Wortman v. Sun Oil Co.

• Decision Date: 26 October 1984
• Docket Number: No. 56494,56494
• Citation: 236 Kan. 266,690 P.2d 385
• Court: Kansas Supreme Court
• Parties: Richard WORTMAN and Hazel Moore, Appellees, v. SUN OIL COMPANY, Appellant.

Page 385

690 P.2d 385

236 Kan. 266

Richard WORTMAN and Hazel Moore, Appellees, v. SUN OIL COMPANY, Appellant.

No. 56494.

Supreme Court of Kansas.

Oct. 26, 1984.

Syllabus by the Court

1. The issues raised concerning commonality, due process, and improper interest are identical to, and thereby controlled by Shutts v. Phillips Petroleum Co., 235 Kan. 195, 679 P.2d 1159, cert. granted 469 U.S. 879, 105 S.Ct. 242, 82 L.Ed.2d ---- (1984).

2. An issue may be considered on appeal even though not considered by the trial court if it involves only a legal question arising from proven or admitted facts finally determinative of the case or if consideration is necessary to serve the ends of justice or to prevent a denial of a fundamental right. State v. Puckett, 230 Kan. 596, 640 P.2d 1198 (1982).

3. A mutual, open, running account is an account kept in writing of a connected series of debit and credit entries of reciprocal charges and allowances which the parties intend not to be considered independently but as a continuation of a related series. The statute of limitations, therefore, does not run against each item separately, but only against the balance due.

4. The "United States Rule" is applicable to interest on suspense royalties. It provides that in applying partial payments to an interest-bearing debt, which is due, in the absence of an agreement or statute to the contrary, the payment shall be first applied to the interest due, then to principal.

5. Post-judgment interest is proper on an unpaid judgment, when the sum owed is certain or can be easily ascertained by calculation at the time of judgment.

Jim H. Goering of Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause, and Gerald Sawatzky, of the same firm, and William C. Phelps, Dallas, Tex., of Sun Exploration and Production Co., were with him on briefs for appellant.

W. Luke Chapin of Chapin & Penny, Medicine Lodge, argued the cause, and Edward L. Moore of Ginder & Moore, Cherokee, Okl., was with him on brief for appellees.

HERD, Justice:

This is a class action to recover prejudgment interest on suspended gas royalties held and used by Sun Oil Company for several years. Sun appeals from the district court judgment in favor of the class.

Appellees are owners of mineral leaseholds located in Texas, Oklahoma, Louisiana, Mississippi, New Mexico and Kansas. Appellant is the lessor which produces natural gas from each appellee's leasehold. The royalty owners seek prejudgment interest on certain gas price increases received by Sun but held in suspension for a period of time.

On several occasions during the 1960's and 1970's, the Federal Power Commission (FPC) allowed Sun to charge its purchasers increased rates for the natural gas produced from appellees' leaseholds. During the pendency of the administrative proceedings and appeals involving these price increases, Sun began receiving money at the increased rates, but did not pay the increase to its royalty owners. In order to qualify for the price increases, the FPC required Sun to enter into an undertaking which required it to refund to its purchasers any price increases which were not ultimately approved. Sun then informed its royalty owners payment of the increased price would be suspended until final approval of the increases.

The principal price increases which were the basis for the current action are set out in FPC Opinions 699, 699H, 770 and 770A. Opinion No. 586, rendered in 1968, had been decided pursuant to the FPC's "area rate approach" and involved only the Hugoton-Anadarko area which consists of all of Kansas and parts of Oklahoma and Texas. In 1974, the FPC abandoned the area rate approach in Opinion No. 699. Opinions 699, 699H, 770 and 770A set "national rates." It was during the administrative and court appeals concerning these FPC increases that Sun began to receive the increased rates on which the royalty owners now claim interest.

The price increases allowed by Opinions 699 and 699H were collected by Sun from July, 1974, through April, 1976. A total of 670 properties were involved: 43.7% from Texas, 24% from Oklahoma, 22.8% from Louisiana, 3.9% from New Mexico, 3.4% from Mississippi, and 2.1% from Kansas. Nine hundred eighty-one interest holders were affected. The total suspended royalty under these opinions was $1,167,000. This amount was paid to the royalty owners in July, 1976.

The price increases allowed by opinions 770 and 770A were collected by Sun between December, 1976 and April, 1978. A total of 690 properties were involved: 40.3% from Texas, 31.6% from Oklahoma, 23.6% from Louisiana, 3.3% from New Mexico, 0.9% from Mississippi, and 0.3% from Kansas. One thousand three hundred fifty-three interest holders were affected. The total suspended royalty under these opinions was $2,676,000. This amount was paid to the royalty owners in April, 1978.

