Terra Energy, Ltd. v. State

• Decision Date: 06 September 2000
• Docket Number: Docket No. 214625,Docket No. 214649.
• Citation: Terra Energy, Ltd. v. State, 241 Mich.App. 393, 616 N.W.2d 691 (Mich. App. 2000)
• Parties: TERRA ENERGY, LTD., Plaintiff-Appellee, v. STATE of Michigan and Department of Natural Resources, Defendants-Appellants, and Bear Petroleum, Inc., James S. Fox, Roze Energy, Inc., and Western States Oil Company, Defendants-Appellees and Stokes Properties, Inc., Nelson Farrier, Bonnie Farrier, Henry K. Gustin, Florence V. Gustin, White Pine R.P.M Inc., West Bay Exploration Company, Ash Mines & Minerals, Hoosier Energy, L.C., Robert F. Mitchell, Kelco Investment, Michael Martin, Alice Martin, North Hawk, L.C., Scans Investments, L.C., Park Lane Investments, Christopher L. Howser, Retgo Investments, William F. Polinski, Section 29 Investments, Oryx Energy Company, Stephen H. Anderson, Shell Western E & P, Inc., Shell Onshore Ventures, Devonian Hydrocarbons, Inc., Dennis W. Jones, Goldie R. Jones, Timothy T. Hages, Helen Cain, Thomas E. Kozlowski, Kenneth Northrup, and Ruth Northrup, Defendants. J5, Inc. Plaintiff-Appellee, v. State of Michigan and Department of Natural Resources, Defendants-Appellants, and Terra Energy, Ltd. and Western States Oil Company, Defendants-Appellees, and Stokes Properties, Inc. and Shell Western E & P, Inc., Defendants.
• Court: Court of Appeal of Michigan

616 N.W.2d 691

241 Mich. App. 393

TERRA ENERGY, LTD., Plaintiff-Appellee, v. STATE of Michigan and Department of Natural Resources, Defendants-Appellants, and Bear Petroleum, Inc., James S. Fox, Roze Energy, Inc., and Western States Oil Company, Defendants-Appellees and Stokes Properties, Inc., Nelson Farrier, Bonnie Farrier, Henry K. Gustin, Florence V. Gustin, White Pine R.P.M Inc., West Bay Exploration Company, Ash Mines & Minerals, Hoosier Energy, L.C., Robert F. Mitchell, Kelco Investment, Michael Martin, Alice Martin, North Hawk, L.C., Scans Investments, L.C., Park Lane Investments, Christopher L. Howser, Retgo Investments, William F. Polinski, Section 29 Investments, Oryx Energy Company, Stephen H. Anderson, Shell Western E & P, Inc., Shell Onshore Ventures, Devonian Hydrocarbons, Inc., Dennis W. Jones, Goldie R. Jones, Timothy T. Hages, Helen Cain, Thomas E. Kozlowski, Kenneth Northrup, and Ruth Northrup, Defendants.

J5, Inc. Plaintiff-Appellee, v. State of Michigan and Department of Natural Resources, Defendants-Appellants, and Terra Energy, Ltd. and Western States Oil Company, Defendants-Appellees, and Stokes Properties, Inc. and Shell Western E & P, Inc., Defendants.

Docket Nos. 214625, 214649.

Court of Appeals of Michigan.

Submitted December 8, 1999, at Lansing.

Decided June 6, 2000, at 9:00 a.m.

Released for Publication September 6, 2000.

Loomis, Ewert, Parsley, Davis & Gotting (by James A. Ault and Jeffrey W. Bracken), Lansing, for Terra Energy, Ltd.

Worman & Dixon, P.L.C. (by John M. McCabe), Okemos, for J5, Inc.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, A. Michael Leffler, Assistant in Charge, and Stephen F. Schuesler, Assistant Attorney General, for State of Michigan and Department of Natural Resources. Before: DOCTOROFF, P.J., and O'CONNELL and WILDER, JJ.

PER CURIAM.

In this interpleader action, defendants-appellants, the state of Michigan and the Department of Natural Resources (hereinafter collectively the state), appeal as of right from the trial court's final orders quieting title to certain oil, gas, and mineral leases and ordering the state to pay a portion of plaintiffs' attorney fees. The state contends that the trial court erred in awarding attorney fees to plaintiffs. We disagree.

Plaintiffs Terra Energy, Ltd., and J5, Inc., are producers of natural gas and oil. Terra and J5 acquired, by lease or assignment of existing leases, the right to explore for and develop natural gas resources in a certain area of Montmorency County. The leases obligated Terra and J5 to pay royalties to the mineral owner. A title review revealed a dispute regarding ownership of the mineral rights. The competing claimants to the mineral rights were defendant the state and defendant Stokes Properties, Inc. (Stokes) and others. Plaintiffs Terra and J5 filed separate interpleader actions to settle the disputes regarding the ownership of the mineral rights. Plaintiffs' interpleader complaints included requests for attorney fees and court costs. Title to the mineral leases was eventually quieted in various parties, but primarily in the state.

