Title: True Oil Co. v. Sinclair Oil Corp.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

True Oil Co. v. Sinclair Oil Corp.1989 WY 79771 P.2d 781Case Number: 86-151, 86-187Decided: 03/24/1989Supreme Court of Wyoming
TRUE OIL 
COMPANY, A WYOMING PARTNERSHIP, APPELLANT 
(PLAINTIFF),

 
 
v. 

 
 
SINCLAIR 
OIL CORPORATION, A WYOMING CORPORATION, APPELLEE 
(DEFENDANT).

 
 
SINCLAIR 
OIL CORPORATION, A WYOMING CORPORATION, APPELLANT 
(DEFENDANT),

 
 
v.

 
 
TRUE OIL 
COMPANY, A WYOMING PARTNERSHIP, APPELLEE 
(PLAINTIFF).

 
 
Appeal from 
the District Court, LincolnCounty, John D. Troughton, 
J.

 
 
ARE NOT AN 
OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] 

 
 
Richard E. 
Day and Houston G. Williams of Williams, Porter, 
Day & Neville, P.C., Casper and R. Stanley 
Lowe and John J. Blomstrom of True Oil Co., Casper, for True Oil Co.

 
 
V. Anthony 
Vehar and Roy A. Jacobson of Vehar, Beppler, Jacobson, Lavery & Rose, 
Kemmerer, Rene P. Lavenant, Jr. and M.W. Parse, Jr. of Fulbright & Jaworski, 
Houston, Tex., and Peter M. Johnson of Sinclair Oil Corp., Salt Lake City, Utah, 
for Sinclair Oil 
Corp.

 
 
Before CARDINE, C.J., and THOMAS, URBIGKIT, and 
MACY, JJ., and BROWN, J., Retired.*

* Retired 
June 30, 1988.

 
 

URBIGKIT, 
Justice.

 
 

[¶1.]     We consider an appeal 
and cross-appeal from the trial court determination of rights, interests, and 
obligations arising from an agreement to drill an expensive and unsuccessful 
exploratory wildcat oil well in the northern overthrust belt of western 
Wyoming.

 
 

[¶2.]     The agreement, 
initially orally and later reduced to writing, was negotiated between the two 
individuals - H.A. (Dave) True, Jr. for True Oil Company (True Oil), 
appellant/cross-appellee, plaintiff below, and Robert Earl Holding for Sinclair 
Oil Corporation (Sinclair Oil), appellee/cross-appellant, defendant below. In 
the course of lengthy and very costly drilling efforts, Sinclair Oil became 
disenchanted with the project and terminated its participation in the 
contribution to well costs. Litigation ensued, the well was abandoned and 
acreage interests earned by the unsuccessful drilling were resold to Exxon 
Corporation, Atlantic Richfield Company and Shell Oil Company (Telephone Pass 
Group) for a modest cash payment and a five percent overriding royalty. Upon 
appeal, we are asked to review the trial court's determination of the parties' 
respective rights and obligations under the terms of their agreement for 
contribution to drilling cost and division of the cash payment and royalty upon 
sale of acreage interests earned by well drilling. We analyze the effect of 
going non-consent during the drilling operation.

 
 
I. 
ISSUES

 
 

[¶3.]     Appellant, True Oil, 
phrases the issues as:

 
 
I. Did 
Sinclair have the right to abandon the Deadman well on September 10, 
1982?

 
 
A. What was 
the effect of Sinclair's abandonment of the Deadman well on September 10, 
1982?

 
 
II. The 
trial court erred as a matter of law in construing the agreement between the 
parties to find a verbal agreement that the Deadman well was to be drilled at 
"Dave True's Cost."

 
 
A. There is 
insufficient evidence to support the trial court's finding of a verbal agreement 
between the parties that the Deadman well would be drilled at "Dave True's 
Cost."

 
 
B. Sinclair 
is estopped from claiming a cost basis other than competitive prices. Sinclair, 
by its actions, has waived its claimed right under the agreement to have costs 
based upon anything but competitive prices.

 
 
III. The 
court erred in disallowing rig and camp costs and fuel cost without 
profit.

 
 
A. There 
was nothing improper in True Oil contracting with its affiliates to furnish a 
part of the equipment and services for the Deadman well at competitive 
prices.

 
 
B. The 
trial court, by the trial and post-trial procedures adopted by it, denied True 
Oil a fair trial.

 
 
C. There is 
sufficient evidence in the record to permit the court to determine cost without 
profit of rigs 17 and 24. 

 
 
IV. The 
court erred as a matter of law in finding that Sinclair had earned full rights 
under the terms of the Deadman/Telephone Pass Exchange agreement and 
agreement.1

 
 

[¶4.]     Cross-appellant, 
Sinclair Oil, questions:

 
 
     1. Is Sinclair 
entitled to recover back from True $720,173 in monies advanced by Sinclair to 
True as Sinclair's share of the costs of the joint venture for which True has 
failed to properly account[?]

 
 
     2. Is Sinclair 
entitled to recover back from True the sum of $65,758.50 being the twenty-five 
percent charged to Sinclair of profit margins of $69,256 enjoyed by Black Hills 
Trucking Company and $193,778 enjoyed by Tool Pushers Supply Company, because 
Mr. True agreed to operate at his own cost and without profit and because by 
reason of his ownership of these corporations those profit margins were of 
personal benefit to him and his family?2

 
 

[¶5.]     Our resolution of the 
issues raised initially by True Oil effectively disposes of the issues raised in 
the cross-appeal; therefore, they will not be addressed separately. We affirm in 
part, reverse in part, and remand.

 
 
II. 
FACTS

 
 

[¶6.]     In the midst of the oil 
and gas exploration boom of the late 1970's and early 1980's, considerable 
interest arose in the geological area in western Wyoming described as an 
extension of the Overthrust Belt, within which major discoveries of oil and gas 
producing fields had been made. True Oil and its managing partner, H.A. "Dave" 
True, Jr. (Dave True), had for some time been interested in the oil and gas 
potential of this hot area because seismographic studies indicated a significant 
deflection in the area of the Basal Plate (subthrust) of the Madison Formation, 
estimated to be located at a depth of 15,000 to 18,000 feet. The deflection was 
believed to indicate a geological formation capable of containing a huge deposit 
of hydrocarbons similar to other earlier discoveries further south in Wyoming and Utah.

 
 

[¶7.]     True Oil obtained 
exploration rights to a large block of federal land in the area by acquiring 
farmout and acreage contribution agreements from third party oil companies 
holding the federal leases. True Oil formed the land into a 24,714.87 acre 
federal unit (known as the Deadman Unit) in the fall of 1978, receiving approval 
of the federal unit agreement and unit operating agreement. Under these 
agreements, True Oil was the designated operator, and provision was made for an 
initial test well. In 1979, True Oil built a road, prepared a location, spudded 
a well, and set conductor pipe.

 
 

[¶8.]     Seeking additional 
participants in the project, Dave True approached Sinclair Oil. True Oil, for 
tax purposes, desired to establish a kitty for drilling costs with cash advances 
made by the participating parties before the end of 1979. Sinclair Oil, through 
Robert Earl Holding (Earl Holding), expressed an interest and further 
discussions and meeting occurred between the principals and representatives of 
the two companies. During the negotiations, Earl Holding stressed that he was 
interested only if the project were done "at cost." Dave True indicated that 
this was agreeable, that there would be no "front-end loading" or "promotion" 
charged to Sinclair Oil. The meaning of the phrase "at cost" as understood and 
communicated between the parties was a primary issue at trial and is a central 
issue for appeal.

