Case Title: Independent Producers Marketing Corp. v. Cobb

Citation: 

Docket Number: 86-30

State: wyoming

Court: Wyoming Supreme Court

Date: 1986-07-21T00:00:00Z

Document:
Independent Producers Marketing Corp. v. Cobb1986 WY 154721 P.2d 1106Case Number: 86-30Decided: 07/21/1986Supreme Court of Wyoming
INDEPENDENT PRODUCERS 
MARKETING CORP., formerly known as The Crude Company, Appellant 
(Defendant),

v.

Kristie R. COBB, Appellee 
(Plaintiff).

Appeal from District 
Court, CampbellCounty, Timothy J. Judson, 
J.

Keith P. Tyler 
and Carl J. Hildebrand, Casper, for appellant. R. Stanley Lowe, Morris 
G. Gray and D. Thomas Kidd filed an amicus curiae brief for RockyMountain Oil and Gas 
Ass'n.

Michael D. 
Zwickl, Casper, 
for appellee.

Before THOMAS, C.J., and BROWN, CARDINE, URBIGKIT 
and MACY, JJ.

CARDINE, 
Justice.

[¶1.]     The sole issue 
presented in this appeal is whether an interest penalty can be assessed against 
a payor who withheld royalty payments on oil or gas that was produced prior to 
the effective date of the Royalty Payment Act.

[¶2.]     In 1982, the Wyoming legislature adopted an act to create §§ 30-5-301 
through 30-5-303, W.S. 1977, which was entitled "Payment for Oil and Gas 
Production Interest," Session Laws of Wyoming, 1982, ch. 27. The Act required that 
lessees, operators, or their assignees pay oil and gas royalties to royalty 
interest owners in a timely fashion. Thus, § 30-5-301(a), W.S. 1977, 
provides:

"The proceeds derived 
from the sale of production from any well producing oil, gas or related 
hydrocarbons in the state of Wyoming shall be paid to all persons legally 
entitled thereto, except as hereinafter provided, commencing not later than six 
(6) months after the first day of the month following the date of first sale and 
thereafter not later than sixty (60) days after the end of the calendar month 
within which subsequent production is sold, unless other periods or arrangements 
for the first and subsequent payments are provided for in a valid contract with 
the person or persons entitled to such proceeds. Payment shall be made directly 
to the person or persons entitled thereto by the lessee or operator or by any 
party who assumes such payment obligation under any legal 
arrangement."

Section 30-5-302 
requires that the payor hold late payments in escrow for the benefit of the 
royalty interest owner, while § 30-5-303 creates an interest penalty of eighteen 
percent for a violation of § 30-5-301(a), supra, and provides for an award of 
attorney's fees if proceedings are brought pursuant to the statute. The 
effective date of the Act was June 1, 1982. Session Laws of Wyoming, 1982, ch. 
27.

FACTS

[¶3.]     The parties stipulated 
to the following facts. From January 1, 1980, until January 1, 1982, appellee 
Kristie Cobb owned a five percent overriding royalty interest in a federal oil 
and gas lease located in CrookCounty. During this period, appellant 
Independent Producers Marketing Corporation (IPMC) purchased all of the oil 
which was produced from the lease and became liable to Ms. Cobb for her 
overriding royalty on this production, a sum of $174,846.29. IPMC did not pay 
Ms. Cobb until April 23, 1984, four years after it first became liable to her, 
and almost two years after the legislature passed the Royalty Payment 
Act.

[¶4.]     On June 6, 1985, Ms. 
Cobb filed a complaint against IPMC in the district court seeking $43,888.81 in 
damages and unspecified attorney's fees under § 30-5-303, supra. She reached the 
damage figure by adding the six-month withholding period of § 30-5-301(a), 
supra, to the effective date of the Act and applying the interest penalty of 
eighteen percent from that date (December 1, 1982) to the date she was finally 
paid (April 23, 1984).

[¶5.]     After the parties 
stipulated to the facts, Ms. Cobb moved for summary judgment on grounds that the 
Act entitled her to the interest penalty as a matter of law, even though the 
royalty arose from production that occurred prior to the effective date of the 
Act. To show legislative intent that supported her interpretation of the Act, 
she attached affidavits by State Senator Thomas Stroock, the Act's sponsor, and 
Joseph Meyer of the Legislative Service Office, one of the Act's draftsmen. 
Senator Stroock stated in his affidavit:

"It was my intent that 
the interest penalty as provided in Wyoming Statute Section 30-5-303 would 
attach to the proceeds derived from the sale of production from any well 
producing oil, gas, or related hydrocarbons, then being held by oil and gas 
operators as of the effective date of the law, which was June 1, 
1982."

