A St. Clair County jury returned a verdict in favor of defendant Dupo Oilfield on June 21 in a case alleging an investor did not receive its interest in the business.
Circuit Judge Heinz Rudolf presided over the case.
Dupo Oilfield Development, Inc., through its president Ray Cole Jr., was represented in the case by Chad J. Sullivan of Jackson Kelly PLLC in Evansville, Ind.
Jasper Oil Producers, Inc., through its president Gary Shields, was represented in the case by Jesse Gilsdorf of Mt. Sterling, Ill.
According to Jasper Oil Producers’ third amended complaint filed January 2016, the plaintiff alleged Shields had been long-time business and personal friends with Cole for more than 30 years.
Beginning in April 2008, the plaintiff alleged he routinely met with Cole to discuss and enter into negotiations to obtain financial backing to purchase an oilfield, commonly referred to as the “Dupo Oilfield” from Charles and Maxine Larson and Larson Resources Inc.
During the meetings Cole allegedly said he would be forming a corporation to acquire and purchase the oilfield or an oil lease of said interest from the Larsons and that the corporation would then need to raise the money to assist in the purchase.
In late August or early September 2008, Cole allegedly offered Shields a 1/32nd share of all mineral interests and development rights being acquired form the Larsons in the Dupo Oilfield, as well as a right to participate in any new wells to be drilled thereon, for a $40,000 investment.
On behalf of Jasper, Shields rejected the offer.
However, he allegedly made a counter-offer for a $25,000 investment in exchange for a 1/32nd “carried working interest” in an oil lease known as the “Larson Lease.”
On Sept. 16, 2008, the defendant allegedly accepted the plaintiff’s counter offer. The money was tendered the next morning, which was allegedly intended for a down payment on the purchase of the oilfield.
On Sept. 25, 2008, the defendant allegedly acquired the interest in the Dupo Oilfield.
When Cole allegedly informed the plaintiff of the purchase one month later, he informed Shields that after speaking with his attorney, he believed Jasper should have paid $40,000 like the other investors even though he had accepted the lesser offer.
Cole allegedly stated that “he did not know how to put down Jasper as an owner, and would have to figure this out as the other investors were owners of the company.”
The plaintiff allegedly contacted the defendant several times over the following months to inquire about the status of Jasper’s purchase in the Dupo Oilfield.
Cole allegedly informed Shields that the oilfield was taking “a great deal” of his time and that he would prepare the documents when he had time.
By August 2009, Jasper was still not receiving any proceeds from the production from the Dupo Oilfield or any invoices for the plaintiff’s share of any expenses from the oilfield.
“Thereafter, each time that plaintiff confronted defendant concerning the conveyance of the interest defendant would acknowledge that he intended to get it done, but always had reasons why he had not performed.
“Plaintiff relied on these statements made by the defendant due to the history of the parties, and particularly, the long standing friendship and business relationship of Gary Shields and Ray Cole, Jr.
“The defendant made these statements for the purposes of misleading the plaintiff as to the defendant’s intentions knowing that defendant was not going to perform his obligations under the agreement,” the complaint stated.
On March 3, 2011, Shields was at a meeting of the Illinois Oil and Gas Association when he confronted Cole about the status of the conveyance to Jasper.
Cole was allegedly vague and non-responsive about his intent to complete the conveyance.
“Plaintiff, by defendant’s actions on this occasion, determined at that point that Dupo was not going to deliver on the promised documents transferring the interest and showing the conveyance, and thus defendant was not going to fulfill its obligations under the agreement,” the complaint stated.
The plaintiff also alleged that no other investors were assigned their ownership rights in the mineral interests.
As of December 31, 2015, the Dupo Oilfield had allegedly sold $2.3 million worth of oil. The plaintiff’s interest would have been about $72,074.
Dupo Oilfield answered the third amended complaint on Nov. 7, arguing that the parties agreed to an investment of $40,000.
The defendant also argued that no written agreement between the parties regarding the conveyance of the mineral interest exists.
“Had Defendant known Plaintiff did not intend to pay the entire $40,000 purchase price it would have either refunded the partial payment or began billing Plaintiff for his proportionate share of expenses as a working interest holder,” the affirmative defenses stated.
The defendant denied that a meeting of the minds necessary to form an agreement took place and that Jasper failed to perform its obligations under the agreement.
It argued that the agreement was that a 1/32nd working interest would be assigned upon payment of $40,000 and execution of the written operating agreement.
Dupo requested the case be dismissed, arguing that the statute of frauds bars the case.
Before the third amended complaint was filed, the Fifth District Appellate Court held on September 29, 2015, that the circuit court erred in dismissing the complaint for a breach of contract based on the five-year statute of limitations.
“Assuming the plaintiff is able to prove his equitable estoppel defense to the statute of limitations, the plaintiff’s claim for specific performance states a cause of action upon which relief may be granted because the contract at issue is evidenced by a writing sufficient to satisfy the Statute of Frauds, and a contract to convey a mineral interest is considered a contract for the sale of real estate.
“Although the circuit court has discretion as to whether to grant specific performance, it erred in dismissing that count prior to an evidentiary hearing,” the appellate court held.
St. Clair County Circuit Court case number 14-AR-236