DeSoto Gathering Co. v. Smallwood

• Decision Date: 14 January 2010
• Docket Number: No. 09–386.,09–386.
• Citation: 2010 Ark. 5,362 S.W.3d 298
• Court: Arkansas Supreme Court
• Parties: DESOTO GATHERING COMPANY, LLC, Appellant, v. Janice SMALLWOOD, Appellee.

2010 Ark. 5

362 S.W.3d 298

DESOTO GATHERING COMPANY, LLC, Appellant,

v.Janice SMALLWOOD, Appellee.

No. 09–386.

Supreme Court of Arkansas.

Jan. 14, 2010.

Perkins & Trotter, PLLC, by: Julie D. Greathouse, G. Alan Perkins, and Matthew N. Miller, Little Rock, and Paul F. Dumas, P.A., by: Paul A. Dumas, Morrilton, for appellant.

Lightle & Raney, LLP, by: Susannah R. Streit and Donald P. Raney, Searcy, for appellee.

DONALD L. CORBIN, Associate Justice.

Appellant, DeSoto Gathering Co., LLC, appeals a judgment of the White County Circuit Court issuing a mandatory injunction for removal of a natural gas pipeline and awarding treble damages for trespass to Appellee, Janice Smallwood, as well as court costs, filing fees, service-of-process expenses, and witness fees. Appellant raises four arguments for reversal, contending that it did not trespass as a matter of law because it constructed the pipeline pursuant to a right of way granted by the landowner and mineral rights owner; that Appellee did not prove damages beyond speculation and conjecture; that Appellee did not sufficiently plead treble damages; and that Appellee did not allege or prove irreparable harm sufficient to support the permanent injunction. Jurisdiction is properly in this court as this case presents significant issues needing clarification of the law. Ark. Sup.Ct. R. 1–2(b)(5) (2009). We find merit to Appellant's first point of error, and therefore reverse the judgment and remand for the trial court to dissolve the injunction.

The facts giving rise to this case began in June 2003 when Appellee leased ten acres near Judsonia in White County from Richard and Shirley Chandler, who owned both the mineral and surface estates in sixty acres. The terms of the lease provided that in exchange for one dollar per year and the rescission of a previous contract of sale between the parties, Appellee would use the ten acres as a single-family residence for her natural life or until she abandoned the property. The lease also stated that the lease and Appellee's leasehold interest were subordinate to any existing or future liens or encumbrances placed on the land by the Chandlers. The lease was recorded on the same day it was executed, June 23, 2003.

Two years later in June 2005, the Chandlers leased to Chesapeake Exploration Limited Partnership the mineral rights to their sixty acres, including the ten acres leased to Appellee. A producing natural gas well was drilled on the Chandlers' property. In January 2008 and again in May 2008, the Chandlers granted Appellant a right of way to build a sub-surface pipeline to market the natural gas produced from the sixty acres. The first right of way was recorded on April 9, 2008, and the second was recorded on June 11, 2008.

This suit began on March 21, 2008, when Appellee filed a petition for emergency and permanent injunction, alleging that Chesapeake was preparing to lay a pipeline across her leasehold estate and that in so doing it had trespassed and caused significant damage. Appellee soon filed an amended petition dismissing Chesapeake and naming Appellant, who was hired to construct the pipeline, as respondent. By letter to Appellant dated July 28, 2008, Appellee demanded a formal apology as well as money damages and attorney fees totaling $42,500, which included a demand for treble damages. On October 14, 2008, Appellee filed a second amended petition alleging that sometime after she had filed her initial petition, Appellant had “placed a second pipeline across her property without her permission causing additional significant damage to her property.” Although this second amended petition asserted additional damages, it did not include a demand for treble damages.

Appellant moved for summary judgment on October 31, 2008, asserting that as a matter of law it had not trespassed on the surface of the land that Appellee had leased for residential purposes because it entered the land pursuant to a right of way granted by the owner of the surface and mineral estates, Appellee's lessor. Appellee responded to the motion for summary judgment on November 20, 2008. In the brief in support of her response, Appellee did not dispute that Appellant had obtained her lessors' consent to construct the pipeline across the ten acres of her leasehold, but alleged that Appellant was required to obtain her consent as well.

The trial court held a hearing on November 24, 2008, in which it stated that it would hold in abeyance a ruling on Appellant's motion for summary judgment and proceed with Appellee's petition for injunction. During the hearing, the trial court ruled from the bench that the motion for summary judgment was denied. This denial was also stated in the final judgment.

At the hearing, Appellee testified that Appellant had entered upon her leasehold without her consent on at least three occasions and placed two connecting pipelines. Appellee presented estimates from a landscaping company of what it would cost to restore the ten acres to its condition prior to the construction of the pipelines. Appellant did not present any evidence at the hearing. During closing argument, Appellee asked the trial court to order removal of the pipelines and to triple the damages to her leasehold.

The trial court ruled from the bench that Appellee's leasehold was “a property interest that must be taken into account to cross the surface.” The trial court awarded Appellee $17,307.50 in damages and ordered both sides to present posttrial briefs on the issue of treble damages. In addition, the trial court denied Appellee's request for a permanent injunction to remove the pipelines. However, in a letter ruling dated the next day after the hearing, November 25, 2008, the trial court reconsidered its decision on the injunction and ruled that Appellant remove all pipelines it had placed across Appellee's leasehold. Following the submission of the posttrial briefs on treble damages, the trial court issued a written order dated December 19, 2008, finding that Appellee's July 28, 2008 letter constituted sufficient notice to Appellant that Appellee would be seeking treble damages. Ultimately, the trial court issued a written judgment and mandatory injunction on December 30, 2008, in which it trebled the damages of $17,307.50 to $51,922.50, and awarded court costs, filing fees, service-of-process fees, and witness fees of $365.61; this judgment also issued the mandatory injunction for removal of the two pipelines. This appeal followed.

In bench trials, the standard of review on appeal is not whether there is substantial evidence to support the finding of the circuit court, but whether the judge's findings were clearly erroneous or clearly against the preponderance of the evidence. El Paso Prod. Co. v. Blanchard, 371 Ark. 634, 269 S.W.3d 362 (2007). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a firm conviction that an error has been committed. Id. Facts in dispute and determinations of credibility are within the province of the fact-finder. Id.

Appellant's first argument for reversal is that the trial court erred as a matter of law in ruling that Appellant committed trespass because Appellant entered the land pursuant to a valid right of way and in accordance with the mineral lessee's right to reasonable use of the surface for development and production of the minerals. Appellee conceded below and on appeal that the Chandlers had the right to execute the oil and gas lease and to grant the right of way; however, her position both below and on appeal is that her consent to the right of way was also required.

Appellant contends this case is a property-rights case, and that the relationship and priority of rights to the property in question should determine the outcome of this case. According...