Schulte v. Apache Corp.

949 P.2d 291, 1995 WL 406539
CourtSupreme Court of Oklahoma
DecidedMarch 17, 1998
Docket81614
StatusPublished
Cited by7 cases

This text of 949 P.2d 291 (Schulte v. Apache Corp.) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schulte v. Apache Corp., 949 P.2d 291, 1995 WL 406539 (Okla. 1998).

Opinion

949 P.2d 291 (1995)

J.F. SCHULTE and Ethelyn Shadid, Appellees.
v.
APACHE CORPORATION, APCO-Program 1980-I, APC Operating Partnership, and Apache Petroleum Limited Partnership 1980-I, Appellants.

No. 81614.

Supreme Court of Oklahoma.

July 11, 1995.
As Corrected November 18, 1997.
As Amended on Rehearing November 18, 1977.
Dissenting Opinion on Rehearing November 18, 1997.
As Corrected March 17, 1998.

Fellers, Snider, Blankenship, Bailey & Tippens, by Terry W. Tippens and Andrew L. Walding, Oklahoma City, for appellees.

Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., by H.B. Watson, Jr. and Sharon Taylor Thomas, Oklahoma City, for appellants.

*293 HODGES, Justice.

I. Issues

The issues in this appeal are (1) whether the trial court violated the mandate of this Court and the law of the case, (2) what is the proper standard of review, (3) whether the plaintiffs met their burden of proof, (4) whether there was competent evidence to support the verdict, and (5) whether the award of attorney fees was appropriate and, if so, whether the trial court erred in the amount awarded. We find the plaintiffs did not meet their burden of proof and the verdict was not supported by competent evidence. Thus, the judgment of the trial court is reversed, and we need not address the other issues.

II. Procedural History

This is the second appeal. In the first appeal, this Court held the trial court erred in granting summary judgment to Apache in that there was a dispute of material facts on the issues of a mining partnership and constructive fraud. Schulte v. Apache Corp., 814 P.2d 469 (Okla.1991) (Schulte I). Much of the present appeal centers around the meaning of this Court's opinion in Schulte I.

III. Facts

The dispute in this case centers around 1,294 acres "earned" by the Mikles No. 1-10 Well (Mikles Well or well). The Mikles Well is located in section 10-10N-22W, Beckman *294 County, Oklahoma. In October 1979, Apache filed an application with the Oklahoma Corporation Commission (Commission) requesting that the oil and gas interest in section 10 be force pooled, including the interests of Fred Shadid and the plaintiffs. Fred Shadid is the husband of Ethelyn Shadid and the father-in-law of J.F. Schulte (plaintiffs). Fred Shadid is a sophisticated oil and gas businessman who has participated in numerous wells for many years. It is uncontested Fred Shadid acted as an agent of the plaintiffs.

In letters of October 29, 1979, and November 2, 1979, Fred Shadid informed Apache (defendant) in writing that he had assigned part of his interest in section 10 to the plaintiffs. In the same letters, Fred Shadid informed Apache that the plaintiffs intended to participate in the well. Thereafter, on November 8, 1979, Fred Shadid wrote A.J. Mason, an Apache landman, and asked the starting date of the well and whether Apache was "getting any contributions from offset leaseholds." In a handwritten note dated November 26, 1979, Mason replied that there were several farmouts involving acreage both within and outside section 10. There was no mention of the plaintiffs sharing in the earned acreage in either of Fred Shadid's letters or of Apache's.

On November 20, 1979, the Commission issued a forced pooling order. On January 23 and February 5, 1980, the Commission issued two correction orders to correct scrivener's errors. All the orders polled the interests in section 10, including the plaintiffs. All the orders stated there were earned acres both inside and outside section 10. In 1985, the Commission issued a clarification which determined that the pooling order did not entitle the participating interest owners to any of the earned acreage.

On November 26, 1979, after the Commission issued its first order, Fred Shadid wrote Apache that he had received the pooling order and elected to take the bonus for his acres and restated the plaintiffs intended to participate in the well. On November 28, 1979, Apache acknowledged the letter and restated its understanding of the election— Ethelyn Shadid would participate with her.9722 acres and Jerome Schulte would participate with his 1.944 acres. Neither Fred Shadid's nor Apache's letters mentioned earned acres or that the plaintiffs would be entitled to a share of the earned acres for participating in the production.

On November 28, 1979, Ethelyn Shadid wrote Apache that she had received a copy of the November pooling order and reiterated that she elected to participate in the well. On December 3, 1979, J.F. Schulte wrote Apache and reiterated that he intended to participate in the well. Neither of these letters mentioned the earned acreage. Fred Shadid testified that he sought to confirm the number of earned acres in a telephone conversation with Mason. Fred Shadid further testified Mason responded the amount would be worked out once the well was completed. Fred Shadid did not question whether the plaintiffs would be entitled to a share of the earned acreage. Mason does not remember having this conversation.

In March 1980, before Apache began drilling the well, it sent a joint operating agreement (JOA) to all the interest owners who were participating in the well. Apache had deleted two sections from the standard JOA. One of the deleted sections would have given the owners in the well preferential rights to buy any other party's interest that was being sold. The other deleted section provided any cash or acreage contribution would be assigned proportionately to the drilling parties. Neither of the plaintiffs signed the JOA although all the other parties who participated in the drilling of the well signed into the JOA.

Apache included the plaintiffs on 1979 Merritt Prospect Partnership tax returns. The assets of the partnership included the acreage earned by the Mikles Well. Copies of both these federal and state tax returns were mailed to the plaintiffs. The plaintiffs were not included in the 1980 returns. Plaintiffs did not rely on the 1979 return but treated their expenses as individual expenses and revenues on their tax returns.

The Mikles Well was spudded in March 1980 and in the next November was completed as a commercial producer. Plaintiffs paid *295 well costs attributable only to their acreage but did not pay any costs attributable to the earned acreage. Plaintiffs were paid income based on their ownership of 2.9166 acres in the unit.

Plaintiffs first demanded assignment of their pro rata share of the earned acreage after the well was spudded. When Apache refused, the plaintiffs filed this lawsuit on March 11, 1981. Plaintiffs alleged the pooling order and their election to participate gave them an interest in the earned acres. They also alleged a mining partnership and constructive fraud. As damages, plaintiffs sought a constructive trust, a quite title decree, an accounting, and damages.

Both parties filed motions for partial summary adjudication. The district court ruled in favor of Apache and granted Apache summary judgment. The plaintiffs appealed. This Court addressed this appeal in Schulte I, 814 P.2d at 469. This Court held the pooling order did not entitle the plaintiffs to an interest in the earned acres nor did it create a cotenancy in the well. Further, the parties did not present sufficient evidentiary materials to determine whether the acts of Apache constituted constructive fraud or whether there was a mining partnership.

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949 P.2d 291, 1995 WL 406539, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schulte-v-apache-corp-okla-1998.