Teel v. Public Service Co. of Oklahoma

• Decision Date: 24 December 1985
• Docket Number: No. 61225,61225
• Parties: Roy M. TEEL, Arlie D. Teel, Roy M. Teel Company, Inc., and SJM, Inc. Appellants, v. PUBLIC SERVICE COMPANY OF OKLAHOMA, Transok Pipeline Company, Appellees.
• Court: Oklahoma Supreme Court

Page 391

767 P.2d 391

1985 OK 112

Roy M. TEEL, Arlie D. Teel, Roy M. Teel Company, Inc., and SJM, Inc. Appellants, v. PUBLIC SERVICE COMPANY OF OKLAHOMA, Transok Pipeline

Company, Appellees.

No. 61225.

Supreme Court of Oklahoma.

Dec. 24, 1985.

As Corrected Jan. 2, 1986.

Rehearing Granted and Opinion Amended July 14, 1987.

Dissenting Opinion July 14, 1987.

Rehearing Denied Jan. 11, 1989.

Appeal From The District Court of Tulsa County; Robert F. Martin, Trial Judge.

This is an appeal from a ruling which held that the fair market value was the price received by the operator, that the purchasers did not convert the gas, and that the purchasers were not unjustly enriched. AFFIRMED IN PART AND REVERSED IN PART AND REMANDED.

James R. Eagleton, Jim F. Gassaway, E. John Eagleton, Marc F. Conley, Houston & Klein, Inc., Tulsa, for appellants; John S. Lowe, of counsel.

Rosenstein, Fist & Ringold and Linda Cole McGowan, Tulsa, for appellees.

KAUGER, Justice.

The questions presented are: whether Transok Pipeline Company and Public Service of Oklahoma (appellees/purchasers), must account for the fair market value of gas produced on leases in which Roy E. Teel, appellant, owned a working interest, and if so, the market value of the gas; whether the purchasers converted Teel's gas; whether the purchasers were unjustly enriched by investment of the gas proceeds; whether the purchasers must account for interest; whether this appeal was properly and timely brought; and whether the right to appeal was waived by acceptance of funds held in suspense by the purchasers. We find the appeal was properly and timely brought, and that limited to the facts presented here a pipeline purchaser who buys gas from a cotenant/operator is a converter after notice is received that the other cotenant has revoked the operator's right to dispose of the gas. ¹ However, because Teel will receive interest under the conversion statute, we do not find that the purchasers were unjustly enriched.

Teel and his family have a working interest in five wells within a common source of supply located in Pittsburgh County, Oklahoma. The wells include the Bender Well (Sec. 33-T9N-R16E), the Presson Well (Sec. 31-T9N-R16E), the Smith Well (Sec. 5-T8N-R16E), the McDuff Well (Sec. 32-T9N-R16E) and the Katy Well (Sec. 28-T9N-R-16E). PSO and Transok bought gas from R.H. Siegfried, R.H. Siegfried, Inc., and George F. Collins, Jr., (operators).

Teel executed a farm out agreement with the operators on December 7, 1966, covering the Bender and Katy Wells providing that after drilling and completion costs were recovered (pay-out) each would own one-half of the working interest. The terms of the operating agreement described the lease as joint property. Under the terms, Teel had the right to take his share of all gas produced in kind at any time. In addition, the operators could buy and/or sell Teel's gas at a price not less than the price the operators received. Teel has never taken his gas in kind. On March 18, 1965, Teel and the operators entered into an agreement covering the McDuff well. On November 6, 1972, Teel and the operators contracted concerning the Presson and Smith Wells providing that after pay-out the working interest would be divided equally between Teel, Siegfried, and Collins--no operating agreement was attached.

The operators drilled and completed producing gas wells under the farm-out agreements and paid shut-in gas royalties from 1967 through 1974. On February 26, 1973, the operators contracted to sell gas to Transok for twenty years with price redetermination to be made every three years designating a price redetermination area which included portions of Pittsburgh, Hughes and McIntosh Counties. Teel refused to join in the contract asserting that the terms were unfair and discriminatory. Before pay-out, Transok paid all production receipts to the operators and distributed payment to the royalty owners of royalty under the division order. After pay-out, at the direction of the operators, Transok placed payments due Teel in a special "suspense" account. Transok assigned its contract to PSO on June 25, 1977.

