F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAR 21 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
FOR THE TENTH CIRCUIT
EVELYN L. SCRIVNER, a/k/a Evelyn
Lee Switzer; EVELYN LEE
SWITZER, Trustee Under the Evelyn
Lee Switzer Living Trust Dated
September 15, 1995; GARY K.
SWITZER; and LARRY W.
SWITZER,
Plaintiffs-Appellants/
Cross-Appellees,
v. Nos. 99-6308, 99-6336,
99-6442, 00-6027
SONAT EXPLORATION COMPANY,
a Delaware Corporation,
Defendant-Appellee/
Cross-Appellant.
______________________________
A-CROSS RANCH LTD, an
Oklahoma Limited Partnership,
Plaintiff-Appellee-Appellant,
Nos. 99-6338, 99-6443,
v. 00-6026
SONAT EXPLORATION COMPANY,
a Delaware Corporation,
Defendant-Appellant-Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. Nos. 97-CV-708-C and 97-CV-710-C)
Bradley D. Brickell of Mahaffey & Gore, P.C. (Andrew J. Waldron of Mahaffey
& Gore, P.C.; H. Blanton Brown and Douglas D. Wilguess of H. Blanton Brown
& Assoc., PC, with him on the briefs), Oklahoma City, Oklahoma, for Evelyn L.
Scrivner, et al., and A-Cross Ranch Ltd.
Gary W. Davis (Paul D. Trimble with him on the briefs) of Crowe & Dunlevy,
Oklahoma City, Oklahoma, for Sonat Exploration Company.
_________________________
Before LUCERO, McKAY, and MURPHY, Circuit Judges.
_________________________
McKAY, Circuit Judge.
_________________________
I. Background
Plaintiffs Evelyn L. Scrivner, Gary K. Switzer, and Larry W. Switzer
(“Scrivner”) obtained oil and gas leases on a number of properties in Oklahoma.
Later, Scrivner assigned those leases to others, including Defendant Sonat
Exploration Company. As consideration for these assignments, Scrivner reserved
an overriding royalty interest in said leases. On April 29, 1997, Scrivner brought
this diversity action under Oklahoma law against Defendant, asserting claims of:
(1) breach of covenant to market gas for the highest and best price; (2) equitable
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accounting; and (3) breach of fiduciary duty. Plaintiff A-Cross Ranch Ltd. (“A-
Cross”) sued Defendant in the same court and under the same theories, so the
district court consolidated the two suits for trial. On January 19, 1999, the day
trial was to begin on both suits, the parties reached a settlement. The Settlement
Agreement required Defendant to assign to Plaintiffs additional royalty interests
in “the leasehold estate created by the oil and gas leases executed by the Plaintiffs
and their predecessors in interest covering the lands described in Exhibits 1 and
2.” (App. at 44). In exchange, Plaintiffs moved to dismiss with prejudice the two
cases at bar and a separate suit pending against Defendant. Following the
dismissals, the district court retained its jurisdiction to monitor the parties’
consummation of the Agreement.
On February 15, 1999, Plaintiffs rejected Defendant’s attempted
assignments as noncompliant with the terms of the Agreement. When Defendant
refused to alter the assignments, Plaintiffs filed an Emergency Motion to Enforce
Settlement Agreement. Defendant responded with its Objection to Plaintiffs’
Motion to Enforce Settlement and Cross-Motion to Enforce Settlement Agreement
or, Alternatively, to Vacate. On July 20, 1999, the court denied Plaintiffs’
Motion, granted Defendant’s Cross-Motion without a hearing, and ordered
Defendant to proffer the assignments in the forms Defendant had prepared.
On November 18, 1999, the court granted Defendant’s Application for
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Attorney’s Fees under the provisions of the Agreement without specifying a final
amount. Plaintiffs appealed that Order on December 2, 1999. See Scrivner v.
Sonat Exploration Co. , No. 99-6442 (10th Cir. filed December 2, 1999); A-Cross
Ranch v. Sonat Exploration Co. , No. 99-6443 (10th Cir. filed December 2, 1999).
