Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Kern County Super. Ct. No. S-1500-CV-252022 AEW. Arthur E. Wallace, Judge.
Valle & Associates, Jeffrey B. Valle, Katherine M. Pratt, and Steven M. Ragona for all Appellants.
Caldwell, Leslie, Proctor & Pettit, Michael R. Leslie, Andrew Esbenshade, Michael D. Roth and Jeanne A. Fugate for Plaintiff, Cross-defendant and Respondent and for Cross-defendant and Respondent.
Clifford & Brown, Patrick J. Osborn and Christopher Hagan for Plaintiff, Cross-defendant and Respondent.
OPINION
VARTABEDIAN, Acting P. J.
This is an appeal from summary judgment granted on cross-defendants’ motion for summary judgment or summary adjudication. We determine appellants have failed to show triable issues of material fact or to show respondents are not entitled to judgment as a matter of law. (See Code Civ. Proc., § 437c, subd. (c).) We also conclude that appellants’ remaining contentions lack merit. Accordingly, we affirm the judgment.
FACTS AND PROCEDURAL HISTORY
Appellant Saba Petroleum, Inc. (Saba) was, in 1995, an independent company engaged in secondary extraction of oil from mostly depleted fields. In August of 1995, Saba entered into a property sale and transfer agreement (hereafter sale agreement) with Shell Western E&P Inc. (which became SWEPI, LP) for the sale and assignment to Saba of certain equipment and leases in Santa Barbara County. (The seller is often referred to by the parties as SWEPI; the company was renamed CalResources at some point, and then became Aera Energy LLC; we will refer to the company as Shell.)
Shell, among other obligations in the 50-page agreement, was to assign to Saba two leases in an oil field known as the Capitan field. In addition, the agreement provided that Saba would be responsible to “plug and abandon” all wells on the property and, with limited exceptions, would be responsible for environmental restoration.
Under the Public Resources Code, the Division of Oil, Gas and Geothermal Resources (DOG) has the authority to order the last registered operator of a well to “plug and abandon” nonproducing oil wells. (See Pub. Resources Code, § 3237.) This term of art primarily means taking steps to prevent the well from releasing oil into the water table and removing surface equipment associated with the well. (See Wells Fargo Bank v. Goldzband (1997) 53 Cal.App.4th 596, 604-605.) The authority to order an operator to plug and abandon a well arises upon a determination by DOG that the well is deserted, in the present context by determining the well has been out of production for an extended period. The sale agreement contained a schedule that required Saba to abandon or return to production a set number of wells yearly over the course of an 84-month period.
One of the leases required consent of the lessors, Robert F. Erburu and Barbara E. Gholson (hereafter Erburu), to the assignment. The sale agreement provided: “In the event any of the interests to be conveyed or transferred to [Saba] … require the consent of a third party to assign [Shell’s] interest, then [Saba] shall be responsible for obtaining the necessary waivers or consents. [Shell] shall not be liable to [Saba] by reason of any inability or failure to obtain any such … consent to assignment. If [Saba] is unable to obtain a required … consent, the Purchase Price shall not be reduced … and such interest shall not be excluded from the [property] conveyed, transferred or assigned to [Saba] at closing.” (There was evidence that some employees of Shell may have thought Shell had obtained Erburu’s consent at the time of an earlier negotiation with Saba in 1991. In any event, one of Shell’s agents testified in deposition that it was common in the oil and gas business to sell lease interests for which the required consent had not been obtained and then “quote, engage in curative activities after the sale basically. And we’ve done it before and we’ll do it again.”)
Appropriate forms were filed with the state establishing that Saba was now the operator of the Capitan field, assignments of the leases were recorded, and Saba began work on the property. In addition, Shell wrote to Erburu seeking consent to the assignment.
Erburu declined. In February of 1996, Chris Hall, a petroleum engineer working for Erburu, confronted Saba’s employee, Marlin Brown, about Saba’s activities on the property. He pointed out that consent for the assignment had not been granted, yet the assignment had been executed and recorded. He suggested that Erburu might terminate the lease, since assignment without the required consent constituted a violation of the lease.
