Title: AMOCO PRODUCTION COMPANY v. BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF SWEETWATER

State: wyoming

Issuer: Wyoming Supreme Court

Document:

AMOCO PRODUCTION COMPANY v. BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF SWEETWATER2002 WY 15455 P.3d 1246Case Number: 01-141Decided: 10/16/2002
October Term, A.D. 2002

 
 

 

AMOCO 
PRODUCTION COMPANY,

 

Appellant(Defendant) 
,

 

v.

 

BOARD 
OF COUNTY COMMISSIONERS

OF 
THE COUNTY OF SWEETWATER,

 

Appellee(Plaintiff) 
.

 

 

Appeal 
from the District Court of Sweetwater County

The 
Honorable John D. Troughton, Judge

 

Representing 
Appellant:

Algirdas 
M. Liepas, of Algirdas M. Liepas P.C., Cheyenne, WY; and Frederick W. Bradley, 
Nicole Crighton, and Andre Burvant of Oreck, Bradley, Crighton, Adams & 
Chase, New Orleans, LA.  Argument by 
Mr. Bradley.

 

Representing 
Appellee:

Nancy 
D. Freudenthal and John C. McKinley of Davis & Cannon, Cheyenne, WY.  Argument by Ms. 
Freudenthal.

 

Before 
HILL, C.J., and GOLDEN, LEHMAN,* KITE, and VOIGT, JJ.

 

 

*Chief 
Justice at time of oral argument.

 

LEHMAN, 
Justice.

 

[¶1]      This is an appeal 
from the entry of summary judgment by the district court concerning the attempt 
by appellee Board of County Commissioners of the County of Sweetwater 
("Sweetwater County") to collect the proportional share of ad valorem tax and 
interest owed by appellant Amoco Production Company ("Amoco") concerning its 
undisputed ownership interest in certain real property within Sweetwater County 
for 1980 through 1985.  We 
affirm.  

 

 

ISSUES

 

[¶2]      Amoco sets forth 
the following summarized issues:

 

1.  Did 
the trial court commit manifest error in failing to hold that the County's claim 
against Amoco in this suit was barred by principles of res judicata and 
judicial estoppel? 

 

2.  Did 
the trial court act improperly in holding that Amoco was now precluded 
from challenging the correctness of the alleged tax debt?

 

3.  Did 
the trial court commit error in holding that UPRC (Union Pacific Resources 
Company) was Amoco's agent for purposes of the County's present tax claim? 

 

4.  Did 
the trial court err in granting summary judgment where its ruling was based on 
so many unalleged, unsubstantiated and incorrect assertions of 
fact?

 

5.  Did 
the trial court properly grant summary judgment in favor of the 
County?

 

6.  Should 
the trial court have awarded interest that accrued during that 
period?

 

Sweetwater County phrases the issues much more succinctly on appeal 
as:
 

1.  Is Amoco Production Company (Amoco) liable to 
Sweet­water County for its proportional share of ad valorem tax and interest 
on increased mineral value determined by the Depart­ment of Revenue 
attributable to Amoco's undisputed ownership interest?
 

2.  Does a genuine issue of material fact exist to preclude 
sum­mary judgment for collecting the delinquent ad valorem taxes and 
interest from Amoco? 
 

 

FACTS 
AND HISTORICAL BACKGROUND

 

[¶3]      From 1980 through 
1985, Union Pacific Resources Company or its predecessor, Champlin Petroleum 
Company (UPRC), was Amoco's unit operator for the Higgins Unit, the Brady Unit, 
the Bruff field and the Siberia Ridge field located within Sweetwater County 
(Proper­ties).  During this time 
frame, the mineral tax system in Wyoming required unit operators, through self 
reporting, to report for assessment all oil and gas produced and remit all ad 
valorem taxes due on such production for all owners.  DOR Rules, ch. IX, §4 (1980) and 
§ 7 (1982).  Thus, Amoco did 
not file any reports with the State and received no tax notices directly from 
the State or Sweetwater County for the Properties as such business was being 
transacted through the State or Sweetwater County and UPRC.  

 

[¶4]      In 1985, State 
regulations concerning the Wyoming mineral tax system were amended and, in part, 
allowed take-in-kind owners, like Amoco with respect to the Proper­ties, to 
file their own reports with the State and directly pay related taxes.1  DOR Rules, ch. XXI, §7(c).  In addition, in 1989, the State of 
Wyoming, Department of Audit (DOA) was created to supervise the Wyoming mineral 
tax system.  Wyo. Stat. Ann. § 
9-2-2003.  Upon its institution, the 
DOA began to perform oil and gas audits.  
Likewise, separate from these audits, other counties within Wyoming, 
including Sweetwater County, began to conduct their own audits primarily through 
contract arrangements.  The contract 
auditor retained by Sweetwater County reviewed production reports for the 
Properties and found significant vol­umes of unreported production for the 
years 1980 through 1985.  These 
findings were sent to the State of Wyoming, Department of Revenue (DOR) for 
review and assessment.  

 

[¶5]      As a result of 
the audits being conducted by the counties, UPRC filed a declaratory judgment 
action seeking to preclude or limit these county audits.  The named counties in this lawsuit, 
including Sweetwater County, responded and filed a counterclaim against UPRC 
requesting judgment for the additional ad valorem tax amounts due for 
underreported and undervalued production uncovered by the various county 
audits.  This litigation (UPRC 
liti­gation) resulted in a judgment, which, in part, upheld the counties' 
ability to hire tax auditors and conduct oil and gas audits.  This court affirmed that part of the 
judgment entered in the UPRC litigation through issuance of its opinion in 
Union Pacific Resources Co. v. State, 839 P.2d 356 (Wyo. 1992).  

