Title: BOB BURG AND FRED W. BOEKEL, D/B/A LAKOTA PARTNERSHIP v. RUBY DRILLING CO., INC., JESSE DALE RUBY AND MAX L. RUBY ; RUBY DRILLING CO., INC., JESSE DALE RUBY AND MAX L. RUBY v. BOB BURG AND FRED W. BOEKEL, D/B/A LAKOTA PARTNERSHIP

State: wyoming

Issuer: Wyoming Supreme Court

Document:

BOB BURG AND FRED W. BOEKEL, D/B/A LAKOTA PARTNERSHIP v. RUBY DRILLING CO., INC., JESSE DALE RUBY AND MAX L. RUBY ; RUBY DRILLING CO., INC., JESSE DALE RUBY AND MAX L. RUBY v. BOB BURG AND FRED W. BOEKEL, D/B/A LAKOTA PARTNERSHIP1989 WY 205783 P.2d 144Case Number: 88-220, 88-221Decided: 11/27/1989Supreme Court of Wyoming
BOB BURG AND FRED W. 
BOEKEL, D/B/A LAKOTA PARTNERSHIP, APPELLANTS (DEFENDANTS),

v.

RUBY DRILLING CO., INC., 
JESSE DALE RUBY AND MAX L. RUBY, APPELLEES (PLAINTIFFS).

RUBY DRILLING CO., INC., 
JESSE DALE RUBY AND MAX L. RUBY, APPELLANTS (PLAINTIFFS),

v.

BOB BURG AND FRED W. 
BOEKEL, D/B/A LAKOTA PARTNERSHIP, APPELLEES (DEFENDANTS).

Appeal from the District 
Court, CrookCounty, Terrence L. O'Brien, 
J.

David D. Uchner, 
Cheyenne, and Peter A. Bjork and Gregory Danielson of Poulson, Odell & 
Peterson, Denver, Colo., for appellants 
in case 

No. 88-220 and 
appellees in case No. 88-221.

Michael A. 
Maycock of Michael A. Maycock, P.C., Gillette, for appellees in case No. 88-220 and for 
appellants in case No. 88-221.

Before CARDINE, C.J., THOMAS, URBIGKIT and GOLDEN, 
JJ., and BROWN, J., retired.

GOLDEN, 
Justice.

[¶1.]     This is an appeal and 
cross-appeal from a judgment generally in favor of an oil and gas drilling 
company, Ruby Drilling Company, Inc., (Ruby), Jessie Dale Ruby (Dale Ruby), and 
Max L. Ruby as individuals, in their action to recognize and enforce certain 
terms of a written agreement and an alleged oral agreement with an oil and gas 
partnership consisting of Bob Burg, Fred Boekel, and others d/b/a Lakota 
Partnership (Lakota), which owned the working interest in three oil and gas 
leases in Crook County, Wyoming. Also involved was Peter Young who had dealt 
with both Ruby and Lakota on those leases. Ruby sought to recover both 
development and operating costs incurred while working the properties under the 
written agreement, as well as assignments of certain undivided interests in some 
of the leases under the alleged oral agreement.

[¶2.]     As will be explained in 
more detail later, the trial judge, after a bench trial and several post-trial 
hearings, ordered Lakota to assign Ruby and Max L. Ruby each a 20% working 
interest in two of the disputed leases. The trial judge granted: (1) Ruby a lien 
upon Lakota's interests in both of those leases for pre-production development 
costs in the sum of $42,462.14; (2) Ruby $15,120 in post-production operating 
expenses from Lakota under a theory of quantum meruit; (3) Ruby $1,718.74 for 
Lakota's share of ad valorem taxes on production from one of the leases which 
was advanced by Ruby; and (4) Ruby $7,500 from Lakota for attorney fees 
associated with the lien issues under W.S. 29-3-103, plus $783.55 for costs. 
Finally, the judge ordered that the judgment shall constitute a decree of 
foreclosure of Lakota's working interests in Lease nos. 1 and 2. Proceeds of the 
sheriff's foreclosure sale were to be applied to the judgment, costs and 
expenses with any excess divided between the parties 60% to Lakota and 40% to 
Ruby and the individual plaintiffs. The trial judge refused to award Ruby or the 
individual plaintiffs: (1) as development costs, any money for the value of 
Ruby's equipment destroyed in a rig fire (which occurred during the development 
phase of work under the written agreement between the parties); (2) an 
assignment of a working interest in the so-called Federal lease; and (3) an 
additional $3,549.45 in attorney's fees under the lien 
issues.

