Indiana Farm Gas Production Co. v. Southern Indiana Gas & Electric Co.

662 N.E.2d 977, 136 Oil & Gas Rep. 513, 1996 Ind. App. LEXIS 301, 1996 WL 109734

• Court: Indiana Court of Appeals
• Decided: March 14, 1996
• Docket: 93A02-9408-EX-476
• Status: Published

Opinions

OPINON

SHARPNACK, Chief Judge.

Indiana Farm Gas Production Company ("IFG") appeals the decision of the Utility Regulatory Commission ("Commission") dismissing its petition to require Southern Indiana Gas and Electric Company ("SIGE-CO") to transport gas from IFG's well. This is the third opinion that has been written in this case. The first two are reported as Southern Indiana Gas & Elec. Co. v. Indiana Farm Gas Prod. Co., 540 N.E.2d 621 (Ind.Ct.App.1989), reh'g granted, 549 N.E.2d 1063, trans. denied (hereinafter "Farm Gas I ") and Southern Indiana Gas & Elec. Co. v. Indiana Farm Gas Prod. Co., 549 N.E.2d 1063 (Ind.Ct.4pp.1990) (hereinafter "Farm Gas II").

IFG raises several issues for our review which we reduce to the dispositive issue of whether the Commission had jurisdiction to resolve the dispute between these parties. We affirm.

The background for this appeal is well stated in Farm Gas I as follows:

"IFG is an Indiana corporation with offices in Evansville SIGECO is a public utility engaged in the business of providing gas and electricity service to the public in portions of southwestern Indiana; its main offices are in Evansville.

SIGECO purchases most of its gas from Texas Gas Transmission Corporation, an interstate pipeline. SIGECO in conducting its business owns and operates an underground storage field, named Oliver Field, in Posey County. IFG leased a tract of land, which was adjacent to Oliver Field, and commenced drilling operations for natural gas. Natural gas was found and the well was named the Travers well.

IFG entered into a contract with Indiana Farm Bureau Cooperative Association, Inc., to sell gas produced from Travers well to Farm Bureau to be used at Farm Bureau's Mt. Vernon refinery. Farm Bureau is a customer of SIGECO, and SIGE-CO has a pipeline running from Oliver field to Farm Bureau. IFG does not have transmission pipeline facilities for natural gas of its own.

IFG filed a petition with the, Indiana Utility Regulatory Commission, pursuant to 1.C. 8-1-2-87.6,[¹] for an order requiring SIGECO to transport the gas from Tra-vers well to Farm Bureau. IFG 'pre-filed the evidence it intended to present at the hearing on the petition, pursuant to a pre-hearing order issued by the Commission.

SIGECO filed a motion to dismiss the petition for a want of jurisdiction since IFG failed to establish, either in the petition or in the 'pre-filed' evidence, that: 1) the gas at issue was 'Indiana produced natural gas; or 2) IFG 'owned the gas'

On August 12, 1987, the Commission denied the motion to dismiss. The Commission found that IFG presented a prima facie case by establishing in the pre-filed evidence that:

1) IFG was the owner of a lease to explore and extract natural gas; 2) the leasehold estate was in Indiana; 3) the well, which was drilled to extract the gas, was on the leasehold premises; 4) the gas was of pipeline quality; and 5) the transporting company, SIGECO, had adequate capacity to accept and transport the volume of gas involved. The Commission determined that proof of 1-8 was sufficient to give rise to rebuttable presumption that the gas was 'Indiana produced and that the gas produced would be 'owned' by IFG.

The Commission based its conclusion on the assumption Indiana courts would likely apply the 'rule of capture' to storage gas, which is gas which has been previously severed from realty, but is injected into the ground for storage. Thus, IFG likely 'captured' the storage gas (assuming that the gas was storage gas) and 1-8 gave rise to a rebuttable presumption that the gas to be extracted will be 'owned' by IFG. The Commission also determined that the statute applied to both 'native gas' and 'storage gas.

On September 1, 1987, SIGECO filed a petition for rehearing and reconsideration, -or, in the alternative, to certify the legal issues to this court. On March 30, 1988, the Commission entered an order on SI-GECO's petition granting in part and denying in part. The Commission granted the petition in part by determining that the statute should be applied only to 'native' gas and not 'storage' gas. The Commission denied the petition in all other respects." |

Farm Gas I, 540 N.E.2d at 622-623 (footnote omitted).

On appeal, we first treated SIGECO's motion to dismiss as an Ind.Trial Rule 12(C) Motion for Judgment on the Pleadings. Because the Commission considered matters outside the pleadings (the "pre-filed" evidence), we then treated it as a motion for summary judgment under T.R. 56.

Agreeing with SIGECO, we reversed the Commission's order and remanded the case for an adjudication in favor of SIGECO on IFG's petition. Id. at 625. Specifically, we found:

"A petitioner, in a proceeding brought under this statute, has the burden of proving all essential elements. The issues of the situs of production and marketable title to the natural gas onee extracted are threshold jurisdictional issues which must be proven by the petitioning party. The Commission is not authorized to answer these issues.