 

[¶6]      DOR then issued 
the first additional assessment and a Notice of Valuation Change (NOVC) 
pertaining to the Higgins Unit to UPRC.  
Subsequently, this court issued its opinion in Wyoming State Tax 
Comm'n v. BHP Petroleum Co., Inc., 856 P.2d 428 (Wyo. 1993), which held that 
ad valorem taxes could be assessed against a unit operator as the agent for all 
working interest owners.  However, 
BHP Petroleum also held that the State and counties could not collect the 
related taxes owed from the other working interest owners by forcing such 
pay­ment to be made from the involved unit operator.  Instead, they were required to collect 
the owed tax amounts directly from each working interest owner.  The issuance of this opinion was 
fol­lowed by DOR issuing the assessments and related NOVCs regarding the 
Brady Unit, the Bruff field and the Siberia Ridge field to UPRC.  

 

[¶7]      UPRC timely 
appealed the assessments for the Properties with the State of Wyoming, Board of 
Equalization (SBOE) and moved the district court to dismiss the counterclaims of 
the counties in the UPRC litigation contending that the counties had not joined 
all working interest owners as indispensable parties.  On UPRC's motion to dismiss, the 
district court ruled that the counties were required to join all working 
interest owners or were required to restrict their claims for recovery to only 
those sums owed by UPRC.  The 
counties chose the latter option; and, in 1994, Sweetwater County and UPRC 
settled the claims concerning the Properties against UPRC and all its working 
interest owners, explicitly except Amoco.  
This settlement specified Sweetwater County retained the right to pursue 
Amoco for its share of those involved taxes and interests owed regarding the 
Properties.  Given this 
settle­ment, the related appeals before the SBOE and the UPRC litigation 
were dismissed.

 

[¶8]      Amoco did not 
timely appeal or join UPRC in its appeal concerning the NOVCs issued to 
Sweetwater County concerning the Properties for the years of 1980 through 1985 
before the SBOE.  Further, 
although Amoco was aware of the UPRC litigation, it did not participate in that 
litigation or join in the settlement reached as mentioned above. 

 

[¶9]      Beginning in 1995, 
Sweetwater County approached Amoco with respect to the tax and interest owed by 
Amoco for the years of 1980 through 1985 concerning the Properties. This effort 
continued until 1999 with no success.  After an updated demand was sent to Amoco to 
pay the amounts owed to which Amoco failed to respond, this action was filed by 
Sweetwater County against Amoco.  The complaint of Sweetwater County alleged 
Amoco owed unpaid ad valorem taxes and interest on Amoco's proportionate share 
of mineral value certified by DOR for oil and gas produced from the Properties 
from 1980 through 1985.  While Amoco answered this complaint and 
disputed that it owed these taxes, Amoco did admit its percentage ownership in 
each of the Properties.  Amoco then filed a motion to dis­miss 
based on jurisdictional issues.  Sweetwater County also filed a motion for 
summary judgment.  
Ultimately, the motion to dismiss was denied by the district court.  However, the 
district court granted Sweetwater County's motion for summary judgment, and this 
appeal followed. 

 

 

 

 

 

STANDARD OF REVIEW

 

[¶10]   Our standard of review is well 
established.  
We recently reiterated this standard of review in the case of Bevan v. Fix, 2002 WY 43, ¶13, 42 P.3d 1013, ¶13 (Wyo. 
2002):

 

            
Summary judgment is appropriate if the record, viewed in the light most 
favorable to the non-moving party, reveals that no genuine issues of material 
fact exist and the prevailing party is entitled to judgment as a matter of 
law.  Worley v. Wyoming Bottling Co., Inc., 1 P.3d 615, 620 
(Wyo. 2000); Terry v. Pioneer Press, Inc., 947 P.2d 273, 275 (Wyo. 1997); Davis v. Wyoming Medical Center, 
Inc., 934 P.2d 1246, 1250 (Wyo. 1997); W.R.C.P. 56(c).  A fact is material 
if it establishes or refutes an essential element of a claim or defense.  Tidwell v. HOM, Inc., 896 P.2d 1322, 1324 (Wyo. 
1995).  In 
evaluating summary judgment, we apply the same standards as the trial court, 
without affording any deference to the trial court's deci­sions on issues of 
law.  Wilder v. Cody Country Chamber of Commerce, 868 P.2d 211, 216 (Wyo. 1994).

 

We also recognized in Bevan v. 
Fix, at ¶26 (citing In re HC, 983 P.2d 1205, 
1209 (Wyo. 1999) and Ahearn v. Anderson-Bishop 
Partnership, 946 P.2d 417, 422 (Wyo. 1997)), we 
may uphold the grant of summary judgment upon any proper legal ground finding 
support in the record.  

 

 

DISCUSSION

 

 

[¶11]   Initially, Amoco argues the district 
court erred in failing to hold Sweetwater County's claim against Amoco was 
barred by the principles of res judicata and 
judicial estoppel.  
In essence, Amoco contends Sweetwater County was estopped from bringing 
this action against Amoco because the County's counterclaim in the UPRC 
litigation was dismissed with prejudice upon settlement.  Thereby, Amoco 
asserts Sweetwater County is precluded from relitigating the issues that could 
have been litigated previously in the UPRC litigation.  

 

[¶12]   In Eklund v. 
PRI Environmental, Inc., 2001 WY 55, ¶¶15-20, 25 P.3d 511, ¶¶15-20 (Wyo. 
2001), we extensively recognized that res judicata and collateral estoppel are 
related but distinct concepts.  

