Eleanor M. PURCELL, Appellee, Counter-Appellant,
v.
SANTA FE MINERALS, INC., а corporation, Appellant, Counter-Appellee.
Supreme Court of Oklahoma.
William K. Elias, Michael J. Massad, of Elias, Books, Brown, Peterson & Massad and Frank H. McGregor, Oklahoma City, for Eleanor Purcell.
Gary W. Davis, Mark D. Christiansen, Paul D. Trimble, Oklahoma City, and William H. Boyles of Gibson, Dunn & Crutcher, Dallas, TX, for Santa Fe Minerals, Inc.
*189 Joseph W. Morris, Teresa B. Adwan, M. Benjamin Singletary, Gable & Gotwals, Inc., Tulsa, and Brenton B. Moore, Tulsa, for Amicus Curiae Oklahoma Division of the Mid-Continent Oil & Gas Association.
SUMMERS, Vice Chief Justice.
¶ 1 The only question rеmaining on appeal for the Court is to determine which statute of limitations controls Plaintiff/lessor's claim for statutory pre-judgment interest on her recovery against the lessee for underpaid royalties. We conclude that it is the five-year statute governing claims on written contracts, rather than the three-year version applicable to liability created by statute.
¶ 2 Eleanor Purcеll filed suit, claiming that she was lessor of certain mineral interests in Canadian County, and that Santa Fe Minerals, Inc. (Santa Fe), as lessee had underpaid her in making its royalty payments. She also sought prejudgment and post-judgment interest. By way of partial summary judgment Purcell was awarded the amount of $317,504.04, with an additional amount for interest. Santa Fe appealed, arguing that it correctly deducted certain costs from the royalty payments, and that the trial court erroneously applied a five-year statute of limitations. Purcell counter-appealed, arguing that she was entitled to interest at a 12% rate instead of the 6% awarded by the trial court. The Court of Civil Appeals affirmed the trial court's disallowance of deductions for post-production costs, affirmed the allowancе of statutory prejudgment interest, and affirmed the applicability of a five-year statute of limitations. It reversed the trial court's use of 6% as interest and remanded, directing that it be calculated at 12%.
I.
¶ 3 The primary issue in this appeal is whether the language of the lease allowed Santa Fe Minerals, Inc., to deduct certain expenses from the royalty payments made to Purcell. We recently addressed this issue in our answer to a question certified to this Court from the United States Court of Appeals for the Tenth Circuit, Mittelstaedt v. Santa Fe Minerals, Inc.,
In sum, a royalty interest may bear post-production costs of transporting, blending, compression, and dehydration, when the costs are reasonable, when actual royalty revenues increase in proportion to the costs assessed against the royalty interest, when the costs are associated with transforming an already marketable product into an enhanced product, and when the lessee meets its burden of showing these facts.
¶ 4 We ordered the parties here to brief the effect of Mittelstaedt upon this appeal. Both agree that it controls, and both state that the matter should be remanded for further proceedings in the trial court. Plaintiff/Purcell notes that she "has not been afforded an opportunity to investigate and/or challenge Santa Fe's allegations in the context of Mittelstaedt." She further states that "[t]he Court should remand the District Court's ruling on the deduction issue with instructions for further proceedings in accordance with Mittelstaedt." Defendant/Santa Fe is in agreement, and states that "Santa Fe should be given an opportunity to supplement the factual record in light of the Mittelstaedt decision to aid the District Court in issuing a nеw ruling in this case." We accordingly reverse that part of the judgment of the District Court adjudicating Purcell's claim to unpaid royalty income, and remand for further proceedings in light of this Court's opinion in Mittelstaedt. Since the law on the primary issue in this appeal has been decided the motion for oral argument is denied.
II.
¶ 5 When Santa Fe sought certiorari to review the opinion of the Court of Civil Appeals it rаised two issues: (1) how to calculate Purcell's royalty (the Mittelstaedt issue) and (2) the proper statute of limitations. The Court of Civil Appeals had determined that the applicable interest rate was 12% instead of the 6% awarded by the trial court. That decision by the appellate court is not *190 before us on certiorari, and thus becomes a part of the law of this case. Lockhart v. Loosen,
¶ 6 Defendant Santa Fe argued in the trial court that Plaintiff's claim for unpaid royalties was subject to a five-year limitations period. The limitations period is five years for an action brought upon a contract, agreement, or promise in writing.
¶ 7 So, at this point it is undisputed that Purcell's claims for underpaid royalty are limited by the five-year limitation statute § 95(First), and that she is entitled to prejudgment interest at 12% as per § 540. The only question remaining is whether she is entitled to the 12% interest on her entire viable claim (back five years), or for some lesser period of time.
