Court Opinion

ID: 9567971
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:59:22.671467+00
Date Added: 2024-06-11T10:24:06.218083
License: Public Domain

SUMMERS, Vice Chief Justice,
Concurring in result.
¶ 1 This well had been shut in years before plaintiff Goodall first made demand for his share of the royalty. Obviously he is out of time unless something tolled the running of the statute of limitations. Goodall claims the fiduciary nature of the operator — royalty owner relationship tolls limitations until the operator repudiates the “trust” by refusing demand, and that he had made no such demand. Defendant Trigg Drilling Company says an operator is not a fiduciary to a royalty owner, that his duty is only to act as a reasonably prudent operator, and that the statute of limitations has long since run. The trial court gave summary judgment for owner Goodall. The Court of Civil Appeals reversed and ruled in favor of operator Trigg.
¶ 2 It is true that there are at least two unresolved factual issues in the case: (1) Does Goodall in fact own an overriding interest as he claims? And (2) when did he learn of the well’s production? But I submit that the second question is only material if something delays the running of limitations so as to make meaningful the date Goodall learned of the well’s production. Absent that something, limitations was running all the time, and his suit was brought too late.
¶ 3 The “something” Goodall and the amicus brief writers for royalty owners claim, is a fiduciary or trust-like relationship between the two parties. After all, oil and gas cases spanning decades use that lan*296guage. Young v. West Edmond Hunton Lime Unit, 275 P.2d 304 (Okla.1954) (unit operator stands in a position similar to that of a trustee); Rees v. Briscoe, 315 P.2d 758 (Okla.1957) (fiduciary relationship created); Ludey v. Pure Oil Co., 157 Okla. 1, 11 P.2d 102, 104 (1931) (fiduciary relationship between lessee and interest owner); Hivick v. Urschel, 171 Okla. 17, 40 P.2d 1077 (1935) (fiduciary duty between assignor and assign-ee of oil and gas lease); Probst v. Hughes, 143 Okla. 11, 286 P. 875, 877 (1930) (fiduciary duty owed to overriding interest holders); Leck v. Continental Oil Co., 800 P.2d 224, 228-229 (Okla.1990) (fiduciary between operator and interest owners); Olansen v. Texaco Inc., 587 P.2d 976, 985 (Okla.1978) (fiduciary between operator and interest owners).
¶ 4 Not so, say Trigg Drilling and the amicus brief writers in support of operators. They argue the operator has his own business interests (and those of his investors) at stake, and he cannot be relegated to the servient sole of mere trustee. The “fiduciary” language in the cases, they say, is mostly dictum, and they cite Bunger v. Rogers, 188 Okla. 620, 112 P.2d 361 (1941) and Howell Petroleum Corp. v. Samson Resources Co. 903 F.2d 778 (10th Cir.1990) to say the relationship is not really fiduciary, but must arise out of the lease contract.
¶ 5 This ease gave the Court an opportunity to provide some useful guidance on the nature of the operator — royalty interest owner relationship: Is it fiduciary? Is it purely statutory? Is it lease/eontract — based? Or is it something else? The opinion doesn’t say much more than that summary judgment was premature. I would write to resolve the issue.
¶ 6 The late Professor Kuntz, in discussing the lessee’s duty of good faith in exercising its pooling power, said this:
Although it has been said that the lessee has a fiduciary obligation in the exercise of the pooling power, it is submitted that the lessee is not a fiduciary and that standards applied to fiduciaries are entirely too strict. This is so because the lessee has not undertaken to manage and develop the property for the sole benefit of the lessor. The lessee has substantial interests that must be taken into account and should not be required to subordinate the lessee’s own interests entirely to the interests of the lessor. Since the lessee’s interests frequently conflict with those of the lessor, however, the lessee must exercise the power in fairness and in good faith, taking into account the interests of both the lessor and lessee. (Citations deleted)

Kuntz, The Law of Oil and Gas, Section ⅛8.3.

