Yankee Atomic Electric Co. v. New Mexico & Arizona Land Co.

BARRETT, Circuit Judge.

New Mexico and Arizona Land Company (Land Company) appeals from an adverse declaratory judgment and order entered in favor of Yankee Atomic Electric Company, Maine Yankee Atomic Power Company, Public Service Company of New Hampshire, and Vermont Yankee Nuclear Power Corporation (Utilities). A brief summary of the facts, which are not in dispute, will facilitate our review.

Utilities are all utility companies who contracted separately with Land Company in 1975 for the purchase of uranium concentrates from ore owned by Land Company in New Mexico. The contracts were the culmination of several months of protracted negotiations, during the course of which each party was represented by counsel. The four contracts, considered in the aggregate, provide for the sale of 800,000 pounds of uranium concentrates for a total price of $22,900,000.00.

The contracts were substantially the same and each contained a Paragraph 10 which provided, inter alia :

All taxes, including but not limited to ad valorem taxes, imposed on the Concentrates on the U3O8 in them shall be Seller’s sole responsibility and paid by it so long as title to the Concentrates remains in Seller. Any taxes imposed on the Concentrates or the U3Og after title to the Concentrates passes to Buyer shall be Buyer’s sole responsibility and paid by it. Any sales, excise, transaction privilege or other similar tax . . . imposed by any governmental entity as a result of the sale of the property being sold hereunder shall be paid by Buyer after Seller notifies Buyer that any such tax has become due. [Emphasis supplied].

This action arose when Land Company and Utilities disagreed over which party would pay certain New Mexico taxes, i. e., New Mexico’s Resources Excise Tax, §§ 7-25-1 et seq. N.M.S.A.1978; New Mexico’s Severance Tax, §§ 7-26-1 et seq. N.M. S.A.1978; and New Mexico’s Oil and Gas Severance Tax §§ 7-30-1 et seq. N.M.S.A. 1978.

In entering its judgment for Utilities the trial court held, inter alia : the taxes operate as excise taxes, but the contract requires their payment by Land Company; the taxes are imposed on the act or privilege of severing; under the terms of the contracts (Paragraph 10) Land Company “can pass on to the plaintiffs (Utilities) only taxes imposed ‘as a result of the sale of the property’ ”; the severance and resources taxes are imposed as a result of severance *857regardless of sale; the Oil and Gas Conservation Tax, in spite of its language “severed and sold” is first prompted by severance, and is an excise tax like the others; sale of the ore and title passes at the time the ore is delivered in Baltimore; transportation is the “taxable event” and it occurs when title is in Land Company; these are not the type of taxes the contracts allow to be passed on to Utilities; and “The taxes not having been incurred ‘as a result of the sale of the property’, but as a result of the severance of the uranium bearing materials from New Mexico land at a time when title existed exclusively in the defendant (Land Company), the taxes cannot be passed from the defendant to the plaintiff (Utilities).”

On appeal, Land Company contends: (1) Paragraph 10 of the respective contracts allocates the economic burden of the Severance, Resources, and Conservation taxes to Utilities; and (2) the trial court failed to allocate the tax burdens in accordance with the manifest intent of the parties. Inherent within these contentions is the underlying issue of whether the trial court properly determined that the taxes in question are imposed as a result of severance, regardless of sale. Because of the dispositive nature of this underlying issue, we elect to discuss it next.

As set forth, supra, the trial court ruled that the taxes involved herein are all excise taxes which are imposed on the act or privilege of severing, regardless of sale. In reviewing the propriety thereof we must, of necessity, review the statutory language of each tax individually. The Court in Andrus v. Allard, 444 U.S. 51, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979), pertinently observed:

Our point of departure in statutory analysis is the language of the enactment. See Southeastern Community College v. Davis, 442 U.S. 397, 405, 99 S.Ct. 2361, 2366, 60 L.Ed.2d 980 (1979). “Though we may not end with the words in construing a disputed statute, one certainly begins there.” F. Frankfurter, Some Reflections on the Reading of Statutes 16 (1943). At p. 56, 100 S.Ct. at p. 322.

See also: Lewis v. United States, 445 U.S. 55, at p. 60, 100 S.Ct. 915, at p. 918, 63 L.Ed.2d 198 (1980).

Section 9 of New Mexico’s Resources Excise Tax provides:

The taxes imposed by the Resources Excise Tax Act . . . are to be paid on or before the twenty — fifth day of the month following the month in which the first of the following occurs: Sale, transportation out of New Mexico or consumption. § 7-25-9 N.M.S.A.1978.

