GOLDEN OIL CO. V. CHACE OIL CO., 2000-NMCA-005,
128 N.M. 526, 994 P.2d 772
GOLDEN OIL COMPANY, Plaintiff-Appellant,
vs.
CHACE OIL COMPANY, INC., Defendant-Appellee.
COURT OF APPEALS OF NEW MEXICO
2000-NMCA-005, 128 N.M. 526, 994 P.2d 772
APPEAL FROM THE DISTRICT COURT OF
BERNALILLO COUNTY. ROBERT H. SCOTT, District Judge.
Released for Publication January 28,
2000.
PHILIP CRAIG SNYDER, Albuquerque, NM, for
Appellant.
L. MICHAEL MESSINA, MESSINA, MADRID &
SMITH, P.A., Albuquerque, NM, for Appellee.
LYNN PICKARD, Chief Judge. WE CONCUR:
THOMAS A. DONNELLY, Judge, RUDY S. APODACA, Judge.
{*527} PICKARD,
Chief Judge.
{1} Golden Oil Company
(Buyer) filed suit against Chace Oil Company, Inc. (Seller) for breach of
contract after Seller refused to sign certain forms under an agreement to sell
its operating interests in several oil and gas leases on the Jicarilla Apache
Reservation to Buyer. Buyer asked the trial court to compel Seller to sign
these forms because the Jicarilla Apache Tribe (Tribe) informed Buyer that it
could not continue operating the oil and gas leases without them. The trial
court dismissed Buyer's complaint without prejudice on the ground that Buyer
failed to join the Tribe as a necessary and indispensable party to this
lawsuit. On appeal, Buyer argues the trial court erred because the Tribe's
interests will not be impaired or impeded by resolution of the issues presented
for adjudication. We disagree and affirm.
BACKGROUND AND PROCEDURAL HISTORY
{2} In 1992, Seller
sold to Buyer certain operating rights it had to oil and gas leases on the
Jicarilla Apache Reservation. The parties executed a contract to transfer these
oil and gas interests, a contract which they entitled "Assignment, Bill of
Sale and Conveyance" (1992 Assignment).
{3} At the time the
parties executed the 1992 Assignment, the Tribe had not yet approved any prior
assignment of these interests to Seller. As a consequence, Seller could not
provide Buyer with an assignment approved by the Tribe either. The parties
contemplated this problem in the 1992 Assignment by including language in the
agreement to the effect that Seller would "execute and deliver such
further assignments . . . as may be required to vest the Oil and Gas Properties
in [Buyer]." Despite Seller's inability to provide Buyer with an
assignment approved by the Tribe, Buyer chose to actively operate the assigned
leases anyway.
{4} In March 1997, the
Tribe's Oil & Gas Administration requested Buyer to execute a form entitled
"Assignment of Oil and Gas Lease-Operating Rights" (JAT-A-2 form).
The Tribe made this request because in order to comply with federal law, any
interest in oil and gas leases on Indian lands can be assigned or transferred
only with the approval of the United States Secretary of the Interior. The
executed JAT-A-2 forms must also be filed with and approved by the Bureau of
Indian Affairs Superintendent.
{5} {*528}
In May 1997, Buyer mailed Seller a letter in which it requested Seller to
sign a JAT-A-2 form for each of the operating rights it had sold to Buyer under
the 1992 Assignment. Seller expressed reservations about complying with Buyer's
request on the grounds that the JAT-A-2 forms required Seller to make
warranties and misrepresentations both to the Tribe and the federal government
that, despite the 1992 Assignment, it was still the current owner of the oil
and gas leases, the underlying leases were free of any encumbrances, and the
leases had been fully performed. When the Tribe learned of Seller's reluctance
to execute the JAT-A-2 forms, it threatened to exclude Buyer from operating the
oil and gas leases until Buyer provided it with fully executed JAT-A-2 forms.
{6} In an effort to
comply with the Tribe's request, Buyer filed suit against Seller for breach of
contract and specific performance. Buyer filed the first of two motions for
summary judgment in January 1998. At the hearing on Buyer's January motion, the
trial judge denied the motion and suggested that the Tribe should change the
tense of the language in the JAT-A-2 form to resolve Seller's reservations
regarding the form's alleged misrepresentations. Buyer relayed the trial
judge's suggestion to the Tribe, which subsequently refused to redraft the form
based on its understanding of federal law.
