Cassinos v. Union Oil Co.

• Decision Date: 20 April 1993
• Docket Number: No. B065018,B065018
• Citation: 14 Cal.App.4th 1770,18 Cal.Rptr.2d 574
• Court: California Court of Appeals Court of Appeals
• Parties: Gus CASSINOS et al., Plaintiffs and Respondents, v. UNION OIL COMPANY OF CALIFORNIA et al., Defendants and Appellants.

Page 574

18 Cal.Rptr.2d 574

14 Cal.App.4th 1770

Gus CASSINOS et al., Plaintiffs and Respondents, v. UNION OIL COMPANY OF CALIFORNIA et al., Defendants and Appellants.

No. B065018.

Court of Appeal, Second District, Division 6, California.

April 20, 1993.

Rehearing Denied May 14, 1993.

Review Denied July 15, 1993.

Hanna and Morton and Edward S. Renwick, Allison L. Malin and David C. Karp, Los Angeles, for defendants and appellants.

Bright and Brown and Gregory C. Brown, Glendale, for plaintiffs and respondents.

STEVEN J. STONE, Presiding Justice.

Union Oil Company of California et al. (Union) appeals from the $5,298,198 judgment of the trial court for injecting offsite wastewater into the mineral estate owned by respondents, Gus Cassinos et al. ¹ We affirm, except for part of the prejudgment interest awarded by the trial court.

Before 1917, Escolle owned the subject property in fee simple absolute. In 1917, Escolle deeded the surface estate to E. Righetti. ² Escolle very broadly and specifically reserved to itself the mineral estate.

In 1946, Escolle entered into an oil and gas lease with Union. In 1980, successor Escolle TIC entered into a revised oil and gas lease with Union which was amended on January 1, 1983. Pursuant to these leases, Union drilled various oil and gas wells on the subject mineral estate, including one known as A-16 which produced small quantities of oil and gas.

During the early 1980's, Union developed an excess wastewater problem on adjacent property it owns. This wastewater hindered production of Union's oil and gas on that property. Union determined that its best solution to this problem would be to inject the water into A-16 on the Escolle lease.

Union obtained permission to do so from Righetti, the owner of the surface estate of the Escolle property. Union also obtained a permit from the State Division of Oil and Gas to do so. In its application to the State, Union declared, inter alia, that the wastewater will come from several leases, including the Escolle lease. All of the wastewater, however, came from Union's offsite sources.

Union never sought permission from the Escolle TIC to inject its wastewater into A-16. In July 1984, Union began to inject this water into A-16 through pipes it laid across the surface of the Escolle property from its adjacent land.

On July 1, 1985, respondents filed a complaint to halt Union from injecting this water into the Escolle mineral estate. The complaint sought declaratory and injunctive relief, as well as damages under theories of subsurface trespass, nuisance and quasi-contract. The gist of the complaint is that Union injected its offsite wastewater into Escolle's reserved mineral estate through A-16 in contravention of the terms of the lease provisions and without Escolle's permission. Union's lengthy injection activities caused injury to the mineral The trial court bifurcated the liability and relief issues. On stipulated facts, the trial court found that the Escolle TIC "own the entire mineral fee ... pursuant to the 1917 deed. They own not only the oil and gas, but also the hard rock mineral, surface rights [subject to those granted to Righetti] and the right to dispose of waters related to the extraction of minerals on the property."

estate and to Escolle's reservation of rights under deed to produce minerals, oil and gas in the field and to its right to use the disposal capacity of that field.

The injection of the wastewater by Union into A-16 interfered with and adversely affected these rights exclusively owned by the Escolle TIC as successors in interest under the 1917 deed. Union could not have drilled A-16 without benefit of the lease from the Escolle TIC, and no express or implied right to inject offlease wastewater exists under that lease or otherwise. Righetti's successors, under whom defendant now claims, "could not grant [this right] to defendant in the 1984 agreement upon which defendant now bases its right to inject waste water."

The wastewater Union injected into A-16 spread and communicated with other oil-producing lease wells in the unusual fractured shale Escolle formation, although the extent of migration is "largely impossible to predict."

Because Union intended to inject its offsite wastewater into A-16 for a non-lease purpose, thereby causing the water to interfere with and adversely affect the mineral rights owned by the Escolle TIC, Union committed trespass. Accordingly, the trial court held Union liable to the Escolle TIC for damage to its mineral rights in the lease area and barred Union from injecting such offsite wastewater into respondents' mineral zones.

In its trial brief for the damages phase of this case, Escolle argued that the correct measure of damages is "the fair market value of the disposal rights taken by Union." Escolle stated that the usual measure of damages for a continuing or permanent trespass is the reasonable rental value of the use of the property. (Civ.Code, § 3334.) Typically, that value is the reasonable rental value during the period of wrongful occupation of the property. (See generally Lindberg v. Linder (1933) 133 Cal.App. 213, 218-219, 23 P.2d 842; Murphy v. Nielsen (1955) 132 Cal.App.2d 396, 399, 282 P.2d 126.) But, this is a unique case.

