Summary
noting that, if our Supreme Court had wished to incorporate a certain provision into a court rule, our Supreme Court could have expressly done so
Summary of this case from Can IV Packard Square, LLC v. SchubinerOpinion
Docket Nos. 214625, 214649.
Submitted December 8, 1999, at Lansing.
Decided June 6, 2000, at 9:00 a.m.
Appeal from Montmorency Circuit Court, Michigan, LC No. 96-003413-CZ, LC No. 96-003393-CZ.
Loomis, Ewert, Parsley, Davis Gotting (by James A. Ault and Jeffrey W. Bracken), for Terra Energy, Ltd, Lansing.
Worman Dixon, P.L.C. (by John M. McCabe), for J5, Inc., Okemos.
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.
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 fees 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.
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.
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. The defendants Southard Company Ltd. (Southard), General Exporting Company, and John McKeown each claimed to be the owner of the whiskey. Id. at 91. 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. After a trial, the court ruled that the defendant Southard was the owner of the whiskey. Id. at 96-97. 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. 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.
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.
Federal courts and numerous state courts allow an interpleader plaintiff to recover attorney fees. In federal interpleader actions, "[a]ttorney'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 A.D.2d 467, 468; 627 N.Y.S.2d 402 (1995) Fischbein, Badillo, Wagner v Tova Realty Co, 193 A.D.2d 442, 444-445; 597 N.Y.S.2d 676 (1993); Olmos v Pecan Grove Municipal Utility Dist, 857 S.W.2d 734, 741 (Tex App, 1993); Hillhaven, Inc v Care One, Inc, 620 S.W.2d 788, 793 (Tex App, 1981); Hartford Accident Indemnity Co v Natchez Inv Co, 161 Miss. 198, 200-221; 132 So. 535 (1931).
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 trial court erred in concluding that it was not entitled to attorney fees. Id. at 680. 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. 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. 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.
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 plaintiffs.
Furthermore, contrary to defendants' arguments, the fact that a provision for an award of attorney fees was not incorporated into MCR 3.603 is not dispositive of whether a common-law exception exists. When interpreting the Michigan Court Rules, this Court applies the rules of statutory construction. Smith v Henry Ford Hosp, 219 Mich. App. 555, 558; 557 N.W.2d 154 (1996). The rules of statutory construction provide that, when enacting a statute, the Legislature is presumed to be aware of the common law that may be affected by the enactment. Bennett v Weitz, 220 Mich. App. 295, 299; 559 N.W.2d 354 (1996). Because the rules of statutory construction apply to the interpretation of court rules, it follows that, when adopting a court rule, our Supreme Court is presumed to be aware of the common law that may be affected by the adoption. Thus, when it adopted MCR 3.603, our Supreme Court is presumed to have been aware of the common-law exception provided in the Star Transfer and GRP decisions. Had the Court wished to disallow an award of attorney fees to an interpleader plaintiff, it could have expressly done so in the court rule.
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 Fees of Kelman, Loria, Downing, Schneider Simpson, 406 Mich. 497, 503-504; 280 N.W.2d 457 (1979); Amerisure Ins Co v Folts, 181 Mich. App. 288, 291; 448 N.W.2d 829 (1989). The common-fund exception is based on the position that "it is unfair to allow others to benefit at the expense of the prevailing party without contributing to the costs incurred in securing the common fund." Popma, supra at 475. Unlike a class action, to which the common-fund exception is usually applicable, plaintiffs in the instant case were not the "prevailing party," but were innocent stakeholders who did not seek to create or protect the fund, but merely sought to avoid multiple liability by having a court quiet title to the mineral rights. Thus, the common-fund exception does not apply to this case. However, given that Michigan courts have recognized the common-fund exception on the basis that a party who has created or protected a fund for the benefit of himself and others should not be the sole bearer of the costs and fees required to create or protect the fund, it is not unusual that an interpleader plaintiff, who admits liability and deposits the money or property with the court pursuant to MCR 3.603, should be allowed to recover the attorney fees required to maintain suit to determine the true owner of the money or property. Therefore, on the basis of Star Transfer and GRP, we conclude that a common-law exception exists allowing the recovery of attorney fees by an interpleader plaintiff.
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 decision to award attorney fees is reviewed for an abuse of discretion. Phinney v Perlmutter, 222 Mich. App. 513, 560; 564 N.W.2d 532 (1997).
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 interpleader action.
Affirmed.
I concur, but write separately to express my concerns about the legal support for the rule the majority announces today and to invite our Supreme Court to clearly resolve this issue.
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 N.W.2d 831 (1994). Exceptions are to be narrowly construed. Brooks v Rose, 191 Mich. App. 565, 575; 478 N.W.2d 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 N.W.2d 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 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 (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 required to follow Supreme Court precedent, People v Sobczak-Obetts, 238 Mich. App. 495, 497; 606 N.W.2d 658 (1999), I concur in the majority's conclusion that attorney fees are recoverable in interpleader actions under Star Transfer.
However, I am hesitant to conclude that interpleader 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.