The court clarified the amount of attorney fees in an order filed on December 22,
1999, which Plaintiffs also appealed. See Scrivner v. Sonat Exploration Co. , No.
00-6027 (10th Cir. filed January 12, 2000); A-Cross Ranch v. Sonat Exploration
Co. , No. 00-6026 (10th Cir. filed January 12, 2000).
We made two jurisdictional inquiries. First, we asked whether our exercise
of jurisdiction was premature in light of the district court’s initially incomplete
attorney fee award. However, the court’s subsequent order clarifying the amount
allays any concerns regarding appealable finality. (App. at 391). We thus dismiss
appeals Nos. 99-6442 and 99-6443 and find jurisdiction under 28 U.S.C. § 1291
for Nos. 00-6026 and 00-6027. Second, we questioned our jurisdiction on the
merits, since the district court retained jurisdiction over the enforcement of the
Settlement Agreement. However, while the district court retained jurisdiction
over the original actions until the Agreement was consummated, the court finally
resolved all issues before it in its order of July 20, 1999, and thus our jurisdiction
is warranted under 12 U.S.C. § 1291 for appeals to that order.
On appeal, both Scrivner and A-Cross challenge the district court’s ruling
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on their Motion to Enforce and the award of attorney fees. However, because A-
Cross’s appeal on the Motion to Enforce was not timely, we will only consider
Scrivner’s appeal on the merits before evaluating the appeals of both Plaintiffs on
the attorney fee award. 1
Defendant appeals the court’s ruling on his Alternative
Motion to Vacate the Settlement Agreement, requesting rescission of the
Agreement only if we hold Scrivner’s interpretation to be correct.
II. Settlement Agreement Interpretation
Both Scrivner and Defendant concur that the Settlement Agreement
required Defendant to assign to Scrivner additional royalty interests in mineral
1
A-Cross contends in its response to the jurisdictional show cause order
that its notices of appeal are sufficient to be an appeal on the merits as well, since
the final order on the merits was entered on November 18, 1999. However, its
notice of appeal filed on December 2, 1999, clearly states that it is appealing the
attorney fee order. Thus, the notice is insufficient to appeal the merits. See F ED .
R. A PP . P. 3(c)(1)(B) (the notice of appeal must designate the judgment or order
being appealed); Cunico v. Pueblo Sch. Dist. No. 60 , 917 F.2d 431, 444 (10th Cir.
1990) (“Our appellate review is limited to final judgments or parts thereof that are
designated in the notice of appeal.”)
In its notice of appeal filed on January 12, 2000, A-Cross attempts to
incorporate the order on the merits entered on November 18. However, the final
order was actually entered on July 20, 1999. In any event, the notice is late.
Even if the time to appeal did not begin to run until November 18, the notice of
appeal was not filed until January 12. The pending attorney fee matter did not
toll the time to file an appeal on the merits. See Utah Women’s Clinic, Inc. v.
Leavitt , 75 F.3d 564, 567 (10th Cir. 1995) (noting that the Supreme Court in
Budinich v. Becton Dickinson & Co. , 486 U.S. 196, 202 (1988), “adopted a
‘bright line rule’ holding ‘that an unresolved issue of attorney’s fees for the
litigation in question does not prevent the judgment on the merits from being
final’”), cert. denied , 518 U.S. 1019 (1996).
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leases. Both agree that the assignments were “to be the equivalent of raising the
revenue interest of Scrivner, et al. 4% . . . so that if the royalty interest of
Scrivner, et al. under a lease was 12.5% then its royalty interest will be increased
to 16.5%.” App. at 45. The two differ, however, on the question: four percent of
what ? Scrivner contended that the Agreement required a four percent increase in
Scrivner’s royalty interest in the leases on all of the properties referenced in the
Agreement. Defendant argued that it only had to assign a four percent royalty
increase attributable to the leases that it owned, which included only portions of
the Scrivner properties referenced in the Agreement. The district court held that
the term “overriding royalty interest,” which was used repeatedly to describe the
interest to be assigned by Defendant, had a specific meaning in the oil and gas
industry: an interest carved out of the working interest of a mineral lease. It
followed, the court reasoned, that one interest carved out of another cannot
exceed the original, and thus the parties could not have intended that Defendant
carve out portions of leases that it did not own to give to Scrivner. In addition,
the court noted that the “Agreement does not state that the overrides are to be
computed based on the ‘original leases,’” but from “‘the leasehold estate created
by the oil and gas leases executed by the Plaintiffs and their predecessors in
interest covering the lands described in Exhibits 1 and 2.’” App. at 192 (quoting
Settlement Agreement, App. at 44). Thus, the court concluded, the Agreement
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indicates the parties’ intent to assign Scrivner additional royalty interests in the
referenced oil and gas leases that were owned by Defendant.