 
 

[¶9.]     Although much of the 
testimony conflicted as to what was discussed during these negotiations, it is 
reasonably clear that the parties understood that the primary objective of the 
well was the sub-thrust of the Madison Formation, with the opportunity to test 
intermediate horizons at lesser depths. It was also understood that it would be 
a two drilling season project, and that the well would be an expensive rank 
wildcat, but that the reservoir potential was high and the participants would 
earn leasehold interests under the constituent farmout acreage to depths reached 
by the test well.

 
 

[¶10.]  In late December 1979, True Oil and 
Sinclair Oil reached an oral agreement for mutual participation in this Deadman 
Unit oil play, with Sinclair Oil advancing $2.5 million to True Oil as one-half 
of the joint $5 million kitty. Drilling commenced in June 1980 and the oral 
agreement was later reduced to writing in a draft prepared by True Oil in the 
spring of 1980 and, after modification, executed by the parties in August 1980. 
This "Deadman Agreement" provided generally that in return for Sinclair Oil's 
fifty percent cost participation in the drilling costs, Sinclair Oil would 
receive a fifty percent interest in the well production and share equally in the 
acreage earned under the farmout agreements.

 
 

[¶11.]  True Oil, as operator responsible for 
drilling operations, engaged the services and equipment of various affiliated 
companies. True Drilling Company was the drilling contractor, True Leasing 
Company provided a rig camp, Eighty-Eight Oil Company supplied the fuel, 
Toolpushers Supply Company furnished various equipment including tubular goods, 
and Black Hills Trucking did the hauling to and from the location. True Drilling 
Company, True Leasing Company, and Eighty-Eight Oil Company are all partnerships 
comprised of the same partners as True Oil. Black Hills Trucking and Toolpushers 
Supply Company are Wyoming corporations whose stock is 
principally held by True family members. Dave True is the chief executive of 
each entity, although each has separate management, employees, business dealings 
and fiscal years.

 
 

[¶12.]  The initial drilling phase was 
accomplished in 1980 by True Drilling Company, reaching a depth of 10,286 feet 
at which point operations were suspended for the winter. For the second drilling 
season, a larger rig capable of deeper drilling was needed to satisfy the 
farmout and contribution agreements. True Drilling Company ultimately purchased 
the required rig. True Oil paid True Drilling Company $2.5 million for its share 
of the advance day work payments to secure this new rig, and Sinclair Oil was 
asked to pay another $2.5 million for its share. Although Sinclair Oil responded 
that it "would certainly consider the necessity of paying this invoice very 
promptly," the billing was never paid. Nevertheless, True Drilling Company 
purchased the larger rig and moved it onto the location at the Deadman well in 
August 1981. 

 
 

[¶13.]  During the fall of 1981, drilling 
difficulties were encountered as the second rig attempted to deepen and then 
ream the hole to a larger diameter. Costs of drilling were considerably higher 
than they had been the year before. In the late fall, Sinclair Oil became 
concerned about mounting costs and the fact that its prepayment was or would 
soon be exhausted. In November 1981, Sinclair Oil advised True Oil that they 
wished to "lay-off" one-half of its interest, preferably to a third party, to 
limit its liability exposure. Consequently, True Oil orally agreed to assume 
one-half of Sinclair Oil's interest and obligations, thereby reducing Sinclair 
Oil's participation to twenty-five percent and increasing True Oil's to 
seventy-five percent. A telex confirming True Oil's agreement to assume one-half 
of Sinclair Oil's interest in the well was sent to Sinclair Oil on December 31, 
1981. Subsequently, the "Deadman Agreement Amendment" reflecting the new 
percentages was drafted and executed by the parties effective retroactively to 
the original date of the Deadman Agreement.

 
 

[¶14.]  Drilling continued through the winter and 
into the spring of 1982. After a loss of tools in May, expensive fishing 
operations commenced and continued unsuccessfully through the summer. At the 
same time in 1982, as incurred well costs grew, the oil boom was ending with 
drilling activity in decline, day rates charged by drilling contractors and 
charges by other service suppliers spiralled downward.

 
 

[¶15.]  On August 12, 1982, the parties met to 
consider the unsuccessful fishing operations, continuing costs and oil industry 
decline. Sinclair Oil, for the first time, expressed concern to True Oil over 
rig costs and inquired if they could be reduced. After agreeing to look into the 
matter, True Oil advised Sinclair Oil in early September that any reduction in 
costs would be minimal. As a result, Sinclair Oil decided to "pull the plug," 
which terminated its participation. On September 10, 1982, Sinclair Oil notified 
True Oil of its decision by telex, that it was "going non-consent" as to further 
participation in drilling costs.3 As an alternative, Sinclair Oil offered to 
accept a further reduction in interest in the venture equal to an apportionment 
of the percentage of final total costs divided by its $2.5 million prepayment. 
As of September 10, 1982, drilling costs had totaled $12,682,588, and the well 
had reached a depth of approximately 11,665 feet. True Oil, believing that to 
realize any value from the well required continued drilling, advised Sinclair 
Oil that by refusing to participate further in costs, Sinclair Oil would forfeit 
its interest in the project.

 
 

[¶16.]  True Oil continued drilling until June 
1983, incurring additional costs of over $8 million in deepening the hole to a 
depth of 13,598 feet. On June 10, 1983, True Oil and Sinclair Oil entered into 
the Deadman/Telephone Pass Exchange Agreement for sale of their interests in the 
unit to the Telephone Pass Group.4 The buyers paid True Oil $412,500 and 
Sinclair Oil $137,500, computed from the seventy-five/twenty-five percent 
division provision of the amended Deadman Agreement, and granted them jointly a 
five percent overriding royalty. Pursuant to the Deadman/Telephone Pass Exchange 
Agreement, the well was plugged and abandoned and the area reclaimed by True 
Oil.

 
 

[¶17.]  This litigation was first commenced in 
January 1983 by True Oil with its complaint later amended after execution of the 
Deadman/Telephone Pass Exchange Agreement. By complaint and amended complaint, 
True Oil alleged Sinclair Oil breached a written and oral agreement to 
participate in drilling the Deadman Well to the Basal Plate of the Madison 
Formation and claimed damages of $2,237,613, which was the amount allegedly 
representing twenty-five percent of the total incurred drilling cost through 
June 10, 1983 in excess of Sinclair Oil's initial $2.5 million contribution. As 
a further claim, True Oil sought a declaratory judgment that Sinclair Oil, by 
withdrawing from cost participation in September 1982, had forfeited all rights 
to participate in the payment or acreage interest received from the Telephone 
Pass Group.

 
 

[¶18.]  By its answer, amended answer, 
counterclaim and amended counterclaim, Sinclair Oil denied any agreement to 
drill to a certain depth, alleged that True Oil misrepresented the cost of the 
project in inducing Sinclair Oil's participation, and contended that by cost 
overcharge, True Oil breached their agreements. Sinclair Oil pursued recovery 
for those alleged overcharges, asked for punitive damages, and sought a 
declaration of a twenty-five percent Deadman/Telephone Pass Exchange Agreement 
entitlement. Alternatively, Sinclair Oil sought rescission of the entire Deadman 
Agreement with a total refund of the $2.5 million plus 
interest.

 
 

[¶19.]  The trial of this matter commenced on 
June 24, 1985 and continued through July 8, 1985. Sinclair Oil, at the close of 
True Oil's case in chief, filed a written motion to dismiss. This motion was 
based in part on Sinclair Oil's allegation that True Oil had not sustained its 
burden of proof as to the propriety of charges to the joint account.5 The trial court reserved a ruling on the 
motion and the trial proceeded. At the trial court's request, written closing 
arguments were submitted after the trial. In its written closing argument, 
Sinclair Oil adopted the position that under the parties' agreement, True Oil 
could only bill the joint account for the services provided by the affiliated 
companies at the affiliates' cost which would constitute "Dave True's 
cost."

