or received any payment from, Durham Ranches or Armand Agra, 
Inc.  According to Mr. Flocchini, 
only two of Armand Agra's seven shareholders are parties or successors to 
parties to the 1982 settlement agreement (Mr. Flocchini and his brother, 
Richard). 

4In the 
district court, the royalty owners claimed Durham Ranches and Flocchini 
Investments were merely alter egos of the individual mineral owners and were 
therefore bound by the 1982 settlement agreement. They do not address that claim 
in their argument to this Court. Therefore, we also do not address 
it.

5It is 
noteworthy that 2 Williams & Meyers, Oil and Gas Law, §339.3, p. 
222.2(1) (Revised 2002) describes the prudent landowner test as "the best 
compromise between the minimum standard of good faith and the rigorous standard 
required of a trustee." See also pp. 212-13 for a detailed discussion of 
the prudent landowner test.  While 
citing Williams & Meyers in their brief, royalty owners fail to mention that 
the standard endorsed by the authors is the very one contained in the 1982 
settlement agreement.