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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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PUBLISH 

FILED 

United States Coμrt ~f Appeals Tenth Circuit 

UNITED STATES COURT OF APPEALS NOV 11991 

TENTH CIRCUIT ROBERT L. HOECKER 

ARKLA EXPLORATION COMPANY; RAMCO NYL 

1987 LIMITED PARTNERSHIP; RB 

OPERATING COMPANY; LEE & AGEE, INC.; 

XAE CORPORATION, 

Plaintiffs-Appellants, 

Clerk 

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No. 91-5056 

VINTAGE PETROLEUM, INC.; VINTAGE 

PIPELINE, INC.; MGAS, INC.; STARGAS 

CORP.; BUTTONWOOD PETROLEUM, INC.; 

AUGUST GOLDSTEIN, JR., 

Plaintiffs, 

v. 

NORWEST BANK OF MINNEAPOLIS, NATIONAL ) 

ASSOCIATION; SPECTRUM GAS SYSTEMS, INC.;) 

PACIFIC-MIDWEST GAS COMPANY; SPECTRUM ) 

NATURAL GAS COMPANY, ) 

Defendants-Appellees. 

) 

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APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF OKLAHOMA 

(D.C. No. 90-C-593-C) 

Submitted on the briefs: 

Timothy T. Trump, Comfort, Lipe & Green, P.C., Tulsa, Oklahoma, 

for Plaintiffs-Appellants. 

Claire v. Eagan and Pamela H. Goldberg, Hall, Estill, Hardwick, 

Gable, Golden & Nelson, P.C., Tulsa, Oklahoma, for 

Defendants-Appellees. 

Appellate Case: 91-5056 Document: 010110096848 Date Filed: 11/01/1991 Page: 1 
Before McKAY, Chief Judge, EBEL, Circuit Judge, and SAFFELS,** 

District Judge. 

**Honorable Dale E. Saffels, Senior District Judge, United States 

District Court for the District of Kansas, sitting by designation. 

McKAY, Chief Judge. 

In this bankruptcy case, Arkla Exploration Company, Ramco NYL 

1987 Limited Partnership, RB Operating Company, Lee & Agee Inc., 

and XAE Corporation (together, Appellants) appeal a decision of 

the district court affirming a bankruptcy court's determination 

that Norwest Bank of Minneapolis, National Association (Norwest) 

has valid security interests under the Oklahoma Uniform Commercial 

Code in gas sold by Appellants that are superior to any security 

interests and liens claimed by Appellants under the Oklahoma Oil 

and Gas Owners' Lien Act (Lien Act), Okla. Stat. Ann. tit. 52, 

§ 548-548.6. 1 For the reasons set forth below, we affirm. 

On September 1, 1987, Norwest executed a security agreement 

with Spectrum Natural Gas Company (SNGC) for the purpose of 

securing a loan. The security agreement granted Norwest a 

security interest in certain property of SNGC then owned and 

after-acquired, including all inventory. Norwest perfected its 

1 After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

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Appellate Case: 91-5056 Document: 010110096848 Date Filed: 11/01/1991 Page: 2 
security interest by filing a financing statement on September 28, 

1987, with the Clerk of Oklahoma County, Oklahoma. 

On November 4, 1987, Norwest executed a security agreement 

with Spectrum Gas Systems, Inc. (SGC) for the purpose of securing 

another loan. This security agreement granted Norwest a security 

interest in certain property of SGC then owned and after-acquired, 

including all inventory. Norwest perfected this security interest 

by filing a financing statement on November 30, 1987, with the 

Clerk of Oklahoma County, Oklahoma. 

Appellants, who are interest owners in certain Oklahoma gas 

wells, sold gas to SNGC and SGC pursuant to gas purchase contracts 

during June through September 1989. SNGC and SGC resold the gas 

and received payment, but did not pay the sale proceeds to 

Appellants. On November 15, 1989, and various dates thereafter, 

Appellants filed lien notices in accordance with the Lien Act to 

secure payment for the gas sold to SNGC and SGC. 