 
 
III. 
DECISION OF THE TRIAL COURT

 
 

[¶20.]  The trial court issued its decision 
letter in November 1985 finding and concluding, inter alia, 
that:

 
 
1. True 
Oil, in conducting operations, was acting as Sinclair Oil's agent in a fiduciary 
capacity.

 
 
2. The 
agreement was one at will entitling Sinclair Oil to withdraw from participation 
on September 10, 1982, but that Sinclair Oil was liable for its principal share 
of costs incurred to that date.

 
 
3. The 
Deadman Agreement was not ambiguous, and the parties had agreed to drill the 
well at "Dave True's cost." Therefore, the partnership affiliates were not 
entitled to any profit, although the corporate affiliates, as separate entities, 
were entitled to a profit.

 
 
4. As an 
alternative basis if the Deadman Agreement was found to be ambiguous, an 
examination of the extrinsic evidence showed that the parties intended that True 
Oil was not to enjoy any profit except interest on the advance in drilling the 
well.

 
 
5. Of the 
total charges to the joint account as of September 9, 1982 of $12,682,588, True 
Oil failed to properly account for $5,563,2796 by not proving or improper charging. The 
lack of proof was directed to non-separation of profit and insufficient 
evidence. Therefore, True Oil's claim for twenty-five percent of any amount must 
fail.

 
 
6. True Oil 
properly accounted for $7,119,3097 in charges to the joint account through 
September 10, 1982 and that Sinclair Oil's twenty-five percent share thereof is 
$1,779,827.

 
 
7. Sinclair 
Oil's prepayment of $2.5 million exceeds its twenty-five percent share of 
properly established charges of $1,779,827. Therefore, Sinclair Oil is entitled 
to recover $32,943, representing twenty-five percent of certain admitted or 
demonstrated improper charges. However, Sinclair Oil is not entitled to recover 
the balance of the unaccounted for charges of $687,230 because "it would be 
speculation on the part of the Court to attempt to determine whether Sinclair is 
entitled to recover any portion of this sum."

 
 
8. The 
parties are entitled to share in the money and royalty interest received in the 
Deadman/Telephone Pass Exchange Agreement on a seventy-five/twenty-five 
basis.

 
 

[¶21.]  The initial trial court decision 
regarding allocation of costs reflected an apparent determination that there was 
a failure of proof by both parties. Following the trial court's decision, True 
Oil filed various motions and letters seeking to reopen the case for 
introduction of evidence regarding True Oil's costs without profit to the 
partnership affiliates. At one point, the trial court issued an Order Granting 
Motion to Dismiss and Order Partially Reopening Case. This combined order 
granted Sinclair Oil's earlier motion to dismiss as far as the failure of proof 
as to proper rigs and camp expenses charged by True Drilling Company and True 
Leasing Company, respectively. Simultaneously, the trial court offered to 
partially reopen True Oil's case for submission of an offer of proof as to these 
affiliate charges without profit. Subsequently, upon determining that True Oil 
had not made the requested offer of proof, the trial court vacated the order 
partially reopening. Findings of Fact, Conclusions of Law and Final Judgment 
were dispositively entered on May 6, 1986, and this appeal 
followed.

 
 
IV. 
STANDARD FOR REVIEW OF THIS CONTRACTUAL ACTION

 
 

[¶22.]  We begin by observing, as did the trial 
court, that this case represents an action on a written contract entered into by 
knowledgeable participants for a profit and in good faith. Thus, resolution of 
the issues presented requires that we look to the terms of the written 
instrument, the Deadman Agreement, and where necessary, apply our established 
principles of contract interpretation and construction. We further note that 
this case involves both factual issues and questions of law. Our standard of 
review of factual issues is whether or not substantial evidence supports the 
findings of the trial court.

 
 
     Our rule is that where 
the sufficiency of evidence is an issue we uphold the judgment if there is 
evidence to support it, and in so doing we look only to the evidence submitted 
by the prevailing party and give to it every favorable inference which may be 
drawn therefrom, without considering any contrary 
evidence.

 
 
Hance v. 
Straatsma, 721 P.2d 575, 578 (Wyo. 1986). See also NL Industries, Inc. v. 
Dill, 769 P.2d 920 (Wyo. 1989); Eddy v. First Wyoming Bank, 
N.A.-Lander, 750 P.2d 294 (Wyo. 1988); Ruby Drilling Co., Inc. v. Title Guar. 
Co. of Wyoming, Inc., 750 P.2d 674 (Wyo. 1988); and Tremblay v. Reid, 700 P.2d 391 (Wyo. 1985). Conversely, on questions of law, we accord no special deference 
to and are not bound by a trial court's decision. Farr v. Link, 746 P.2d 431 
(Wyo. 1987); Griffin v. Bethesda 
Foundation, 609 P.2d 459 (Wyo. 1980); Matter of 
North Laramie Land Co., 605 P.2d 367 (Wyo. 1980).

 
 
V. RIGHT TO 
WITHDRAW FROM COST PARTICIPATION

 
 

[¶23.]  True Oil first contends that the trial 
court committed error in finding that Sinclair Oil could withdraw from cost 
participation in the Deadman well on September 10, 1982. This contention is 
premised on True Oil's argument that the parties had contractually agreed to 
attempt to drill to the Basal Plate of the Madison Formation, that Sinclair Oil 
was obligated to contribute to the costs of the well until time of abandonment 
in June 1983, and that when Sinclair Oil went non-consent to withdraw from cost 
contribution, it breached the Deadman agreements.

 
 

[¶24.]  We disagree. The finding by the trial 
court, supported by substantial evidence, that True Oil had effectively conceded 
this issue by its own evidence at trial, is dispositive on this appeal of the 
case. The testimony of several witnesses indicated that the parties had 
contemplated the sub-thrust (Basal Plate) of the Madison Formation as an 
"objective" of the drilling program. The absence of any understanding of a 
binding obligation to contribute to drilling costs to such depths is clearly 
illustrated in this examination of Dave True by the trial court during 
trial:

 
 
THE COURT: 
Mr. True, it was your understanding of the agreement that True Oil Company was 
obligated to go to the subthrust of the Madison formation, is that 
correct?

 
 
THE 
WITNESS: Your Honor, I don't know as if I agree with the word obligated because 
-

 
 
THE COURT: 
Promise?

 
 
THE 
WITNESS: If it was an obligation, then we would have a definite limitation. It 
was an objective.

 
 
THE COURT: 
Was it your understanding that Sinclair was obligated to pay clear to the 
subthrust of the Madison?

 
 
THE 
WITNESS: No, sir. It was my understanding that Sinclair shared True Oil 
Company's objective of getting to the Madison.

 
 
THE COURT: 
Well, did True - was it your understanding that True Oil Company had promised 
-

 
 
THE 
WITNESS: No, sir.

 
 
THE COURT: 
- to continue drilling until it hit the subthrust of the Madison 
formation?

 
 
THE 
WITNESS: No, sir. As a matter of fact, I tried to -

 
 
THE COURT: 
Was it your understanding that it was Sinclair's obligation to keep paying until 
you hit the subthrust of the Madison formation?

 
 
THE 
WITNESS: No, sir.

 
 

[¶25.]  Additionally, during cross-examination of 
Dave True, this exchange occurred:

 
 
Q. I think 
you've said earlier that you don't question Sinclair's right to quit on 
September 10, 1982, but the consequences of their quitting was a forfeiture, 
then, of any interest that they might have?