¶ 8 Santa Fe argued that the claim for 12% interest was not a contractual claim, but based upon a liability created by a statute, and that a three-year limitations period applied, citing, 12 O.S. § 95 (Second). Then on certiorari Santa Fe suggested that a one-year limitations period under 12 O.S. § 95 (Fourth) was consistent with the analysis made by the Court of Civil Appeals in this case.[3] Plaintiff argued that the 12% interest was a contractual claim, and that the five-year limitations period applicable to unpaid royalties also applied to the interest.
¶ 9 We must first note that the statute providing for the 12% rate,
D. For purposes of the Production Revenue Standards Act, the statute of limitations on actions brought pursuant to the provisions of the Production Revenue Standards Act shall be five (5) years from the date the cause of action shall have accrued, provided however, nоthing shall create, limit or expand any statute of limitations applicable to production occurring prior to September 1, 1992.
52 O.S.Supp.1992 § 570.14(D).
This statute also shows that the limitations period does not apply to production occurring prior to September 1, 1992. The case before us involves production prior to this date, and the limitations period now provided by § 570.14 does not apply to this сontroversy.
*191 ¶ 10 Santa Fe argues that the enactment of this statute, by itself, indicates that prior to its enactment a three-year limitation period applied. Santa Fe equates legislative silence during the period preceding § 570.14 on the issue of limitations with a legislative recognition that the Legislature was changing the law by enacting § 570.14. It is true that the Legislature is not presumed to perform vain and useless acts. Hill v. Board of Education,
¶ 11 The three limitation periods of 12 O.S.1991 § 95 examined by the trial and appellate courts are as follows:[4]
§ 95. Limitation of Other Actions.
Civil actions other than for the recovery of real property can only be brought within the following periods, after the cause of action shall have accrued, and not afterwards:
First. Within five (5) years: An action upon any contract, agreement, or promise in writing;
Second. Within three (3) years: An action upon a contract express or implied not in writing; an action upon a liability created by statute other than a forfeiture or penalty; and an action on a foreign judgment; ...
Fourth. Within one (1) year: An action for libel, slander, assault, battery, malicious prosecution, or false imprisonment, an action upon a statute for penalty or forfeiture, except where the statute imposing it prescribes a different limitation;
The issue is how to characterize, for the purpose of limitations, a claim for the 12% intеrest authorized by § 540 (now § 570.10). Is it part of a contractual cause action based upon a breached lease, or is the claim one for interest based upon a liability created by statute, or is it an action based on a statute for a penalty?
¶ 12 Suit was filed February 26, 1992 as an action seeking a declaratory judgment, breach of contract and accounting for unpaid royaltiеs. Interest was sought pursuant to 52 O.S.1991 § 540. On February 26, 1987, the version of § 540 provided in part as follows:
Any said first purchasers or owner of the right to drill and produce substituted for the first purchaser as provided herein that violates this act shall be liable to the persons legally entitled to the proceeds from production for the unpaid amount of such proceeds with interest thereon at the rate of twelve percent (12%) per annum, calculated from date of first sale.
52 O.S.Supp.1987 § 540(B), (emphasis added).
Then effective July 1, 1989 this part of the statute read as follows:
Any said first purchasers or owner of the right to drill and produce substituted for the first purchaser as provided herein that violates this section shall be liable to the persons legally entitled to the proceeds from production for the unpaid amount of such proceeds with interest thereon at the rate of twelve percent (12%) per annum, to be compounded annually, calculated from date of first sale.
52 O.S.Supp.1989 § 540(D), (emphasis added).
This language was in effect as 52 O.S.1991 § 540(D) when suit was filed in February 1992.[5] The language refers to one who "violates this act" and one who "violates this section" as being liable for the 12% interest. Section 540 also states that:
*192 C. The district court for the county in which the oil or gas well is located shall have jurisdiction over all proceedings brought pursuant to this act. The prevailing party in any proceeding brought pursuant to this act shall be entitled to recover any court costs and reasonable attorney's fees.
52 O.S.Supp.1987 § 540(C), (emphasis added).
The statute refers to proceedings brought pursuant to the act. Santa Fe relies upon the statutory language, and argues that its liability tо pay interest arises from the statute. However, merely examining the statutory language is insufficient to determine if the liability arises from a statute. We must determine whether the liability arises from contract, or from the common law and is codified by the statute.