The above issues must either: 1) be without dispute; 2) have been established by agreement of the parties; or 3) have been conclusively established in a prior proceeding. Here, the petitioner could have elected to file an action for declaratory judgment in a trial court of general jurisdiction in order to determine the 'ownership' of the gas."

Id. Because the case required the Commission to determine whether the natural gas at issue was SIGECO's personal property or gas which was subject to being reduced to the possession and ownership of IFG, we held, "[ulltimately this is a question of property law, which is outside the scope of delegated authority and expertise of the Commission." Id.

IFG filed a petition for rehearing with this court. On rehearing, we modified our decision. Farm Gas II, M49 NE.2d at 1064. Specifically, we stated in part:

"After hearing oral argument we reconsider this matter, vacate portions of our previous opinion, and now remand to the Commission to proceed with a hearing on the merits.

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The dispositive issue upon rehearing is: Did this court improperly order summary judgments [sic] in favor of the moving party [SIGECO] which had not supported its motion by any affidavits or sworn testimony?

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In the original briefing of this matter SIGECO seemed to treat its motion as an Ind.Tr.R. 41(B) motion and IFG argued it as if it were an Ind.Tr.R. 12 motion. This Court decided to treat the motion as an Ind.Tr.R. 56 motion, and a review of the previous decision will explain why. We now stand by our decision that this matter should be treated as a Rule 56 motion. We do this because the Commission considered matters outside of the pleadings. Specifically, the Commission considered IFG's prefiled testimony.

In our original opinion we ordered the Commission to enter an adjudication in favor of SIGECO. We, in effect, ordered the Commission to grant summary judgment against the non-moving party, IFG, even though SIGECO had not supported its motion by affidavits or testimony as provided by Ind.Trial Rule 56(C) and (D).

The motion filed by SIGECO relied upon prefilled testimony submitted by IFG. After considering the oral arguments presented by the parties on the petition for rehearing, we find it was erroneous to rely upon the prefiled testimony as a basis for ordering judgment against IFG. The pre-filed testimony was not given under oath. It may be changed or withdrawn until the witness appears at a hearing and swears that the prefiled testimony is his true testimony.

The Commission should hold a hearing upon the issues presented by IFG's petition including a determination of jurisdiction.,

Therefore, we vacate the order previously entered and remand this matter back to the commission for further proceedings consistent with this revised opinion."

Id.

Upon remand, the Commission held an evidentiary hearing and then dismissed the case. The Commission concluded, on the authority of Farm Gas I, that it lacked jurisdiction over the disputed questions of property ownership upon which the resolution of the case depended. The Commission stated:

"Although the evidentiary record in the Cause is extensive, the portion of the original Court of Appeals opinion which was not vacated by the subsequent opinion on rehearing renders evaluation and weighing of this evidence unnecessary. Based on the pleadings and the evidence of record, it is clear that ownership of the gas in the Travers Well is in dispute, and that Petitioner has not conclusively established its ownership in an action for declaratory Judgment in a trial court of general jurisdiction.... Based upon the evidence of record, taken together with the two Court of Appeals opinions, we find that Petitioner has failed to invoke jurisdiction pursuant to I.C. 8-1-2-87.6 and that its Petition must therefore be dismissed."

Record, pp. 648-649. IFG now appeals the Commission's dismissal.

We need not address the merits of IFG's arguments concerning the jurisdiction of the Commission and the applicability of the rule of capture to storage gas because we are bound by our holding in Farm Gas I that the Commission lacked jurisdiction through the "law of the case" doctrine. Under this doctrine, an appellate court's determination of a legal issue is binding both on the trial court on remand and the appellate court on a subsequent appeal, given the same case with substantially the same facts. Cha v. Warnick, 476 N.E.2d 109, 114 (Ind.1985), reh'g denied, cert. denied, 474 U.S. 920, 106 S.Ct. 249, 88 L.Ed.2d 257; Indiana State Bd. of Pub. Welfare v. Tioga Pines Living Ctr., 637 N.E.2d 1306, 1316 (Ind.Ct.App.1994), reh'g denied. Al issues decided directly or implicitly in a prior decision are binding on all subsequent portions of the case. Certain Northeast Annexation Area Landowners v. Fort Wayne, 622 N.E.2d 548, 549 (Ind.Ct.App.1993), reh'g denied, trans. denied. The doctrine "merely expresses the practice of courts generally to refuse to reopen what has been decided...." Messinger v. Anderson, 225 U.S. 436, 444, 32 S.Ct. 739, 740, 56 L.Ed. 1152 (1912); see Landowners, 622 N.E.2d at 549. The doctrine is "based upon the sound policy that when an issue is once litigated and decided, that should be the end of the matter." United States v. United States Smelting Ref. & Mining Co., 339 U.S. 186, 198, 70 S.Ct. 537, 544, 94 L.Ed. 750 (1950), reh'g denied.

