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Ultra Res., Inc. v. Hartman

Supreme Court of Wyoming

March 19, 2015

ULTRA RESOURCES, INC., a Wyoming Corporation, Appellant (Defendant),
v.
DOYLE and MARGARET M. HARTMAN, JOHN H. HENDRIX CORPORATION, MICHAEL L. KLEIN and JEANNE KLEIN, RONNIE H. WESTBROOK and KAREN WESTBROOK, Appellees (Plaintiffs). SWEPI LP, a Delaware Limited Partnership, Appellant (Defendant),
v.
DOYLE and MARGARET M. HARTMAN, JOHN H. HENDRIX CORPORATION, MICHAEL L. KLEIN and JEANNE KLEIN, RONNIE H. WESTBROOK and KAREN WESTBROOK, Appellees (Plaintiffs). LANCE OIL & GAS COMPANY, a Delaware Corporation, Appellant (Defendant),
v.
DOYLE and MARGARET M. HARTMAN, JOHN H. HENDRIX CORPORATION, MICHAEL L. KLEIN and JEANNE KLEIN, RONNIE H. WESTBROOK and KAREN WESTBROOK, Appellees (Plaintiffs)

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Appeal from the District Court of Sublette County. The Honorable Norman E. Young, Judge.

Representing Appellant Ultra Resources, Inc.: Douglas J. Mason of Mason & Mason, P.C., Pinedale, Wyoming; Michael J. Gallagher, Shannon Wells Stevenson, Natalie West of Davis Graham & Stubbs LLP, Denver, Colorado. Argument by Ms. Stevenson.

Representing Appellant SWEPI, LP: Patrick J. Murphy, Erica Day of Williams, Porter, Day & Neville, Casper, Wyoming; Phillip D. Barber of Phillip D. Barber, P.C., Denver, Colorado. Argument by Mr. Murphy.

Representing Appellant Lance Oil & Gas Company: Paul J. Hickey of Hickey & Evans, Cheyenne, Wyoming; Ezekiel James Williams of Lewis Bess Williams & Weese, P.C., Denver, Colorado.

Representing Appellees: John A. Masterson, Michael J. Sullivan of Lewis Roca Rothgerber LLP, Casper, Wyoming; Jake Eugene Gallegos, Michael J. Condon of the Gallegos Law Firm, P.C., Santa Fe, New Mexico. Argument by Mr. Sullivan and Mr. Condon.

Before BURKE, C.J., and HILL, KITE, DAVIS, JJ., and GOLDEN, J., retired.

OPINION

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KITE, Justice

[¶1] Appellants/Defendants Ultra Resources, Inc. (Ultra), SWEPI, LP (SWEPI) and Lance Oil & Gas Co. (Lance Oil)[1] appeal

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from the district court's orders after Appellees/Plaintiffs Doyle and Margaret Hartman, et. al. filed a motion to enforce a judgment and net profits contract (NPC) pertaining to oil and gas leases in Sublette County, Wyoming.[2] The defendants claim the district court did not have jurisdiction to rule on the issues presented in the plaintiffs' motion to enforce. They also contest the district court's decision on the merits of the motion to enforce and its award of attorney fees to the plaintiffs. We conclude the district court had jurisdiction over the issues presented, it correctly interpreted its prior judgment and the defendants' accounting responsibilities under the NPC, and it properly granted the plaintiffs' request for attorney fees, although we do order a minor revision of the award.

[¶2] We affirm with revision.

ISSUES

[¶3] The issues[3] on appeal are:

1. Did the district court have jurisdiction to consider the plaintiffs' motion to enforce the judgment and the NPC?

2. Did the district court err by ruling that defendants were not entitled to credit for expenses which were invoiced prior to 2007 because they should have been charged against the net profits interest (NPI) during the time period at issue in the trial?

3. Did the district court err by ruling that, under the terms of the NPC, expenses had to be charged against the NPI in the month following the month the expenses were invoiced?