[¶3.]     In its appeal in case 
no. 88-220, Lakota seeks reversal of that part of the trial court's judgment 
granting Ruby an oil and gas lien for pre-production development costs of 
$42,462.14 upon Lakota's working interest in the two leases, rather than on 
production revenues as set forth in the written agreement. Lakota argues that, 
under the terms of the parties' express contract, if an oil and gas lien 
attaches at all, it attaches only to production revenues and should not require 
foreclosure and sale of Lakota's entire working interest in the two leases. 
Additionally, Lakota claims the trial court's written judgment failed to treat 
Lakota's 40% working interest in those two leases under the written agreement 
separately from appellant Peter Young's 20% working interest in those leases 
under that same agreement. Lakota argues this point in light of evidence in the 
record indicating an oral agreement between Young and Ruby under the purported 
terms of which Young paid certain sums of money to Ruby for Ruby's rendering of 
certain services. Lakota asserts that, based on the evidence presented at trial, 
it remains unclear whether Young's oral agreement with Ruby was effective both 
before and after payout of production costs on the leases and was applicable to 
both pre-production development costs and post-production operating expenses. 
Consequently, Lakota asks this court to remand the case for additional findings 
of fact relating to: (1) determining the precise terms of the oral agreement 
between Young and Ruby; (2) conducting an accounting of payments made to Young 
and of payments Young made to Ruby; and (3) determining the date on which Young 
transferred his 20% working interest in a state lease to Lakota in exchange for 
an interest in a Federal lease.1

[¶4.]     In contrast, in its 
cross-appeal in case no. 88-221, Ruby and Max Ruby seek to reverse those parts 
of the trial court's judgment refusing: (1) to grant Ruby an assignment of an 
interest in the so-called Federal lease; (2) to award Ruby the value of its 
equipment destroyed in the rig fire, and (3) to award Ruby an additional 
$3,549.45 in attorney fees.2

[¶5.]     Comparing the foregoing 
appellate issues with the trial court's judgment, we conclude that neither party 
appeals from those features of the judgment awarding Ruby only 60% of the total 
development costs, awarding Ruby 100% of the operating costs on a quantum meruit 
basis, awarding Ruby a working interest in two of the disputed leases, awarding 
Ruby 60% of the ad valorem taxes it advanced on Lakota's behalf, and awarding 
Ruby costs of $783.55.

[¶6.]     In case no. 88-220, 
which is Lakota's appeal, we hold that the lien statute has no application to 
this set of facts. Accordingly, we reverse and remand those portions of the 
judgment ordering foreclosure and sale of Lakota's working interests in two of 
the disputed leases to satisfy the oil and gas lien. On remand the district 
court shall accomplish the appropriate division of the production revenues 
through the application of the parties' contract. We affirm on the remaining 
issues. In case no. 88-221, which is Ruby's appeal, we affirm the district 
court's decisions not to require Lakota to assign Ruby an interest in the 
federal lease and not to allow Ruby to recover its losses on equipment destroyed 
in the rig fire. Since we hold that the lien statute does not apply, we reverse 
and vacate the award of attorney's fees to Ruby. All other aspects of the 
judgment are affirmed.

FACTS

[¶7.]     The specific oil and 
gas leases involved here are located in the Tomcat Oil Field in Crook County, Wyoming. They include:

(1) an August 1, 1983, 
lease covering the SW 1/4 NE 1/4 NW 1/4 S.E. 1/4 of Section 15, Township 49 
North, Range 65 West, 6th P.M. (Lease no. 1); (2) a "top lease" over an expired 
July 26, 1983, lease covering the SW 1/4 S.E. 1/4 S.E. 1/4 SW 1/4 of Section 10, 
Township 49 North, Range 65 West, 6th P.M. (Lease no. 2);

(3) a May 1, 1973, 
federal lease covering the NE 1/ 4 S.E. 1/4 of Section 15, and the N 1/2 SW 1/4 
of Section 14, Township 49 North, Range 65 West, 6th P.M. (Federal 
lease).

[¶8.]     Lakota and Ruby had 
been involved in previous dealings on the lands covered by Leases no. 1 and 2 
with a man named Grady Perkins; both had been unable to get Perkins to pay his 
bills. Recognizing that they were losing money to Perkins, Lakota and Ruby began 
negotiating an agreement that might allow each of them to recover their losses. 
While Lakota and Ruby were negotiating, Ruby began drilling and reworking wells 
on the lands covered by Lease no. 1. On August 31, 1983, Lakota submitted two 
written agreements to Ruby concerning the lands covered by Lease no. 1 and 
nearby land covered by Lease no. 2. Dale Ruby, acting for Ruby, made written 
amendments on these agreements, initialed the changes, and returned them to 
Lakota; Lakota did not agree to those amendments and no contract was reached. On 
September 28, 1983, Lakota assigned Ruby an undivided 20% interest in Lease no. 
1.

[¶9.]     Between the fall of 
1983 and the spring of 1984, Lakota executed a number of assignments of the 
working interests in a group of leases covering lands near those at issue in 
this case. Some of these assignments granted Pete Young, Dale Ruby,3 and Max Ruby each a 16.66% working 
interest and others granted the same three individuals each a 20% working 
interest. One of the assignments also contains a United States Bureau of Land 
Management designation of Ruby as the operator of that particular lease. Ruby 
would later contend that these assignments evidenced an oral agreement between 
Lakota and Ruby to assign Dale Ruby d/b/a Ruby, Max Ruby, and Pete Young similar 
interests in Lease no. 2 and the Federal lease. There was also evidence that 
Ruby had posted a state water pollution control discharge permit bond for a 
water discharge pit on the Federal lease.