 
 
A. That has 
been my experience over the years, yes, sir.

 
 

[¶26.]  Furthermore, the written agreement is 
devoid of language indicating an unqualified obligation to contribute to 
drilling costs to the sub-thrust. The pertinent provisions of the contract 
provide:

 
 
True 
agrees, as soon as weather permits in the Spring of 1980, to move in a rotary 
rig and diligently pursue drilling operations as long as weather conditions 
permit during 1980. True further agrees to continue diligently, as drilling 
season controlled by weather conditions permit, to drill the well to the ultimate depth agreed upon by the 
parties. As a minimum, True will diligently attempt to drill the well to the 
depth required to satisfy the Farmout Contracts described above. [Emphasis 
added.]

 
 

[¶27.]  A subsequent provision of the contract 
provides: 

 
 
Further, it 
is agreed that all costs of drilling, testing, completing and operating the 
initial test well until payout is reached as defined in the Farmout Agreements, 
* * * shall be borne in the following proportions:

 
 
True 
________ 50% 

 
 
Sinclair 
____ 50%8

 
 

[¶28.]  The trial court found that under the 
contract, each party had the right to stop contributing to costs of the well at 
any time, or at least after November 1980 when the well had reached a depth of 
9,000 feet as called for in some of the farmout agreements. The trial court 
concluded that this was an agreement at will which contemplated that the parties 
would agree upon the ultimate depth of the well. This conclusion is an 
appropriate analysis of the written contract.

 
 

[¶29.]  Our rules of contract construction are 
well-established. The determination of the parties' intent is our prime focus in 
construing or interpreting a contract. State v. Moncrief, 720 P.2d 470 
(Wyo. 1986); Amoco Production Co. v. Stauffer 
Chemical Co. of Wyoming, 612 P.2d 463 
(Wyo. 1980). 
"If an agreement is in writing and the language is clear and unambiguous, the 
intention is to be secured from the words of the agreement." Nelson v. Nelson, 
740 P.2d 939, 940 (Wyo. 1987). See also Kost v. First Nat. Bank 
of Greybull, 684 P.2d 819 (Wyo. 1984). When the language is clear and 
unambiguous, the writing as a whole should be considered, taking into account 
relationships between various parts. Kost, 684 P.2d  at 823; Rouse v. Munroe, 658 P.2d 74 (Wyo. 
1983). Contract construction and interpretation are done by the court as a 
matter of law. Amoco Production Co., 612 P.2d  at 465; Bulis v. Wells, 565 P.2d 487 (Wyo. 
1977).

 
 

[¶30.]  If the contract is ambiguous, the intent 
of the parties may be determined by resort to extrinsic evidence. Rouse, 658 P.2d  at 78; Mountain Fuel Supply Co. v. Central Engineering & Equipment Co., 
611 P.2d 863 (Wyo. 1980). An ambiguous contract is one 
"which is obscure in its meaning because of indefiniteness of expression or 
because of a double meaning being present." Farr, 746 P.2d  at 433. See also 
Bulis, 565 P.2d  at 490. The existence of ambiguity is a question of law. Hensley 
v. Williams, 726 P.2d 90 (Wyo. 1986); Amoco Production Co., 612 P.2d  at 
465.

 
 

[¶31.]  After analysis of the provisions of the 
Deadman Agreement, we agree with the trial court that neither party was 
unreservedly obligated to participate in drilling costs to the sub-thrust of the 
Madison Formation, whatever those costs might total. The provision that the 
parties agree to drill to the "ultimate depth agreed upon by the parties" is 
inherently indeterminate as reserving a right to stop. The testimony of Dave 
True supplements this interpretation to sustain our conclusion that neither 
party intended to irretrievably continue to be obligated to pay costs until 
drilling reached that depth. Therefore, we hold by application of the 
terminology of the agreement itself that Sinclair Oil had the right to withdraw 
from cost participation in the well on September 10, 1982 without causing a 
breach in its Deadman well participation. The converse of this holding, however, 
is that Sinclair Oil is liable for its share of the proper costs of drilling 
until it went non-consent on September 10, 1982, a point not contested by 
Sinclair Oil. The method of determining such costs, and the effect of Sinclair 
Oil's withdrawal for division of the consideration received from the 
Deadman/Telephone Pass Exchange Agreement are at issue, and their resolution 
will comprise the balance of this opinion.

 
 
VI. 
DRILLING THE WELL "AT COST"

 
 
A. Costs to 
partnership affiliates - True Drilling Company, True Leasing Company and 
Eighty-Eight Oil Company.

 
 

[¶32.]  The second major issue of this litigation 
arises within the True Oil contention that the trial court committed error in 
construing the agreement between the parties requiring the well to be drilled at 
"Dave True's cost" rather than True Oil's cost. The effect of this disallowance 
was denial of profit to the affiliated partnership companies who provided 
services and equipment to True Oil, the designated 
operator.

 
 

[¶33.]  In this regard, we agree with True Oil. 
In resolving this issue, it is necessary to again look to the terms of the 
Deadman Agreement and similarly apply contract application and interpretation 
principles. The parties in the agreement were designated by 
provision:

 
 
This 
agreement entered into this 31st day of December, 1979, by and between True Oil 
Company, P.O. Drawer 2360, Casper, Wyoming 82602, herein called "True," and 
Sinclair Oil Corporation, P.O. Box 1677, Englewood, Colorado 80150, herein 
called "Sinclair," and collectively referred to as 
"Parties."

 
 

[¶34.]  The provision allocating costs 
provided:

 
 
     Further, it is agreed 
that all costs of drilling, testing, completing and operating the initial test 
well until payout is reached as defined in the Farmout Agreements, including 
costs of forming the Unit, acquiring access to location, building roads and 
location, moving in and out a spudder and any other related operations shall be 
borne in the following proportions:

 
 
True 
________ 50% [amended to seventy-five percent]

 
 
Sinclair 
____ 50% [amended to twenty-five percent]

 
 

[¶35.]  The agreement was executed in this 
fashion:

 
 
Executed 
this 31st day of December, 1979.

 
 
SINCLAIR 
OIL CORPORATION

 
 
By: /s/ 
R.E. Holding

 
 
President

 
 
TRUE OIL 
COMPANY

 
 
By: /s/ 
H.A. True, Jr.

 
 
H.A. True, 
Jr., Partner

 
 

[¶36.]  In reading these provisions together, it 
is clear that the contract was made and executed between Sinclair Oil and True 
Oil. Dave True, as an individual, was not a party to the contract, nor was the 
drilling contractor, True Drilling Company, nor were any other of the affiliated 
companies. See WNB-Gillette v. Davis, 770 P.2d 215 (Wyo. 
1989), differentiating between proceeding against a partner individually and as 
a partner. We do not agree with the trial court interpretation of these 
provisions as prohibiting the affiliated partnership companies from including a 
profit element in their service and equipment contracts with True Oil. A 
realistic reading of the terms indicates the well was to be drilled at the cost 
to True Oil, and such cost was to be shared by the parties according to their 
respective interests. If a net out billing limitation for other entities and all 
affiliates was expected, it should have been recited within the written 
agreement terms.

 
 

[¶37.]  We do find, nevertheless, that the terms 
of the contract on this issue are somewhat vague and indefinite, thus ambiguous, 
so that resort to extrinsic evidence is appropriate to establish the intent of 
the parties when the contract was made. Rouse, 658 P.2d  at 78. We observe that, 
in the preliminary negotiations, Earl Holding, representing Sinclair Oil, 
indicated to Dave True, representing True Oil, that he was only interested in 
the project if it was done at cost. Dave True agreed and stated there would be 
no "front-end loading" or "promotion" devices by which a nonoperator (Sinclair 
Oil) pays a greater share of development and exploration costs than the operator 
(True Oil) in relation to their earned interest.9

 
 

[¶38.]  Although Earl Holding testified that he 
understood the project was to be done at Dave True's cost and Dave True 
testified that it was to be done at True Oil's cost, we believe the intent of 
the parties can most reliably be ascertained by their conduct in relation to the 
contract.

