RSM Production Corporation v. Vintage Petroleum, Inc.
(Tex.App.- Houston [14th Dist.] Oct. 23, 2008)(Seymore) (contract formation, enforceability, effect of missing
signature of third party, sj)

We conclude the summary judgment proof did not conclusively establish Vintage's
and Santa Fe/Devon's intention not to be bound unless Premier also signed the
contract. Accordingly, we sustain RSM's two issues.

REVERSED AND REMANDED: Opinion by Justice Seymore  
Before Justices Brock Yates, Seymore and Boyce
14-07-00563-CV RSM Production Corporation, A Texas Corporation v. Vintage Petroleum, Inc., A Delaware
Corporation, and Devon Energy Corporation, A Delaware Corporation, Successor to Santa Fe Energy
Resources, Inc.--Appeal from 334th District Court of Harris County
Trial Court Judge:
Sharon McCally  


M E M O R A N D U M  O P I N I O N

In this breach-of-contract case, appellant RSM Production Corporation, a Texas -corporation (“RSM"),
appeals a take-nothing summary judgment in favor of appellees, Vintage Petroleum, Inc., a Delaware
corporation (“Vintage"), and Devon Energy Corporation, a Delaware corporation, successor to Santa Fe
Energy Resources, Inc. (“Devon" and “Santa Fe," respectively).  Concluding a genuine issue of material fact
exists regarding whether Vintage and Devon's predecessor, Santa Fe, intended to be bound by an
agreement with RSM absent the signature of a third entity, Premier Consolidated Oilfields, PLC (“Premier"),
we reverse and remand.[1]

I.  Factual And Procedural Background

RSM had an agreement with the government of Grenada giving RSM the exclusive right to obtain an
exploration license to conduct drilling operations on approximately 4.75 million acres offshore of Grenada.  In
March 1998, RSM negotiated an Initial Grenada Inter‑Company Agreement (“Agreement") with Vintage,
Santa Fe, and Premier.[2]  The Agreement contained the following opening recital: "THIS AGREEMENT is
made this ___ day of March, 1998, by, between and among Vintage Petroleum, Inc. . . . , Premier Oil Plc . . .
, Santa Fe Energy Resources, Inc. . . . , and RSM Production Corporation . . . ."  Under the Agreement, RSM
was required to assign to each of the three other parties an interest in the exploration license RSM would
obtain from Grenada.

The Agreement contained several provisions specifying the parties' respective rights and obligations and the
stages through which the operation was to proceed. First, the Agreement acknowledged Vintage's, Santa
Fe's, and Premier's wish to acquire undivided interests in the exploration license RSM was to obtain from the
government of Grenada:

While recognizing the existence of this force majeure condition [in existence while there is any adverse claim
regarding Grenada's ownership of the petroleum rights in any portion of the area covered by the License
and uncertainty regarding maritime boundaries among Grenada, Venezuela, and Trinidad and Tobago] and
the uncertainty surrounding its resolution, Vintage, Premier and Santa Fe wish to acquire undivided interests
in the License at this time, and RSM wishes to assign such interests, retaining a 30% carried working interest
until payout in each development license and a 4% overriding royalty interest on all production from the area
covered by the License, and an additional 42% working interest in the License. RSM anticipates that it will
later assign the retained 42% working interest to a larger, more experienced oil company (the “Bell Cow").  
By this instrument, the parties set forth their binding contractual agreement concerning such assignments,
retained RSM interests, and other matters.

Second, under the Agreement, after the 42% working interest had been assigned to the “Bell Cow," the
parties were to “promptly negotiate and unanimously agree upon an operating agreement to be effective
upon issuance of the exploration license . . . ."

Third, “[s]ubject to the receipt of all necessary approvals by the Government of Grenada and the parties'
execution of the operating agreement," RSM was required promptly to “assign an undivided 9-a% interest to
each of Vintage, Premier and Santa Fe, reserving and retaining the remaining 72% interest."

Fourth, the Agreement established who would bear the expense of activities, including exploration work,
done before the exploration license was issued by the government of Grenada:

Activities Before License Issuance. The parties anticipate that the primary activities prior to exploration
license issuance will be negotiations by the Government of Grenada (with assistance from RSM) in respect
of its maritime boundaries, although there may be some reprocessing of existing seismic data or other
technical studies during this time period and even, if allowed by the Government of Grenada, some new
exploration work. All expenses during this period shall be borne solely by Bell Cow, Vintage, Premier and
Santa Fe . . . .  The parties agree that as of the date of this agreement, the only costs and expenses that
have been incurred so far in connection with the contemplated transactions amount to a total of $ ___, all of
which have been initially paid by RSM subject to reimbursement as described above.

