*1 Teel, TEEL, Roy Roy M. M. Arlie D. SJM, Inc., Company, Appellants,
Inc.
PUBLIC SERVICE COMPANY OF
OKLAHOMA, Pipeline Transok
Company, Appellees.
No. 61225.
Supreme Court of Oklahoma.
Dec. 1985.
As Corrected Jan. 1986.
Rehearing Opinion Granted and July
Amended
Dissenting Opinion July
Rehearing Denied Jan. *2 Eagleton, Gassaway, Jim E.
James R. F. Eagleton, F. Conley, John Marc Houston & Klein, Inc., Tulsa, appellants; for S. John Lowe, of counsel.
Rosenstein, Ringold Fist & and Linda McGowan, Tulsa, Cole for appellees. KAUGER, Justice. questions presented whether are: Company Pipeline
Transok and Public Ser- (appellees/purchasers), vice Oklahoma fair must account for the market value Roy M. in which on leases gas produced Teel, appellant, working a owned so, gas; and the market value of the whether the converted gas; unjustly whether were gas pro- enriched investment of the ceeds; purchasers must ac- whether the interest; appeal count for whether this was brought; properly timely and whether and accept- right appeal was waived suspense by ance of funds held appeal properly chasers. We find brought, to the timely and and that limited presented pipeline purchaser, here a facts buys cotenant/operator a who that the a after notice received converter operator’s has revoked the other cotenant However, dispose gas.1 receive under because Teel will statute, we do not find that unjustly enriched. were working inter- family Teel his have a a source est five wells within common County, Okla- supply Pittsburgh located homa. include the Bender Well The wells (Sec. 33-T9N-R16E), Well the Presson (Sec. 31-T9N-R16E), (Sec. the Smith Well (Sec. 5-T8N-R16E), 32- the McDuff Well (Sec. T9N-R16E) Katy 28- Well bought T9N-R-16E). and Transok PSO Siegfried, Siegfried, gas from R.H. R.H. Collins, Jr., Inc., (opera- George F. tors). Teel a rule of found herein.
1. Insofar as announces conver- sion, peculiar it is confined to the scenario agreement completion Teel executed a farm out determine costs and to establish 7, 1966, on operators December cover- pay-out accepted Teel dates. the ac- ing Katy providing Bender and Wells counting pay-out dates and settled the dis- completion drilling that after costs pute approved with the which was (pay-out) were each would recovered own 22,1982. by the trial on court October interest. one-half operators parties are not appeal. to this agreement operating terms of the de- agreed Transok and PSO that Teel’s settle- joint property. scribed the lease as Under operators ment prejudice with the did not terms, Teel had the to take his claims asserted purchasers. gas produced in share of all kind at September On the trial court addition, operators buy time. In could held put could on evidence to price and/or sell Teel’s not less prove that the contract was unreason- operators than received. Teel however, able on October it re- has taken his in kind. On never March ruling versed its refused hold an Teel and the entered hearing evidentiary on the relevant market- *4 agreement covering into an the McDuff ing deciding area that the market fair val- well. On November Teel and the ue and the market area were identical to operators concerning contracted the Pres- the redetermination area and the contract providing son and Wells Smith that after price. pay-out the interest would be di- Subsequently, September on Teel, equally Siegfried, vided between and the trial court determined Teel that was operating agreement Collins—no was at- percent entitled to six interest from the tached. proceeds date the they were received until operators completed pro- drilled and deposited were the escrow account. The ducing gas agree- wells under the farm-out trial court Teel directed to submit executed paid gas royalties ments and shut-in from indicating division to orders Transok through February 26, 1973, 1974. On production interest in liqui- the and ordered operators the to contracted