 

Res judicata bars the relitigation of previously litigated 
claims or causes of action. Slavens v. Board of County Commissioners, 854 P.2d 683, 
686 (Wyo. 1993).  
Four factors are examined to determine whether the doctrine of res 
judicata applies:  
(1) identity in parties; (2) identity in subject matter; 
(3) the issues are the same and relate to the subject matter; and 
(4) the capacities of the persons are identical in reference to both the 
subject matter and the issues between them. Id. 
Collateral estop­pel bars relitigation of previously litigated issues and involves an 
analysis of four similar factors:  (1) whether the issue decided in the 
prior adjudication was identical with the issue presented in the present action; 
(2) whether the prior adjudication resulted in a judgment on the merits; 
(3) whether the party against whom collateral estoppel is asserted was a 
party or in privity with a party to the prior adjudication; and (4) whether 
the party against whom collateral estoppel is asserted had a full and fair 
opportu­nity to litigate the issue in the prior proceeding.  Id.

 

            
The proper doctrine for our consideration is collateral estoppel.  As noted, res 
judicata applies to claims or causes of action.  The prior adjudication involved a claim by 
Ash against PRI, while this action concerns a claim by Eklund against PRI.  While the two 
proceedings arose out of the same incident and involve the same defendant, they 
are clearly separate claims arising out of injuries personal to each 
plaintiff.  The 
question Eklund has raised relates to the issue of whether Tebben was acting within the scope 
of his employment at the time of his alleged negligent act.  Eklund posits that 
consent decrees, set­tlements, and voluntary dismissals constitute a 
"judgment on the merits."  Eklund argues that an admission by PRI that 
Tebben was acting within the scope of his employment is a necessary predicate of 
the settlement with Ash and, accordingly, PRI is precluded from contesting the 
issue in this litigation.

 

            
We have considered consent judgments and dismissals with prejudice to be 
the equivalent of a judgment on the merits for purposes of res judicata.  In CLS v. CLJ, 693 P.2d 774 (Wyo. 1985), the appellant 
failed to appear at trial, and his suit to establish paternity was dismissed 
with prejudice pursuant to W.R.C.P. 41(b).  A second suit raising the same claim was 
sub­sequently filed.  We held that the appellant was barred by the 
doctrine of res judicata from bringing the same claim because an involuntary 
dismissal under Rule 41(b) operated as an adjudica­tion of the merits.  693 P.2d  at 
777.

 

            
In Day v. Davidson, 951 P.2d 378 (Wyo. 1997), 
Day had filed an action based on vicarious liability against Pamida, Inc. based 
on the negligent acts of one of its employees.  Day accepted an offer of judgment from Pamida 
and then subse­quently filed an action against the employee based on the 
negli­gent act underlying the vicarious liability claim.  We held that Day 
could not bring a subsequent action against the employee based on the fact that, 
as a vicarious liability situation, the employee was entitled to be credited 
with the amount of the judgment entered against his employer leaving Day with 
nothing to recover from the employee.  951 P.2d  at 383.   While not 
directly implicating the doctrine of res judicata, Day, like CLS, concerned 
the same claim brought 
by the same plaintiff.

 

            
The application of res judicata to those situations where a plaintiff 
attempts to bring the same claim in a subsequent action against the same or 
different defendants has a logical basis:  It encourages resolution of the plaintiff's 
claims in a single action, and it forces parties to abide by their 
agreements.  
The other cases cited by Eklund in his brief also concern the application 
of res judicata to consent judgments and settlements.  See, e.g., Jefferson v. Greater Anchorage Area Borough, 451 P.2d 730 (Alaska 1969); Clark v. Haas Group, Inc., 953 F.2d 1235 (10th Cir. 1992); and In re Vern O. Laing, 
31 F.3d 1050 (10th Cir. 1994).  We are not, however, dealing with res 
judicata in this case, but rather, with collateral estoppel.

 

            
We have never addressed the effect of collateral estoppel on settlements 
or consent judgments.  
Other authorities have set forth the rule as follows:

 

Issue preclusion does not attach unless it is clearly shown 
that the parties intended that the issue be foreclosed in other litigation.  

 

. . .

 

            
. . . In most circumstances, it is recognized that con­sent 
agreements ordinarily are intended to preclude any further litigation on the 
claim presented but are not intended to preclude further litigation on any of 
the issues presented.  
Thus consent judgments 
ordinarily support claim preclusion but not issue preclusion.  

 

18 Charles Alan Wright, Arthur R. Miller & Edward H. 
Cooper, Federal Practice and Procedure:  Jurisdiction § 4443, at 382-85 (1981) 
(emphasis added).  
See also, Linder v. Missoula County, 251 
Mont. 292, 824 P.2d 1004, 1006-07 (1992); and Hofsommer 
v. Hofsommer Excavating, Inc., 488 N.W.2d 380, 385 (N.D. 1992).  The logic behind 
not applying collateral estoppel to set­tlements and consent judgments 
absent an expressed intention of the parties to be bound in further proceedings 
is quite obvious:  
Application of the doctrine absent an intent to be bound in 
sub­sequent proceedings would act as a deterrent to voluntary 
settlements.  
If, by settling one lawsuit, a party forsakes the right to challenge all 
issues at stake in any future litigation, then the incentive to settle short of 
trial is reduced. 

 

(Emphasis added.)