We review the district court’s interpretation of the settlement agreement de
novo. See Valley Nat’l Bank v. Abdnor , 918 F.2d 128, 130 (10th Cir. 1990).
Under Oklahoma law, courts interpreting a contract must consider the entire
agreement “so as to give effect to every part, if reasonably practicable.” O KLA .
S TAT . tit. 15, § 157. “If the language of a contract is clear and without ambiguity,
the Court is to interpret it as a matter of law. Similarly, the existence of an
ambiguity is a decision to be made by the Court.” Corbett v. Combined
Communications Corp. , 654 P.2d 616, 617 (Okla. 1982) (citation omitted). In
addition, “[i]f a contract be ambiguous in its terms, the court should examine the
entire contract for the purpose of declaring the meaning and intentions of the
parties as expressed by the entire contract.” Standard Accidental Ins. Co. v.
Goldberg , 250 P. 892, 893 (Okla. 1926). If the meaning of the contract is
“apparent on the face of the instrument,” then “no extraneous evidence is proper
to give a different construction.” James Talcott, Inc. v. Finley , 389 P.2d 988, 993
(Okla. 1964). Finally, “[t]echnical words are to be interpreted as usually
understood by persons in the profession or business to which they relate, unless
clearly used in a different sense .” O KLA S TAT . tit. 15, § 161 (emphasis added).
In this case, the court correctly noted the use of the term “override” and its
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usual interpretation in the industry. However, the court misconstrued the use of
that term in conjunction with the remainder of the contract. The Agreement states
that Defendant is to assign to Plaintiffs an interest in “the leasehold estate created
by the oil and gas leases executed by the Plaintiffs and their predecessors in
interest covering the lands described in Exhibits 1 and 2.” (App. at 44) (emphasis
added). In further describing the assignment, the Agreement states that it will be
“the equivalent of raising the revenue interests of Scrivner , et. al. 4% under each
lease its minerals are subject to .” (App. at 45) (emphasis added). Nowhere is the
increase described as a portion of Defendant’s interests; in fact, the Agreement
makes it clear that it is Scrivner’s interests that will increase under Scrivner’s
leases on the referenced wells. In addition, the Agreement specifically references
its Exhibit 2, which lists not only eleven of the thirteen Scrivner leases owned by
Defendant, but six additional Scrivner leases as well. The use of the term
“override” implies a carveout, but the parties here expressed an intention to carve
a portion out of the royalties derived under the referenced Scrivner wells, not
those of Defendant.
It is not surprising that the unusual nature of this carveout was confusing to
the district court. Even Defendant concedes in its brief that it “is required to
deliver . . . additional interests in the form of an override calculated as if the face
of the Scrivner Group’s leases had a 16.5 percent royalty percentage.” (Ans. Br.
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at 11) (emphasis added). Although unusual—perhaps due to the last minute
nature of its preparation—the Agreement is clear that the overriding royalty
Defendant is to provide is based on the Scrivner leases referenced in the exhibit.
