Court Opinion

ID: 9633904
Source: CourtListenerOpinion
Date Created: 2023-08-22 12:06:11.25746+00
Date Added: 2024-06-11T18:08:44.893239
License: Public Domain

HERNANDEZ, Judge (dissenting). I respectfully dissent. In my opinion all six of plaintiffs’ points of error are without merit. Rule 56(c), N.M.R.Civ.P. provides, in pertinent part, that: “The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” [Emphasis mine] Ballentine’s Law Dictionary defines “fact” as: “A thing done; an action performed or an incident transpiring; an event or circumstance; an actual occurrence. An actual happening in time or space or an event mental or physical. That which has taken place, not what might or might not have taken place.” “A material fact is one of such a nature as will affect the result or outcome of the case depending upon its resolution.” Rathbun v. W. T. Grant Company, 300 Minn. 223, 219 N.W.2d 641 (1974). “[T]he law applicable to a given case determines what is a material fact. Only these facts are material which have some legal significance, that is, control in some way the legal relations of the parties.” Ahten v. Citizens Homestead Association, 163 So.2d 403 (La.App.1964). The material facts upon which the outcome of this case depends, as I see them, are the following: Plaintiffs, in paragraph 1 of their complaint, admit that on or about November 7, 1969 they entered into an oil and gas lease with Pubco Petroleum Corporation. Plaintiffs, in paragraph 3 of their complaint, acknowledge that Mesa Petroleum Company is the successor in interest to Pubco Petroleum Corporation. Plaintiffs, in paragraph 4 of their complaint, acknowleged having received a division order from the defendant, Koch Oil Company and attached a copy of it to their complaint. Exhibit “F” to plaintiffs’ complaint is a letter from Koch Oil Company to the plaintiffs informing them that they were holding several thousand dollars of royalty payments pending receipt of an executed division order, and that upon receipt of that order a check would be sent to plaintiffs. Plaintiffs, in paragraph 6 of their complaint, acknowledge receipt of a division order from the defendant, Permian Corporation, and attached a copy of it to their complaint. The lease (Ex. A to plaintiffs’ complaint) recites, among other things, that: (1) It would remain in force for a term of five years and as long thereafter as oil and gas were produced; and (2) the royalties to be paid to plaintiffs were 3/i6ths to be delivered at the wells or to the credit of the plaintiffs in the pipe line to which the wells might be connected. Plaintiffs, in answer to interrogatories propounded by the defendant, Koch Oil Company, stated that they had not made any arrangements for taking their share of the production in kind and that they had not made any arrangements or contracts to sell their share. Mr. Frederick J. Hansen, house counsel and assistant secretary of Koch Industries, Inc., of which the defendant, Koch Oil Company was a division, stated the following in his affidavit: (1) that Koch Oil Company has been engaged in the business of purchasing crude oil and other liquid hydrocarbons in excess of 20 years; (2) that it engages in such business in 11 states, including New Mexico, and is “presently the largest single purchaser by volume of such hydrocarbons in the states of Oklahoma and Kansas”; (3) that Koch Oil Company consistently requires the execution of division orders before making payment; (4) that he personally was intimately familiar with Koch Oil Company hydrocarbon purchasing business for more than 10 years, and that he could not remember of the company ever disbursing money for such purchases without a signed division order; (5) that to the best of his knowledge the practice followed by Koch Oil Company was the common and customary practice followed throughout the oil industry; (6) that Koch Oil Company’s form of division order contains only usual and customary terms commonly found in division orders from other purchasers. The law applicable to this case, in my opinion, is the following: “An oil and gas lease is merely a contract between the parties and is to be tested by the same rules as any other contract.” Leonard v. Barnes, 75 N.M. 331, 404 P.2d 292 (1965). Judge Phillips speaking for the court in Wolfe v. Texas Co., 83 F.2d 425 (10th Cir. 1936), involving many of the issues in this case, stated: “Parties to a contract are presumed to know a well-defined trade usage generally adopted by those engaged in the business to which the contract relates. Persons, who enter into a contract in the ordinary course of business; unless the terms of the contract indicate a contrary intention, are presumed to have incorporated therein any