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Date Created: 2014-07-15 09:03:03.657945+00
Date Added: 2024-06-11T13:13:35.298436
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OSCN Found Document:GASKINS v. TEXON, LP

	
				

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GASKINS v. TEXON, LP2014 OK CIV APP 22321 P.3d 985Case Number: 111278Decided: 09/06/2013Mandate Issued: 02/25/2014DIVISION IVTHE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION IVCite as: 2014 OK CIV APP 22, 321 P.3d 985
GLENDELL GASKINS, Plaintiff/Appellant,v.TEXON, LP, a 
foreign limited partnership, Defendant/Appellee.AndCP ENERGY, LLC, an 
Oklahoma limited liability company, Defendant.

APPEAL FROM THE DISTRICT COURT OFCREEK COUNTY, OKLAHOMA
HONORABLE JOE SAM VASSAR, TRIAL JUDGE

AFFIRMED

Jessie V. Pilgrim, MOYERS, MARTIN, SANTEE & IMEL, LLP, Tulsa, Oklahoma, 
for Plaintiff/AppellantMark Banner, Heather L. Cupp, HALL, ESTILL, HARDWICK, 
GABLE GOLDEN & NELSON, P.C., Tulsa, Oklahoma, for 
Defendant/Appellee

JERRY L. GOODMAN, JUDGE:
¶1 Glendell Gaskins (Gaskins) appeals the trial court's November 19, 2012, 
order dismissing his declaratory judgment action against Texon, LP (Texon), 
after finding Gaskins failed to state a claim for which relief can be granted 
under the Oklahoma Production Revenue Standards Act, 52 O.S.2011, § 570.1 et seq. 
The appeal was assigned to the accelerated docket pursuant to Oklahoma Supreme 
Court Rule 1.36(a)(2), 12 O.S.2011, Ch. 15, App. 1.1 Based upon our review of the facts and 
applicable law, we affirm.
BACKGROUND
¶2 Gaskins sought a declaratory judgment against Texon determining that Texon 
was liable under the Oklahoma Production Revenue Standards Act (PRSA), 52 O.S.2011, § 570.1 et seq. 
Gaskins asserts § 570.10(A) creates a statutory duty for Texon to hold all 
revenue or proceeds from the purchase of oil and gas in trust for the benefit of 
the legal owners.2
¶3 Gaskins asserted he sold 642 barrels of oil from wells located in Creek 
County, Oklahoma, to SemCrude in June and July of 2008, and that this oil was 
injected into SemCrude's pipeline system at the Midway and Derrisaw stations 
where it was transported for sale in Cushing, Oklahoma.3 Gaskins further asserted his oil was 
commingled in the pipeline with oil produced and purchased from other wells and 
eventually sold to several downstream purchasers, including Texon, who purchased 
1,650 barrels of oil in June and 1,085 barrels in July, 2008. Gaskins asserted 
SemCrude filed bankruptcy on July 22, 2008, and that it failed to pay him 
approximately $62,000.00 for his oil. Gaskins contends Texon has proceeds from 
the sale of oil by SemCrude to Texon, which includes proceeds from the sale of 
his commingled oil.
¶4 Texon filed an answer, pleading, inter alia, the affirmative 
defense of failure to state a claim upon which relief can be granted. Gaskins 
filed a motion for summary judgment on September 5, 2012. On September 20, 2012, 
Texon's counsel filed an affidavit averring discovery was necessary before it 
could respond. The court granted an extension of time. Gaskins subsequently 
filed an application for hearing pursuant to 12 O.S.2011, § 2012(C) on Texon's 
affirmative defense; the court granted the application over Texon's 
objection.
¶5 A hearing was held on November 19, 2012, on Texon's affirmative defense. 
By order filed on November 19, 2012, the court held the PRSA did not apply to 
Gaskins' sale of oil to SemCrude and Texon's subsequent purchase of Gaskins' oil 
from SemCrude. The court found Gaskins failed to state a claim for which relief 
could be granted under the PRSA and that the defect in the second amended 
petition could not be remedied by amendment. The court dismissed Gaskins' 
petition for declaratory judgment. Gaskins' appeals.
STANDARD OF REVIEW