In 1978, Teel brought an action for an accounting and for determination of leasehold rights against the operators, Siegfried and Collins, and the purchasers, PSO and Transok. On August 9, 1979, the trial court ordered all proceeds, including $649,474.17 in the suspense account attributable to Teel's interest placed in an escrow account during the pending of litigation. The trial court also ordered an accounting to determine completion costs and to establish the pay-out dates. Teel accepted the accounting pay-out dates and settled the dispute with the operator which was approved by the trial court on October 22, 1982. The operators are not parties to this appeal. Transok and PSO agreed that Teel's settlement with the operators did not prejudice claims asserted against the purchasers.

On September 1, 1982, the trial court held that Teel could put on evidence to prove that the contract price was unreasonable however, on October 22, 1982, it reversed its ruling and refused to hold an evidentiary hearing on the relevant marketing area deciding that the fair market value and the market area were identical to the redetermination area and the contract price.

Subsequently, on September 20, 1983, the trial court determined that Teel was entitled to six percent interest from the date the proceeds were received until they were deposited in the escrow account. The trial court directed Teel to submit executed division orders to Transok indicating Teel's interest in the production and ordered liquidation of the escrow account with all proceeds paid to Teel. Teel appeals from the finding that the fair market value was the price received by the operator. He also appeals from the refusal of the trial court to find that the purchasers converted his gas and that they were unjustly enriched by the sale thereof. The purchasers counter that the order issued on October 22, 1982, was a final order which determined all issues and that, therefore, the appeal was untimely. Teel contends that the final order was not issued until September 20, 1983, when the trial court awarded interest.

I THIS APPEAL WAS PROPERLY AND TIMELY BROUGHT

Initially, Teel petitioned for a declaration of the rights of the parties, an order quieting title against claims of other parties, and an accounting. On March 28, 1979, Teel amended the petition, alleging conversion if the remaining gas were insufficient to pay for the gas already taken. He also sought interest or the highest market value and fair compensation for expenses incurred. The trial court specifically reserved the question of whether the purchasers were unjustly enriched by conversion of Teel's gas at the October 22, 1982, hearing. The purchasers contend that the conversion was a second cause of action, and that it was also determined on October 22 when the trial court found Teel was entitled to a split connection and that until the connection was in place Teel should receive his share from the proceeds received by the operator. Teel contends that conversion is not a separate cause of action but an additional theory of recovery arising from the same occurrence.

A cause of action embodies all theories of recovery or damages which emanate from one occurrence or transaction. ² In this case, Teel's cause of action arose from the breach of his rights concerning production from five wells. Teel originally requested that he be allowed to place a split connection on the wells and to take all the gas produced until the imbalance was corrected. By amendment to the petition, he alleged the possibility of conversion e.g., if the wells did not contain enough gas to balance his breached rights. Conversion is an alternative theory of relief, not a separate cause of action. In any event Teel dismissed the cause of action against the operators after settlement and proceeded on the amended petition seeking damages for the purchasers conversion and interest.

The material inquiry is whether all the issues were completely resolved in the October, 1982 proceedings. The trial court in the September 20, 1983 proceeding, ruled on the motion for summary judgment; the right to recover prejudgment interest, and on an accounting of the money earned by the purchasers on the production proceeds. The court also found Teel was entitled to recover six percent interest and directed execution of a division order. All the issues were not determined until the order of September 20, 1983, because the October 22, 1982, order did not decide the interest issue, and the matter was passed repeatedly at the request of the purchaser.

Before the enactment of the new pleading code, 12 O.S.Supp.1984 § 2008, issues were raised only by allegations of fact contained in the body of the pleading, and the prayer for relief was not considered part of the pleading. Here, Teel explicitly asserted recovery for interest on the escrow account as an element of his cause of action. The disposal of a segment of a cause of action is not a judgment but an interlocutory summary adjudication, a limitation on the issues to be tried, subject to alteration or modification by the trial court before final judgment. The trial court retains full power to make one complete judgment and dispose of all aspects of the action. An interlocutory summary adjudication does not form an appealable order. ³ The order of October 22, 1982, did not dispose of all the issues in controversy. The final order from which an appeal could be properly and timely brought was September 20, 1983.

II ACCEPTANCE OF ESCROW FUNDS DID NOT WAIVE THE RIGHT TO APPEAL

The purchasers' argue that Teel accepted the benefits of the trial court's judgment thereby waiving his right to appeal. Teel contends that the only benefit he received was the amount paid into an escrow account in accordance with the settlement agreement with...