Premium Valve Services, LLC v. Comstock Oil & Gas, LP, Comstock Oil & Gas-Louisiana, LLC and Certain Underwriters

• Court: Court of Appeals of Texas
• Decided: August 11, 2016
• Docket: 01-15-00108-CV
• Status: Published

Opinion

Opinion issued August 11, 2016

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-15-00108-CV ——————————— PREMIUM VALVE SERVICES, LLC, Appellant V. COMSTOCK OIL & GAS, LP, COMSTOCK OIL & GAS-LOUISIANA, LLC, AND CERTAIN UNDERWRITERS, Appellees

On Appeal from the 270th District Court Harris County, Texas Trial Court Case No. 2009-65461

MEMORANDUM OPINION

Premium Valve Services, LLC appeals from a final judgment, rendered upon

trial to the jury, in favor of appellees, Comstock Oil & Gas, LP, Comstock Oil &

Gas-Louisiana, LLC, and Certain Underwriters. In two issues, PVS argues that the

trial court erred by refusing to include a proposed question in the jury charge, and by failing to apply the proper measure of damages. We reverse and remand for a

new trial.

Background

Appellees are the owners of the Collins #1 oil well located in Louisiana. PVS,

which supplies rental equipment for the oil and gas industry, provided a frack stack1

that was used on the Collins #1 well. During fracking operations on the Collins #1

well, the flow cross on the rented frack stack supplied by PVS failed, causing the

frack stack to explode. The well was immediately shut down.

Appellees later sued PVS for negligence and products liability.2 In their

pleading, appellees alleged that the Collins #1 well was damaged as a result of the

blowout caused by PVS and that the “physical damage to the well included, but was

not limited to, the well-bore being filled with formation materials (that

eventually caused the well to have to be abandoned and re-drilled despite

[appellees’] attempts to save the well) and damage to other property at the well

site.” PVS generally denied appellees’ claims and alleged, among other things, that

most of the damage to the well was caused by appellees’ negligent remedial efforts,

1 A “frack stack” is a piece of well head equipment used during completion and well stimulation operations to pump fluids and proppants into the well and to flowback materials from the well. Frack stacks consist of numerous component parts, including a flow cross and various valves for controlling pressure. 2 The trial court granted summary judgment in PVS’s favor with regard to appellees’ other causes of action.

2 not the blowout. Specifically, PVS argued that the well could have been repaired

after the blowout, but that appellees’ flawed remedial efforts caused a tool to be

lodged in the well, and it was the inability to retrieve the tool that ultimately caused

appellees to abandon the well.

At trial, appellees presented evidence that PVS negligently supplied them with

a frack stack that contained a manufacturing defect, i.e., a pre-existing crack in the

flow cross, and that the defective equipment was a producing cause of the blowout

that caused permanent damage to the Collins #1 well. Witnesses testified that

appellees attempted to restore and repair the Collins #1 well but those attempts

proved unsuccessful. Appellees then abandoned the well and began drilling the

Collins #2 well. The parties presented conflicting testimony regarding whether the

Collins #2 well was a replacement well for the Collins #1 well.

The parties also presented conflicting testimony regarding whether the Collins

#1 well was capable of being repaired after the blowout and the reasonableness of

appellees’ remedial efforts. In particular, PVS’s expert testified that the blowout did

not cause any downhole damage; it only damaged the well’s surface casing which

appellees were able to completely repair. The expert further testified that the well

had been cleaned out all the way to the last frack plug, and had been returned to the

condition it was prior to the blowout when a tool being used in the remediation

became stuck in the hole. According to PVS’s expert, the tool only became stuck in

3 the hole during the repair process because appellees did not follow their own

remedial procedures and appellees were forced to abandon the well after they could

not dislodge the tool. Appellees’ expert, on the other hand, testified that the blowout

caused downhole damage to the Collins #1 well which required appellees to attempt

to clean out and restore the well, and that appellees’ remedial efforts were both

reasonable and necessary.

During the charge conference, PVS objected to the trial court’s failure to

submit to the jury the following question: “Was the Collins No. 1 well damaged to

such an extent as a result of the occurrence that it could not be reasonably repaired?”

The trial court overruled the objection and refused to include appellees’ proposed

question in the charge.

The jury found that PVS’s negligence proximately caused the blowout and

that the equipment PVS had provided to appellees contained a manufacturing defect

that was a producing cause of the blowout.3 In addition to these liability findings,

the jury was also asked to determine what sum of money would fairly and reasonably

compensate appellees for their damages that resulted from the blowout. The jury

made the following three findings: (1) the difference in the market value of the

Collins #1 well immediately before and immediately after the blowout was

$7,562,000; (2) the reasonable and necessary cost to repair and restore the Collins

3 PVS is not challenging the jury’s liability findings on appeal.

4 #1 well was $5,138,000; and (3) the reasonable and necessary cost to re-drill and

complete a well to replace the Collins #1 well was $0.