applicable, existing general trade usage relating to such business. * * * * * * In the absence of an express provision in an oil and gas lease with respect to marketing the production, there is an implied duty on the part of the lessee to make diligent efforts to market the production in order that the lessor may realize on his royalty interest.” “A division order is an instrument required by the purchaser of oil and gas in order that it may have a record showing to whom and in what proportions the purchase price is to be paid.” Wagner v. Sunray Mid-Continent Oil Company, 182 Kan. 81, 318 P.2d 1039 (1957). Section 20-4-103(a), N.M.S.A. 1953 (Repl. Vol. 4, Supp. 1975) provides: “Error may not be predicated upon a ruling which admits or excludes evidence unless a substantial right of the party is affected.” Our Supreme Court in Goodman v. Brock, 83 N.M. 789, 498 P.2d 676 (1972) adopted the following from 3 Barron and Holtzoff, Federal Practice and Procedure, § 1234 at 124-126 (Revised by Wright 1958), as the test to be applied in evaluating a motion for summary judgment: “Though it has been said that summary judgment should not be granted if there is the ‘slightest doubt’ as to the facts, such statements are a rather misleading gloss on a rule which speaks in terms of ‘genuine issue as to any material fact,’ and would, if taken literally, mean that there could hardly ever be a summary judgment, for at least a slight doubt can be developed as to practically all things human. A better formulation would be that the party opposing the motion is to be given the benefit of all reasonable doubts in determining whether a genuine issue exists. If there are such reasonable doubts, summary judgment should be denied. A substantial dispute as to a material fact forecloses summary judgment.” Looking now at some of plaintiffs’ specific contentions. As to Mesa Petroleum Co., plaintiffs contend that Mesa’s objections and answers to interrogatories are invalid and “are utterly of no force and effect whatsoever on the consideration of the motion for summary judgment.” Assuming, but not deciding, that this contention is correct any consideration of either of these documents by the trial court would be harmless error because all of the material facts are contained in other documents, mostly in plaintiffs’ complaint. Plaintiffs further contend that “there being not a single item, word or phrase properly of record for Mesa Petroleum Co. other than its answer” the trial court prematurely and therefore erroneously granted Mesa’s motion for summary judgment. Rule 56(c), supra, does not limit the trial court’s consideration solely to pleadings and other documents submitted by the movant. The trial court can consider all pleadings and other documents properly of record. As to Koch Oil Co., plaintiffs contend that since Koch admitted that it was holding money belonging to plaintiffs that the trial court erred in entering a judgment as to Koch which recited that Koch: “have and recover judgment on all issues in this cause, dismissing this action with prejudice.” Plaintiffs in their complaint prayed that defendants be required to make a proper accounting and to “show cause to justify their continued illegal actions” and for such other relief as might be proper under the circumstances. Koch in an affidavit by Mr. Frederick J. Hansen, its house counsel, in support of its motion for summary judgment gave an accounting through the month of August, 1975. Any claim that plaintiffs might have against Koch for such money was not foreclosed by this judgment. Plaintiffs under Point of Error II, state that an oil and gas lease is a contract and that it is to be construed most strongly against the lessee. That such a lease contains implied covenants on the part of the lessee, i. e., to market the production, to develop the properties, to explore, to discover and to produce. They then state that: “it is the contention of plaintiffs that the oil and gas lease has been breached” but that the extent of the breach is unknown. Paragraphs 7 and 8 are equally unspecific as to who, when and how, any of the defendants breached any of these implied covenants. The most specific allegation is contained in paragraph 7, to-wit: “The Defendants and each of them have breached the implied duty of fair dealing with the plaintiffs.” I would first point out that Koch Oil Co. and the Permian Corporation are not parties to the lease, and consequently, are not bound by any of its terms, express or implied. Mesa’s answers to paragraphs 7 and 8 of plaintiffs’ complaint were as follows: “6. Answering Paragraph 7, Defendant admits that the oil and gas lease contains numerous and varied implied covenants and that this Defendant, as