 

[¶13]   Application of the four factors 
identified above demonstrates that the UPRC litigation did not render Sweetwater 
County's ability to collect the taxes and interest owed by Amoco concerning the 
Properties as sought in this litigation res judicata.  As admitted by 
Amoco, Amoco was not a party in the UPRC litigation.  Moreover, although 
Amoco points out that the district court ruled in the UPRC litigation that the 
counties needed to join the working interests owners, which included Amoco, as 
indispensable parties if it sought to collect those tax monies owed by these 
entities, this was not the only option afforded to the counties.  In addition, the 
district court in the UPRC litigation indicated the counties could seek to 
collect those taxes owed by UPRC without any joinder of additional parties.  Specifi­cally, 
the district court in the UPRC litigation ordered "[t]he Counties are required 
to join all working interest and mineral interest owners in this action, or 
alternatively are required to restrict their claims for recovery in this action, 
to those sums allegedly owned [sic] by UPRC."  The counties, including Sweetwater County, 
merely chose the latter option.  

 

[¶14]   While an argument exists that the 
subject matter involved is the same in the UPRC litigation and this action as it 
concerns Sweetwater County, namely the collection of taxes and interest owed 
with respect to the Properties, it is clear that distinctly separate issues 
exist as they relate to this subject matter as between Amoco and Sweetwater 
County.  As 
stated immediately above, given the ruling of the district court in the UPRC 
litigation, Sweetwater County along with the other counties involved, chose to 
proceed against UPRC as opposed to the other involved working interest 
owners.  
Therefore, the claim resolved upon settlement of the UPRC litigation was 
limited to the collection of taxes and interest from UPRC and ulti­mately 
those working interest owners who elected to participate in the settlement 
exclusive of Amoco.

 

[¶15]   The language of the settlement reached 
in the UPRC litigation is also very telling.  That settlement by its express terms excludes 
Amoco and specifically reserves Sweetwater County's ability to pursue Amoco for 
taxes and interest owed with respect to the Prop­erties.   The 
Settlement Agreement entered into states:

 

            
The parties agree that the payment of the above sum is in settlement of 
all claims Sweetwater County may have against UPRC and all its Sweetwater County 
interest owners, except 
Amoco, for unpaid gross production (ad valorem) taxes, interest and 
penalties on oil and gas production occurring during years 1979 through 
1988.  This agreement shall not be 
construed in any way to limit Sweetwater County's right to pursue Amoco for 
Amoco's share of gross production (ad valorem) taxes and interest due Sweetwater 
County on Amoco's share of produc­tion from UPRC operated properties.

 

(Emphasis added.)  For those same reasons cited above, we also 
cannot conclude that the capacities of Sweetwater County and Amoco are similar 
in the respective litigations regarding both the subject matter and the issues 
between them.  
As already recognized, Amoco was not a party to the UPRC litigation and 
the specific issues in the respective mat­ters are different.

 

[¶16]   Likewise, with respect to the 
application of collateral estoppel, there is absolutely no evidence that 
Sweetwater County upon settlement of the UPRC litigation intended to be 
foreclosed from the collection of taxes and related interest from Amoco 
regarding the Prop­erties in any subsequent proceeding.  In fact, the very 
contrary is established within the express wording of the settlement agreement 
entered into in the UPRC litigation.  Addi­tionally, as stated previously, the 
issue decided in the UPRC adjudication was not identical with the issue now 
asserted against Amoco by Sweetwater County, and Sweetwater County did not 
litigate in the prior UPRC litigation the issue now asserted against Amoco.

 

[¶17]   In Cross v. 
Berg Lumber Co., 7 P.3d 922, 930 (Wyo. 2000) (citing Allen v. Allen, 550 P.2d 1137, 1142 (Wyo. 1976)), we 
stated that judicial estoppel is sometimes referred to as a doctrine which 
estops a party to play fast and loose with the courts or to trifle with judicial 
proceedings.  
It is an expression of the maxim that one cannot blow hot and cold in the 
same breath.  A 
party will just not be allowed to maintain inconsistent positions in judicial 
proceedings.  
Further, we enunciated that judicial estoppel requires that "where a man 
is suc­cessful in the position taken in the first proceeding, then that 
position rises to the dignity of conclusiveness." Cross, at 930 (citing Erhart v. 
Flint Engineering & Const., 939 P.2d 718, 724 (Wyo. 1997); Hatten Realty Co. v. Baylies, 42 Wyo. 69, 290 P. 561, 
566 (1930)).  

 

[¶18]   In this instance, no contrary position 
has been taken by Sweetwater County.  Sweet­water County simply has sought 
through both respective litigations to obtain the payment of taxes and interest 
owed by all parties concerning the Properties.  Again, the evidence presented before us 
establishes that Sweetwater County intended not to be foreclosed upon settlement 
of the UPRC litigation from the collection of taxes and related interest from 
Amoco.  In 
addition, after the settlement agreement had been executed and the district 
court entered its dismissal in the UPRC litigation, the State, Sweetwater 
County, and UPRC con­tinued to supply Amoco with audit information that 
Amoco had requested in the furtherance of Sweetwater County's consistent demand 
for payment of taxes and interest from Amoco.  Finally, at the risk of being redundant, we 
must again point out that Amoco was not a party to the UPRC litigation.  Therefore, it was 
impossible for Amoco to have been successful in the UPRC litigation concerning 
the position it now asserts and warrant the conclusive dispo­sition of this 
matter.

 

Foreclosure From Challenging The Claimed Debt

 

[¶19]   Amoco asserts the district court erred 
when ruling Amoco was foreclosed from challeng­ing the amounts set forth in 
the NOVCs sent to UPRC for the applicable time frame regard­ing the 
Properties.  In 
support of this argument, Amoco contends 1) there was no formal valuation 
of Amoco's property by the DOR; 2) there was no certification of the value 
of Amoco's property made by DOR to Sweetwater County; 3) Sweetwater County 
did not assess Amoco's property by entering the value of that property on its 
rolls;2 4) no tax bill was ever issued to Amoco by 
Sweetwater County; 5) Amoco was never advised of its adminis­trative 
rights to contest or appeal the tax; and 6) there has never been an 
administrative adjudication of whether Amoco owes any taxes.

