Krista Corner
Havre Daily News
kcorner@havredailynews.com
A jury on Monday found that a oil and gas developer owes its former partner $1.4 million for breach of contract.
After a six-day civil proceeding in state District Court, jurors found John O. Brown, Textana Inc. and Santana Inc. guilty of fraud or malice and decided in favor of Klabzuba Oil and Gas Inc.
Brown declined to comment today.
Klabzuba operations manager Cole Chandler said the company is satisfied with the ruling.
“I think the verdict speaks for itself,” he said Tuesday.
The lawsuit dealt with two disputed gas wells, located in Hill County.
Klabzuba had hired Brown to be its eyes and ears in the are in the early 1980s. In the agreement, Klabzuba would be responsible for 75 percent of any investment on gas wells and would reap three-fourths of the profits. Brown's share was 25 percent in costs and revenues.
The Klabzuba legal team asserted that Brown had concealed the two wells, located in the area Klabzuba was researching, and took full ownership over them.
Klabzuba and the Brown have had an extensive legal battle. The original claim in this case, filed by Brown, on December 24, 2002 said Brown claimed that Klabzuba drilled and continued to drill wells obtained by him. Subsequently, after the contract expired on Dec. 31, 1997 and wasn't renewed, both parties had taken leases and because of gas spacing regulations, Brown said they were entitled to revenues from Klabzuba's wells. The parties in the case had been partners for 21 years before their professional relationship dissolved.
The trial dealt with a the counterclaim filed by Klabzuba on Feb. 14, 2003. The counterclaim said that Klabzuba was not liable for the payments based on breach of contract. Klabzuba claimed that Brown had acquired property without Klabzuba's knowledge, therefore forcing Klabzuba to forfeit profits.
In the closing arguments Monday, the legal team for Klabzuba Oil and Gas argued that John O. Brown and his wife Sandy Brown betrayed Robert Klabzuba by concealing a property Browns had leased.
Brown's attorney claimed that Brown offered the property and participation in the exploration of the property to Klabzuba, but Klabzuba refused.
Klabzuba's lead attorney, Keith Tooley, told the jury he thought the legal team had proven that Brown had concealed the property and betrayed Klabzuba's trust.
“We've shown you that John O. Brown breached his contract and told falsehoods,” Tooley said.
He added that Klabzuba was owed 75 percent of the profits Browns made from the properties and the wells. He said John O. Brown lied by saying in several depositions and conversations with other employees and representatives of the Klabzubas' company that he and his father, J. Burns Brown had owned those properties and leases for years and years before the Klabzubas ever came to Montana. In the trial, the lawyers said, Brown admitted he was wrong.
Brown's lawyer, John Stephenson said Klabzuba's claims were unfounded and that the statute of limitations had already run out.
“Klabzuba's claims have no merit,” Stephenson said. “Our position is that the statute of limitations ran out in June of 1991.”
Statute of limitations for civil action on contracts is eight years. Brown acquired the property and began exploration in 1983.
The jury ruled that the statute of limitations had not expired.
Brown's attorney said in closing that Brown didn't maliciously hide the land and leases, he had simply become confused about when the land was purchased.
“Brown was confused about when he'd acquired the redlands,” Stephenson said. He added that Brown had made unintentional errors, not intentional falsehoods.
Stephenson went on to explain that Brown put the land purchase on public record at the Hill County Courthouse two months after he'd purchased the land. He also said that Brown had sent in records to Klabzuba about the nature of his business as was required by the contract for professional services, and that had Brown wanted to hide the fact of the purchase, he'd have created a dummy corporation.
“The things John Brown did indicate a lack of fraudulent intent,” Stephenson said. “He could have put the land into a dummy corporation if he wanted to acquire the land fraudulently.” Instead, Stephenson said, he put everything into public record.
In the rebuttal statement, Tooley dismissed the claims the defense made saying they were nonrepresentative of fact.
“The thief didn't get caught because the thief was the guard,” said Tooley.