[¶10.]  The parties finally reached an agreement 
concerning Lease no. 1 and put it in a writing dated May 18, 1984. That document 
was a hybrid agreement involving aspects of both a farmout agreement and an 
operating agreement. It provided that Dale Ruby d/b/a Ruby Drilling Company, 
Inc., would be the operator, that Lakota was the owner, and that Ruby, Max Ruby 
and Pete Young each owned a 17.1% working interest in that lease. Under the 
agreement, Ruby was to drill or rework ten wells on the Lease no. 1 lands and 
the parties agreed to the following formula for division of production and 
recovery of development expenses associated with bringing those wells into 
production:

5. [Lakota] agrees to 
allow [Ruby] to recover all of its costs and expenses of drilling, testing, 
completing, equipping and placing wells on production * * * revenues as set 
forth below:

(a) On production 
obtained prior to payout and after payout:

PARTY                       
PERCENTAGE                     
           
INTEREST

Gene L. Payne) 
                    
12.5 of 8/8                              
Fee Royalty 

Sylvia 
Levinson)

 
 
M.E. Hoagland 
                                 
2.0 of 8/8                                
Overriding Royalty

Lakota Partnership               
34.2 of 8/8                  
(Overriding Royalty prior to payout and working                           
interest after payout)

Max L. Ruby 
                          
17.1 of 8/8                              
Working Interest

Pete Young                            
17.1 of 8/8                              
Working Interest

Ruby Drilling 
Co.                  
17.1 of 8/8                              
Working Interest

Dale Ruby,4 Max L. Ruby and Pete Young, agree 
to allow Lakota Partners to recover $35,000.00 based on 26.65% of the 
production, and Lakota Partners agrees to allow Dale Ruby, Max L. Ruby, and Pete 
Young to recover $55,000.00 based on 59.85% of the production. If the figures 
aforementioned are not recovered simultaneously, and Lakota Partners recovers 
their $35,000.00 prior to Dale Ruby, Max L. Ruby, and Pete Young recovering 
their $55,000.00, Lakota Partners agree to convert to a 10% overriding royalty 
until such time as Dale Ruby, Max L. Ruby and Pete Young recover their $55,000 
in full. At such time as Dale Ruby, Max L. Ruby, and Pete Young recover their 
$55,000, Lakota Partners shall reconvert to a 34.2% working 
interest.

6. [Ruby] shall have full 
control of all operations on the subject lands and shall assume all liabilities 
whether expressed or implied as 100% working interest owner prior to payout. 
[Ruby] agrees that payout will be determined on a lease 
basis.

[Ruby] shall 
maintain in force and effect such policies of insurance as are reasonably 
necessary to protect the interests of the parties. Damage claims arising out of 
operations on the subject land shall be handled by [Ruby] and its attorneys, and 
settlement of claims of this kind will be within the discretion of 
[Ruby].

At this point, 
no agreement had been reached between Lakota and Ruby concerning the lands 
covered by Lease no. 2 or the Federal lease.

[¶11.]  While negotiations on this agreement were 
pending, Young had been working on Lease no. 1 wells with Ruby and his hours 
were being invoiced by Ruby as a development expense. Ruby and Young invoiced 
this way even though they had reached their own oral agreement to enhance Ruby's 
ability to recover development expenses on Lease no. 1 wells sometime during 
negotiations between Lakota and Ruby on the operating agreement. Under this oral 
agreement, Young agreed to pay Ruby 10% of his 17.1% working interest in 
proceeds of production until Ruby and Max Ruby recovered their $55,000 in 
development expenses.

[¶12.]  Young "worked" for Ruby under this 
arrangement until the summer of 1984; he apparently made one or more payments to 
Ruby under the oral contract until August 27, 1984. In late 1984 or early 1985, 
Young traded his entire 17.1% working interest in Lease no. 1 to Lakota for an 
interest in the Federal lease. The record is unclear concerning the total amount 
Young paid to Ruby under the oral agreement between its inception and the time 
he traded his working interest in Lease no. 1 to Lakota.

[¶13.]  On July 12, 1984, one of Ruby's drilling 
rigs and two Ruby trucks were destroyed in a rig fire on a Lease no. 1 well. The 
fire was started by a Ruby employee who ignited gases escaping from the well 
with a welding torch. Ruby had not obtained insurance on its Lease no. 1 
operations when the fire destroyed that equipment. Instead, Ruby billed each 
Lease no. 1 working interest owner for a proportionate share of the fire loss, 
apparently believing that the provision in the agreement allowing Ruby to 
recover its costs was grounds for that billing. Lakota objected to the billing 
under the "insurance" language in the Lease no. 1 agreement noted above, and 
based on its assertion that Ruby had fully depreciated the destroyed equipment 
before the fire. Lakota never paid Ruby anything for the fire damaged 
equipment.