The royalty owners' lawsuit was filed as a class action on August 30, 1979. Notice of the lawsuit was sent by first-class mail to each royalty owner. Three thousand one hundred fifty-nine notices were mailed out. One hundred five of the class members opted out.

The trial court held prejudgment interest was due from Sun to the royalty owners on the suspended gas royalties. Post-judgment interest was also awarded. Sun Oil Company appeals.

Appellant first argues Kansas law is violated by including in the plaintiff class nonresident members who do not own Kansas leases. Sun claims such a class action fails to meet the commonality prerequisite stated in Shutts, Executor v. Phillips Petroleum Co., 222 Kan. 527, 557, 567 P.2d 1292 (1977), cert. denied 434 U.S. 1068, 98 S.Ct. 1246, 55 L.Ed.2d 769 (1978) (Shutts I ): "When liability is to be determined according to varying and inconsistent state laws, the common question of law or fact prerequisite of K.S.A. 60-223(a)(2) will not be fulfilled." Shutts I, in which the commonality requirement was fulfilled, pertained to three states and this case pertains to six states. The six states obviously present more variation in laws than the three; however, this case presents the same issues as those in Shutts I.

There are substantial facts supporting commonality in this suit which is brought for interest on suspended royalties. The difference between the two cases is merely the degree of Kansas ownership to the total. All members of the plaintiff class are royalty owners of Sun. Their royalties were suspended at the same time. Sun accumulated and used the suspended royalties of all the owners. Sun notified all royalty owners of suspension at the same time. Sun paid all the owners the suspended royalties at the same time. The FPC opinions regulated the rates of all the royalty owners. Sun kept its records and treated all royalty owners the same, regardless of residency.

Sun next argues the due process clause of the Fourteenth Amendment prohibits Kansas from asserting jurisdiction over nonresident class members who do not have "minimum contacts" with Kansas. The basis of its argument is that the United States Constitution requires the existence of a substantial relationship between a state and any individual over which the state court seeks to assert jurisdiction. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565 (1878). Sun further argues that since Pennoyer, the United States Supreme Court has insisted the state asserting jurisdiction have "minimum contacts" with the party, plaintiff or defendant. See Internat. Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), and Shaffer v. Heitner, 433 U.S. 186, 212, 97 S.Ct. 2569, 2584, 53 L.Ed.2d 683 (1977). Sun concludes there were no such "minimal contacts" between the nonresident plaintiffs and the state of Kansas. This issue was discussed in depth in Shutts I. Additionally, we held in Shutts v. Phillips Petroleum Co., 235 Kan. 195, Syl. p 1, 679 P.2d 1159, cert. granted 469 U.S. 879, 105 S.Ct. 242, 82 L.Ed.2d ---- (1984) (Shutts II ):

"While the essential element to establish in personam jurisdiction over nonresident defendants is some 'minimum contact' between the defendant and the forum state, the element necessary to the exercise of jurisdiction over nonresident plaintiff class members is procedural due process."

Sun contends this Kansas rule is incorrect and should be reversed.

Sun next maintains the trial court applied an improper interest rate to the suspended royalties. Pursuant to Sun's agreement with the FPC to refund to gas purchasers any accumulated amounts of unapproved price increases, Sun also agreed to an interest rate to be paid on those amounts. The trial court applied that agreed-upon rate to the suspended royalties. Sun argues the statutory prejudgment rate of interest of each state should instead be applied. The Court of Appeals held in Gray v. Amoco Production Company, 1 Kan.App.2d 338, 564 P.2d 579 (1977), aff'd in part, rev'd in part 223 Kan. 441, 573 P.2d 1080 (1978), that the law of the forum pertaining to interest was applicable rather than the laws of the various states of residence of the plaintiffs. In Shutts I, 222 Kan. 527, Syl. p 22, 567 P.2d 1292, we stated:

"Where a gas producer, under circumstances described in the foregoing syllabus, files a corporate undertaking with the Federal Power Commission, wherein it agrees to pay 7% interest on 'FPC suspense monies' until rate proceedings are determined by the commission, and 8% thereafter on the gas purchasers' share of the 'impounded' money, in the event the commission orders a refund, equitable principles require that the royalty owners receive the same treatment as to their share ...."

The foregoing issues concerning commonality, due process, and improper interest are identical to those raised and decided in our previous decision in Shutts II, 235 Kan. 195, 679 P.2d 1159, and are almost identical to Sterling v. Marathon Oil Co., 223 Kan. 686, 576 P.2d 635 (1978); Sterling v. The Superior Oil Co., 222 Kan. 737, 567 P.2d 1325 (1977),...