 
 
     It is well settled 
that, if the meaning of a contract or instrument is doubtful on its face, the 
practical construction put upon it by the parties should have great weight in 
determining its proper construction. * * * This is especially true where the 
parties have for a long time acquiesced in, and acted in good faith upon, such 
practical construction.

 
 
Rohrbaugh 
v. Mokler, 26 Wyo. 514, 188 P. 448, 450 
(Wyo. 1920). 
See also Sunburst Exploration, Inc. v. Jensen, 635 P.2d 822, 825 (Wyo. 1981); P & M Cattle Co. v. Holler, 559 P.2d 1019 
(Wyo. 1977); and In re Utah Idaho Sugar Co., 57 
Wyo. 425, 120 P.2d 601, 607 (1942).

 
 

[¶39.]  In the instant case, the record indicates 
that Sinclair Oil was aware from the outset that True Drilling Company was going 
to be the drilling contractor and by late 1980, Sinclair Oil had become aware 
that other affiliates were providing services to the well. The record further 
reveals that True Oil billed the joint account on the basis of the charges 
billed to True Oil by the affiliated companies, which included a profit margin, 
and invoices of these charges were sent to Sinclair Oil beginning in 1980. 
Sinclair Oil never complained that the prices being charged were not at the cost 
to the affiliates. In August 1982, Sinclair Oil asked if rig costs could be 
lowered, based on their knowledge of decreasing costs for comparable rigs 
throughout the industry, but not on any claim that the affiliates, specifically 
True Drilling Company, were not billing at their cost. Additionally, Sinclair 
Oil calculated the point that its initial $2.5 million investment would be 
exhausted based on the invoices received which reflected payment to the 
affiliates at competitive prices. Sinclair Oil used this estimate in determining 
when to withdraw from further cost participation.

 
 

[¶40.]  Most telling, with respect to practical 
construction of the contract by the parties, was Sinclair Oil's posture on this 
issue before and during trial. Beginning in 1983, with its answer and 
counterclaim to True Oil's complaint and through the end of the trial in 1985, 
Sinclair Oil defended on the asserted basis that the Unit Operating Agreement 
controlled between the parties and that True Oil was bound by the provision 
therein, that an operator, using operator owned equipment, may only bill the 
non-operator at either operator's cost plus eight percent or competitive rates 
minus twenty percent.10 The only time Sinclair Oil asserted the 
position that the affiliates were limited to billing at their cost was in its 
written final argument submitted at the conclusion of the trial. The conduct of 
the parties, particularly Sinclair Oil, belies any intent or understanding that 
their contract required the affiliated partnerships to provide services and 
equipment at their cost.

 
 
"Parties 
are far less liable to have been mistaken as to the meaning of their contract 
during the period while harmonious and practical construction reflects that 
intention than they are when subsequent differences have impelled them to resort 
to law, and one of them then seeks a construction at variance with the practical 
construction they have placed upon it of what was intended by its 
provisions."

 
 
J.W. Denio 
Milling Co. v. Malin, 25 Wyo. 143, 165 P. 1113, 1115 (1917) (quoting 6 
R.C.L. at 853).

 
 

[¶41.]  Sinclair Oil argues, and the trial court 
found in evaluating extrinsic evidence, that Earl Holding and Dave True had 
orally agreed that the well would be drilled at "Dave True's cost." This was a 
finding of fact by the trial court and as such can only be set aside on appeal 
if not supported by substantial evidence, clearly erroneous or contrary to the 
great weight of the evidence. Walter v. Moore, 
700 P.2d 1219 (Wyo. 1985). However, findings of fact which 
are not supported by the evidence, contrary to the evidence, or against the 
great weight of the evidence may not stand. Id. at 1222. The only evidence supporting this 
oral agreement was the testimony of Earl Holding that he understood the project 
was to be done at "Dave True's cost." No other evidence of this alleged oral 
agreement is in the record. On the other hand, the testimony of Dave True that 
the project was to be done at True Oil's cost is consistent with the written 
agreement, which was approved by top management and counsel for Sinclair Oil 
before execution. Also significant is that Sinclair Oil's position on the cost 
issue in the proceeding below is inconsistent with any such oral agreement. 
Sinclair Oil's evidence, particularly as presented through its auditors, was 
directed at demonstrating noncompliance with the Unit Operating Agreement and 
Accounting Procedure cost provisions. Under these circumstances, we hold that 
the trial court's finding of an oral agreement to drill the well at "Dave True's 
cost" is not supported by the evidence, is against the great weight of the 
evidence, and cannot be sustained.

 
 

[¶42.]  Sinclair Oil more stridently urges that 
True Oil was an agent and trustee for Sinclair Oil and the resulting fiduciary 
obligations prohibited True Oil from contracting with its affiliated 
partnerships above cost at competitive prices. The trial court similarly 
concluded that the partners in the affiliated partnerships could not do 
indirectly what they agreed through Dave True not to do directly. While we 
recognize that a fiduciary relationship existed between True Oil and Sinclair 
Oil, we are of the opinion that the rights and duties of the parties are 
controlled by their agreement. We find that the agreement of the parties was 
that True Oil was to develop and operate the initial well at its costs as 
operator and not to provide profit free services from all of the True family 
enterprises.

 
 

[¶43.]  In this respect, the distinction between 
an operator, designated to develop mineral leases, and a drilling contractor, 
hired to do the actual drilling, must be kept in mind. See Greenan v. Ernst, 408 
Pa. 495, 184 A.2d 570, 581 (1962). True Oil is not a drilling business. Under its authority 
as operator, True Oil could have contracted with any drilling company to drill 
the Deadman well and, in fact, the record reveals that True Oil did contact 
other drilling companies when the need arose for a larger rig for the second 
phase of drilling. The same is true with respect to the services provided by the 
other affiliated companies. The record contains uncontradicted testimony by the 
management personnel of the various True entities that these entities do a 
considerable amount of work for companies other than True Oil, as much as 
seventy-five percent in certain instances. In addition, the record discloses 
that Sinclair Oil had on prior occasion independently employed True Drilling 
Company. Further, the record indicates that True Oil often obtains these same 
services from non-affiliated companies.

 
 

[¶44.]  We are persuaded in construction of the 
agreement and operational events that followed that competitive rates were what 
was mutually contemplated from the outset until after non-consent notice. Under 
these circumstances, this court determines that the fiduciary duty to be met by 
True Oil was to obtain drilling and related services at a reasonable cost as 
reflected by competitive rates. The following language in Tenneco Oil Co. v. 
Bogert, 630 F. Supp. 961, 967 (W.D.Okla. 1986) is 
instructive:

 
 
     Even though the 
present joint operating agreement may be seen to create a joint venture with 
attendant fiduciary duties, the court is mindful that the term "fiduciary" is 
easily bandied-about without precision. "The scope of the transactions affected 
by the relation and the extent of the duties imposed are not identical in all 
fiduciary relations." Restatement (Second) of Trusts § 2 comment b (1959). In 
the case of joint ventures to develop oil and gas properties, the law is well 
established that the determination of the existence and extent of such duties is 
controlled by the terms of the agreement between the 
parties.