 

[¶20]   Initially, it is important to recognize 
the State regulations, applicable during the time frame involved, mandated unit 
operators were responsible for filing sworn production returns for the total 
amounts produced and payment of all the related taxes owed.  DOR Rules at ch. 
IX, § 4 (1980) or § 7 (1982) for the years 1980 through 1985 provided:

 

            
The party filing the sworn production return shall be responsible for the 
payment of the taxes on such production.  The actual operator of an oil or gas lease or 
unit shall report for assessment 100% of the oil or gas produced from the lease 
or unit . . . .  A return from a producer will be unacceptable 
if it reports less than 100% of a lease's or unit's production for the year, 
whether the working interest receive their interest in money or kind.

 

We further recognized in Wyoming 
State Tax Comm'n v. BHP Petroleum Co., Inc., 856 P.2d 428 (Wyo. 1993) that 
the practice of valuing all production for assessment through the unit operator 
and not each working interest owner by DOR was well understood and had been 
historically followed by DOR.  Indeed, in that case this court rejected the 
assertion that the State of Wyoming and counties within Wyoming would be 
required to separately assess and issue tax bills to each of the undisclosed 
working interest owners who did not report their production for separate 
assessment.

 

            
The State contends that not accepting its interpretation of assignee, so 
as to allow collecting of ad valorem taxes from the unit operator, will make it 
difficult to collect these taxes.  It is said that difficulty will result 
because the unit operator is responsible for reporting the volume of production 
and if then each working interest owner is to report their individual volume and 
the State must assess them pro rata, it will be an administra­tive 
nightmare.  This might be possible if our 
holding were different.  We limit the County and State's ability to 
collect taxes through sale of property, not their ability to assess taxes.  We think the 
hypothetical difficulty is not borne out.  Appel­lees point out in their brief:

 

            
Appellees do not seek to impose an administrative nightmare on the taxing 
authorities.  
The operator will 
continue to provide assessment data.  Tax notices may be sent to the operator, as 
in the past.  
The operator will continue to discharge its contractual duty to pay taxes 
on behalf of other owners (subject, of course, to adequate provisions for 
reimbursement by them).  The operator and other owners who have paid 
their taxes should not, however, have their property placed in jeopardy because 
of the failure of a delinquent owner to pay the taxes on production owned and 
sold by that owner.  

 

Id., at 434- 35 (emphasis added). 

 

[¶21]   As pointed out by Sweetwater County, as 
a practical matter, the unit operator is the only entity during the applicable 
time period that could be sent assessment notices from DOR.  Likewise, during 
this time frame, Sweetwater County received assessment notices from DOR that 
solely identified the unit operator.   Hence, Sweetwater County would have 
also found it impossible to split up the tax owed and separately notify each 
individual work­ing interest owner. 

 

[¶22]   When it was discovered, through the 
audits conducted with respect to the Properties, that UPRC had failed to 
accurately report the volume and value of all production from the Properties, 
DOR revalued that oil and gas production and sent increased assessments to UPRC 
and NOVCs to Sweetwater County as required.  In turn, Sweetwater County issued NOVCs to 
UPRC.  As 
Sweetwater County further points out, the revaluation and reassess­ment by 
DOR of 100% of production from the Properties included Amoco's ownership 
interest as a component part of the increased value, as did UPRC's initial 
erroneous reports include Amoco's ownership interest as a component of the 
initial value reported.  Finally, the interest of Amoco in each of the 
Properties involved is established through the admission of Amoco made through 
its answer to the complaint of Sweetwater County in this case.3

 

[¶23]   All assessments sent by DOR to UPRC 
concerning the Properties contained detailed notices that an administrative 
conference with DOR was allowed, as well as the right to appeal the assessments 
to the SBOE.  
These assessments also advised that the assessments would be certified to 
Sweetwater County for assessment and billing by the county assessor and 
treasurer when the time frame for appeal had lapsed or when any related appeal 
was finally resolved. 

 

[¶24]   Wyoming statutory law and DOR rules for 
the applicable years clearly provided that an appeal notice must be received by 
the SBOE within 30 days of the assessment to be deemed timely.  Wyo. Stat. Ann. § 
39-2-201(d).  
It is also well recognized that there may be no administrative 
adjudication of tax liability unless a timely appeal is filed with the SBOE and 
if no timely appeal is made the tax assessment becomes final.   Antelope Valley Imp. & Serv. Dist. v. State Bd. of 
Equalization, 992 P.2d 563, 567 (Wyo. 1999).  Therefore, Amoco's assertion that there must 
be an administrative adjudication that it owes any taxes for the additional 
assessment made by Sweetwater County on the Properties to be deemed valid lacks 
merit.

 

[¶25]   Amoco had an ability to seek a 
conference with DOR or appeal the additional assess­ments made against the 
Properties but failed to do so.  In fact, UPRC did appeal these assessments 
before the SBOE with Amoco failing to join in this effort.  Therefore, Amoco 
waived any right to contest the assessments made against the Properties, and 
these assess­ments became final.  In accord, Amax Coal West, Inc. v. State Bd. of Equalization, 896 P.2d 1329, 1333 (Wyo. 1995).

 

[¶26]   In a related argument, Amoco also 
attempts to argue that UPRC was not its agent and, therefore, the fact that DOR 
and Sweetwater County gave notice of the additional tax owed to UPRC cannot be 
attributed as good and proper notice to Amoco.   As recited previously, during the 
applicable time frame it was well established that unit operators were 
responsible for filing sworn production returns for all production and payment 
of 100% of the related taxes owed and that ad valorem taxes were assessed solely 
through the unit operator.  Review of the involved operating agreements 
executed between Amoco and UPRC further estab­lishes a contractual agreement 
between these entities which confirms this process.

