Title: Halliburton v. Grothaus

State: oklahoma

Issuer: Oklahoma Supreme Court

Document:

Halliburton v. Grothaus  Halliburton v. Grothaus 1998 OK 110 981 P.2d 1244 69 OBJ 3784 Case Number: 87304 Decided: 11/03/1998 Mandate Issued: 06/24/1999 Supreme Court of Oklahoma HALLIBURTON OIL PRODUCING CO., an Oklahoma Corporation, Plaintiff-Appellee (Garnishor), v. ROSALIE GROTHAUS, SALLY K. TAYLOR, UNITED STATES OF AMERICA ex rel. INTERNAL REVENUE SERVICE, NATIONAL BANK AND TRUST COMPANY OF ADA, OKLAHOMA, a national banking association, THE VOGUE ENTERPRISES, INC., BAILEY, BANKS & BIDDLE, previously known as Peacock Jewelers, Inc., and THE COMMISSIONERS OF THE LAND OFFICE OF THE STATE OF OKLAHOMA, GENERAL MOTORS ACCEPTANCE CORPORATION, FIRST NATIONAL BANK & TRUST CO. OF ADA, OKLAHOMA, NORMAN DRUG COMPANY A/K/A NORMAN DRUG, INC., COUNTY TREASURER OF SEMINOLE COUNTY, OKLAHOMA, AND BOARD OF COUNTY COMMISSIONERS OF SEMINOLE COUNTY, OKLAHOMA AND OKLAHOMA GAS AND ELECTRIC COMPANY, Defendants-Appellants, and KERR-MCGEE CORPORATION Service Agent: Russell G. Horner 123 Robert S. Kerr Oklahoma City, OK 73102 Garnishee. [981 P.2d 1246] ON CERTIORARI TO THE COURT OF CIVIL APPEALS, DIV. 4. ¶ 0 Halliburton Oil Producing Co. brought garnishment proceedings in the District Court, Seminole County, Gordon R. Melson, trial judge, for the satisfaction of a post-foreclosure deficiency determination. The trial court (a) found that the proceeds from gas production, which the garnishee holds in obedience to the garnishment process, are available for the satisfaction of the debt, (b) denied defendants' claims of exemption based on the land's allegedly restricted status, and (c) ordered the funds paid over to the judgment creditor. The Court of Civil Appeals reversed. On certiorari granted upon the deficiency creditor's petition, THE COURT OF CIVIL APPEALS' OPINION IS VACATED; THE TRIAL COURT'S POST-DEFICIENCY PAYOVER ORDER IS REVERSED AND THE CAUSE IS REMANDED FOR FURTHER PROCEEDINGS TO BE CONSISTENT WITH TODAY'S PRONOUNCEMENT M. Allen Core, Tulsa, Oklahoma; Marcella Burgess Giles, McLean, Virginia; E. Edward Wiles, Potomac, Maryland for Appellants Terry Stokes, Fuller, Tubb Pomeroy, Kirschner, Bickford & Stokes, Oklahoma City, Oklahoma, and Gary P. Snow, Mattingly & Snow, Seminole, Oklahoma for Appellee OPALA, J. ¶1 The dispositive issue on certiorari is whether the money held by Kerr-McGee Corporation is impressed with immunity from liability because it represents gas runs from restricted Indian land I THE ANATOMY OF LITIGATION The Foreclosure Suit ¶2 Rosalie Grothaus and Sally K. Taylor [Grothaus and Taylor, deficiency-order debtors or defendants] inherited restricted Indian land. On 27 February 1976 they executed a promissory note and secured its payment by a mortgage on the inherited property. The note and mortgage were approved by the Bureau of Indian Affairs [BIA]. ¶3 Halliburton Oil Producing Company [Halliburton, judgment creditor or mortgagee] succeeded by assignment to the ownership of the note and mortgage. Upon the defendants' default, Halliburton brought suit on the note and foreclosed the mortgage. The property was then offered at sheriff's sale to satisfy the judgment. An October 5, 1992 deficiency determination for the unsatisfied amount of the adjudicated indebtedness followed the sale. The post-sale deficiency order and affidavit of judgment were filed of record in the office of the county clerk on 20 October 1992. The Garnishment Proceedings ¶4 Upon learning, some three years later, that the defendants were receiving income from gas production (on other land than that included in the foreclosure) from property consisting of two separate tracts located in the county, Halliburton brought garnishment proceedings against Kerr-McGee Corporation [Kerr-McGee or garnishee].3 Garnishee's amended answer states that it has on hand for defendant Taylor $1,057.54. Halliburton concedes the garnishment, insofar as it affects Grothaus' indebtedness, may be subject to a prior claim by the IRS.4 The deficiency-order debtors pressed separate claims for exemption from garnishment, maintaining that the production was from restricted Indian property. The answer by the Secretary of the Interior [Secretary] to the garnishment proceeding states that: (a) the two tracts of land