4. Did the district court err by rejecting the defendants' argument, based upon the principles of estoppel and finality, that the plaintiffs had agreed and the district court had previously ordered expenses would be charged against the NPI when billed to other working interest owners in joint interest bills (JIBs)?

5. Did the district court err in awarding attorney fees to plaintiffs?

FACTS

[¶4] The parties own interests in certain oil and gas leases in Sublette County, Wyoming. Ultra Resources, Inc. v. Hartman, 2010 WY 36, ¶ 10, 226 P.3d 889, 902 (Wyo. 2010) ( Ultra I ). Defendants Ultra and SWEPI[4] are working interest owners and operators of the leases, defendant Lance Oil is a non-operator working interest owner, and the plaintiffs own a NPI in the leases. Id., ¶ 11, 226 P.3d at 902-03. In the underlying litigation, the district court entered a

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declaratory judgment recognizing the existence of the NPI and delineating the operators' NPC accounting responsibilities. It also granted a monetary judgment against the defendants for the amount due to the plaintiffs for the NPI through December 31, 2006. Id., ¶ ¶ 14, 17, 226 P.3d at 903-04. With a few exceptions not relevant here, we affirmed the district court's decision in Ultra I. After our mandate issued, the district court entered an amended judgment and the defendants paid the monetary judgment.

[¶5] In July 2010, the plaintiffs filed a motion to enforce judgment, claiming the defendants were not properly accounting to them as required by the earlier declaratory judgment and the NPC. The defendants asserted the district court did not have jurisdiction to consider the matters raised in the plaintiffs' motion to enforce and the plaintiffs should have commenced a new action instead. The district court concluded it had jurisdiction and issued a number of orders on the merits of the plaintiffs' motion to enforce.

[¶6] The primary order at issue here pertains to the defendants' attempts to charge pre-2007 expenses to calculate the NPI starting January 1, 2007. The district court ruled that the NPI had been fully calculated through December 31, 2006 at trial, and the NPC required expenses to be charged to the NPI in the month following the date the expenses were invoiced. Consequently, the district court refused to allow the defendants to charge expenses invoiced prior to January 1, 2007, when calculating the 2007 NPI. The district court also concluded the plaintiffs were the prevailing parties in the enforcement proceeding pursuant to the Wyoming Royalty Payment Act (WRPA), segregation of the attorney fees between claims was not required and the operating defendants were required to pay the plaintiffs' attorney fees.

[¶7] The defendants appealed the district court's decisions on the merits and its order on attorney fees. We will provide additional factual background as relevant to the issues discussed below.

DISCUSSION

1. Jurisdiction

[¶8] The defendants maintain the district court did not have subject matter jurisdiction to decide the issues raised in the plaintiffs' motion to enforce and the plaintiffs should have commenced a new civil action to have the matters heard. " The existence of subject matter jurisdiction is a question of law that we review de novo." Madsen v. Bd. of Trustees of Memorial Hospital of Sweetwater County, 2011 WY 36, ¶ 9, 248 P.3d 1151, 1153 (Wyo. 2011), citing Cantrell v. Sweetwater County School Dist. No. 2, 2006 WY 57, ¶ 6, 133 P.3d 983, 985 (Wyo. 2006). See also Stephens v. Lavitt, 2010 WY 129, ¶ 9, 239 P.3d 634, 637 (Wyo. 2010).

[¶9] In Ultra I, the case was remanded to the district court for further proceedings consistent with our decision. The defendants argue the district court's jurisdiction over the action ended when the district court entered an amended judgment consistent with our mandate and they satisfied the monetary judgment. Thus, they claim the district court did not have jurisdiction to consider the issues raised in the plaintiffs' motion to enforce. The two aspects of the district court's order challenged by the defendants are the district court's exclusion of the pre-2007 expenses from the 2007 NPI accounting and its interpretation of the NPC deadlines for the operators' expense reports.[5]

[¶10] Courts have inherent power to enforce their own judgments. In Hurd v. Nelson, 714 P.2d 767 (Wyo. 1986), we affirmed the district court's post-judgment order enforcing a property settlement in a divorce action. Speaking to the district court's enforcement powers, we stated:

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" Courts have inherent power to enforce their own judgments and should see to it that such judgments are enforced when they are called upon to do so. To deprive a court of power to execute its judgments is to impair its jurisdiction, and the general rule is that every court having jurisdiction to render a particular judgment has inherent power and authority to enforce it and to exercise equitable control over such enforcement. Thus, a court of equity has inherent power to enforce its decrees. A court of equity retains and possesses the power to control the manner of the execution of its decree, and has the inherent right to modify, by a subsequent order, the manner in which it shall be enforced. * * * " 46 Am.Jur.2d Judgments § 898, p. 1032 (1969).

Id. at 771.

[¶11] A court also has inherent power to interpret its judgments and clarify ambiguous terms. 46 Am.Jur.2d Judgments § 73 (2015) states:

Trial courts have the inherent authority to interpret and clarify their judgments. The mere interpretation of a judgment involves no challenge of its validity, or an attack on it, and a clarification of an ambiguous judgment is not a modification or amendment of the judgment. An order clarifying a judgment explains or refines rights already given, and it neither grants new rights nor extends old ones. Unlike a modification, amendment, or alteration to a judgment, which must be accomplished under the court rules or some other exception to preclusion, a clarification of a judgment can be accomplished at any time.

( footnotes omitted). See also Ladwig v. Chatters, 623 N.W.2d 266 (Minn. Ct. App. 2001) (trial court had jurisdiction to interpret, clarify and enforce its earlier judgment).

[¶12] In Zaloudek v. Zaloudek, 2010 WY 169, 245 P.3d 336 (Wyo. 2010), we addressed the husband's post-judgment motions to clarify his obligations under the property division provisions of a divorce decree and to extend his deadline for compliance with a cash award to the wife. The district court denied the husband's motions, entered a judgment in favor of the wife for interest accrued since the original decree and ordered the husband to satisfy the judgment within five days. Id., ¶ 6, 245 P.3d at 339. Relying on Hurd, supra, we concluded the district court's post-judgment rulings were authorized because they fell within the court's inherent authority to enforce its own judgments. Id., ¶ 13, 245 P.3d at 341.

[¶13] The defendants argue that Hurd does not provide authority for the district court's actions in this case because it was a divorce action and the legislature specifically granted courts continuing jurisdiction in such cases. Wyo. Stat. Ann. § 20-2-203 (LexisNexis 2013) grants courts continuing jurisdiction to enforce and modify orders concerning the care, custody and visitation of children after a divorce decree. However, Hurd addressed property division issues and § 20-2-203 does not grant continuing jurisdiction to courts to modify property divisions in divorce decrees. Glover v. Crayk, 2005 WY 143, ¶ 6, 122 P.3d 955, 957 (Wyo. 2005).

[¶14] Instead, Hurd specifically addressed the court's inherent power to enforce its own orders. The power is, of course, limited to interpretation and clarification of orders and enforcement of their terms. In doing so, the court must stay true to the earlier judgment. In Eddy v. First Wyoming Bank, 713 P.2d 228, 235 (Wyo. 1986), this Court confirmed that the district court may interpret an earlier judgment pursuant to a post-judgment motion to clarify. We stated the court may take additional evidence at a post-judgment hearing to effectuate the original intent of the order. Id. See also Glover, ¶ 13, 122 P.3d at 958 (interpreting motion to amend or modify a divorce decree as a motion to correct a clerical mistake under W.R.C.P. 60(a)). The district court in the case at bar, therefore, had inherent authority to interpret, clarify and enforce its judgment in accordance with its original intent.

[¶15] In contesting the district court's jurisdiction over the post-judgment proceedings, the defendants also fail to recognize the significance of the declaratory judgment aspects of the original decision. The trial judgment stated:

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98. The defendants remain obligated to and shall perform the required NPI accounting on a consolidated basis and make payments monthly to the plaintiffs commencing with production month January 2007, and shall do so in accordance with the terms of the Net Profits Contract and its Accounting Procedure and in compliance with the Court's Findings of Fact, 25-30, supra.