 

[¶27]   Specifically, review of the operating 
agreements executed for the Higgins and Brady units disclose the following:

 

ARTICLE 21

TAXES

 

21.1 Payment.  Any and all ad 
valorem and severance taxes payable upon the Committed Working Interests (and 
upon Lease Burdens which are not payable by the owners thereof) or upon 
materials, equipment or other property acquired and held by Unit Operator 
hereunder, and any and all taxes (other than income taxes) upon or measured by 
Unitized Substances produced from the Unit Area which are not payable by the 
pur­chaser or purchasers thereof or by the owner of Lease Burdens, shall be paid by Unit Operator as 
and when due and payable.

 

 . . .

 

21.4  Notices and 
Returns.  
Each Party shall promptly furnish Unit Operator with copies of 
notices, assessments, levies or tax statements received by it pertaining to the 
taxes to be paid by Unit Operator.  Unit operator shall make such returns, reports and 
statements as may be required by law in connection with any taxes above provided 
to be paid by it and shall furnish copies to the parties upon request. 
 It shall 
notify the Parties of any tax which it does not propose to pay before such tax 
becomes delinquent.

 

(Emphasis added.)  In addition, the operating agreements between 
Amoco and UPRC for the Bruff and Siberia Ridge fields state:

 

 

 

12.  TAXES:

 

Any and all ad valorem taxes payable upon materials, 
equipment and other property acquired and held by Operator hereunder, and any 
and all taxes (other than income taxes) upon or measured by the oil or gas 
produced from the Subject Lands which are not payable by the purchaser thereof 
or by the owners of the royalty, overriding royalty, production payment or 
similar interests, shall be 
rendered and paid by the Operator as and when due and payable.  Taxes upon 
materials, equipment and other property acquired and held by Operator shall be 
charged to and borne by the parties owning the same in proportion to their 
respective interests therein.  Taxes upon or measured by pro­duction 
shall be charged to and borne by the parties in proportion to their respective 
interests in production upon which such taxes are based.  Reimbursements from 
owners of royalty, overriding royalty, production payment or similar interests, 
on account of taxes paid for such owners, shall be paid or credited to the 
parties in the same proportions as such taxes were charged to such parties.

 

(Emphasis added.)  

 

[¶28]   The plain and unambiguous language used 
within the operating agreements involved clearly designates UPRC, the unit 
operator, as the sole responsible party for reporting pur­poses and for the 
complete payment of those taxes due and that UPRC was to act as the agent of 
Amoco for such purposes.  The parties obviously intended UPRC to have 
extensive tax reporting and remittance duties with respect to Amoco and its 
working interest in the Proper­ties.   It reasonably follows that the parties 
intended that UPRC had the authority to receive tax assessments concerning the 
Properties, particularly as they may involve Amoco, so as to enable UPRC to 
accomplish its express reporting and payment of tax responsibilities.  To conclude 
otherwise would be absurd. 

 

[¶29]   Further, although Amoco argues that the 
first sentence of article 21, subsection 21.4 of the Higgins and Brady units 
operating agreements quoted above provides that individual working interest 
owners were to receive notices, assessments and tax statements, we do not 
agree.  That 
sentence merely states that if Amoco, as a working interest owner, was to 
receive notices, assessments and tax statements, it had an affirmative duty to 
pass them on to UPRC.  
If notices, assessments, and tax statements were received by UPRC, as the 
unit operator, as was the case here, this provision simply did not ever become 
operable.   
Indeed, this sentence in the operating agreements goes further to clarify 
that UPRC was to be afforded notice of any tax assessments concerning the 
Properties received by the working interest owners so that UPRC could meet its 
expressed contractual reporting and tax pay­ment obligations.  Given the 
administrative regulations in effect during the applicable time frame, the well 
designated and understood historical practices during that period, and the 
intent of UPRC and Amoco expressed within each of the operating agreements 
involved concerning ad valorem tax issues, we hold that UPRC acted as the 
implied agent, if not the express agent, of Amoco and that notice to UPRC by DOR 
and Sweetwater County was suf­ficient notice to Amoco as required by Wyoming 
law of the additional tax assessed and those administrative rights to contest or 
appeal the additional tax assessed in this instance.4

 

[¶30]   A taxpayer as a matter of fundamental 
due process has the right to receive assessment notices that describe in plain 
terms the basis for the assessment. Union Pacific R.R. Co. v. Donnellan, 2 Wyo. 478 
(1882).  This 
fundamental right was afforded Amoco through proper and adequate notice being 
given by both DOR and Sweetwater County through UPRC. 

 

Assertions of Fact

 

[¶31]   Amoco contends that the district court 
erred in granting summary judgment because that ruling was based on many 
unalleged, unsubstantiated, and incorrect assertions of fact and that the 
district court generally erred in granting summary judgment in favor of 
Sweet­water County.  In making these arguments, Amoco points 
primarily to statements made by the district court in various decision letters 
issued in this case.  
However, upon review of the actual order entered by the district court 
granting Sweetwater County summary judg­ment, we do not find that the 
district court erred in granting Sweetwater County such relief.

 

[¶32]   The action commenced by Sweetwater 
County against Amoco is, in essence, a collec­tion claim.  Simply stated, 
Amoco is required to pay all taxes on the gross product attributable to its 
working or non-working interest in the Properties.  Wyo. Stat. Ann. § 
39-3-101(d).  
Amoco's ownership interest in the Properties has unequivocally been 
admitted by Amoco.5   Therefore, Amoco's undisputed ownership 
inter­est establishes the percentage of additional taxes that Amoco owes on 
the unreported production on the Properties for the years 1980 through 1985 
found by the contract auditor retained by Sweetwater County. 

