Seal v. Sealexco, Inc.

734 So. 2d 162, 98 La.App. 5 Cir. 548, 142 Oil & Gas Rep. 299, 1999 La. App. LEXIS 1207, 1999 WL 254563
CourtLouisiana Court of Appeal
DecidedApril 27, 1999
DocketNos. 98-CA-548, 98-CA-549
StatusPublished

This text of 734 So. 2d 162 (Seal v. Sealexco, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Seal v. Sealexco, Inc., 734 So. 2d 162, 98 La.App. 5 Cir. 548, 142 Oil & Gas Rep. 299, 1999 La. App. LEXIS 1207, 1999 WL 254563 (La. Ct. App. 1999).

Opinion

J^CHEHARDY, Judge.

In this matter, the trial court rendered judgment in favor of plaintiff on three different claims, and rendered judgment for defendants on their reconventional demand on a portion of one of their claims, to be applied as a credit against the judgment in the main demand. Defendants appeal. For the following reasons, we amend and affirm as amended.

On August 23, 1990, plaintiff, Warren Seal (hereafter Warren), filed suit against Sealexco, Inc. and brothers Ben and Jerry Seale (hereafter Sealexco, Ben and Jerry). In 1983, Warren, Ben and Jerry formed Sealexco, a Louisiana oil and gas company which acquired properties, sought investors for drilling expenses, drilled wells and split profits. Warren was president of Sealexco, Ben was secretary/treasurer and Jerry was vice-president.

After the parties had a “falling out” in 1986, Warren sold his interests in Sealexco to Ben and Jerry via a “stock redemption agreement.” Warren’s lawsuit, which was later consolidated with two other lawsuits from Iberia Parish between the same parties and concerning related issues, asserted claims for, inter alia, unjust enrichment, funds due on the stock redemption agreement, and a 1.062% “after casing point” (ACP) interest in a mineral lease. Ben, Jerry and Sealexco reconvened, alleging, inter alia, “corporate opportunities and/or monies wrongfully taken” by Warren, and a percentage of Sealexco’s liabilities due from Warren under the stock redemption agreement. Jerry was subsequently dismissed from [3the suits, and the matter proceeded to a bench trial on September 16, 18, and 19, 1996.1 The parties were allowed to file post-trial memoranda and [164]*164the trial court took the matter under submission.

On February 6, 1998, the trial court rendered judgment, in pertinent part, as follows: 1) in favor of Warren and against Ben and Sealexco in the amount of $126,-000.18 on the unjust enrichment claim; 2) in favor of Warren and against Sealexco in the amount of $124,828.77 pursuant to the stock redemption agreement; and 3), in favor of Warren and against Sealexco in the amount of $52,085.25 in the 1.062% ACP claim. The trial court also awarded $21,629.85 in favor of defendants on their reconventional demand, to act as a credit against the amounts owed by Sealexco to Warren. Ben and Sealexco appeal, asserting that the trial court erred in granting the three monetary awards to Warren on the main demand, and further erred in failing to make any award on their corporate opportunities and/or monies wrongfully taken claim and in failing to award the full amount of them claim against Warren on the percentage of Sealexco’s liabilities they asserted was due. For the following reasons, we amend and affirm as amended.

The first issue for us to review is whether the trial court erred in awarding damages to Warren for unjust enrichment. Warren testified at trial that his unjust enrichment claim arose out of payments he made for drilling and completion costs of various wells Sealexco operated in Iberia Parish (hereafter the Iberia Prospect). •

As explained by Warren, his duties at Sealexco included reviewing submissions from various companies holding rights to drill wells on parcels of land. Warren testified that he is a petroleum geologist with many years of experience in the oil and gas field, and he would analyze the geological data of a certain parcel and then make recommendations to the other officers of Sealexco as to whether or not it was a viable field for oil and gas exploration. Each officer would have the right of first refusal of buying a percentage of the operating | ¿interest in the proposed wells. Sealexco would then look for outside partners to purchase working interests in order to gain capital to drill and operate the wells.

Warren further testified that an individual who owned a working interest in the Iberia Prospect, Warren Knight, forfeited a portion of his interest when he failed to pay his full share of the expenses. Warren testified that after meeting with Ben, he believed that they reached an agreement that would allow Warren to purchase a portion of the Knight forfeited interest individually. Warren therefore paid the drilling, completion and lease operating costs of the various wells that were due from the portion of the Knight forfeited interest which he believed he owned, a total of approximately $120,000.00.

At some point thereafter, the individuals in Sealexco disagreed on who was entitled to the profits from the Knight forfeited interest, and the succeeding operator of the Iberia Prospect, Crescent Drilling and Exploration (hereafter Crescent), instituted a eoncursus proceeding in Iberia Parish to determine the true owner(s) of the proceeds. Crescent placed the amounts in dispute into the registry of the court.

As the relationship between Warren and Ben had soured, on March 7, 1986, the parties executed a stock redemption agreement, in which Warren divested himself of the 40% of Sealexco’s stock which he owned, and exchanged it for 40% of the corporation’s mineral assets it owned in various properties. Warren also agreed to pay 40% of Sealexco’s current liabilities. In conjunction therewith, a detailed audit was performed on Sealexco, to determine what its assets and liabilities were at the time. Thereafter, trial took place and a final judgment was rendered in the concur-sus proceeding in favor of Ben and Sealex-co, finding that they were entitled to the full amount of the Knight forfeited interest which had been placed into the registry of the court, a total of over $800,000.00.

In the instant proceeding, Warren testified at trial that because Ben and Sealexco [165]*165were allowed to withdraw the full amount of the funds placed into the registry of the court in the concursus proceeding, they were unjustly enriched, as Warren had paid approximately $120,000.00 of the drilling and completion costs of the Knight forfeited interest. In addition to his testimony, Warren offered the testimony of Bernard Hagstette and Richard Halprin, lstwo individuals who were involved in the operation, management and/or accounting of the Iberia Prospect for other companies. Each witness verified that Warren had made these expense prepayments on the disputed portion of the Knight forfeited interest. Halprin, the joint interest accountant for Crescent in the Iberia Prospect, further testified that no expense prepayments on the disputed interest were received from either Ben or Sealexco.

On appeal, defendants assert that the trial court judgment is erroneous as a matter of law because La. C.C. art. 2298 only provides a limited cause of action for unjust enrichment, and that it does not apply herein because Warren could have recovered the prepayments he made directly from the parties he paid (i.e., the operators of the Iberia Prospect). We disagree.

Testimony at trial was clear that Warren paid these costs so that the Iberia Prospect wells could be operated and profits could eventually result if the drilling was successful. It is illogical to argue that Warren could recover these funds directly from the operators (Sealexco and Crescent), as the operators did not retain the funds; the funds were used to operate the wells. The concursus proceeding found that the profits belonged to Ben and Sea-lexco. However, it is clear from the record that Ben and Sealexco did not pay the operating expenses which were necessary to generate the profits. They were therefore unjustly enriched by having the benefit of the profits without paying what was required for the profits to be realized.

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Related

CRESCENT DRILLING & DEV. v. Sealexco, Inc.
570 So. 2d 151 (Louisiana Court of Appeal, 1990)
Hezeau v. Pendleton Methodist Mem. Hosp.
715 So. 2d 756 (Louisiana Court of Appeal, 1998)

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734 So. 2d 162, 98 La.App. 5 Cir. 548, 142 Oil & Gas Rep. 299, 1999 La. App. LEXIS 1207, 1999 WL 254563, Counsel Stack Legal Research, https://law.counselstack.com/opinion/seal-v-sealexco-inc-lactapp-1999.