Fifth, the Agreement provided, “Upon the execution of this agreement a Management Committee shall be
formed to provide supervision, direction and approval of the activities conducted prior to the issuance of the
exploration license."  The Agreement further provided “Each of the parties shall appoint one representative
to the Management Committee and one alternate representative."

The Agreement also included a withdrawal provision. That provision stated in part, “Prior to the execution of
the Operating Agreement, any party may withdraw or otherwise terminate its participation in this agreement
by paying to the Operator for the benefit of all remaining parties the amount of $50,000."[3]

Finally, the Agreement concluded: “IN WITNESS WHEREOF, the parties have executed this instrument, with
the intention of being contractually bound thereby, as of the date set forth above."  The Agreement then
included four signature blanks - one for ARSM Production Corporation, A Texas corporation"; one for
“Vintage Petroleum, Inc., A Delaware corporation"; one for “Premier Consolidated Oilfields PLC, An English
corporation"; and one for “Santa Fe Energy Resources Inc., A Texas [sic] corporation."

On March 26, 1998, RSM's president, Jack Grynberg, signed the Agreement and sent it to Vintage, Santa
Fe, and Premier under a cover letter, in which he requested that each company's representative execute
and return a copy.  Although Vintage and Santa Fe signed the Agreement after receiving it, Premier
experienced financial difficulties and never signed the Agreement.  Nothing in the Agreement conditions any
party's participation on the participation of Premier or any other party.

In the fall of 2002, Grynberg sent a letter to Vintage and Santa Fe (by then, Devon) concerning the
Agreement and attaching information.[4]  In response, on December 5, 2002, Vintage sent a letter to
Grynberg advising him “that Vintage has elected not to pursue the project . . . ." and returned the information
that RSM had provided for Vintage's consideration.  The same month, Santa Fe/Devon also informed RSM
of its intention not to pursue the project and returned the same information to RSM.

The parties did not obtain a “Bell Cow," execute an operating agreement, or form a  management
committee.  RSM never assigned an interest in an exploration license to Vintage, Santa Fe/Devon, or a “Bell
Cow", and had not charged the other parties with the expenses of activities occurring before issuance of an
exploration license.    By 2005, RSM had done seismic exploration, but no drilling, in connection with the
project.  As of 2006, Grynberg did not have a license for the project.

In November 2005, RSM filed suit against Vintage and Santa Fe /Devon alleging that Vintage and Santa
Fe/Devon breached the Agreement by failing to pay a $50,000 withdrawal fee as required under the
Agreement.  Vintage and Santa Fe/Devon filed a joint motion for summary judgment on the sole ground that
no valid contract existed between RSM, Vintage, and Santa Fe/Devon because one of the intended parties,
Premier, did not sign the proposed agreement, and the language of the agreement and the parties'
collective inaction conclusively demonstrated the parties did not intend to be bound by an agreement not
signed by all parties.  On June 6, 2007, the trial court granted Vintage and Santa Fe/Devon's motion for
summary judgment and dismissed RSM's claims with prejudice.

II. Issues Presented

RSM raises two issues on appeal: (1) whether the Agreement was “intended to become effective only upon
the execution by all the parties for which signature blanks were provided"; and (2) whether it was Vintage's
and Santa Fe/Devon's “intention not to be bound by the Agreement that they signed unless all parties
named in it also signed."[5]  These two issues essentially present a single challenge to the sole ground
raised in Vintage and Santa Fe/Devon's traditional motion for summary judgment C that no valid contract
existed between RSM, Vintage, and Santa Fe/Devon because (1) Premier did not sign the proposed
agreement, and (2) the language of the agreement and the parties' collective inaction conclusively
demonstrated the parties did not intend to be bound by an agreement not signed by all parties.[6]

III. Summary Judgment Burden And Standard Of Review

To prevail on a motion for traditional summary judgment, the movant must show there is no genuine issue of
material fact and the movant is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c); Sw. Elec.
Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).  A defendant is entitled to summary judgment if it
conclusively negates an essential element of the plaintiff's case or conclusively establishes all necessary
elements of an affirmative defense.  Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995).  A party
conclusively establishes a matter if reasonable people could not differ about the conclusion to be drawn from
the evidence.  See City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005).

