Phillips Petroleum Co. v. Oklahoma Tax Com'n

Phillips Petroleum Co. v. Oklahoma Tax Com'n
1993 OK CIV APP 116
876 P.2d 719
65 OBJ 2085
Case Number: 79284
Decided: 06/22/1993

PHILLIPS PETROLEUM COMPANY, UNION PACIFIC RESOURCES COMPANY, (FORMERLY CHAMPLIN PETROLEUM COMPANY), TXO PRODUCTION CORP., KOCH INDUSTRIES, INC., AND CITGO PETROLEUM CORPORATION, APPELLEES/COUNTER-APPELLANTS,
v.
THE OKLAHOMA TAX COMMISSION, AND ROBERT E. ANDERSON, ROBERT L. WADLEY, AND DON W. KILPATRICK, MEMBERS OF THE OKLAHOMA TAX COMMISSION, APPELLANTS/COUNTER-APPELLEES.

Appeal from the District Court of Oklahoma, County, Bryan C. Dixon, Judge.

AFFIRMED IN PART, REVERSED IN PART.

David Hudson, Gen. Counsel, Kathryn Bass, Asst. Gen. Counsel, Oklahoma Tax Com'n, Oklahoma City, for appellants/counter-appellees.
Clyde A. Muchmore, Kelley C. Callahan, Harvey D. Ellis, Crowe & Dunlevy, Oklahoma City, for appellees/counter-appellants.

OPINION

BAILEY, Presiding Judge

¶1 The Oklahoma Tax Commission (Commission) seeks review of an order of the Trial Court granting partial summary judgment to Phillips Petroleum Company, Union Pacific Resources Company, TXO Production Corporation, Koch Industries, Inc., and Citgo Petroleum Corporation (collectively, Holders) in Holders' declaratory judgment action. In the counter-appeal, Holders seek review of the order of the Trial Court granting partial summary judgment to Commission disposing of all remaining issues.

¶2 Holders are oil and gas companies, and in the ordinary course of business retain proceeds otherwise payable to the owners of producing mineral interests for a number of reasons.

¶3 Holders protested the assessment of additional tax and interest. However, while the protests stood pending, Holders commenced the present action against Commission in the Trial Court seeking declaratory and injunctive relief. Therein, Holders challenged the validity of Commission's audits and assessment of additional tax/interest, Commission rules relating to reporting of unclaimed property as impermissibly conflicting with the Act, Commission's position relative to the mineral proceeds held in Holders' "miscellaneous suspense accounts," and Commission's procedures governing Holders' protests.

¶4 After settlement of the issue of reportability of mineral proceeds held pending "litigation" and other issues, both sides moved for summary judgment. Following hearing thereon, the Trial Court granted partial summary judgment to Holders, determining Commission's position under its rules relative to reportability of the "current balance" and "title requirements" mineral proceeds conflicted with the provisions of the Act. The Trial Court granted partial summary judgment to Commission on the issues of validity of the underlying audits and assessment of interest, and dismissed the remaining issues as not ripe for adjudication. The parties appeal as aforesaid.

¶5 Generally, relief under the Declaratory Judgment Act may not be obtained from "orders, judgments, . . . decrees," or "decisions" of administrative agencies, boards or commissions of this State.

¶6 After partial settlement in the present case, however, the parties submitted on counter-motions for summary judgment only the issues of (1) validity under the Act of the Commission rules regarding the extent of funds reportable after the lapse of the seven-year abandonment period (the "current balance" and "title requirement" issues), (2) validity of Commission's position regarding funds held in suspense for other reasons, and (3) validity of Commission's audits and assessment of additional tax/interest. The Trial Court ruled thereon as aforesaid, but held the effect of Commission's position on funds held in other miscellaneous suspense accounts not ripe for determination.

¶7 Under these circumstances, the above cited authorities, and mindful of our duty to inquire sua sponte into not only our own jurisdiction but also that of the lower court,

¶8 In that vein, Commission first challenges the Trial Court's judgment rejecting Commission's interpretation of the Act to require Holders' report as abandoned all mineral proceeds retained if any of the proceeds have remained unclaimed for seven years (the "current balance" issue). Commission takes the position under the Act that after the seven-year abandonment period has expired, the holder must report all unclaimed proceeds accrued to date. Holders argue the Act requires reporting of only those proceeds held unclaimed for seven or more years.