in controversy are owned by Grothaus and Taylor; (b) on 5 September 1986 the BIA determined that the property was not restricted and executed a relinquishment of the land's supervision; (c) the BIA later determined in August 1994 that the land was in fact restricted, basing its decision on a finding that the deficiency-order debtors had sufficient quantum of Indian blood and (d) the determination of their [981 P.2d 1248] actual Indian blood relates back to their acquisition of the land. According to the Secretary, although restricted Indian land is generally not subject to creditors' claims and notwithstanding the land's current restricted status, "the royalty income from the property is subject to the preexisting judgment lien at the point that the restricted property was recognized by the BIA as restricted."5 (Emphasis supplied.) The Secretary stated that he would have no objection to a determination that the royalties were "subject to the preexisting judgment lien." ¶5 Grothaus and Taylor objected to the garnishment, arguing that: (a) Halliburton was attempting to encumber restricted assets to satisfy a judgment entered against property that is not the subject of the garnishment proceedings; (b) the Secretary had approved the mortgage to secure an indebtedness of the property that had been foreclosed upon; (c) but because there is no proof that the Secretary had approved an encumbrance upon the property in contest in the garnishment proceedings, it is invalid; (d) the federal jurisprudence relied upon by the Secretary is factually distinguishable from this case and (e) the trial court is without jurisdiction to encumber restricted Indian land without prior approval by the Secretary. ¶6 The trial court (a) found that the proceeds from gas production which Kerr-McGee holds in obedience to the garnishment process are available for the satisfaction of the debt, (b) denied Grothaus' and Taylor's claim of exemption based on the land's restricted status and (c) ordered the funds paid over to the judgment creditor. The defendants unsuccessfully pressed the trial court to "reconsider"6 its denial of their separate claims for exemption from execution, arguing that (a) the property in contest has always been restricted because none of the requirements for removal of the restrictions has occurred and (b) the Secretary's answer in the garnishment incorrectly states that both tracts of land (whose production proceeds are sought) were determined to be unrestricted on 5 September 1986.7 ¶7 The Court of Civil Appeals reversed, holding that (a) whatever lien rights may have attached during the land's unrestricted status were contingent upon the resolution of the controversy over the quantum of defendants' Indian blood and (b) the lien's enforcement by garnishment or other process was barred upon restoration of the land to restricted status. Because the garnishment summons were issued to Kerr-McGee after the land's restricted-status restoration, the defendants were deemed entitled to a full exemption of the royalty proceeds from garnishment. II ¶8 The deficiency-order debtors attack the foreclosure decree, order of sale, confirmation-of-sale order and the deficiency order as void because separate appraisals were not submitted for the surface and mineral estates. They claim that because the process of conducting the sheriff's sale was contrary to statutory requirements, (a) the order confirming the sale is void and (b) the court lacked subject matter jurisdiction to [981 P.2d 1249] determine any deficiency on the obligation adjudged in the foreclosure decree. Defendants also urge the deficiency determination does not meet the sine qua non prerequisites for a lien. This is so because the statutory formula requires a determination of "a fair and reasonable market value of the mortgaged premises,"8 whereas the trial court merely used the appraisal submitted to the sheriff. According to the deficiency debtors, (a) the statutory requirements for a deficiency determination are jurisdictional, (b) in their absence the trial court does not have subject matter jurisdiction to issue execution and (c) the infirmity appears on the face of the judgment roll. In sum, defendants argue that the decree and postdecree orders are facially void for want of power to pronounce