As Shell and Saba tried to convince Erburu to consent to the assignment, Saba also contended to Shell that the sale agreement should be wholly or partially voided because of Erburu’s failure to consent to the assignment. In response, Shell sent a letter to Saba, backdated to August 15, 1995 (the letter agreement), which has become the primary focus of this appeal. The letter is addressed to Saba and, in relevant part, states:
“The purpose of this correspondence is to confirm operating arrangements with regard to the Erburu Lease … while efforts are ongoing to secure the consent of the lessors of the assignment of the lease. [¶] The assignment of the Erburu lease shall be subject to obtaining the lessors[’] consent to the assignment. The effective date of the assignment shall be the date that such consent has been obtained. In the interim, the following operating arrangements shall be in full force and effect:
“1. Effective August 15, 1995, [Shell] hereby assigns and sets over to [Saba] all of [Shell’s] rights to operate said Erburu lease for the purpose of extracting hydrocarbons there from. From and after August 15, 1995, Saba shall be responsible for all expenses and costs of any nature or kind with respect to the Erburu lease.
“2. Effective August 15, 1995, Saba shall be entitled to receive one hundred percent (100%) of all of the proceeds from the sale of hydrocarbons from the Erburu lease.
The sale agreement had provided that Shell was entitled to the proceeds from “oil in storage above the pipeline connection” on the effective date of the agreement.
“This letter agreement shall ipso facto terminate on the date that consent has been secured from the lessors of the Erburu lease, and thereafter the relationship between [Shell] and Saba shall be governed by [the sale agreement].”
Erburu never consented to the assignment.
Saba apparently suffered financial reverses. In the fall of 1998, Saba was taken over by new management affiliated with Greka Energy Corporation (then known as Horizontal Ventures, Inc.).
Soon after the management change in 1998, DOG notified Saba it would require Saba to plug and abandon the Erburu wells. Saba’s new general counsel, Susan Whalen, wrote to Shell’s in-house counsel claiming the sale agreement was unenforceable “because of [Saba’s] lack of receipt of any benefit in the transaction” and notified DOG that Saba contended the plugging and abandonment obligation rested with Shell. Shell’s counsel responded on January 11, 1999, that Shell considered the sale agreement to be in full force and effect, and that the plugging and abandonment responsibility was Saba’s.
In March of 1999, Saba merged with Greka by means of an exchange of Saba stock for that of Horizontal Ventures, Inc., which subsequently was renamed Greka Energy Corporation. Thereafter, Saba continued operations as a wholly owned subsidiary of Greka Energy Company.
DOG issued its formal order for capping and abandonment on August 6, 1999. After Shell repeatedly rejected Saba’s demands that Shell resume responsibility for the oil field, Saba entered into a written agreement with DOG by which Saba agreed to plug and abandon the wells pursuant to a stated schedule. Six months later, Saba had failed to perform under the agreement. Threatened with enforcement action by DOG, Saba began plugging and abandonment operations in the first half of 2000. Greka Oil & Gas, Inc., an “affiliated company” of Saba, actually performed the plugging and abandonment at a claimed cost of about $3 million. Saba assigned its claims against Shell to Greka Oil & Gas, Inc., in a document dated April 2, 2001.
Saba continued to demand action and indemnification from Shell during this time, demands which Shell rejected.
On December 30, 2003, Aera Energy LLC, a Shell partnership with Exxon Mobile and successor to SWEPI and Cal Resources, filed suit against Greka CA, Inc., claiming unpaid oil-well royalties. Greka Oil & Gas, Inc., and Greka CA Inc. (collectively, Greka) filed a cross-complaint on March 11, 2004, joining various Shell entities as cross-defendants with Aera Energy LLC. In addition to asserting Greka’s own claims for unpaid royalties, the cross-complaint alleged Shell had engaged in a scheme to defraud Saba by selling it oil leases Shell knew it had no authority to sell in the absence of the lessors’ consent. It also alleged Shell had negligently misrepresented the status of the necessary consents, sought rescission of the sale agreement and a declaration that the agreement was void, and sought indemnity and contribution for its plugging and abandonment costs.
The parties engaged in extensive and contentious discovery. Monetary sanctions were imposed on attorneys for both sides. The sanctions imposed on Greka’s attorneys, Valle & Associates, are the subject of Valle’s own appeal in the present case.
Both sides filed motions for summary judgment or summary adjudication. Greka contended it should prevail on all of its claims attacking the validity of the sale agreement, since the agreement specifically provided it would “terminate” unless approved by Shell’s board of directors within 30 days after execution of the sale agreement, and discovery had not produced any evidence of such approval. Shell requested summary judgment on all of Greka’s causes of action because they were barred by the applicable statutes of limitations. In addition, Shell requested summary adjudication of each cause of action on the basis of the statute of limitations and on the additional basis of uncontroverted facts and defenses particular to each cause of action.
