Thе FOURTH NATIONAL BANK OF TULSA, Plaintiff-Appellant and Counter-Appellee, v. Joann APPLEBY, Special Administrator of the estate of Melvin P. Appleby, Jr., Deceased, et al., Defendants, and ANR Production Company, a corporation, Defendant-Appellee and Counter-Appellant.
No. 74350.
Supreme Court of Oklahoma.
Nov. 23, 1993.
829 P.2d 829
As for the requirements in Rule 9.1, we agree with the PRT that petitioner did not give notice to all of his clients when he resigned from the practice of law. This failure prejudiced the cases of at least one client. Although petitioner turned this matter over to two other attorneys, it remained his responsibility to see that the task of notification and returning files was completed. It was not completed.
The Kamins factors also indicate that reinstatement is not appropriate at this time. Petitioner has apparently dealt with his problem with alcohol. However, he did not attempt to make amends with the many clients who filed grievances until he realized that he would not be admitted to another state‘s bar with the problems unresolved in Oklahoma. Although he apologized to every former client who testified, his actions of failing to get in touch with them for six years placed the legal profession is a poor light. It is unclear how many of these former clients still have no knowledge of the circumstances surrounding their former attorney and who were never given their files. These thirty-six grievances not only showed а repeated failure to advance the clients’ best interests, two of them alleged fraud and misrepresentation.
While petitioner has made an effort to remain informed in certain legal areas, he has not taken any Oklahoma legal educational courses. He has not kept current with the Oklahoma Bar Journal. He did not work in a law-related job during the period following his resignation.
It is this Court‘s duty to safeguard the interests of the public, the courts and the legal profession. Kamins, 752 P.2d at 1130. There must be a determination that reinstatement would not negatively or adversely affect the Bar. Id., at 1130. This duty becomes especially important when presented with a reinstatement petition. The attorney seeking reinstatement has in the past demonstrated a lack of fitness to practice law. In reviewing the petition for reinstatement, this Court must be mindful of the harm which could be caused to the public and the potential clients. Matter of Reinstatement of Elias, 759 P.2d 1021, 1022 (Okla.1988).
Considering all these factors, and the heavy burden placed on the petitioner, we agree that reinstatement should be denied. On application by the Oklahoma Bar Association, costs, totalling $1999.55 are assessed against William R. Thompson. The costs are to be paid within thirty (30) days of the date of the mandate of this opinion.
HODGES, C.J., LAVENDER, V.C.J., and SIMMS, HARGRAVE, OPALA, KAUGER and WATT, JJ., concur.
ALMA WILSON, J., concurs in result.
Richard K. Books, Sharon Taylor Thomas, Watson & McKenzie, Oklahoma City, for defendant-appellee and counter-appellant.
WATT, Justice.
Which takes precedence between ANR‘s mechanics’ and materialmen‘s liens and Bank‘s mortgages is the central issue in this appeal. The resolution of this central issue requires that we address several matters of first impression.
Dates are critical to our decision. Consequently, we will set out a chronology of significant events. Unless otherwise indicated, the parties stipulated to the dates set out and to all other facts.
CHRONOLOGY
| Event | Date(s) |
|---|---|
| OCC entered four orders force pooling Appleby‘s mineral interests. ANR was named operator: | 6/25/80 |
| Appleby elected to participate in ANR‘s wells under the terms of the OCC‘s forced pooling orders. Appleby paid his share of the ANR‘s drilling, completion and joint interest charges on the four wells until October 1981, following which time he paid no more of ANR‘s charges: | 1980-81 |
| Inclusive dates of ANR‘s unpaid joint interest charges billed to the Appleby interests: | 10/15/81-05/1/88 |
| Bank filed its mortgages between: | 04/4/83-02/6/84 |
| Bank filed its foreclosure action: | 10/17/86 |
| ANR filed a counterclaim against Bank asserting mechanics’ and materialmen‘s liens and their priority over Bank‘s mortgages: | 04/30/87 |
| ANR filed lien claims (covering the same claims as those asserted in its counterclaim) in the Washita and Caddo County Clerk‘s offices under | 07/14/89 |
FACTS AND PROCEDURAL HISTORY
In 1980, ANR filed forced pooling applications in the Oklahoma Corporation Commission. ANR obtained Commission orders force pooling the mineral interests underlying four tracts located in Washita and Caddo Counties in which Appleby owned unleased minerals. The Commission‘s forced pooling orders gave unleased mineral owners the option to take a lease bonus and a percentage royalty, or to participate in the well. Participants would receive the full percentage of their ownership of the pooled area by agreeing to pay their pro-rata share of the costs of drilling, completion, and operation of the wells. Appleby elected to participate, but did not sign an operating agreement with ANR. Nevertheless, Appleby paid his share of ANR‘s well costs throughout 1980 until sometime shortly before October 15, 1981. Beginning with ANR‘s October 15, 1981 bill, Appleby paid no more of ANR‘s joint interest billings. These unpaid charges amount to $53,415.92. Appleby, however, never attempted to have ANR replaced as operator of the four wells.