Indiana has applied this doctrine in its strictest sense and has resisted creating exceptions to the strict application of the doctrine. See, e.g., Landowners, 622 N.E.2d at 548; Borgman v. Borgman, 420 N.E.2d 1261 (Ind.Ct.App.1981); Stoner v. Howard Sober, Inc., 127 Ind.App. 338, 141 N.E.2d 458 (1957); Pittman-Rice Coal Co. v. Hansen, 122 Ind.App. 334, 102 N.E.2d 387 (1951); Riesbeck Drug Co. v. Wray, 111 Ind.App. 467, 39 N.E.2d 776 (1942); Mertz v. Wallace, 93 Ind.App. 289, 169 N.E. 333 (1929); Terre Haute & I.R. Co. v. Zehner, 28 Ind.App. 229, 62 N.E. 508 (1902). In fact, Indiana courts have held numerous times that the law of the case must be followed even when the earlier decision is deemed to be incorrect. See Landowners, 622 N.E.2d at 549; Cunningham v. Hiles 439 N.E.2d 669, 676 (Ind.Ct.App.1982); Borgman, 420 N.E.2d at 1265; Stickler v. Live Stock Insurance Assoc., 73 Ind.App. 508, 127 N.E. 831; Terre Haute, 62 N.E. at 508; see also E.H. Schopler, Annotation, Erroneous Decision as Law of the Case on Subsequent Appellate Review, 87 A.L.R.2d 271, 288, 296 (1963). While a court has the power to revisit prior decisions of its own or of a coordinate court in any ciream-stance, as a general rule courts should be reluctant to do so in the absence of extraordinary circumstances. Landowners, 622 N.E.2d at 549.

Indiana has, however, recognized a narrow exception in cases where the initial decision was "clearly erroncous and would work a manifest injustice." State v. Lewis, 543 N.E.2d 1116, 1118 (Ind.1989) (quoting Arizona v. California, 460 U.S. 605, 618 n. 8, 103 S.Ct. 1382, 1391 n. 8, 75 L.Ed.2d 318 (1983)). In Lewis, the supreme court refused to follow the law of the case. Id. The court held that a retrial of the defendant would violate double jeopardy under then current law, even though the court had found eight years earlier that a retrial would not violate double jeopardy under the old law. Id.

The court stated:

"To retry appellee on a charge of which he was acquitted eight years ago out of blind adherence to a discretionary rule of practice-even one accorded as much deference as this one-would work precisely the kind of manifest injustice of which the [United States Supreme Court] warned. Further, this case presents precisely the sort of extraordinary circumstance of which the Court speaks, wherein it is appropriate to disregard the law of the case in favor of the prevailing rule of law."

Id. at 1118-1119. We note that there was a significant change in the substantive law applicable to the case that warranted the court to reject application of the law of the case.

In the present case, we find the law of the case doctrine to be applicable. In Farm Gas I, we specifically held that the Commission had no jurisdiction to decide the property law issue upon which the resolution of the case depended. Farm Gas I, 540 N.E.2d at 625-626. Soon thereafter, we granted a rehearing and vacated portions of the original opinion on the grounds that the prefiled testimony of IFG had not yet been admitted into evidence and could not, therefore, be relied on to support a motion for sammary adjudication. Farm Gas II, 549 N.E.2d at 1064. After remand, the Commission held an evi-dentiary hearing on IFG's petition. At that time, IFC's prefiled testimony was admitted into evidence without change. The Commission later dismissed IFC's petition for lack of jurisdiction.

Although Farm Gas I was vacated in part by Farm Gas II, we find that the grounds for vacating portions of the opinion were procedural in nature and had no effect on the Jurisdictional analysis of the original opinion. Furthermore, we find that the facts of the case before us pertaining to the issue of the Commission's jurisdiction remain essentially the same as the facts of the first appeal. That is, ownership is still in dispute. Moreover, we find no "extraordinary cireum-stances", such as a change in the law or a constitutional right in jeopardy, which would cause adherence to the previous ruling to work a manifest injustice. See Lewis, 543 N.E.2d at 1118; Landowners, 622 N.E.2d at 549. Consequently, our holding in Farm Gas I that the Commission has no jurisdiction to determine the property law question upon which resolution of the case rests constitutes the binding law of the case.

For the foregoing reasons, we affirm the Commission's order dismissing IFC's petition for lack of jurisdiction.

AFFIRMED.

GARRARD, J. concurs. BARTEAU, J. dissents with separate opinion.

1 . This statute states in part:

"(b) Any person, corporation, or other entity engaged in the production, gathering, sale or transportation of natural gas produced in Indiana may petition the commission to:

(1) Require a gas utility certified under section 86 or 87 of this chapter to purchase or transport Indiana produced natural gas owned by the petitioning entity; and

(2) Set the rates for the purchase or transportation of that gas."

I.C. § 8-1-2-87.6.