Court Opinion

ID: 5160440
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:42:46.003969+00
Date Added: 2024-06-11T08:25:35.767197
License: Public Domain

BABCOCK, Judge,
dissenting.
I respectfully dissent.
The majority concludes that the controlling factor in determining whether a mining partnership exists is the degree of active exercise of an existent contractual right of participation in control or management of the venture. In my view, the existence of the right is sufficient as a matter of law. See Ayco Development Corp. v. G.E.T. Service Co., 616 S.W.2d 184 (Tex.1981); see also Shell Oil Co. v. Prestridge, 249 F.2d 413 (9th Cir.1957). The active exercise of that right may be probative of the parties’ intent to form a mining partnership, but it is not a prerequisite therefor as a matter of law.
The majority justifies its rule by reasoning that it is difficult for a nonoperating working interest owner who is otherwise also engaged in the oil and gas business and thus is in a position to prescribe the direction of, or to participate in, operating decisions to be sufficiently disengaged from a venture to avoid the appearance of being a minor partner. I believe this reasoning misses the mark. The parties to mining ventures are free to limit their liability by the express terms thereof. One 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 in fact or not.
Here, the agreement provided in part that: (1) Lewis was to conduct a reconnaissance seismic program, the extent and nature of which was to be established by Lewis and Roxy; (2) all interpretations of the seismic data made by any of the parties to the agreement (Lewis, Blocker, or Roxy) was made available to the other parties; (3) upon completion of the reconnaissance seismic program and after consultation with Blocker and Roxy, Lewis would then undertake a detailed seismic investigation to establish drilling prospects; (4) Lewis was, to the extent indicated by the data interpretations and after consultation with Blocker and Roxy, to undertake and manage a drilling program under the Lewis-GLN agreement; (5) in addition to their initial payments for the acquisition in the interests in the Michigan leases, Blocker and Roxy agreed to contribute varying *44amounts to the reconnaissance, seismic, and detailed seismic program; (6) Blocker and Roxy agreed to pay Lewis for its overhead costs, $2,500 and $5,000 per month respectively; and (7) Roxy and Blocker had full access to regulatory reports, daily drill-ings, logs, core samples, and to the derek floor.
I would hold the agreement to be ambiguous regarding the issue of right of involvement or participation in the control or management of this venture. See Pepcol Manufacturing Co. v. Denver Union Corp., 687 P.2d 1310 (Colo.1984). Thus, extrinsic evidence is admissible and must be considered by the trial court in order to determine the mutual intent of the parties to the agreement. Union Rural Electric Ass’n v. Public Utilities Commission, 661 P.2d 247 (Colo.1983). This extrinsic evidence may include any pertinent circumstances attendant to the transaction, including the conduct of the parties under the agreement. Nahring v. Denver, 174 Colo. 548, 484 P.2d 1235 (1971). Therefore, there are genuine issues of material fact which exist as to' the element of “joint operations” and summary judgment was improper.