The trial court held that ANR had liens under
The Court of Appeals held that ANR had no lien under
ISSUES
Ultimately, there is but one issue here: Whose liens take priority, Bank‘s mortgages or ANR‘s mechanics’ and materialmen‘s liens? In reaching our ultimate conclusion, however, we must consider several individual issues:
- How are liens created under
52 O.S. 1981 § 87.1(e) perfected? - If ANR properly perfected its liens, what was “the date of the furnishing of the first [labor or material]” for establishing the priority of its liens under
42 O.S.1981 §§ 141 ,142 , and what effect does42 O.S.1981 § 23 have on this calculation? - What are the rights and obligations of the parties with respect to attorney‘s fees?
DISCUSSION
Historical Background and Analysis of Oklahoma‘s Mechanics’ and Materialmen‘s Lien Statutes
In this country, mechanics’ and materialmen‘s liens were not recognized by either
Mechanics’ and materialmen‘s liens give laborers and materialmen a lеvel of protection enjoyed by no other lien holder because such liens have priority from the date the first labor or materials are furnished, although the lien may not be perfected by filing until much later. In general, mechanics’ and materialmen‘s liens are governed by
... for the erection, alteration or repair of any [improvements to real property].... Compliance with the provisions of this act shall constitute constructive notice of the claimant‘s lien to all purchasers and encumbrancers ... subsequent to the date of thе furnishing of the first [labor or material].
This language creates a classic mechanics’ and materialmen‘s lien, which protects laborers and materialmen whose labor or goods contribute to the construction or repair of an improvement to real property.
There is an important difference between
That
... within four (4) months after the date upon which material ... was last furnished or labor last performed under contract as aforesaid.
Without some limits it would be possible, even likely, that the priority of a oil and gas lien operator‘s lien could relate back many years before the operator filed its lien statement. For example, ANR claims that its liens have priority from October 1981, although ANR did not file its lien statement until July 1989.
I.
We first must examine an issue of first impression: How are liens created under
Both the trial court and the Court of Appeals held that
Oklahoma incorporated
The legislature passed the predecessor to
ANR argues that, because
II.
We must now interpret the lien statutes to arrive at the date of priority of ANR‘s liens. The parties disagree over what date should be used as the date of perfection of ANR‘s liens under
Section 141 says mechanics’ and materialmen‘s liens
... shall be preferred to all other liens ... which may attach ... subsequent [to the date labor or matеrials are first furnished].
ANR first furnished labor or materials that Appleby did not pay for on June 25, 1980. Thus, according to ANR, its liens have priority from that date, although ANR‘s liens were not perfected until July 14, 1989. We disagree with this analysis because it does not consider
A lien is extinguished by the mere lapse of time within which, under the provisions of civil procedure, an action can be brought upon the principal obligation.
We have not previously considered what effect
Section 23 requires us to examine the statute of limitations applicable to ANR‘s claims upon which their liens were based. The relationship between Appleby and ANR in the wells at issue here was bаsed on an implied contract arising under a statute. Consequently, the three-year statute of limitations governing implied contracts and liabilities created by statute,
The dissent‘s reliance on Noble Foundation v. Vick, 840 P.2d 619 (Okla.1992), is misplaced. The dissent proposes that ANR‘s claim is based on a construction contract so the statute of limitations could not start to run until ANR ceases operating thе wells, although ANR‘s operations may not cease for thirty, forty, or more years. The adoption of the dissent‘s proposal would judicially repeal
This appeal presents an entirely different situation from the one we dealt with in Vick. There we held that a land owner‘s cause of action against a contractor for breach of a construction contract for defective work did not begin to run until the contract was completed. In Vick, we stated, “The rationale behind this rule [that the statute of limitations does not begin to run on a construction contract until the project is comрleted] ‘is that there is no breach for defective performance if the defects can be remedied by the date of completion [of the construction contract].‘” Id. 840 P.2d at 622. Vick‘s teachings are inapposite to this case. The dissent does not suggest a reason, and we see none, for delaying the starting of the statute of limitations on unpaid accounts until the completion of a construction project because the billings were for work done on that project. We certainly did not intend for the Vick rule to apply in cases such as this one, where unpaid labor and material bills used to establish lien priority, covered work done years longer before thе filing of the competing lien than the length of the statute of limitations governing suits on accounts.