¶9 The Act presumes that mineral proceeds retained by a holder and unclaimed by the owner for more than seven years after the proceeds become payable or distributable have been abandoned,

¶10 In interpreting a statute the Courts strive to give effect to that which is expressed, not to add new provisions which the legislature, in the exercise of its function, omitted or withheld.

¶11 Consequently, and giving effect to the plain wording of the seven year abandonment provision, we find the Trial Court did not err in holding Commission's "current balance" rule invalid as conflicting with the Act for at least three reasons. First, we hold that the clear wording of §§ 656 and 658 of the Act decrees that any mineral proceeds retained for a full seven years or more without contact with or action by the owner evidencing owner's continued interest therein are presumed abandoned. Thus, and to the extent Rule 60.007.02 conflicts with the clear mandate of §§ 656 and 658 of the Act as we construe those sections, the Commission rule is invalid. Second, we deem it significant that even though given the opportunity to ratify Commission's "current balance" approach to retained mineral proceeds, the Legislature nevertheless chose not to so amend the relevant provisions of the Act.

¶12 Commission also challenges the Trial Court's judgment finding the mineral proceeds retained by Holders pending fulfillment of "title requirements" not subject to the reporting as unclaimed property, notwithstanding retention thereof in excess of the seven year abandonment period. On this issue, Commission Rule 60.007.02(E) provides:

. . . [M]ineral interest proceeds held in suspense pending title requirements will be considered abandoned seven years after the last correspondence concerning such title or seven years from the first payable date, whichever is later.

Under this rule, Commission takes the position that title to oil and gas passes to the gathering system at the moment the product passes into the system's pipeline or truck, and consequently, mineral proceeds become payable or distributable upon extraction and sale of the minerals.

¶13 Sections 656 and 658 of the Act, at pertinent times hereto, presumed abandoned those funds held for the owner for seven years after the funds became "payable or distributable."

Property is payable or distributable for the purposes of this act notwithstanding the owner's failure to demand the property or to present an instrument or document required to receive payment of the property.

(Emphasis added).

¶14 Where the legislature amends a statute by change of phraseology from that of the original enactment, a presumption arises that the legislature intended a change of meaning to attach.

¶15 Further, administrative interpretation of a statute is entitled to great weight, so where the legislature reenacts a statute without substantial changes, it is persuasive - though not dispositive - of legislative recognition and approval of the administrative construction placed upon a statute.

¶16 In the present case, Commission interpreted the statutes in question as requiring Holders to report as abandoned mineral proceeds held in suspense pending title requirements after seven years, but excepting proceeds subject to litigation and those about which owners had contacted Holders. The 1991 amendment defining "payable or distributable" essentially codified Commission's interpretation. Under these facts and circumstances, we hold the Trial Court erred in finding Commission's rule regarding funds suspended for title requirements invalid.

¶17 Holders in their counter-appeal contend the Commission rules challenged in the present case and other Commission rules in place impact funds held in the "miscellaneous suspense" categories, and thus, Holders argue, the Trial Court erred in finding the "miscellaneous" issues not ripe for adjudication.

¶18 The order of the Trial Court granting partial summary judgment to Holders and finding Commission's "current balance" rule invalid is AFFIRMED. The order of the Trial Court finding the issue of disposition of funds retained in the "miscellaneous" categories not ripe for review is AFFIRMED. The order of the Trial Court granting partial summary judgment to Holders finding Commission's "title requirements" rule invalid is REVERSED. The order of the Trial Court granting partial summary judgment to Commission on the issues of validity of the underlying audits, validity of Commission's assessment of interest, and Holders' estoppel/laches defenses thereto is REVERSED.

¶19 HANSEN, C.J., and HUNTER, J., concur.

Footnotes:

1 For example, inability to locate the owners for payment, insufficient title information, pendency of probate proceedings or other litigation affecting title, outstanding unpaid liens, unsigned division orders, and the like.

2 60 O.S.Supp. 1982 § 651 et seq., hereinafter the "Act."

3 Section 1657 of Title Twelve, Oklahoma Statutes (1991) provides:

This act shall not be applicable to orders, judgments, or decrees made by the State Industrial Court, the Corporation Commission, or any other administrative agency, board or commission of the State of Oklahoma.

