Court Opinion

ID: 9857141
Source: CourtListenerOpinion
Date Created: 2023-09-24 13:51:14.892039+00
Date Added: 2024-06-11T09:38:03.486136
License: Public Domain

QUINN, Chief Justice,
dissenting:
The majority acknowledges that where an express agreement provides for a right to participate in the management or control *990of the mining operation, the absence of any actual exercise of that right should not preclude a finding that the joint operation element of a mining partnership exists. 740 P.2d at 987. However, the majority then concludes that under this standard Blocker Exploration Company’s rights did not rise to the level of active participation in control or management. I disagree with this conclusion, and accordingly dissent from that portion of the majority opinion holding that summary judgment was properly entered in favor of Blocker on the issue of a mining partnership. Because I would return the case to the trial court for resolution of factual issues relating to the mining partnership, I would not decide here whether Blocker was required to file a cross-appeal in order to raise in support of summary judgment various issues not addressed by the trial court.
I.
As the majority correctly states, in a case such as this where there has been no actual control or participation by the co-owners in a mining venture, the critical issue is the extent to which the express agreement between the parties gives a right of participation in the management or control of the operation to the party whose status as a mining partner is in dispute. If the agreement does give a co-owner a right to participate in management or control that goes beyond such rights as are merely incident to co-ownership, it may justifiably be concluded that the joint operation element of a mining partnership has been satisfied, regardless of whether the rights provided for in the agreement were actually exercised. This approach has been followed by other courts. See, e.g., Vicioso v. Watson, 325 F.Supp. 1071 (OD.Cal.1971); Ayco Development Corp. v. G.E.T. Service Co., 616 S.W.2d 184 (Tex.1981); Mud Control Laboratories v. Covey, 2 Utah 2d 85, 269 P.2d 854 (1954); see also Shell Oil Co. v. Prestridge, 249 F.2d 413, 417 (9th Cir. 1957) (although there was some evidence that Shell had exercised actual control over the drilling, “under the provisions of the agreement alone there was sufficient joint control of the enterprise” to establish a joint venture as a matter of law); see generally Boigon and Murphy, Liabilities of Nonoperating Mineral Interest Owners, 51 U.Colo.L.Rev. 153, 164-72 (1980). As Judge Babcock observed in his dissent to the court of appeals’ opinion in this case, “parties to mining ventures are free to limit their liability by the express terms of [their agreement],” and “[o]ne who contracts voluntarily for the right of involvement or participation in the control or management of a mining venture should be liable for the debts of the partnership, whether that right is exercised or not.” Frontier Exploration, Inc. v. Blocker Exploration Co., 709 P.2d 39, 43 (1985) (Babcock, J., dissenting).
Indeed, some commentators have defined a mining partnership as “a partnership relation imposed by law, independent of, and often antagonistic to, express contractual declarations, which even in modern courts is invoked to impose joint and several liability on nonoperating interest owners in favor of third parties transacting business with or injured by a mineral venture.” Boi-gon and Murphy, 51 U.Colo.L.Rev. at 154. This definition is considerably more expansive than the traditional “right to control” test. In my view, however, summary judgment was improper in this case even under the more restrictive “right to control” test.
II.
Although the record does not indicate that Blocker actively participated in the management or control of the exploration activities on the leases, the record does contain the express agreement setting forth the terms and conditions under which Lewis and Blocker were to join together to exploit the opportunities presented by the Lewis-GLN agreement. The agreement between Lewis and Blocker states that Lewis was to convey to Blocker a twenty-five percent interest in leases it acquired from GLN, in exchange for which Blocker agreed to pay Lewis the following amounts: $364,129.57 for its interest in the initial leases; a percentage of the amount paid by Lewis to GLN for other interests; a percentage of Lewis’s out-of-pocket ex*991penses; $2,500 per month towards Lewis’s overhead for seismic programs; and up to $250,000 towards the reconnaissance seismic program. It also contains the following provisions:
2. Reconnaissance Seismic Program.
Lewis will conduct a reconnaissance seismic program in the area of mutual interest, the extent and nature of such program to be determined by Lewis. All data and all interpretations made by Lewis will be available to you [Blocker] and you will make available to Lewis all interpretations made by you or at your direction.