The district 
court held a hearing on the motion and concluded that Ms. Cobb was entitled to 
summary judgment on both the interest penalty and the attorney's fees. IPMC 
filed a timely motion under Rule 59(e), W.R.C.P., to alter or amend the 
judgment. The motion was supported by the affidavits of attorneys R. Stanley 
Lowe and Morris Gray, and accountant Phyllis Bean, who had all represented oil 
companies during the legislative proceedings which led to the bill's passage. 
The content of these affidavits is typified by the following excerpt from Mr. 
Lowe's affidavit:

"It was my understanding 
that the language in § 30-5-301(a) specifically assured producers such as 
Eighty-Eight Oil Company, whom I represent, that they would not have to treat 
proceeds from sales of production occurring prior to June 1, 1982, as being 
subject to the statute in the same manner as post June 1, 1982, proceeds from 
the sales of production."

[¶6.]     The district court 
refused to consider the Lowe and Gray affidavits because no excuse was offered 
for the failure to submit them during the summary judgment proceedings. The 
court denied IPMC's motion to alter or amend the judgment, and IPMC has 
appealed.

LEGISLATIVE HISTORY BY 
AFFIDAVIT

[¶7.]     The district court 
could not have considered the affidavits submitted by IPMC even if they had been 
submitted prior to the summary judgment hearing. The court erred to the extent 
that it relied upon the affidavits of Senator Stroock and Mr. Meyer. Affidavits 
by legislators or other persons involved in the enactment of a statute are not a 
proper source of legislative history.

"In construing a statute 
the courts refuse to consider testimony about the intent of the legislature by 
members of the legislature which enacted it. The courts evidently wish to avoid 
having to pass upon the credibility of legislators and ex-legislators." 2A N. 
Singer, Sutherland Statutory Construction, § 48.16 at 338 (rev. ed. 1984) 
(citing Waterman Steamship Corp. v. United States, 381 U.S. 252, 85 S. Ct. 1389, 
1398, 14 L. Ed. 2d 370 (1965)).

[¶8.]     This error does not 
prevent us from affirming the judgment, however, because

"if the trial court's 
judgment is sustainable on any theory, it will not be disturbed on appeal." 
DeWald v. State, Wyo., 719 P.2d 643, 650-651 (1986). See also 
Litzenberger v. Merge, Wyo., 698 P.2d 1152, 1153 
(1985).

The 
interpretation of the Royalty Payment Act is purely a question of law. It does 
not matter how the district court arrived at its interpretation if it was 
correct.

RETROACTIVITY

"Wyoming has long followed 
the general rule that retrospective application of a statute to events occurring 
before [its] enactment * * * is not favored." Johnson v. Safeway Stores, Inc., 
Wyo., 568 P.2d 908, 914 (1977).

"`[A] provision will 
operate prospectively only, unless the words employed show a clear intention 
that it should have a retrospective effect.'" Id. (quoting Mestas v. Diamond Coal & Coke Company, 12 
Wyo. 414, 76 P. 567, 569 (1904)). See also Adkins v. Sky Blue, Inc., Wyo., 701 P.2d 549 (1985), and McClellan v. Tottenhoff, Wyo., 666 P.2d 408 
(1983).

[¶9.]     IPMC contends that the 
district court retroactively applied the interest penalty provision of the 
Royalty Payment Act and that this was error because the Act contained no 
explicit language permitting retroactive application. While we agree with IPMC 
that the Act contains no explicit retroactivity language and, therefore, should 
only be applied prospectively, we do not necessarily accept IPMC's premise that 
the district court applied the Act retroactively in this 
case.

"A statute operates 
prospectively when the precipitating event for the application of the statute 
occurs after the effective date of the statute, even though the precipitating 
event had its origin in a situation existing prior to the enactment of the 
statute." Aetna Life Insurance Company v. Washington Life and Disability Insurance 
Guaranty Association, 83 Wn.2d 523, 520 P.2d 162, 170 
(1974).

[¶10.]  Section 30-5-301(a), W.S. 1977, supra, 
states:

"The proceeds derived 
from the sale of production * * * shall be paid * * * not later than six (6) 
months after the first day of the month following the date of first sale * * 
*."

The sanction for 
a violation of § 30-5-301(a), supra, is found in § 30-5-303(a), 
supra:

"Any lessee or operator, 
purchaser or other party legally responsible for payment who violates the 
provisions of this article is liable * * * for the unpaid amount of such 
proceeds, plus interest at the rate of eighteen percent (18%) per annum on the 
unpaid principal balance from the due 
date specified in W.S. 30-5-301(a)." (Emphasis added.)