sell to dation pro- of the escrow with account all twenty years price Transok for rede- paid appeals ceeds to Teel. Teel from the every termination to be years made three finding fair that the market was value the designating a redetermination area by operator. received the He also portions which included of Pittsburgh, appeals from the refusal of the trial court Hughes and McIntosh Counties. Teel re- to find that the converted his join fused to in the asserting contract they unjustly were enriched the terms were unfair and discriminatory. by the sale thereof. The coun- pay-out, Before Transok all ter that the order issued on October receipts the to and distributed 1982, was final payment order which the determined royalty to of royalty owners that, therefore, all issues and appeal under the pay-out, division order. After was untimely. the direction of Teel operators, contends that the final Transok placed payments special due order was September Teel in a not issued until “sus- pense” assigned account. Transok its con- when trial court awarded interest. tract to on PSO June .1978, Teel brought I action an for an accounting and for determination of lease- THIS APPEAL WAS PROPERLY AND rights against
hold operators, Siegfried TIMELY BROUGHT Collins, purchasers, PSO and 9, 1979, petitioned August Initially, Transok. On Teel for a declaration trial proceeds, rights court all of the including $649,- parties, ordered of the quiet- an order suspense ing 474.17 the parties, account title claims of attributable other placed Teel’s interest accounting. in an and an escrow ac- On March during count pending litigation. petition, of Teel alleging amended conver- trial court also accounting ordered an sion if remaining gas were insufficient 20, 1983, September gas already He also because pay for taken. the October sought highest 22, 1982, market interest or the value order did not decide the interest expenses for in- compensation and fair issue, passed and the matter repeated- was specifically curred. The trial court re- ly request at the purchaser. question of whether the served unjustly by chasers enriched conver- were Before the enactment of the new sion of Teel’s at the October code, pleading 12 O.S.Supp.1984 2008, is § hearing. contend that the only by allegations sues were raised of fact action, conversion was a second cause of body contained in the pleading, of the and that it was also determined on October prayer for relief was not considered trial court found Teel when the Here, part pleading. explicitly Teel split entitled to a connection and that until recovery asserted for interest on place the connection was Teel should escrow account as an element of his cause proceeds receive his share from the re- disposal segment of action. The of a of a operator. ceived contends that judgment cause of action is not a but an separate is not a cause action interlocutory summary adjudication, a limi theory recovery arising but an additional tried, subject tation on the issues to be from the same occurrence. alteration or modification the trial court A cause of action embodies all theo judgment. before final The trial court re recovery damages ries of or which emanate power complete tains full to make one or one occurrence transaction.2 In judgment dispose aspects of all case, this Teel’s cause action arose from *5 An interlocutory summary adjudi action. rights concerning produc the breach of his appealable cation does not form an order.3 originally tion from five wells. Teel re The order of October did not quested place split that he be allowed to dispose controversy. of all the issues in connection on the wells and to take all the appeal The final order from which an could gas produced until the imbalance was cor properly timely brought Sep be By petition, rected. amendment to the he tember alleged possibility e.g., of conversion if enough gas the wells did not contain to rights.