[] This court reviews the dismissal de novo considering the legal 
    sufficiency of the petition and taking all allegations in the plaintiff's 
    petition as true. The function of a motion to dismiss is to test the law of 
    the claims, not the facts supporting them. No dismissal for failure to state 
    a claim upon which relief may be granted should be allowed unless it appears 
    beyond doubt that the plaintiff can prove no set of facts in support of the 
    claim which would entitle relief. Plaintiffs need neither identify a 
    specific theory of recovery nor set out the correct remedy or relief to 
    which they may be entitled. If any set of facts can be established which is 
    consistent with the allegations, a motion to dismiss should be denied. 
    Dismissal is appropriate only for lack of any cognizable legal theory to 
    support the claim or for insufficient facts under a cognizable theory. Where 
    not all claims appear to be frivolous on their face or without merit, 
    dismissals for failure to state a claim upon which relief may be granted are 
    premature. The movant bears the substantial burden of demonstrating any 
    insufficiency. . . .
Gens v. Casady Sch., 2008 
OK 5, ¶ 8, 177 P.3d 565, 
568-69 (footnotes omitted).
¶6 Furthermore, the issue presented is one of statutory interpretation and 
therefore presents a question of law which is subject to de novo review. 
Williams v. Smith & Nephew, Inc., 2009 OK 36, ¶ 8, 212 P.3d 484, 486. An appellate 
court exercises plenary, independent, and non-deferential authority when 
reexamining legal rulings. Barnes v. Oklahoma Farm Bureau Mut. Ins. Co., 
2000 OK 55, ¶ 4, 11 P.3d 162, 166.
ANALYSIS
¶7 This case involves the legal scope and effect of 52 O.S.2011, § 570.10(A) of the 
PRSA. Section § 570.10(A) provides:

All proceeds from the sale of production shall be regarded as separate 
    and distinct from all other funds of any person receiving or holding the 
    same until such time as such proceeds are paid to the owners legally 
    entitled thereto. Any person holding revenue or proceeds from the sale of 
    production shall hold such revenue or proceeds for the benefit of the owners 
    legally entitled thereto. Nothing in this subsection shall create an express 
    trust.
¶8 Gaskins contends § 570.10(A) creates a statutory duty on Texon to hold 
revenue or proceeds from the purchase of oil and gas in trust for the benefit of 
the legal owners.4 Gaskins contends the PRSA uses language typically 
associated with trusts to separate equitable title to the revenue or proceeds 
from legal title: "any person" holding either revenue or proceeds from the sale 
of oil or gas "[s]hall hold such revenue or proceeds for the benefit of the 
owners." and "[a]ll proceeds . shall be regarded as separate and distinct from 
all other funds. ."
¶9 Texon disagrees with Gaskins' interpretation of § 570.10(A), asserting the 
PRSA regulates how interest owners and local operators (or their proxies) work 
together at the wellhead and serves to hold operators accountable to their 
interest owners. Texon maintains the PRSA does not state or even suggest that it 
creates any duty or applies to downstream purchasers of oil and gas after it 
reaches the stream of interstate commerce. Thus, because the PRSA is intended to 
regulate only dispositions at the well, "person" in § 570.10(A) cannot be read 
to apply to a downstream purchaser that does not receive the "proceeds" of the 
sale at the well. Finally, Texon contends nothing in the language of § 570.10(A) 
creates or suggests a trust. Rather, it expressly disclaims a trust and creates 
a debtor-creditor commercial relationship.
¶10 In the present case, we find the language of § 570.10(A) to be clear and 
unambiguous. Thus, the issue is whether § 570.10(A) creates a duty on a 
downstream purchaser such as Texon to hold revenue or proceeds in an implied 
trust for the benefit of the legal owner. No Oklahoma court has recognized such 
a duty or implied trust pursuant to § 570.10(A) of the PRSA.
¶11 Gaskins relies on a 2008 Oklahoma Attorney General opinion wherein the 
Attorney General opined § 570.10(A) embodies trust concepts and creates an 
implied trust.