Nevertheless, Defendant contends and the district court held that Defendant
could not have agreed to convey something it did not own. This is not a correct
statement of law. Absent illegality, parties may contract as they see fit, even
promising to convey items that are not in their possession or control. 2
In addition,
immediately following the above-cited conveyance language, the parties
specifically provided an appraisal procedure to provide Scrivner with an
equivalent value for the assignments if Defendant was unable to convey them:
2
See The Harriman , 76 U.S. (9 Wallace) 161, 172 (1869) (“If a condition
be to do a thing which is impossible . . . it is void; but if it be to do a thing which
is only improbable or absurd, or that a thing shall happen which is beyond the
reach of human power, as that it will rain to-morrow, the contract will be upheld
and enforced.”); Bonner v. Okla. Rock Corp. , 863 P.2d 1176, 1183 (Okla. 1993)
(“Absent illegality, parties are free to bargain as they see fit; a court may neither
make a new contract to benefit a party nor rewrite the existing one .”); Barnes v.
Helfenbein , 548 P.2d 1014, 1021 (Okla. 1976) (“Courts are concerned only with
the legality of the contract. The fairness or unfairness, folly or wisdom, or
inequality of contracts are questions exclusively within the rights of the parties to
adjust at the time the contract is made.”); Davon Drilling Co. v. Ginder , 467 P.2d
470, 473 (Okla. 1970) (“Contracts entered into by parties will be enforced, if
within the law, although they may contain harsh terms.”); Commerce Acceptance
Co. v. Campbell , 368 P.2d 496, 498 (Okla. 1962) (“It is the duty of the court to
enforce valid contracts voluntarily entered into, in the absence of fraud or
mistake, and the courts have no authority to relieve parties of their solemn
obligations, assumed under such contracts.”); Kendall v. Hastings , 198 P.2d 998,
1000 (Okla. 1948) (vendors may not only contract to sell land they do not yet
own, they may maintain an action for damages for a breach by the purchaser if
they were able to make good title at the time stipulated) .
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Should the Defendant determine that it is unable or unwilling to
convey said interest pursuant to Paragraph 4A and 4B above it will
notify Plaintiffs’ attorneys of record by certified mail on or before
the date specified in Paragraph G, and thereby effectuate the
following procedure:
1. Within five (5) business days of the Plaintiffs’ receipt of
Notice of the Defendant’s inability to convey, the Plaintiffs
will select an appraiser to assist in a valuation of said
additional royalty above described.
(App. at 45) (emphasis added). The Agreement proceeds to describe at length the
method for selecting appraisers, transferring funds to Scrivner, accruing interest
on late payments, etc. Thus, the possibility that Defendant would be unable to
make the required conveyances was provided for in some detail. If the parties had
known that Defendant would be able to transfer interests under all of the leases,
then there would have been little purpose in outlining a detailed plan for
transferring the equivalent value in lieu thereof.
Oklahoma statutes provide three relevant canons for the interpretation of
the Settlement Agreement. First, “[a] contract must be so interpreted as to give
effect to the mutual intention of the parties, as it existed at the time of
contracting, so far as the same is ascertainable and lawful.” O KLA . S TAT . tit. 15,
§ 152. Second, “[t]he language of a contract is to govern its interpretation, if the
language is clear and explicit, and does not involve an absurdity.” O KLA . S TAT .
tit. 15, § 154. Third, “[w]hen a contract is reduced to writing, the intention of the
parties is to be ascertained from the writing alone, if possible.” O KLA . S TAT . tit.
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15, § 155. Examining the Agreement to discern the parties’ intent at the time of
contracting, we conclude that the Agreement explicitly requires Defendant to
increase Scrivner’s royalty interests under each lease Scrivner’s minerals are
subject to, as referenced in Exhibit 2, by four percent or the appraised equivalent
thereof. Thus, we reverse the decision of the district court rejecting this
interpretation. Because we conclude that the Agreement in its entirety is not
ambiguous, we decline to consider the parties’ extrinsic evidence regarding the
formation of the Agreement. 3
III. Unilateral Mistake
Defendant protests, however, that our interpretation of the Agreement is not
what Defendant intended, and so the parties did not have a sufficient “meeting of
the minds” essential to valid contract formation. 4
Renewing his alternative
3
Scrivner has presented excerpts from the trial transcript that assist in
justifying its position; however, our holding that the contract is unambiguous
prevents a review of these arguments. See James Talcott, Inc. , 389 P.2d at 993.