Thereafter, the state filed a motion for partial summary disposition pursuant to MCR 2.116(C)(8) and (10) regarding plaintiffs' requests for attorney fees and costs. On the basis of Star Transfer Line v. General Exporting Co., 308 Mich. 86, 13 N.W.2d 217 (1944), and GRP Ltd. v. United States Aviation Underwriters, Inc., 70 Mich.App. 671, 247 N.W.2d 583 (1976), aff'd. 402 Mich. 107, 261 N.W.2d 707 (1978), the trial court granted the state's motion for summary disposition and ordered that Stokes and the state pay plaintiffs' costs and attorney fees. Terra's attorney fees were determined to be $46,275.85 and J5's attorney fees were determined to be $14,207.77. The court ordered that Stokes was liable for $40,177.25 of Terra's attorney fees¹ and that the state was liable for the remaining $6,098.60. With respect to J5's attorney fees, the court ruled that Stokes was responsible for $12,495.12 and that the state was responsible for $1,712.65. The trial court subsequently ruled that Terra and J5 were to collect their attorney fees from the royalty funds being held in escrow and that defendant Stokes was to be liable to the owners of the escrow funds for its portion of the attorney fees. However, because defendant Stokes paid its portion of the attorney fees directly to Terra and J5, only the state's portion of the attorney fees was to be paid from the funds in escrow.

Defendants first argue that the trial court erred in awarding attorney fees to plaintiffs because, as a matter of law, attorney fees cannot be awarded in an interpleader action. We disagree. This issue presents a question of law, which we review de novo. Cardinal Mooney High School v. Michigan High School Athletic Ass'n, 437 Mich. 75, 80, 467 N.W.2d 21 (1991).

Generally, attorney fees are not recoverable unless expressly allowed by statute, court rule, or common-law exception. MCL 600.2405(6); MSA 27A.2405(6); Popma v. Auto Club Ins. Ass'n, 446 Mich. 460, 474, 521 N.W.2d 831 (1994). There is no Michigan statute or court rule that allows an interpleader plaintiff to recover attorney fees. The question before us is whether there exists a common-law exception allowing the recovery of attorney fees by interpleader plaintiffs.

Plaintiffs rely on Star Transfer, supra, and GRP, supra, to support their position that such a judicial exception exists. In Star Transfer, the plaintiff, which operated a public warehouse, commenced an interpleader action to determine the owner of 799 cases of whiskey stored in its warehouse. Star Transfer, supra at 90-91, 13 N.W.2d 217. The defendants Southard & Company Ltd. (Southard), General Exporting Company, and John McKeown each claimed to be the owner of the whiskey. Id. at 91, 13 N.W.2d 217. In its interpleader complaint, the plaintiff requested that it be given a lien for the reasonable costs, expenses, and attorney fees associated with the interpleader action. Id. at 95, 13 N.W.2d 217. After a trial, the court ruled that the defendant Southard was the owner of the whiskey. Id. at 96-97, 13 N.W.2d 217. The Michigan Supreme Court affirmed the trial court's ruling that Southard was the owner of the whiskey and ruled that Southard's ownership was subject to a lien of the plaintiff for the attorney fees incurred with respect to the interpleader action in the trial court and on appeal. Id. at 119-120, 13 N.W.2d 217. However, the Court reversed the trial court's decree to the extent that it determined defendants General Exporting and McKeown to be personally liable for the plaintiff's attorney fees, holding that "[u]nder the facts and circumstances, we believe that such provisions of the trial court's decree were inequitable and should be vacated and set aside." Id. at 120, 13 N.W.2d 217.

The state contends:

The Court's direction without discussion in Star Transfer is not binding precedent for the proposition that plaintiffs in interpleader cases are entitled as a matter of law to actual attorney fees and litigation costs. If that were the case, direction relating to recovery of attorney fees/litigation costs could have been incorporated in the court rule relating to interpleader cases.

However, a case is stare decisis on a particular point of law if the issue was "raised in the action decided by the court, and its decision made part of the opinion of the case." 20 Am Jur 2d, Courts, § 153, p. 440. In Star Transfer, although the Court did not discuss the attorney fee award at length, the issue was raised by the parties, was decided by the Court, and was included in the opinion. We therefore conclude that Star Transfer provides a precedent for awarding attorney fees to an interpleader plaintiff.² In GRP, supra, the plaintiff brought a declaratory judgment action to determine its rights with respect to an insurance contract. The trial court found in favor of the plaintiff, but denied the plaintiff's request for an award of the attorney fees and costs incurred in bringing the declaratory judgment action. Id. at 677, 247 N.W.2d 583. The plaintiff filed a cross appeal, arguing that the trial court erred in concluding that it was not entitled to attorney fees. Id. at 680, 247 N.W.2d 583. The plaintiff argued that while neither statute nor court rule permitted the recovery of attorney fees in a declaratory judgment action, it was entitled to attorney fees under the judicial exception allowing the recovery of attorney fees in interpleader actions. Id. at 681, 247 N.W.2d 583. The plaintiff argued that its declaratory judgment action was comparable to an interpleader action because it indifferently sought recovery from the defendants. Id. Citing Star Transfer, this Court stated that, "[o]ne who commences an interpleader action is entitled to the recovery of attorneys' fees." GRP, supra at 681, 247 N.W.2d 583. However, this Court found the exception inapplicable on the basis that the declaratory judgment action was not an interpleader action because the plaintiff did not bring the action to protect itself against multiple liability. Id. at 681-682, 247 N.W.2d 583.

The statements in GRP regarding the exception were dicta because, as a result of this Court's finding that the exception was not applicable to the facts before it, it was not necessary that this Court address the existence of such an exception. See Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 597-598, 374 N.W.2d 905 (1985) ("statements concerning a principle of law not essential to determination of the case are obiter dictum and lack the force of an adjudication"). Nevertheless, this Court's statements in GRP were further evidence of the existence of an exception allowing the recovery of attorney fees by interpleader plaintiffs. Therefore, on the basis of Star Transfer and GRP, supra, we conclude that a common-law exception exists allowing the recovery of attorney fees by interpleader p...