Opinion ID: 2523351
Heading Depth: 1
Heading Rank: 4

Heading: Royalty Payments

Text: [¶ 7] Ms. Morris asserts CMS did not properly pay her royalties and the district court's finding that it did is incorrect. Consideration of this issue, as well as the other issues presented, requires an understanding of the WRPA. The provisions of the WRPA governing payment for production state in pertinent part as follows: § 30-5-301. Payment for production; time for payment; payor. (a) 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. Payments 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. . . . . § 30-5-302. Payment for production; interest on late payments. Any delay in determining any person legally entitled to an interest in the proceeds from production shall not affect payments to all other persons entitled to payment. In instances where payment cannot be made for any reason within the time limits specified in W.S. 30-5-301(a), the lessee or operator; purchaser or other party legally responsible for payment shall deposit all proceeds credited to the eventual interest owner to an escrow account in a federally insured bank or savings and loan institution in Wyoming.... Payment of principal and accrued interest from such accounts shall be paid by the escrow agent to all persons legally entitled thereto within thirty (30) days from the date of receipt by the escrow agent of final legal determination of entitlement thereto.... § 30-5-303. Payment for production; penalty for violation; jurisdiction; costs and fees. (a) Any lessee or operator, purchaser or other party legally responsible for payment who violates the provisions of this article is liable to the person or persons legally entitled to proceeds from production for the unpaid amount of such proceeds, plus interest at the rate or eighteen percent (18%) per annum on the unpaid principal balance from the due date specified in W.S. 30-5-301(a). (b) The district court for the county in which a well producing oil, gas or related hydrocarbons is located has jurisdiction over all proceedings brought pursuant to this article and the prevailing party in any proceedings brought pursuant to this article shall be entitled to recover all court costs and reasonable attorney's fees. [¶ 8] Pursuant to these provisions, CMS was required to pay the proceeds from the sale of production to those legally entitled within six months after the first day of the month following the date of first sale and thereafter not later than sixty days from the end of the calendar month in which subsequent production was sold. Section 30-5-301(a). In the event it could not determine who was legally entitled to these proceeds, CMS was required to deposit the proceeds into an approved escrow account and, failing that, was required to pay a penalty of 18% interest on the unpaid balance. Sections 30-5-302, 30-5-303(a). [¶ 9] From the evidence presented at trial, the district court found that CMS began producing coal bed methane from the leases in April 1999. The first sale of production occurred in December of 1999. Pursuant to § 30-5-301(a), CMS was required to pay Ms. Morris by June of 2000. [3] However, the district court found that Ms. Morris did not begin receiving royalty payments until November 24, 2000. CMS also did not escrow any funds during the period from June to November of 2000. The district court found that CMS suspended payments to Ms. Morris again on January 29, 2002; however, CMS did not deposit funds into an escrow account until April 8, 2002. [¶ 10] In spite of finding that CMS failed either to timely make payments to Ms. Morris or into an escrow account, the district court concluded that ultimately CMS had paid Ms. Morris all she was due. The district court based this conclusion on the following findings: CMS had paid Ms. Morris $7,054.76 in royalties before it suspended payments on January 25, 2002; CMS deposited $28,139.86 in the escrow account on April 8, 2002; CMS instructed the bank to distribute funds to Ms. Morris on September 18, 2002, and on September 30, 2002, the bank sent Mrs. Morris a check for $25,871.94; on October 11, 2002, CMS instructed the bank to distribute additional funds and on November 25, 2002, the bank sent Ms. Morris a check for $5,730.71. The district court further found from the evidence presented that Ms. Morris failed to meet her burden of proving that she was owed any more than the $38,657.41, either in royalties or as interest on the amounts CMS failed to timely pay or escrow. [¶ 11] Ms. Morris's principal claim on appeal is that the district court's findings are clearly erroneous because there was no way for her, or the court, to determine from CMS's records whether she was properly paid. She contends CMS did not provide the documentation necessary to make that determination and the documentation it did provide was unreliable. She claims CMS's after the fact revisions and overstatements of payments further contributed to the problem of determining whether she was properly paid. She also asserts CMS's own expert witness testified she was not paid royalties on some wells. [¶ 12] The following principles govern our review of a district court's determinations following a bench trial: The factual findings of a judge are not entitled to the limited review afforded a jury verdict. While the findings are presumptively correct, the appellate court may examine all of the properly admissible evidence in the record. Due regard is given to the opportunity of the trial judge to assess the credibility of the witnesses, and our review does not entail re-weighing disputed evidence. Findings of fact will not be set aside unless they are clearly erroneous. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. With regard to the trial court's findings of fact, we assume that the evidence of the prevailing party below is true and give that party every reasonable inference that can fairly and reasonably be drawn from it. We do not substitute ourselves for the trial court as a finder of facts; instead, we defer to those findings unless they are unsupported by the record or erroneous as a matter of law. The district court's conclusions of law, however, are subject to our de novo standard of review. Lieberman v. Mossbrook, 2009 WY 65, ¶ 40, 208 P.3d 1296, 1308 (Wyo.2009) (citations omitted). [¶ 13] Viewing the evidence in accordance with the above principles, we uphold the district court's determination that Ms. Morris failed to prove she was owed royalties or interest beyond the $38,657.41 CMS had paid as of November 2002. Ms. Morris presented no evidence proving the royalty amount she was owed. Ms. Morris expressly testified she was unsure of the amount but that her expert would know. Her expert testified that, while there were some irregularities in the reports, they ultimately resolved themselves. The only actual discrepancies he found were accounted for by direct payments from CMS to creditors of Ms. Morris who had acquired an interest in her royalty payments. Thus, Ms. Morris failed to prove that she was entitled to additional royalty payments beyond those CMS had made to her as of November of 2002. [¶ 14] Turning to Ms. Morris's claim that she was unable to prove her damages because of CMS's actions, we address first her contention that she could not prove her damages because CMS refused to produce the necessary documentation during discovery. Evidence was presented supporting a conclusion that Ms. Morris was granted access to all the documentation that CMS had generated concerning her royalty interests. CMS made the materials available to Ms. Morris at offices in Denver, Colorado, and Casper, Wyoming. Additionally, CMS's expert testified he provided Ms. Morris's expert all pertinent material he had in his possession and Ms. Morris's expert acknowledged the same. [¶ 15] Ms. Morris asserts the documentation CMS provided was unreliable. She relies heavily on an internal CMS memorandum dated April 20, 2001. The memorandum states that internal research into production information had revealed incorrect first dates of sale and/or volume numbers for approximately thirty wells reported between August 2000 and November 2000. On this basis, Ms. Morris asserts that the production numbers for all 221 wells in which she has an interest, at all pertinent times, were untrustworthy. We are not convinced. The memo reflects an effort by CMS to ensure the accuracy of its production numbers and suggests that the mistakes identified were corrected. In addition, a large portion of the memorandum is devoted to explaining the remedial measures that had already been put into place and the remedial measures that would be put into place in the near future to ensure accurate reporting. Thus, while this memorandum discloses CMS had some initial problems with its reporting on some wells it does not prove that the information CMS ultimately provided was unreliable. [¶ 16] Ms. Morris also argues that CMS's production numbers as reported to her were unreliable because they did not match the production numbers reported to the Wyoming Oil and Gas Conservation Commission (WOGCC) as reflected on the WOGCC website. One difficulty with this assertion is that the WOGCC website includes a disclaimer that its numbers should not be relied upon. Additionally, CMS's expert testified certain of the WOGCC website numbers were incorrect because CMS had revised some production figures reported to the WOGCC down to zero and submitted the revised production report to the WOGCC which were not reflected on the website. Rather than substantiating Ms. Morris's claim that CMS's numbers were unreliable, the evidence suggested only that the WOGCC numbers Ms. Morris relied upon were not reliable. [¶ 17] Ms. Morris's final argument concerns the wells for which she never received reporting or payment. Her expert testified he found approximately thirty-three wells for which she had never received payment. He was never asked to calculate the royalty amount due on those wells. He made a quick calculation and guessed the royalty interest would be probably less than $500. CMS's expert testified only three such wells existed. He testified the production numbers including the volumes calculated for these wells by Ms. Morris's expert were correct. No competent evidence on the sales price of this production, however, was ever presented. Again, the record supports the district court's conclusion that Ms. Morris failed in her burden of proof. [¶ 18] Having examined all of the properly admissible evidence, we uphold the district court's conclusion that CMS ultimately paid Ms. Morris more than she was due. Viewing the evidence in the light most favorable to CMS and giving due regard to the district court's opportunity to assess the credibility of the witnesses, we are not left with the definite and firm conviction that a mistake has been committed. The district court's findings are not clearly erroneous.