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WOOD & LOCKER, INC. v. DORAN & ASSOCS.

March 1, 1989

WOOD & LOCKER, INC., Plaintiff
v.
DORAN AND ASSOCIATES; PLATEAU RESOURCE DEVELOPMENT CORP.; WELDON C. DORAN; DONALD R. LAUGHLIN; EDMUND R. RIGATTI; EDWARD O. RAY; LAKE PLAINS ENERGY, INC.; B.J. HUMBERT CO.; BRUCE HUMBERT; and JANELLE A. HUMBERT, Defendants



The opinion of the court was delivered by: SMITH

 D. BROOKS SMITH, UNITED STATES DISTRICT JUDGE

 Several motions are before the court at this time. Defendants' motion to dismiss Counts VII and XI of the Complaint will be granted. In addition, defendant Laughlin's motion to dismiss due to defective service of process will be granted. All of the remaining motions by the defendants will be denied.

 I

 Allegations of Complaint

 The Complaint, which consists of one hundred and thirty-two (132) paragraphs and is sixty-seven (67) pages in length, can be summarized briefly as a breach of contract suit. Plaintiff Wood and Locker, Inc. and Energy Minerals, Inc., are engaged in the business of raising capital for investment in oil and gas programs. Defendants Doran and Associates, Inc. and Plateau Resource Development Corp. are engaged in the business of designing and promoting oil and gas investment projects, acquiring sites for oil and gas wells, drilling such wells, and operating, supervising, and maintaining them.

 Defendants Lake Plains Energy, Inc., B.J. Humbert Co., and Appalachian Energy, Inc., are engaged in the business of acquiring sites for oil and gas well, drilling such wells, and operating, supervising and maintaining them.

 Defendants Weldon Doran, Donald Laughlin, Edmund Rigatti, and Edward Ray owned all or part of the stock of, or controlled and dominated, or were the agents, servants, or officers of Doran and Associates and/or Appalachian Energy, Inc., and/or Plateau Resource Development Corp.

 Defendants Bruce Humbert and Janelle Humbert owned all or part of the stock of, or were the agents, servants, or officers of Lake Plains Energy, Inc., and B.J. Humbert Co.

 Defendants Doran, Laughlin, and Rigatti designed an oil and gas drilling and operating scheme whereby they induced investors to enter into contractual agreements either with them or with an entity controlled by them to locate drilling sites and to develop and operate oil and gas wells on behalf of investors. Pursuant to their scheme, they induced plaintiff and Energy Minerals, Inc., by means of fraudulent representations, to invest in a number of oil and gas well drilling programs.

 On November 8, 1977, plaintiff and Energy Minerals entered into a series of turnkey drilling agreements with Appalachian Energy, Inc., Doran and Associates, and Plateau Resource Development Corp., whereby the latter agreed to drill, complete, and prepare for operation and production various oil and gas wells. On that same date, the same parties also entered into a series of Operating Agreements, whereby the latter agreed to place the wells into production and to connect them to a pipeline, to sell all the oil and gas produced at the best available price, and to collect and hold in trust any proceeds derived therefrom.

 Defendants Doran, Laughlin, and Rigatti disregarded the corporate entities of Doran and Associates Appalachian Energy, Inc., and Plateau Resource Development Corp. and through a pattern of stock ownership and control dominated and controlled the latter and dissipated the latter's funds and assets for their own enrichment and to enrich other businesses under their control.

 In furtherance of their scheme to defraud plaintiff, defendants Doran, Laughlin, Rigatti, Ray, Doran and Associates, and Plateau Resources Development Corp. entered into certain agreements concerning the turnkey and operating agreements without plaintiff's knowledge with defendants Lake Plains Energy, Inc., B.J. Humbert Co., Bruce Humbert, and Janelle Humbert.

 Pursuant to the turnkey and operating agreements, plaintiff paid defendants in excess of $ 20,000,000.00 for completion and operation of one hundred and forty-five (145) wells. Defendants failed to complete the wells and diverted or dissipated those funds.

