State v. BHP Petroleum Co., Inc.

URBIGKIT, Chief Justice,

dissenting.

This appeal in essential components has simple parts. From 1979 to 1987, appellee BHP Petroleum Company, Inc., oil and gas lessee, failed to pay contractual royalty obligations for gas production to the State of Wyoming as lessor. Constitutional trust funds from school lands were involved under the provisions of Wyo.Const. art. 18. With an eight year delay in royalty payments due to the State of Wyoming finally satisfied by a January 1987 payment of $428,567.50, the debtor also recognized an interest payment obligation to the state under W.S. 30-5-301 through 30-5-303, first effective June 1, 1982, but no obligation for interest on the retained state land funds for two plus years prior to passage of the Stroock/Urbigkit Oil Royalties Non-Payment Act, Wyo.Sess.Laws ch. 27 (1982).1 The real issue presented is whether delayed contractual payment of state trust funds constituting oil and gas lease proceeds would have always remained interest free if the enforcement statute, W.S. 30-5-301 through 30-5-303, had never been enacted.

It is recognized that the state-phrased resistance to absolution of oil producers responsibility for retention and use of state funds speaks to an unjust enrichment concept. In particular, since we deal here with constitutionally obligated funds, I present the issue of right of a government as identical with private parties to collect statutory interest on debts due and unpaid as the price of retention where the contract makes no specific provision for a deficiency *674interest accrual. It is my conclusion that when the money is a liquidated sum, from the date due, interest is accrued equally for a governmental entity as would be for any private entity. It would then logically follow that the State’s brief and the consequent discussion in this court’s opinion is converted into a non-issue since government should equally be accorded the statutory right to interest on unpaid debts to it. Within that concept, neither a demand requirement nor unjust enrichment ideology has preclusive relevancy.2

Realistically, resolution of this obligation of the oil producer which was delinquent in payment of the school land royalties to the state for the period before the penalty interest statute was enacted should have been determinable by answering three questions:

1. Does Wyoming have an interest statute which is applied to unpaid liquidated obligations?

2. Do governmental entities, including the state, share in the benefit of that interest rate statute?

3. Was the oil and gas leasehold obligation a liquidated amount in this case?

Ancillary to these questions is the suggestion derived from Rissler & McMurry Co. v. Atlantic Richfield Co., 559 P.2d 25 (Wyo.1977) that application of the interest statute is first dependent upon demand by the payee. See however Goodwin v. Upper Crust of Wyoming, Inc., 624 P.2d 1192, 1198 (Wyo.1981) and Northern Gas Co. v. Town of Sinclair, 592 P.2d 1138 (Wyo.1979).

Answering the first question requires reconstruction of Wyoming history since obviously there is a general interest statute, albeit emplaced within the Uniform Commercial Code as W.S. 40-14-106(e): “If there is no agreement or provision of law for a different rate, the interest of money shall be at the rate of seven percent (1%) per annum.”

That section came into the Wyoming code by a provision in Wyo.Sess.Laws ch. 191, § 9-103 (1971) which provided:

(2) Section 13-477, Wyoming Statutes 1957, Compiled 1965, is amended and reenacted to read as follows:
If there is no agreement or provision of law for a different rate, the interest of money shall be at the rate of seven per cent per annum.

The quoted language came into the current law as W.S. 40-9-103 (1975 Cum.Supp.) (and now W.S. 40-14-106(e)) as recited in Rissler & McMurry Co., 559 P.2d at 31-32 (footnote omitted):

Section 13-477, W.S.1957, C.1965, in 1970, provided as follows:
“Interest upon the loan or forbearance of money, goods or things in action, shall be at the rate of seven per cent, per annum, unless a greater rate, not exceeding ten per cent, per annum, be contracted for by the parties.”
By § 9-103, Ch. 191, Session Laws of Wyoming, 1971, that section was amended to read as follows:
“If there is no agreement or provision of law for a different rate, the interest of [sic] money shall be at the rate of seven percent per annum.”
The same words appear also as § 40-9-103, W.S.1957, 1975 Cum.Supp., as part of the Wyoming Uniform Consumer Credit Code. As far as this case is concerned, the law has not changed. The interest rate is adopted only as a convenient measure of damage for loss of use of money and recognizes the legislative view that money has value beyond its intrinsic worth.
None of the Wyoming cases which have been cited clearly particularized that the statute is incorporated as a matter of law in all contracts or whether, where allowed as a part of recovery, interest is added as an item of damages for breach of contract in failure to pay a just claim when due. In any event, the statutory interest has been used only as the standard for the rate of interest al*675lowed, when the court has determined the amount due is liquidated. Regardless of whether interest is agreed upon in advance or the statutory rate is applied, it constitutes a penalty for failure to pay over money when due.

