Ruby Drilling Co., Inc. v. Duncan Oil Co.

2002 WY 85, 47 P.3d 964, 154 Oil & Gas Rep. 460, 2002 Wyo. LEXIS 90, 2002 WL 1189032
CourtWyoming Supreme Court
DecidedJune 5, 2002
Docket01-72
StatusPublished
Cited by11 cases

This text of 2002 WY 85 (Ruby Drilling Co., Inc. v. Duncan Oil Co.) is published on Counsel Stack Legal Research, covering Wyoming Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ruby Drilling Co., Inc. v. Duncan Oil Co., 2002 WY 85, 47 P.3d 964, 154 Oil & Gas Rep. 460, 2002 Wyo. LEXIS 90, 2002 WL 1189032 (Wyo. 2002).

Opinion

KITE, Justice.

[¶ 1] Dunean Oil Company, Inc. (Duncan) paid Ruby Drilling Co., Inc. (Ruby) $23 per foot in advance to drill a 6,000-foot oil well consistent with the contract Ruby drafted. *966 Ruby drilled the hole in such a manner that it deviated from vertical so much it was unusable. Duncan hired specialized contractors to correct the deviation and complete the well. Thereafter, Ruby sued Duncan for breach of contract claiming additional money was owed because the contract terms changed from per foot to per day cost when Duncan hired the other contractors. Duncan for the costs to complete the well. After a bench trial, the trial court held Ruby breached the contract and Duncan was entitled damages. We affirm.

ISSUES

[¶ 2] We rearticulate the issues in the following manner:

1. Did the trial court properly construe the written drilling agreement to be a footage contract with the specifications based on the customary industry usage of the terms?
2. Did the trial court improperly limit Ruby's expert witness from testifying regarding changes to the Ruby drilling contract?
3. Was the trial court's decision contrary to the clear weight of the evidence?
4. Did the trial court err as a matter of law and contrary to the clear weight of the evidence in determining damages?

FACTS

[¶ 3] Ruby had been drilling water and oil wells for fifty-six years. Duncan had used Ruby's services in the past to drill several shallow coalbed methane water wells. In the fall of 1997, Duncan asked Ruby whether, in the event the company had the proper equipment, it would be interested in bidding on a 6,000-foot oil well to be drilled in the Kaycee area. Ruby advised Duncan that it had a suitable rig and would like to bid the contract. Ruby also represented it had drilled a number of water wells around Kaycee and was familiar with the area but failed to tell Duncan it had never before drilled a well as deep as 6,000 feet.

[¶ 4] Ruby proposed to drill the well for $23 per foot on a footage contract with additional miscellaneous costs including per diem for mobilization/demobilization and hourly rates for specified service work. Duncan accepted the proposal and requested Ruby send a contract with an invoice to expedite the project and allow the cost to fall within Duncan's 1997 budget. On December 29, 1997, Duncan signed the contract and sent Ruby a check for $141,200 as an advance payment.

[¶ 5] On January 1, 1998, Ruby moved a drilling rig to the well location and commenced work. On January 14, 1998, at approximately 510 feet, a straight hole survey showed five degrees deviation from vertical. A straight hole survey relates the degree of deviation from vertical but does not reflect the direction of the deviation. The industry standard provides deviation should not exceed one degree per thousand feet with a maximum deviation at total depth of not more than five to six degrees. Ruby advised Dunean that the reading was probably a mistake and continued to drill. Ruby conducted three more surveys as the well was drilled deeper which indicated increased deviation. By January 16, 1998, the well reached 1,780 feet, and the survey reflected cight degrees' deviation. Had drilling continued in this manner, the bottom hole would have been nearly 1,078 feet from the surface location and on another lease. Duncan told Ruby to stop drilling until Baker Hughes Inteq, a directional survey company, could evaluate the deviation. Ruby did not stop drilling until it reached 2,200 feet. In order to correct the severe deviation, Baker Hughes recommended the well be plugged back to the surface pipe, the well bore be filled with cement, and directional equipment be used to drill vertically into the formation.

[¶ 6] Duncan offered Ruby an opportunity to correct the deviation, but Ruby said all it could do was drill in the same manner that had led to the deviation in the first instance. Duncan hired Baker Hughes to correct the deviation, and Ruby remained on site and assisted. The project continued to experience difficulties and delays caused by Ruby's inadequate equipment and equipment failures. Baker Hughes left the site when the well reached approximately 5,081 feet because the deviation had been resolved, and *967 Ruby completed the well by conventional drilling to 5,950 feet. Ruby had anticipated the project would take ten to twelve days, but, due to the various problems, it took forty-five days.

[¶ 7] After completion in February of 1998, the parties had no additional contact until April of 1998 when Ruby sent two invoices to Duncan. One invoice was computed on a straight day work basis for forty-five days, totaling $114,290 ($255,490 less the original $141,200 advance payment), and one was computed on a combined footage/day work basis for thirty-seven days, totaling $119,003 ($260,203 less the original $141,200 advance payment) to provide Duncan the option of paying for either straight day work or combined footage/day work. Duncan refused to pay and advised Ruby the latter owed Duncan for the expenses incurred to correct the well deviation.

[¶ 8] In July 1999, Ruby filed suit against Duncan for breach of contract and damages of $119,003 plus interest at eighteen percent per annum. Duncan answered and counterclaimed for breach of contract and damages of $181,811.01. Subsequent to a bench trial, the court found Ruby had breached the footage contract by failing to drill the well in a workmanlike manner, the footage contract was not converted by the parties' actions into a day work contract, and Duncan was entitled to a judgment of $155,211 for the costs it incurred to correct and complete the well. Ruby appealed.

STANDARD OF REVIEW

[¶ 9] We are required to review the trial court's construction of the drilling contract and its factual determination that Ruby breached the terms of that contract.

"When a trial court in a bench trial makes express findings of fact and conclusions of law, we review the factual determinations under a clearly erroncous standard and the legal conclusions de novo." Rennard v. Vollmar, 977 P.2d 1277, 1279 (Wyo.1999). This court does not weigh the evidence de novo; therefore, findings may not be set aside because we would have reached a different result. Moreover, the appellant bears the burden of persuading the appellate court that the finding is erroneous.

Schlesinger v. Woodcock, 2001 WY 120, ¶ 13, 35 P.3d 1232, ¶ 13 (Wyo.2001) (some citations omitted); see also Polo Ranch Company v. City of Cheyenne, 969 P.2d 132, 136 (Wyo.1998).

Normally, the construction and interpretation of an unambiguous contract is a matter for the court to address as a question of law. Garcia v. UniWyo Federal Credit Union, 920 P.2d 642, 645 (Wyo.1996); Feather v. State Farm Fire and Cas., 872 P.2d 1177, 1180 (Wyo.1994); Mobil Coal Producing, Inc. v.

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2002 WY 85, 47 P.3d 964, 154 Oil & Gas Rep. 460, 2002 Wyo. LEXIS 90, 2002 WL 1189032, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ruby-drilling-co-inc-v-duncan-oil-co-wyo-2002.