Court Opinion

ID: 9591176
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:02:49.35055+00
Date Added: 2024-06-11T18:01:07.949011
License: Public Domain

SIMMS, Justice,
dissenting:
Today the majority holds that with the enactment of 52 O.S.Supp.1985, § 540, the requirement of execution of a division order as a prerequisite to payment for royalty proceeds became “violative of public policy.” In my opinion, the majority’s holding is contrary to the law and unsupported by the facts of this case, and I must respectfully dissent.
*1281To reach this broad-brush “public policy” result, the majority has apparently interpreted § 540 in total isolation, for in its own opinion the majority has acknowledged that:
1) A division order is a device of long standing in the oil purchasing industry and a recognized part of the custom and usage of the industry; and
2) Through custom and usage, division orders have always been required to entitle a royalty owner to receive payment for proceeds from purchaser; and
3) The requirement of execution of a division order before a royalty owner is entitled to receive payment is part of the common law which remains in full force and effect unless a statute plainly expresses the intent to abolish that common law right; and
4) Section 540 does not plainly, or otherwise, express any intent to abolish the common law custom and usage requirement of execution of division orders; and
5) The new 1989 amendment to § 540, 52 O.S.Supp.1989, § 540(B), explicitly provides for the execution of division orders as a prerequisite for payment to royalty owners, from and after the effective date of July 1, 1989.
With these admissions, it would seem beyond question that the Court would hold that § 540 should be construed in a manner consistent with the existing common law. Basic axioms of statutory construction require it. Instead, however, the majority doggedly proceeds to its conclusion that under § 540, division orders are violative of public policy because, it holds, the only prerequisite for payment is demonstration of marketable title.
The effect of the majority opinion, as I view it, is the creation of a four year “window” (1985-1989) during which the law is different from what it was before and what it will be after. Different legislative enactments pertaining to the same subject, should be construed together as a harmonious whole. See, Letteer v. Conservancy District No. 30, Okl., 385 P.2d 796 (1963). In addition to being erroneous, the majority’s decision has unnecessarily inserted conflict and confusion in a stable and settled area of oil and gas law.
I agree with the trial court’s interpretation of § 540. It simply requires proceeds derived from an oil and gas sale to be paid to persons “legally entitled thereto”, no later than six months after the date of first purchase. Certainly the first purchaser may withhold proceeds when title is not marketable, but demonstration of marketable title alone is not sufficient in and of itself to cause an owner to be “legally entitled” to receive payment. Clearly then, under § 540 “causes” other than unmarketable title may exist which make an owner not “legally entitled” to receive payment for proceeds of production. Failure to execute a division order to purchaser to provide that purchaser with directions for payment and setting forth the terms and conditions for the purchase of royalty oil is one such “cause” under § 540 which must be met before a royalty owner would be “legally entitled” to be paid from proceeds.
Additionally, I am not persuaded by the majority’s attempt to distinguish this matter from its recent decision in Teel v. Public Service Company of Oklahoma, Okl., 767 P.2d 391 (1985). I appreciate the tenuous position which Sun Oil must see itself occupying, in light of the holding of Teel and the language used therein. While it is true as the majority states, that the majority opinion in Teel did not find that the absence of a division order in and of itself was sufficient to sustain a finding of conversion — it did find that a division order is essential for a purchaser to protect itself against such a claim. Using the same pen, the majority in Teel stated:
“A division order consists of an agreement between the working interests and the purchasers which provides a formula for payment of the purchaser’s price of gas. Its function is to protect the purchaser from liability. Nonetheless, the purchaser is not protected unless the owners of the interest sign the division order. In the absence of an executed division order and in the presence of no*1282tice that the non-contraetmg cotenant has revoked the operator’s right to sell, failure of a purchaser to account to each working interest owner for his/her pro rata share of the proceeds subjects the purchasers to the same liability as the operator and the purchaser may become a converter of the property.” [At 397] Emphasis added.
In large part the instant case was at best a plea for declaratory judgment as to the abstract question of whether plaintiffs’ proposed royalty division of interest form was superior to, or at least a sufficient replacement for, Sun’s proposed division order. Plaintiffs’ amended petition merely alleged that they submitted an executed royalty division of interest form to defendant but that defendant had refused to make royalty payments to the plaintiffs. The gist of much of the action before the trial court was not even to receive the relief granted here by the majority, but simply to obtain a judicial declaration of which form was better and which should be approved.
The Court uses “public policy” as a crutch to reach a result which is unsupportable. There is no factual basis in this record or in the contract in issue which justifies the pronouncement made today. The majority has failed to mention just what unfair or unfavorable conditions were attempted to be imposed upon these royalty owners under the guise of custom and usage which would justify such a result. Nothing in the majority opinion or in the record shows terms in the division order prepared by Sun Oil which were unfair or oppressive.
The recent amendment to § 540 is a clear statement and mandate of the public policy which has always existed in this State — including the years 1985 through 1989. I would affirm the trial court.
I am authorized to state that Vice Chief Justice OPALA, and Justice HODGES and Justice SUMMERS join with me in the views expressed herein.