successor in interest and title to Pubco Petroleum Corporation, is the designated agent of the Plaintiffs for purposes of delivering the oil to pipeline purchasers for the Plaintiffs’ credit, all of which has been done in accordance with law and the requirements of the oil and gas lease in question. Defendant denies the remaining allegations contained in said Paragraph 7. “7. Answering Paragraph 8, Defendant denies any failure to comply with the express and implied provisions, conditions, covenants, duties or obligations which it assumed under the terms of the lease agreement in question and further denies that the Plaintiffs are entitled to any injunction or other relief by reason of the foregoing allegations.” These answers together with Mesa’s letter of September 27, 1974, (Exhibit “H” to plaintiffs’ complaint) to plaintiffs, the affidavit of Mr. Frederick J. Hansen, dated February 28, 1975, together with the lease (Exhibit “A” to plaintiffs’ complaint), in my opinion, established a prima facie showing on the part of Mesa that it was entitled to summary judgment. Once such a showing was made the burden was on the plaintiffs to come forward and demonstrate that a genuine issue of fact existed. Goodman v. Brock, supra. Plaintiffs filed two affidavits in response, one by their attorney, Mr. Joseph E. Roehl, four paragraphs of which merit discussion: (1) that Mesa’s motion should be stricken for failure to comply with the provisions of Rule 7(b)(1), N.M.R. Civ.P.; (2) that the motion should be stricken because it was premature in that Mesa had not made “good, sufficient and proper answers” to certain enumerated interrogatories; (3) that since Mesa had denied the allegations of paragraph 18 of the complaint that this then raised a genuine issue for trial; (4) that plaintiffs would shortly file an amended complaint setting forth plaintiffs’ theories and causes of action in individual counts. Rule 7(b)(1), supra, does not apply to motions for summary judgment because Rule 56 is sui generis. Furthermore, a motion for summary judgment does not require specification beyond the appropriate language of the statute. Mesa’s answers to interrogatories were filed February 5, 1975, and Mr. Roehl’s affidavit was filed November 12, 1975. During this period of nine months plaintiffs had an appropriate remedy under Rule 37(a), N.M. R.Civ.P. and did not avail themselves of it. Considering that the primary purpose of Rule 56 is to hasten the administration of justice and expedite litigation [Agnew v. Libby, 53 N.M. 56, 201 P.2d 775] raising such a defense at this late date was not timely. Paragraph 18 of plaintiffs’ complaint states: “The ex parte action of the Defendants herein involved is totally invalid and not binding upon the plaintiffs.” Plaintiffs are referring to the division orders sent to them by Koch and Permian. As plaintiffs in their brief-in-chief acknowledge, there is an implied covenant in oil and gas leases with respect to marketing the production. There is an implied duty on the part of a lessee to make diligent efforts to market the production. Darr v. Eldridge, 66 N.M. 260, 346 P.2d 1041 (1959). Therefore, when plaintiffs did not provide storage or arrange for the sale of their share of the royalty it became Mesa’s duty to market it. Under the existing trade practice the purchasers of the oil have the right to withhold payment until a division order signed by plaintiffs had been furnished. Wolfe v. Texas Co., supra. Hence, Mesa’s denial of the allegations of paragraph 18 did not raise a material issue of fact for determination at trial. Plaintiffs’ statement that they intended to file an amended complaint was not a valid ground for denying defendants’ motions. A motion for summary judgment cannot be defeated by reason that the plaintiffs may have a good cause of action on a differently stated complaint. Bright v. O’Neill, 3 A.D.2d 728, 159 N.Y.S.2d 742 (1957). The affidavit of the plaintiff, Mary R. Lackey, did not, in my opinion, controvert any of the material facts. “If upon consideration of all material undisputed facts, a basis is present to decide the issues as a matter of law, summary judgment is proper.” Worley v. United States Borax and Chemical Corp., 78 N.M. 112, 428 P.2d 651 (1967). Since all of the material facts were undisputed nothing remained for the trial court to do but to determine whether defendants were entitled to a judgment based on those facts. The trial court, in my opinion, correctly determined that they were entitled to a judgment. Granted that plaintiffs alleged many things in their long complaint, however, even assuming the correctness of all of them aside from those facts recited above, none were material to the outcome of this litigation.