On November 20, 1989, SNGC and SGC filed voluntary petitions 

for relief under Chapter 11 of the Bankruptcy Code. Appellants, 

on February 25, 1990, filed with the bankruptcy court a "Complaint 

to Determine Lien Priority and Conversion." On June 19, 1990, 

Appellants filed an "Objection to Norwest's Motion for Summary 

Judgment" in which Appellants challenged the validity of Norwest's 

security interests. The bankruptcy court, on July 6, 1990, 

granted a judgment in favor of Norwest concluding that Norwest's 

perfected security interests were superior to any liens filed by 

Appellants under the Lien Act. The district court affirmed and 

this appeal followed. 

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Appellate Case: 91-5056 Document: 010110096848 Date Filed: 11/01/1991 Page: 3 
The sole question presented on appeal is whether the Lien Act 

accords Appellants' liens priority over Norwest's security 

interests even though Norwest's security interests antedated 

Appellants' liens. Appellants rely on section 548.4.C of the Lien 

Act which provides as follows: "Upon perfection by filing the 

security interest and lien (authorized under this act) ... shall 

relate back to and be effective as of the date on which severance 

occurred and shall take priority over the rights of all persons 

whose rights or claims arise or attach. between the time the 

security interest and lien attaches and the time of filing." 

Okla. Stat. Ann. tit. 52, § 548.4.C. According to Appellants, 

under this provision their liens, once perfected, related back to 

the date on which the gas sold to SNGC and SGC was removed from 

the land, and Norwest's security interests in that gas did not 

attach and become perfected under the Oklahoma UCC until later, 

upon delivery of the gas to SNGC and SGC. 

Norwest's position, agreed with by the bankruptcy and 

district courts, is that the relation back provision of the Lien 

Act does not undermine security interests under the Oklahoma UCC. 

Norwest relies on section 548.6.C of the Lien Act which states: 

Nothing in this act shall be construed to impair or 

affect the rights and remedies of any person under the 

provisions of the Uniform Commercial Code, section 1-101 

et seq. of Title 12A of the Oklahoma Statutes, and the 

provisions of this act shall be deemed cumulative to and 

not a limitation on or a substitution for any rights or 

remedies otherwise provided by law to a creditor against 

his debtor. 

Okla. Stat. Ann. tit. 52, § 548.6.C. According to Norwest, this 

provision protects its status as a secured party under the 

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Appellate Case: 91-5056 Document: 010110096848 Date Filed: 11/01/1991 Page: 4 
Oklahoma UCC from being subordinated to any lien under the Lien 

Act. 

The bankruptcy and district courts' interpretation of the 

Lien Act is a legal question which we review de nova. See In re 

Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266 (10th Cir. 1988). 

There are no reported decisions from Oklahoma interpreting the 

Lien Act. Therefore, we must look to principles of statutory 

construction under Oklahoma law and make a reasonable 

determination as to how the Oklahoma Supreme Court would construe 

the statute. See In re North Side Lumber Co., 83 B.R. 735, 737 

(9th Cir. BAP 1987), aff'd, 865 F.2d 264 (9th Cir. 1988). 

Under Oklahoma law, the task of interpreting the Lien Act 

begins with the plain language of the statute. Seventeen Hundred 

Peoria, Inc. v. City of Tulsa, 422 P.2d 840, 843-44 (Okla. 1966). 

In this case, it is also where the inquiry ends, for "[w]here [as 

here] the language of a statute is plain and unambiguous, and its 

meaning is clear. , the statute will be accorded the meaning 

as expressed by the language therein employed." Cave Springs Pub. 

Sch. Dist. I. 30 v. Blair, 613 P.2d 1046, 1048 (Okla. 1980). 