We review a trial court's grant of a traditional summary judgment de novo.  See Provident Life & Accident Ins.
Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003).  In reviewing a summary judgment, we take as true all
evidence favorable to the nonmovant, and we resolve all doubts and indulge every reasonable inference in
the nonmovant's favor. Grant, 73 S.W.3d at 215.

IV. Did The Summary Judgment Proof Conclusively Establish Vintage And Santa Fe/Devon Did Not
Intend The Agreement To Bind Them Unless Premier Also Signed?

The question, then, is whether Vintage and Santa Fe/Devon's summary judgment proof established their
intent not to be bound by the Agreement unless Premier also signed.  “While intent is usually a fact question,
an issue which is normally a question of fact can be proved so conclusively by evidence that it becomes a
matter of law."  IMCO Oil & Gas v. Mitchell Energy Corp., 911 S.W.2d 916, 920 (Tex. App.-Fort Worth 1995,
no writ) (citing Dixon v. Sw. Bell Tel. Co., 607 S.W.2d 240, 242 (Tex. 1980)).  To be entitled to summary
judgment, it was incumbent on Vintage and Santa Fe/Devon to establish their intent as a matter of law.  See
id.  The summary judgment proof they offered must establish the existence of the fact such that reasonable
minds cannot differ on the conclusion to be drawn from the proof.  See id. (citing Triton Oil & Gas Corp. v.
Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982)).

In their summary judgment motion, Vintage and Santa Fe/Devon relied on the following summary judgment
proof to establish they did not intend to be bound by the Agreement absent Premier's signature:  (1)
provisions in the Agreement, including (a) the opening recital, which named Premier as one of the parties,
(b) portions of the paragraph stating the desire of Vintage, Premier, and Santa Fe/Devon to acquire
undivided interests in the Grenada exploration license, (c) portions of the paragraph conditionally requiring
RSM to assign an undivided 9a % interest to Vintage, Premier, and Santa Fe/Devon, (d) portions of the
paragraph requiring “the parties" to establish an operating agreement, (e) portions of the paragraph
requiring Bell Cow, Vintage, Premier and Santa Fe/Devon to bear expenses incurred before issuance of the
license, (f) portions of the paragraph providing for formation of the management committee and for “[e]ach of
the parties" to appoint representatives, (g) portions of the paragraph regarding RSM's intention to find a
“Bell Cow", (h) the merger clause, and (i) the concluding paragraph stating the intention of the “parties" to be
bound and  containing a signature line for each party, including Premier; (2) Grynberg's cover letter to the
representatives of Vintage, Premier, and Santa Fe/Devon, requesting they sign the Agreement and return
one copy to him; (3) copies of the Agreement lacking Premier's signature; and (4) Grynberg's deposition
testimony in which he indicated provisions of the Agreement had not been accomplished, including (a)
formation of a management committee, (b) negotiation of an operating agreement, (c) enlistment of a “Bell
Cow", (d) RSM's charging its expenses to the parties, and (e) drilling, seismic work, technical studies, or
other exploration before 2005.[7]

In response, RSM argued the following proof showed there were disputed material fact issues on the
question of intent: (1) proof the Agreement was open to all interested parties; (2) proof Vintage and Santa
Fe/Devon had not qualified their participation by any requirement that additional parties execute the
Agreement, (3) proof Vintage and Santa Fe/Devon had signed the Agreement knowing of the uncertainty of
Grenada's issuance of the License, and (4) proof Vintage and Santa Fe/Devon allowed the co-venture to
proceed for over four-and-a-half years before withdrawing.

The record supports RSM's argument.[8]  In Grynberg's March 26, 1998 letter requesting the
representatives of Vintage, Premier, and Santa Fe/Devon to sign, Grynberg referred to telling “Conoco to
'lump it,'" suggesting there had been prior negotiations with that company, and the other parties knew about
those negotiations.  The Agreement itself contains the parties' acknowledgment of the uncertainty
surrounding resolution of the License issue with Grenada, but contains no language conditioning Vintage's
or Santa Fe/Devon's participation on Premier's participation.  According to Grynberg's deposition testimony,
although it was the initial intention that all three parties sign, it was not a requirement.  Finally, Vintage and
Santa Fe/Devon apparently waited until December, 2002Cover four years after Grynberg's March 26, 1998
letter requesting Premier's signature - to inform Grynberg they were not proceeding with the project.

