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Abraham v. Palm Operating, LLC

Court of Appeals of Oklahoma, Division I

July 17, 2019

TIM ABRAHAM, Plaintiff/Appellee,
PALM OPERATING, LLC, Defendant, and PACER ENERGY MARKETING, LLC, Defendant/Appellant.

          Mandate Issued: 08/15/2019


          R. Brent Blackstock, Tulsa, Oklahoma, for Plaintiff/Appellee,

          Carol McNern, Tulsa, Oklahoma, for Defendant/Appellant.

          Kenneth L. Buettner, Judge.

         ¶1 Defendant/Appellant Pacer Energy Marketing, LLC, appeals summary judgment granted to Plaintiff/Appellee Tim Abraham in his suit for violation of the Production Revenue Standards Act, conversion, and restitution. The material facts are undisputed and they show Pacer's liability to Abraham was discharged by Pacer's payment to the well operator, Defendant Palm Operating, LLC. Pacer was entitled to judgment as a matter of law and we therefore reverse.

         ¶2 In his February 2016 Petition, Abraham alleged that he owned a Carried Working Interest in an oil lease covering the Elias-Kerns No. 2 well, that Palm had been the operator of the well since May 19, 2009, and that Pacer had been the first purchaser of the well's production since January 1, 2010. Abraham alleged he had made demand for payment of proceeds but Palm and Pacer had failed to pay. Abraham alleged Palm and Pacer owed him interest on the unpaid proceeds for violation of the Production Revenue Standards Act (52 O.S.2011 §570.1 -§570.15, "PRSA"), actual and punitive damages for conversion, and restitution.

         ¶3 In its Answer, Pacer asserted it had purchased crude from the well beginning December 12, 2010. Pacer denied it violated the PRSA or owed interest to Abraham. Pacer also denied it was liable to Abraham for conversion or that it owed restitution. As affirmative defenses, Pacer asserted the expiration of the limitations period, laches, and waiver. Pacer further asserted it was unclear whether Abraham's interest was marketable and that any failure to make payment was due to Abraham's negligence or lack of diligence, as well as error by Palm or prior operators.

         ¶4 The parties then filed motions for summary judgment. In a journal entry filed January 11, 2018, the trial court granted summary judgment in favor of Abraham for $22, 859.52 for production through December 31, 2016 plus 12% interest from January 1, 2017, as well as costs and fees. [1]

         ¶5 Pacer appeals. Summary judgment proceedings are governed by Rule 13, Rules for District Courts, 12 O.S.2011, Ch. 2, App.1. Summary judgment is appropriate where the record establishes no substantial controversy of material fact and the prevailing party is entitled to judgment as a matter of law. Brown v. Alliance Real Estate Group, 1999 OK 7, ¶7, 976 P.2d 1043, 1045. Summary judgment is not proper where reasonable minds could draw different inferences or conclusions from the undisputed facts. Id. We review the evidence de novo, in the light most favorable to the party opposing summary judgment. Vance v. Fed. Natl. Mortg. Assn., 1999 OK 73, ¶6, 988 P.2d 1275. Because this is an appeal from summary judgment, it should have proceeded under the accelerated procedure established in Oklahoma Supreme Court Rule 1.36. That rule provides that in such cases, "(u)nless otherwise ordered by the appellate court, no briefs will be allowed on review." Although the parties have filed briefs, we limit our review to the designated trial court record to determine whether there is any dispute of material fact.

         ¶6 The material facts which are not in dispute show that Abraham owns a 1/32 carried working interest [2] in the production from the Elias-Kerns #2 well, which has been producing since 1982. Palm became the operator of the well in May 2009 and Pacer has been the first purchaser of production since December 2010. Abraham sued both, asserting he had not been paid for his interest. [3] Most important to this dispute is that the parties agree that at Palm's direction, Pacer paid to Palm the working interest proceeds for the production it took from the well.

         ¶7 Abraham asserted he was entitled to interest from Pacer under 52 O.S.2011 §570.10 (E)(1), which provides:

Except as provided in paragraph 2 of this subsection, a first purchaser or holder of proceeds who fails to remit proceeds from the sale of oil or gas production to owners legally entitled thereto within the time limitations set forth in paragraph 1 of subsection B of this section shall be liable to such owners for interest as provided in subsection D of this section on that portion of the proceeds not timely paid. When two or more persons fail to remit within such time limitations, liability for such interest shall be shared by those persons holding the proceeds in proportion to the time each person held such proceeds.

         The exception provided for in paragraph 2 of that subsection relates solely to royalty proceeds. [4] Pacer countered that it had no liability for the proceeds after it paid them to Palm, the producing ...

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