[¶14.]  The July 26, 1983, lease on the Lease no. 
2 lands had a primary term that expired on October 20, 1984. In December 1983, 
Ruby hired an engineer to survey wellsites on the Lease no. 2 lands, apparently 
in preparation to drill wells and extend the primary term of the July 26, 1983, 
lease. In October 1984, those wellsites were staked, but neither Ruby nor Lakota 
had obtained state permits to drill. After Dale Ruby discussed this problem with 
Lakota, Burg completed and mailed two applications for permits to drill shallow 
oil wells on Lease no. 2 lands to the Wyoming Oil and Gas Conservation 
Commission; these applications showed Ruby as the operator on those potential 
wells. These applications were received on October 4, 1984, but neither was 
accompanied by the required twenty-five dollar fee. A Mr. Basko with the 
Commission contacted Dale Ruby about the missing fees and Ruby forwarded the 
money so that the drilling permits could be completed. The money was received on 
October 16, 1984, but the permits were not issued in time to allow Ruby to 
commence a well and prevent the July 26, 1983, lease on the Lease no. 2 lands 
from expiring.

[¶15.]  At this point, there was some 
miscommunication between Ruby and Lakota. Dale Ruby inquired about the lease 
status of the Lease no. 2 lands and Lakota replied that there was not a problem. 
Dale Ruby apparently understood this to mean that the July 26, 1983, lease had 
in fact been extended. Actually, Lakota had obtained a new lease and had 
authorized Ruby to develop the wells described in the October 16, 1984, drilling 
permits. When Ruby went out to the Lease no. 2 lands to prepare to drill the two 
wells Pete Young was already there preparing the sites. Dale Ruby testified at 
trial that Pete Young felt he was proceeding under the new top lease on the 
Lease no. 2 lands. After Dale Ruby learned this, no wells were drilled by Ruby 
under the October 1984 drilling permits issued for Lease no. 
2.

[¶16.]  There was some production on Lease no. 1 
wells during 1984. In early 1985, Dale Ruby discovered that Young had assigned 
his interest in Lease no. 1 to Lakota in return for an interest in the Federal 
lease. This apparently convinced Dale Ruby that Lakota was not going to assign 
Ruby, Dale Ruby, or Max Ruby any interest in the Federal lease, and on February 
6, 1985, he filed an oil and gas lien on Lease no. 1 in an attempt to recover 
sums Lakota allegedly owed under the May 18, 1984, farmout operating agreement. 
Production revenues from Lease no. 1 have been held in suspension by the oil 
purchaser since that time. We have examined the record and find that none of the 
Rubys filed an oil and gas lien on Lease no. 2.

[¶17.]  On August 1, 1985, Ruby, Dale Ruby, and 
Max Ruby filed a complaint in district court alleging their right to recover for 
the fire damaged equipment and asserting that a verbal agreement existed between 
Ruby and Lakota on Lease no. 2 and the Federal lease. Under this alleged verbal 
agreement, Lakota contracted Ruby as the operator on those two leases under 
terms similar to those contained in the Lease no. 1 farmout operating agreement. 
The plaintiffs also alleged that Lakota owed substantial amounts of money for 
expenses of development and operation on Lease no. 1 wells and prayed for 
judgment and an oil and gas lien against Lakota's interest in Lease no. 1. 
Lakota answered generally denying these claims, counterclaiming that the suit 
for a lien on Lease no. 1 lands was willful and malicious, and asked for 
compensatory and punitive damages. Ruby, Dale Ruby, and Max Ruby denied the 
counterclaim and the parties conducted discovery.

[¶18.]  A bench trial took place on October 22, 
24, and 29, 1986. The trial court sifted through the documentary evidence, 
listened to witnesses for both sides, and in open court made findings of fact 
and conclusions of law which were to serve as the basis for future hearings 
concerning the specific terms of the final judgment.

[¶19.]  The parties met before the court again on 
November 12, 1986, to present evidence and arguments on the reasonable costs and 
expenses that would be used to arrive at a total dollar value for an oil and gas 
lien based on the terms of the May 18, 1984, farmout operating agreement. After 
that hearing, the parties made several exchanges of proposed forms of judgment 
but were unable to arrive at an acceptable written articulation of the trial 
court's October 29, 1986, findings. This problem resulted in a second post-trial 
hearing, July 22, 1987, in which counsel for Lakota argued that the form of 
judgment proposed by Ruby's and Max Ruby's counsel did not comport with the 
trial court's October 29, 1986, open court findings because it granted a lien 
for development expenses against Lease no. 1 itself and not against only the production from Lease no. 1. Next, the 
parties discussed the need for findings in the final judgment to reflect a 40% 
reduction in any expenses Lakota was to owe to Ruby and Max Ruby because Ruby 
and Max Ruby each possessed 20% of the working interests in wells on those 
leases and as working interest owners were responsible for their proportionate 
shares of those costs. The parties then engaged in a rather protracted 
discussion and argument over exactly what the trial court really did find and 
conclude on October 29, 1986. That colloquy was followed by a brief discussion 
of the attorney's fees recoverable by counsel for Ruby and Max Ruby on the 
litigation resulting in a lien on the Lease no. 1 production. Counsel for Ruby 
and Max Ruby referenced an affidavit on this matter signed on April 7, 1987, and 
Lakota's counsel made some arguments concerning the reasonableness of the fees 
explained in the affidavit.