In Russell v. Flanagan, 544 P.2d 510, 512 (Okla.1975), we held that a contractor‘s cause of action for non payment of its billings differs from a land owner‘s cause of action against a contractor for breach of warranty arising out of defective materials or workmanship. There, we interpreted
For the instant action, plaintiff [land owner] sought judgment for breach of warranty [against a plumbing contractor]. While this may be an action collaterally concerning labor or services, it is not a civil action for labor or services within the meaning of the statute, and
§ 936 is, therefore, inapplicable. [Emphasis added.]
Thus, ANR‘s cause of action underlying its lien claims here is entirely different from the sort we dealt with in Vick, which would have involved a land owner‘s cause of action against ANR for furnishing defective workmanship or materials. The Vick exception applies only to suits by land owners against contractors, not to suits for unpaid laborers’ or materialmen‘s bills.
We must interpret lien laws so as to enable lien holders and potential lenders to perfect liens and know their rights in a simple straightforward way. Potential lenders are entitled to know that if they check the County Clerk‘s records and thosе records show no prior laborers’ and materialmen‘s liens, the lenders’ exposure is limited to liens perfected within the applicable statute of limitations for suits on accounts. To apply Vick here would be declare that an oil and gas operator‘s laborers’ and materialmen‘s liens could be perfected at any time and would relate back to the date such labor or materials were first furnished, though that date may have been thirty, forty, or more years prior to the date the operator perfected its lien. This we decline to do.
Clearly,
ANR did not properly perfect its liens until it filed them in the Caddo and Washita County Clerks’ offices on July 14, 1989. Because ANR had a cause of action on each of the operator‘s bills it submitted to Appleby, each of ANR‘s unpaid monthly bills to Appleby was barred by the statute of limitations after three years under
The trial court‘s judgment holding that ANR‘s liens were superior to Bank‘s mortgages is reversed. We remand the matter to the trail court with instructions to enter judgment for Bank on its mortgages.
III.
The attorney‘s fee issue remains, although the outcome concerning it has changed. Because ANR is not the prevailing party under
We must decide whether Bank, as prevailing party on ANR‘s lien claim, is entitled to an attorney‘s fee to be taxed as costs under
In Voelkle, a mortgagee obtained judgment and an attorney‘s fee against his mortgagor. The mоrtgagee had joined other lien claimants to perfect its title against them. There, as here, the mortgagee prevailed against a lien claimant who had filed a counterclaim in which he asserted that his lien was superior to the mortgagee‘s mortgage. We held that the mortgagee was not entitled to an attorney‘s fee against the other lien claimant besides the fee to which he was entitled from the principal defendant as part of his judgment on the note and mortgage. We based our holding on the fact that the primary subject of a foreclosure action is against the mortgagor and the property securing the debt, and that clearing junior liens is a pаrt of the task of foreclosure. A lien claimant in a mortgage foreclosure action is an “incidental defendant,” although he files a counterclaim. The attorney‘s fee awarded the mortgagee in the principal action, therefore, should include a fee for the time and effort expended in clearing junior liens. Voelkle, Id., 338 P.2d at 1082-83.8 Under such circumstances, the mortgagee is not entitled to an additional attorney‘s fee from the unsuccessful lien holder under
CERTIORARI PREVIOUSLY GRANTED, COURT OF APPEALS’ OPINION VACATED, TRIAL COURT‘S JUDGMENT REVERSED, MATTER REMANDED WITH INSTRUCTIONS.
HODGES, C.J., and SIMMS, HARGRAVE and KAUGER, JJ., concur.
LAVENDER, V.C.J., and OPALA, ALMA WILSON and SUMMERS, JJ., concur in part, dissent in part.
SUMMERS, Justice, concurring in part and dissenting in part:
Although I concur in portions of the opinion I must respectfully dissent from the Court‘s conclusion that ANR‘s lien is ineffective as to any material or services provided more than three years before the lien was perfected by filing. Our recent case of Samuel Roberts Noble Foundation v. Vick, 840 P.2d 619 (Okla.1992) and the earlier decisions on which it relies should dictate a different result.
The majority reasons that the oral agreement between the operator of the oil well and Appleby is the obligation upon which the lien is based. Under
In Vick the central question was when the statute of limitation began to run on a written construction contract. We held that the statute of limitations for a written construction contract does not begin until the construction is completed. The contractor urged that the breach of contract action was barred because the action was brought five years after his portion of the construction was completed. We held that the limitations period did not begin when the individual subcontract was completed, but when the construction of the entire building was completed.
The obligation in favor of an operator of an oil or gas well is Corporation Commission imposed, rather than purely contractual. The duty to operate under such a Com-
The relevant statutes,
In Clark v. Oklahoma Electric Co., 288 P. at 937, we expressly stated that materialman‘s and mechanic‘s liens for oil and gas well operators differ from other materialman‘s liens because of the clear statutory language creating the liens. There, in holding that electricity provided over a twenty-two month period was not protected by a materialman‘s lien, we noted the difference in the statutes which created distinct type of materialman‘s liens, and specifically excepted from the holding those situations arising out of the continued operation of an oil and gas well. We explained that when an operator is providing continued services, the express language of the governing statutes provides that the date of attaсhment of a lien for ongoing services was the date the services were first provided.