In IMCO, the Fort Worth Court of Appeals affirmed a summary judgment against IMCO, a plaintiff who was
challenging the validity of a contract to which it was not a party.  IMCO, 911 S.W.2d at 917B18, 921.[9]  The
Fort Worth court rejected IMCO's argument “that the mere existence of multiple‑party signature lines and the
reference to all of the >parties' indicate[d] a requirement that the document will not become effective until
signed by all the parties for whom signature lines are provided."  Id. at 920.  Finding no Texas authority
involving multiple-party signature blanks, the Fort Worth court observed,

We believe the appropriate rule to apply was thoroughly discussed in Skinner v. Haugseth, 426 So. 2d 1127
(Fla. Dist. Ct. App. 1983), where the court analyzed the views in several jurisdictions and held that a contract
not signed by all of the parties will be valid unless the nature or the wording of the contract indicates a
condition precedent is intended.  Id. at 1131.

Id.[10]

The Skinner court, nevertheless, acknowledged authority to the contrary, i.e., indicating that an instrument,
executed by only some of the parties among whom it purports to be made, is not binding on those who have
executed it.  Skinner v. Haugseth, 426 So. 2d 1127, 1129 (Fla. Dist. Ct. App. 1983).  One circumstance
supporting such cases exists when A>the parties executing the instrument would have a remedy by way of
indemnity or contribution against the other parties named, which remedy is lost by the failure of such other
parties to execute the instrument.'" Id. (quoting 17 C.J.S. Contracts ' 62 (1963)); see 17 C.J.S. ' 75 (1999).   
Vintage and Santa Fe/Devon do not argue the contract in the present case provides for indemnification by,
or a right of contribution from, Premier.

To support the argument they are not bound by the Agreement, Vintage and Santa Fe/Devon rely on
Simmons & Simmons Construction Co. v. Rea, 286 S.W.2d 415 (Tex. 1955) and Scaife v. Associated Air
Center, Inc., 100 F.3d 406 (5th Cir. 1996).  In both cases, the appellate courts concluded there was no
binding written contract.  See Simmons, 286 S.W.2d at 418-19; Scaife, 100 F.3d at 411.  Those cases,
however, are distinguishable from the present case because in each the plaintiff was suing a non-signing
party.  See Simmons, 286 S.W.2d at 416 (jury trial involving signatory plaintiff suing non-signatory
defendant); Scaife, 100 F.3d at 407B08 (summary judgment involving non-signatory plaintiff suing non-
signatory defendant).  Neither case presented the issue of whether the signature of a third entity, not a party
to the suit, was a condition precedent to the parties' agreement to be bound.      

We conclude the summary judgment proof did not conclusively establish Vintage's and Santa Fe/Devon's
intention not to be bound unless Premier also signed the contract.[11]  Accordingly, we sustain RSM's two
issues.

Having sustained RSM's two issues, we reverse the summary judgment and remand for further proceedings.

/s/        Charles W. Seymore

Justice

Judgment rendered and Memorandum Opinion filed October 23, 2008.

Panel consists of Justices Yates, Seymore, and Boyce.

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[1]  Because the dispositive issue is clearly settled in law, we issue this memorandum opinion.  Tex. R. App.
P. 47.4.

[2]  Premier is not a party to the lawsuit.

[3]  The Agreement specified that RSM was to be “designated the Operator during the first two years of the
exploration license, with a provision that a new operator shall be elected at the end of the first two years by
the parties holding at least a 55% interest in the License."

[4]  From this point on, in the opinion, we refer to Devon as “Santa Fe/Devon" to reflect the relation between
the original and successor entities.

[5]  RSM also refers to, but does not challenge, the trial court's handwritten notation on the judgment
indicating it sustained Vintage and Santa Fe/Devon's objections to Grynberg's affidavit in support of RSM's
response to the motion for summary judgment.

[6]  Vintage and Santa Fe/Devon state that their summary judgment motion was a traditional, rather than a
no-evidence, motion.

[7]  Vintage and Santa Fe/Devon characterize Grynberg as testifying no seismic work was done before
2005.  Grynberg, however, testified the last seismic work was done in 2005.