Summary judgment resolves all causes of action; summary adjudication resolves damages and duty issues, affirmative defenses, or some, but not all, causes of action. (Code Civ. Proc., § 437c, subd. (a), (f)(1).) To avoid the cumbersome “summary judgment or in the alternative summary adjudication,” and because the trial court granted judgment on all remaining causes of action (after the parties’ voluntary dismissal of other causes of action), we will refer to the motion and order simply as ones for summary judgment.
After hearing on the motions, the court issued a minute order denying Greka’s motion. The court concluded Greka had not identified a specific duty of Shell or other specific claim that would arise from a determination the sale agreement had terminated, so summary adjudication was inappropriate. Three days later, the court issued a minute order granting Shell’s motion for summary adjudication of the first through fifth causes of action (those not dealing with the Kern County oil royalties). The court concluded that the uncontroverted facts established a date (Jan. 11, 1999) upon which Saba (and therefore Greka) knew or should have known of Shell’s unqualified assertion that Saba alone was responsible for plugging and abandonment at the Capitan oil field, and that date lay outside the period of limitations for all relevant causes of action. The minute order directed Shell’s counsel to prepare a formal order.
After submission of proposals and filing of objections by Greka, the court adopted the second proposed order submitted by Shell. The reasoning of this order was far more extensive than that of the minute order, although the net result was the same. In addition to the rationale expressed in the minute order, the court concluded that Greka’s indemnity and contribution claims were precluded by the express terms of the sale agreement, which remained in full force and effect because Greka’s fraud, rescission, and declaratory judgment attacks on the sale agreement were time-barred. The court also entered a formal order denying Greka’s motion for summary adjudication.
In addition to granting summary judgment as described above, judgment was entered December 28, 2005, in favor of Shell and against Greka. The judgment recited that, by stipulation of the parties, the initial complaint and all remaining cross-claims were dismissed and were referred for binding arbitration. The judgment also awarded $5,208.60 to Shell as sanctions from Greka and its counsel, Valle & Associates, jointly and severally. Greka and counsel filed timely notices of appeal.
DISCUSSION
I. Introduction
Although Greka raises several other issues on appeal, its primary focus is on the trial court’s conclusion that all of Greka’s causes of action were barred by the statute of limitations. As will be seen, we conclude the trial court erred in this regard with respect to the indemnity cause of action but correctly found the remaining causes of action were untimely filed. However, as discussed in section III, post, the court’s alternative basis for granting summary adjudication of the indemnity cause of action -- namely, that Shell showed no right of indemnity existed -- was correct. Accordingly, we will conclude the trial court correctly granted summary judgment.
Greka also contends the trial court erred in overruling Greka’s demurrer to one of Shell’s affirmative defenses and that the court erred in compelling certain discovery. We will conclude Greka was not prejudiced by these rulings, since all causes of action were properly adjudicated against it.
Finally, Greka and its counsel contend the trial court abused its discretion in imposing monetary sanctions against them for discovery violations. We will conclude the court did not abuse its discretion.
As a result of these conclusions, we will affirm the judgment in its entirety.
II. Statute of Limitations Issues
The trial court determined that there was no material conflict in the evidence establishing January 11, 1999 as the latest possible date upon which Greka knew or should have known Shell took the position that Greka was solely responsible for closing down the Capitan oil field. Consequently, neither the doctrine of delayed discovery nor other tolling rules would be effective to permit the filing of the cross-complaint on March 11, 2004. This rationale was carried over into the formal order granting the motion for summary judgment. Greka contends the court erred with respect to Greka’s fraud, declaratory relief, and indemnity causes of action.
A. Fraud
Greka makes three central points concerning its fraud cause of action. First, it says a cause of action cannot accrue until the “plaintiff has suffered actual and appreciable harm.” Second, it contends Shell misled the trial court into assuming that the date of discovery of Shell’s alleged fraud was the same as Greka’s discovery of facts permitting Greka to assert the contract was void due to failure of consideration. Third, Greka contends it did not “discover” that Shell “never intended to honor its promises” in the letter agreement until some unspecified date within the statute of limitations period. We will briefly address each point.
