Germany v. Denbury Onshore, LLC


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Docket Number: 2007-CA-00283-SCT

Supreme Court: Opinion Link
Opinion Date: 06-19-2008
Opinion Author: DIAZ, P.J.
Holding: Affirmed

Additional Case Information: Topic: Contract - Proof of damages
Judge(s) Concurring: SMITH, C.J., WALLER, P.J., CARLSON, GRAVES, DICKINSON, RANDOLPH AND LAMAR, JJ.
Dissenting Author : EASLEY, J., without separate written opinion.
Procedural History: Summary Judgment; Dismissal
Nature of the Case: CIVIL - CONTRACT

Trial Court: Date of Trial Judgment: 01-19-2007
Appealed from: PIKE COUNTY CIRCUIT COURT
Judge: Michael M. Taylor
Disposition: The plaintiffs in this case entered into an agreement that gave them an option to purchase the right under another agreement to share in the acquisition of royalty interests in an oil and gas field. The plaintiffs claim that they did not exercise the option because the defendants prevented them from obtaining information essential to determining whether the right under the other agreement to share in the purchase of royalty interests was worth anything. Accordingly, the plaintiffs filed suit and asserted the following claims against several defendants, all but one of whom were parties to the agreement containing the option to purchase: breach of contract, intentional infliction of emotional distress, tortious interference with contract, bad faith, and conspiracy. The Circuit Court of Pike County granted summary judgment to the defendants on all claims asserted by the plaintiffs and dismissed the plaintiffs’ complaint with prejudice. The plaintiffs appeal the trial court’s dismissal of their complaint.
Case Number: 05-094-PCT

  Party Name: Attorney Name:   Brief(s) Available:
Appellant: FORREST GERMANY, A MISSISSIPPI RESIDENT AND E.B. GERMANY & SONS, A TEXAS CORPORATION




WAYNE DOWDY, ANDREA ANN SANDERS



 
  • Appellant #1 Brief

  • Appellee: DENBURY ONSHORE, LLC, AJIT JHANGIANI, A TEXAS RESIDENT, ROSEWOOD PARTNERS, L.L.C., A MISSISSIPPI CORPORATION AND PIRVEST, INC., A TEXAS CORPORATION TROY FARRELL ODOM, WILLIAM F. BLAIR, JAMES LAWTON ROBERTSON, ELIZABETH GANZERLA, CHARLES "CHAD" BARUCH, ELIOT SHAVIN  
    Appellee #2:  

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    Topic: Contract - Proof of damages

    Summary of the Facts: Forrest Germany, President of E.B. Germany and Sons, a Texas corporation, began purchasing acreage in Pike County on behalf of Germany and Sons that would eventually become part of an oil and gas field known as the McComb Field Unit. Germany and Sons’ interests in the McComb Field were passed through several corporations and ended up being assigned to Rosewood Partners, LLC. Rosewood had been formed by Germany and Luther Henderson, the Chairman of Pirvest, Inc. Germany served as Rosewood’s President and managed its daily affairs. Germany and Sons owned an approximately 4.4% interest in Rosewood, but that interest would increase to slightly more than 18% upon its repayment of certain debts to Rosewood. Henderson owned a majority interest in Rosewood which was held primarily by Pirvest. Denbury Resources, Inc. owned the closest carbon dioxide pipeline to the McComb Field. Rosewood contacted Denbury about purchasing Rosewood’s interest in the McComb Field. Denbury and Rosewood entered into a “Purchase and Sale Agreement,” pursuant to which Denbury paid an initial purchase price of $2,500,000. Denbury was also obligated to pay Rosewood “in any future month in which the price of oil . . . exceeds $22.00 per barrel . . . the difference between the actual price per barrel received by [Denbury] and $22.00 per net barrel times fifteen percent (15%) or $0/75 per net barrel of oil sold, whichever is less.” Additionally, the Purchase Agreement contained a “non-competition covenant” by which Rosewood agreed that “any party affiliated or related to” it, including Germany, would not “acquire, directly or indirectly, any mineral, leasehold, royalty or overriding royalty interest in the McComb Field Unit for a period of three (3) years from the date of closing.” Denbury and Rosewood also entered into a “Letter Agreement” that was made part of the Purchase Agreement. Under the Letter Agreement, the parties “agreed to purchase and share various royalty and overriding royalty interests within the McComb Field Unit,” subject to certain conditions. Henderson died after sustaining severe injuries in a car accident. Ajit Jhangiani, a Pirvest officer and member of Rosewood, was appointed executor of Henderson’s estate; he also became President of Pirvest. Jhangiani began questioning Germany’s decisionmaking as Rosewood’s President. Germany learned from Henderson’s son-in-law, Gregg Gapp, that Jhangiani had been negotiating on behalf of Rosewood with Denbury to sell it Rosewood’s rights. Germany filed a lawsuit on behalf of himself, his wife, and Germany and Sons against Jhangiani, individually and as the executor of Henderson’s estate, and Rosewood. Germany asserted claims of breach of contract, tortious interference with contract, bad faith and intentional infliction of emotional distress against the defendants. Jhangiani subsequently agreed to settle Germany’s breach-of-contract suit. The parties entered into and signed a “Settlement Agreement and General Release.” Pursuant to the Settlement Agreement, the Brookhaven property was deeded and transferred to Germany and Sons; all debts and obligations of Germany and Germany and Sons to Rosewood, Pirvest and Henderson’s estate were forgiven; and Germany was granted an option to purchase Rosewood’s interest in the Letter Agreement for $125,000 which would expire ninety days from the execution of the Settlement Agreement. Four days before the option was set to expire, Germany filed a second suit on behalf of himself and Germany and Sons against Denbury, Jhangiani (individually), Rosewood and Pirvest, asserting the following claims against all of the defendants: breach of contract, intentional infliction of emotional distress, tortious interference with contract, bad faith, and conspiracy. Germany never obtained the information about Denbury’s royalty acquisitions and thus did not exercise the option. The option, therefore, expired. Denbury acquired slightly less than one half of one percent (.5%) of the royalty interests in the McComb Field. Accordingly, Rosewood’s right under the Letter Agreement to share in the future purchases of royalty interests was never triggered, and the Letter Agreement terminated. The defendants filed motions for summary judgment on all of Germany’s claims which the court granted. Germany appeals.

    Summary of Opinion Analysis: The trial court ruled that, because Rosewood’s right under the Letter Agreement to share in royalty purchases had not been triggered, and the plaintiffs never acquired an interest in the Letter Agreement, the plaintiffs could not have suffered any damages as a result of the defendants’ alleged refusal to provide them with information about Denbury’s acquisition of royalty interests. It is undisputed that the Letter Agreement was worthless because Denbury never acquired 1% of the royalty interests in the McComb Field. Accordingly, there is no genuine issue of material fact as to whether the plaintiffs sustained any damages by not exercising the option, regardless of whether the defendants’ alleged actions and omissions contributed to the failure to exercise the option. The plaintiffs’ argument that they could have recovered damages by filing a derivative action against Denbury on behalf of Rosewood cannot be considered because the plaintiffs did not make this argument before the trial court.


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