Pioneer Operations Co., Inc. v. Brandeberry

• Decision Date: 06 April 1990
• Docket Number: No. 63644,63644
• Citation: 14 Kan.App.2d 289,789 P.2d 1182
• Parties: PIONEER OPERATIONS COMPANY, INC., Appellant, v. Norman W. BRANDEBERRY; The Fourth National Bank & Trust Company of Wichita; Merchants National Bank of Topeka; Brandeberry Oil Operations, Inc.; Sally E. Brandeberry; Diamond Oil, Inc.; Russell Engine Service, Inc.; Sterling Butane, Inc.; Kizzar Well Service, Inc.; Sentinel Machine & Supply Company; Service Acid, Inc.; and English Oil Service, Inc., Appellees.
• Court: Kansas Court of Appeals

Page 1182

789 P.2d 1182

14 Kan.App.2d 289

PIONEER OPERATIONS COMPANY, INC., Appellant, v. Norman W. BRANDEBERRY; The Fourth National Bank & Trust Company of Wichita; Merchants National Bank of Topeka Brandeberry Oil Operations, Inc.; Sally E. Brandeberry Diamond Oil, Inc.; Russell Engine Service, Inc.; Sterling Butane, Inc.; Kizzar Well Service, Inc.; Sentinel Machine & Supply Company; Service Acid, Inc.; and English Oil Service, Inc., Appellees.

No. 63644.

Court of Appeals of Kansas.

April 6, 1990.

Review Dismissed May 25, 1990.

Syllabus by the Court

1. Generally, an appellate court may only review final decisions; orders which do not dispose of all parties or of all claims are interlocutory and not subject to review.

2. If a court, pursuant to K.S.A.1989 Supp. 60-254(b), certifies that there is no just reason to delay an appeal from a judgment on one of multiple claims, notice of appeal must be filed within 30 days or the issues decided in the claim become res judicata.

3. The validity of a trial court's certification of a claim as appropriate for immediate appeal pursuant to K.S.A. 60-254(b) may be raised in a timely appeal from a judgment on the remaining claims.

4. A claimant who presents a number of alternative legal theories, but whose recovery is limited to one, has a single claim for relief, and certification of one claim as appropriate for immediate appeal is error.

5. An oil and gas lien claimant has priority dating from the commencement of the furnishing of labor and materials over a subsequent security interest holder or mortgagee.

6. An oil and gas lease mortgagee is not liable to a materialman's lien holder on foreclosure for operating costs attributable to the mortgagor's working interests so long as the mortgagee is not receiving all of the runs attributable to all of the working interests in an oil and gas lease.

Michael S. Holland, Russell, for appellant.

Terry C. Cupps and Michael C. Gillespie, of Foulston & Siefkin, Wichita, for appellee The Fourth Nat. Bank & Trust Co. of Wichita.

Before ABBOTT, C.J., BRISCOE, J., and MELVIN M. GRADERT, District Judge, assigned.

MELVIN M. GRADERT, District Judge, assigned:

Pioneer Operations Company, Inc., (Pioneer) appeals the district court's determination that The Fourth National Bank & Trust Company of Wichita's security interest in Brandeberry Oil Operations, Inc.'s fractional working interest in numerous oil and gas leases was superior to Pioneer's mechanics' liens.

Brandeberry Oil Operations, Inc., (Brandeberry) is owned by Norman W. Brandeberry and Sally E. Brandeberry. In 1984, Norman Brandeberry assigned his working interests in oil and gas leases to Brandeberry, the corporate entity. Brandeberry's primary assets consist of working interests in oil and gas properties.

Pioneer is the operator of the property in which Brandeberry has a working interest. Pioneer began paying Brandeberry's working expenses in May 1984. Pioneer filed mechanics' liens on some, but not all, of Brandeberry's property. When Pioneer filed the liens in the spring of 1986, Brandeberry's property was already subject to mortgages and security agreements.

On November 28, 1985, Brandeberry, Norman W. Brandeberry, and Sally E. Brandeberry executed two promissory notes to The Fourth National Bank & Trust Company of Wichita (Bank IV). The indebtedness is secured, in part, by mortgages and security agreements covering all of Brandeberry's working interest and revenue interest. Bank IV properly filed its security agreements on the Brandeberry property in March and May of 1985. Therefore, Pioneer began furnishing operating expenses to Brandeberry before Bank IV filed its security interests, but Bank IV perfected its security interests before Pioneer filed its mechanics' liens.

Brandeberry is also indebted to Merchants National Bank of Topeka (Merchants), but that debt and security agreement are not relevant to this appeal as they are second in priority to Bank IV's.

