Houck v. Hold Oil Corp.

1993 OK 166, 867 P.2d 451, 128 Oil & Gas Rep. 93, 65 O.B.A.J. 23, 1993 Okla. LEXIS 196, 1993 WL 527411
CourtSupreme Court of Oklahoma
DecidedDecember 21, 1993
Docket69492, 70460
StatusPublished
Cited by57 cases

This text of 1993 OK 166 (Houck v. Hold Oil Corp.) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Houck v. Hold Oil Corp., 1993 OK 166, 867 P.2d 451, 128 Oil & Gas Rep. 93, 65 O.B.A.J. 23, 1993 Okla. LEXIS 196, 1993 WL 527411 (Okla. 1993).

Opinion

LAVENDER, Vice Chief Justice:

FACTS AND PROCEDURAL HISTORY

Appellants/counter-appellees, J.C. Houck and Ruth 0. Houck (Houcks) purchased the surface estate to eighty acres of undeveloped lakefront property near Lake Eufaula. The tract was subject to an oil and gas lease subsequently assigned to appellee/eounter-appellant, Hold Oil Corporation (Hold).

In March 1982, the Houcks discovered Hold had excavated a reserve pit and destroyed trees, timber and underwood in the process of building an access road to its first gas well site. This well was drilled in March 1982 prior to the effective date (July 1, 1982) of the Surface Damage Act (Act), 52 O.S.Supp.1982, § 318.2 et seq. Subsequently, an employee of the Houcks negotiated with Hold to settle damages to the surface estate. Hold later notified Houck of its intent to drill a second gas well, which was commenced in September 1982. However, no settlement was finalized between the parties.

The Houcks sued Hold for injuries to the property caused by the drilling of the wells. Observing that Hold had a legitimate property right to enter and start drilling operations under the lease and finding Hold had not acted arbitrarily, capriciously or maliciously with respect to the Houcks’ property rights, the trial court declined to submit any issue of punitive damages to the jury. He also ruled Hold was not a trespasser in exercising its property rights, and was not liable for treble damages under 23 O.S.1981, § 72, a statute concerning injury to trees.

The trial court further took the position that from the commencement of the drilling of the first well (March 1982) to the completion of the second well in September 1982 the drilling activities on the property were one continuous operation. On this basis he ruled the damage provisions of the Act retroactively applied to both wells. He also noted neither party presented evidence to clearly distinguish damages caused by the drilling of the first and second gas wells, but we note the trial court’s ruling as to recovery of damages under the Act came at the beginning of trial; in other words, prior to the parties presenting any evidence on the issue. Although the trial court repeated his pretrial ruling after the Houcks’ case in chief and again prior to instructing the jury on the law, the parties were told at the start of trial the matter would be tried under the damage provisions of the Act and not the common law rules as to the standard of liability for the recovery of damages in effect prior to the effective date of the Act. 1 Contrary to his ruling as to the standard of liability for recovery of damages, the trial court decided the treble damage provision of the Act [52 O.S.Supp.1982, § 318.9] did not apply because when Hold initiated operations in March 1982 and drilled the first well the Act was not yet effective and it would have been impossible for Hold to have complied with the notice, settlement agreement or appraiser provisions of the Act prior to such effective date.

The jury returned a verdict for the Houcks for both permanent ($5,600.00) and temporary ($24,400.00) damages. After trial, Hold’s motion for judgment notwithstanding the verdict was partially granted. Its motion for new trial was denied. The temporary damage award was reduced from $24,400.00 *455 to $5,600.00, and consequently, the jury’s verdict was reduced from $30,000.00 to $11,-200.00. Hold had sought to lower the total award to $5,600.00. The Houcks were also awarded attorney fees and costs. Both parties appealed.

The Court of Appeals affirmed in part and reversed in part. They affirmed the jury’s award of $5,600.00 for permanent injury to the surface, the trial court’s determination not to instruct the jury on the issue of punitive damages, and the trial court’s refusal to award treble damages for injury to timber, as provided in 23 O.S.1981, § 72. They also affirmed trial court rulings rejecting the following defenses raised by Hold: statute of limitations, latches and an argument it was not liable for any damages because the drilling operations were performed by an independent contractor. They rejected a claim by the Houcks the case was wrongfully transferred from Oklahoma County to Pitts-burg County. Also rejected was an attack by Hold the Act was impermissibly applied retroactively and was unconstitutional as an impairment of contract. They reversed the trial court’s decision to grant Hold judgment notwithstanding the verdict, and reinstated the jury’s verdict on temporary damages in the amount of $24,400.00. They further declared the trial judge abused his discretion by not trebling the damage award under § 318.9 of the Act. Finally, the Court of Appeals vacated the trial court’s award of attorney fees in favor of the Houcks because in their view the trial court erred in setting the amount thereof. The issue of attorney fees was remanded to the trial court for the setting of an appropriate amount in favor of the Houcks. Hold petitioned for certiorari which we previously granted.

ISSUES

Hold raises the following issues on certio-rari. It contends because it was not a wilful and knowing violator of the Act, the Houcks are not entitled to treble damages under § 318.9. It further argues the only damages the Houcks are entitled to recover are those representing the diminution in market value, which it asserts is $5,600.00 and together with this argument that the jury was improperly allowed to award both permanent and temporary damage for the same injuries. Hold also argues it should have been entitled to differentiate damages as to the first and second wells because one was drilled prior to the effective date of the Act and one after, i.e. that the common law rules as to recovery of damages in effect prior to the effective date of the Act were applicable to the first well. It also claims the trial and appellate courts’ retroactive application of the Act in this case is unconstitutional because it violates the constitutional prohibition against impairment of contracts. OKLA. CONST, art. II, § 15; U.S. CONST, art I, § 10. Finally, Hold asserts the Court of Appeals’ application of the treble damage provision of the Act violates the constitutional provision as to ex post facto laws because drilling was commenced prior to the effective date of the Act. OKLA. CONST, art. II, § 15. 2

We reverse and remand for a new trial on the basis Hold should have been allowed to differentiate injury caused by the first and second wells. The first well, having been completed prior to the effective date of the Act, was not covered by the Act, but the rules of the common law in effect prior thereto as to the standard of liability for the recovery of damages. The second well was covered by the Act having been commenced after the effective date of the Act. We also hold the record does not support an award of treble damages under the Act because the Houcks failed to carry their burden to show Hold was a wilful violator of § 318.9. In that we are reversing and remanding for a new trial we finally provide guidance to the parties and the trial court as to the proper measure of damages under both the Act and the common law.

I.

We first address Hold’s contention it was entitled to differentiate the damages assoei- *456 ated with the first well from the second well.

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Bluebook (online)
1993 OK 166, 867 P.2d 451, 128 Oil & Gas Rep. 93, 65 O.B.A.J. 23, 1993 Okla. LEXIS 196, 1993 WL 527411, Counsel Stack Legal Research, https://law.counselstack.com/opinion/houck-v-hold-oil-corp-okla-1993.