Greka (through its predecessor Saba) paid Shell $25,000 on or about August 15, 1995, for lease rights it alleges were worthless. This payment constitutes actual and appreciable harm. (See Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240-1241.) While Greka argues that the fraud in question arose from Shell’s intent never to honor the promises made in the letter agreement (which was written in March of 1996 but backdated to August 15, 1995), the net effect of the alleged fraud was to prevent Saba from cancelling the sale agreement and recovering the $25,000 it already had paid.
Relying on Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, Greka next contends the trial court failed to distinguish Greka’s failure-of-consideration contract claim, which Greka first asserted in 1998, from its fraud claim, which it did not assert (and claims it did not know about) at that time. We do not doubt that, under Fox, some contract claims could arise earlier than the discovery that the same contract was fraudulently induced. Fox did not, however, alter the standard for discovery of facts sufficient to begin the limitations period. (Id. at p. 807.) Accordingly, if the same facts provide a basis for discovery of two different causes of action, the legal effect of discovery of those facts remains unchanged after Fox.
This brings us to Greka’s third claim, that the undisputed evidence did not establish that Greka knew or should have known of the alleged fraud by January 11, 1999, at the latest. Greka points to the fact that itdid not assert rights under the letter agreement until a meeting with Shell on February 7, 2001. It says Shell’s rejection of that claim on April 2, 2001, was the first event that put Greka on notice of fraud and began the three-year limitation period. (See Code Civ. Proc., § 338, subd. (d).)
Greka cites no authority for the proposition that rejection of a particular legal theory by the defendant is necessary to put a plaintiff on notice for limitations purposes. We have found no such authority, nor would we expect to, since such a rule would permit revival of an otherwise-barred cause of action any time a potential plaintiff’s newly asserted claim was rejected by a potential defendant.
In the present case, Shell asserted rights in 1998 and 1999 completely incompatible with Greka’s (current) interpretation of the letter agreement, which agreement had already been in existence for several years. Such an unqualified assertion of rights, in light of the parties’ mutual knowledge of the letter agreement, provided Saba and Greka with reason at least to suspect that Shell did not intend to treat the letter agreement as a modification of the sale agreement. Thus, the same facts -- categorical assertions by Shell of the continuing validity of the sale agreement -- constituted Greka’s discovery of both the contract and the fraud causes of action. (See Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at p. 807.) The trial court did not err in finding Greka’s fraud claim was barred by the statute of limitations.
B. Declaratory Relief
The parties to a business contract are, in the ordinary case, deemed to be familiar with the terms of the contract when they sign it. In addition, there is evidence in the present case that relevant Saba officials were aware specifically of a provision of the sale agreement that stated: “Any obligation of SWEPI to close the sale or exchange contemplated hereunder shall be, and is, conditioned on and subject to SWEPI’s Board of Directors having approved this AGREEMENT. In determining whether or not to approve, SWEPI’s Board of Directors may act with full and unfettered discretion in the exercise of its independent business judgment and shall not be prejudiced or limited in the exercise of such discretion and judgment by the prior execution of this AGREEMENT. If SWEPI’s Board of Directors fails to approve this AGREEMENT, whether by action or inaction, within thirty (30) days of its execution by all Parties hereto, this AGREEMENT shall forthwith terminate and neither Party shall have any further rights or obligations hereunder, except for [Saba’s] obligations under the Confidentiality Agreement and the Indemnification Agreement.”
When Erburu’s agent first contacted Saba to demand it stop activities and vacate the property, Saba’s manager wrote to Saba’s president, describing the seriousness of the problem and steps Saba could possibly take to resolve it. In that 1996 memo, the manager wrote: “SWEPI’s Board of Directors must approve this deal [DID THEY?].” (Brackets and caps in original.) As far as the record shows, Saba did not attempt to find out whether they did. During discovery in this case, Greka discovered that the board had neither approved nor disapproved the contract and amended its cross-complaint to seek a judicial declaration that the contract had terminated 30 days after its execution.