 

[¶33]   Amoco's responsibility to remit taxes 
in proportion to its ownership interest in the Prop­erties matches its 
agreement with UPRC for apportioning tax liability among the Prop­erties' 
owners.  
Indeed, the language from the operating agreements entered into between 
Amoco and UPRC states that taxes are to be charged to and borne by the parties 
in propor­tion to their respective interests in the production upon which 
these taxes are based. Further, while Amoco asserts that a dispute exists 
between Amoco and UPRC about the apportion­ment of the additional tax 
liability imposed, this dispute is again a private matter to be resolved between 
Amoco and UPRC and does not prohibit Sweetwater County from collec­tion of 
the tax owed.  
Finally, for those reasons set forth above, Amoco waived any ability to 
contest the additional taxes assessed because it failed to timely contest the 
assessments made against the Properties, and these assessments are now 
final.   

 

[¶34]   Therefore, while we do not agree with 
some of the statements made by the district court in its various decision 
letters, as such statements appear to be inappropriate given the record before 
us, we conclude that Sweetwater County met its burden of showing that no 
material question of fact existed in this case and it was entitled to summary 
judgment as a matter of law.  As previously established, we may uphold the 
grant of summary judgment upon any proper legal ground finding support in the 
record.  Bevan v. Fix, at ¶26.  

 

 

[¶35]   In its final issue, Amoco argues the 
district court erred by granting Sweetwater County accrued interest.  Generally speaking, 
Amoco seems to assert the district court abused its discretion in awarding 
Sweetwater County interest regarding the past due ad valorem taxes owed by Amoco 
under the circumstances.  While Amoco acknowledges the rule that 
interest is to be imposed on tax debts, it contends this court has, through its 
previous holdings in Amoco Production Co. v. State Board 
of Equalization, 12 P.3d 668 (Wyo. 2000) and Kunard 
v. Enron Oil & Gas Co., 869 P.2d 132 (Wyo. 1994), recognized that equity 
should be considered in imposing such interest and the imposition of interest 
should not be ordered where delays were caused by the taxing entity's 
inefficient and ineffective audit of the taxpayer's production.  Accordingly, Amoco 
argues if a tax debt is owed, any delay in collecting this debt was attributable 
to the tardiness of Sweetwater County and interest should not be awarded on the 
tax amount owed by Amoco.

 

[¶36]   Wyo. Stat. Ann. § 39-3-101 (Michie 
1997) provides:

 

(a) Taxes provided by this act are due and payable at the 
office of the county treasurer of the county in which the taxes are levied.  Fifty percent (50%) 
of the taxes are due on and after September 1 and payable on and after November 
10 in each year and the remaining fifty percent (50%) of the taxes are due on 
and after March 1 and payable on and after May 10 of the suc­ceeding 
calendar year except as hereafter provided.  If the entire tax is paid on or before 
December 31, no interest or penalty is chargeable.

 

(b) The balance of any tax not paid as provided by 
sub­section (a) of this section is delinquent after the day on which it is 
payable and shall bear 
interest at eighteen percent (18%) per annum until paid or collected.

 

(Emphasis added.)  The language used within this statute is 
plain and unambiguous and clearly requires that if a tax is not paid by those 
dates specified, the tax must be deemed delinquent and interest mandatorily 
charged.  We do 
not believe that the legislature could have been any clearer in expressing such 
an intent.

 

[¶37]   This court has also recognized that the 
purpose of interest is to serve as compensation for the use of money, or as a 
penalty, or it may constitute a part of the tax.  Assessing interest only from the date of 
notification and demand is contrary to this purpose.  Kunard, 869 P.2d  at 135; Moncrief v. State Bd. of Equalization, 856 P.2d 440, 
445 (Wyo. 1993).  
This court also recently enunciated in State 
Dep't of Rev. v. Amoco Production Co., 7 P.3d 35, 40 (Wyo. 2000):

 

In Kunard, 869 P.2d  at 134, we 
recognized that when a taxpayer excludes required elements from its reported 
produc­tion, and the exclusion causes an underpayment, the tax is delinquent 
upon the taxpayer's failure to pay on the date due, not at the later date when 
the taxpayer is presented with notice and demand of the deficiency.

 

[¶38]   Interest is a crucial component of tax 
delinquency required by law and is intended to partially compensate the taxing 
authority which has been deprived of the use of the unpaid and overdue tax 
monies over the delinquency period.  Additionally, we believe that to hold 
otherwise would simply foster underreporting by the taxpayer in hopes that the 
taxpayer could illegally avoid the payment of tax in total, at least until a 
subsequent audit uncovered the intentional fallacy and, at minimum, would allow 
the taxpayer to use such tax monies without the payment of interest thereby 
rendering the taxpayer's fraud to his sole benefit and the detriment to the 
taxing authority and the public whom it represents.  Given the fact that 
the Wyoming taxing statutory scheme relies upon reporting by taxpayers, the 
existence of the assessment of statutory interest provides an incentive to 
assure the taxpayer truly and accu­rately submits the required reports.  The imposition of 
statutory interest will also ensure that taxpayers who improperly file 
inaccurate reports or attempt to delay the taxing process are not unjustly 
rewarded.  In accord Kunard, at 
135.

