Summary
applying Rule 59(e) to a motion to reconsider an interlocutory order
Summary of this case from Gonzales v. Geer, Wissel, Levy & Hartwell, P.A. (In re Siebel)Opinion
CASE NO. CIV-08-668-R
06-23-2011
NAYLOR FARMS, INC., Plaintiff, v. ANADARKO OGC COMPANY, et al., Defendants.
ORDER
Before the Court is Defendant QEP Energy Company ("QEP") motion for partial reconsideration of this Court's Order of May 10, 2011 [Doc. No. 146] insofar as the Court held that Okla. Stat. tit. 52, § 570.10(A) creates an implied trust relationship. Doc. No. 160. Plaintiffs have filed a response to this motion [Doc. No. 190] and Defendant QEP has filed a reply [Doc. No. 196]. In support of its motion, Defendant QEP argues that the subject Order is inconsistent with the Court's Order of April 1, 2010 in McKnight v. Linn Operating, Inc., Case No. CIV-10-30-R [Doc. No. 33]. Additionally, Defendant QEP argues that the disclaimer in § 570.10(A) of the creation of an express trust by anything in that subsection forecloses any trust relationship because there are only two types of implied trusts under Oklahoma law, resulting trusts and constructive trusts, both of which are implied in law as remedial measures. Defendant QEP's Motion at p. 6, citing Powell v. Chastain, 318 P.2d 859, 862 (Okla. 1957); Johnson v. Johnson, 205 P.2d 314 (Okla. 1949); Wootton v. Melton, 631 P.2d 1337 (Okla. Civ. App. 1981); and Goodwin v. Beard, 343 P.2d 192 (Okla. 1967). Finally, Defendant QEP argues that because QEP does not hold funds belonging to the royalty owners, the other authorities relied upon by the Court are not applicable.
Plaintiffs in response assert that this Court's Order herein was correct; that § 570.10(A) only disclaims the creation of any express trust but does create an implied trust relationship; and that QEP's argument that the royalty owners have no claim of ownership to the proceeds QEP holds is sophistry and contrary to the case of Reserve Oil, Inc. v. Dixon, 711 F.2d 951 (10 Cir. 1983), cited by the Court in its Order of May 10, 2011.
Defendant QEP in reply basically reurges the arguments made in its motion for reconsideration.
The Court has carefully considered its Order of April 1, 2010 in McKnight and the arguments and authorities of the parties as well as other authorities. The Court is persuaded that the part of its Order of May 10, 2011 herein in which the Court held that the provision of the Production Revenue Standards Act, Okla. Stat. tit. 52, § 570.10(A), creates an implied trust, or trustee relationship between the person or entity holding proceeds of production as trustee, and royalty owners as owners legally entitled to same, as beneficiaries, was incorrect for the reasons explained herein.
First, upon reconsideration, the Court is persuaded that the analysis of § 570.10(A) by the District Court of Delaware in In re Sem Crude L.P., 407 B.R. 140 (D. Del. 2009) was correct and that the opinion of the Oklahoma Attorney General, Atty Gen. Op., 2008 OK AG 31, 2008 WL 4860573 at *10 (Nov. 5, 2008) was incorrect as explained in the McKnight Order of April 1, 2010 at pp. 5-6, and for the further reasons explained below.
Section 570.10(A) states, in part, as follows: "Nothing in this subsection shall create an express trust." So the only type of trust that could be created by § 570.10(A) would be an implied trust. However, Defendant QEP is correct that under Oklahoma law, implied trusts are trusts created by operation of law and are of two species, resulting trusts and constructive trusts. Powell v. Chastain, 318 P.2d 859, 862 (Okla. 1957); Johnson v. Johnson, 201 Okla. 268, 205 P.2d 314, 318 (Okla. 1949). Both resulting and constructive trusts are equitable remedies designed "to prevent wrongful taking of unlawful holding of property." Wooton v. Melton, 631 P.2d 1337, 1341 (Okla. Civ. App. 1981); See Goodwin v. Beard, 343 P.2d 192, 196 (Okla. 1967); Powell v. Chastain, 318 P.2d at 862. "A constructive trust may be implied by law when one, through some manner of wrongdoing - e.g. fraud, abuse of confidence, or trick - obtains title to property." Wooten v. Melton, 631 P.2d at 1341. "A resulting trust . . . may be judicially imposed on one holding legal title to property if it was obtained under facts and circumstances disclosing an intention that the beneficial interest was not to be enjoyed by the legal title holder." Id. Not only is the law in Oklahoma that implied trusts are resulting and constructive trusts, but this is the prevailing usage of the term "implied trusts" in courts everywhere and by treatises. See e.g., R. Chester, G. Bogert and G. Bogert, The Law of Trusts and Trustees, § 451 at p. 280 (3 ed. 2005). Accordingly, § 570.10(A) cannot be said to create an implied trust.
