Opinion ID: 503762
Heading Depth: 2
Heading Rank: 3

Heading: Volume Base Claim

Text: 51 In its 1983 pretrial ruling, the district court granted summary judgment against Phoenix on its claim that the consortium improperly had excluded CEPE's 25% interest when computing the two-percent royalty payments. Yielding to the model contracts the government had decreed for all oil companies in 1973, the consortium reluctantly transferred 25% of its interest in the Coca Concession to CEPE. Following this transfer, the consortium reduced by CEPE's 25% the volume base on which it calculated Phoenix and Norsul's two-percent royalty. In the district court, Phoenix contended that this reduction constituted a breach of its 1965 contract. 52 The district court decided that the Ecuadorian government had addressed directly the amount of oil production which legally could be subjected to the two-percent royalty. Resolution 11927 provided that there shall be excluded, in order to carry out the assessment of the 2%[,] the percentage of CEPE in the net production. The court accorded this decree and its affirming Sentencia presumptive validity which Phoenix failed to overcome. The court rejected Phoenix's argument that the Resolution could not adjudicate private rights and that it was intended only to apply to the calculation of the government's 86% royalty tax. 53 Two years later, Phoenix sought reconsideration based on additional documents and the depositions of former Ecuadorian ministers. Phoenix argued that Ministry calculation sheets for 1975 revealed that the government had computed the two-percent royalty on the full 100% volume base and only then taxed at the 86% rate 75% of the volume base. After the depositions were taken and following argument by the parties, the district court denied the motion to reconsider. The court found the newly submitted calculation sheets unenlightening and concluded that the particular mathematics the government used did not change the legal basis on which summary judgment had been entered. Nor did the new evidence create any issue of material fact. 54 We find no reversible error in the district court's initial entry of summary judgment or its subsequent refusal to alter the ruling in light of the new evidence. Resolution 11927's whereas clauses stated expressly that the decree was designed to terminate the disagreements arising out of the assessment and payment of two percent of the net production established in Clause Sixth of the private agreement signed on July 16, 1965, and also to establish with certainty the taxable base which generates the income tax. 55 The taxation-only interpretation Phoenix encourages us to give Resolution 11927 ignores the government's purpose, stated in the document's first whereas clause, to resolve the disagreements between the parties. Certainly, this goal would not be accomplished if the Resolution's provisions did not apply to the untaxed, distributed portion of the royalty--that part actually in dispute among the parties. Moreover, the Resolution contains numerous provisions that clearly apply to the entire two-percent royalty, rather than to just the taxed portion. 56 Read as Phoenix would advocate, the Resolution would require royalty payments on the entire 100% volume base yet only 75% of the royalty payments would be subject to the government's 86% royalty tax. The government, in effect, would be foregoing its 86% tax on a quarter of all royalties paid. The obvious hostility with which the government viewed these royalty payments suggests strongly that it would not have enacted such a provision. 57 The deposition evidence supports the district court's entry of summary judgment on this claim. The Natural Resources Minister testified that neither CEPE nor any third party was obligated to pay the two-percent royalty on oil that belongs to the State. The Minister's legal advisor was even more specific, stating that under Resolution 11927 the consortium had the duty to pay the two-percent royalties only after deducting from the production amounts that portion belonging to CEPE.