After the jury returned its verdict, appellees filed a Motion for Omitted

Finding and for Entry of Judgment asking the court to make a finding as to whether

the Collins #2 well was a replacement well for the Collins #1 well. The trial court

granted the motion in its entirety and expressly found that the Collins #1 well “could

not be reproduced.” The trial court awarded appellees damages in the amount of

$12,700,000,4 plus pre-judgment interest, costs of court, and post-judgment interest.

Jury Charge

On appeal, PVS argues that damage to an oil and gas well is damage to real

property, and therefore, the proper measure of damages in this case is dependent

upon whether the damage to the Collins #1 well was temporary or permanent. See

Gilbert Wheeler, Inc. v. Enbridge Pipelines (E. Tex.), L.P., 449 S.W.3d 474, 481–

82 (Tex. 2014) (setting forth general measure of damages in injury to real property

cases and discussing distinction between temporary and permanent damages to real

property). According to PVS, the trial court erred by failing to submit a question to

the jury regarding the repairability of the well because the jury’s answer to that

4 The $12,700,000 award is the total value of the damages assessed by the jury: the difference in the market value of the Collins #1 well immediately before and immediately after the blowout ($7,562,000), plus the reasonable and necessary costs to repair and restore the well ($5,138,000).

5 question would have provided the court with a factual basis from which the court

could have determined whether the injury to the well was temporary or permanent.

Id. at 481 (holding that whether injury to real property is temporary or permanent is

question of law for court and that disputed facts that underlie temporary-versus-

permanent distinction must be resolved by factfinder).

A. Standard of Review

A properly requested jury question must be submitted if the question is on a

controlling issue that is raised by the pleadings and supported by some evidence.

TEX. R. CIV. P. 278; Union Pac. R.R. Co. v. Williams, 85 S.W.3d 162, 166 (Tex.

2002). A trial court may refuse to submit a jury question only if no evidence exists

to warrant its submission, i.e., less than a scintilla. See Elbaor v. Smith, 845 S.W.2d

240, 243 (Tex. 1992). To rise above a scintilla, the evidence offered to prove a vital

fact must do more than create a mere surmise or suspicion of its existence. See

Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983). The standard of review

for an allegation of jury charge error is an abuse of discretion. Tex. Dep’t of Human

Servs. v. E.B., 802 S.W.2d 647, 649 (Tex. 1990). A trial court abuses its discretion

by acting arbitrarily, unreasonably, or without consideration of guiding principles.

Walker v. Gutierrez, 111 S.W.3d 56, 62 (Tex. 2003).

Even if a trial court abused its discretion when it refused to submit a question

to the jury, we cannot reverse the judgment on this basis unless this charge error was

6 harmful. TEX. R. APP. P. 44.1(a); Wal–Mart Stores, Inc. v. Johnson, 106 S.W.3d 718,

723 (Tex. 2003). Harm occurs when the error in the charge probably caused the

rendition of an improper judgment or prevented the appellant from properly

presenting the case to the court of appeals. TEX. R. APP. P. 44.1(a); Johnson, 106

S.W.3d at 723. Charge error “is generally considered harmful” and thus reversible

“if it relates to a contested, critical issue.” Columbia Rio Grande Healthcare, L.P. v.

Hawley, 284 S.W.3d 851, 856 (Tex. 2009).

B. Applicable Law

A claim for damage to a wellbore is a claim for damage to a real property

interest. See Cressman Tubular Prods. Corp. v. Kurt Wiseman Oil & Gas, Ltd., 322

S.W.3d 453, 462 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (holding

damage to wellbore is damage to real estate improvement); see generally Wagner &

Brown, Ltd. v. Sheppard, 282 S.W.3d 419, 426 (Tex. 2008) (“oil and gas wells are

improvements to real property”).

In Gilbert Wheeler, Inc., the Texas Supreme Court explained that a trial court

must determine whether an injury to real property is temporary or permanent in order

to establish the proper measure of damages in such cases. Gilbert Wheeler, Inc., 449

S.W.3d at 478–80. Although the proper measure of damages for a temporary injury

to real property is generally the cost to repair or restore the property to its pre-injury

condition, the proper measure of damages for a permanent injury is the difference in

7 the property’s fair market value before and after the injury. Id. at 478–79, 481. A

temporary injury, however, will be deemed permanent if the cost to restore or repair

the property “exceeds the diminution in the property’s market value to such a

disproportionately high degree that the repairs are no longer economically feasible.”

Id. at 481 (recognizing applicability of “economic feasibility exception,” which

limits owner to lesser amount of damages when necessary to avoid

overcompensation).