 
 

[¶45.]  In relation to fiduciary duty, Sinclair 
Oil refers us to Beadle v. Daniels, 362 P.2d 128 (Wyo. 1961). We are not 
convinced that Beadle is of assistance to Sinclair Oil. In that case, the 
corporate driller was the designated operator under contracts termed "Contract 
for Conveyance of Interest in Oil and Gas Lease, and for Operation and 
Development Thereof" by which interests in an oil and gas lease were conveyed to 
various non-operating parties. Id. at 129. The contracts provided that the 
"Operator shall charge Non-operator with his proportionate share of the expenses 
and costs incurred thereon" in the performance of drilling and oil and gas 
operations. Id. at 129. The president and executive 
vice-president of the drilling company, as individuals, purchased certain 
production equipment, including a pump jack and sucker rods, at a bargain price. 
The officers supposedly sold the pump jack and sucker rods to the corporation 
for use on the lease at an enhanced price and the non-operators sued to recover 
the excess charges. There was no evidence that the purchase was approved or even 
discussed by the directors or the stockholders of the drilling company, nor was 
any entry of the transaction made in the corporate minute book. Id. at 
129.

 
 

[¶46.]  We held in Beadle, 362 P.2d  at 130 that 
the officers were agents for the corporation and their acts in this instance 
were the acts of the drilling company, so the cost to the individuals for the 
materials became the cost to the corporation. This court then held that the 
driller was the agent for the non-operators and, as operator, it could only 
charge actual cost pursuant to the "expense and cost" provision of the 
controlling operating agreements.

 
 

[¶47.]  In Andrau v. Michigan Wisconsin Pipe Line 
Co., 712 P.2d 372, 375 (Wyo. 1986), in commenting on Beadle, we 
said:

 
 
     The holding in Beadle 
v. Daniels was that the operating agreements imposed a fiduciary duty upon the 
operator which prevented the operator from charging nonoperators a higher price 
for pumping equipment than had been paid by the operator. Beadle does not stand 
for the proposition that a fiduciary relationship exists between operators and 
nonoperators irrespective of their express agreement. [Emphasis 
added.]

 
 

[¶48.]  The facts here are different from Beadle. 
The contracts for services and equipment entered into between True Oil and 
various affiliates were negotiated between management personnel of the separate 
partnerships and corporations. For example, the drilling contracts (designated 
as Bid Sheet and Drilling Order) between True Oil and True Drilling Company were 
executed by J.D. Milliken, manager for True Oil, and R.P. Kirkpatrick, assistant 
manager and drilling superintendent for True Drilling Company. The record showed 
that even though the True entities share a common ownership, the management, 
employees, and financial affairs are separate for each affiliate. Under these 
circumstances, we do not perceive that the acts of the affiliates were the acts 
of True Oil, and profit to the affiliates is not profit to True 
Oil.

 
 

[¶49.]  Within these circumstances, we recognize 
that, as opposed to the situation in Beadle, True Oil as operator did not charge 
Sinclair Oil a higher price for services and equipment than was paid by True 
Oil; thus, True Oil did not violate its fiduciary duty to Sinclair Oil. In sum, 
we hold that True Oil was entitled to bill the parties' joint account for 
services and equipment provided by True Drilling Company, Eighty-Eight Oil 
Company, and True Leasing Company to be chargeable in an amount not in excess of 
competitive rates.11

 
 
B. Costs of 
rigs and camp provided by True Drilling Company and True Leasing 
Company.

 
 

[¶50.]  Our analysis of the propriety of 
disallowing the rigs and camp costs is set out separately because a different 
standard of review is applicable. At the end of True Oil's case, Sinclair Oil 
moved for a motion to dismiss and the trial court reserved ruling. In the 
post-trial proceedings the trial court, as a result of its ruling on the costs 
issue and the fact that True Oil did not submit proof of these affiliate 
partnerships' costs without profit, granted the motion to dismiss insofar as 
rigs and camp charges were concerned.

 
 

[¶51.]  Our standard of review of a motion to 
dismiss granted at the end of a plaintiff's case in chief resulting in a 
W.R.C.P. 41(b)(1)12 ruling needs further explanation to 
differentiate the rigs and camp charges. Essentially, this court applies a 
directed verdict analysis, taking the plaintiff's evidence as true and affording 
it all favorable and reasonable inferences. Osborn v. Manning, 685 P.2d 1121 
(Wyo. 1984); Fuller v. Fuller, 606 P.2d 306 
(Wyo. 1980); Angus Hunt Ranch, Inc. v. Reb, 
Inc., 577 P.2d 645 (Wyo. 1978); Svalina v. Big 
Horn Nat. Life Ins. Co., 466 P.2d 1018 (Wyo. 
1970); Hawkey v. Williams, 72 Wyo. 20, 261 P.2d 48 (1953). "`A motion for 
judgment at the close of the plaintiff's case is in the nature of a demurrer to 
the evidence, and admits its truth.'" Hawkey, 261 P.2d  at 55 (quoting Boyle v. 
Mountford, 39 Wyo. 141, 147, 270 P. 537, 539 (1928)). This 
court in Fuller, 606 P.2d  at 307-08 clarified this issue of involuntary 
nonsuit:

 
 
     Where the plaintiff's 
proof has failed in some aspect, the motion should be granted - where the 
plaintiff's proof is overwhelming, the motion should be denied. Where the 
plaintiff has presented a prima facie case based on unimpeached evidence, the 
trial judge should not grant the motion even though the judge himself may feel 
that the plaintiff has not sustained his burden of proof. Arbenz [v. Bebout], 
supra [444 P.2d 317 (Wyo. 1968)]; Kure v. Chevrolet Motor Division, Wyo., 581 P.2d 603 
(1978); and Angus Hunt Ranch, Inc. v. Reb, Inc., Wyo. 577 P.2d 645 
(1978).

 
 
When this 
situation is properly assessed, we conclude that True Oil made a prima facie 
showing of the costs of the rigs and the camp. The trial court acknowledged as 
much in its decision letter, but failed to allow True Oil the costs simply 
because the profit margin of these endeavors was not separated out from their 
total costs. Therefore, the "Order Granting Motion to Dismiss" is reversed. Upon 
remand, True Oil is entitled to prove costs of operations through September 10, 
1982 based on competitive rates charged by all the affiliates, and is entitled 
to a judgment for the balance due of Sinclair Oil's proportionate share of those 
costs as incurred prior to September 10, 1982. Sinclair Oil, however, may 
challenge any claims for any or all drilling costs as loaded or 
non-competitive.

 
 
VII. RIGHT 
TO PROCEEDS FROM DEADMAN/TELEPHONE PASS EXCHANGE AGREEMENT

 
 
In final 
issue, True Oil contends that the trial court erred as a matter of law in 
division of the benefits received from the Deadman/Telephone Pass Exchange 
Agreement, which gave Sinclair Oil a twenty-five percent share of $550,000, 
$137,500, and a five percent (1.25%) overriding royalty interest. We agree 
partially with True Oil's contention.

 
 
The 
conclusion of the trial court on this issue is reiterated as the appellate 
argument by Sinclair Oil. The trial court determined that the Deadman Agreement 
contained two distinct sets of contractual rights and obligations in assessing 
that the agreement produced an outright conveyance of leasehold rights and 
interests associated with the farmout and acreage contribution agreements. The 
trial court characterized these leasehold rights and interests as separate and 
distinct from the obligation to share in all costs of the test well and any 
subsequent wells, and from the right to share in oil production, if any. The 
trial court found that the property purchased by the Telephone Pass Group 
represented a property interest to both Sinclair Oil and True Oil which existed 
throughout their venture no matter how long they mutually continued to 
contribute. The trial court concluded that the Deadman Agreement was a joint 
venture and neither the agreement nor the joint venture was terminated prior to 
the execution of the Deadman/Telephone Pass Exchange 
Agreement.

