Tuesday, June 10, 2014

Dews v. Halliburton Industries case brief summary

Dews v. Halliburton Industries case brief summary
288 Ark. 532, 708 S. W. 2d 67 (1986)

Procedural Posture
Defendant Lyle Dews was found to be responsible for debt acquired by Halliburton Industries Inc. in the drilling of an oil well that amounts to approximately $519,397.40. Due to Massey not appearing in court, the Trial court found that Massey and Dews were jointly liable for the companies claims. 

Defendant, Lyle Dews had an executed a farmount agreement for leases from Crystal Oil Co.
Terms of the lease required that Dews, at his expense, drill a test well by May 15, 2982 and continue drilling to a depth sufficient to test the Cotton Valley Formation.
Crystal reserved an overriding royalty interest. However, if production was obtained, then Dews would be assigned an interest in the leasehold estate.
Dews paid no consideration for this farmount.
Dews then entered into an agreement with Bruce Massey whereby Massey would pay the Dews $50,000 in exchange for Dews assigning Massey his right to the leasehold estate under the Crystal-Dew agreement. Dews reserved a 5% of the leasehold estate as an overriding royalty interest. In return Dew agreed to have the well be drilled.
Drilling was completed before deadline and Crystal signed over leases. However, Massey contracted the work to be done, but since he had not fulfilled his contractual obligation of $50, 000, Dews didn’t turn over the leases as he had agreed with Massey.
Companies responsible for drilling filed suit against Massey in attempt to collect money and then Dews was brought in as a party defendant and Dews then cross claimed against all the companies.

Whether defendant was liable for expenses created by a contract with a third party.

Plaintiff can be held liable under a quasi contract theory. 

Dews was aware that Massey was in breach of their contract, but allowed the worked to continue in hopes that his contractual obligation would be fulfilled. It was demonstrated that Dews was aware that the companies were performing a valuable service to the well. Massey authority to contract the work came from the same contract that he breached, therefore, Dews was entitled to not stand by and watch the companies perform labor.

Result: Supreme Court affirmed.

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