Opinion ID: 1217617
Heading Depth: 1
Heading Rank: 2

Heading: the claimed fiduciary duty

Text: Appellant claims that it is well accepted that [a] Unit Operator stands in the position of a fiduciary or trustee to nonoperators. He places great weight on the cases of Beadle v. Daniels, Wyo., 362 P.2d 128 (1961); Young v. West Edmond Hunton Lime Unit, Okla., 275 P.2d 304 (1954); and Reserve Oil, Inc. v. Dixon, 711 F.2d 951 (10th Cir.1983), to support this claim. While these cases do support appellant's contention that there is often a fiduciary or trustee-type relationship between operator and nonoperator owners, they do not provide support for the fiduciary duty appellant claims is owed in this case. Appellant cites no authority, and this court has found none, which supports the proposition that an operator holding a valid lien upon a nonoperator's entire working interest cannot foreclose that lien, but must instead foreclose only upon the production obtained from the working interest. No court, to our knowledge, has ever imposed this duty. Even more important in this case, however, is the operating agreement which expressly negates such a duty. The agreement controls the disposition of this case. First, we distinguish Reserve Oil, Inc. v. Dixon, supra. There, nonoperator working interest owners of an oil and gas well sued the operator alleging breach of a fiduciary duty when the operator sold the well's production in which the nonoperator had an interest but failed to turn over the proceeds of the sale to the nonoperator. The court stated that the contract gave the nonoperator full control over its proportionate share of the oil and gas and that the operator had no right to, or interest in, the oil and gas or its proceeds beyond a nonoperator's unpaid share of costs. The court went on to hold that the  contract created a trustee type relationship imposing a duty of fair dealing between the operator and non-operator owners in the matter of distribution of shares among the owners. (Emphasis added.) 711 F.2d at 953. The court in Reserve Oil, Inc. v. Dixon, supra, expressly noted that it was simply construing the parties' contract. The contract created a narrow trustee-type relationship when the operator sold the nonoperator's production from the well. Nothing stated in the Reserve Oil, Inc. case supports the appellant's claim that the operator's fiduciary duty prevents him from foreclosing upon all of the nonoperator's working interest to satisfy debts owed for drilling costs. Likewise, neither Young v. West Edmond Hunton Lime Unit, supra, nor Beadle v. Daniels, supra, found the broad fiduciary duty claimed here. In Young, the Oklahoma Supreme Court held that an operator of a unit forcibly created by statute holds a position similar to that of a trustee. The court found that the fiduciary duty owed by the operator was breached when it purchased production of the unit at a price lower than that offered by other purchasers. The court stated that the statutes (which compelled interest owners to surrender all rights to produce from the unit) required the operator to account to all owners for unit production at the highest market price available. Young v. West Edmond Hunton Lime Unit , like Reserve Oil, Inc. v. Dixon , dealt with an operator selling production belonging to a nonoperator. Both of those cases held that when the operator so acted, there was a trustee-type relationship which imposed certain duties upon the operator. But in the present case there is no claim that the operator was doing anything that was not strictly according to the parties' express written agreement. The gas he contracted to sell and sold was gas he owned or was authorized to sell for his own account per the agreement. If it included some of the nonoperator's share of production, the agreement provided a gas-in-the-bank arrangement to the nonoperator. The actions in the present case fall well outside of the areas in which there was found a fiduciary duty in Reserve Oil, Inc. v. Dixon and Young v. West Edmond Hunton Lime Unit . In Beadle v. Daniels, supra, the operator, a corporation, was sued by nonoperators when the operator's officers purchased pumping equipment for less than that charged to the nonoperators. This court held that the officers of the operator owed a fiduciary duty to the operator, and that the operator was the agent for the nonoperators. We stated that the operating agreements were controlling in reaching our decision; and, therefore, we thought it unnecessary to consider [the] suggestion that said agreements created a mining partnership   . 362 P.2d at 131. 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. Beadle does, however, aid us in our decision in this case; the fiduciary duty claimed in the present case, like that in Beadle, is specifically dealt with in the operating agreement.