Whether an injury to real property is temporary or permanent is a question of

law for the court. Id. However, if there are disputed facts that underlie the temporary-

versus-permanent distinction, such fact questions must be submitted to the factfinder

upon proper request. Id. The Texas Supreme Court has defined “temporary” and

“permanent” injuries to real property as follows:

An injury to real property is considered permanent if (a) it cannot be repaired, fixed, or restored, or (b) even though the injury can be repaired, fixed, or restored, it is substantially certain that the injury will repeatedly, continually, and regularly recur, such that future injury can be reasonably evaluated. Conversely, an injury to real property is considered temporary if (a) it can be repaired, fixed, or restored, and (b) any anticipated recurrence would be only occasional, irregular, intermittent, and not reasonably predictable, such that future injury could not be estimated with reasonable certainty.

Id. at 480 (emphasis in original). Thus, when the injury is alleged to have been

caused by a solitary event that, by its nature, is not subject to recurrence or repetition,

8 an injury to real property is generally considered permanent if the property cannot

be repaired, fixed, or restored. See id.

C. Analysis

Appellees alleged that PVS negligently supplied them with a defective flow

cross, the failure of which caused damage to the Collins #1 well, including the

wellbore. Such an allegation constitutes a claim for damage to a real property

interest. See Cressman Tubular Prods., 322 S.W.3d at 462; see generally Wagner &

Brown, Ltd., 282 S.W.3d at 426.

At trial, the parties presented conflicting testimony with regard to whether the

Collins #1 well was repairable after the blowout. Specifically, PVS’s expert testified

that the well, which did not incur any downhole damage, was repairable after the

blowout, and that the well had been returned to the condition it was in prior to the

blowout when a tool being used in the remediation effort became stuck in the hole.

Appellees’ expert, however, testified that the well could not be repaired due to the

downhole damage caused by the blowout, despite appellees’ reasonable and

necessary remedial efforts.

During the charge conference, PVS objected to the trial court’s failure to

submit a jury question “on whether or not the well in question was damaged to such

an extent that it could not be reasonably repaired” and argued that a question

regarding the repairability of the well was “a necessary foundational question for the

9 Court to submit” with respect to the issue of damages “and as a result of failing to

submit that issue, there will be the absence of a necessary jury finding on a question

of fact.” PVS also proposed the following jury question: “Was the Collins No. 1 well

damaged to such an extent as a result of the occurrence that it could not be reasonably

repaired?” The trial court overruled the objection and refused to include PVS’s

proposed question in the charge. PVS preserved this complaint for our review by

objecting to the omission of a question on the well’s repairability after the blowout

and tendering a proposed question before the charge was read to the jury. See TEX.

R. CIV. P. 272, 274, 278, 279.

The trial court abused its discretion when it refused to submit a question on

repairability to the jury because the question was supported by the written pleadings

and the parties presented more than a scintilla of evidence with respect to the

repairability of the Collins #1 well after the blowout. See TEX. R. CIV. P. 278

(requiring submission of jury questions supported by written pleadings and

evidence); Union Pac. R.R. Co., 85 S.W.3d at 166 (same); see also Exxon Corp. v.

Perez, 842 S.W.2d 629, 631 (Tex. 1992) (per curiam) (trial court erred by denying

properly requested question on viable affirmative defense that was timely raised by

pleadings and evidence).

We cannot reverse on this basis, however, unless this charge error probably

caused the rendition of an improper judgment or prevented PVS from properly

10 presenting its case on appeal. TEX. R. APP. P. 44.1(a); Johnson, 106 S.W.3d at 723.

Not only was the repairability of the Collins #1 well a contested issue at trial, but the

jury’s answer to that question would have provided the court with a factual basis

from which it could have determined whether the injury to the well was temporary

or permanent. Gilbert Wheeler, Inc., 449 S.W.3d at 481 (holding that whether injury

to real property is temporary or permanent is question of law for court, but

underlying factual disputes must be submitted to factfinder). The trial court’s

resolution of that legal question would have determined the proper measure of

damages in this case. Gilbert Wheeler, Inc., 449 S.W.3d at 481. Accordingly, we

hold that the trial court’s failure to submit a jury question on this critical issue was

harmful because it deprived the trial court of a factual basis from which it could have

determined the proper measure of damages in this case. See generally Hawley, 284

S.W.3d at 856 (stating that charge error “is generally considered harmful . . . if it

relates to a contested, critical issue”).

Both parties agree that there is an omitted jury finding but they disagree about

what was omitted and who bore the burden of asking for it. The trial court’s deemed

finding, to the extent that it was an effort to remove the harm from the omission of

the question regarding repairability, does not render the error harmless. This is

because the trial court cannot deem an omitted jury finding over a party’s request

for submission of that issue to the jury. See TEX. R. CIV. P. 299 (allowing trial court

11 to deem findings only for “omitted, unrequested elements” that are supported by

evidence) (emphasis added). And, the deemed finding does not address whether the

well was repairable but rather presumed that it was.

We sustain PVS’s first issue.5

Conclusion

We reverse and remand for a new trial.

Russell Lloyd Justice

Panel consists of Justices Bland, Brown, and Lloyd.

5 In light of our disposition, we need not reach PVS’s second issue. 12