Here it is impossible to trace the entire migration or effect of the wastewater injected. Thus, the exact amount of injury to the mineral estate is difficult to ascertain.

Escolle argued that because Union intentionally trespassed into the mineral estate to solve its offlease wastewater disposal problem and to benefit its other, offsite mineral holdings, the appropriate measure of damages under these circumstances is the cost to dispose of the wastewater injected during the pertinent period. This theory of damages sounds in quasi-contract, a remedy sought in its complaint. Thus, Escolle maintains that the benefit to Union from this trespass is the proper measure of damages. We agree.

Escolle established that the fair market value of such rights was $1.75 per barrel of water disposed. Oil operators, including Union, paid this price in this area during the pertinent period of time. Escolle also argued it is entitled to transportation costs of between 68 and 72 cents per barrel.

At the end of the relief phase of trial, the trial court concluded, inter alia, "that defendant Union has committed a trespass upon the property rights of plaintiffs and the measure of damages to be applied in this case is set forth in Civil Code Section 3334...."

The trial court determined that the fair market value of disposing of wastewater was $1.75 per barrel, exclusive of transportation costs. Union injected 2,067,343 barrels of offsite wastewater into A-16 between June 1984 and April 1986, when Union voluntarily stopped disposing of this water there. The trial court found that the Escolle TIC plaintiffs are entitled to judgment against Union in the principal sum of $3,617,843.

In addition, the trial court concluded that the Escolle TIC are entitled to prejudgment interest in the amount of $1,680,355, under both Civil Code section 3287, subdivision (a), and Civil Code section 3288, because the damages are capable of being made reasonably certain and the interest would make them whole. (Howe v. City Title Ins. Co. (1967) 255 Cal.App.2d 85, 63 Cal.Rptr. 119; Bare v. Richman & Samuels, Inc. (1943) 60 Cal.App.2d 413, 140 P.2d 895; Greater Westchester Homeowners Assn. v. City of Los Angeles (1979) 26 Cal.3d 86, 160 Cal.Rptr. 733, 603 P.2d 1329; In re Pago Pago Aircrash of January 30, 1974 (1981) 525 F.Supp. 1007, 1016.) The trial court determined the total judgment to be the sum of $5,298,198 and costs of suit.

DISCUSSION

Three issues are before us on appeal: 1. Did the trial court correctly hold Union liable in trespass for interfering with and damaging the mineral estate reserved by Escolle? 2. If so, did the trial court use the proper measure of damages? and 3. Did the trial court properly award prejudgment interest to Escolle?

Liability

The parties urge this court to consider who owns the right to inject offsite wastewater into A-16 for a purpose other than operating the Escolle mineral lease. Because Union injured the mineral estate owned by Escolle under deed without Escolle's consent, Union committed trespass. Therefore, we need not decide who owns the injection right, which would be a question of first impression in the State of California. (See generally Rozewski v. Simpson (1937) 9 Cal.2d 515, 520, 71 P.2d 72; Palermo v. Stockton Theatres, Inc. (1948) 32 Cal.2d 53, 65-66, 195 P.2d 1.)

"The essence of the cause of action for trespass is an 'unauthorized entry' onto the land of another." (Civic Western Corp. v. Zila Industries, Inc. (1977) 66 Cal.App.3d 1, 16, 135 Cal.Rptr. 915.) "[A] trespass may occur if the party, entering pursuant to a limited consent, i.e., limited as to purpose or place, proceeds to exceed those limits by divergent conduct on the land of another. 'A conditional or restricted consent to enter land creates a privilege to do so only in so far as the condition or restriction is complied with.' [Citation.]" (Id., at p. 17, 135 Cal.Rptr. 915; accord, Mangini v. Aerojet-General Corp. (1991) 230 Cal.App.3d 1125, 1141, 281 Cal.Rptr. 827.)

In particular, causing subsurface migration of fluids into a mineral estate without consent constitutes a trespass. (See generally Tidewater Oil Company v. Jackson (10th Cir.1963) 320 F.2d 157, 163, holding oil and gas lessee liable for intentional, non-consensual flooding operations which caused damage to neighbor's lease; see also Hancock Oil Co. v. Meeker-Garner Oil Co. (1953) 118 Cal.App.2d 379, 257 P.2d 988, holding that slant drilling which drains a pool of oil owned by another on adjacent parcel constitutes subsurface trespass.)

In cases involving grants and reservations of mineral rights, our Supreme Court has stated that "[t]he rules of law should be sufficiently adaptable to...