By its terms, section 548.4.C of the Lien Act provides 

interest owners in oil and gas with a security interest and a lien 

that, upon perfection, relates back to the date on which the 

minerals were severed. However, under the unambiguous language of 

section 548.6.C, a lien authorized under the Lien Act shall not 

"impair or affect the rights and remedies of any person under the 

provisions of" the Oklahoma UCC. Thus, as the bankruptcy and 

district courts held, while the Lien Act, by its clear language, 

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Appellate Case: 91-5056 Document: 010110096848 Date Filed: 11/01/1991 Page: 5 
authorizes a lien to secure payment from oil or gas to an interest 

owner, it also insures that security interests under the Oklahoma 

UCC are not subordinated to that lien. Any other reading of the 

Lien Act is simply contrary to the plain language used by the 

Oklahoma Legislature. 

Interpretation of the Lien Act as assuring the priority of 

security interests under the Oklahoma UCC is further supported by 

section 548.6.C's location in the Lien Act after section 548.4.C. 

Indeed, section 548.6.C is the final section of the Lien Act. The 

established rule in Oklahoma is that if there is any conflict 

between two sections of a statute, the last in order of position 

must prevail. See Earnest, Inc. v. LeGrand, 621 P.2d 1148, 1151 

(Okla. 1980). Thus, the priority rule set forth in section 

548.4.C must be read as restricted by the protections provided by 

section 548.6.C for persons with interests under the Oklahoma UCC. 

Looking at the language of the Lien Act, Appellants contend 

that while section 548.6.C expressly protects the "rights and 

remedies" of persons under the Oklahoma UCC, it does not provide 

that the "priority" of those "rights and remedies" cannot be 

impaired. Accepting this argument, however, would require that we 

ignore certain commercial realities. The practical outcome of a 

priority conflict is that the winning party (i.e., the party with 

the prior interest) satisfies himself in full out of the 

collateral before a subordinate party satisfies himself with what, 

if anything, is left. Thus, if Norwest's security interests are 

subordinated to liens filed later in time by Appellants, then 

Norwest's rights and remedies as secured parties under the 

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Oklahoma UCC are impaired or affected. Cf. Mid-America Indus., 

Inc. v. Ketchie, 767 P.2d 416, 420 (Okla. 1989)(remedies under the 

Oklahoma UCC have not been "impair[ed]" or "affect[ed]" where "the 

holder of a valid security interest ... must be paid first."). 

Appellants, citing the Lien Act and this court's decision in 

Reserve Oil, Inc. v. Dixon, 711 F.2d 951 (10th Cir. 1983), also 

argue that Norwest's security interests, aside from being 

subordinate to their liens, are unenforceable against them. 

Specifically, Appellants contend that SNGC and SGC never acquired 

rights in the gas delivered by Appellants to which Norwest's 

security interest could attach under Oklahoma law2 because 

Appellants, until payment by SNGC and SGC, retained an equitable 

interest in the gas. However, nothing in the Lien Act would 

suggest that Appellants, aside from acquiring a lien, retained any 

interest in the gas delivered to SNGC and SGC. Indeed, the Lien 

Act provides that "[n]either the provisions of this act nor the 

filing of any instrument permitted under it shall affect the time 

at which legal title to the oil and gas may pass from an interest 

owner or operator to a first purchaser II Okla. Stat. tit. 

52, § 548.5. (footnote omitted). 

Similarly, Reserve Oil does not establish that SNGC and SCG 

did not have rights in the gas acquired from Appellants to which 

Norwest's security interest could attach. In Reserve Oil, this 

court, construing the specific operating agreements at issue in 

2 Okla. Stat. Ann. tit. 12A, § 9-203 provides in pertinent part 

that "a security interest is not enforceable against ... third 

parties with respect to the collateral and does not attach unless 

... the debtor has rights in the collateral." 

