KM Upstream, LLC v. Elkhorn Contr., Inc.

• Decision Date: 06 June 2012
• Docket Number: S–11–0186,S–11–0208.,S–11–0207,Nos. S–11–0185,s. S–11–0185
• Citation: 2012 WY 79,278 P.3d 711
• Parties: KM UPSTREAM, LLC, a Delaware limited liability company, Appellant (Defendant), v. ELKHORN CONSTRUCTION, INC., a Wyoming corporation, Appellee (Plaintiff). Elkhorn Construction, Inc., a Wyoming corporation, Appellant (Plaintiff), v. KM Upstream, LLC, a Delaware limited liability company, Appellee (Defendant).
• Court: Wyoming Supreme Court

278 P.3d 711

2012 WY 79

KM UPSTREAM, LLC, a Delaware limited liability company, Appellant (Defendant),

v.ELKHORN CONSTRUCTION, INC., a Wyoming corporation, Appellee (Plaintiff).

Elkhorn Construction, Inc., a Wyoming corporation, Appellant (Plaintiff),

v.KM Upstream, LLC, a Delaware limited liability company, Appellee (Defendant).

Nos. S–11–0185, S–11–0207, S–11–0186, S–11–0208.

Supreme Court of Wyoming.

June 6, 2012.

Representing KM Upstream, LLC: Drake D. Hill, Rebecca H. Noecker, and Michael L. Beatty of Beatty, Wozniak & Reese, PC. Argument by Ms. Noecker.

Representing Elkhorn Construction, Inc.: Mark W. Harris of Harris Law Firm, PC; Scott D. Cessar and Audrey K. Kwak of Eckert Seamans Cherin & Mellott, LLC. Argument by Mr. Cessar.

Before KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, JJ.

VOIGT, Justice.

[¶ 1] The district court granted summary judgment to Elkhorn Construction, Inc. (Elkhorn), a subcontractor, on its mechanic's lien claim against KM Upstream, LLC (KM), the owner of an amine plant, the construction of which plant underlies all the issues of this case.¹ KM appealed, arguing that summary judgment was improper because of the existence of genuine issues of material fact, and because the district court did not have jurisdiction to proceed with the case, given the automatic stay arising in the bankruptcy proceedings of Newpoint Gas, LP (Newpoint, LP).² KM also asserts that the district court could not proceed in the absence of Newpoint because Newpoint, the contractor, is an indispensable party. Elkhorn cross-appealed, contending that the district court should have adjudicated its claimed oil and gas lien, in addition to the mechanic's lien, thereby making attorney's fees and costs available.

[¶ 2] Because of a W.R.C.P. 54(b) certification issue, the appeal and the cross-appeal were each filed twice. The resulting four docketed cases, as referenced in the heading of this opinion, have been joined for briefing, argument, and opinion. We affirm in part, reverse in part, and remand to the district court for further proceedings consistent herewith.

ISSUES

[¶ 3] 1. Did the automatic stay in Newpoint, LP's bankruptcy deprive the district court of jurisdiction to enter summary judgment in this case?

2. Did the district court err in granting summary judgment in the absence from this case of Newpoint, an indispensable party?

3. Did the district court err in granting summary judgment in the absence from this case of HFG Engineering US, Inc. (HFG), an alleged joint venturer with Newpoint, and therefore an indispensable party?

4. Did the district court err in finding no genuine issues of material fact?

5. Did the district court err in awarding summary judgment in an amount exceeding the contract price where Wyo. Stat. Ann. § 29–2–101(b) (LexisNexis 2007) requires that the work or materials establishing a mechanic's lien be furnished under a contract?

6. Did Elkhorn's Lien Statement set forth both a mechanic's lien claim and an oil and gas lien claim?

7. Did the district court err in concluding that Elkhorn's damages were liquidated and awarding pre-judgment interest?

8. Did the district court err in finding that Elkhorn conceded that $181,369 of its claim was not valid, and by subtracting that amount from Elkhorn's judgment?

9. Did the district court err in holding that the allowed foreclosure of the mechanic's lien “mooted” the necessity for the district court to address Elkhorn's separate motion for summary judgment on the oil and gas lien claim?

FACTS

[¶ 4] On July 6, 2007, KM and Newpoint, Inc. entered into a contract whereby the latter would construct for the former “an amine plant at West Frenchie Draw, Fremont County, Wyoming[.]” KM agreed to pay Newpoint, Inc. $15,664,490 as a fixed cost, as might be amended by written change order. Eventually, two written change orders increased the price to $15,695,855.30. KM paid Newpoint, Inc. $15,524,659.21, and it paid $219,256.72 to other contractors to finish the job.

[¶ 5] Newpoint, Inc. subcontracted with Elkhorn to build the foundation and to interconnect certain “skids.” The Time and Material Contract between Newpoint, Inc. and Elkhorn contained a “target price” of $5,700,000, which target price was not to be increased but by Newport, Inc., in writing. Despite the fact that this target price was never formally increased in writing, and despite the fact that no additional change orders were presented, Newpoint, Inc. approved Elkhorn's invoices in the total amount of $9,910,086.96.