Section 7 of New Mexico’s Severance Tax Act provides, inter alia:

A. The severance tax on uranium is measured by .... The taxable event is the sale, transportation out of New Mexico or consumption whichever first occurs. § 7-26-7 N.M.S. A.1978.

Section 4 of New Mexico’s Oil and Gas Conservation Tax Act provides, inter alia:

A. There is levied and shall be collected by the oil and gas accounting commission a tax on all products which are severed and sold. § 7-30-4 N.M.S.A.1978.

The words of these statutes are to be interpreted in their ordinary definitions and in the meanings commonly attributed to them. Jones v. Liberty Glass Company, 322 U.S. 524, 68 S.Ct. 229, 92 L.Ed. 142 (1947); Glover Construction Company v. Andrus, 591 F.2d 554 (10th Cir. 1979), aff’d - U.S. -, 100 S.Ct. 1905, 64 L.Ed.2d 548 (1980). In so doing, it is clear that the taxable event on the uranium ore herein under New Mexico’s Resource Tax and its Severance Tax follows its “sale, transportation out of New Mexico or consumption”. Similarly, the taxable event under New Mexico’s Oil and Gas Conservation Act occurs when the product is “severed and sold”. Under each Act, severance, in and of itself, does not give rise to a taxable event; however, under each Act, severance, coupled with the “sale, [sold] transportation out of New Mexico, or consumption” triggers the imposition *858of the tax.1 Accordingly, we hold that the Court erred in finding/concluding that the taxes herein were predicated solely on the privilege of severance, regardless of sale.

Having determined that the taxes herein are predicated upon the privilege of severance and the sale, transportation out of New Mexico or consumption of the ore mined, we must now determine whether the Court correctly construed Paragraph 10 of the respective contracts, whereby the parties agreed upon the allocation of taxes.

In interpreting Paragraph 10, it is fundamental that courts cannot change or alter contract language for the benefit of one party and to the detriment of another party. Williams Petroleum Company v. Midland Cooperatives Incorporated, 539 F.2d 694 (10th Cir. 1976). Every contract must be interpreted according to its own terms, Security Mutual Casualty Company v. Century Casualty Company, 531 F.2d 974 (10th Cir. 1976), and construed to effectuate the manifest intent of the parties. Quad Construction, Inc. v. Wm. A. Smith Contracting Co., Inc., 534 F.2d 1391 (10th Cir. 1976). The courts of New Mexico have consistently considered and construed contracts as a whole, Schaefer v. Hinkle, 93 N.M. 129, 597 P.2d 314 (1979), and considered a contractual provision which is clear and unambiguous as conclusive. Rushing v. Lovelace Bataan Health Program, 93 N.M. 168, 598 P.2d 211 (1979).

Applying these standards and guidelines to Paragraph 10 herein, we must hold that the Court erred in ruling that Land Company was liable for the mineral taxes assessed on the uranium ore mined.

As noted, supra, Paragraph 10 allocated the payment of taxes in three distinct ways; a. Sellers to pay all taxes as long as title remained with them; b. Buyers to pay all taxes imposed on the uranium after title thereto passed to Buyers; and c. Buyers to pay all taxes imposed “as a result of the sale of the property being sold”. Inasmuch as Buyers, Utilities, are obligated to pay all taxes imposed as a result of “the sale of the property being sold”, and in light of our determination that all three taxes are predicated upon the severance and sale of the uranium ore, we hold that Utilities, under the provision of Paragraph 10 contained in each of the executed contracts with Land Company, is obligated to pay the New Mexico taxes at issue herein.2

Reversed and remanded for further proceedings consistent herewith.

. Our conclusion is, we believe, bolstered by the general language contained in § 7-26-4(A) N.M.S.A.1978; “Unless otherwise provided in this section, the ‘taxable event’ is the severance of a natural resource whose taxable value is determined under Subsections B, C, D and E of this section;” when contrasted with the specific language dealing with severance of uranium found in § 7-26-7 N.M.S.A.1978. See supra. Where there exist two statutes dealing with the same subject matter, the two should be harmonized, if possible; if there exists a conflict between their provisions, the statute dealing with subject in a more detailed manner will prevail, unless intended otherwise by the Legislature. Glover Const. Co. v. Andrus, supra.

. The language employed in all the relevant New Mexico statutes is distinctly different than the unqualified language found, for example, in the Wyoming Severance Tax statute that the excise tax levied is based on “. . . the value of the gross product extracted upon the privilege of severing or extracting uranium ...” § 39-6-302(a), W.S.1977.