{7} In April 1998,
Buyer wrote the trial judge a letter in which it explained the Tribe's
position. In that same letter, Buyer renewed its motion for summary judgment.
After denying Buyer's motion, the trial court issued a letter ruling in which
it dismissed Buyer's complaint on the basis that Buyer, in failing to join the
Tribe in this lawsuit, had failed to join a necessary and indispensable party.
Necessary and Indispensable Party
{8} The trial court
dismissed Buyer's complaint under Rule
1-019 NMRA 1999 for failure to join a
necessary and indispensable party. In reviewing a trial court's dismissal under
Rule 1-019, the proper standard of review is abuse of discretion.
See C.E.
Alexander & Sons, Inc. v. DEC Int'l, Inc.,
112 N.M. 89, 91,
811 P.2d
899, 901 (1991). "An abuse of discretion occurs when a ruling is clearly
contrary to the logical conclusions demanded by the facts and circumstances of
the case."
Sims v. Sims, 1996-NMSC-78, P65,
122 N.M. 618,
930 P.2d
153.
{9} In accordance with
Rule 1-019, we must first assess whether the trial court could properly
conclude that the Tribe should be joined if feasible.
See Srader v. Verant,
1998-NMSC-25, PP18-19,
125 N.M. 521,
964 P.2d 82. Under Rule 1-019(A):
A person who is subject to service of process shall be
joined as a party in the action if:
(1) in his absence complete relief cannot be accorded
among those already parties; or
(2) he claims an interest relating to the subject of
the action and is so situated that the disposition of the action in his absence
may:
(a) as a practical matter impair or impede his ability
to protect that interest; or
(b) leave any of the persons already parties subject
to a substantial risk of incurring double, multiple or otherwise inconsistent
obligations by reason of his claimed interest. . . .
{10} The trial court's
ruling was based on Rule 1-019(A), paragraphs (1) and (2). Although a trial
court can invoke paragraph (1) as the sole basis for finding an absentee
necessary, it is relatively rare for a trial court to do so.
See 4 James
Wm. Moore, et al.,
Moore's Federal Practice § 19.03[2][c] (3d ed. 1999)
[hereinafter Moore]. Instead, as in the case at bar, trial courts usually use
paragraph (1) in conjunction with at least one of the other bases of compulsory
party joinder.
See id. Accordingly, we focus our attention on the trial
court's use of paragraph (2).
{11} Buyer argues that
the Tribe is not a necessary party under Rule 1-019(A)(2) because its interests
will not be harmed if
{*529} Seller is
forced to sign the JAT-A-2 forms. Buyer's argument is predicated on the
presumption that it will prevail on the merits. Based on this presumption, Buyer
addresses the issue of whether the Tribe's interests
will be injured if
Seller
is forced to sign the JAT-A-2 forms, but fails to address the
issue of whether the Tribe's interests
might be implicated if Seller is
not
forced to sign the JAT-A-2 forms.
See Moore, § 19.03[3][c] ("Rule
19 does not require an absolute showing that [a party's] interest
will
necessarily be harmed by nonjoinder; rather, it is concerned that
nonjoinder 'may' result in such harm."). Without passing judgment on
Buyer's argument, we hold that the trial court could reasonably conclude that
if Buyer were to lose on the merits, the Tribe's economic interests might be
implicated.
See Srader, 1998-NMSC-25, P25, 125 N.M. at 529, 964 P.2d at
90 ("The court may consider this type of economic impact caused by
disputes between non-Indian parties when analyzing the practical effects of
permitting litigation without a tribe's inclusion.").