¶ 7 I agree with Professor Kuntz. But, on the other hand, can an operator market a known royalty owner’s oil or gas, hold the owner’s proceeds until the five year statute at 12 O.S. § 95(1) has run, and then plead limitations when the interest owner asks for his or her money? Surely not. Yet we don’t have a “discovery rule” for breach of contract. Something would have to toll the statute. A true fiduciary relationship would do that, but it would also impose too onerous a burden on the operator.
¶ 8 While Oklahoma ease law has not enunciated the exact nature of the special relationship between a royalty owner and an operator, nearly all eases have agreed that a special relationship exists. Young, supra; Rees, supra; Hivick, supra; et al. The relationship has been defined as one “similar to a trustee.” Young, at 309. Clearly, the operator has superior knowledge of the production of the well, which may not be readily available to the royalty owners. The operator has a statutory duty to hold the revenue for the benefit of the legal owners. Tit. 52 O.S.Supp.1995 Section 570.10. Such a duty includes the notification of royalty owners of their financial benefits, and the methods by which the proceeds may be paid. § 579.10(B)(3)(c). While an operator may maximize its own business profits, it should not be allowed to do so to the detriment of the royalty owners who have bestowed confidence and trust in the business integrity of the operator.
¶ 9 Rather than as a true fiduciary relationship, I would describe the relationship between an operator and royalty interest owner as quasi-fiduciary. As explained in Colonial Imports Inc. v. Carlton Northwest Inc., 121 Wash.2d 726, 853 P.2d 913 (1993), a *297quasi-fiduciary relationship is created “when a special relationship of trust and confidence has been developed between the parties, where one party is relying upon the superior specialized knowledge and experience of the other, where a [party] has knowledge of a material fact not easily discoverable by the [other party], and where there exists a statutory duty to disclose.” Id. 853 P.2d at 917; see also Miller v. U.S. Bank of Washington, 72 Wash.App. 416, 865 P.2d 536 (1994). Unlike in a true fiduciary relationship, a quasi-fiduciary is not forbidden from personal dealings, nor forbidden from maximizing profits for both parties; rather, the duty is dependent upon the facts and circumstances of each case. See Jones v. Ellis, 551 So.2d 396 (Ala.1989). Quasi-fiduciary relationships have been recognized in the insurer-insured relationship, in the corporate director-shareholder relationship, and the corporate officer-shareholder relationship. See Lira v. Shelter Ins. Co., 913 P.2d 514 (Colo.1996); Jones, supra.
¶ 10 If Goodall owns an overriding royalty interest in this well, and if it is of record so as to place Trigg on notice of his interest, I would hold that there was a quasi-fiduciary relationship between Goodall and Trigg Drilling. See Young, supra; Rees, supra; West Edmond, supra. Thus we are back to the primary question — is Goodall’s claim barred by limitations, or is the statute tolled as in pure fiduciary cases? In Becker v. State ex rel Dept. of Public Welfare, 312 P.2d 935, 942 (Okla.1957) we recognized that the statute of limitations begins to run when a trustee repudiates the trust and such fact is brought to the knowledge of the beneficiary. It seems to me that a trust-like, or quasi-fiduciary relationship should be governed by the same reasoning with regard to limitations as a true fiduciary situation. The “beneficiary” is generally not in a position to know there has been a breach of duty until he realizes he is not getting his due. See Levine v. Advest, 1996 WL 409323 (Conn.Super.1996) (a quasi-fiduciary relationship was sufficient to toll the statute of limitation); Ludey v. Pure Oil, II P.2d at 104.
¶ 11 Does this mean that a royalty owner can know a well is producing, know the operator is not honoring his royalty interest, and nevertheless wait an indeterminate time before making demand and thus postpone the date of “repudiation” and commencement of the limitations period? It does not. When an owner in that situation knows or should know of production, and knows that within a reasonable time after production has begun that he is not getting his share from the operator, knowledge of the operator’s “repudiation” should be imputed to him, and the statute of limitations controlling an action for breach of a trust-like duty will begin. 12 O.S.1991 § 95(3).1 So, under this theory is either party entitled to summary judgment here?
¶ 12 There is a dispute as to when Goodall became aware of production from the well and thus knew that he had money coming. Trigg Drilling asserts that he knew of the well’s production in 1978. Goodall contradicts this by claiming that he did not know of the well’s production until 1992. Summary judgment is proper only when the record shows that there is no issue of material fact, and that one party is entitled to judgment as a matter of law. Meadows v. Fain, 776 P.2d 1270, 1272 (Okla.1989); Flanders v. Crane, 693 P.2d 602 (Okla.1984). This disputed fact is material to the statute of limitations defense.
¶ 13 There is also a material dispute as to another critical fact: whether Goodall is in fact an owner of this overriding royalty interest. Goodall asserts that he never conveyed or relinquished his interest in the well. Trigg Drilling asserts that his interest was relinquished by way of an unrecorded agreement. This controversy alone should preclude summary judgment.
¶ 14 Finally, of course, Trigg cannot be charged with breach of any trust-like duty if Goodall’s interest was not of record so as to impose upon Trigg the duty to account for Goodall’s share of production.
*298¶ 15 Were I writing for the Court I would say that there is not, nor has there ever been, a true fiduciary duty between operator and royalty or interest owner. Professor Kuntz was correct. But the concept of a trust-like, or quasi-fiduciary duty is not new in this state, and has been the law probably since Probst in 1930, Ludey in 1931, and Hivick in 1935, and certainly since Young v. West Edmond in 1954. For statutes of limitations purposes I would impose upon the parties the respective burdens 1 have set out herein. And I would consider the writing to be more a clarification of existing law than a change.
¶ 16 But I do not write in dissent. The Court correctly finds neither party entitled to summary judgment and remands. Perhaps the court below can figure out whether Goodall’s statute of limitations was tolled.

. The availability of a remedy based in quasi-trust would not preclude a remedy in contract based on breach of the instrument by which the royalty interest was created. For limitations see 12 O.S.1991 § 95(1).