balance his breached Conversion is II relief, an theory sepa alternative not a rate cause of action. event Teel ACCEPTANCE OF ESCROW FUNDS dismissed the cause of action DID THE NOT WAIVE RIGHT proceeded after settlement and APPEAL TO petition seeking damages on the amended purchasers for the conversion and interest. purchasers’ argue accepted The Teel that judgment the benefits of the trial court’s inquiry The material is whether all the waiving right thereby appeal. his to completely issues were resolved the Oc- only contends that the benefit he received tober, proceedings. The trial court in was the amount into an ac- escrow September 20, proceeding, ruled count in accordance the settlement judgment; on the with summary motion for right agreement to prejudgment operators, recover with the and that the on accounting money by an of the earned clearly provided settlement it was production proceeds. on the prejudicing made his claims without The court also found Teel was entitled to against Transok and PSO. percent
recover six interest and directed general party execution of a order. All rule is that a division the is- sues were not determined until the voluntarily accepts judg order of who benefits of a Co., Co., Drilling 2. Mann v. State Farm Mut. Auto Ins. 3. Anderson v. Falcon v. Halli- Mann v. State Farm Mut. Auto Retherford burton Ins. see note 2 appeal.4 they ment An ex waives must account for the fair market if, ception appeal, possible is on it is gas. made value judgment a more favorable with obtain The owners of undivided interest judgment. out the risk of a less favorable gas rights in oil and are tenants com Acceptance judgment benefits mon. Each of may develop the cotenants appeal is not inconsistent an if with it is property the common but not to the exclu lodged solely to obtain a more advanta sion of the other cotenants.7 When geous judgment i.e., a appeal.5 no-risk It — by cotenant, discovered one the cotenant undisputed that at a minimum Teel was may necessary deduct the expenses of de money entitled to the in escrow. Teel does veloping, extracting, marketing;8 but argue that the amount awarded is not accounting an must be made to the other due but that amount and an additional cotenants for pro rata share of the amount should be awarded. Teel has not production. appeal waived his because the ac tions taken him are not inconsistent A tenant in common lease position appeal.6 his on his/her interest in without the cotenants,
consent of other
but in the ab
sence
express agreement,
of an
one
coten-
Ill
agent
ant is not an
other. A
A PIPELINE PURCHASER WHO BUYS
sales contract
executed
a cotenant is
GAS FROM A COTENANT/OPERA-
limited to
However,
his/her interest.
TOR WITH NOTICE THAT THE OP-
cotenants name
operator
a cotenant as
ERATOR LACKS AUTHORITY TO exploit the cotenancy for their
prof
mutual
DISPOSE OF ALL THE
MAY
GAS
it, they become coadventurers in the enter
BECOME A CONVERTER
prise and stand in a fiduciary relationship
Teel,
to one
Siegfried,
another.9
and Col
determinative issue is whether the
lins each owned
gas.
are converters
interests
of Teel’s
Siegfried
wells.
Collins were
contend that
named
Teel and the
operators,
operating agreement
are cotenants and that each are
specifically provided:
produce
entitled to
*6
They
the wells.
also
argue that it
operators’
is the
responsibility
“In
the
party
event
shall fail to make
to account to Teel. Teel asserts
arrangements
that the
the
necessary to take in
purchasers have
purchase
taken without a
separately dispose
kind or
propor-
of its
contract,
with notice of his
tionate share of the oil
gas pro-
and/or
Engines,
Const., Inc.,
1957);
4. United
Inc. v. McConnell
Company
Coal
Styron,
Oil and Gas
v.
303
1101,
(Okla.1981);
641 P.2d
1105
965,
Tara Oil Com-
(Okla.1956);
P.2d
Essley,
969
Mershon v.
pany
Mitchell, Inc.,
Kennedy
v.