4
Scrivner objects to our consideration of Defendant’s rescission request,
noting that the district court did not specifically rule on Defendant’s alternative
motion to rescind the Settlement Agreement. (Aplt. Rep. Br. at 19-20). While the
court did not enter a separate judgment denying Defendant’s motion to rescind,
we take jurisdiction over the issue because the court’s decision to accept the
Agreement under Defendant’s interpretation was final and required rejecting the
rescission request. See DeBoard v. Sunshine Mining & Ref. Co. , 208 F.3d 1228,
1236-37 (10th Cir. 2000) (holding that, because district court did not enter
separate judgment denying cross-motion for attorney fees, judgment was never
entered in the record for rule 58 and thirty-day period never began to run, but
taking jurisdiction over the issue because the court’s decision was final).
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argument, Defendant asks that we rescind the Agreement for lack of mutual
assent. It is true that “a mistake on one side, if it is material, may be grounds for
rescinding and cancellation by a court of equity.” O’Neal v. Harper , 75 P.2d 879,
882 (Okla. 1937). However, Oklahoma, like the majority of states, does not
permit the rescission of a contract for unilateral mistake unless the other party
was aware of the mistaken party’s error:
A party to a contract may rescind the same in the following
cases only:
1. If the consent of the party rescinding, or of any party jointly
contracting with him, was given by mistake, or obtained through
duress, menace, fraud, or undue influence, exercised by or with the
connivance of the party as to whom he rescinds , or of any other party
to the contract jointly interested with such party.
O KLA S TAT . tit. 15, § 233 (emphasis added). In explaining this principle,
Oklahoma courts have noted : “‘[T]he modern tendency is to recognize unilateral
mistake as a ground for rescission of an unexecuted contract . . . [but] the
principle is applied when the mistake was known to the other party to the
transaction.’” First Fed. Sav. & Loan Ass’n v. Hutchinson , 591 P.2d 1189, 1191
(Okla. Ct. App. 1978) (quoting United States v. Jones , 176 F.2d 278, 285 (9th Cir.
1949)); Mobil Oil Corp. v. Flag-Redfern Oil Co. , 522 P.2d 651, 655 (Okla. Ct.
App. 1973) (same). Defendant presents no evidence that Scrivner knew about
Defendant’s mistaken interpretation of the Agreement prior to receiving
Defendant’s fractional assignments.
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In addition, rescission would require the rescinding party to “restore to the
other party everything of value which he has received from him under the
contract.” O KLA S TAT . tit. 15, § 235. As specific consideration for settling its
claims with Defendant under the Settlement Agreement, Scrivner provided
Defendant with a motion to dismiss with prejudice a separate case, Dunstan v.
Sonat Exploration Co. , No. 91399 (Okla. filed June 5, 1998). Defendant can no
longer restore that consideration to Scrivner. For both of these reasons, we reject
rescission as an alternative remedy to the parties’ dispute.
The district court awarded Defendant attorney fees for prevailing against
both Scrivner and A-Cross in the enforcement action, as allowed by the
Settlement Agreement. Because we hold that Defendant does not prevail in this
action, we reverse the court’s award of attorney fees to Defendant as to both
Scrivner and A-Cross.
In its Reply Brief, Scrivner alleges for the first time that Defendant has not
performed other obligations under the Agreement. Scrivner requests that we
remand these matters back to the district court with instructions to enforce all
remaining unperformed settlement obligations. (Aplt. Rep. Br. at 12-14). We
decline to consider these new allegations. “Issues not raised in the opening brief
are deemed abandoned or waived.” Coleman v. B-G Maint. Mgmt. , 108 F.3d
1199, 1205 (10th Cir. 1997).
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Accordingly, we REVERSE and REMAND this action to the district court
for enforcement of the Settlement Agreement, dismissal of the attorney fee
awards, and other proceedings not inconsistent with this opinion.
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Scrivner v. Sonat Exploration Co.
Court: Court of Appeals for the Tenth Circuit
Date filed: 2001-03-21
Citations: 242 F.3d 1288
Copy CitationsCombined Opinion