The language of Section 570.10(A) clearly supports the imposition of a 
    resulting trust by which the holder of the proceeds of production is the 
    resulting trustee that holds those proceeds for the resulting beneficiaries; 
    i.e., the persons legally entitled to them. However, further analysis 
    reveals that Section 570.10(A) also imposes a constructive trust on such 
    proceeds. The primary reason for imposing a constructive trust is to avoid 
    unjust enrichment.
.
Additionally, not enforcing Section 570.10(A) through the imposition of a 
    constructive trust would promote unjust enrichment. It would give the holder 
    of the revenue or proceeds both legal and beneficial title to and use of 
    property of others not only in violation of law, but also for which the 
    holder had not paid. Thus, the holder of those proceeds would obtain legal 
    and beneficial title to the property of others in violation of State law and 
    at the actual expense of those who sold presumptively in reliance on the 
    State law. Consequently, if Section 570.10(A) were found not to create a 
    resulting trust, Section 570.10(A) would impose a constructive trust on the 
    holder of such funds..
The Legislature intended an implied trust (whether resulting or 
    constructive) under the provisions of Section 570.10(A) of Title 52. See 
    Cacy v. Cacy, 619 P.2d. 200, 202 (Okla. 1980); Littlefield v. 
    Roberts, 448 P.2d 851, 
    856 (Okla. 1968); Bryant v. Mahan, 264 P. 811, 812 (Okla. 1927). 
    Furthermore, the holder of the revenue or proceeds of oil and gas production 
    is an implied trustee who has no rights in or to such revenue or proceeds 
    and who is under a statutory duty to pay the revenue or proceeds of oil and 
    gas production to the implied beneficiaries; i.e., the owners legally 
    entitled thereto. The holder of the revenue or proceeds of oil and gas 
    production acquires no right, title or interest in such revenue or 
    proceeds.
¶12 Attorney General opinions are persuasive authority and silence by the 
Legislature may be interpreted as acquiescence. Tulsa Cty. Publ. Facility 
Auth. v. State ex rel. O.T.C., 1998 OK CIV APP 12, ¶ 9, 955 P.2d 741, 743 (citing The 
National Cowboy Hall of Fame and Western Herit. Ctr. v. State ex rel. Oklahoma 
Human Rights Comm'n, 1978 OK 
76, 579 P.2d 1276).
¶13 Upon reviewing the plain language of § 570.10(A), we agree with Texon 
that nothing in the language of § 570.10(A) creates or suggests a duty on a 
downstream purchaser or applies to downstream purchasers of oil and gas after it 
reaches the stream of interstate commerce. Moreover, there is nothing in that 
language requiring the imposition of an implied trust.5 We find In re SemCrude, L.P. 
(Samson Res. Co. v. SemCrude, L.P., et al.), 407 B.R. 140 (D.Del. 2009), 
persuasive. After entering bankruptcy, SemCrude failed to pay producers and 
owners from various states for oil and gas produced between June 1, 2008, and 
the date of bankruptcy. Oklahoma producers filed adversary proceedings in the 
Delaware Bankruptcy Court to obtain declaratory judgments establishing what 
rights, if any, were afforded by Oklahoma law and their priority relative to 
other security interests.6 More specifically, the producers asserted § 
570.10(A) created an implied trust over oil and gas revenue and proceeds for the 
benefit of Oklahoma producers. They further asserted the Oil and Gas Owners' 
Lien Act of 1988 gave them priority over competing claims. See 52 O.S.2001, § 548 et seq. 
(repealed by Laws 2010, SB 1615, c. 142, § 13, emerg. eff. April 19, 2010).
¶14 Interpreting Oklahoma law, the bankruptcy court disagreed, concluding the 
PRSA does not impose an implied trust in favor of the producers, stating:

The requisite intent for creating a resulting trust under Oklahoma law 
    must be clear, decisive, and unequivocal. Estate of Ingram, 874 P.2d 
    [1282] at 1287. Here, the Court concludes that § 570.10(A) of the PRSA does 
    not create a resulting trust because the intent to create one is simply not 
    provided by the plain words of the statute.
.
Read in its entirety, the PRSA provides a comprehensive regulatory 
    structure governing how interest owners and operators work together at the 
    wellhead, and serves to hold operators accountable to their interest 
    owners.
.
Because the PRSA requires operators to pay interest to owners at 
    specified rates and otherwise has common commercial terms and conditions 
    throughout, the Court finds that the statute concerns a debtor-creditor 
    relationship and does not impose a trust 
relationship.
Id. at 153-54. The court found that unlike situations where a statute 
is clear that the intent is for the trustee to hold funds for the benefit of 
beneficiaries, the PRSA does not identify a trustee, actually require 
segregation of trust proceeds, or otherwise impose rights or duties typically 
associated with a trustee/beneficiary relationship. Id. at 152. The court 
concluded § 570.10(A) must be read in context with other provisions of the PRSA, 
which reading supports the conclusion the PRSA is a regulatory scheme for how 
operators and owners will interact with regard to the well. See also McKnight 
v. Linn Operating, Inc., 2010 WL 9039794 (W.D. Okla. Apr. 1, 2010) and 
Naylor Farms, Inc. v. Anadarko OGC Co., et al., 2011 WL 7267853 (W.D. 
Okla. June 23, 2011) agreeing with the analysis in In re SemCrude that § 
570.10(A) does not create an implied trust and disagreeing with the Oklahoma 
Attorney General's opinion.
¶15 Moreover, the Oil and Gas Owners' Lien Act of 1988 provided a procedure 
for Gaskins to secure a lien on the proceeds from the sale of his oil and gas. 
See 52 O.S.2001, § 548 
et seq. (repealed by Laws 2010, SB 1615, c. 142, § 13, emerg. eff. April 
19, 2010). In In re SemCrude, the bankruptcy court held the existence of 
this Act further supported its conclusion that the PRSA did not create a 
trust.

The existence of these lien rights bears upon, and supports, the Court's 
    earlier construction of the PRSA. The Lien Act predates enactment of the 
    PRSA, and was not repealed upon enactment of the PRSA. The Oklahoma 
    Producers' contention that the PRSA imposes a trust for their benefit upon 
    production and proceeds is belied by the continued vitality of the rights 
    afforded under the Lien Act, as it is axiomatic that a party cannot hold a 
    lien in its own property.
In re SemCrude, L.P., 407 B.R. at 157 fn. 10.7
¶16 In response to the In re SemCrude, L.P. decision, the Oklahoma 
Legislature repealed the existing Lien Act of 1988 and enacted the Oil and Gas 
Owners' Lien Act of 2010 ("Lien Act"). See 52 O.S.2011, § 549.1 et 
seq., Cmt. 10 (The 2010 Act was "designed to remedy some of the deficiencies 
perceived to be present in the Prior Act as well as to address some of the 
issues that emerged in the SemGroup litigation.") The purpose of the statute was 
to give Oklahoma producers and royalty owners a first-priority lien to secure 
payment for their interest in oil and gas sold to a first purchaser. The new 
lien attaches to oil and gas before extraction and follows the oil and gas upon 
severance. It also attaches to the proceeds of sale. The Lien Act strengthens 
the rights of Oklahoma interests owners in three (3) ways: 1) Oklahoma oil and 
gas interests are now governed by real property law, which designates the 
applicable law by the state in which the wellhead is located; (2) Oklahoma 
interest owners can now obtain a lien that will remain attached until a first 
purchaser has paid in full the purchase price of produced oil; and (3) the Lien 
Act explicitly and unbendingly grants superior priority to Oklahoma interest 
owners above all other lienholders and U.C.C. Article 9 secured creditors. 
See There's A New Act in Town: How the Oklahoma Oil and Gas Owners' 
Lien Act of 2010 Strengthens the Position of Oklahoma Interest Owners, 65 
Okla. L. Rev. 133 (2012). Title 52 
O.S.2011, § 549.6 allows a downstream purchaser to take free of the 
statutory lien only under certain conditions.
¶17 We agree with the bankruptcy court that the PRSA is a regulatory scheme 
for how operators and owners will interact with regard to the well. In addition, 
§ 570.10(A) specifically provides it applies only to the revenue or proceeds 
from the sale of production, i.e., the oil and gas and other minerals 
that the lessee extracts from the ground at the wellhead. Section 570.10(A) does 
not specifically apply to downstream purchasers. Accordingly, we reject Gaskins' 
assertion that the PRSA applies to Texon's subsequent purchase of oil and gas 
from SemCrude.
¶18 Gaskins further asserts Texon will be unjustly enriched if it is not 
required to pay the proceeds from the sale of his oil and gas. A review of the 
record on appeal reveals, however, that Gaskins did not assert an unjust 
enrichment claim against Texon in this case nor was this issue raised to the 
trial court below. Rather, Gaskins merely sought a declaratory judgment that the 
PRSA applies to Texon. Therefore, this assertion of error is denied.
¶19 Accordingly, the trial court properly dismissed Gaskins' declaratory 
judgment action against Texon for failure to state a claim for which relief can 
be granted under the PRSA. The court's November 19, 2012, order is therefore 
affirmed.

