Capco Acquisub, Inc. v. Greka Energy Corp.
| Decision Date | 04 August 2008 |
| Docket Number | No. 25,642.,25,642. |
| Parties | CAPCO ACQUISUB, INC., Plaintiff-Appellee, v. GREKA ENERGY CORPORATION, Defendant-Appellant, and Michael Harton, Linda Harton, Joe Ann Duncan (a/k/a Jo Ann Missey and f/k/a Anderson), Robert Wraldo Duncan IV, Allee Thompson, Betty Baum Cooper, Deborah Thompson (f/k/a Debra Ann Campbell), Tom Ray Gainer (as his sole and separate property), and Lela Renee Thomas (as her sole and separate property), Plaintiffs-Appellees, v. Greka AM, Inc., Saba Energy of Texas, Incorporated, Strata Various L.C., Tatum Energy, L.C., Capco Acquisub, Inc., Dr. Iftikhar Ahmad, Darsham S. Mundy, Dr. Hamid Ur Rahman, Muhammad Saeed, Kaleem Ahmad Sayed, Seher Enterprises, Inc., and Summer Enterprises, Inc., Defendants-Appellees. |
| Court | Court of Appeals of New Mexico |
{1} This is the second appeal originating from a judgment entered in a case concerning oil and gas properties in Lea County, New Mexico. The judgment involved two separate lawsuits pending in Lea County District Court that were consolidated for trial: Capco Acquisub, Inc. v. Greka Energy Corporation, No. CV-2001-249 (Lea County, N.M., filed July 6, 2001) and Michael Harton, et al. v. Greka AM, Inc., et al., No. CV-2001-417 (Lea County, N.M., filed Oct. 29, 2001). We refer to the former suit as the "Capco Action" and the plaintiffs in that suit as the "Capco Plaintiffs." We refer to the latter suit as the "Harton Action" and the plaintiffs in that suit as the "Harton Plaintiffs."
{2} Following a trial in which Defendant Greka Energy Corporation (GEC) and its subsidiaries, Defendants Greka AM, Inc. (Greka AM) and Saba Energy of Texas, Inc. (Saba) (collectively, the Subsidiaries), failed to appear, the district court entered judgment against all three entities. In the first appeal related to that judgment, we affirmed the district court's denial of the Subsidiaries' motion for extension of time to file a notice of appeal and dismissed the remainder of the Subsidiaries' appeal. Capco Acquisub, Inc. v. Greka Energy Corporation (Capco I), 2007-NMCA-011, ¶ 8, 140 N.M. 920, 149 P.3d 1017. GEC, however, filed a timely notice of appeal, which is the subject of today's opinion.
{3} GEC seeks reversal of the judgment on the following grounds: (1) the district court lacked personal jurisdiction over GEC; (2) the district court should not have permitted the Harton Plaintiffs to add GEC as a defendant to the Harton Action at trial; (3) the district court erred in awarding punitive damages against GEC; (4) the district court erred in disregarding the corporate separateness of GEC and the Subsidiaries; and (5) NMSA 1978, § 53-17-20 (1969), precluded the Capco Plaintiffs from filing suit in New Mexico. We affirm in part, reverse in part, and remand for further proceedings.
{4} In order to address the issues GEC raises on appeal, it will be helpful to trace the development of the present case from its origins in the separate lawsuits that were eventually consolidated for trial. We look first at the Capco Action, then at the Harton Action, and then follow the consolidation of the cases chronologically.
{5} Capco Acquisub, Inc. (Capco) filed a complaint for accounting and payment of monies owing against GEC in Lea County district court on July 6, 2001. Capco alleged that it filed the action on behalf of itself and other "affiliates" who own interests in the Southwest Tatum Prospect, which is an oil and gas development in Lea County. Capco asserted that Saba, or its parent company, operated the subject properties in the Southwest Tatum Prospect, and that GEC assumed operations by virtue of a merger with Saba in March 1999. Capco claimed that Saba's working interest in the Southwest Tatum Prospect is set forth in a joint interest operating agreement, but that the agreement does not set forth the working interests owned by the Capco Plaintiffs.