Not only Rissler & McMurry Co., but the subsequent ease, Northern Gas Co., and the group of even more recent cases3 establish that where contractual obligations exist establishing liquidated amounts to be paid with no specific provision for interest computation, the payee is entitled to seven percent interest under what is now W.S. 40-14-106(e) as a general liquidated claim interest statute. The rule for interest entitlement was recently stated in O’s Gold Seed Co. v. United Agri-Products Financial Services, Inc., 761 P.2d 673, 677 (Wyo.1988):

Prejudgment interest is recoverable in Wyoming on liquidated claims but not on unliquidated claims, with a liquidated claim being defined as one that is readily computable by basic mathematical calculation. Holst v. Guynn, 696 P.2d 632 (Wyo.1985); [State Highway Com’n v.] Brasel & Sims Construction Co., Inc., 688 P.2d 871 [Wyo.1984]. We have established that, in the absence of a contractual provision to be contrary, W.S. 40-14-106(e) is applicable in determining the rate of prejudgment interest to be awarded. Holst, 696 P.2d 632; Rissler & McMurry Company v. Atlantic Richfield Company, 559 P.2d 25 (Wyo.1977). W.S. 40-14-106(e) provides:
“If there is no agreement or provision of law for a different rate, the interest of money shall be at the rate of seven percent (7%) per annum.”

See also Miles v. CEC Homes, Inc., 753 P.2d 1021, 1028 (Wyo.1988).

These cases preserve the heritage of Wyoming law predating the 1971 passage of the Uniform Commercial Code including W.S. 13-478 (1957) relating to interest on judgments now found in W.S. 1-16-102 and W.S. 13-479 (1957) from which the present liquidated debt interest statute, W.S. 40-14-106(e), was derived. In actual result, the 1971 Uniform Commercial Code renovation of Wyoming interest statutes removed the usury limitation of ten percent interest earlier emplaced in W.S. 13-477 (1957) and then continued the provisions of W.S. 13-479 (1957) where no provision establishing an interest rate existed in the agreement between the parties. Clearly, Wyoming now has a historically continued general interest statute at a seven percent rate applicable to liquidated obligations for which no agreement determining a higher rate of interest is provided.

The second inquiry is whether Wyoming’s interest case law and the present W.S. 40-14-106 provisions equally apply to governmental entities as otherwise applied to private individuals and business concerns. That subject is settled by Northern Gas Co., 592 P.2d 1138, where Justice Thomas, writing for the court, specifically applied the Rissler & McMurry Co. interest entitlement for liquidated obligations to the benefit of the governmental entity, the Town of Sinclair. It is additionally noted that neither the litigant nor the majority provide argument or authority that interest entitlement under W.S. 40-14-106 does not reach obligations owed to the state’s governmental entities.

We then examine within the third question for any application of the interest statute whether a liquidated indebtedness exists here. A definition of liquidated debt has been frequently and consistently restated by this court:

This court has spoken frequently about the prerequisites to recovery of prejudgment interest and holds with the majority of courts that interest is recoverable on liquidated but not on unliquidated claims and that a claim is considered liquidated when it is readily computable by simple mathematical computation. Zitterkopf v. Roussalis, Wyo.1976, 546 P.2d 436; Mader v. James, Wyo.1976, 546 P.2d 190; Chandler-Simpson, Inc. v. Gorrell, *676Wyo.1970, 464 P.2d 849, 853 (see Wyoming cases there cited); United Pacific Insurance Company v. Martin and Luther General Contracts, Incorporated, Wyo.1969, 455 P.2d 664; Leet v. Joder, 1956, 75 Wyo. 225, 295 P.2d 733. See also Wyoming Construction Company v. Western Casualty and Surety Company, 10 Cir.1960, 275 F.2d 97, cert. den., 362 U.S. 976, 80 S.Ct. 1061, 4 L.Ed.2d 1011, allowing recovery of interest on a claim decided on the basis of Wyoming law.

Rissler & McMurry Co., 559 P.2d at 31. See likewise Bueno v. CF & I Steel Corp., 773 P.2d 937 (Wyo.1989) reciting the same test.

In this case, the royalty was to be computed by terms of the Wyoming oil and gas lease at a one-eighth (12¾⅛%) of production. What the record reflects is that from commencement of production on October 1979 until November 1981, BHP Petroleum paid no part of the one-eighth royalty and then for the next seven months, paid part, to accumulate the readily computed total of $428,567.50 which then was only paid in January 1987. Obviously, oil royalty fits within a liquidated obligation definition which was coincidentally the whole premise of the eighteen percent penalty provision introduced into the 1982 enactment of the Unpaid Royalty Act 'statute. Bueno, 773 P.2d at 940 teaches that “[m]athematical computability is the criterium for a liquidated claim.”4 Holst v. Guynn, 696 P.2d 632 (Wyo.1985); Goodwin, 624 P.2d at 1198. The Wyoming rule is similar to a more detailed statement in Arizona law, Homes & Sons Const. Co., Inc. v. Bolo Corp., 22 Ariz.App. 303, 526 P.2d 1258, 1261 (1974) (quoting Arizona Title Insurance & T. Co. v. O’Malley Lbr. Co., 14 Ariz.App. 486, 496, 484 P.2d 639, 649 (1971)), providing “the definition that a claim is liquidated ‘if the evidence furnishes data which, if believed, makes it possible to compute the amount with exactness, without reliance upon opinion or discretion.’ ” Mathematical computability from undisputed records establishes the liquidated nature of the obligation. Bueno, 773 P.2d at 940.

