Court Opinion

ID: 158882
Source: CourtListenerOpinion
Date Created: 2010-08-14 05:30:22+00
Date Added: 2024-06-11T08:06:41.763930
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                      UNITED STATES COURT OF APPEALS
                                                                         NOV 26 1999
                                    TENTH CIRCUIT
                                                                      PATRICK FISHER
                                                                             Clerk

 EAST TEXAS SEISMIC DATA,
 LLC., an Oklahoma Company;
 CAMPAC EIGHTY-TWO LIMITED
 PARTNERSHIP, an Oklahoma limited
 partnership,

                Plaintiffs - Appellants,                No. 98-5181
           v.                                        (N.D. Oklahoma)
 SEITEL DATA, INC., a corporation;               (D.C. No. CV-97-981-BU)
 FIRST SEISMIC CORPORATION, a
 corporation,

                Defendants,

 and

 SANTA FE ENERGY RESOURCES,
 INC., a corporation; ICM GLOBAL,
 INC., a corporation.

                Defendants - Appellees.

                              ORDER AND JUDGMENT        *

       This order and judgment is not binding precedent, except under the
       *

doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Before BALDOCK , REAVLEY ** , and BRORBY , Circuit Judges.

      East Texas Seismic Data, LLC (“East Texas”) and Capmac Eighty-Two

Limited Partnership (“Capmac”) appeal the summary judgment granted to IMC

Global, Inc. (“IMC”) and Santa Fe Energy Resources, Inc. (“Santa Fe”). Because

the contract is unambiguous and explicitly grants each venturer the right to sell its

interest in seismic data after two years, we affirm.

      Capmac is the successor to McKenzie Management, Inc. (“McKenzie”).

Santa Fe is the successor to Adobe Resources, Inc. (“Adobe”). IMC is the

successor to FMP Operating Company (“FMP”). McKenzie, Adobe and FMP

were members of a joint venture which obtained the seismic data at issue. East

Texas purchased one-half of McKenzie’s interest in the seismic data prior to

McKenzie’s succession by Capmac. More than 2 years after the termination of

the venture, and prior to succession by Santa Fe and IMP, Adobe and FMP

transferred their interest in the seismic data to First Seismic Corporation (“First

Seismic”).

      The ownership and disposition of the seismic data is the subject of

contractual terms contained in the joint venture agreement between McKenzie,

Adobe and FMP. The relevant portion of section 5.1 of the agreement provides:

      **
        Honorable Thomas M. Reavley, United States Senior Circuit Judge for the
Fifth Circuit, sitting by designation.

                                         -2-
             All [seismic data] acquired in the Venture Program (the
      “Data”) will be kept in the custody of Adobe or Consultant but shall
      be owned by the Venturers. ... The right to sell all or trade any part
      of the Data shall be vested exclusively in the Venturers in proportion
      to their Participation Interest in the Prospect or Prospects to which
      the Data relates or, if not relatable to specific Prospects, shall be
      allocated to the Venturers in accordance with their Participation
      Interest in the Venture Program. However, during the term of such
      Venture Program and for two (2) years thereafter no such sale or
      trade shall be made without unanimous approval by the Venturers. ...
      The Venturers hereby agree to execute a separate agreement within
      one hundred twenty (120) days from the execution of this Agreement
      for the disposition of seismic data acquired or to be acquired
      hereunder.

The separate agreement referred to in section 5.1 was never completed.

      Appellants seek damages for conversion and an accounting of proceeds

from the sale to First Seismic, claiming that the data was partnership property

subject to fiduciary duties. In addition, appellants contend that the agreement

must be construed according to industry standards which would impose additional

obligations on appellees with regard to the data.

      The agreement states that the seismic data will be owned by the venturers

and that the right to sell all or trade any part of the seismic data will be

exclusively vested in the venturers. Only an unreasonable construction of the

language of the agreement would render the data partnership property. The

agreement vests exclusive rights to sell the data in the venturers, indicating that

the agreement confers this right on the venturers individually rather than on the

partnership. The terms “right to sell all or trade any part” indicates that the

                                           -3-
ownership rights of each partner attach to the data itself, rather than to an interest

in the partnership. The two year limitation on the unanimity requirement clearly

implies that once the two year period is over, the right of sale is unrestricted.

This agreement is unambiguous and grants each venturer the unrestricted right to

sell its proportionate interest in the data.

       Appellants argue that the agreement must be construed according to

extrinsic evidence of industry custom, citing to     Oxley v. General Atlantic

Resources, Inc., 936 P.2d 943 (Okla. 1997) and Heiman v. ARCO, 891 P.2d 1252

(Okla. 1995). In those cases the court held that the agreement was silent or

ambiguous with regard to the dispute and applied industry custom to construe the

agreement. Appellants argue that the failure to complete the additional agreement

referred to in section 5.1 renders the joint venture agreement ambiguous,

requiring the court to construe the agreement according to industry custom. The

joint venture agreement is neither silent nor ambiguous. In the absence of an

additional agreement concerning the disposition of the data, the agreement

explicitly grants each venturer the right to sell its interest in the data. There is no

basis for considering extrinsic evidence of industry custom to construe an

explicit and unambiguous agreement.       Jackson Materials, Co. v. Grand River Dam

Authority, 170 P.2d 552, 557 (Okla. 1945)

                                               -4-
        Appellants also cite to   R ESTATEMENT (S ECOND ) OF C ONTRACTS §221 (1979)

as authority that the agreement should incorporate industry standards. Even if the

agreement were ambiguous, the order of preference for construction of contracts

places industry custom last after course of performance and course of dealing.

R ESTATEMENT (S ECOND ) OF C ONTRACTS §203 (1979). If extrinsic evidence were

admissible to construe this agreement, the appellant’s unilateral interpretation

would be given greater weight than industry standard. Appellants have also sold

a proportionate interest in the data, indicating that, contrary to their contention

regarding industry custom, appellants interpret this contract to grant a right of

sale.

        Appellants contend that section 7.2 of the agreement restricts the right of

sale granted in section 5.1. Section 7.2 reads:

              Anything to the contrary herein notwithstanding, those
        provisions of this Agreement which govern rights and obligations
        accruing hereunder prior to termination, or govern the rights and
        obligations between and among the parties beyond the term of the
        Venture Program or as to properties in the Area of Interest, shall
        continue to be effective and survive the termination of this
        Agreement, or the withdrawal of any Venturer therefrom.

Appellants argue that this provision modifies the rights of the venturers to sell

their interest in the data. The intended effect of this provision is not patently

obvious because it is drafted in vague and general terms. Because the terms of

section 5.1 are specific and exact, such terms should be given greater weight than

                                            -5-
the general language found in section 7.2.         R ESTATEMENT (S ECOND ) OF

C ONTRACTS §203 (1979). Furthermore, appellants raised this issue for the first

time in this appeal and did not address the effect of section 7.2 in the district

court.

         AFFIRMED.

                                                    ENTERED FOR THE COURT

                                                    Thomas M. Reavley
                                                    Senior Circuit Judge

                                             -6-