Opinion ID: 1175395
Heading Depth: 1
Heading Rank: 2

Heading: Johnson's Employment Contract With Puma I

Text: Underlying this dispute is a complicated series of business relationships and transactions. Johnson first became involved with appellees when, at the invitation of Anderson, he joined the newly formed Puma Petroleum Company in June 1980. Puma I was organized as a Wyoming limited partnership with Anderson as the sole general partner. The company was originally set up with an initial lifespan of roughly three and one-half years ending on December 31, 1983. Johnson was hired by Puma I under the terms of a written employment contract (Contract) between himself and Anderson dated June 6, 1980. The first page of the Contract contains a section entitled Tenure and Nature of Johnson's Work and, under subparagraph a. of that section, the Contract states Johnson shall for a period from June 1, 1980, to December 31, 1983, diligently devote his best efforts to the business and affairs of [Puma I]   . Under section 2 of the Contract Johnson was to receive $110,000 per year salary and additional compensation including a share of the following oil and gas interests: 2.b.(1) Anderson agrees to share equally with Johnson in the remaining overriding interest as provided for under the Partnership Agreement, after deductions of overriding royalty interests assigned to other employees or associates of [Puma I], but will strive to maintain the overriding royalty interest to be assigned to Johnson be not less than 2% proportionately reduced to the interest acquired by [Puma I]. Such overriding royalty interest to be applicable to leasehold interest acquired during period of Anderson's and Johnson's association as provided under the terms of this agreement. 2.b.(2) Johnson to share at his option equally with Anderson, covering the General Partner's right to buy up to a 1/16th working interest, proportionately reduced to the interest acquired in the prospect by [Puma I], at cost, under the terms and conditions set forth in the Partnership Agreement. Such option to purchase to be applicable to prospects developed during the period of association between Anderson and Johnson, as covered under this agreement. The working interest purchase option will cover the remaining working interest available, after deductions, if any, to other employees or associates of [Puma I], but Johnson will share equally with Anderson in this option to purchase the remaining working interests. The Contract also stated that it was binding upon both parties' successors and assigns and that it was a Colorado contract. The Puma I partnership agreement referenced in the Contract, along with an amendment to that partnership agreement, was filed with the Wyoming Secretary of State on July 18, 1980. The original Puma I partnership agreement at paragraph II.A provided that Anderson, as general partner, would receive overriding royalties [o]n any mineral leasehold interest acquisition made by [Puma I]   . The amendment to the original agreement contained two substitute provisions for paragraph II.A in the original partnership agreement, which amended provisions provided: 1. On any mineral leasehold interest acquisition, including acquisition of producing properties made by the Partnership, the General Partner shall receive an overriding royalty equal to 6.25% of 8/8ths, proportionately reduced to the interest acquired by [Puma I] if that interest is less than a full working interest. 2. In the event [Puma I] acquires properties other than mineral leasehold interests, as described in subparagraph 1 above, the General Partner shall receive 5% of the interest acquired by [Puma I] after payout which shall include all costs of acquisition and costs of maintaining and operating a property during payout. The provisions of this subparagraph 2 shall not apply to property or oil field equipment purchased by [Puma I] in the course of [Puma I]'s drilling, completing, operating and producing oil and gas wells in which [Puma I] has a working interest. In his deposition, Anderson testified that the original Puma I partnership agreement was amended, and the amended text that allowed the general partner the right to share in overrides on leases acquired by Puma I was stricken as shown above. This was done to prevent the general partner from acquiring an interest in overriding royalties on property acquired by Puma I, which was capable of producing paying quantities of oil or gas at the time Puma I acquired it. Affidavits of the limited partners in Puma I echo this explanation. Johnson's primary obligation under the Contract was to act as a petroleum geologist for Puma I. He was to develop and generate potential oil and gas prospects and prospects for farmout agreements on the same. Johnson screened a number of wells for Puma I during his employment and some of the wells were drilled based upon his recommendation. Between 1980 and December 31, 1983, Johnson received assignments of overriding royalties under the Puma I partnership agreement and the employment contract between Puma I and Johnson. (See subsection entitled Leases in which Johnson Claims an Interest below)