 
 
First, we 
cannot agree with the trial court's construction of the agreement as conveying a 
leasehold interest. In construing a contract, we must consider it as a whole and 
take into account the relationships between the various parties, if that can be 
done and a reasonable construction achieved. Sunburst Exploration, Inc., 635 P.2d 822; Northern Gas Co. v. Town of Sinclair, 
592 P.2d 1138 (Wyo. 1979). The pertinent provisions as to 
rights, interests, and obligations of the parties in the Deadman Agreement are 
the following:

 
 
WHEREAS, 
True holds certain Farmout and/or Acreage Contribution Agreements covering lands 
and leases situated within and which have been committed to the Deadman Unit, 
and

 
 
WHEREAS, 
Sinclair has requested that it be allowed to acquire an interest in said 
Agreements and participate with True in the drilling of the required well, 
and

 
 
WHEREAS, 
the parties have reached agreement for participation by Sinclair subject to 
terms and conditions herein set forth,

 
 
NOW, 
THEREFORE, the parties hereto agree as follows:

 
 
I. By 
execution of this Agreement, True grants to Sinclair an undivided one half 
interest in and to the rights to earn certain leasehold interests as set forth 
in the Farmout and/or Contribution Agreements * * *:

 
 
* * * * * 
*

 
 
II. 
Execution of this Agreement by Sinclair shall evidence their acceptance of the 
interest granted and their agreement to be bound by all of the terms and 
conditions of this Agreement and all of the terms and conditions of the Farmout 
and Contribution Agreements * * *.

 
 
* * * * * 
*

 
 
V. The net 
interests in acreage earned or contributed under Farmout or Contribution 
Agreements * * * and the proceeds from the sale of oil, gas or other hydrocarbon 
substances from said interests, shall be shared in the following 
proportions:

 
 
True 
________ 50% [amended to seventy-five percent]

 
 
Sinclair 
____ 50% [amended to twenty-five percent]

 
 
Further, it 
is agreed that all costs of drilling, testing, completing and operating the 
initial test well until payout is reached as defined in the Farmout Agreements, 
including costs of forming the Unit, acquiring access to location, building 
roads and location, moving in and out a spudder and any other related operations 
shall be borne in the following proportions:

 
 
True 
________ 50% [amended to seventy-five percent]

 
 
Sinclair 
____ 50% [amended to twenty-five percent]

 
 
As to all 
subsequent wells drilled on the jointly acquired acreage, all costs and income 
shall be shared by the parties according to their respective net working 
interests. [Emphasis added.]

 
 
Reading 
these provisions together, it is clear that under the agreement, Sinclair Oil 
acquired an interest in the right to earn leasehold interests subject to the 
obligation to share proportionately in all costs associated with the enterprise. 
True Oil could not grant a leasehold interest in the subject acreage at the time 
of the agreement because True Oil had no leasehold interest at that point. True 
Oil simply was a party to agreements whereby it could earn leasehold interests 
by well drilling. Contrary to the ruling of the trial court, the property 
interest purchased by the Telephone Pass Group did not exist throughout the 
venture, but rather it came into existence and its dimensions were defined by 
the venture drilling of the Deadman well.

 
 
Under the 
Deadman Agreement, Sinclair Oil obtained a right to participate in the costs and 
rewards of the project. While Sinclair Oil did not actually breach the agreement 
by pulling the plug on September 10, 1982, it does not follow under any 
reasonable construction of the agreement that Sinclair Oil could continue to 
reap the rewards of further drilling without continuing to contribute to costs. 
Sinclair Oil ceased earning interests under the farmout and contribution 
agreements when it noticed nonconsent and discontinued its drilling cost 
contributions.

 
 
The trial 
court found the enterprise of the parties to be a joint venture. Existence of a 
joint venture is a question of fact for the trier of fact. Madrid v. Norton, 596 P.2d 1108 (Wyo. 1979); P & M 
Cattle Co., 559 P.2d 1019. We believe this finding is supported by the evidence. 
We further observe, however, that "[a] joint venture sounds in, and is founded 
upon, contract." Madrid, 596 P.2d  at 1119. Sinclair Oil urges, 
and the trial court found, that Sinclair Oil's withdrawal from the project only 
pertained to "the well" and did not affect other rights and interests, and was 
not an abandonment of the venture. We cannot agree. The scope of the joint 
venture was defined by the Deadman Agreement as being the drilling of the 
initial well and the sharing of the interests earned thereby. Although the 
sharing of costs and proceeds of any subsequent wells is mentioned, no agreement 
to drill such wells was made. Under our construction of the contract, Sinclair 
Oil's notice to True Oil that it would no longer consent to expenditures on the 
well affected an abandonment and termination of the joint venture, although such 
abandonment was not a breach since it was a joint venture at will. Therefore, 
under these circumstances, we hold that Sinclair Oil abandoned the joint venture 
and ceased to earn further interests in acreage earned by drilling after 
non-consent date.

 
 
Although we 
hold that Sinclair Oil is only entitled to share in the consideration from the 
Deadman/Telephone Pass Exchange Agreement to the extent that the acreage and 
interests transferred to the Telephone Pass Group had been earned as of 
September 10, 1982, we are aware that this may have only a minimal effect on the 
division of such proceeds. True Oil maintained in the proceeding below that the 
Deadman/Telephone Pass Exchange Agreement would not have occurred absent the 
continued drilling by True Oil. At the time of Sinclair Oil's withdrawal from 
the venture, however, the well had been drilled to a depth of approximately 
11,665 feet, thereby satisfying most or all of the depth requirements of the 
farmout and contribution agreements. The exact dimensions of the interests 
actually earned and the corresponding rights in the consideration received will 
be subject to the proof of the parties upon remand on a prorated acreage basis 
so that True Oil receives sole benefit for any acreage earned after September 
10, 1982.13

 
 
VIII. 
SANCTIONS

 
 
Sinclair 
Oil in appellate briefing and by separate motion has sought sanctions against 
True Oil and its counsel under W.R.C.P. 11 and Rule 3.3(a)(1), Wyoming Rules for 
Professional Conduct. The issue, of course, dies with the decision we make. 
Counsel for True Oil actively represented their client as did the firm 
representing Sinclair Oil, and with our disposition on the merits, we decline to 
sanction either party.14 

 
 
IX. 
CONCLUSION

 
 
We affirm 
as to Sinclair Oil's right to withdraw from the project as of September 10, 
1982. We reverse the trial court's disallowance of affiliate charges, provide 
for modification in division of consideration received from the 
Deadman/Telephone Pass Exchange Agreement, and remand for further proceedings 
consistent with this opinion. The trial judge may want to reassign this case for 
retrial. Cf. Madsen v. Prudential Federal Sav. & Loan Ass'n, 767 P.2d 538 
(Wyo. 
1988).

 
 
Affirmed in 
part, reversed in part, and remanded.