{12} To illustrate
this possibility, we observe: Buyer brought this lawsuit because Seller
allegedly breached the 1992 Assignment. Under that contract, Buyer, as
assignee-sublessee, is permitted to operate Seller's interests in certain oil
and gas leases on the Jicarilla Apache Reservation. According to the Tribe,
this contract may be enforceable as between Buyer and Seller, but it is not
enforceable against the Tribe or the federal government. If the Tribe is
correct, then the Tribe would lose any revenue that might be generated by the
operation of the oil and gas leases because the Tribe and Seller are parties to
a contract that permits Seller, as lessee, to operate the very leases it has
attempted to sublease to Buyer. Put more succinctly, if the trial court decided
that Seller did not have to sign the JAT-A-2 forms, Buyer could not operate the
leases because to do so would be illegal and Seller could not operate the
leases either because it has contracted its rights to Buyer. This type of
economic effect implicates the Tribe's interests.
See id.
{13} Buyer fails to
address the ramifications that could result if the trial court held that Seller
did not have to sign the JAT-A-2 Form in the Tribe's absence. We simply note
that the interests of a necessary party will necessarily be impaired and
impeded when a trial court rules in its absence, unless the interests of the
absentee and one of the extant parties are truly identical.
See Moore, §
19.03[3][f]. In the case at bar, the Tribe has an interest not only in deriving
economic benefits from the operation of oil and gas leases on its lands but
also in protecting its sovereign right to litigate on its own behalf and in the
forum of its choice.
See Srader, 1998-NMSC-25, P33, 125 N.M. at 530, 964
P.2d at 91. We thus hold that the trial court could reasonably conclude that
the interests of the Tribe and Buyer are not truly identical, and that the
Tribe's interests might therefore be impaired or impeded if the trial court
entered a judgment in its absence.
{14} The next issue we
must address is whether the trial court could have reasonably concluded that
the Tribe's joinder is not possible.
See Rule 1-019(B). We observe that
joinder is normally feasible; however, it may become unfeasible if it is
somehow precluded by jurisdictional barriers.
See Srader, 1998-NMSC-25,
P19, 125 N.M. at 528, 964 P.2d at 89. Sovereign immunity is one such
jurisdictional barrier.
See Srader, 1998-NMSC-25, P29 125 N.M. at 530,
964 P.2d at 90.
{15} The trial court
reasonably concluded that it could not join the Tribe in this lawsuit because
of the doctrine of tribal sovereign immunity. As sovereigns, Indian tribes like
the Jicarilla Apache Tribe are immune from suit absent Congressional
authorization or an effective waiver in tribal, state, or federal court.
See
id. Buyer filed its complaint in state court. No waiver exists that permits
suit against the tribes in state court, and no Congressional authorization has
been given.
See id. As a result, the trial court properly concluded that
the doctrine of tribal sovereign immunity precludes joinder of the Tribe.
See
id.
{*530} C.
Determination by Court When Joinder is not Feasible
{16} In light of the
fact that the Tribe cannot be joined, we must next decide whether the trial
court could reasonably conclude that it should dismiss Buyer's lawsuit instead
of proceeding without the Tribe.
See Rule 1-019(B). The factors the
trial court must consider include:
first, to what extent a judgment rendered in the
person's absence might be prejudicial to him or those already parties; second,
the extent to which, by protective provisions in the judgment, by the shaping
of relief, or other measures, the prejudice can be lessened or avoided; third,
whether a judgment rendered in the person's absence will be adequate; fourth,
whether the [Buyer] will have an adequate remedy if the action is dismissed for
nonjoinder.
See id. We have already concluded that the trial court
could reasonably weigh factors one through three in favor of dismissing Buyer's
lawsuit in the Tribe's absence, so we will not revisit those factors here. See
Srader, 1998-NMSC-25, PP31-32, 125 N.M. at 530, 964 P.2d at 91. We finally
note that the trial court could reasonably conclude that the fourth factor also
weighs against Buyer, and that equity and good conscience do not suggest a
different result. See Srader, 1998-NMSC-25, PP33-34, 125 N.M. at
530-531, 964 P.2d at 91-92 ("The public interest in protecting tribal
sovereign immunity surpasses a [Buyer's] interest in having an available forum
for suit. . . . The majority of case law suggests that Rule 1-019 requires
dismissal when an immune tribe has substantial interests in the
litigation."). Accordingly, we cannot say that the trial court abused its
discretion.
{17} For the reasons
stated, we affirm.
LYNN PICKARD, Chief Judge
THOMAS A. DONNELLY, Judge