Provident Energy Associates v. Bullington

Citation: 77 F. App'x 427Docket: No. 02-35798; D.C. No. CV-01-00055-SEH

Court: Court of Appeals for the Ninth Circuit; October 7, 2003; Federal Appellate Court

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Provident Energy Associates initiated a declaratory judgment lawsuit against Foy Wallace Bullington, O.O. Thompson, and Murphy Phillips, both individually and as executor of the Estate of Ford Fullingim. Provident sought a court declaration affirming its ownership of the Two Medicine Cut Bank Sand Unit (TMCBSU) and associated revenues, asserting that the Bullington Parties had no rights or interests in these assets. The district court granted summary judgment to Provident based on a judicial admission from the Bullington Parties in their filings.

The Bullington Parties contended that the district court lacked subject matter jurisdiction due to a claimed absence of diversity of citizenship. This argument was rejected, as the citizenship of Provident, a Montana LLC, is determined by its members' citizenship. Originally, Provident had two members: Prism, an Oklahoma corporation, and Lone Star International Energy, Inc. (LSI), a Nevada corporation. However, LSI lost its membership status due to bankruptcy on December 8, 1998, as per Montana law. Consequently, complete diversity existed between Provident (considered a citizen of Montana and Oklahoma) and the Bullington Parties (all citizens of Texas), thus affirming the district court's subject matter jurisdiction.

Additionally, the Bullington Parties' first motion to amend their answer, filed on June 5, 2002, was denied by the district court. The court had previously set a deadline of November 16, 2001, for amendments, which could only be modified with a showing of good cause. The Bullington Parties' justification—that their attorney misread the First Amended Complaint, leading to erroneous admissions—was deemed insufficient to demonstrate good cause, as carelessness does not reflect diligence. Thus, the district court did not abuse its discretion in denying the amendment motion.

The district court's grant of summary judgment is reviewed de novo. Summary judgment is appropriate when the evidence shows no genuine issue of material fact, allowing the moving party to prevail as a matter of law. Upon a proper motion for summary judgment, the nonmoving party must present evidence of a genuine issue for trial. The court granted summary judgment based on the Bullington Parties’ judicial admission in their First Amended Original Answer, where they acknowledged being pre-bankruptcy lenders to Lone Star, with no interest in Provident or the TMCBSU, and stated that any claims they had were against Lone Star’s bankruptcy estate. Judicial admissions are conclusive unless amended or withdrawn. Although the Bullington Parties later claimed this admission was unintentional, their First Amended Original Answer contained contradictory statements, asserting an interest in Provident and denying relief sought by the Plaintiffs. Additionally, an affidavit from their counsel indicated a misunderstanding regarding the admission. Despite the judicial admission being a significant factor, it was not the sole consideration, as other evidence presented by the Appellants raised genuine issues of material fact that warranted further examination.

A Mutual Agreement, signed by the Bullington Parties and LSI's President and Secretary, does not label the financing as a "loan" but indicates LSI's intention to assign each investor a carried working interest in the Mont-Mill Unit. An affidavit from Gary Little, President of Prism and Manager of Provident, reveals that the Bullington Parties owed Prism a share of working interest expenses, indicating they were investors rather than mere lenders to LSI. This raises a genuine issue of material fact regarding their actual role in the financing arrangement. The district court's summary judgment was deemed premature since the Bullington Parties presented evidence supporting their interpretation. Consequently, the summary judgment is reversed and the case is remanded for further proceedings. The decision is not suitable for publication and cannot be cited according to Ninth Circuit Rule 36-3. The affidavit was also included as an exhibit in the Bullington Parties' Statement of Genuine Issues.