{6} Prior to the merger, Saba had received on a monthly basis all revenues for the collective ownership interests in the subject properties, deducted the Capco Plaintiffs' share of monthly expenses, and paid the Capco Plaintiffs their respective share of net proceeds. However, following the merger, GEC discontinued paying monthly net proceeds to the Capco Plaintiffs, yet continued to bill the Capco Plaintiffs for their share of expenditures. GEC also refused to provide the Capco Plaintiffs with information regarding production, sales volumes, and revenues. Capco filed the suit seeking judgment for compensatory damages, attorney fees, and interest on the sums owing as determined by an accounting, as well as punitive damages.
{7} GEC filed an answer on September 5, 2001. GEC denied that the working interest of the Capco Plaintiffs was included in Saba's interest and admitted that it was not paying proceeds to the Capco Plaintiffs. GEC also stated as an affirmative defense that the district court lacked jurisdiction over GEC because GEC is a foreign corporation that is neither operating nor transacting business in New Mexico. On February 4, 2002, GEC filed a motion to dismiss for lack of jurisdiction. On the same date, GEC filed a motion to dismiss the claims of Capco's "affiliates" because Capco was not the real party in interest as to those claims, as well as a motion for summary judgment asserting that Capco's claims were precluded by a settlement agreement between GEC and Capco in another case.
{8} Capco filed a response to GEC's motion to dismiss for lack of jurisdiction, arguing that GEC waived the defense of lack of personal jurisdiction because GEC requested affirmative relief in its answer. On February 9, 2004, prior to ruling on GEC's motion to dismiss, the district court consolidated the Capco Action with the Harton Action.
{9} Michael and Linda Harton filed a pleading styled "petition for declaratory judgment" against GEC, Greka AM, Saba, and Capco, among others, on October 29, 2001. Although GEC is a named defendant in the caption and is mentioned in the introductory paragraph of the petition, GEC is not mentioned throughout the remainder of the petition. The Hartons and other Harton Plaintiffs thereafter filed several amended complaints, each of which omit mention of GEC altogether.
{10} The Harton Plaintiffs alleged that, on or about April 12, 1996, they entered into an oil and gas lease (the Lease) as lessors of land on which the Harton State # 1 Well (the Well) was eventually drilled. Through a succession of assignments and/or mergers, Greka AM became the designated operator of the lands covered by the Lease. The Harton Plaintiffs received their last payment for their interest in production from the Well in July of 2000, and Greka AM thereafter refused to pay the Harton Plaintiffs for their interest in production or proceeds attributable to gas produced from the Well.
{11} The Harton Plaintiffs further claimed that the Lease terminated due to a halt in production that was not remedied in accordance with the Lease. The Lease provides at Paragraph 6 that "this lease shall not terminate if Lessee commences reworking or additional drilling operations within 60 days thereafter and diligently prosecutes the same...." The Harton Plaintiffs alleged that, on August 8, 2001, the Well ceased production due to a mechanical failure of a gearbox, and that Greka AM did not attempt to commence reworking or additional drilling operations within 60 days. Greka AM, despite being informed that its interest in the Lease had terminated and that continued production from the Well would be considered hostile to the Harton Plaintiffs' interest, continued to produce from the Well after October 29, 2001.
{12} The Harton Plaintiffs sought the following relief: (1) a declaratory judgment that the Lease had expired; (2) a judicial decree that the expired Lease no longer conveys a determinable fee mineral interest in the land covered by the Lease (removal of cloud on title); (3) a monetary judgment for past due royalties; (4) a monetary judgment for the value of economically recoverable oil and gas reserves that were drained from the land covered by the Lease; (5) a monetary judgment for the defendants' failure to develop the land covered by the Lease; (6) compensation for slander of title; (7) compensation for bad faith trespass; (8) punitive damages; and (9) attorney fees.
{13} On October 31, 2003, the Subsidiaries filed a motion to dismiss the Harton Action for failure to join indispensable parties and an alternative motion to consolidate pending trials. The Subsidiaries noted in their motion that the Capco Plaintiffs, who were named defendants in the Harton Action, brought a similar suit (the Capco Action) seeking past due royalties attributable to their alleged interests in the Well. The Subsidiaries argued that the Capco Plaintiffs were indispensable parties to the Harton Action under Rule 1-019 NMRA because "if they [the Capco Plaintiffs] are not parties to the [Harton A]ction, Defendant could be `subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations by reason of [their] claimed interests.'" Although the Subsidiaries did not clarify which defendant or defendants would be subject to multiple or inconsistent obligations, the Subsidiaries acknowledged in their alternative motion to consolidate that the Capco Action was filed against GEC. The Subsidiaries argued that the cases should be consolidated because they involved common...
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