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Date: 03-05-2015
Case Style: C & M Exploration, LLC v. C. Mark Crawford, BDI, LLC, Calvin R. Hullum, aka Calvin Hullum, Bengalia Land & Cattle Company and Ring Energy, Inc.
Case Number: CJ-2014-2216
Judge: Daman H. Cantrell
Court: District Court, Tulsa County, Oklahoma
Plaintiff's Attorney: Sam Daniel, III
Defendant's Attorney: Andrew Hartman for Calvin R. Hullum and Bengalia Land & Cattle Company
Jack Moore for BDI, LLC, Calvin R. Hullum and Bengalia Land and Cattle Company
Ned Dismuke for Ring Energy, Inc.
Description: Tulsa, OK C & M Exploration, LLC sued C. Mark Crawford, BDI, LLC, Calvin R. Hullum, aka Calvin Hullum, Bengalia Land & Cattle Company and Ring Energy, Inc. seeking specific performance of a contract claiming:
1. CM is an Oklahoma Limited Liability Company doing business in Tulsa County, State
of Oklahoma.
2. Crawford is an individual doing business in Tulsa County, State of Oklahoma.
3. BDI is an Oklahoma Limited Liability Company doing business in Tulsa County, State
of Oklahoma.
4. flullum is an individual doing business in Tulsa County, State of Oklahoma.
5. Bengalia is an Oklahoma Corporation doing business in Tulsa County, State of
Oklahoma.
6. Ring is duly domesticated in the State of Oklahoma and is doing business in Tulsa
County, State of Oklahoma.
7. The events and transactions which are the subject matter hereof arose and took place
in Tulsa County, State of Oklahoma.
8. This Court has jurisdiction over the parties hereto and subject matter herein and venue
is proper in Tulsa County, State of Oklahoma.
FACTUAL ALLEGATIONS COMMON TO ALL CLAIMS FOR RELIEF
9. That C & M is owned and managed by Charles A. Crawford who is engaged in the
oil and gas business.
10. Bengalia is owned and controlled by Hullum each of which is in the oil and gas
business.
11. BDI is owned and controlled by Crawford each of which is in the oil and gas
business.
12. That at all times material hereto, Bengalia, Hullum, Crawford and BDI were joint
venturers and partners and the Agreement with CM was a part of a joint venture with
CM.
13. That on or about the year 2005 Crawford made and entered into a verbal agreement
with CM for and on behalf of Crawford, BDI, Hullum and Bengalia, for CM to perform
numerous oil and gas related consulting services as well as various oil and gas drilling and related services including submitting geological information, logs, maps, and data (hereinafter “Agreement”) pertaining to the development of Dorothy Prospect, the Auntie Em Prospect, and the Auntie Em Extension Prospect, and all other future prospects located in Gray County, Haskell County, Finney County, and Pratt County, State of Kansas (hereinafter “Area of Mutual interest”).
14. That for and in consideration of the Agreement by CM to provide said services, Crawford, for and on behalf of himself, and as a partner and joint venturer with Hullum, Bengalia and his own company BDI, promised to CM that CM would be granted a recordable assignment of an overriding royalty interest in the amount of .005 (1/2%) on the Dorothy Prospect (as well as all additional future prospects located in the aforedescribed Counties) and .0025 (1/4%) on the Auntie Em and Auntie Em Extension Prospects, hereinafter referred to as the (“Override”).
15. That subsequent to performance of the verbal agreement by CM, Crawford submitted a written memorandum of the Agreement stating that Crawford would assign the Override which was dated September 11, 2008, a copy of which is attached hereto as Exhibit A as if filly set forth herein (hereinafter “Memo”).
16. CM received additional partial and fractional monetary compensation for his time and services in furthering the development of the prospect; such payment was not in lieu of the Agreement for the Override.
17. That subsequent to the Memo Crawford made representations and sent emails to CM assuring CM that it would receive the .005 Override in all of the prospects, and Circa 2009 even showed CM an executed assignment of the Override, but refused to deliver it to CM until CM performed numerous oil and gas related consulting services for Crawford, BDI, Bengalia and Hullum in additional prospect areas located in the Counties of Pratt and Finney, State of Kansas.
18. CM continued to perform oil and gas related consulting services in exchange for the additional Override of .005 in the Area of Mutual Interest, and in August, 2012 received its final monetary payment which was not in lieu of but in addition to the Override.