¶ 13 In Smith Engineering Works v. Custer,
¶ 14 In County of San Diego v. Sanfax Corp.,
¶ 15 Santa Fe describes itself as the lessee of certain oil and gas leases pertaining to mineral rights possessed by Purcell. Santa Fe's obligation or liability to pay Purcell a royalty existed prior to the effective date of § 540. For example, In re Levy,
Depletion of the store of oil or gas under the land, if there be any, commences at the time the oil or gas is reduced to possession by the lessee . . ., at which time delivery of the royalty, or share reserved to the landowner for permitting lessee to explore and reduce to possession, also commences.
Id.
Thus, § 540 did not create a new duty on the part of Santa Fe to pay Purcell a royalty upon production. Nor is it argued that § 540 altered the contractual obligation of Santa Fe to pay Purcell the royalty.[6]
¶ 16 Santa Fe focuses on § 540's requirement to pay 12% interest, and states that it had no express duty under its leases (or contracts) to pay interest, and that the obligation to pay the interest is thus a liability arising from this statute. However, we have recently noted the duty to pay interest on production payments apart from § 540. Heiman *193 v. Atlantic Richfield Co.,
¶ 17 In Fleet v. Sanguine, Ltd.,
¶ 18 The Legislature is not presumed to perform vain and useless acts when creating law. Hill v. Board of Education, supra, Bryant v. Commissioner of the Department of Public Safety, supra. The Legislature has now removed the statutory language referring to the 12% rate as a penalty. We thus decline to characterize the 12% rate as a penalty when the Legislature has amended the statute to remove that language.
¶ 19 The 12% interest is based uрon a breach of the obligation to pay the royalty arising ex contractu in the manner prescribed by § 540. We have said that only a single cause of action may be predicated upon the same set of facts, but different theories of liability may be argued in support of the cause of action. Fleet,
¶ 20 Courts have looked to whether the existence of an agreement is a necessary element of the claim when determining whether the claim is a new substantive liablity under a statute. Travelers Express Co. v. Cory,
¶ 21 This theory is at the heart of Purcell's argument that § 540 imposes a form of damages for the breach of the underlying contract (lease). She argued before the trial and appellate courts that when § 540 became effective it was incorporated into and became a part of the leases then existing. In other words, § 540 is contractual liability; i.e., the statute provides a meаsure of damages in the form of 12% interest for when the contract is breached. There is no doubt that existing law is incorporated into a lease at the time a lease is created. Heiman v. Atlantic Richfield Co.,
¶ 22 In Gardner the existence of a contract was necessary in an action to recover damages calculated in accordance with the rate schedules. In our case today the existence *194 of a lease is necessary in an action to recover damages calculated in accordance with § 540. The аpplication of § 540 to existing leases incorporates the provisions of that statute into the contractual arrangements. Thus, § 540 did not change the substantive liability of Santa Fe, and for the purpose of applying a statute of limitations § 540 is not a statutory liability independent of a contract or agreement between the parties. We affirm the District Court's use of a five-year statute of limitations for Purcell's claim as to interest as well as royalty payments.
III
¶ 23 The opinion of the Court of Civil Appeals is vacated in such part so as to be consistent with this opinion. The judgment of the District Court of Canadian County is affirmed in part and reversed in part. The cause is remanded to that Court for further proceedings consistent with this opinion.
¶ 24 KAUGER, C.J., and SUMMERS, V.C.J., and HODGES, LAVENDER, OPALA, ALMA WILSON and WATT, JJ., concur.
¶ 25 SIMMS, J., concurs in judgment.
¶ 26 HARGRAVE, J. concurs in part and dissents in part.
NOTES
Notes
[1] This issue relates to whether § 540 applied to leases executed prior to its enactment. Section 540 was not applied retroactively in certain circumstances. Teel v. Public Service Co. of Oklahoma,
[2] This case was resolved in the trial court by three partial summary judgment phases. Ordinarily the briefs used on appeal would be those used by the trial court. Okla.Sup.Ct.R. 1.36. However, this procedure does not apply herein because the final motion for partial summary judgment was filed prior to October 1, 1993. Id. at 1.36(a).
[3] Santa Fe does not aсtually advance an argument here that § 95 (Fourth) applies. It urges the three-year period set by § 95 (Second).
[4] The 1991 version of § 95 was in effect when the action was filed February 26, 1992. Amendments to § 95 either before that date or subsequent thereto are not at issue in this case.
[5] In 1992 § 540 was amended and re-codified at 52 O.S.Supp.1992 § 570.10. 1992 Okla.Sess. Laws c. 190, §§ 10, 28. The effective date for the amended version was July 1, 1993. Id. at § 31. No exрress effective date was expressly stated for the re-codification. Id. at §§ 30, 31.
[6] Section 540 did alter certain common law provisions. See Hull v. Sun Refining and Marketing Co.,
[7] See Shanbour v. Phillips 66 Natural Gas Co.,
[8] See note 1 supra.