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Appellate Case: 91-5056 Document: 010110096848 Date Filed: 11/01/1991 Page: 7 
that case, held that the operator of oil wells served in a 

fiduciary capacity, as a trustee, to the working interest owners 

who retained full control over their proportionate share of the 

oil and gas produced. In this case, the gas purchase contracts 

entered into between Appellants and SGNC and SGC bear no 

resemblance to the operating agreements discussed in Reserve Oil. 

Unlike the interest owners in Reserve Oil, Appellants here 

retained no ownership interest in or control over the gas 

delivered to SNGC and SGC. Specifically, the gas purchase 

agreements did not provide that legal title would pass only upon 

payment. Instead, the agreements provided that SNGC and SGC took 

legal title to Appellants' gas upon delivery. Where, as here, a 

debtor gains possession of collateral pursuant to an agreement 

endowing him with any interest other than naked possession, the 

debtor has acquired such rights as would allow a security interest 

to attach. See Morton Booth Co. v. Tiara Furniture, Inc., 564 

P.2d 210, 214 (Okla. 1977). Therefore, SNGC and SGC had rights in 

the gas delivered to Appellants sufficient to effectuate 

attachment of Norwest's security interest. 

As final arguments, Appellants contend that (1) section 

548.4.C of the Lien Act lists specific types of liens that are not 

affected by the priority rule stated therein, and the exclusion of 

Oklahoma UCC security interests from that list indicates that the 

Oklahoma Legislature did not intend that they take priority over 

liens authorized by the Lien Act3 and, (2) section 548.6.C of the 

3 Under section 548.4.C: 

(continued on next page) 

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Appellate Case: 91-5056 Document: 010110096848 Date Filed: 11/01/1991 Page: 8 
Lien Act was drafted either to inform interest owners that the 

Lien Act was not their exclusive remedy, or to clarify that the 

holders of security interests under the Oklahoma UCC maintain 

their rights only against the debtor and those who do not have 

liens authorized by the Lien Act. Appellants' first contention 

ignores the structure and language of the Lien Act. As discussed 

above, section 548.6.C is the final section of the Lien Act. As 

such, section 548.6.C is the last expression of the Oklahoma 

Legislature's will regarding the priority of security interests 

under the Oklahoma UCC, and that section controls over any 

inference that arises from the exclusion of security interests 

under the Oklahoma UCC from section 548.4.C's list of liens and/or 

security interests that do have priority over liens authorized 

under the Lien Act. 

As for Appellants' second argument, section 548.6.C states 

unambiguously that the Lien Act shall- not impair or affect the 

rights or remedies of "any person" under the Oklahoma UCC. 

Because section 548.6.C expressly applies to "any person" and not 

just interest owners of oil and gas wells, interpretation of it as 

merely advising interest owners that the Lien Act is not their 

exclusive remedy is not warranted. Similarly, nothing in the 

(continued from previous page) 

[t]he security interest and lien created pursuant to 

this act ... shall not have priority over the security 

interest and/or lien rights previously created and 

perfected pursuant to Section 144 of Title 42 of the 

Oklahoma Statutes, subsection (e) of Section 87.1 of 

Title 52 of the Oklahoma Statutes, or an operating 

agreement or other voluntary agreement for the 

development and operation of the property. 

Okla. Stat. Ann. tit. 52, § 548.4.C. 

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language of section 548.6.C suggests that the broad protection set 

forth therein for rights under the Oklahoma UCC does not apply in 

conflicts that involve liens authorized under the Lien Act. 

Instead, the phrase "nothing in this act" at the beginning of 

section 548.6.C clearly explains that liens authorized under the 

Lien Act shall not undermine rights under the Oklahoma UCC. 

Accordingly, we conclude that the bankruptcy court properly 

determined that Norwest's security interests under the Oklahoma 

UCC were not subordinated to Appellants' liens authorized under 

the Lien Act. Therefore, we AFFIRM the district court's 

affirmance of the bankruptcy court's judgment. 

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