The referenced findings of fact stated:

25. Proper accounting for the NPI involves expenses and revenues allocable to operations under the Exhibit A leases to the Net Profits Contract and more recently the Subject Leases . . .
26. The plaintiffs' NPI is 4.98%, rather than 5.0%, because of the small interest owned by a non-plaintiff.
27. The Net Profits Contract sets forth the terms to be applied and honored in order to perform proper computation of any payable net profits. The accounting requirements are set forth in the body of the Net Profits Contract, in Exhibit A listing the permitted royalty and overriding royalty burdens on the leases, and in Exhibit C-1, which is an Accounting Procedure.
28. The Net Profits Contract Accounting Procedure may not be amended without the consent or approval of Novi or its successors in interest, including plaintiffs or their successors in interest. The Net Profits Accounting Procedure has never been amended.
29. The Net Profits Contract and the Net Profits Accounting Procedure establish principles to be followed in performing the proper accounting of the NPI as follows:
(a) Plaintiffs' net profits [interest] equals 4.98% of cumulative gross revenue less cumulative expenses on a consolidated basis associated with the operation of NPI leases and wells on those leases;
(b) The NPI is to be calculated each month and the incremental net profits for that month, if positive, is to be paid as soon as practicable after the end of any month in which net profits have been realized;
(c) Gross revenue is based on proceeds from wellhead gas and oil sales and on fair market value for other sales;
(d) Deductible expenses are those that are reasonable and customary in connection with the operation and development of oil and gas properties. These expenses are properly chargeable against the NPI leases and are limited by amounts specified in the Accounting Procedure unless and until that procedure is amended as provided therein;
(e) Expenses that are not reasonable and customary and not properly chargeable in connection with the operation and development of NPI leases and therefore, not deductible, include, among others, federal income tax, interest on capital and other expenses, depreciation, acquisition costs, accrual accounts, and future asset retirement accounts;
(f) The Accounting Procedure limits the amount of deductible labor expense (including employee benefits), Pinedale district office expense, well overhead rates, and legal expenses; and
(g) Deductible expenditures that benefit both NPI and non-NPI wells are allocated based on the ratio of the operators' end-of-year NPI well count to total well count.
30. In performing the NPI accounting, the only permitted burden deductions from gross revenues are the overriding royalty and landowners' royalties set forth in the listing of leases on Exhibit A to the Net Profits Contract. The permissible burdens on the Subject Leases are depicted on Exhibit B attached and incorporated herein.
The Uniform Declaratory Judgments Act, as adopted in Wyoming at Wyo. Stat. Ann. § 1-37-101 through § 1-37-115 (LexisNexis 2013), has a provision that specifically authorizes " further relief" in a declaratory judgment action. Section 1-37-110 states:
§ 1-37-110. Supplemental relief
Further relief based on a declaratory judgment may be granted. Application therefor shall be by petition to a court

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having jurisdiction to grant the relief. If the application is sufficient the court, on reasonable notice, shall require any adverse party whose rights have been adjudicated by the declaratory judgment to show cause why further relief should not be granted.
Section 1-37-110 has been cited as authority for courts' post-declaratory judgment determinations in various contexts for many years. In In re General Adjudication of All Rights to Use Water in the Big Horn River System, 835 P.2d 273 (Wyo. 1992), the tribes filed a motion for order to show cause why the state engineer should not be held in contempt for failing to follow an earlier declaratory judgment concerning tribal water rights. While sorting out various orders that had previously been entered in the case, we addressed the state engineer's duty to follow and implement earlier declaratory judgment rulings. We cited § 1-37-110 as authority for the following statement:
When . . . it is impossible to determine if the tribal right is being violated because the right itself is in some respect illdefined, the state engineer should promptly seek clarification from the district court so that appropriate remedial action, if needed, may be undertaken. See Wyo. Stat. § § 1-37-106 & 1-37-110 (1988).
Id See also Beatty v. Chicago, B. & Q. ...

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