 Plaintiff had the right according to the agreements to terminate them in the event of any gross negligence, willful misconduct, any criminal activity on the part of Doran and Associates, Plateau Resource Development Corp., or Appalachian Energy, Inc. Plaintiff terminated all agreements on January 14, 1983. Defendants have refused to turn control of the wells over to plaintiff.

 Counts I and II of the Complaint are for breach of the Turnkey and Operating Agreements, respectively. Count III is for conversion. Count IV is for fraudulent misrepresentation. Count V is brought under Section 10(b) of the Securities Exchange Act of 1934 (15 USC § 78j(b)) and Rule 10b-5 (17 C.F.R. § 240.10b-5). Counts VI and VII are brought under Section 12(2) (15 U.S.C. § 77 l (2)) and Section 17(a) (15 USC § 77q(a)) of the Securities Act of 1933, respectively. Counts VIII - X are brought under the civil RICO act (18 USC §§ 1961 et seq.). Count XI is for willful, wanton, and/or negligent breach of duties arising under the Turnkey and Operating Agreements. Count XII is for common law civil conspiracy.

 II

 Statutes of Limitation

 As has been indicated, plaintiff terminated all of the Turnkey and Operating Agreements on November 14, 1983. On June 24, 1983, approximately six months after it had terminated the agreements, plaintiff filed a voluntary petition for Chapter 11 reorganization in the United States Bankruptcy Court for the Western District of Texas. On June 21, 1985, approximately two and one-half (2 1/2) years after it had terminated the agreements and just three (3) days less than two (2) years after filing its Chapter 11 petition, plaintiff initiated the present action.

 Defendants argue that Counts III - XII are time-barred because the applicable statutes of limitation for each of those Counts had expired by the time plaintiff commenced this action. This contention is without merit. 11 U.S.C. § 108(a) provides in pertinent part that:

 
If applicable bankruptcy law . . . fixes a period within which the debtor may commence an action, and such period has not expired before the date of the filing of the petition, the trustee may commence such action only before the later of (1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or (2) two years after the order for relief.

 The effect of this provision is to extend any relevant statute of limitation for at least an additional two (2) years after the filing of a Chapter 11 petition, provided that it had not already expired by the time that the petition was filed.

 Although 11 U.S.C. § 108 makes reference only to "the trustee," it must be read in conjunction with 11 USC § 1107(a), which provides in relevant part that:

 
Subject to any limitations on a trustee serving in a case under this chapter, and to such limitations or conditions as the court prescribes, a debtor in possession shall have all the rights . . . of a trustee serving in a case under this chapter. (Emphasis added.)

 When they are read in conjunction, 11 USC § 1107(a) grants to a debtor in possession the above rights granted to the trustee under 11 USC § 108. See In re Flying S Land & Cattle Co., 71 Bankr. 183 (Bkrtcy. D.Nev. 1987).

 Defendants' assertion that each of Counts III - XII is governed by a statute of limitation of two years or less is incorrect. Many of the claims set forth in those counts have a statute of limitation which exceeds two years. For instance, Count IV, which asserts a claim for fraudulent misrepresentation, is governed by a six-year limitation. See A.J. Cunningham Packing Corp., et al. v. Congress Financial Corp, et al., 792 F.2d 330 (3d Cir. 1986). Counts VIII through X, which are brought under RICO, are governed by a four-year limitation. See Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987).

 Assuming arguendo that the applicable statute of limitation for each of the counts in question began to run on January 14, 1983, when plaintiff terminated all of the Turnkey and Operating Agreements, defendants' argument would have to be rejected even if they were correct in asserting that each of these counts is governed by a statute of limitation of two years or less. As has been indicated, plaintiff filed its Chapter 11 petition on June 24, 1983, approximately six months after the claims in Counts III - XII arose. It is undisputed that none of the applicable statutes of limitation for these counts had expired by that date. It therefore follows that the statute of limitation for each of these counts was extended by virtue of 11 USC §§ 108(a) and 1107(a) for at least an additional two years until June 24, 1985. Plaintiff, however, commenced this action within that time period on June 21, 1985. Consequently, none of the claims set forth in Counts III through XII is time-barred.

 III

 Count ...


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