[¶20.]  The trial court considered the evidence 
and filed a final judgment on June 28, 1988. These appeals 
followed.

CASE NO. 
88-220

Consistency of Relief 
Ordered in the Judgment

[¶21.]  Lakota first contends that the relief 
ordered in the final judgment is not consistent with the trial court's 
interpretation of the May 18, 1984, contract. Specifically, Lakota recounts that 
the trial court heard and reviewed voluminous evidence concerning the intention 
of the parties as manifested in the May 18, 1984, agreement and after hearing 
that evidence found:

[Ruby], as the operator, 
gets to recover all of his costs and expenses of drilling, testing, completing, 
equipping, and placing the wells on production from the production revenues and 
that - I find the agreement of the parties was that they wanted to get a quick 
payout on attributed investments and they attributed an investment of $35,000 to 
[Lakota] and the 55,000 to Ruby [d/b/a Ruby Drilling Co.], Max Ruby, and Pete 
Young.

I do not construe that as 
putting a cap on the amount of - of legitimate costs of drilling, testing, 
completing, and equipping and placing that Ruby incurred. * * * I find that that 
was a way to ensure both of the parties of a quick payout.

* * * * * 
*

I do not buy the argument 
that that was a cap, nor do I buy the argument that he was guaranteed that 
payment by the partners. The agreement 
clearly says that it's to come out of the production revenues. It appears 
we've approached that point, in any event.

(Emphasis 
added). That finding, among others, was incorporated into paragraph 13 of the 
final judgment. Lakota then directs us to the decretal portion of the final 
judgment which provides in pertinent part:

WHEREFORE, IT IS ORDERED 
ADJUDGED AND DECREED as follows:

A. Plaintiffs shall have 
judgment on their lien in the amount of * * * 
($42,462.14).

B. Pursuant to W.S. § 
29-3-103(a)(b)(i), plaintiffs shall have judgment for attorney fees in the 
amount of * * * ($7,500.00) plus cost in the amount of * * * 
($783.55).

C. Plaintiff [Ruby] shall 
have judgment on its quantum meruit claim for expenses of production in the 
amount of * * * ($15,120.00). In addition, plaintiff [Ruby] shall have judgment 
in the amount of * * * ($1,718.74), said amount being sixty percent of the total 
taxes paid. The total quantum meruit judgment is * * * 
($16,838.74).

* * * * * 
*

IT IS FURTHER ORDERED 
that this judgment shall constitute a decree of foreclosure of [Lakota's] 
interests in [Lease 1 and Lease 2]

IT IS FURTHER ORDERED 
that the sheriff proceed to foreclose and sell the property pursuant to 
Wyoming 
Statutes, the proceeds received from the sale shall first be applied to the 
costs and expenses of foreclosure and thereafter to the amount of the 
judgment.

 

(Emphasis 
added). Lakota argues that by ordering foreclosure and sale of its working 
interests in Leases no. 1 and 2 to immediately satisfy Ruby's oil and gas lien 
for pre-production development costs, the trial court ignored its own finding 
that Ruby only had a contract right to recover those sums out of production 
revenues. We agree.

[¶22.]  At the outset of our analysis of this 
issue, we must first observe that we are discussing the issue in the context of 
the oil and gas lien on Lease no. 1, but not Lease no. 2 since none of the Rubys 
filed a lien on Lease no. 2. As no lien was filed on that lease, the district 
court did not have jurisdiction to foreclose a lien on that lease in any 
event.

[¶23.]  The court's primary function when 
interpreting a contract is to seek out the intent of the parties. State v. 
Pennzoil Company, 752 P.2d 975, 979 (Wyo. 1988). When crafting its final judgment 
to effectuate that interpretation, the trial court cannot order relief that goes 
beyond the express findings it makes. State Highway Commission v. Garton & 
Garton, Inc., 418 P.2d 15, 21 (Wyo. 1966). Cf. W.R.C.P. 52(c). Pursuant to 
its findings, the trial court could only grant Ruby a contract right with 
priority to recover its pre-production development costs out of production 
revenues.