When a plaintiff knows of facts that make it reasonable to suspect it has a cause of action, the plaintiff is required to investigate. (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 398.) In 1996, Saba knew two facts with certainty: Assignment of the Erburu lease had been foiled, to Saba’s detriment, by Erburu’s failure to consent; and the failure of the board of directors of SWEPI to affirmatively ratify the sale agreement would have allowed Saba immediately to assert the nullity of the agreement, the very claim it now asserts in the declaratory relief cause of action. Given this information, it was incumbent on Saba to make the simple inquiry necessary to establish this cause of action. (See id. at p. 407.) If Shell had refused to provide this information or had misrepresented the status of ratification, the statute of limitations might well have been tolled. (See id. at p. 409.) In light of the importance of the issue, which was recognized by Saba at the time, failing to make any inquiry at all in 1996 was unreasonable as a matter of law. (See State ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 415-416.)
Greka also contends, in effect, that no statute of limitations whatsoever is applicable to the declaratory judgment claim because the sale agreement ceased to have any legal existence, by its own terms, on the 30th day after execution, in the absence of affirmative board action by Shell to approve the agreement. Greka cites several cases in which automatic termination provisions were given effect by the courts. (Abrams v. St. John’s Hospital & Health Center (1994) 25 Cal.App.4th 628; Boogaert v. Occidental Life Ins. Co. (1983) 150 Cal.App.3d 875; Silva v. National American Life Ins. Co. (1976) 58 Cal.App.3d 609.) In all of these cases, however, the automatic termination of rights in the contract was asserted as a defense to a timely claim by plaintiffs; none involved a statute of limitations issue. In the present case, Greka contends the contract automatically became a nullity on the 30th day after execution, thereby restoring the parties to their pre-contract relationship even if they continued to act pursuant to the contract; the cited cases provide no support for Greka’s contention.
A case from this court, neither cited nor discussed by Greka, provides relevant guidance. In Jacobs v. Tenneco West, Inc. (1986) 186 Cal.App.3d 1413 (Tenneco), the parties contracted to sell real property. The contract provided that escrow would be subject to approval by seller Tenneco’s board of directors. (Id. at p. 1415.) Seller refused to consummate the sale, relying on its board’s inaction on the contracts. (Ibid.) The buyer sued for specific performance of the contract.
This court held that the implied covenant of good faith and fair dealing required the seller to present the agreement to its board of directors, and its failure to do so constituted a breach of the contract. Accordingly, the Tenneco court held, the seller was not entitled to rely on its own breach of the contract in order to excuse its performance of the contract. (Tenneco, supra, 186 Cal.App.3d at p. 1418.) If this breach contributed to the nonoccurrence of the condition (board approval of the agreement), the seller could not rely on the condition to avoid the sale. If the seller could show the board would not have approved the agreement if it had considered the matter in good faith, the condition still could be operative as a defense to enforcement of the agreement. (Ibid.)
In the present case, of course, the metaphorical shoe is on the other foot. Here, the party with no duty to present the agreement to the board of directors, the buyer, seeks to rely on seller’s breach to avoid the contract. Nevertheless, one principle from Tenneco is directly applicable here: A contract does not become a nullity simply because of the nonoccurrence of a condition requiring board approval. (See also Rest.2d Contracts, §§ 229, 245.) Failure to obtain such approval may be a breach of the covenant of good faith and fair dealing, and it may or may not result in injury to the other party. But inherent in Tenneco is the requirement that the nonbreaching party must assert its rights under the contract or for rescission of the contract; the contract does not just disappear, since various facts are relevant to resolution of the issues of breach, causation, and injury in any particular case. (See also Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 146 & fn. 6.) Thus, an affirmative assertion of rights is necessary to avoid a contract based on failure of a condition, and the assertion of rights must occur in a timely manner to preserve those rights.
The trial court did not err in finding Greka’s declaratory relief claim was barred by the statute of limitations.
C. Indemnity
In keeping with established precedent, we conclude the trial court erred in granting summary adjudication of Greka’s indemnity cause of action on the basis of the statute of limitations. A claim for equitable indemnity does not accrue until the plaintiff actually pays the sums for which indemnity is sought. (See People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 751; Sunset-Sternau Food Co. v. Bonzi (1964) 60 Cal.2d 834, 843 [“The implied promise of indemnity and reimbursement applies only to the actual loss and not to the liability incurred.”]; see also General Brewing Corp. v. Clark (1968) 264 Cal.App.2d 518, 519.)