Finally, the Court agrees with Defendant QEP that it does not hold funds belonging to the royalty owner class Plaintiffs and that the case of Reserve Oil, Inc. v. Dixon, 711 F.2d 951 (10 Cir. 1983) is distinguishable from the circumstances present in this case. In this case, the royalty owner class Plaintiffs have a right to receive payment of royalty interests, e.g., one-eighth or three-sixteenths of the proceeds of production, but they have no ownership interest in specific funds received or held by Defendant QEP.
In Reserve Oil, Inc. v. Dixon, 711 F.2d 951, the plaintiffs were working interest owners in wells governed by joint operating agreements, which vested ownership of the oil and gas produced from the wells in those parties in the same percentage that they owned interests in the wells. 711 F.2d at 952. The joint operating agreements also gave the working interest owners the right to dispose of their oil and gas as they saw fit, by taking it in kind and selling it. Id. The Tenth Circuit explained why the "contract" [joint operating agreements] in that case created a trustee-type relationship between the operator and the non-operator working interest owners in the wells:
This contract does not simply create an indebtedness on the part of the operating corporation to pay to the other owners their shares of the profits from the well production. It gives the party ownership and full control over its proportionate share of the oil and gas. The operator is allowed to invade the owner's province only when the owner fails to dispose of its production proceeds, and even then the owner can revoke that power. Furthermore, if the operator exercises its right to dispose of the owner's production proceeds, the operator can take proceeds from the sale for its own use only to the extent necessary to cover the owner's unpaid proportionate share of the costs of production. The operator has no right to or interest in either the oil and gas or the proceeds from its sale beyond the owner's unpaid proportionate share of the costs. Nor do we find anything in the contract authorizing the commingling of funds. We therefore hold that this contract created a trustee type relationship imposing a duty of fair dealing between the operator and the non-operator owners in the matter of distribution of shares among the owners. We do not mean to imply that there is a general agency relationship as to third parties, which of course is specifically disavowed in the contract itself.
No contracts similar to those in Reserve Oil exist in this case between the royalty owner class Plaintiffs and Defendant QEP. The royalty owner class Plaintiffs are parties to leases with Defendant QEP or to which Defendant QEP is a successor lessee, which give the royalty owner class Plaintiffs only the right to receive payments from production, and not title to production or the proceeds of production.Reserve Oil, Inc. v. Dixon, 711 F.2d at 953 (footnotes omitted).
In accordance with the foregoing, Defendant QEP's motion for partial reconsideration of this Court's Order of May 10, 2011 [Doc. No. 146] is GRANTED and upon reconsideration, the Court's Order of May 10, 2011 [Doc. No. 146] at pages 8 through the first paragraph of page 10 is VACATED. The concluding paragraph of that Order is altered and amended to provide as follows:
In accordance with the foregoing, Defendant QEP Energy Company's motion for partial summary judgment on the issue of the non-existence of a fiduciary duty under Okla. Stat. tit. 52, § 87.1 [Doc. No. 115] is DENIED; and Plaintiff Naylor Farms' motion for partial summary judgment on the existence of fiduciary duty under Okla. Stat. tit. 52, § 87.1 is GRANTED and its motion on the existence of a fiduciary duty under Okla. Stat. tit. 52, § 570.10(A) is DENIED.
IT IS SO ORDERED this 23 day of June, 2011.
/s/ _________
DAVID L. RUSSELL
UNITED STATES DISTRICT JUDGE