See also, e.g., Walters v. Oklahoma Ethics Commission, 746 P.2d 172 (Okl. 1987) (District Court not permitted to review Ethics Commission decision); Chancellor v. Tenneco Oil Co., 653 P.2d 204 (Okl. 1982) (District court powerless to construe or declare rights arising under administrative decision of Corporation Commission).

4 Section 306 of Title Seventy-five, Oklahoma Statutes (1991), states, in pertinent part:

The validity or applicability of a rule may be determined in an action for declaratory judgment in the district court . . . if it is alleged the rule, or its threatened application interferes with or impairs, or threatens to interfere with or impair, the legal rights or privileges of the plaintiff.

See also, Lincoln Bank & Trust v. Oklahoma Tax Commission, 827 P.2d 1314, 1318 (Okl. 1992).

5 Lincoln Bank & Trust v. Oklahoma Tax Commission, 827 P.2d at 1318.

6 Lincoln Bank & Trust v. Oklahoma Tax Commission, 827 P.2d at 1318-1319.

7 Particularly, paragraphs 4 and 5 of the Trial Court's order on the counter-motions for summary judgment.

8 Section 656 of Title Sixty, Oklahoma Statutes (Supp. 1982), provides, in part:

All intangible personal property and any income or increment thereon held in a fiduciary capacity for the benefit of another person is presumed abandoned unless the owner has, with seven (7) years after it becomes payable or distributable, increased or decreased the principal, accepted payment of principal or income, corresponded in writing concerning the property or otherwise indicated an interest as evidenced by a memorandum on file with the fiduciary.

Section 658 of the same Title further provides:

All intangible personal property, not otherwise covered by the Uniform Disposition of Unclaimed Property Act, including any income or increment thereon and deducting any lawful charges, that is held or owing in this state in the ordinary course of business of the holder and has remained unclaimed by the owner for more than seven (7) years after it became payable or distributable is presumed abandoned; provided, that no travelers' check shall be presumed abandoned until it has been outstanding for fifteen (15) years from its date of issuance.

9 Proposed H.B. No. 1538, § 16, as passed from the House Judiciary Committee, contained a subsection(c) to § 658.1 of the Act, providing:

At the time any owner's underlying right to receive mineral proceeds is presumed abandoned under this section, any mineral proceeds then held for or owning to the owner as a result of the underlying right and any mineral proceeds accruing after that time as a result of the underlying right and not previously presumed abandoned are presumed abandoned.

10 E.C. Schroeder Co. v. Clifton, 153 F.2d 385 (10th Cir. 1946).

11 Toxic Waste Impact Group, Inc. v. Leavitt, 755 P.2d 626 (Okl. 1988).

12 See, e.g., Hollytex Carpet Mills v. Hinkle, 819 P.2d 289 (Okl.App. 1991).

13 Couch v. Int'l. Brotherhood of Teamsters, 302 P.2d 117, 119 (Okl. 1956) (rejection of language of amendment indicative of legislative intent). See also, 2A Sands, Sutherland on Statutory Construction, § 48.18.

14 Couch, 302 P.2d at 119.

15 See, Boswell v. Citronelle-Mobile Gathering, Inc., 292 Ala. 344, 294 So. 2d 428 (1974) (Rejecting holder's argument that mineral proceeds held pending resolution of title controversy represent mere debt owed to rightful owner of mineral interest so that debt does not become "payable" until title to mineral interest in question is established.)

16 See, footnote 9, supra.

17 See, footnote 9, supra.

18 60 O.S. 1991 § 658 .

19 Irwin v. Irwin, 433 P.2d 931, 934 (Okl. 1965) ("[A] change in phraseology from that of the original act will raise the presumption that a change of meaning was also intended.")

20 Board of Education, Vici Public Schools, Independent School Dist. No. I-5, Dewey County v. Morris, 656 P.2d 258, 261 (Okl. 1982); Magnolia Pipe Line Co. v. Okla. Tax Comm., 196 Okl. 633, 167 P.2d 884 (1946).

21 Lincoln Bank & Trust Co. v. Exchange Nat'l. Bank & Trust Co., Ardmore, 383 F.2d 694 (10th Cir. 1967).

22 In support of this argument, Holders point to the mineral proceeds retained due to lien claims filed or other "miscellaneous" reasons, asserting such proceeds must be retained "pending resolution of [any] dispute" and/or determination of the name or location of the owner.