 

[¶39]   Although Amoco urges this court to 
apply equity and abate the running of interest and argues that it is Sweetwater 
County's fault for not having pursued Amoco sooner for the taxes owed, we do not 
agree with these assertions.  In particular, Amoco argues that the case of 
Kunard, at 136, and the reasoning used therein 
requires the abatement of interest in this instance.  However, we find 
that case distinguishable from this case. In Kunard, 
the taxpayer, Enron, received relief on the running of interest solely because 
the county had in its posses­sion a credit balance on account.  Therefore, because 
of the credit balance that existed, there never existed an amount of unpaid tax 
which would initiate the running of interest as called for under Wyo. Stat. Ann. 
§ 39-3-101.  As 
stated in Kunard, at 136:

 

Furthermore, none of the purposes to be served by 
inter­est charges are served by assessing interest against a taxpayer who 
has maintained a credit balance for the taxable period.  The taxpayer does 
not benefit from the free use of the money, and clearly no penalty is necessary 
to discourage future reporting discrepancies which result in a credit 
balance.

 

Finally, this court has held that "[e]quitable 
considera­tions will not be entirely disregarded even in tax cases."  Morrison-Knudson Co. v. State Bd. of Equalization, 58 
Wyo. 500, 135 P.2d 927, 939 (1943).  Because Enron's overpayments exceeded its 
underpayments for each of the tax years in ques­tion, the County was never 
deprived use of the underpayment dollars.  Thus, it would be inequitable to allow the 
County to charge interest on the underpayment, particularly since the County has 
had free use of the overpayment dollars.

 

In accord State Dep't of Rev. v. Amoco 
Production Co., at  40 (holding that Amoco's defi­cient tax 
payment over several given years was not an adequate case for application of the 
reasoning used in Kunard).

 

[¶40]   In this case, Amoco chose not to 
consent to the audit findings made by Sweetwater County and failed to timely 
appeal such findings as allowed.  Amoco then failed to make any tax payment to 
Sweetwater County with respect to the additional assessment made.  While Amoco 
contends that it was unable to verify the amount of tax owed because it was not 
able to obtain the necessary information from UPRC and Sweetwater County, we do 
not find this to be a valid excuse for non-payment of the tax assessed.  Any dispute between 
Amoco and UPRC is again a private matter, which is not before this court and is 
frankly not the concern of Sweetwater County.  In addition, any dispute concerning the 
assessment of Sweetwater County for the Properties during the applicable time 
frame should have been addressed by Amoco through utilization of the proper 
appellate procedures provided.

 

[¶41]   Amoco's argument that Sweetwater 
County's delay in prosecuting the collection of the tax owed by Amoco is to 
blame is also specious.  No authority exists for the abatement of 
interest on the proposition that the taxing authority must sue for collection of 
delinquent taxes.  
To the contrary, it is well established in Wyoming that the authority to 
create a tax­payer belongs to the legislature; and, once an entity is 
legally liable as a taxpayer, that entity cannot shift its tax liability absent 
a specific statute creating a tax forgiveness exemption.  BHP Petroleum, 856 P.2d  at 434 and Union Pacific Resources, 839 P.2d  at 372.   See also Chevron U.S.A., Inc. v. State, 918 P.2d 980, 
984 (Wyo. 1996).  
Wyo. Stat. Ann. § 39-3-101(e) also makes it clear that "[f]ailure to 
send notice, or to demand payment of taxes, does not invalidate any taxes 
due."

 

[¶42]   Established Wyoming case law also 
provides that there may be no administrative adjudi­cation unless a timely 
appeal is filed with the SBOE; and if no timely appeal is filed with the SBOE, 
the assessment becomes final.  Antelope Valley 
Imp. v. State Bd. of Equalization, 992 P.2d  at 
567.  
Therefore, Sweetwater County's asserted delay in prosecu­tion of the 
tax owed by Amoco in this case has absolutely no effect on the validity of the 
tax assessed against Amoco.  The advisable approach for a taxpayer who 
disputes a tax assess­ment is to timely make payment of the tax assessed 
thereby abating the accrual of interest.  Upon timely payment of the tax, there never 
will exist an amount of unpaid tax which initi­ates the running of interest 
under Wyo. Stat. Ann. § 39-3-101.  Of course, the taxpayer must also make sure 
to timely dispute the assessed tax utilizing the proper procedure available 
pursuant to established Wyoming law. 

 

 

CONCLUSION

 

[¶43]   We affirm the 
action of the district court in granting summary judgment in favor of Sweetwater 
County and against Amoco in this action. 
 

FOOTNOTES

1Amoco took advantage of these changes and began to both 
report production and pay its own taxes in 1986. 

 

  
2DOR is required to assess mineral production, 
not the respective county.  See Wyo. Stat. Ann. § 39-2-201(a)(i). 

  
3Amoco's admitted ownership in the Properties is 
a follows:

 

Field/Unit                      
API# or Tax Group                     
Amoco's interest ownership 

 

Higgins                         
   
037-G0051/52             
                        
31.3943%

                                    
   
037-20927                                          
31.9396%

                                    
   
037-20712                  
                        
31.9500%

                                    
   
037-21535                                          
36.1335%

                                    
   
037-20832                                          
22.1653%

 

Brady                            
   
037-G0059                                         
17.500%

                                    
   
037-G0058                                         
17.2067%

                                    
   
037-G0061                                         
17.500 %

                                    
   
037-G0062                                         
33.898 %

                                    
   
037-20551                                          
37.500 %

                                    
   
037-20642                                          
36.3570%

 

Bruff                              
   
037-21479                                          
37.50 %

 

Siberia Ridge                 
   
037-21690                                          
8.97 %

  
4Whether or not UPRC provided or failed to 
provide Amoco with proper notification of the additional tax assessed by 
Sweetwater County is not a present issue before this court.   

 

  
5See fn. 3.