the deficiency determination, the order of sale and that of post-sale confirmation. ¶9 This argument is sans support in the record and clearly without merit. No predicate has been laid in the trial court for an appellate argument questioning the facial validity of either the foreclosure decree or of any of the challenged post-decree orders. The only ground correctly laid for this certiorari review is the deficiency debtors' claim that the land is entitled to the protection of restricted Indian ownership. Facial Infirmity ¶10 A district court judgment or order is facially void if, on an inspection of the judgment roll,9 it is apparent that one or more of the requisite jurisdictional elements - that of the subject matter, in personam cognizance, or the court's power to render a particular decision - is shown to have been absent.10 Whenever absence of cognizance appears on the face of the judgment roll, the judicial act is void and subject to attack at any time.11 ¶11 The defendants' argument is clearly without record support. For a showing that a judicial act lacks facial validity, an entire judgment roll must be included in the materials presented for review. The defendants failed to incorporate into the record for this appeal the entire judgment roll record for (a) the foreclosure suit, (b) the sheriff's sale, (c) the post-sale confirmation and of (d) the deficiency determination. [981 P.2d 1250] Untimely Vacation Attack Pressed On Certiorari ¶12 Even if the judgment roll were before the court, defendants' attack upon the postdecree orders, based on an alleged facial defect or infirmity, is impermissible and must fail. The claimed defect does not constitute an infirmity that would impair the court's jurisdiction in the garnishment proceedings. ¶13 In sum, the foreclosure decree and the three post-decree orders are not open to attack in this case because (a) no vacation proceedings had been brought below that are now sought to be reviewed and (b) there is absolutely no record support for a collateral challenge for facial jurisdictional defects in the nisi prius rulings. Because on this record no facial infirmity in the critical adjudications is apparent, they must stand here impervious to a challenge. III THE STATUS OF THE DEFICIENCY DETERMINATION AS A JUDGMENT LIEN IS NOT IMPLICATED ¶14 Halliburton argues that by placing the deficiency determination ¶15 When garnishment is the chosen judgment enforcement method, the status of a deficiency determination as a § 706 lien is not implicated. A §706 judgment lien attaches only to realty and cannot survive the lifting of minerals. ¶16 The enforcement method pressed by Halliburton is not compatible with its assertion of a § 706 lien on realty. From the time of garnishment summons service the res in the hands of the summoned third party is impressed with an equitable lien in favor of the judgment creditor (Halliburton), who brought the garnishment. What Halliburton seeks through garnishment is personal property to which a § 706 lien does not attach. Halliburton's judgment lien theory is an impermissible attempt to jump through two insurmountable hoops - from realty into extracted gas and then from severed gas into royalty proceeds - all in an attempt to reach money derived from the sale of gas extracted from property owned by the deficiency-order debtors. ¶17 The proceeds from oil (or gas) lifted from land that was not in restricted Indian ownership at the time of severance is reachable by garnishment and available for the creditor's satisfaction. The land's status at the point of extraction is critical in assessing the proceeds' availability. This approach is entirely consistent with the long-held view that land restricted when it is to be affected by legal process stands immune [981 P.2d 1252] from the owner's liability for obligations adjudged (or incurred) before the premises attained the legally protected status. ¶18 In sum, the garnishability of the res - held by Kerr-McGee on behalf of the deficiency-order debtors when summons was served - hinges on whether the funds were derived from pre-restoration or post-restoration runs. If any of the res to which the equitable lien attached at the time summons was served is royalty from post-restoration production, that part should be released from