On March 28, 1986, Brandeberry, Norman W. Brandeberry, and Sally E. Brandeberry defaulted on the Bank IV notes. On May 16, 1986, Pioneer brought this action seeking to recover for Brandeberry's proportionate share of the operating expenses due on the liened property. On June 23, 1987, Pioneer was allowed to amend its petition to include a quantum meruit claim against Bank IV and Brandeberry.

Brandeberry and Norman and Sally Brandeberry have subsequently declared bankruptcy and are judgment proof.

On January 27, 1988, the district court issued a journal entry of partial judgment. The district court determined the priorities of the three claimants. Bank IV was declared first in priority, Merchants second, and Pioneer third. Brandeberry's assets are apparently insufficient to satisfy all of the claimants. The district court certified this judgment for appeal pursuant to K.S.A.1989 Supp. 60-254(b).

On July 1, 1988, the district court entered judgment against Pioneer on its remaining claim seeking recovery from Bank IV in quantum meruit. On July 14, 1988, Pioneer filed a notice of appeal from both the January 27, 1988, and July 1, 1988, journal entries.

Bank IV first contends Pioneer's failure to timely appeal from the January 27, 1988, judgment bars this appeal and, thus, that judgment is determinative on the issue of priorities.

Generally, this court may only review final decisions; orders which do not dispose of all of the parties or of all claims are interlocutory and not subject to appellate review. See Skahan v. Powell, 8 Kan.App.2d 204, 205, 653 P.2d 1192 (1982).

K.S.A.1989 Supp. 60-254(b), which is identical to Fed.R.Civ.Proc. 54(b), creates an exception to the general rule. It provides:

"When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim or third-party claim or, when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties."

In this case, the district court, using the proper statutory language, certified that the journal entry of partial judgment on January 27, 1988, was a final judgment and that there was no just reason for delay. See City of Salina v. Star B, Inc., 241 Kan. 692, Syl. p 1, 739 P.2d 933 (1987). As with other civil appeals, Pioneer was required to file a notice of appeal within 30 days. K.S.A.1989 Supp. 60-2103. However, Pioneer did not file a notice of appeal until July 14, 1988, following the district court's entry of partial judgment on July 1, 1988, which disposed of Pioneer's quantum meruit claim against Bank IV. The notice of appeal states that Pioneer is appealing both the January 27, 1988, and July 1, 1988, journal entries of partial judgment.

The issue is whether Pioneer's failure to timely appeal from the January 27, 1988, journal entry of partial judgment bars this appeal on the issue of priorities. Pioneer contends the district court erroneously characterized Pioneer's suit as involving multiple claims and that it should be allowed to attack this error even though it did not appeal within 30 days. Bank IV responds that the 30-day limitation is jurisdictional and acts as a complete bar to this appeal on the issue of priorities.

We conclude that, because Pioneer filed a timely notice of appeal following the July 1, 1988, journal entry of partial judgment, it can now attack the propriety of the K.S.A.1989 Supp. 60-254(b) certification. We also conclude the district court erred in certifying the journal entry of partial summary judgment on the priorities issue as a final judgment.

In Dennis v. Southeastern Kansas Gas Co., 227 Kan. 872, 610 P.2d 627 (1980), our Supreme Court considered 60-254(b). In Dennis, the plaintiffs attempted to attack a cross-claim which had been certified as a final judgment pursuant to 60-254(b). The issue decided in the cross-claim was fatal to the plaintiffs' primary claim. However, the plaintiffs did not file a notice of appeal from that judgment.

The Kansas Supreme Court held the judgment on the cross-claim was res judicata and binding on the plaintiffs and was not reviewable on appeal. The court explained:

"Under the federal decisions once there has been a Rule 54(b) certification and a final judgment has been entered, the time for appeal begins to run. It has res judicata effect if no appeal is taken during the time permitted for an appeal. [Citations omitted.] In interpreting K.S.A. 60-254(b), we adopt and follow the federal decisions which interpret Rule 54(b) of the Federal Rules of Civil Procedure. If a certification and final judgment has been entered pursuant to K.S.A. 60-254(b), the time for appeal immediately commences to run and such a judgment becomes res judicata where a timely appeal is not taken by an aggrieved party. If a timely appeal is not taken in such a case, such a judgment may not later be reviewed as an intermediate ruling when an appeal from the final judgment disposing of the entire case is taken pursuant to K.S.A. 60-2102. We have, therefore, concluded that the judgment of the trial court in favor of the city on its cross-claim against the gas company, granting indemnity to the city, is a final and binding judgment and is not reviewable on this appeal under the provisions of K.S.A. 60-2102(a)(4)." 227 Kan. at 878, 610 P.2d 627.

Although the language in Dennis could be...