¶20 AFFIRMED.
 

THORNBRUGH, P.J., and RAPP, J., concur.

FOOTNOTES

1 Texon's 
motion for leave to file appellate briefing was granted on February 6, 
2013.

2 Gaskins 
originally filed suit against CP Energy, LLC, on February 28, 2012. CP Energy 
was dismissed on August 6, 2012. An amended petition and second amended petition 
were filed on July 17, 2012, and August 6, 2012, respectively, adding Texon as a 
defendant.

3 
Gaskins' second amended petition asserted SemGroup, L.P., owned and controlled 
SemCrude, L.P. For purposes of simplicity, we will refer to these parties as 
"SemCrude" in this opinion.

4 Gaskins 
maintains the PRSA is a statute of creation and that the legislature intended to 
create a new and comprehensive statutory scheme when it enacted Senate Bill 168 
in 1992. Gaskins states the PRSA was a major legal reform for the oil and gas 
industry, creating fourteen new sections of law and amending one existing 
section, 52 O.S.1991, § 540, 
which did not provide for duties, responsibilities, or a standard of care but 
merely set time limits for oil and gas proceeds to be paid. In addition, he 
contends 52 O.S.2011, §§ 570.10 
and 570.14 are remedial statutes that create a new liability and an action to 
enforce it where none previously existed in the common law and they should be 
accorded liberal construction to encourage development of Oklahoma's natural 
resources and protection of owners of produced oil and gas. Gaskins contends he 
retained beneficial title or interest in the proceeds and that Texon is a mere 
holder of the proceeds. Gaskins further cites to the legislative history of the 
PRSA, including major changes to the PRSA in 1992.

5 Implied 
trusts are equitable remedies which arise entirely by implication of law and are 
either constructive or resulting trusts. See Cacy v. Cacy, 1980 OK 138, 619 P.2d 200. These trusts are used 
by the courts as a remedial device to restore the status quo. Id. The 
burden of proving the existence of an implied trust rests on the party seeking 
to enforce it. Matter of Burns Estate, 1978 OK CIV APP 42, ¶ 10, 585 P.2d 1126, 1129. Evidence to 
support imposition of an implied trust "must be clear, unequivocal and decisive 
beyond a reasonable doubt." Cacy, 1980 OK 138, at ¶ 5, 619 P.2d at 
202.
A constructive trust is imposed when an individual obtains a legal right to 
property through fraudulent, abusive means, or through a method which violates 
equity and good conscience. Matter of Estate of Ingram, 1994 OK 51, ¶ 19, 874 P.2d 1282, 1287. "The primary 
reason for imposing a constructive trust is to avoid unjust enrichment." 
Robison v. Graham, 1990 OK 
93, ¶ 19, 799 P.2d 610, 616 
(citing Cacy, 1980 OK 138, 
at ¶ 7, 619 P.2d at 202; Easterling v. Ferris, 1982 OK 99, ¶ 10, 651 P.2d 677, 680). There must be 
some active wrongdoing on the part of the person against whom recovery is 
sought. Robison, 1990 OK 
93, at ¶ 18, 799 P.2d at 616. Conversely, a resulting trust may be 
judicially imposed where the circumstances indicate that the grantor of legal 
title to property did not intend for the beneficial interest to be enjoyed by 
the grantee of the legal title. See Wootton, 1981 OK CIV APP 24, 631 P.2d 1337.