[¶ 6] On March 6, 2009, Elkhorn filed a Lien Statement with the Fremont County Clerk, reading in pertinent part as follows:

NOTICE is hereby given that pursuant to and in accordance with Section 29–1–301 et seq. and Section 29–3–101 et seq., Wyoming Statutes, 2007, Elkhorn Construction, Inc., whose mailing address is P.O. Box 809, Evanston, Wyoming 82931, has and claims a lien against the leasehold interest and improvements hereinafter described and all production of oil, gas, ore and minerals in solid form, or proceeds therefrom in the amount of $4,880,588.83, plus interest, late charges, attorney's fees and costs from January 16, 2009, for materials furnished and delivered and labor supplied for the improvement of said property by Elkhorn Construction, Inc.

An itemized list setting forth and describing the materials delivered and labor supplied by Elkhorn Construction, Inc., is attached hereto as Appendix “A” and by this reference hereby made a part hereof.

That the materials and labor were delivered and performed for and to Newpoint Gas, LP at its special instance and request and upon its promise to pay Elkhorn Construction, Inc. the reasonable value therefore. A copy of the contract is attached as Appendix “B.”

Elkhorn Construction, Inc. furnished and delivered such labor and materials aforesaid during the period of March 18, 2008 to January 16, 2009.

The aforesaid materials and labor were furnished to Newpoint Gas, LP for the improvement of the West Frenchie Draw Amine Gas Treating Plant, on real property situate in Fremont County, Wyoming, and being more particularly described as follows:

....

The foregoing described real property is owned by the State of Wyoming, whose address is indicated above.

(Emphasis in original.) Attached to the Lien Statement were 1,260 pages of invoices and labor charges for amounts claimed by Elkhorn.

[¶ 7] On March 23, 2009, Elkhorn filed a complaint against KM, alleging three causes of action: foreclosure of the lien as a mechanic's lien under Wyo. Stat. Ann. § 29–2–101 (LexisNexis 2007), foreclosure of the lien as an oil and gas lien under Wyo. Stat. Ann. § 29–3–103 (LexisNexis 2007), and unjust enrichment/quantum meruit.³ KM responded with a motion to add Newpoint, Inc. as “a party needed for just adjudication of this dispute under W.R.C.P. 19.” That motion was followed by a similar motion to join Newpoint, Inc. under W.R.C.P. 12(b)(7) and W.R.C.P. 19(a). Eventually, KM and Elkhorn stipulated that Newpoint, Inc. be joined as a party defendant, and an order to that effect was entered on November 24, 2009. Thereafter, Elkhorn filed its Second Amended Complaint, alleging the same three causes of action, but naming “Newpoint Gas, LP a/k/a Newpoint Gas Services, Inc.” as a defendant. The Second Amended Complaint was re-filed with a corrected caption, naming Newpoint Gas Services, Inc. as the additional defendant.

[¶ 8] KM filed an answer in response to the Second Amended Complaint, denying that Elkhorn was entitled to recover any amounts under any of its causes of action, and presenting numerous affirmative defenses. Newpoint, Inc. filed an answer, in pertinent part denying that Elkhorn had provided any material or performed any labor for which it had not been paid. Newpoint, Inc. also counterclaimed against Elkhorn, claiming that Elkhorn had breached its contract with Newpoint, Inc. by seeking compensation beyond the contract's target price, without prior notice as required by the contract. Newpoint, Inc. also sought a declaration that nothing further was owed to Elkhorn under the contract. Newpoint, Inc. later filed an amendment to its answer and counterclaim, limiting the counterclaim to a request for a declaratory judgment as to what amounts Elkhorn might be owed, and adding a cross-claim against KM, with seven claims for relief: misrepresentation, estoppel/waiver, breach of the implied covenant to provide timely and adequate plans, breach of contract, indemnity, breach of the covenant of good faith and fair dealing, and unjust enrichment.

[¶ 9] KM answered Newpoint, Inc.'s cross-claim, and filed a responsive cross-claim against Newpoint, Inc., in which it alleged breach of contract as follows: creation of the Elkhorn lien, failure to manage contract expenses, failure to pay or discharge lien, failure to provide notice of liens, failure to acquire subcontractor's waiver of lien rights, failure to assure consistent subcontract, failure to indemnify, and breach of the duty of good faith and fair dealing. Finally, KM sought a declaration as to Newpoint, Inc.'s obligations to defend against and hold KM harmless from the Elkhorn claims, or other claims arising by virtue of contract or common law.

[¶ 10] After replying to Newpoint, Inc.'s amended counterclaim, Elkhorn filed an amendment to its Second Amended Complaint in which it added a breach of contract claim against Newpoint, Inc., seeking $4,880,588.83 for amounts that it had not been paid under the project. Subsequently, Newpoint, Inc. answered the amendment to Elkhorn's Second Amended Complaint, and amended its cross-claim against KM by adding allegations of negligent retention of contractor, and indemnity under a specific section of the contract. KM then answered Newpoint, Inc.'s cross-claim, and amended its cross-claim against Newpoint, Inc. by alleging the following causes of action: breach of contract—joint venture obligations, promissory estoppel, equitable estoppel,...