[8]  Although RSM relied on Grynberg's affidavit in support, we refer only to those assertions for which there
is other documentary support in the record.

[9]  IMCO was a mineral rights case involving at least two operating agreements on the same tract and
multiple preferential rights to purchase.  See IMCO Oil & Gas v. Mitchell Energy Corp., 911 S.W.2d 916,
917B18 (Tex. App.- Fort Worth 1995, no writ).  In 1993, IMCO was attempting to purchase interests that had
been the subject of an agreement between IMCO's prospective seller, Westland Oil, and another party,
Mitchell Energy, which had succeeded to rights governed by agreements among yet other parties.  See id. at
918.  IMCO's purchase of the rights it sought was thwarted when Mitchell - pursuant to a 1972 agreement
signed by some but not all parties for whom there were signature blanks - exercised its preferential right to
the property IMCO was trying to purchase.  See id.  IMCO was challenging the validity of the 1972
agreement.  See id. at 920.

[10]  The Skinner court also allowed that a party could “prove by parol evidence that when he signed the
contract he made it known to the other parties who now seek to sustain the contract that he only intended to
be bound if all parties signed it."   Skinner v. Haugseth, 426 So. 2d 1127, 1131 (Fla. Dist. Ct. App. 1983).  
The summary judgment proof in the present case contains no such evidence.

[11]    In Turboff v. Gertner, Aron & Ledet Investments, this court considered the procedural mirror image of
the present case.  See 763 S.W.2d 827  (Tex. App. - Houston [14th Dist.] 1988, writ denied).  Gertner, Aron,
& Ledet (GAL) was suing the defendant, Turboff, to enforce a buy-sell agreement that contained a signature
line for a non‑party, First Texas, which was to consent to financing terms set forth in the agreement.  See id.
at 828.  First Texas, however, had not signed the agreement.  See id.  GAL filed a motion for partial
summary judgment, arguing that, as a matter of law, First Texas's consent was not required to bind Turboff.  
See id. at 829.  GAL prevailed in the trial court, and Turboff appealed.  See id. at 828.  In a split decision,
this court reversed.  Id. at 832.  After listing eight pieces of summary judgment proof, the court reasoned:

The evidence outlined above indicates that the transaction was not consummated as proposed or intended
and supports the reasonable inference that the consent of First Texas to the financing terms of the
agreement was contemplated by the parties.  We must indulge all reasonable inferences in favor of the
non‑movant.  This inference is sufficient to raise a fact question concerning whether the parties
contemplated the consent of First Texas as a condition to enforceability of the agreement.  Furthermore, in
the face of this inference, the irrelevance of First Texas' [sic] signature cannot possibly be established as a
matter of law.  Therefore, the summary judgment evidence was insufficient to support the trial court's order
and the judgment was improper.  For the same reason summary judgment for Turboff would have been
equally improper.

Id. at 830 (emphasis added) (citations omitted).  Thus, dictum in Turboff supports this court's decision in the
present case.

After remand and on appeal from a bench trial, the Corpus Christi court of appeals affirmed a judgment in
favor of GAL.  See Turboff v. Gertner, Aron & Ledet Invs., 840 S.W.2d 603, 612 (Tex. App.- Corpus Christi
1992, writ dism'd).   The court extensively discussed language in the agreement that stated conveyance of
the property was "subject to" existing First Texas liens - language not mentioned in this court's opinion.  See
id. at 606-08.  The court observed that “subject to" could reasonably be construed to mean something other
than setting a condition precedent.  Id. at 608.  The court also referred to an unchallenged finding of fact:

In its findings of fact, the trial court determined that the parties intended to be bound irrespective of First
Texas' [sic] consent.  The Turboffs do not challenge the sufficiency of the evidence to support that finding.  
They merely raise the issue that any evidence regarding intention of the parties is irrelevant because the
contract is facially unambiguous.  The unchallenged finding is binding.

The Fourteenth Court of Appeals opinion is a sound one.  The trial court attempted to follow it in the second
trial by trying the issue of intent.  No challenge is made to the findings.

Id. at 609 (citation omitted).  Thus, the opinions of this court and the Corpus Christi court of appeals in
Turboff support the conclusion that the summary judgment proof in the present case does not conclusively
establish lack of intent to be bound absent Premier's signature.