Opinion ID: 165825
Heading Depth: 4
Heading Rank: 5

Heading: New Mexico Unfair Practices Act

Text: 80 Appellees moved for partial summary judgment on Elliott's statutory claims, including Elliott's claim under the New Mexico Unfair Practices Act, which the district court originally denied. Later, Appellees again moved for partial summary judgment on Elliott's punitive damages and UPA claim. The district court vacated the previous order denying Appellees' summary judgment motion and granted Appellees' motion, dismissing Count 1 of the Second Amended Complaint. The district court concluded that Elliott, as a royalty owner, is neither a purchaser nor seller of royalty gas, nor does the case involve the sale, lease, rental, or loan of goods and services as required by the UPA. 81 On appeal Elliott argues that the district court erred by ignoring that Elliott is an involuntary purchaser of processing services under the UPA. Elliott argues that Appellees violated the UPA by charging Elliott inflated rates for processing services and misrepresenting the amount (39% in-kind fee) charged for such services. The State of New Mexico, as amicus curiae, supports Elliott's argument, asserting that Appellees' conduct falls within the ambit of the UPA. The State argues that Appellees' retention of 39% of the NGLs is in connection with the processing services at the Plant. Appellees counter that real estate interests, including oil and gas leases, are not goods or services under the UPA, and, under New Mexico law, royalty instruments do not result in purchases or sales of either oil and gas or post-production services. 82 The UPA provides that [u]nfair or deceptive trade practices and unconscionable trade practices in the conduct of any trade or commerce are unlawful. N.M. Stat. Ann. § 57-12-3. Trade or commerce includes the advertising, offering for sale or distribution of any services and any property and any other article, commodity or thing of value, including any trade or commerce directly or indirectly affecting the people of this state. Id. at § 57-12-2(C). An unfair or deceptive trade practice 83 means an act specifically declared unlawful pursuant to the Unfair Practices Act . . ., a false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services or in the extension of credit or in the collection of debts by a person in the regular course of his trade or commerce, which may, tends to or does deceive or mislead any person. . . . [ 23 ] 84 Id. at § 57-12-2(D). An unconscionable trade practice is similarly defined as 85 an act or practice in connection with the sale, lease, rental or loan, or in connection with the offering for sale, lease, rental or loan, of any goods or services, including services provided by licensed professionals, or in the extension of credit or in the collection of debts which to a person's detriment: 86 (1) takes advantage of the lack of knowledge, ability, experience or capacity of a person to a grossly unfair degree; or 87 (2) results in a gross disparity between the value received by a person and the price paid. 88 Id. at § 57-12-2(E). Because the Unfair Practices Act constitutes remedial legislation, [courts] interpret the provisions of this Act liberally to facilitate and accomplish its purposes and intent. State ex rel. Stratton v. Gurley Motor Co., 105 N.M. 803, 737 P.2d 1180, 1185 (Ct.App. 1987). 89 This circuit recently recognized that the UPA  `does not apply to sales of real estate.' Kysar v. Amoco Prod. Co., 379 F.3d 1150, 1157 (10th Cir.2004) (quoting McElhannon v. Ford, 134 N.M. 124, 73 P.3d 827, 832 (Ct.App.2003)). Kysar held that misrepresentations in connection with a mineral lease regarding rights of access were unconnected to a good or service and therefore did not constitute a violation of the UPA. Id. In concluding that a completed house is a form of realty and therefore cannot be goods or services under the UPA, the McElhannon court said, [t]he word goods is generally understood to mean personal estate as distinguished from realty, and [t]he word services is generally understood to mean work done by one person at the request of another. 73 P.3d at 832 (quotations, citations, and alterations omitted). The court further reasoned that [t]o the extent goods and services are combined to create a structure that is permanently affixed to realty, they are understood to have been `converted' to realty. Id. 90 Elliott is a royalty interest owner alleging, at the core of its case, underpayment of royalties. 91 The term royalty or royalty interest, as used in oil and gas parlance to define a mineral interest in land, has a well known and commonly accepted meaning. It means a share (usually 1/8th) in the oil and gas reserved to the landowner from an oil and gas lease, which when produced is delivered to the purchaser free of cost to the landowner. 92 Shinn v. Buxton, 154 F.2d 629, 632 (10th Cir.1946). In New Mexico a grant or reservation of the underlying oil and gas, or royalty rights provided for in a mineral lease as commonly used in this state, is a grant or reservation of real property. 93 Duvall v. Stone, 54 N.M. 27, 213 P.2d 212, 215 (1949). [I]t matters not whether the production from a mineral well is claimed or whether a portion of the fund resulting from the sale of the production is claimed; in New Mexico, both assets are realty. Fullerton v. Kaune, 72 N.M. 201, 382 P.2d 529, 533 (1963). Because the payment of royalties, including any associated deductions for post-production costs, is not connected to goods or services but to realty, Elliott's claim does not fall within the ambit of the UPA. The district court's grant of summary judgment is therefore affirmed. 94