3. Detailed Seismic Investigation.
After completion of the reconnaissance seismic program, Lewis will, after consultation with you, undertake a detailed seismic investigation to establish drilling prospects, if, and to the extent indicated by, the reconnaissance program.
4. Drilling Program.
Thereafter, Lewis will, to the extent indicated, undertake and manage a drilling program as contemplated by the Lewis-GLN Agreement.
* # * # * #
8. Detailed Seismic Contribution.
Blocker will contribute to Lewis 25% of its out-of-pocket costs incurred for the detailed seismic survey, if you elect to Participate in such a program.
Paragraph eleven further states that Blocker’s rights under the agreement “shall be governed by the Lewis-GLN Agreement.” The Lewis-GLN agreement provides in pertinent part as follows:
8. In connection with the drilling of any well upon lands covered by the Leases, Lewis agrees to furnish, or cause to be furnished, to GLN the following information:
(a) A copy of the permit to drill, the surveyor’s location plat, and all reports and forms filed with all regulatory authorities relating to the drilling, testing, completing, or abandoning of such wells; and
(b) To furnish by mail, or telephone if requested, daily drilling reports and full information relative to the drilling progress of each such well; and
(c) To permit GLN’s employees, agents or representatives to have access to the derrick floor at all times, at their sole risk, and to furnish complete information relative to all cuttings and cores taken and drill stem tests or other tests made; and
(d) Upon request, to save samples of all cuttings and cores marked with the depth from which they came and to deliver same to representatives of GLN at the well (this provision shall create no obligation to make cuttings or to take cores); and
(e) To furnish evidence that the operator has adequately tested each prospective productive formation and all showings of oil and gas which may be encountered which would be tested by a reasonable and prudent operator, and otherwise, to make bonafide efforts to complete each such well as a well capable of producing oil and/or gas in paying quantities; and
(f) To notify the representatives of GLN reasonably in advance so that it can have representatives present when any logging, coring or drill stem test or production test is to be made; and
(g) Upon completion of each well, to furnish two (2) copies of all logs, core records, analysis, drill stem and production tests as satisfactory evidence of the depth drilled.
♦ # # * * *
In addition each party shall promptly furnish to the other all seismic data acquired by it in the area of mutual interest, as defined below.
Although the contractual provisions of the Lewis-Blocker agreement do not expressly set forth Blocker’s rights against Lewis in the event of Lewis’s noncompliance, there are at least sufficient ambiguities in the agreement to justify the admission of extrinsic evidence on the meaning of various contractual provisions as they relate to Blocker’s right of control. See Pepcol Manufacturing Co. v. Denver Union Corp., 687 P.2d 1310 (Colo.1984); Union Rural Electric Ass’n v. Public Utili*992ties Comm’n, 661 P.2d 247 (Colo.1983). For example, it is not clear whether the phrases “after consultation with you [Blocker]” in paragraph three and “to the extent indicated” in paragraph four mean that Blocker had an actual veto power over Lewis’s decisions in regard to these matters, or whether — as suggested by paragraph eight — Lewis could in fact proceed with the detailed seismic survey over Blocker’s objection, but would then be obligated to look elsewhere to fund the survey. Moreover, it is at least arguable that the Lewis-GLN agreement contemplated that GLN (and thus Blocker) was to have some right to participate in the control or management of Lewis’s exploration activities.
Summary judgment is proper only where there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. C.R.C.P. 56(c). The fact that both parties relied on the express terms of the agreement in their respective motions for summary judgment is no reason, in my view, to disregard the ambiguous nature of the contractual provisions on the critical issue of Blocker’s right to participate in the management or control of the exploration activities. Since the operative contractual language is ambiguous in regard to this issue, I would reverse the judgment and direct that the case be remanded to the court of appeals with directions to return the case to the trial court so that that court may receive evidence clarifying the ambiguities, and may then determine whether the contractual provisions gave Blocker a right of control sufficient to satisfy the element of joint operation.