garnishment. This determination cannot be made on the record before us. IV THE NATURE AND PURPOSE OF POST-REMAND PROCEEDINGS TO BE CONDUCTED UNDER THIS COURT'S MANDATE ¶19 We are remanding this cause for a hearing and determination of at least two unresolved issues essential to deciding the deficiency-order debtors' claim to an exemption from garnishment based upon immunity conferred on their ownership of restricted Indian lands: (a) whether only one or both tracts of land from which the royalty proceeds derived stood unrestored to restricted status at the critical time in contest and (b) whether any part of the garnishment-impressed res can be traced to post-restoration runs. ¶20 The record in this case lacks clarity with reference to the two critical tracts from which gas production was taken. According to the Secretary's answer, the BIA issued a relinquishment of supervision [cessation of restricted status] as to both tracts. No supporting documents are attached to its answer. The defendants' "motion for reconsideration" raises a serious question about the status of one of the tracts. To that motion they attach (a) a September 5, 1986 relinquishment of supervision issued on only one tract of land and (b) a letter from the BIA to an oil company about the expiration of a lease on the other tract. This correspondence, as the defendants urge, indicates that the BIA may not have relinquished supervision over the latter property. The question whether both properties' restricted status was removed in 1986 is of course one of fact. It should be resolved on remand. ¶21 The garnishee's amended answer, which states that Kerr-McGee is holding funds for defendant Taylor, does not reveal whether any of the funds on hand are attributable to gas production before or after [ 981 P.2d 1253 ] restoration of the producing property's restricted status. If any runs in contest are from post-restoration land, they would stand impressed with a claim of immunity. Should the court determine that the funds cannot be traced to post-restoration runs, the garnishment-impressed res would be subject to creditor's seizure. ¶22 The answer of the Secretary is fraught with an inherent ambiguity, perhaps because of the BIA's misunderstanding that the instant proceeding was one to enforce a judgment lien rather than one to reach personalty through garnishment process for the satisfaction of a deficiency determination. According to the Secretary's response, the royalty income from the two restricted properties was subject to the preexisting judgment lien. If the Secretary was mistaken, as we believe he may have been, that the process in progress was for a judgment lien enforcement rather than one to seize funds by garnishment, the BIA should be afforded the opportunity to clarify its position after remand. V SUMMARY ¶23 No proceedings had been instituted below to vacate the deficiency determination. The attack lodged for the first time on certiorari comes too late. There is absolutely no record support for any attack upon the facial validity of (1) the foreclosure decree, (2) the order of sale, (3) the confirmation-of-sale order or of (4) the deficiency determination. These adjudications stand here impervious to attack for their facial invalidity. ¶24 A judgment lien will neither attach to an oil and gas lease nor to the proceeds of any lifted substances. From the time of garnishment summons service, money then in the hands of the garnishee is impressed with an equitable lien in garnishor's favor. If any of the garnishment-impressed res to which the equitable lien attached at the time summons was served in this case comes from post-restoration runs, it must be released. Because on this record the issues essential to deciding the deficiency-order debtors' claim to immunity from liability remain unresolved, this cause must be remanded for their determination. ¶25 On certiorari granted upon the judgment creditor's petition, the Court of Civil Appeals' opinion is vacated; the trial court's post-deficiency payover order is reversed and the cause is remanded for further proceedings to be consistent with today's pronouncement. ¶26 HODGES, LAVENDER, SIMMS, HARGRAVE, OPALA, WILSON and WATT, JJ., concur; ¶27 SUMMERS, V.C.J., concurs in part and dissents in part; ¶28 KAUGER, C.J., recused. FOOT