Shell contends this rule offends public policy because it permits a plaintiff to revive an entire indemnity claim simply by incurring an additional minor expense, such as renting a truck to inspect the abandoned wells five years after the last real work was done. We are confident, however, that existing doctrines of laches and estoppel are adequate to prevent such claims, even if a plaintiff’s ploy results in an indemnity claim that is technically with the statute of limitations. (See Transwestern Pipeline Co. v. Monsanto Co. (1996) 46 Cal.App.4th 502, 520.) In the present case, there is no contention of untimely discharge of the obligation for which indemnity is sought.
The trial court erred in concluding the indemnity cause of action was barred by the statute of limitations, but such error was not prejudicial because, as we discuss below, the trial court found in the alternative correctly that the indemnity cause of action fails on the merits.
III. The Merits of the Indemnity Cause of Action
The trial court ruled that Greka could not recover on its indemnity claim, even if not barred by the statute of limitations, because the sale agreement assigned abandonment and cleanup costs to Saba. The court concluded that this express contractual assignment of responsibility precluded an implied contractual indemnity claim arising out of those same responsibilities.
The order states: “The Court finds that the evidence is undisputed that the Greka Entities’ indemnity and contribution claims fail for the additional reason that, because the Greka Entities’ fraud, rescission and declaratory relief claims are time-barred, the PSA [sale agreement] remains in full force and effect. Under the PSA, (1) Saba agreed to indemnify [Shell] for all environmental claims and environmental cleanup liability arising directly or indirectly from the use, operation, maintenance, occupation, ownership or abandonment of the Capitan Oil Field, (2) Saba waived any and all claims for indemnity and contribution with respect to the condition of the Capitan Oil Field …, and (3) therefore any indemnity and contribution claim by the Greka Entities is precluded.”
Greka disagrees with this conclusion on two grounds. First, it argues that the letter agreement expressly modified any obligations Greka had under the sale agreement, and exempted the Erburu lease from any otherwise applicable obligations of Greka under the sale agreement. As a result, Greka argues, the obligations of the parties to one another are those established by the letter agreement, which Greka says gives rise to its equitable right of indemnity. Second, Greka reprises its argument that the sale agreement became a nullity when not approved by Shell’s board of directors within 30 days of execution of the agreement. We have discussed this latter claim above and will not address it here.
Greka’s first contention is based on a mischaracterization of the letter agreement. Greka contends that, as to the Erburu lease property, the letter agreement suspends the sale agreement in its entirety and establishes a regime between Shell and Saba of petroleum rights owner and oil field operator, with rights and duties imposed on the parties pursuant to a “typical” operator agreement. That, however, is not what the letter agreement says and it is not what the parties did.
We have set forth at length the contents of the letter agreement, ante at page 4. At this point, however, it will be helpful to reiterate certain passages from the letter. “The purpose of this correspondence is to confirm operating arrangements … while efforts are ongoing to secure the consent of the lessors of the assignment of the lease.” “The effective date of the assignment shall be the date” of such consent. “In the interim, the following operating arrangements shall be in full force and effect:” Shell “assigns and sets over to [Saba]” all of its “rights to operate said Erburu lease for the purpose of extracting hydrocarbons therefrom.” Saba is responsible for “all expenses and costs of any nature or kind with respect to the Erburu lease” and is entitled to 100 percent of the “proceeds from the sale of hydrocarbons from the Erburu lease.” “This letter agreement shall ipso facto terminate on the date that consent has been secured … and thereafter the relationship [between the parties] shall be governed by” the sale agreement. (All italics added.)
On the face of the letter agreement, the primary change is that the effective date of assignment of one of the leases is delayed and Shell instead grants Saba only the right to extract hydrocarbons from the leasehold. This partial assignment of Shell’s rights under the lease was effective both to grant Saba sufficient rights to accomplish the overall purposes of the sale agreement and, also, to overcome Erburu’s objection to Saba’s presence on the land as assignee of the lease.
This modification of the assignment of rights was not a mere formality; Saba’s rights as a partial assignee may have been different from its rights as assignee of the entire lease, particularly with respect to its ability to enforce the lease as real party in interest. (See 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, §§ 732-733, pp. 816-817.) But that was a change in the degree of Saba’s ownership of the leasehold, not in the fundamental relationship between Shell and Saba: Shell remained a seller and Saba remained a buyer, but what was sold were the “rights to operate said Erburu lease for the purpose of extracting hydrocarbons there from” instead of “all” leasehold interests as contemplated by the sale agreement. This did not reconstitute Saba as Shell’s agent or as a contract operator for Shell; under the clear terms of the letter agreement, Saba continued to have an ownership interest in the fields and was entitled to operate the fields for its own account.
