Wasatch Oil & Gas, L.L.C. v. Reott

2007 UT App 223, 163 P.3d 713, 2007 Utah App. LEXIS 221, 2007 WL 1775009
CourtCourt of Appeals of Utah
DecidedJune 21, 2007
DocketCase No. 20060562-CA
StatusPublished
Cited by7 cases

This text of 2007 UT App 223 (Wasatch Oil & Gas, L.L.C. v. Reott) is published on Counsel Stack Legal Research, covering Court of Appeals of Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wasatch Oil & Gas, L.L.C. v. Reott, 2007 UT App 223, 163 P.3d 713, 2007 Utah App. LEXIS 221, 2007 WL 1775009 (Utah Ct. App. 2007).

Opinion

OPINION (For Official Publication)

BILLINGS, Judge:

T1 Plaintiff Wasatch Oil & Gas, LLC. (Wasatch) appeals the trial court's grant of partial summary judgment to Defendant Ed *715 ward A. Reott (Reott). 1 On appeal, Wasatch argues the trial court erred in concluding (1) that Reott had standing to challenge whether Wasatch was a lawful successor in interest, entitled to exercise redemption rights, and (2) that Wasatch was not a valid successor in interest because it had no legal or equitable title to the disputed property. We reverse the trial court's grant of partial summary judgment and remand for further proceedings.

BACKGROUND 2

{2 From approximately 1997 to 2000, Mission Energy, LLC. (Mission) was a Colorado limited liability company engaged in oil and gas business on federal and state land in Carbon and Duchesne Counties, Utah. Mission was governed by the Mission Operating Agreement (the MOA). According to the MOA, "[the right to operate the LLC shall be vested in the [mJanagers, acting by majority vote ... [and alt all times during the term of the LLC, there shall be at least four {mJanagers." The MOA requires that the identity of Mission's managers be disclosed in a schedule attached to the MOA. At the time of the MOA's execution in April 1997, the schedule attached to the MOA listed four managers: Fred G. Jager, William F. Muller, Charles B. Willard, and Justin C. Sutton. From 1997 to 2000, Sutton purportedly acted as Mission's sole manager. Sutton officially resigned as manager on October 1, 2000, and Jager acted as manager following Sutton's resignation.

13 In 1997, Mission was the record title owner of two mineral leasehold interests (ML 43541 & ML 48798), issued by the Utah School and Institutional Trust Lands Administration (SITLA), in Section 82, Township 12 South, Range 16 East (Section 82). These two leases collectively covered the entire 640 acres of Section 32. In 1997, Mission was also the owner of the Lavinia State # 1-82 well (the Well), located on forty acres wholly within Section 82 with a specified depth of 3398 feet. 3

[ 4 In February 1997, the Estate of Lavi-nia Reott made a bridge loan to Mission in the amount of $160,000. 4 Mission promised to repay the loan within three months. Mission did not repay the loan, and in May 1998, Reott filed suit against Mission in federal court to recover the unpaid loan. In December 1999, Reott obtained a judgment against Mission in the amount of $204,000, plus costs and post-judgment interest.

15 From February 1998 through May 2000, eleven mechanics' liens were recorded against Mission's Section 32 interests due to Mission's failure to pay for goods and services provided. Two companies, J-West Oilfield Services, Inc. (J-West) and Key Energy Services, Inc. (Key Energy), filed lawsuits against Mission to foreclose on their mechanics liens and, ultimately, obtained judgments and orders of foreclosure against Mission.

T 6 On June 21, 2000, Mission and Wasatch executed a letter agreement (the Agreement) that provided for, among other things, the transfer of Mission's mineral lease rights (ML 43541 & ML 483798) in Section 82 to Wasatch. 5 The Agreement assigned Wasatch all record title and working interest to the Section 82 leases, "except for the well-bore rights and attributable spacing unit relating to ... the [Well]." Thus, under the Agreement, Mission retained the Well, including the Well's corresponding mineral lease rights. In return, Wasatch agreed to assume the obligation to maintain the leases it received, reimburse Mission for monies *716 Mission had paid in rental payments on certain leases, and provide Mission with "a right to participate in a 'trade' relating to a drilling deal that Wasatch may be successful in putting together on the [lJeases." The Agreement was never recorded, and Wasatch did not end up putting together the drilling deal.

T7 On June 28, 2000, Sutton executed three mineral lease assignment forms (the Assignments) purporting to transfer all of Mission's Section 82 leasehold rights. Specifically, the Assignments, signed by Sutton on the line designated for "Lessee-Assign- or," assign the assignor's/lessee's rights to ML 48541 and ML 48798 to Wasatch. The Assignments do not expressly identify Sutton as the manager of Mission or as a person authorized to execute the Assignments on Mission's behalf. On the back of the Assignments, Wasatch agrees to "hereby accept[] the assignment from Mission."

T8 The MOA gives managers the authority to "execute on behalf of [Mission] without obligation on third party's part for inquiry as to actual authority or as to disposition of funds, all contracts, leases, notes, mortgages, deeds, evidences of indebtedness or security agreements" and to "enter into any and all other agreements on behalf of [Mission], with any other person or entity for any purpose." The MOA states, however, that

[alny document or instrument, of any and every nature, including without limitation, any agreement, contract, deed, promissory note, mortgage or deed of trust, security agreement, financing statement, pledge, assignment, bill of sale and certificate, which is intended to bind [Mission] or convey or encumber title to its real or personal property shall be valid and binding for all purposes if executed by any two of the [mlJanagers.

T 9 Following the Assignments, Mission retained only the Well. Although Wasatch admits it knew about Mission's debts to Key Energy and J-West prior to the issuance of the Assignments, Wasatch thought the J-West and Key Energy mechanies' liens only attached to the Well.

{10 The Assignments were not recorded with the Carbon County Recorder. On July 5, 2000, SITLA approved the Assignments. On August 22, 2000, Mission sent a letter to Wasatch stating:

I was informed that you, or your offices had been contacted by several individuals, specifically ... Reott, regarding potential filings of judgment against Mission.... There are several creditors with outstanding issues.... I must request that you advise your offices to refer any similar[ ] creditor, or legal calls directly to my attention. Further{,] given the confidentiality of the agreements entered into between our companies, I would request that no verbal, or written information be sent to anyone without prior permission from Mission.... 6

Wasatch claims that this letter ratifies the Assignments, signed by Sutton, and that "tlhe letter evidences that Mission was not a stranger to the deal and that Sutton did not act ultra vires or on his own behalf but as Mission's manager, when [he] effected the transfers to Wasatch." (Emphasis omitted.) On August 22, 2000, Sutton also wrote Reott, stating, among other things, that:

[The managers of Mission ... are doing everything possible to protect the assets of the company. We are working with several companies to develop a drilling program in hopes of receiving revenues to pay off creditors of the company.

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Bluebook (online)
2007 UT App 223, 163 P.3d 713, 2007 Utah App. LEXIS 221, 2007 WL 1775009, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wasatch-oil-gas-llc-v-reott-utahctapp-2007.