[¶24.]  This conclusion requires us to consider a 
potential jurisdictional matter, which neither party has expressly raised, but 
which we believe must be addressed to insure finality in this appeal. See, e.g., 
Ricci v. New Hampshire Insurance Company, 721 P.2d 1081, 1088 (Wyo. 1986) (this court 
can address an issue not raised by the parties below if it involves the trial 
court's subject matter jurisdiction). Lakota could have argued that the trial 
court did not have statutory authority to impose an oil and gas lien for the 
development costs Ruby is entitled to recover from the proceeds of production, 
based on the theory that the trial court interpreted the May 18, 1984, agreement 
to be essentially a farmout agreement and not an express contract for Ruby's 
materials and services in bringing the wells on Lease no. 1 into production. The 
thrust of this argument would have been that the contract debt for development 
costs that Ruby can recover out of production is not a "debt" eligible for the 
statutory protections of the oil and gas lien statute. Under a normal farmout 
agreement no separate debt exists because the farmee assumes the risk that it 
might lose its development costs in exchange for the possibility that it will 
attain production and receive an outright share of the working interest in the 
lease. See Johnson v. Anderson, 768 P.2d 18, 22 n. 3 (Wyo. 1989) (citing 8 H. 
Williams and C. Meyers, Oil and Gas Law, Manual of Oil and Gas Terms at 342 
(1987)).

[¶25.]  This case is not that simple, however, 
because of the confused nature of the May 18, 1984, agreement, which, as 
reflected by the trial court's findings, has characteristics of both a normal 
farmout agreement and an operator's agreement. It forces Ruby to risk 
development costs on Lease no. 1 in order to receive an assignment of a 
percentage of the working interest in that lease, but it also gives Ruby an 
express contractual right to recover those development costs out of any 
production that does result from Lease no. 1 exploration under a specific payout 
formula.

[¶26.]  This presents an interesting legal 
dilemma. The agreement seems to create an express contractual right in Ruby to 
recover development costs which arguably demands protection under the language 
of our oil and gas lien statute, and if that is the case, the lien statute 
allows foreclosure against the entire working interest in the lease to which the 
lien attaches. See W.S. 29-3-103 and W.S. 29-3-105 (May 1984 Repl.). Allowing 
Ruby to foreclose such a lien, however, would arguably sanction unjust 
enrichment because it would allow Ruby to foreclose against Lakota's working 
interest in Lease no. 1, when Ruby's express contractual right underlying the 
lien applies only against production revenues.

[¶27.]  This leaves us with essentially two 
options in terms of the operation of the oil and gas lien statute for resolving 
this case. The first would be for us to hold that the character of Ruby's 
contractual right is more analogous to the farmout situation than an operator or 
contractor situation, and therefore, Ruby's contract right to recover 
development costs out of production did not confer the trial court with 
statutory jurisdiction to grant a lien. This thesis involves holding that there 
was no contract debt upon which Ruby can now ground its request for a statutory 
lien. The other alternative is to apply the plain language of the lien statute, 
but to limit the relief available to Ruby in this situation under that statute 
to that which it bargained for in the May 18, 1984, written agreement. When 
considering these alternatives, we are also cautious of construing the lien 
statute in a way that may damage its utility under more "normal" circumstances, 
where it serves as a more immediate remedy to an oil and gas contractor who has 
not been paid for materials and supplies which help bring a lease into 
production. Lien statutes create remedies in derogation of common law and must 
be strictly construed. Cities Service Oil Company v. Pubco Petroleum 
Corporation, 497 P.2d 1368, 1371-72 (Wyo. 1972).

[¶28.]  After carefully considering our options, 
the plain language of the lien statute, and the unique circumstances of this 
case, we hold that the trial court did not have jurisdiction to apply the oil 
and gas lien statute, and could not order relief under such a lien. The trial 
court specifically found that Ruby has an express contractual right to recover 
its pre-production development costs out of production revenues which Lakota has 
already received or which are currently being held in suspension by an oil and 
gas purchaser pending resolution of this litigation. Further, Lakota does not 
assert the nonexistence of a debt to Ruby under the 
contract.

[¶29.]  Ruby possessed an express contractual 
right to recover its development outlays from production revenues which 
qualifies for a contractual remedy. That remedy, however, should not expand the 
express contractual right Ruby bargained for into a guaranteed payment of those 
expenses by allowing Ruby to foreclose against Lakota's entire working interest 
in Lease no. 1. We recognize that the usual contract between a provider of 
services or materials to develop an oil and gas lease and the owner of an 
interest in the real estate covered by the lease provides the underpinning for a 
statutory oil and gas lien. See W.S. 29-3-103; W.S. 29-3-110; Cities Service, 
497 P.2d  at 1373. The parties' agreement as to how they would divide production 
revenue under the formula expressed in their contract did not change Ruby's 
status as a farmee with respect to what it had to do to acquire its working 
interest. Traditionally, a farmee's expenditures do not come within the embrace 
of the lien statute. Since the amounts owed to Ruby were conditioned upon 
production, the lien statute has no application to this set of facts. If Ruby 
wanted the ability to foreclose against Lakota's working interest to recover 
development costs with an oil and gas lien, it should have contracted for that 
circumstance rather than contracting for a hybrid farmout operating 
agreement.

[¶30.]  On remand, when the trial court 
reconsiders the relief it will order to effect Ruby's judgment for development 
costs to make that relief consistent with its interpretation of the May 18, 
1984, agreement, it must limit the scope of that relief to production revenues 
only. Neither this court, nor the trial court, have an obligation to rescue Ruby 
from the terms of an undesirable contract into which it voluntarily 
entered.

