South Central Petroleum, Inc. v. Long Brothers Oil Company

974 F.2d 1015 (8th Cir. 1992)

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Nature of the Case

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Facts

P, along with several other investors, purchased oil interests from Phillips Petroleum Company (Phillips). P bought all but an 11.22 percent interest in a gas well known as the Silberberg B-1. P signed an agreement with Ds 'to work together in an effort to buy Texaco's one-eighth (1/8) working interest in the Silberberg #B-1 unit.' P agreed to contact Texaco and attempt to acquire Texaco's Silberberg B-1 interest 'for a price not to exceed $400,000.' If successful, the parties agreed to purchase and own the interest according to a 50 percent (P), 37.5 percent (D), and 12.5 percent (Sawyer) arrangement. The parties agreed that their agreement would become effective September 15, 1988, and 'continue in effect for a period of six (6) months, and thereafter until terminated by any of the parties to this agreement with thirty (30) days prior written notice.' On December 5, 1988, Texaco agreed to sell its Silberberg B-1 interest to a third party. On February 14, 1989, P notified Sawyer that it was terminating their agreement pursuant to the thirty-day termination provision. Less than thirty days later, on March 15, 1989, P exercised its preferential purchase right and purchased Texaco's interest in the Silberberg B-1 for $ 137,500. P did not notify Sawyer or D of the Texaco acquisition. Ds learned of the deal and demanded that P convey one-half of the acquisition pursuant to the September 27, 1988 agreement. P refused. Ds moved the district court for summary judgment. The motion was granted and the district court ordered P to transfer one-half of the acquired Texaco interest to D, who in return were ordered to pay Long Brothers one-half of the purchase price and transaction costs ($90,928) minus an offset ($28,301), representing one-half of the income minus expenses earned by P from the Texaco interest from the time Long Brothers acquired it until the district court's order. During the trial to determine the profits from the well, the court admitted evidence expert opinions based on information obtained from a commercial production service, which received its information from the state, which in turn obtained its information from the operator of the well. None of these sources testified at the trial but experts regularly used such data in formulating their opinions. The court stated that experts may testify as to conclusions based on evidence that's not itself independently admissible. P appealed.