East TX Seismic Data v. Seitel Data, Inc. ( 1999 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
NOV 26 1999
TENTH CIRCUIT
PATRICK FISHER
Clerk
EAST TEXAS SEISMIC DATA,
LLC., an Oklahoma Company;
CAMPAC EIGHTY-TWO LIMITED
PARTNERSHIP, an Oklahoma limited
partnership,
Plaintiffs - Appellants, No. 98-5181
v. (N.D. Oklahoma)
SEITEL DATA, INC., a corporation; (D.C. No. CV-97-981-BU)
FIRST SEISMIC CORPORATION, a
corporation,
Defendants,
and
SANTA FE ENERGY RESOURCES,
INC., a corporation; ICM GLOBAL,
INC., a corporation.
Defendants - Appellees.
ORDER AND JUDGMENT *
This order and judgment is not binding precedent, except under the
*
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Before BALDOCK , REAVLEY ** , and BRORBY , Circuit Judges.
East Texas Seismic Data, LLC (“East Texas”) and Capmac Eighty-Two
Limited Partnership (“Capmac”) appeal the summary judgment granted to IMC
Global, Inc. (“IMC”) and Santa Fe Energy Resources, Inc. (“Santa Fe”). Because
the contract is unambiguous and explicitly grants each venturer the right to sell its
interest in seismic data after two years, we affirm.
Capmac is the successor to McKenzie Management, Inc. (“McKenzie”).
Santa Fe is the successor to Adobe Resources, Inc. (“Adobe”). IMC is the
successor to FMP Operating Company (“FMP”). McKenzie, Adobe and FMP
were members of a joint venture which obtained the seismic data at issue. East
Texas purchased one-half of McKenzie’s interest in the seismic data prior to
McKenzie’s succession by Capmac. More than 2 years after the termination of
the venture, and prior to succession by Santa Fe and IMP, Adobe and FMP
transferred their interest in the seismic data to First Seismic Corporation (“First
Seismic”).
The ownership and disposition of the seismic data is the subject of
contractual terms contained in the joint venture agreement between McKenzie,
Adobe and FMP. The relevant portion of section 5.1 of the agreement provides:
**
Honorable Thomas M. Reavley, United States Senior Circuit Judge for the
Fifth Circuit, sitting by designation.
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All [seismic data] acquired in the Venture Program (the
“Data”) will be kept in the custody of Adobe or Consultant but shall
be owned by the Venturers. ... The right to sell all or trade any part
of the Data shall be vested exclusively in the Venturers in proportion
to their Participation Interest in the Prospect or Prospects to which
the Data relates or, if not relatable to specific Prospects, shall be
allocated to the Venturers in accordance with their Participation
Interest in the Venture Program. However, during the term of such
Venture Program and for two (2) years thereafter no such sale or
trade shall be made without unanimous approval by the Venturers. ...
The Venturers hereby agree to execute a separate agreement within
one hundred twenty (120) days from the execution of this Agreement
for the disposition of seismic data acquired or to be acquired
hereunder.
The separate agreement referred to in section 5.1 was never completed.
Appellants seek damages for conversion and an accounting of proceeds
from the sale to First Seismic, claiming that the data was partnership property
subject to fiduciary duties. In addition, appellants contend that the agreement
must be construed according to industry standards which would impose additional
obligations on appellees with regard to the data.
The agreement states that the seismic data will be owned by the venturers
and that the right to sell all or trade any part of the seismic data will be
exclusively vested in the venturers. Only an unreasonable construction of the
language of the agreement would render the data partnership property. The
agreement vests exclusive rights to sell the data in the venturers, indicating that
the agreement confers this right on the venturers individually rather than on the
partnership. The terms “right to sell all or trade any part” indicates that the
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ownership rights of each partner attach to the data itself, rather than to an interest
in the partnership. The two year limitation on the unanimity requirement clearly
implies that once the two year period is over, the right of sale is unrestricted.
This agreement is unambiguous and grants each venturer the unrestricted right to
sell its proportionate interest in the data.
Appellants argue that the agreement must be construed according to
extrinsic evidence of industry custom, citing to Oxley v. General Atlantic
Resources, Inc., 936 P.2d 943 (Okla. 1997) and Heiman v. ARCO, 891 P.2d 1252
(Okla. 1995). In those cases the court held that the agreement was silent or
ambiguous with regard to the dispute and applied industry custom to construe the
agreement. Appellants argue that the failure to complete the additional agreement
referred to in section 5.1 renders the joint venture agreement ambiguous,
requiring the court to construe the agreement according to industry custom. The
joint venture agreement is neither silent nor ambiguous. In the absence of an
additional agreement concerning the disposition of the data, the agreement
explicitly grants each venturer the right to sell its interest in the data. There is no
basis for considering extrinsic evidence of industry custom to construe an
explicit and unambiguous agreement. Jackson Materials, Co. v. Grand River Dam
Authority, 170 P.2d 552, 557 (Okla. 1945)
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Appellants also cite to R ESTATEMENT (S ECOND ) OF C ONTRACTS §221 (1979)
as authority that the agreement should incorporate industry standards. Even if the
agreement were ambiguous, the order of preference for construction of contracts
places industry custom last after course of performance and course of dealing.
R ESTATEMENT (S ECOND ) OF C ONTRACTS §203 (1979). If extrinsic evidence were
admissible to construe this agreement, the appellant’s unilateral interpretation
would be given greater weight than industry standard. Appellants have also sold
a proportionate interest in the data, indicating that, contrary to their contention
regarding industry custom, appellants interpret this contract to grant a right of
sale.
Appellants contend that section 7.2 of the agreement restricts the right of
sale granted in section 5.1. Section 7.2 reads:
Anything to the contrary herein notwithstanding, those
provisions of this Agreement which govern rights and obligations
accruing hereunder prior to termination, or govern the rights and
obligations between and among the parties beyond the term of the
Venture Program or as to properties in the Area of Interest, shall
continue to be effective and survive the termination of this
Agreement, or the withdrawal of any Venturer therefrom.
Appellants argue that this provision modifies the rights of the venturers to sell
their interest in the data. The intended effect of this provision is not patently
obvious because it is drafted in vague and general terms. Because the terms of
section 5.1 are specific and exact, such terms should be given greater weight than
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the general language found in section 7.2. R ESTATEMENT (S ECOND ) OF
C ONTRACTS §203 (1979). Furthermore, appellants raised this issue for the first
time in this appeal and did not address the effect of section 7.2 in the district
court.
AFFIRMED.
ENTERED FOR THE COURT
Thomas M. Reavley
Senior Circuit Judge
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