Trial Court's 
Interpretation of the May 18, 1984, Agreement

[¶31.]  Concerning Lakota's additional 
contentions that the May 18, 1984, written agreement can be interpreted 
differently from the interpretation chosen by the trial court, we decline 
Lakota's invitation to retry the case at the appellate level. The trial court 
persevered through a morass of confused documentary and testimonial evidence in 
this case presented by parties who themselves did not know what their actual 
business relationship was. Other than the inconsistency in the judgment 
discussed above, the trial court arrived at an interpretation of the contract 
that was supported by the evidence; Lakota has not challenged the trial court's 
interpretation of the contract on that basis and doing so would not help it 
under the applicable standard of review which ignores conflicting evidence 
presented on appeal by Lakota and gives Ruby every reasonable inference we can 
draw from the evidence supporting the trial court's findings. See Pancratz 
Company, Inc. v. Kloefkorn-Ballard Construction/Development, Inc., 720 P.2d 906, 
908-09 (Wyo. 
1986). We decline Lakota's invitation to retry this case on appeal and defer to 
the trial court's interpretation of the contract terms. Lakota should not be 
heard to complain about the trial court's interpretation of a written contract 
that it drafted. See Pennzoil, 752 P.2d  at 979-80 (ambiguities in written 
contracts are construed most strictly against the 
drafter).

Effect of Young's 
Collateral Oral Agreement With Ruby

[¶32.]  Lakota's next issue questions whether the 
trial court rendered judgment as to the amount of damages for development costs 
without adequately considering the payments Ruby may have already received from 
Young under their collateral oral agreement. Lakota fails to present any 
justification for this court to open the judgment as to the amount of 
development costs other than the general assertion that some evidence exists in 
the record which might justify that action. Consequently, Lakota fails to 
present this issue with cogent argument or cited authority and we need not 
consider it further. Johnston v. Conoco, Inc., 
758 P.2d 566, 568 (Wyo. 1988).

CASE NO. 
88-221

Farmout Operating 
Agreement as to the Federal Lease

[¶33.]  Ruby and Max Ruby begin this appeal by 
challenging the district court's finding that there was no oral or written 
agreement between them concerning development or production of the lands covered 
by the Federal lease. In a direct appeal from a final civil judgment this court 
assumes that the evidence of the prevailing party below is true and gives that 
party every reasonable inference that can fairly and reasonably be drawn from 
it. Pancratz, 720 P.2d  at 908-09. 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. Id.

[¶34.]  Ruby and Max Ruby urge us to reanalyze 
the evidence presented at trial and somehow draw the collective inference that 
they had a collective agreement with Lakota that required Lakota to assign them 
up to 50% of the working interest in the Federal lease. Whether an oral or 
written contract has been entered into depends on the parties' intent and is a 
question of fact. Wyoming Sawmills, Inc., v. 
Morris, 756 P.2d 774, 775 (Wyo. 1988). The finder of fact in this case 
was the trial court, which heard all of Ruby's evidence allegedly supporting the 
existence of an oral contract as to the Federal lease. The trial court rejected 
that evidence and we defer to that finding.

Ruby's Liability for 
Losses Incurred in the Rig Fire

[¶35.]  The next issue in this case is Ruby's 
challenge to the trial court's determination that, under the plain language of 
the May 18, 1984, operating agreement quoted above, Ruby both assumed the risk 
of equipment loss on Lease no. 1 operations due to a rig fire and Ruby breached 
its contractual obligation to obtain insurance to cover such a loss. We need 
only affirm one of these bases for the trial court's conclusion to affirm on 
this issue and we choose the second.

[¶36.]  Courts review contractual language to 
ascertain the true intent of contracting parties; when contractual language is 
unambiguous its plain meaning evidences that intent. Pennzoil, 752 P.2d  at 978. 
The trial court found the May 18, 1984, operating agreement to be an unambiguous 
contract between Ruby, Max Ruby, and Lakota concerning development of Lease no. 
1. As quoted above, that contract required Ruby to maintain insurance in both 
parties' interests in the development of Lease no. 1. Ruby failed to maintain 
insurance coverage for the type of loss suffered in the rig fire and 
consequently breached its obligation to do so under the plain language of the 
contract. That breach precludes Ruby from recovering its rig fire losses from 
the other parties to the operating agreement. See Western Plains Service 
Corporation v. Ponderosa Development Corporation, 769 F.2d 654, 658 (10th Cir. 
1985).

Attorney's Fees Under 
W.S. 29-3-103

[¶37.]  Ruby prayed for attorney's fees in this 
case based on W.S. 29-3-103(a) (May 1984 Repl.), which provides for them if an 
oil and gas lien is granted. Since we hold that Ruby was not entitled to a lien 
under the peculiar facts of this case, we conclude that Ruby was not entitled to 
attorney's fees.

CONCLUSION

In case no. 
88-220, we reverse the judgment and remand with instructions that the district 
court accomplish the appropriate division of the production revenues through the 
application of the parties' contract. We affirm on the remaining issues. In case 
no. 88-221, we reverse and vacate the award of attorney's fees to Ruby. We 
affirm on the remaining issues.