In Industrial Tile Co. v. Home Fed. Sav. & Ln Ass‘n, 331 P.2d 918 (Okla.1958), we held that a lien for materials and labor attached as of the commencement of the building. This lien has priority over a subsequent encumbrance which was imposed during the course of the construction but prior to the expiration of the period provided for filing the lien. We have also held that where materials are furnished at different times, but all for the same general purpose, the lien will relate back to the first purchase and cover all the material provided. Chickasha Cotton Oil Co. v. Standard Lumber Co., 175 Okl. 15, 52 P.2d 816 (1936). Even more convincing is Cyclone Drilling & Workover Inc. v. Woods, 671 P.2d 688, 690 (Okla.Ct.App.1983) (approved for publication by the Supreme Court), which interpreted Section 144 as follows:
A close reading of [Section 144] discloses that when an oil and gas lien is timely filed, it refers back and applies from the date the first time of material is furnished to the lease or the date the first labor or services are performed on the lease. (Emphasis added)
In Atlas Supply Co v. Bank of Commerce of Okmulgee, 101 Okl. 57, 223 P. 159 (1924), we addressed the question of priority as between a supplier of oil and gas material and a mortgagee. We held that when the supplies are furnished on a ongoing basis as required in the operation of the well, that lien is superior to the mortgage. However, only those supplies provided before the date of the mortgagee‘s recording of the mortgage can be the subject of the priority lien.
Under the current language of statutes, the Atlas conclusion would be slightly different because the statutes expressly state that the materials furnished on an ongoing
In In re George Rodman, 38 B.R. 822 (1984), the bankruptcy court held that under Oklahoma law, an open account for the supply of material to an oil and gas rig provided lien rights to the supplier starting on the date that the first supplies are provided. This lien continued until the lien statement is filed оr the time for filing expires. Thus, regardless of whether ANR‘s operations are characterized as an “open account,” the critical fact is that ANR was providing ongoing services in the operation of a well. Rodman correctly held that the lien rights relate back to the first day supplies are provided.
These cases are contrary to the majority‘s position that only those services within three years from the filing date are recoverable by way of a materialman‘s lien. Instead, the last date of services or materials supplied relate back to the date that material was first supplied. Section 144 states that this lien shall be preferred over all other liens or encumbrances which arise subsequent to the day the first labor is furnished. It is this first date which is relevant for the purposes of priority. There are no cases in Oklahoma which would require the filing of a lien statement every three years, and which would essentially create a new lien every three years. Rather, this “relation back” doctrine permits only one lien for services and material provided under one contract. This interpretation of the lien statutes is consistent not only with the plain language of the statutes but also with cases like Vick and Chickasha Cotton Oil.
The majority‘s position forces ANR to file a lien before his services are completed. Case law holds that any lien statement filed bеfore the completion of the work would be premature and thus the lien would be unenforceable. In Davis v. Bullard, 32 Kan. 234, 4 P. 75 (Kan.1884), the lien statement was filed prior to the completion of the building. The court held that the premature filing made the lien unenforceable. See also Chicago Lumber Co. v. Tomlinson, 54 Kan. 770, 39 P. 694 (1895); Conroy v. Perry, 26 Kan. 472 (1881).
The majority‘s apparent concern with this rationale is that it believes there would be a harsh result to a mortgagee. However, a mortgagee who takes as collateral for a loan an interest in oil and gas is not different than other encumbrancers. All encumbrancers are deemed to have constructive notice of the materialman‘s lien.
I am authorized to state that V.C.J. LAVENDER and J. OPALA join in these views.
Notes
... No deed, mortgage, contract, bond, lease, or other instrument relating to real estate other than a lease for a period not exceeding one year and accompanied by actual possession, shall be valid as against third persons unless acknowledged and recorded as herein provided.
Every conveyance of real property acknowledged or approved, certified and recorded as prescribed by law from the time it is filed with the register of deeds for record is constructive notice of the contents thereof to subsequent purchasers, mortgagees, encumbrancers or creditors.
Sixth. An action for relief, not hereinbefore provided for, can only be brought within five (5) years after the cause of action shall have accrued.
... The operator of such [force pooled] unit ... shall have a lien on the mineral leasehold estate or rights owned by the other owners therein and upon their shares of the production from such unit to the extent that costs incurred in the development and operation upon such unit are a charge against such interest by order of the Commission or by operation of law....
Civil actions ... can only be brought within the following periods, after the cause of action shall have accrued, and not afterwards:
Second: Within three (3) years: An action upon a contract, express or implied not in writing; an action upon a liability created by statute other than a forfeiture or penalty ...