&
A division order consists of an to do so September, the trial court in agreement between interests 1983. The were aware of provides which a for they attempted Teel’s interest because payment mula for purchaser’s price agreement of the reach an with him several times gas. Its protect pur receipt function is to copy and were of a of his letter Nonetheless, chaser from liability.11 revoking operators’ right to deliver his purchaser protected is not purchasers.15 receiving unless the own- to the After Ellis, "Although independent agents "The Production of Gas Joint In or contractors Properties," Legal engaging phases drilling terest 21st Southwestern various well, Taxation, completion engage Foundation on but who do not Oil and Gas Law and Note, p. (1970); participate operation, in nor undoubtedly in the full would "Oil and Gas: Production trespassers be liable as for Split Getting Imbalance in Stream Gas Wells— *7 physical damage they produced, Share,” 955, which it is Your Fair 30 Okl.L.Rev. 966 liability submitted that (1977). their should not ex- Harper See also Beren v. Oil 546 gas produced tend to the value of the oil or 1356, (Okl.App.1975). P.2d 1358 they actually engaged produc- unless in the operation distinguished engaging tion as from 11. 4 Williams and 9, Meyers, supra; see note at phases operation in isolated such as Note, p. 571-72 § 701 "Oil and Gas Production cementing, perforating, clearing. The Split Getting Imbalance in Stream Gas Wells— pipeline purchaser purchased or other who Share”, 10, supra; Heming- Your Fair see note production from one not entitled thereto Gas,” 3632-63, way, p. "The Law of Oil and would be a converter and liable to the true (2nd Ed.1983). § 7.5 owner.” 12. Masterson, Problems "Division Order Created knowledge pur 15. With this PSO continued to by Apportionment Royalty’, 10 of OklaX.Rev. gas purchaser good chase the not was a (1957). 289 Pettitt, 243, faith. Texas Co. v. 107 Okla. 220 P. 956, (1923). purchases, coupled 959 PSO’s with 13. 4 Williams and 11, Meyers, see note knowledge, its amounts to bad faith and consti Distillery tutes an action in tort. Norman, v. Stizel-Weller 14. See 1 Kuntz, Gas”, 242-43, 182, p. F.Supp. (W.D.Ky.1941). "Oil and 11.2 § 39 187 (1962), which distinguishing Moody states: The factor between v.
398 revocation, con- an purchaser the was a interest is interest in where the gas purchased property it is under an oil and lease.19 verter because Tara operator not authorized specifically an which was market from limited to a price gas royalty deliver it.16 clause—this is not the Tara the lease con
question us. In before provided tained a clause which the IV pay lessee royalty would the at the interest AN OF IN ACTION FOR CONVERSION market at the well. None of PROPERTY, OF THE MEASURE agreements opera between Teel and the MARKET THE FAIR DAMAGES IS tors language. contained this THE PROPERTY VALUE OF because Teel contends that jointly gas,20 were liable for Teel’s thus gas, they purchasers have taken his are amount, recovery any, is limited to the if damages statutory for the for con liable which exceeds the balance the escrow In conversion an action for the of version. account. damages property, the measure of is the property market of at fair value V time conversion and interest thereon —if party pursues diligence. the suit with BEFORE LITIGANTS MAY RECOVER ENRICHMENT, may high An election be made to take FOR UNJUST fair property est market value of the THERE BE with MUST ENRICHMENT any interest at time A IN- between the COUPLED WITH RESULTING verdict.17 Because trial court JUSTICE presention refused con evidence argument of Insofar as the un cerning gas, the market value of the this concerned, just par is a enrichment before is remanded issue for consideration ty enrichment, unjust recover there trial court.18 coupled must be enrichment to another pipeline purchasers resulting injustice.21 receipt submit that with a Corp. Hughey, Tara Petroleum v. purchaser 630 Teel’s oil and benefited the (Okla. 1981), 1273 P.2d is determina but because will receive at the least Tara, tive. the lessor the lessee production, sued the market of his market sold proven establish value for under a has not injustice.22 he an royalty provision in A royalty the lease. Additional should not be allowed. Wagner, (1933) also, Lachman, 167 Okla. 23 P.2d 637 See Edwards v. P.2d 534 nonconsenting Drilling and Teel is the cotenant did not 677 Hamco Oil and Co. v. Ervin, (Okla.1960). operator’s authority; P.2d revoke the instead 354 445 he re operator’s production on the lied to extend his party complains 18. Neither court’s trial lease. by jury denial of trial in the conversion action. remand, by jury On waiver of trial 14, supra. See note trial, binding subsequent on the by jury applicable. Seymour trial is otherwise Damages provided are O.S.1981 64: § Swart, P.2d v. wrongful "The detriment caused con- personal presumed property version Hays Mutual v. Phoenix Ins. Life be: (Okla. 1964); Royalty Doss Co. v. Oil property 1. The value of time of Lahman, Elliott the conversion with time; or, the interest (1952). Berry, 206 Okl. *8 prosecuted Where the Bearman, 886, 2. action has been 71, 20. Probst v. 76 Okla. P. 183 diligence, highest with reasonable (1919). market 888 property any value of the at time between the verdict, and Halsobrunn, without F.Supp. Importers 21. v. 500 Efco and, option injured 152, party; (E.D.Pa.1980); at the Oil 157 Sachs v. Continental 614, compensation Co., (E.D.Pa.1978). F.Supp. A fair for the time and 454 619 money properly expended pursuit in 14,
property." 22. See note
309
IN
he is
to recover
AFFIRMED
PART.