THOMAS, J., filed a specially 
concurring opinion, in which URBIGKIT, J., 
joins.

FOOTNOTES

1 Lakota framed its 
appellate issues as:

A. The district court's 
interpretation of the Letter Agreement dated May 18, 1988 is not consistent with 
the court's oral findings.

B. The court's 
interpretation of the Letter Agreement fails to give effect to the parties' 
intent as expressed in all provisions of the Letter 
Agreement.

C. The judgment fails to 
limit the extent of the oil and gas lien to the consideration expressed in the 
Letter Agreement dated May 14, 1984.

D. The judgment fails to 
separately treat the working interest of Mr. Young and Lakota 
Partnership.

2 Ruby, Dale Ruby, and Max 
Ruby frame their appellate issues as:

I. The Trial Court erred 
in finding that the parties did not have an enforceable agreement which entitled 
the plaintiffs to have an interest in all three leases which were the subject of 
the action.

II. The Trial Court erred 
in finding that Ruby Drilling Co., Inc. assumed the risk as the driller and the 
operator as to the costs and expense of the fire which destroyed the drilling 
rig and further erred in finding that Ruby Drilling Co., Inc. breached the 
agreement by failing to insure against the loss.

III. The Trial Court 
erred in reducing the plaintiffs attorney fees from the amount shown by the 
affidavit of plaintiff's counsel of plaintiffs, insofar as proof of the 
reasonableness of the attorney's fees were properly submitted to the Court, and 
the evidence showed, and the court found, that 95% of the attorney's fees should 
be allowed.

3 The record does not 
indicate whether Dale Ruby took these assignments in his capacity as an officer 
for Ruby Drilling or as an individual.

4 The record does not 
indicate whether the use of "Dale Ruby" in this single-spaced paragraph, rather 
than "Ruby Drilling Co.," was pertinent to the parties' agreement over the way 
development costs on Lease no. 1 wells would be recovered. The initial paragraph 
of the May 18, 1984, agreement indicates that Dale Ruby d/b/a Ruby Drilling Co. 
Inc., was the designated operator on Lease no. 1 and that the parties and the 
trial court appear to have litigated the entire lawsuit under the assumption 
that "Dale Ruby" and "Ruby Drilling Co." were synonymous in the May 18, 1984, 
agreement. We will defer to that interpretation here.

THOMAS, Justice, specially 
concurring, with whom URBIGKIT, J., 
joins.

[¶38.]  I concur in the result reached in the 
majority opinion. There is no justification for invocation of the lien by Ruby 
Drilling Company in this instance. The conclusion that the parties are limited 
to their contractual remedies is eminently correct. That deduction is factually 
proper, but it is the function of the trial court to make factual conclusions. 
The propriety of that determination as a matter of law is essential to our 
disposition.

[¶39.]  The legal justification for our ruling is 
found in the relationship of the parties as co-owners of the working interest in 
the lease. The effect of the May 18, 1984 agreement, in addition to limiting 
Lakota's and Ruby's contractual rights, was to establish a relationship 
"sufficiently similar to a partnership to constitute a joint venture." Texas Oil 
& Gas Corporation v. Hawkins Oil & Gas, Inc., 282 Ark. 268, 668 S.W.2d 16, 17 (1984). The sharing of the income and expenses of a working interest in an 
oil and gas lease by the co-owners of the working interest in the same 
proportions as their ownership interests is the essence of a joint venture. The 
agreement outlined the respective rights of the parties in relation to their 
joint venture for developing and producing Lease No. 1.

[¶40.]  Joint ventures are like partnerships, and 
they embody a reciprocal fiduciary duty of fair dealing among the members of the 
entity. Madrid v. Norton, 596 P.2d 1108 
(Wyo. 1979). 
According to recognized commentators, the fiduciary relationship is the most 
important characteristic of a joint venture. 2 H. Williams & C. Meyers, Oil 
and Gas Law § 437.1 (1988). The May 18, 1984 agreement does not recognize a 
right of either party to assert a lien against the joint venture property. In 
the absence of the reservation of such a right, the assertion of a lien against 
the joint venture property would amount to a violation of the fiduciary duty 
owed, and the assertion of the lien would be recognized as a breach of the joint 
venture agreement. Cf. Andrau v. Michigan Wisconsin Pipe Line Company, 712 P.2d 372 (Wyo. 
1986) (court holding no breach of a fiduciary duty resulted from the assertion 
of a lien because the agreement of the parties clearly provided for the 
assertion of a lien).

[¶41.]  In the absence of a contractual provision 
that permits one joint adventurer to assert a lien against the other, sound 
policy reasons exist to limit the parties to the remedies provided in their 
contract or by the general law of partnerships. The court should not recognize 
an effort at self-help that violates a fiduciary duty owed to the other party. 
Since that is the result reached by the majority opinion, I am pleased to concur 
in the disposition of this case.