The ancillary question of required demand for interest accrual exculpated from Rissler & McMurry Co. is specifically settled by the further analysis on the subject provided in Northern Gas Co., 592 P.2d at 1143:

The real question is whether Northern Gas Company should be excused by the indication in Rissler & McMurry Company v. Atlantic Richfield Co., supra, that notice of the amount due must be furnished before the interest will start to run. The record is clear that the information with respect to the natural gas sales always was available to Northern Gas Company. Northern Gas Company informed the Town of Sinclair of the amount of .gross revenue at the time that it paid the franchise fee provided for in Section 6 of Ordinance No. 112. As between the two parties, Northern Gas Company had the information needed to compute the franchise fee, and the Town of Sinclair had to obtain the information from Northern Gas Company even for purposes of this litigation. Since the thrust of the caveat found in Rissler & McMurry Company is that a defendant should not be held in default if he has not been informed of what to pay, it need not be applied in this case. In this instance there would be no necessity for the Town of Sinclair to inform Northern Gas Company of what it should pay because Northern Gas Company, had it followed the terms of the contract, would have known the correct amount which was due.

Goodwin, 624 P.2d at 1198, in analysis of both Rissler & McMurry Co. and North-*677em Gas Co., recognized for the lessee obligation:

From the language in these two cases, it is clear that notice was not necessary to start the interest running in this case. Appellants knew that if they paid the rent due under the sublease agreement that interest would thereby be stopped. They did not need notice from appellees informing them of the amount due.
Appellees were entitled to the use of the money they were to receive under the agreement from the date it became due. The use of money has real economic value, particularly in the current economy of inflation and high interest rates of which we take judicial notice. Appellees were deprived of that benefit. Prejudgment interest should have been awarded as an attempt to compensate for that loss. Since the amount due under the contract was at all times readily computable, appellants should be charged with the statutory rate of interest on all the unpaid rents from the date each became due. We must remand to the district court to modify its judgment accordingly.

Succinctly, BHP Petroleum produced the gas from state school lands and failed, neglected or refused to file correct reports or pay royalties to the landowner, the State of Wyoming. To summarize, a liquidated obligation was created, it was not paid when due, for which reason payee under W.S. 40-14-106(e) should, in addition to the late payment, be obligated for the statutory rate of seven percent interest commencing October 1979 and continuing until the penal interest statute applied a much higher eighteen percent interest, so that the State would be properly compensated for about $4.9 million in gas sales for which it had a royalty entitlement of twelve and one-half percent totaling $480,946 of which it was only promptly and properly paid $52,379.5

I would reverse and remand for assessment of interest on withheld royalty payments accrued from monthly leasehold production between October 1979 and June 1982.

. The provisions of Wyo.Sess.Laws ch. 27 (1982), effective June 1, 1982, are not at issue in this appeal. Rather, the question is what obligations for interest, if any, did the defaulting lessee have before the 1982 passage of the punitive eighteen percent interest statute. See, for a discussion of the statute, Independent Producers Marketing Corp. v. Cobb, 721 P.2d 1106 (Wyo.1986).

. It is of interest to recognize that the state school land sale statute, W.S. 36-9-107, provides a delinquency provision of eight percent per year on all amounts not paid when due.

. Bueno v. CF & I Steel Corp., 773 P.2d 937 (Wyo.1989); O’s Gold Seed Co. v. United Agri-Products Financial Services, Inc., 761 P.2d 673, 677 (Wyo.1988); Miles v. CEC Homes, Inc., 753 P.2d 1021, 1028 (Wyo.1988); Goodwin, 624 P.2d 1192.

. Statements in trial hearing and briefing that nonpayment of the landowner’s royalty of $428,-567.50 over thirty-three months was just an "inadvertent miscalculation" belies belief and requires multiplexed factual blinders for logical review. Actually, contrary to those statements, it was not "miscalculation", except for the last seven months involving about $14,000, it was twenty-six months of total nonpayment of the leasehold royalty obligation constituting the lessor/landowner’s twelve and one-half percent entitlement.

. The amount involved in this appeal has never been computed within this record, but it is obviously something less than the original claim of the State as added interest of about $79,000. The difference, in part, is the result of the district court’s decision to impress the penalty interest at an earlier date than the oil company had desired. Apparently, the contested amount for this appeal is in the general range of about $40,000 based on an approximated computation by averaged total. It is not the dollar amount involved in this case, but a general application to protect governmental revenues that is important. Legislative vigilance and protective enactments are invited, if not required. Non-penalty retention of money results in delayed, if not total, nonpayment. That is just a matter of “good business” without payment of the rental cost — interest.