First Baptist Church v. Yates Petroleum Corp.

2012 NMCA 064, 2 N.M. 90
CourtNew Mexico Court of Appeals
DecidedJune 13, 2012
DocketNo. 33,632; Docket No. 30,359
StatusPublished
Cited by2 cases

This text of 2012 NMCA 064 (First Baptist Church v. Yates Petroleum Corp.) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Baptist Church v. Yates Petroleum Corp., 2012 NMCA 064, 2 N.M. 90 (N.M. Ct. App. 2012).

Opinion

OPINION

VIGIL, Judge.

{1} This case requires us to determine whether a contractual agreement to waive interest on proceeds owed to mineral owners of the rights to a well is rendered void by the New Mexico Oil and Gas Proceeds Payment Act (the Act), NMSA 1978, Sections 70-10-1 to -6 (1985, as amended through 1991). We conclude that the Act does not render such a contract void, and the district court having ruled otherwise, we reverse.

BACKGROUND

{2} Defendant is the operator of the “Runnin’ AZH Com. No. 1 Well.” Plaintiffs are owners of mineral rights to the well, and contend they are entitled to interest on the proceeds they received from production of the well. Defendant began production from the well in August 2002, and when proceeds were obtained from production, Defendant retained a title attorney to identify the apparent owners of the mineral rights to the well. Pursuant to the title opinion, “division orders” were sent to Plaintiffs in May 2003, to be signed and returned. “A division order is a specialized contract developed for the petroleum industry that provides authorization to a purchaser of oil and gas to pay proceeds from production to the owners of production.” Murdock v. Pure-Lively Energy 1981-A, Ltd., 108 N.M. 575, 579, 775 P.2d 1292, 1296 (1989). For protection against potential liability for improper payments, “a purchaser typically requires each person who is entitled to a royalty share in the production proceeds to execute a division order that declares the portion of production to which he is entitled.” Id. Another typical feature of a division order is that until a satisfactory title determination is made, no interest is owed on withheld payments. Id. at 579-80, 775 P.2d at 1296-97.

{3} The division orders listed the title requirements to entitle Plaintiffs to proceeds from the well, and specifically requested that each Plaintiff provide a copy of the trust document establishing its right to the interest claimed. Each Plaintiff executed and returned the division order, and Plaintiffs retained the same attorney among them to assist them in satisfying the title requirements. Defendant accepts substitute or altered division orders from interest holders, but all Plaintiffs in this case signed the division order without making changes. Plaintiffs’ and Defendant’s counsel communicated from 2004 through 2006, during which time Plaintiffs provided documents and other materials, but not the requested trust document. In 2006, despite not being provided a copy of the trust, Defendant placed Plaintiffs on pay status. Plaintiffs began receiving payments, but since payment had not been made within the time limits of Section 70-10-3 (1985), they also demanded interest on the proceeds under Section 70-10-4 (1991). Defendant refused to pay interest pursuant to a clause in the division orders signed by Plaintiffs which authorizes payment without interest if the delay in payment results from a question concerning Plaintiffs’ marketable title. The clause states:

If any claim is made which adversely affects title to any interest credited hereunder, or such title is unmarketable in the opinion of a licensed New Mexico attorney, the parties credited with such interest severally agree to furnish abstracts or other evidence of title acceptable to [Defendant], and to cure any defects which render the title of the Interest Owners unmarketable, without expense to [Defendant], In the event offailure to furnish such evidence of marketable title, [Defendant] is authorized to withhold payments without payment of interest until the claim is settled.

(Emphasis added.)

{4} Plaintiffs filed a class action in the district court asserting their right to interest on the proceeds notwithstanding the clause in the division order. The district court certified the class and ruled that the agreement in the division order to withhold payment without interest violates Section 70-10-4, and declared the agreement void. Damages were awarded following a non-jury trial, and the district court entered a declaratoryjudgmentrequiring Defendant in the future to pay interest on all proceeds paid after the deadlines set forth in Section 70-10-3.

{5} Defendants appeal, contending that Section 70-10-4 does not prohibit the parties from contractually agreeing to forego interest on payments if the delay in payment results from a question concerning the seller’s marketable title.

STANDARD OF REVIEW

{6} This case turns upon whether the right to interest on the proceeds from production codified in Section 70-10-4 outweighs New Mexico’s strong public policy favoring parties’ rights to contract. Interpretation of a statute is a question of law which we review de novo. See Morgan Keegan Mortg. Co. v. Candelaria, 1998-NMCA-008, ¶ 5, 124 N.M. 405, 951 P.2d 1066.

{7} “In interpreting statutes, we seek to give effect to the Legislature’s intent, and in determining intent we look to the language used and consider the statute’s history and background.” Key v. Chrysler Motors Corp., 121 N.M. 764, 768-69, 918 P.2d 350, 354-55 (1996), aff’d in part, rev’d in part on other grounds by 2000-NMSC-010, 128 N.M. 739, 998 P.2d 575. When presented with a question of statutory construction, we observe the following general principles: (1) the plain language of the statute is the primary indicator of legislative intent; (2) we will not read into a statute language which is not there, particularly if it makes sense as written; and (3) when several sections of a statute are involved, they must be read together so that all parts are given effect. See High Ridge Hinkle Joint Venture v. City of Albuquerque, 1998-NMSC-050, ¶ 5, 126 N.M. 413, 970 P.2d 599.

HISTORY OF THE ACT

{8} The Oil and Gas Proceeds Payment Act was originally enacted in 1985. 1985 N.M. Laws, ch. 55, §§ 1-5. In general, the Act addresses the timing and procedure required of producers, “payors,” for the payment of proceeds from oil and gas productions to interest holders of those minerals. Id.

{9} Section 70-10-3 (1985) directs when payments must be paid. In pertinent part, payment is owed:

[C]ommencing not later than six months after the first day of the month following the date of first sale and thereafter not later than forty-five days after the end of the calendar month within which payment is received by payor for production unless other periods or arrangements are provided for in a valid contract with the person entitled to such proceeds.

Section 70-10-4, as originally enacted in 1985, provided:

A. Any delay in determining any person legally entitled to an interest in the proceeds from production shall not affect payments to all other persons entitled to payment.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

State v. Jones
New Mexico Supreme Court, 2025
First Baptist Church of Roswell v. Yates Petroleum Corp.
2012 NMCA 64 (New Mexico Court of Appeals, 2012)

Cite This Page — Counsel Stack

Bluebook (online)
2012 NMCA 064, 2 N.M. 90, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-baptist-church-v-yates-petroleum-corp-nmctapp-2012.