[¶11.]  Ms. Cobb contends it was the failure to 
pay for more than six months after the effective date of the Act that triggered 
the penalty. Thus, she claims that appellee had six months in which to pay 
without penalty. IPMC maintains that the production of oil or gas is the event 
which precipitates the Act's interest penalty. Therefore, if the penalty is 
imposed on pre-Act production, it is applied retroactively. The argument of IPMC 
is flawed because production is not the event which triggers the penalty. 
Instead, the sanction is precipitated by the payor's failure to pay the proceeds 
of production at any time more than six months after the first day of the first 
month after the date of first sale.1 The term "production" is used at 
the beginning of § 30-5-301(a) only to describe the kind of proceeds whose 
nonpayment will trigger the interest penalty. The Act is not applied 
retroactively just because the proceeds happen to be generated by production 
that occurred prior to the Act's effective date.

"A statute is not 
necessarily retroactive because it draws on antecedent facts for its operation." 
Belco Petroleum Corporation v. State Board of Equalization, Wyo., 587 P.2d 204, 210 
(1978).

[¶12.]  In this case, the first sale of oil took 
place in early 1980 and the six-month grace period expired before that year was 
over. The precipitating event, nonpayment, first occurred in 1980, and occurred 
each day thereafter until IPMC finally paid Ms. Cobb in 1984. If the district 
court had extended the interest penalty back to six months after the first day 
of nonpayment in late 1980, it would have been applying the statute 
retroactively because it would have been relying on a precipitating event that 
occurred prior to the effective date of the statute.

[¶13.]  But the district court did not do this. 
Intending to avoid a retroactive application of the statute, the court ignored 
each day of IPMC's nonpayment prior to the effective date of the statute. The 
court treated the effective date of the Act, June 1, 1982, as if it was the 
first day when payment was due. Nonpayment was excused for a six-month grace 
period after that date, and as a result, December 1, 1982, became the first day 
of unexcused nonpayment; it became the precipitating event. Because the district 
court relied on a precipitating event that occurred after the effective date of 
the statute, it applied the statute prospectively.

[¶14.]  The district court's application of the 
Royalty Payment Act in this case is consistent with the legislature's obvious 
intent to stop oil producers from retaining other people's money for their own 
use. IPMC had the free use of Ms. Cobb's money from early 1980 until April 23, 
1984. When the Act became law on June 1, 1982, IPMC could have avoided the 
interest penalty by searching its records and paying Ms. Cobb and all the other 
interest owners to whom it owed money. In fact, the court gave IPMC the benefit 
of the six-month grace period of § 30-5-301(a), supra, and only imposed the 
penalty to the extent that IPMC held the proceeds after December 1, 
1982.

[¶15.]  If we accepted IPMC's retroactivity 
argument, we would reach an absurd result. A producer who began production on 
June 1, 1982, and withheld payments from that date until April 23, 1984, would 
pay a penalty while a payor like IPMC who withheld the proceeds from early 1980 
until April 23, 1984, would pay no penalty. The district court's holding, which 
would penalize each of these producers equally for their nonpayment after the 
effective date of the Act, makes good sense.

[¶16.]  Affirmed.

FOOTNOTES

1 In its amicus brief, the 
Rocky Mountain Oil and Gas Association, which supports IPMC's position, admits 
that

"the precipitating event 
for an assessment of the eighteen percent (18%) interest penalty was a failure to pay persons legally entitled to 
receive payment, commencing not later than six (6) months after the first 
day of the month following the date of the first sale * * 
*."

URBIGKIT, Justice, 
concurring.

[¶17.]  I concur. However, I do not agree that 
available source material on legislative intent should necessarily be 
proscribed. Theories of legislative intent abound and have been variously 
avoided or implicitly considered in the jurisprudence history of this state. Cf. 
this writer's dissent to the order denying reconsideration in State, Board of 
Land Commissioners v. Lonesome Fox Corporation, Wyo., 714 P.2d 783 (1986), with 
the opinion in the original case, State, Board of Land Commissioners v. Lonesome 
Fox Corporation, Wyo., 707 P.2d 167 (1985), and this writer's dissent to the 
order on rehearing in Matter of Adoption of BGD, Wyo., 719 P.2d 1373 
(1986).

[¶18.]  I would not find either legislative 
history review or statutory construction philosophy intrinsically invoked in the 
affirmance of this case. However, attention to the subject in an early case 
would be more than justified, for direction not only to the bar and bench, but 
to the legislature in particular, due to an obvious need for improved 
legislative records and history to afford the possibility of further substance 
and weight in this court's interpretative effort.