19. That unbeknownst to CM, on November 7, 2012 Hullum and Crawford made and entered into a Merger Agreement with Ring whereby they made and executed recordable assignments which reserved the Override but conveyed all of the working interest in the leases and wells to Ring in exchange for common stock of Ring without disclosing, excepting and reserving that portion of the Override which was promised to be conveyed to CM.
20. That CM discovered the sale and made a final demand for the assignment of the Override; circa, February, 2014, Crawford prepared and submitted a typed proposal for a settlement and release agreement which was rejected by CM because, inter alia, it did not comport to the Agreement as the amount of the Override was proportionately reduced and was not the accurate percentage, did not cover all of the lands in the Area of Mutual Interest, was limited in duration, and did not disclose the leases which were conveyed to Ring.
21. Subsequent to the Merger Agreement, Ring has purchased additional leases in the Area of Mutual Interest and under the provisions of Article 11 .4D of the Merger Agreement Ring is obligated to assign to Crawford and Hullum additional overrides to which C & M ‘s Override attaches.
22. CM then contacted Ring and made demand for his Override which Ring rejected.
23. Crawford then threatened CM it will not be assigned the Override.
24. That numerous oil and gas wells have been drilled and completed and are now
producing within the Area of Mutual Interest to which CM’s Override attaches and
entitling CM to the proceeds of the sale of production.
FIRST CLAIM FOR RELIEF
(SPECIFIC PERFORMANCE/AUDIT-ACCOUNTING)
(ALL DEFENDANTS)
25. Plaintiff incorporates paragraphs 1 through 24, and in addition thereto, alleges and states as follows:
26. That the Agreement for the conveyance of Override, and Memo thereof, was fUlly performed by CM as of the date the leases were assigned to Ring.
27. That Ring is on notice of CM’s Override and should assign that portion to which CM is entitled directly to C & M.
28. CM is a third party beneficiary of the agreement between CrawfordlHullum and Ring.
29. CM is entitled to a Decree of specific performance ordering Defendants Crawford, BDI, Hullum, Bengalia and Ring to convey of record an overriding royalty interest in the amounts aforedescribed on each and every lease and well in the prospects Area of Mutual Interest in a form acceptable to Plaintiff, and execute Division Orders for the payment to CM of the proceeds from the sale of production attributable to each and every well drilled on all of the Leases effective from the date of first production.
30. Plaintiff is entitled to audit the books of all Defendants for a lull and complete accounting of the proceeds of the sale of production and the total prospect acreage to which the Override will attach.
SECOND CLAIM FOR RELIEF
(BREACH OF FIDUCIARY DUTY AND IMPLIED COVENANT OF GOOD
FAITH, HONESTY AND FAIR DEALING)
(DEFENDANTS CRAWFORD, Bill, HULLUM, BENGALIA)
31. Plaintiff incorporates paragraphs 1 through 30, and in addition thereto, alleges and
state as follows:
32. CM trusted said Defendants to exercise the utmost good faith, honesty and fair
dealing in abiding by the Agreement.
33 . Said Defendants owed Plaintiff a fiduciary duty to not take advantage and not to
oppress the rights of Plaintiff under the Agreement.
34. Said Defendants breached said duties and committed actions which have caused
damage to CM and which were were malicious and grossly reckless and CM is entitled to
exemplary damages to deter such conduct.
CONSTRUCTIVE TRUST/EQUITABLE LIEN
(ALL DEFENDANTS)
35. That a constructive trust and equitable lien should be imposed upon the record title to the real property, minerals, and leasehold interests of all owners in the wells and prospect Area of Mutual Interest and upon the proceeds from the sale of production from the wells to the extent of the overriding royalty interest and purchasers of production and purchasers of the leasehold and wells thereon be placed on notice of the claims herein.
THIRD CLAIM FOR RELIEF
(CONVERSION)
(DEFENDANTS CRAWFORD, BDI, HULLUM, BENGALIA)
36. Plaintiff incorporates paragraphs I through 35 and in addition alleges as follows
37. Said Defendants have breached the duties and obligations set forth in the Agreement and wrongfully assigned to Ring or wrongfully reserved to themselves the Override and wrongfIilly diverted proceeds from the sale of production belonging to CM to the exclusion and detriment of CM and exercised full dominion and control of the funds and Override with the malicious purpose of depriving CM of its interest therein.
38. Said Defendants have wrongfully received the proceeds of production attributable to the Override belonging to CM.
39. Plaintiff is entitled to recover interest and the lost investment opportunity from the use of the money from the date of conversion and to obtain the current or highest value of the money convened as provided by Statute, as well as punitive damages.