The “Assignment and Conveyance” incorporated into the sale agreement described the assigned lease property as: “Leasehold interests in oil, gas or other minerals, including working interests, carried working interests, rights of assignment and reassignment, and other interests under or in oil, gas or mineral leases, and interests in rights to explore for and produce oil, gas and other minerals.”
Greka apparently contends the letter agreement’s use of the phrase “operating arrangements” in and of itself constituted Saba as a “contract operator” of the Erburu field. Although Greka does not specifically define this term, it appears Greka means to imply that Shell has merely hired Saba to run Shell’s oil field for it. “Lessees, in some instances, may enter into a contract with a well operator who does not otherwise have an interest in the development of the property.” (8 Williams & Meyers, Oil and Gas Law (2006) Manual of Oil & Gas Terms, p. 707.) The hired operator might appropriately be called a contract operator.
Accordingly, we conclude Greka is wrong when it contends the letter agreement established that “Saba would act only as Shell’s contract operator and therefore would be responsible only for operating expenses and costs, not Shell’s lease abandonment obligations.” We agree with the trial court that the matter of indemnity is established in the sale agreement and is unaffected by the letter agreement.
Of equal importance, however, we also conclude the letter agreement does not constitute the basis for an implied contractual indemnity claim in any event. Thus, even in the absence of the express assignment of duties in the sale agreement, Greka would be required to affirmatively establish an equitable claim for indemnity in order to recover from Shell; the mere absence of an express provision establishing indemnity from Greka to Shell does not establish the implied presence of a converse duty for Shell to indemnify Greka.
Greka’s briefs on appeal do not attempt to explain its claim that there was an implied contractual indemnity requirement flowing from the letter agreement, except to say, in essence, that Greka was acting as Shell’s agent pursuant to the agreement and an agent is usually entitled to indemnity for damages incurred because of its principal’s breach of contract. (See Sunset-Sternau Food Co. v. Bonzi, supra, 60 Cal.2d at p. 837.) Greka argues that, in the absence of a full assignment of the lease, Shell “remained responsible for all abandonment obligations under the Erburu Lease.” Because it discharged those obligations as Shell’s agent, asserts Greka, indemnification was a necessarily implied term in the letter agreement.
This argument lacks merit. First, as described above, the letter agreement did not establish Saba as Shell’s contract operator; Shell transferred to Saba the right to operate the Erburu field for Saba’s own account. Second, the obligations that Greka discharged were not “abandonment obligations under the Erburu Lease”; they were obligations imposed by statute on the current operator of the oil field. (See Pub. Resources Code, § 3237, subd. (c).) Those obligations were, under the terms of the Public Resources Code, Saba’s own obligations as the “current operator” of the field and, since Saba owned the operating rights, were not subject to indemnification by Shell. Implied contractual indemnity arises from “a contracting party’s fair responsibility for foreseeable damages caused by its breach of the promises it made in the contract.” (Garlock Sealing Technologies, LLC v. NAK Sealing Technologies Corp. (2007) 148 Cal.App.4th 937, 973-974.) Here, neither the letter agreement nor the original sale agreement gave rise to any obligation for Shell to pay abandonment costs.
For all of the foregoing reasons, we conclude Greka did not establish that there was a triable issue of fact that, if resolved in its favor, could have resulted in a judgment against Shell for indemnity of Greka’s plugging and abandonment expenses.
IV. Other Procedural and Discovery Rulings
The trial court denied Greka’s motion to amend its cross-complaint to add Saba as an additional cross-complainant. It also overruled Greka’s demurrer to one of Shell’s affirmative defenses to the cross-complaint. Finally, it ordered Greka to respond to certain discovery and declined to order Shell to respond to certain of Greka’s discovery requests. In each instance, as we will briefly explain, Greka was not prejudiced by the court’s ruling, since we have affirmed the order granting the summary judgment motion.
Greka’s cross-complaint asserted indemnity rights based on an assignment of rights from Saba. When Greka realized it could not assert a punitive damages claim as an assignee (Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 942), it purported to reassign the rights to Saba. The amendment sought to add Saba as an additional cross-complainant so that Saba could assert a claim for punitive damages in the fraud cause of action. Because the trial court correctly found that the fraud claim was time-barred, there is no underlying claim on which punitive damages can be awarded in any event. (See Commonwealth Mortgage Assurance Co. v. Superior Court (1989) 211 Cal.App.3d 508, 521.) Precluding the amendment did not prejudice Greka or Saba.