6 The 
parties in the present case did not participate in the bankruptcy 
proceedings.

7 "The 
1988 Act was intended to guarantee Oklahoma interest owners a right to payment 
for oil produced and sold to a first purchaser. However, two major weaknesses in 
the language of the 1988 Act subordinated the position of Oklahoma interest 
owners, especially when facing U.C.C. Article 9 secured creditors claiming a 
security interest in the same oil. First, the 1988 Act expressly carved out an 
exception for U.C.C. Article 9 secured creditors. As a result, interest owners 
lost their claims over produced oil to secured creditors who asserted their 
security interests in the same oil. Second, the 1988 Act designated real 
property as the choice of law, thus making the debtor's state of incorporation 
the governing law, rather than the state where the wellhead is located." See 
There's A New Act in Town: How the Oklahoma Oil and Gas Owners' Lien Act of 
2010 Strengthens the Position of Oklahoma Interest Owners, 65 Okla. L. Rev. 
133 (2012)(footnotes omitted).

Citationizer© Summary of Documents Citing This DocumentCite
Name
Level
None Found.Citationizer: Table of AuthorityCite
Name
Level
Oklahoma Court of Civil Appeals Cases CiteNameLevel 1978 OK CIV APP 42, 585 P.2d 1126, MATTER OF ESTATE OF BURNSDiscussed 1981 OK CIV APP 24, 631 P.2d 1337, Wootton v. MeltonDiscussed 1998 OK CIV APP 12, 955 P.2d 741, 69 OBJ        1323, FACILITIES AUTHORITY v. OKLAHOMA TAX COMMISSIONDiscussedOklahoma Supreme Court Cases CiteNameLevel 1990 OK 93, 799 P.2d 610, 61 OBJ        2510, Robison v. GrahamDiscussed at Length 1994 OK 51, 874 P.2d 1282, 65 OBJ        1713, In the Matter of the Estate of IngramDiscussed 1968 OK 180, 448 P.2d 851, LITTLEFIELD v. ROBERTSCited 2008 OK 5, 177 P.3d 565, GENS v. CASADY SCHOOLDiscussed 2009 OK 36, 212 P.3d 484, WILLIAMS v. SMITH & NEPHEW, INC.Discussed 1978 OK 76, 579 P.2d 1276, NATIONAL COWBOY HALL OF FAME v. STATE ex rel. OKLA. HUMAN RIGHTS COMM.Discussed 1980 OK 138, 619 P.2d 200, Cacy v. CacyDiscussed at Length 1927 OK 486, 264 P. 811, 130 Okla. 67, BRYANT v. MAHANCited 1982 OK 99, 651 P.2d 677, Easterling v. FerrisDiscussed 2000 OK 55, 11 P.3d 162, 71 OBJ        3219, BARNES v. OKLAHOMA FARM BUREAU MUTUAL INS. CO.DiscussedTitle 12. Civil Procedure CiteNameLevel 12 O.S. 2012, Defenses and Objections - When and How Presented - By Pleading or MotionCitedTitle 52. Oil and Gas CiteNameLevel 52 O.S. 549.1, Short TitleCited 52 O.S. 549.6, Rights of PurchasersCited 52 O.S. 540, Renumbered as 52 O.S. § 570.10 by Laws 1992, SB 168, c. 190, § 28Cited 52 O.S. 548, Oil and Gas Owners' Lien ActDiscussed 52 O.S. 570.1, Short TitleDiscussed 52 O.S. 570.10, Proceeds from Sale of ProductionDiscussed