FOURTH CLAIM FOR RELIEF
(MISREPRESENTATION, FRAUD, AND DECEIT)
(DEFENDANTS CRAWFORD, HULLUM, BENGALIA, BD1)
40. Plaintiff incorporates paragraphs 1 through 41, and in addition thereto, alleges and states as follows:
42. That the actions of Crawford, on behalf of himself individually, and as a partner and joint venture, as hereinabove described constitute misrepresentation, fraud, and deceit. Crawford made material representations to CM that CM would receive the Override in exchange for perfonnance of services which were rendered.
43. CM relied to its detriment upon the representations of Crawford in providing the
services to Crawford and the co venturers.
44. Crawford’s representations were false and made with the intent to wrongfully
deceive CM and to utilize the work from CM to their own advantage and not to assign
the Override to CM.
45. But for the false representations and deceit, CM would not have entered into the
Agreement.
46. Said Defendants willfully, intentionally, and recklessly committed acts of
misrepresentation, fraud, and deceit in inducing CM to rely to its detriment and then in
failing to honor the Agreement to convey the proper agreed to Override.
47. As a result of the aforedescribed actions of Crawford, CM has been damaged in the
amount of the lost value of the Override and lost income therefrom.
48. Said Defendants breached said duties and committed actions which were malicious
and grossly reckless and CM is entitled to exemplary damages to deter such conduct.
FIFTH CLAIM FOR RELIEF
(QUIET TITLE AND INJUNCTIVE RELIEF)
(ALL DEFENDANTS)
49. Plaintiff incorporates paragraphs 1 through 48, and in addition thereto, alleges and states as follows:
50. Plaintiff claims ownership of an Override pertaining to all of the minerals and oil and gas leasehold estate which have been purchased and obtained directly by Defendants, and indirectly by Defendant’s through any entity in which Defendant’s are an owner, manager, officer or director, and which lie within the following Counties of Pratt, Gray,
Haskell and Finney, State of Kansas, and in all other areas which pertain to the prospects.
51. That title to the Override in the specific percentages as aforedescribed should be quieted in the Plaintiff and the Defendants, and all other persons or entities claiming by, through or under Defendants, which parties should further be barred from asserting any right, title, claim or interest in and to said Override and a Temporary Restraining Order should be entered prohibiting Defendants, and their agents and assigns from transferring or encumbering said interests, and further a Preliminary and Permanent Injunction should be ordered prohibiting Defendants and all persons or entities claiming by, through, or under Defendants from obtaining the proceeds from the sale of production attributable to the prospect wells to the extent of the Override claimed by Plaintiff.
COMBINED PRAYER FOR RELIEF
Wherefore, premises considered, Plaintiff prays for a Judgment against
Defendants as follows:
1. First Claim for Relief: For a Decree of Specific Performance/Audit-Accounting.
2. Second Claim for Relief: Damages in excess of $10,000: Constructive Trust/Equitable
Lien.
3. Third Claim for Relief: Damages in excess of $10,000 plus punitive damages in the
maximum amount as provided by law.
4. Fourth Claim for Relief: Actual Damages in excess of $10,000, plus punitive damages
in the maximum amount as provided by law.
5. Fifth Claim for Relief: A Decree of Quiet Title and Injunctive Relief
6. As to all Claims for Relief: Costs, attorneys fees, interest, and all special and consequential damages in the maximum amount provided by law, and for such other and further relief as is proper in justice and equity.
Ring Energy answered as follows:
1. Ring lacks sufficient information to admit or deny the allegations of paragraph No.
1 of the Petition, therefore they are denied.
2. Ring admits the allegations of paragraph No. 2 of the Petition.
3. Ring admits the allegations of paragraph No. 3 of the Petition.
4. Ring admits the allegations of paragraph No. 4 of the Petition.
5. Ring is unable to admit or deny the allegations of paragraph No. 5 of the Petition.
There is no Oklahoma corporation by the name of Bengalia Land & Cattle Company. There
is an Oklahoma corporation by the name of Bengalia Land and Cattle
6. Ring admits the allegations of paragraph No. 6 of the Petition.
7. Ring lacks sufficient information to admit or deny the allegations of paragraph No.
7 of the Petition, therefore they are denied.
8. Ring denies that the court has jurisdiction over Defendant Bengalia Land & Cattle
Company because there is no Oklahoma corporation by that name and states that this matter involves oil and gas interests in real property located outside Tulsa County, but otherwise admits the allegations of paragraph No. 8 of the Petition.
