Terra Energy, Ltd. v. State
Terra Energy, Ltd. v. State
Opinion of the Court
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
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 inter-pleader actions to settle the disputes regarding the ownership of the mineral rights. Plaintiffs’ inter-pleader 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 NW2d 217 (1944), and GRP, Ltd v United States Aviation Underwriters, Inc, 70 Mich App 671; 247 NW2d 583 (1976), aff’d 402 Mich 107; 261 NW2d 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 attor
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 NW2d 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 NW2d 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.
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*399 fees/litígatíon 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.
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. The plaintiff filed a cross appeal, arguing that the
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 NW2d 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 plaintiffs.
Defendants also argue that an award of attorney fees was not justified under the common-fund exception. While we believe that the reasoning behind the common-fund exception is applicable to an exception for interpleader plaintiffs, we agree that the common-fund exception, as it has been defined by the courts, is not applicable to the instant case. The common-fund exception provides for an award of attorney fees to a party that, alone, has borne the expenses of litigation that created or protected a common fund for the benefit of others as well as itself. In re Attorney
Next, defendants argue that an award of attorney fees was improper because plaintiffs accepted the leases with knowledge that there were competing claims to the ownership of the mineral rights and without warranty of title. We disagree. A trial court’s
The leases from the state were granted “without warranty, express or implied,” and contained the following provision:
Lessor shall not be liable for any damages resulting from failure of its title to rights included herein: provided, however, that if the Lessor’s title fails as to any or all of the rights in the oil and gas covered by this lease, the Lessor shall refund to the Lessee all bonus, rental or royalty payments made by the Lessee attributable to that part or portion of, or interest in, the title which has failed.
Defendants contend that, considering these provisions, it was inequitable for the trial court to award attorney fees. However, the lease provisions merely limit defendants’ liability for damages resulting from failure of title, it does not extend to an award of attorney fees permitted by a common-law exception. Here, the state’s title did not fail. Furthermore, we agree with the trial court’s determination that nothing in the language of the leases obligated plaintiffs to defend the state’s title or clearly indicated an intent that plaintiffs bear the burden of the expenses required to establish the state’s title to the mineral rights. Therefore, the trial court did not abuse its discretion in ordering the state to pay a portion of plaintiffs’ attorney fees incurred in bringing the inter-pleader action.
Affirmed.
The trial court apportioned a greater amount of attorney fees to defendant Stokes on the basis of its finding that Stokes did not have a reasonable basis for claiming title to the mineral rights. Defendant Stokes has not filed an appeal challenging its liability for attorney fees.
Federal courts and numerous state courts allow an interpleader plaintiff to recover attorney fees. In federal interpleader actions, “[ajttomey’s fees and costs are to be awarded to an innocent and otherwise disinterested stakeholder who has been required to expend time and money to participate in a dispute not of his own making and the outcome of which has no impact upon him.” Sun Life Assurance Co of Canada v Thomas, 735 F Supp 730, 733 (WD Mich, 1990). Typically, the award is imposed against the party that benefited from the interpleader action and is taken out of the interpleader fund, but the court may tax a losing claimant directly if that claimant’s conduct justifies doing so. Prudential-Bache Securities, Inc v Tranakos, 593 F Supp 783, 785 (ND Ga, 1984). States that allow the recovery of attorney fees by interpleader plaintiffs include New York, Texas, and Mississippi. See Republic Nat’l Bank of New York v Lupo, 215 AD2d 467, 468; 627 NYS2d 402 (1995); Fischbein, Badillo, Wagner v Tova Realty Co, 193 AD2d 442, 444-445; 597 NYS2d 676 (1993); Olmos v Pecan Grove Municipal Utility Dist, 857 SW2d 734, 741 (Tex App, 1993); Hillhaven, Inc v Care One, Inc, 620 SW2d 788, 793 (Tex App, 1981); Hartford Accident & Indemnity Co v Natchez Inv Co, 161 Miss 198, 200-221; 132 So 535 (1931).
Concurring Opinion
(concurring). I concur, but write separately to express my concerns about the legal sup
Michigan follows the so-called “American rule,” under which attorney fees are not recoverable unless specifically authorized by statute, court rule, or a common-law exception. Popma v Auto Club Ins Ass’n, 446 Mich 460, 474; 521 NW2d 831 (1994). Exceptions are to be narrowly construed. Brooks v Rose, 191 Mich App 565, 575; 478 NW2d 731 (1991). Furthermore, to recover attorney fees under a common-law exception, that exception must be generally recognized. Popma, supra at 475; Phinney v Perlmutter, 222 Mich App 513, 560; 564 NW2d 532 (1997); Brooks, supra at 575.
The only support for the exception the majority announces today is found in two cases — Star Transfer Line v General Exporting Co, 308 Mich 86; 13 NW2d 217 (1944), and GRP, Ltd v United States Aviation Underwriters, Inc, 70 Mich App 671; 247 NW2d 583 (1976), aff d 402 Mich 107 (1978). As the majority recognizes, the statement in GRP that attorney fees are recoverable in interpleader actions was merely dictum, lacking the force of an adjudication. This leaves only Star Transfer.
In that case, our Supreme Court was not presented with the issue whether interpleader actions constitute a generally recognized common-law exception to the American rule. Although the Court did in fact allow an award of attorney fees, Star Transfer, supra at 119-120, the Court did not hold that the American rule is inapplicable to interpleader actions. I do recognize, however, that Star Transfer is stare decisis with respect to this issue because the Court affirmed the trial court’s grant of attorney fees. Because I am
However, I am hesitant to conclude that inter-pleader actions are a “generally recognized” exception to the American rule on the basis of one Supreme Court opinion that did not squarely address the issue. I therefore invite our Supreme Court to amend the Michigan Court Rules to provide that attorney fees are recoverable in interpleader actions.
Reference
- Full Case Name
- Terra Energy, Ltd v. State of Michigan; J5, Inc v. State of Michigan
- Cited By
- 11 cases
- Status
- Published