X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:Children of Charles Kaechele owned the surface of a 973-acre tract of grazing land in Austin County that was originally purchased by their father in 1952. In 1992, the children and the owners of the mineral estate executed an oil and gas lease with Ranchquest, owned by Robert Leon and Robert Huckaby. This pair also owned Texical, which operated the wells on the lease; Tex-Atic, which operated the wells on leases Ranchquest later took over; and Amcas, which served as the repository of investor funds. In July 1996, Pensor Production, a drilling contractor, contracted with American Cascade Energy to provide the rig and crew to take over the drilling of a well called Best No. 2, and later, a well called Best No. 3. The two wells sat on approximately four acres of the tract. The children sued all those involved in the operation and production of the wells in October 1997 for damage to the surface estate. They claimed that a ring levee was not constructed around Best No. 2 until March 1997, after drilling fluids, diesel fuel, oil and saltwater had been discharged onto the pasturelands, and raw sewage was discharged into open pits. The children also claimed that the defendants had pumped fluids from the ring levee and reserve pit at Best No. 3 into ditches that flowed into a nearby creek. At trial, the children introduced a series of reports prepared by the Railroad Commission after 24 site inspections of Best No. 2 and 22 inspections of Best No. 3. Both wells were found in violation of Railroad Commission Statewide Rule 8, which sets up rules and regulations to protect fresh water from pollution by salt water. Though the reports extensively detailed the problems at Best No. 2, the report on Best No. 3 mentioned only the numerous violations of Rule 8. At trial, Frank Roberts, a consultant for the defendants, testified that the site around Best No. 3 had been cleaned up in 1999, and the reserve pits were left open at the children’s demand. He said the black, caked material at the sites was simply a mixture of graphite and glycerin that could easily be disposed of. In conjunction with the TRC, the consultant had remediated the soil contaminated by the drilling fluid. Michael Swetish, an environmental scientist, testified for the children that he thought the sites had been heavily impacted by salt. He said that if the contaminated soil was not cleaned up, the contaminants would gradually seep into the soil deeply enough to contaminate underground water sources. He estimated that remediation would cost $288,000. The defendants’ real estate appraiser gave his opinion that the market value of the whole tract was $730,000 ($750/acre). If the four acres were contaminated, the maximum diminution of value to the whole tract would be $3,000. The children’s real estate appraiser used the sales-comparison method to arrive at a starting value of $730,000 and a diminution of value of $300,000. The jury ruled for the children, awarding them $200,000 as a reasonable cost to repair, $10,000 in compensatory damages, and $88,000 in attorneys fees. When asked what the diminution in value to their property was, the jury answered “$0.” The trial court found the injury to the children’s property was permanent, therefore the correct measure of damages was the diminution in value to the land. Since the jury said there was no diminution, the trial court entered judgment for the defendants. On appeal, the children argue: 1. that the trial court erred in ruling the damage was permanent, rather than temporary: 2. that the trial court erred in allowing in evidence that Amcas made an unsolicited and unaccepted offer to purchase the tract as evidence of the tract’s market value; 3. that the trial court should have given the jury an instruction on negligence per se; 4. that the evidence was legally and factually sufficient to support the jury’s findings on several jury findings. HOLDING:Affirmed in part; reversed and remanded in part. The trial court should have found that the damage was temporary, not permanent, the court rules. There was uncontested evidence that the damage to the land could be remediated, so the trial court erred. The trial court did not err, however, in allowing in the evidence of Amcas’ offer to purchase the tract for $730,000. The evidence was used to show the value of the property before the damage, not as inadmissible evidence of a settlement offer. Amcas’ offer even stated specifically, “This letter is not an offer of settlement and is not intended in that manner.” The trial court abused its discretion by not giving a jury instruction on negligence per se for violation of Rule 8. Rule 8(b) states that “no person conducting activities subject to regulation by the commission may cause or allow pollution of surface or subsurface water in the state.” The rule “clearly affords protection” to the class that the children belong to � surface owners � against hazards like pollution of surface and subsurface water. The facts raised the issue, and a jury instruction should have been given. The court upholds the jury’s answer to one question about Ranchquest’s compliance with certain lease provisions. However, the court rules that the jury’s answer of $0 to the diminution of value question was unsupported by the evidence. Real estate appraisers from both sides agreed that there had been some diminution of value. The fact that Amcas unaccepted offered to buy the property for $730,000 was not evidence of the market value of the property. OPINION:Radack, C.J., Nuchia and Hanks, JJ.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.