9. Ring admits that Defendant Charles R. Crawford (“Crawford”) is engaged in the oil and gas business and otherwise lacks sufficient information to admit or deny the remaining allegations of paragraph No. 9 of the Petition, therefore they are denied.
10. Ring incorporates its response to paragraph No. 5 into its response to paragraph No. 10. Ring admits that Defendant Calvin R. Hullum (“Hullum”) is engaged in the oil and gas business and lacks sufficient information to admit or deny the allegations of paragraph No. 10, therefore they are denied.
11. Ring admits that Crawford is engaged in the oil and gas business and lacks sufficient information to admit or deny the remaining allegations of paragraph No. 11, therefore they are denied.
12. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 12 of the Petition, therefore they are denied. In addition, these allegations have nothing to do with Ring. It was not a part of any joint venture or a partner with any of the parties identified in paragraph No. 12 nor a party to any agreement alleged in that paragraph.
13. Rings lacks sufficient information to admit or deny the allegations of paragraph No. 13 of the Petition, therefore they are denied. In addition, these allegations have nothing to do with Ring. It was not a party to the verbal agreement alleged in paragraph No. 13.
14. Ring denies the allegations of paragraph No. 14 of the Petition to the extent they are inconsistent with the express terms of the document attached as Exhibit A to the Petition. Ring otherwise lacks sufficient information to admit or deny the allegations, therefore they are denied. In addition, these allegations have nothing to do with Ring. It was not a party to any agreement identified in paragraph No. 14 nor a partner or joint venturer as alleged in that paragraph.
15. The terms of Exhibit A to the Petition speak for themselves. Ring otherwise lacks sufficient information to admit or deny the allegations of paragraph No. 15 of the Petition, therefore they are denied. In addition, these allegations have nothing to do with Ring. It was not a party to the alleged agreement attached as Exhibit A to the Petition.
16. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 16 of the Petition, therefore they are denied.
17. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 17 of the Petition, therefore they are denied. In addition, these allegations have nothing to do with Ring.
18. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 18 of the Petition, therefore they are denied. In addition, these allegations have nothing to do with Ring.
19. Ring admits that it entered into a Merger Agreement with Hullum and Crawford whereby certain working interests were conveyed to Ring in exchange for, inter alia, Ring common stock. Plaintiff was not a party to the Merger Agreement and any overrides which it seeks to recover by this action should come from Hullum and Crawford. Ring lacks sufficient information to admit or deny the remaining allegations of the paragraph No. 19, therefore they are denied.
20. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 20 of the Petition, therefore they are denied. In addition, none of the allegations of paragraph No. 20 concern or relate to Ring.
21. Ring denies the allegations of paragraph No. 21 of the Petition.
22. Ring admits the allegations of paragraph No. 22 but denies that it has any obligation to Plaintiff, including but not limited to any obligation to convey overriding royalty interests to Plaintiff.
23. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 23, therefore they are denied.
24. Ring denies that there is an “Area of Mutual Interest” and is therefore unable to admit or deny the remaining allegations of paragraph No. 24 of the Petition, therefore they are denied.
25. Ring incorporates its response to paragraphs No. I — 24 into its response to Plaintiffs first claim for relief.
26. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 26 of the Petition, therefore they are denied.
27. Ring denies the allegations of paragraph No. 27 of the Petition, and that it has any liability to Plaintiff. Any assignment of overrides to Plaintiff should come from the other Defendants, not Ring.
28. Ring denies the allegations of paragraph No. 28 of the Petition.
29. Ring denies the allegations of paragraph No. 29 as related to it and lacks sufficient information to admit or deny the allegations as related to the other Defendants, therefore they are denied.
30. Ring denies the allegations of paragraph No. 30 as related to it and lacks sufficient information to admit or deny the allegations as related to the other Defendants, therefore they are denied.
31. Ring incorporates its responses to paragraphs No. I — 30 into its response to Plaintiffs second claim for relief.
32. Ring is not a party to the Agreement and does not owe Plaintiff any obligations under it, including those described in paragraph No. 32, therefore Ring denies all the allegations of paragraph No. 32 as related to it. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 32 as related to the other Defendants, therefore they are denied.
33. Ring denies that it owes any obligations to Plaintiff, including but not limited to a fiduciary duty, therefore Ring denies the allegations of paragraph No. 33 as related to it. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 33 as related to the other Defendants, therefore those allegations are denied.
34. Ring denies that it owes any duties or obligations to Plaintiff, that it has damaged Plaintiff, and that Plaintiff is entitled to punitive damages against Ring, therefore it denies all of the allegations of paragraph No. 34 as related to Ring. It lacks sufficient knowledge or information to admit or deny the allegations of paragraph No. 34 as related to the other Defendants, therefore those allegations are denied.