 
 
FOOTNOTES

 
 

1 Appellee, Sinclair 
Oil, somewhat differently characterizes these issues as:

 
 
1. Did the trial court 
commit reversible error (a) in finding that the parties to the joint venture had 
not agreed to drill or participate in the costs of drilling the initial test 
well to any particular depth or formation, or (b) in finding and holding that as 
a consequence Sinclair did not breach the joint venture agreement when Sinclair, 
in good faith and in the exercise of its own best business judgment after 
several months of watching money being poured down a hole in fruitless fishing 
operations, elected to spend no more money in attempts to deepen the well. * * 
*

 
 
2. Did the trial court 
commit reversible error in construing the written joint venture agreement to the 
effect: (a) that it did not authorize True, as the co-adventurer who managed and 
conducted the joint venture, to enjoy undisclosed profits at the expense of 
Sinclair and did not derogate from True's fiduciary duty to abstain from taking 
such profits? * * *

 
 
3. Did the trial court 
commit reversible error in failing to excuse True, under the equitable doctrines 
of waiver or estoppel, from its duty to account for such secret profits, where 
(a) Sinclair was wrongfully induced to invest $2.5 million in the joint venture 
on the basis of misrepresentations made by True to Sinclair, and (b) the conduct 
of Sinclair relied upon to establish the waiver and estoppel was the failure of 
Sinclair to raise the issue at a time earlier than Sinclair did raise 
it?

 
 
4. Did the trial court 
commit reversible error by its allocation of the burden of proof and the burden 
of going forward with the evidence so as to deny True an opportunity to prove 
its case?

 
 
5. Did the trial court 
commit reversible error in declining to exercise its equitable power to declare 
Sinclair's share of the oil and gas rights in the entire Deadman Unit forfeit, 
where the ground relied upon to justify the forfeiture was Sinclair's election 
to invest no further monies in an attempt to deepen the well under the 
circumstances then existing?

 
 

2 Cross-appellee, True 
Oil, describes these issues as:

 
 
A. Sinclair is not 
entitled to the return of any monies.

 
 
B. Was the trial court 
correct in its holding that Sinclair was not entitled to judgment on any portion 
of the charges made by the corporations, Toolpushers Supply and Black Hills 
Trucking?

 
 

3 Sinclair Oil found 
authority to withdraw based on its interpretation of the non-consent provisions 
of the Unit Operating Agreement. Although Sinclair Oil was not a party to the 
Unit Operating Agreement, the Deadman Agreement provided that operations would 
be conducted in accordance with the Unit Operating Agreement except as otherwise 
provided in the Deadman Agreement and the farmout 
agreements.

 
 

4 Although True Oil was 
asserting a forfeiture by Sinclair Oil in litigation already commenced, the 
Telephone Pass Group, knowing of Sinclair Oil's contractual interest in the 
Deadman Unit, insisted Sinclair Oil be made a party to this 
agreement.

 
 

5 Sinclair Oil was at 
this point alleging that True Oil was required to comply with provisions in the 
Accounting Procedure that was attached to and incorporated into the Unit 
Operating Agreement regarding owner operated equipment. These provisions limited 
operators, using operator owned equipment, to charging the joint account 
competitive prices minus twenty percent or cost plus eight percent. 
Alternatively, Sinclair Oil alleged that True Oil was required to justify its 
charges on a showing of quantum meruit based on the value to Sinclair Oil of the 
services furnished.

 
 

6 This figure reflects 
the total disallowances of:

 
 
1. $1,065,082 for 
charges from True Drilling Company on the smaller rig;

 
 
2. $3,788,007 for 
charges from True Drilling Company on the larger rig;

 
 
3. $190,350 for 
charges from True Leasing Company for the camp rental;

 
 
4. $32,677 for charges 
from Eighty-Eight Oil Company for profit on the fuel;

 
 
5. $326,307 for 
charges allegedly attributable to the pre-September 10, 1982 period, but not 
invoiced to Sinclair Oil;

 
 
6. $99,096 for 
miscellaneous audit exceptions to Sinclair Oil; and

 
 
7. $61,760 for charges 
concerning drill bits allegedly used post-September 10, 1982 and transportation 
expenses of the smaller rig.

 
 

7 This figure 
represents the total of:

 
 
1. $6,856,275 for 
charges admitted by Sinclair Oil;

 
 
2. $69,256 for charges 
for profit to Black Hills Trucking; and

 
 
3. $193,778 for 
charges for profit to Toolpushers Supply Company.

 
 

8 Of course, the 
fifty/fifty split was changed to seventy-five/twenty-five in the amended Deadman 
Agreement.

 
 

9 Testimony in the 
record indicates that agreements between operators and non-operators providing 
for promotion and front-end loading are not uncommon in the oil exploration 
industry. Under such an agreement, the non-operator pays a greater percentage of 
the exploration costs in relation to the percentage interest he receives in the 
project, thereby providing the operator an incentive for managing operations. 
For example, a non-operator may pay two-thirds of the costs for a realized 
one-half interest in the project.

 
 

10 In its decision, the 
trial court rejected Sinclair Oil's theory that the Unit Operating Agreement 
controls. In a post-trial letter to counsel for both parties, the trial court 
observed that the Unit Operating Agreement added nothing but confusion. On 
appeal, neither party asserts that the Unit Operating Agreement should control 
on the issue of costs. As to this subject, for remand, the trial court decision 
constitutes the law of the case. Kaler v. Puget 
SoundBridge & 
Dredging Co., 72 Wn. 497, 130 P. 894 (1913). 
See also Gifford-Hill-Western, Inc. v. Anderson, 
496 P.2d 501 (Wyo. 1972) in analysis of the law of the 
case.

 
 

11 It of course follows 
that, as found by the trial court, the charges reflecting competitive rates 
attributable to the corporate affiliates, Black Hills Trucking and Toolpushers 
Supply Company, could be billed to the joint account. In retrial, contest of the 
competitiveness of billed charges is not foreclosed for either affiliated or 
non-affiliated suppliers and services.

 
 

12 W.R.C.P. 41(b)(1) 
provides in pertinent part:

 
 
After the plaintiff, 
in an action tried by the court without a jury, has completed the presentation 
of his evidence, the defendant, without waiving his right to offer evidence in 
the event the motion is not granted, may move for a dismissal on the ground that 
upon the facts and the law the plaintiff has shown no right to relief. The court 
as trier of the facts may then determine them and render judgment against the 
plaintiff or may decline to render any judgment until the close of all the 
evidence.

 
 

13 We acknowledge the 
potential unfairness to True Oil since that last, very expensive, two thousand 
feet may have provided information which made the prospect saleable. We will, 
however, not remake the deal to eliminate the mutual right to determine the 
depth provision. This application of the agreement gives the non-operating 
partner a percentage of what acreage was earned to the date of discontinued cost 
contribution.

 
 

14 We do have some real 
problems with the atmosphere of this litigation, both at trial and in appellate 
briefing. There is a childhood truism that a stitch in time saves nine. 
Appropriately paraphrased in 1989, it would be said a thought in mind saves 
time.

 
 
The supposition of 
hardball lawyering deserves that reflection as highlighted in Hinerfeld, The 
Sanctions Explosion, California Lawyer, Nov. 1987, at 82:

 
 
Perhaps the greatest 
irony of this decade's emphasis on sanctions is noted by Thornton [Timothy M. 
Thornton, Jr., a personal injury defense lawyer in Los 
Angeles, California] and echoed by a 
number of other litigators: "The type of motion most often brought frivolously 
is a motion for sanctions," Thornton says. "It's just automatically 
attached."

 
 
The same irony was 
anticipated by Harvard Law School Professor Arthur Miller, who participated in 
the reform of federal civil procedures. Miller told the Second Circuit Judicial 
Conference in 1984 of his "Kafkaesque dream" in which motions for sanctions 
would be countered with motions to sanction frivolous motions for sanctions, 
which would be similarly countered with more motions for sanctions, ad 
infinitum.

 
 
Routine requests for 
sanctions have prompted Judge Wiggins and others to call for a cease-fire on 
rule 11 motions. "This take-no-prisoners attitude you get from macho litigators 
in the big cities has to stop," says Wiggins. "The rule was never intended as a 
litigation tool. It is intended to deter misconduct, not to reward the other 
side."