Shell alleged in its answer to the first amended cross-complaint that the cross-complainants were “alter egos” of one another. The trial court overruled Greka’s demurrer to this affirmative defense. Since the defense was not a basis for the grant of summary judgment, Greka was not prejudiced by the presence of that defense in Shell’s answer.
Respondents filed a request for judicial notice of certain documents from a bankruptcy proceeding for the debtor Saba Enterprises, Inc., petition No. 05-60144-ajg, filed in the United States Bankruptcy Court for the Southern District of New York. We previously deferred consideration of that request. We now deny judicial notice of the requested materials on the basis that such materials are not relevant to any issue determined in this appeal.
Prior to filing its answer to the amended cross-complaint, Shell conducted discovery in aid of its potential alter ego defense. Greka objected to the discovery, but the court ordered Greka to provide the requested information. The discovery order has no bearing on the basis upon which summary judgment was properly granted. Accordingly, Greka was not prejudiced by the discovery order.
Finally, the court denied Greka’s motion to compel discovery based on Shell’s refusal to identify persons and documents that would have been relevant at a later stage of the trial, when Shell’s financial condition would have been an issue in establishing the amount of any punitive damages award. Since there will be no trial and no punitive damages award, denial of the discovery motion has not prejudiced Greka.
V. Discovery Sanctions
The trial court imposed sanctions on Greka and its counsel for counsel’s conduct at the deposition of a Greka executive. A few weeks later, the court granted, in part, another motion to compel discovery, and again imposed sanctions on Greka and its counsel.
Greka and counsel contend on appeal that they “asserted their objections in good faith and with substantial justification, and they had a right to test the legal principle” involved. They do not, however, cite any legal authorities, discuss the relevant standard of review, or otherwise demonstrate the trial court abused its discretion in all of the circumstances. Accordingly, we deemed this contention waived. (People v. Stanley (1995) 10 Cal.4th 764, 793; Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.) In any event, appellants have not established that the trial court abused its discretion in either award of sanctions. (See Parker v. Wolters Kluwer United States, Inc. (2007) 149 Cal.App.4th 285, 294.)
DISPOSITION
The judgment is affirmed. Respondents are awarded costs on appeal.
WE CONCUR: GOMES, J., KANE, J.
More typically, however, the term appears to refer to one of the parties to an “operating agreement,” defined as “An agreement between or among interested parties for the testing and development of a tract of land. Typically one of the parties is designated as the operator and the agreement contains detailed provisions concerning the drilling of a test well, the drilling of any additional wells …, the sharing of expenses, and accounting methods. The authority of the operator, and restrictions thereon, are spelled out in detail in the typical agreement.” (8 Williams & Meyers, Oil and Gas Law, supra, p. 707.) Such a person or entity that has management responsibility for a jointly owned field seems, more usually, to be referred to as a “contract operator.”
The letter agreement does not use the phrase “contract operator” and the relationship set forth in the letter agreement does not appear to conform to either of the foregoing usages, primarily because the agreement provides no share of production or revenues to Shell.
The letter agreement instead describes “operating arrangements” and “assigns and sets over” to Saba “rights to operate” the Erburu field. “Operating rights” is deemed synonymous with “working rights.” (8 Williams & Meyers, Oil and Gas Law, supra, p. 710.) “Working rights,” in turn, is defined as “The operating interest under an oil and gas lease. The owner of the working interest has the exclusive right to exploit the minerals on the land,” even though others may have some right to a portion of the proceeds of such exploitation. (Id. at p. 1158.) This usage is consistent with California law, which defines an “operator” as “any person who, by virtue of ownership, or under the authority of a lease or any other agreement, has the right to drill, operate, maintain, or control a well.” (Pub. Resources Code, § 3009.)
In summary, no authority of which we are aware implies from the use of “operating rights” or “operator” an agency or other subordinate relationship. While a contract operator may be one kind of “operator,” so may a lessee or one holding similar rights under “any other agreement.” In addition, the letter agreement is not a typical or ordinary contract operator agreement, and the court did not err in excluding evidence from Greka’s proffered expert concerning the implied or usual terms of such an agreement.