Teel contends
entitled
percent per
of
an-
interest
rate
six
at the
IN
REVERSED
PART AND REMAND-
paid
it
gas purchased until was
num on the
ED.
exception that mon-
into escrow—with
July
ey paid into escrow after
C.J.,
DOOLIN,
HARGRAVE, V.C.J.,
rate of
interest
should draw
at
12%
HODGES, OPALA,
and
ALMA
charges
He
540.23
under 52 O.S.1981 §
KAUGER, JJ.,
and
WILSON
concur.
if
more than the
purchaser
earned
LAVENDER,
SUMMERS,
SIMMS and
respective-
percent
percent,
twelve
six
and
JJ., dissent.
additional mo-
ly, he is
to recover
entitled
SUMMERS, Justice, dissenting:
theory.
enrichment
unjust
nies on a
I respectfully
from the court’s
dissent
inap
Title 52
540
O.S.1981 §
impose
election to
the law of conversion
1,
plicable
July
it became effective
because
upon
I
controversies
this nature. would
filed, (1978)
1980,
the suit was
after
permit
way
Teel to recover
of “bal-
court had ordered the funds es-
after the
ancing”
doctrine
restitution.
9,
under
1979). Generally,
(August
crowed
stat
Co.,
Harper
Beren v.
Oil
Here, past pur transaction between preju-
chaser would be altered is, therefore,
dicially, inapplicable. it (B) provides pertinent only changed subsection which § 23.Title O.S.1981 540 amendment 52 part: provides: now Any said first or owner of the "B. proceeds “A. from the sale of oil derived produce drill and substituted for the or or from oil well purchaser provided vio- as herein that first persons legally paid shall be entitled there- persons shall to the lates this act be liable to, (6) commencing no six later than months legally proceeds produc- entitled to the from sale, first no after the date of and thereafter unpaid proceeds of such tion for the amount (60) sixty days later after the end of the than at the rate of twelve with interest thereon subsequent pro- calendar month within which annum, (12%) per percent from calculated duction is sold.... Provided, sale.” however, date of first in those instances proceeds such cannot be because where Muskogee Au v. Medical Center Hammons marketable, thereto is title 539, Trinity thority, P.2d 542 697 production shall all chasers of such cause Broadcasting Corp. Oil 692 P.2d v. Leeco proceeds earn due such interest to interest 1364, (Okla.1984); Wickham v. Oil 1366 (6%) annum, Gulf percent per of six until rate 613, Corp., v. P.2d Wilson 623 615 such the title interest has been time as to such Com’n, Okla. 594 P.2d State ex rel. Tax perfected.... 1212 Any B. first or said owner of produce drill and substituted for the Corp., see su v. Oil note Wickham provided purchaser first as herein that vio- Gulf pra; Bd. v. Okla. Oklahoma Water Res. Dist., Central persons lates act shall liable to the this be (Okla.1969); Wa M.C. legally proceeds produc- to the entitled shabaugh Glass 177 Okla. proceeds v. Bartlett Collins unpaid tion of such for the amount (1936). See also at the rate of twelve thereon annum, Dewey, (12%) percent per penalty...." Anderson v. Idaho as the (1960); Bonynge, 161 Cal. Lake in 4 This statute was amended Okla.Sess.Laws (1911). (1985). pp. P. ch. 390-91 However