35. Ring denies the allegations of paragraph No. 35 as related to it, and lacks sufficient information the admit or deny the allegations as related to the other Defendants, therefore they are denied.
36. Ring incorporates its responses to paragraphs No. 1 — 35 into its response to Plaintiff’s third claim for relief.
37. Ring denies that the other Defendants have wrongfully assigned to it any
overrides and diverted an proceeds to it so that Ring denies the allegations of paragraph No. 37 as related to it, and lacks sufficient information to admit or deny the allegations as related to the other Defendants, therefore Ring denies those allegations.
38. Ring denies that it has wrongfully received any proceeds, therefore Ring denies the allegations of paragraph No. 38 as related to it, and lacks sufficient information to admit or deny the allegations as related to the other Defendants, therefore they are denied.
39. Ring denies that it has converted any property belonging to Plaintiff and that Plaintiff is entitled to any of the relief claimed in paragraph No. 39, therefore Ring denies the allegations of paragraph No. 39 as related to it. Ring lacks sufficient information to admit or deny the allegations of paragraph No. 39 as related to the other Defendants, therefore those allegations are denied.
40. Ring incorporates its responses to paragraphs No. I — 39 into its response to Plaintiff’s fourth claim for relief.
41. The allegations of paragraph No. 42 (sic) do not concern or relate to Ring, therefore it is not required to respond to them.
42. The allegations of paragraph No. 43 (sic) do not concern or relate to Ring, therefore it is not required to respond to them.
43. The allegations of paragraph No. 44 (sic) do not concern or relate to Ring, therefore it is not required to respond to them.
44. The allegations of paragraph No. 45 (sic) do not concern or relate to Ring, therefore it is not required to respond to them.
45. Paragraph No.46 (sic) of the Petition concerns “[s]aid Defendants.” Ring denies the allegations of paragraph No. 46 (sic) as related to it.
46. The allegations of paragraph No. 47 (sic) do not concern Ring, therefore it is not required to respond to them.
47. Paragraph No.48 (sic) of the Petition concerns “[s]aid Defendants.” Ring denies the allegations of paragraph No. 48 (sic) as related to it.
48. Ring incorporates its responses to paragraphs No. 1 —47 into its response to Plaintiff’s fifth claim for relief.
49. Ring denies the allegations of paragraph No. 50 (sic) as related to it and lacks sufficient information to admit or deny the allegations as related to the other Defendants, therefore those allegations are denied.
50. Ring denies the allegations of paragraph No. 51 (sic) as related to it and lacks sufficient information to admit or deny the allegations as related to the other Defendants, therefore those allegations are denied.
AFFIRMATIVE DEFENSES
Ring alleges the following affirmative defenses and expressly reserves the right to allege any other defenses discovered as a result of additional discovery and investigation in this case:
1. Failure to state a claim upon which relief may be granted.
2. Lack of standing to sue Ring.
3. Statute of frauds.
4. Statute of limitations.
5. Laches
CROSS CLAIM
1. Rings’ cross claim is against Hullum and Crawford and arises from the Merger Agreement.
2. As part of the consideration for the Merger Agreement, Hullum and Crawford warranted that they had “defensible title” to the oil and gas properties conveyed to Ring.
3. Hullum and Crawford breached their warranty to the extent Plaintiff is awarded a judgment as to any interest conveyed to Ring under the Merger Agreement.
4. Ring would be entitled to exercise the “Remedies for Title Defects” provided in the Merger Agreement to the extent Plaintiff is awarded a judgment as to any interest conveyed to Ring under the Merger Agreement.
WHEREFORE, Ring prays for judgment in its favor and against all of the other parties for the following:
a. Plaintiff takes nothing by its claims against Ring;
b. Alternatively, if Plaintiff is awarded any of the interest conveyed to Ring under the Merger Agreement, then Ring is entitled to judgment against Hullum and Crawford for breach of warranty and the “Remedies for Title Defects” provided in the Merger Agreement;
c. A determination that Plaintiff is not entitled to an interest acquired by Ring subsequent to the Merger Agreement;
d. Quieting title to Ring in the interests conveyed to it under the MergerAgreement and any interests acquired by it subsequent to the Merger Agreement;
d. Rings’ attorney fees and costs of this action, and such other relief, at law and in
equity, as the Court deems just.
Outcome:
Plaintiff's Experts:
Defendant's Experts:
Comments: