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Parties Involved:
Howell Petroleum Corporation
Appellant
Samson Resources Company
Appellee

Document Text:

HOWELL 

v. 

SAMSON 

PUB&a!$l( > 

.FILED 

-~Utti~'~tates Courc of Appeals 

' Tenth Circuit 

MAY l 7 1990 ,- .. ::(,~., 

IN THE UNITED STATES\~T OF APPEAL9-"\01JERT L. HOECKER 

FOR THE TJ.ffl':llJf,;c;~;RCUIT Clerk 

PETROLEUM CORPORATION, ) 

) 

Plaintiff-Appellant, ) 

Cross-Appellee, ) Nos .• 88-2129 

) 88-2551 

) 88-2-.629 

) 

RESOURCES COMPANY, ) 

) 

Defendant-Appellee, ) 

Cross-Appellant. ) 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

(D.C. NO. CIV-87-278-W) 

B. J. Rothbaum, Jr. ( David E. Pepper, Michael S. Richie, WflJHam 

J. Skepnek and Brinda K. White on the briefs), Linn & Helms,· 

Oklahoma City, Oklahoma, Attorneys for Appellant/Cross-Appelle.e, 

Howell Petroleum Corporation. 

James A. Kirk (Jon w. Laasch with him on the briefs), Kirk & 

Chaney, Oklahoma City, Oklahoma, Attorneys for Appellee/CrossAppellant, Samson Resources Company. 

Before MCKAY, ANDERSON, Circuit Judges, and THEIS,* Distric't 

Judge. 

ANDERSON, Circuit Judge. 

. . ·• _, ~ •"'.~-·,, 

* Honorable Frank G. Theis, Senior Judge, U.S. District Court, 

for the District of Kansas, sitting by designation. 

Appellate Case: 88-2129 Document: 010110295883 Date Filed: 05/17/1990 Page: 1
Howell Petroleum Corporation ("Howell") owns overriding 

royalty interests in three oil and gas wells operated by Samson 

Resources Company ("Samson"): the McClure No. 2-5 Well in Ellis 

County, Oklahoma ("the Oklahoma well"), and the Ozark Real Estate 

No. 2-19 Well and the Yeager No. 2-20 Well in Johnson County, 

Arkansas (respectively, "the Ozark well" and "the Yeager well''; 

collectively, "the Arkansas wells"). When Samson failed to pay 

any royalties, Howell broughi suit in federal court in Oklahoma, 

seeking proceeds of $183,535.13 from the Oklahoma well and 

$543,649.60 from the Arkansas wells, plus statutory interest. 

Samson answered, denying liability. 

Before the trial, the claim arising from the Oklahoma well 

was settled. The Arkansas claims were tried to the court. Samson 

argued that Howell could not recover any proceeds which were due 

more than three years before suit was filed, on the theory that 

the action was brought under Ark. Stat. Ann. § 53-525 (which 

governs the payment of "proceeds derived from the sale of oil or 

gas production"), and therefore was subject to Oklahoma's threeyear limitations period for "an action upon a liability created by 

a statute ••• ," Okla. Stat. tit. 12, § 95. Howell contended 

that a different limitations period applied because the action was 

one for the imposition of a constructive trust. 

The court found that Samson had withheld royalties, but that 

Howell was not entitled to a constructive trust because that 

theory had not been pled. Consequently, Howell's recovery was 

limited to the $86,836.55 which had come due in the three years 

preceding the suit. The court also held that Howell could not 

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Appellate Case: 88-2129 Document: 010110295883 Date Filed: 05/17/1990 Page: 2
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collect interest under the authority of the Arkansas statute. 

Each party claimed to have prevailed, and sought attorney's 

fees under section 53-525. In addition, Howell sought a fee award 

for successfully settling the Oklahoma claim, and court costs. 

The court denied both parties' motions. 

I • 

Howell first argues that the district court erroneously 

denied its request for a constructive trust and should have 

applied "the statute of limitations applicable to actions for the 

imposition of a constructive trust." Brief of Appellant at 14. 

The parties' contentions revolve around whether or not Howell sufficiently pled a constructive trust theory, and, if so, whether or 

not Howell was entitled to such relief. We need not resolve these 

questions, however, because Howell's argument misconstrues the 

nature of a constructive trust. A constructive trust is a 

remedial device used by courts to enforce substantive rights, Ladd 

v. State ex rel. Oklahoma Tax Comm'n, 688 P.2d 59, 62 (Okla. 

1984); Goodwin v. Beard, 434 P.2d 192, 196 (Okla. 1967); Wootton 

v. Melton, 631 P.2d 1337, 1341 (Okla. Ct. App. 1981); it is not 

itself a substantive right. See generally G. Bogert & G. Bogert, 

The Law of Trusts and Trustees§ 471 (1978 & Supp. 1989); 5 A. 

Scott & w. Pratcher, The Law of Trusts§§ 461-62 (1989). 

A suit seeking a constructive trust is governed by the 

statute of limitations applicable to the underlying cause of 

action. See Green v. Oilwell, Div. of United States Steel Corp., 

767 P.2d 1348, 1353 n.9 (Okla. 1989); Hughes v. Fidelity Bank, 

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Appellate Case: 88-2129 Document: 010110295883 Date Filed: 05/17/1990 Page: 3
N.A., 645 P.2d 492, 495 (Okla. 1982); Barefoot v. Oklahoma Nat'l 

Bank & Trust Co., 474 P.2d 652, 656 (Okla. 1970); Jones v. Jones, 

459 P.2d 603, 604 (Okla. 1969); Morris v. Leverett, 434 P.2d 912, 

920 (Okla. 1967). 1 The district court did not err in failing to 

apply "the statute of limitations applicable to actions for the 

imposition of a constructive trust" because Oklahoma has no such 

thing. 2 

1 Just as the choice of the applicable statute of limitations 

is unaffected by a plaintiff's request for a constructive trust, 

the time the limitations period commences to run is unaffected by 

the plaintiff's choice of remedy. See 5 A. Scott & w. Pratcher, 

supra, at§ 462.4. Howell relies upon Becker v. State ex rel. 

Department of Public Welfare, 312 P.2d 935 (Okla. 1957), for the 

proposition that the statute does not begin to run against a 

plaintiff seeking a constructive trust until the defendant 

unambiguously repudiates the trust. That case involved a claim 

that property the defendant obtained fraudulently was held in 

constructive trust for the cross-claimants' benefit. Regarding 

the statute of limitations, the court first noted that the 

defendant waived any defense based on the statute because he 

failed to plead it. Id. at 942. Four paragraphs later, the court 

said that the claim was not barred by the statute of limitations 

because the cross-claimants had no notice that the defendant had 

repudiated the trust. Id. 

The second statement is dicta because the issue had been 

waived and was not before the court. Further, such a rule makes 

sense when the underlying claim is for fraud, because a fraud 

claim does not arise until the fraud is discovered, Okla. Stat. 

tit. 12, § 95, and the repudiation of the trust and the discovery 

of the fraud often will be simultaneous. In other cases, however, 

such a rule would contradict the cases cited above by making the 

time during which a suit may be filed depend upon the plaintiff's 

choice of remedy rather than the nature of the underlying claim. 

See generally Annotation, When Statute of Limitations Starts to 

Run Against Enforcement of Constructive Trust, 55 A.L.R.2d 220 

(1957 & Supps. 1987 & 1989) (when statute begins to run differs, 

depending upon nature of underlying claim). Therefore, the Becker 

dicta does not apply to the present case. 

2 Arguably, the district court should have used the limitations 

period mandated by Okla. Stat. tit. 12, § 105 for "a claim 

accruing outside this state." Because Howell has not made this 

argument, the issue has been waived and we will not consider it. 

See,~, Adams-Arapahoe School Dist. No. 28-J v. Continental 

Ins. Co., 891 F.2d 772, 776 (10th Cir. 1989). 

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II. 

Howell also claims that the district court erred when it 

denied Howell statutory interest. Ark. Stat. Ann. § 53-525 (now 

Ark. Stat. Ann. § 15-74-60l(a)) sets time limits for the payment 

of "proceeds derived from the sale of oil or gas production," and 

allows for twelve percent annual interest on late royalties. 

However, the statute provides that "any delay in determining the 

persons legally entitled to an interest in such proceeds from 

production caused by unmarketable title to such interest shall not 

affect payments to persons whose title is marketable." Id. This 

implies that the interest penalty does not apply to payments which 

were late because the payee's title was unmarketable. 

In TXO Production Corp. v. Page Farms, Inc., 698 S.W.2d 791 

(Ark. 1985), the Pages executed an oil and gas lease to TXO. The 

Pages were sent a division order which correctly recited their 

interest, but they did not promptly sign and return it. For this 

reason, TXO withheld royalty payments. The Arkansas Supreme Court 

affirmed an award of interest under section 53-525. Regarding 

TXO's argument that the delay was caused by the Pages' title being 

unmarketable, the court said: 

"The marketability of a title is to be determined by the 

public record. There is no indication that Page Farms 

did not have a clear record title while TXO was delaying 

its payments. In fact, TXO's own examining attorney had 

approved the title." 

Id. at 792. The court went on to state that the title was not 

rendered unmarketable by the Pages' failure to execute the division order. Id. at 793; accord Hull v. Sun Refining & Marketing 

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Co., No. 71,179 (Okla. Sept. 26, 1989) [1989 Okla. LEXIS 150] 

(interpreting an identical statute and holding that "because the 

only condition for which [the statute] justifies suspension of 

royalty payments is the existence of unmarketable title, failure 

to execute a division order is not a defense to an action for the 

payment of proceeds from oil production"). 

In Atlanta Exploration, Inc. v. Ethyl Corp., 784 S.W.2d 150 

(Ark. 1990), one Ferguson assigned a plot of land to his grandson 

("Ferguson, Jr."), who died and left the land to his son 

("Ferguson III"). After Ferguson, Jr. died, Ferguson conveyed the 

same land to his son ("Ferguson, Sr."), who leased the oil and gas 

rights to the defendant. Unaware that Ferguson III actually owned 

the land, the defendant paid royalties to Ferguson, Sr. Ferguson 

III sued to collect past royalties. The Arkansas Supreme Court 

affirmed the trial court's refusal to award statutory interest: 

"Here, [the defendant] made timely payments, but 

due to a mistake, it made them to the wrong person 

• • [O]ur law governing timely oil and gas payments 

••• should be construed with appropriate regard to the 

spirit which prompted its enactment, the mischief sought 

to be abolished and the remedy proposed. Arkansas's law 

is designed to prevent a company from withholding the 

payment of royalties to persons entitled to them. It 

does not, however, embrace the situation where timely 

payments are made but, by mistake, were made to the 

wrong person." 

Id. at 153 (citations omitted). 

A. 

Samson sent Howell a division order for the Ozark well, based 

upon a title opinion, reciting Howell's interest as approximately 

six percent. Howell disputed this figure, believing that its 

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Appellate Case: 88-2129 Document: 010110295883 Date Filed: 05/17/1990 Page: 6
share was seven percent, and did not sign and return the order. 

Samson would not pay royalties without an executed division order. 

There was no dispute over the marketability of Howell's title to 

the six percent claim: only its title to the land entitling it to 

additional royalties was unmarketable. 

Had Howell not asserted an entitlement to the additional one 

percent, Samson clearly would not have been justified in delaying 

payment of the undisputed six percent. As in Page Farms, the 

defendant's own title opinion showed the marketability of Howell's 

six percent interest, and Howell's failure to return the division 

order did not render that title unmarketable. It is clear from 

the statute that the unmarketability of one person's title should 

not delay the payment of other entitled parties' royalties, but it 

is not clear whether the unmarketability of part of one person's 

title justifies a delay in paying the rest of that same person's 

proceeds. While the issue is not free from doubt, we believe that 

the Arkansas Supreme Court would not interpret this provision as 

excusing a delay in the payment of royalties on the interest in 

which Howell's title was marketable. See Wright, The Arkansas Law 

of Oil and Gas, 10 U. Ark. Little Rock L.J. 5, 25 (1987-88) ("the 

Arkansas Supreme Court is likely to interpret section 53-525 in 

favor of the ••• party entitled to receive lease proceeds" (citing, e.g., TXO Prod. Corp. v. First Nat'l Bank, 705 S.W.2d 423, 

424-25 (Ark. 1986) (holding that the time limits in section 53-525 

begin to run as soon as the oil or gas is delivered, not when payment is actually made)). This is a case of "a company ••• withholding the payment of royalties to persons entitled to them." 

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Atlanta Exploration, Inc. v. Ethyl Corp., 784 S.W.2d at 153. 

Accordingly, we reverse the district court's decision not to grant 

interest on Howell's royalties from the Ozark well. 

B. 

A mortgage on Howell's share of the Yeager well had been 

released, and the release filed with the county, shortly after the 

well began producing. However, Samson was unaware of the release 

and sent Howell a division order reflecting the existence of the 

mortgage, along with a request for evidence that the mortgage had 

been satisfied. Howell signed and returned the order, but did not 

provide a copy of the release. Consequently, Samson did not pay 

any royalties. 

This delay is akin to the situation in Atlanta Exploration. 

Page Farms is distinguishable because in that case, there was "no 

indication that Page Farms did not have clear title II TXO 

Prod. Corp. v. Page Farms, Inc., 698 S.W.2d at 792; see Atlanta 

Exploration, Inc. v. Ethyl Corp., 784 S.W.2d at 153 (making the 

same distinction). Perhaps Samson should have referred to "the 

public tecord," TXO Prod. Corp. v. Page Farms, Inc., 698 S.W.2d at 

792, before delaying payment because of the perceived unmarketability, but that failure is excusable in light of the fact that 

Howell returned a division order reflecting the continued 

existence of the mortgage. This misled Samson, just as the 

defendant in Atlanta Exploration was misled by the conduct of the 

Ferguson clan. Acting pursuant to an executed division order is 

not "the mischief sought to be abolished," Atlanta Exploration, 

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Inc. v. Ethyl Corp., 784 S.W.2d at 153, by section 53-525. The 

district court properly denied Howell interest on the royalties 

from the Yeager well. 

III. 

Samson contends that it was the prevailing party in the 

district court, so it was "entitled to" its attorney's fees under 

Ark. Stat. Ann. § 53-525 (recodified as Ark. Stat. Ann. 15-74-

603(e)).3 It is not clear whether the trial court had any discretion to deny fees to the prevailing party. Compare Darragh 

Poultry & Livestock Equip. Co. v. Piney Creek Sales, Inc., 743 

S.W.2d 804, 806 (Ark. 1988) (trial judge has no discretion not to 

award costs where authorizing statute does not so indicate) with 

Atlanta Exploration, Inc. v. Ethyl Corp., 784 S.W.2d at 153 

(affirming decision of trial court not to award attorney's fees 

under section 53-525 to plaintiffs who recovered overdue royalty 

payments, but no interest thereon). We need not resolve this 

question, because Samson was not "the prevailing party." 

Samson contends that it was the prevailing party because the 

trial court accepted its contentions on almost every significant 

issue. This argument conveniently overlooks the fact that the 

court held Samson liable for $86,836.55. 4 Samson has presented no 

3 Howell also made a motion for fees under section 53-525, 

which the district court denied. That decision was not appealed. 

4 Attorney's fees are to be awarded to "[t]he prevailing party 

in any proceeding brought pursuant to this Act," meaning one in 

which "persons legally entitled to the proceeds seek relief for 

the failure of the purchaser to make timely payment •••• " Ark. 

Stat. Ann. S 53-525 (now Ark. Stat. Ann. § 15-74-603(b)). This 

[footnote continued] 

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authority for the proposition that a defendant who has been found 

liable for a significant sum can be considered the prevailing 

party. 5 

Our reversal of the trial court's decision not to award 

Howell interest on the proceeds from the Ozark well further 

weakens Samson's position. See Brookside Village Mobile Homes v. 

Meyers, 782 S.W.2d 365, 367-68 (Ark. 1990); Ragland v. Allen 

Transformer Co., 740 S.W.2d 133, 137 (Ark. 1987), cert. denied, 

486 U.S. 1007 (1988) (a fee award to a prevailing party must be 

reversed when the underlying judgment is reversed). 

Samson did not prevail in this action. 

IV. 

Howell contends that it should have been awarded its costs 

pursuant to Federal Rule of Civil Procedure 54(d). The trial 

court's decision whether or not to tax costs will be reversed only 

for an abuse of discretion. Moe v. Avions Marcel Dassault-Breguet 

Aviation, 727 F.2d 917, 936 (10th Cir. 1984). The court was 

within its discretion to refuse to award costs to a party which 

was only partially successful. See In re Corrugated Container 

[footnote continued] 

includes a claim for the royalties themselves, as well as a claim 

for interest thereon. See TXO Prod. Corp. v. Page Farms, Inc., 

698 S.W.2d at 792 ("This action was brought ••• under [section 

53-525] to recover unpaid royalties •••• "). 

5 Samson's reliance upon Bosworth v. Eason Oil Co., 213 P.2d 

548, 556 (Okla. 1949), is misplaced. Fees were awarded to the 

defendant in that case under the court's equitable discretion, not 

because the defendant (who was found liable for $500 of the 

$200,000 sought by the plaintiff) was "the prevailing party." 

Also, there is quite a difference between being liable for $500 

and being liable for almost $87,000. 

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Antitrust Litigation, 756 F.2d 411, 418 (5th Cir. 1985); Sobel v. 

Yeshiva Univ., 619 F. Supp. 839, 844 (S.D.N.Y. 1985). 

v. 

Finally, Howell claims that it should have been awarded its 

attorney's fees for successfully settling the claim arising from 

the Oklahoma well, under an Oklahoma statute entitling "[t]he 

prevailing party" in an action brought to recover overdue oil or 

gas royalties to recover attorney's fees, Okla. Stat. tit. 52, 

S 540. 

Samson responds that, in Oklahoma, only a party which obtains 

a final judgment on the merits can be considered a prevailing 

party. It is clear that a party "prevail[s]" when the opponent 

confesses to a judgment. See Southwestern Bell Tel. Co. v. Parker 

Pest Control, Inc., 737 P.2d 1186, 1187 (Okla. 1987); Wieland v. 

Danner Auto Supply, Inc., 695 P.2d 1332, 1333 (Okla. 1984); Dulan 

v. Johnston, 687 P.2d 1045, 1047 (Okla. 1984); Cox v. American 

Fid. Assur. Co., 581 P.2d 1325, 1326 (Okla. Ct. App. 1977). 

Samson·seeks to distinguish these cases on the grounds that, unlike a confession of judgment, an out-of-court settlement does not 

involve a final judicial determination on the merits. After 

examining the relevant authorities, we agree. 

In Wieland, the Oklahoma Supreme Court stated that fee awards 

to prevailing parties were "not limited to situations where a 

party prevails only after a trial on the merits: •• [T]he 

operative factor is success, not at which stage or how that suecess is achieved I II Wieland v. Danner Auto Supply, Inc., 

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695 P.2d at 1334 (quoting Parker v. Matthews, 411 F. Supp. 1059, 

1063 (D.D.C. 1976), aff'd, 561 F.2d 320 (D.C. Cir. 1977)). But in 

the next paragraph the court noted: 

"A judgment by confession has the same legal effect 

as a judgment after trial •••• It comes under the 

general definition ••• : 'A judgment is the final 

determination of the rights of the parties in an action.' Thus, a judgment by confession ••• is a final 

determination that a plaintiff has prevailed on his 

claim. 

Wieland v. Danner Auto Supply, Inc., 695 P.2d at 1334 (quoting 

Okla. Stat. tit. 12, S 681) (citations omitted). 

The impression that, under Oklahoma law, a final judgment is 

a prerequisite to being a prevailing party6 is strengthened by 

Carter v. Rubrecht, 108 P.2d 546 (Okla. 1940), a decision relied 

upon in Wieland, 695 P.2d at 1334. In Carter, the plaintiff 

brought suit, then dismissed the action without prejudice. The 

defendant's request for attorney's fees, as the prevailing party, 

was rejected. The court held that a penalty statute was to be 

strictly construed, and noted "the policy to tax the attorney's 

fee only in those cases where the other party was determined by 

final judgment to be the losing party. II Carter v. 

Rubrecht, 108 P.2d at 548; ~ also Kaw Valley Fair Ass'n v. 

Miller, 21 P. 794, 795 (Kan. 1889) (distinguishing between a 

tender of the amount sought and an offer to confess to judgment), 

cited in Dulan v. Johnston, 687 P.2d at 1047. 

The district court correctly denied Howell's motion for fees. 

6 We note that the Wieland court declined "to include only a 

party who successfully obtained a judgment after a trial on the 

merits" as a "prevailing party." Wieland v. Danner Auto Supply, 

Inc., 695 P.2d at 1334 (emphasis added). If no judgment at all 

were necessary, the underscored words could have been omitted. 

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The judgment of the district court is in part AFFIRMED, and 

in part REVERSED and REMANDED for a determination of the interest 

due Howell on the proceeds from the Ozark well. 

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