Faulkner Drilling Co., Inc. v. Gross

• Citation: 943 S.W.2d 634
• Decision Date: 25 April 1997
• Docket Number: Nos. 95-CA-1677-MR,CA-1684-MR,s. 95-CA-1677-MR
• Court: Court of Appeals of Kentucky
• Parties: FAULKNER DRILLING COMPANY, INC., Appellant, v. Al GROSS; Endicott & Associates; and Robert S. Miller, Appellees. Robert S. MILLER, Cross-Appellant, v. FAULKNER DRILLING COMPANY, INC., Cross-Appellee. (DIRECT), 95-(CROSS).

Page 634

943 S.W.2d 634

FAULKNER DRILLING COMPANY, INC., Appellant, v. Al GROSS; Endicott & Associates; and Robert S. Miller, Appellees.

Robert S. MILLER, Cross-Appellant, v. FAULKNER DRILLING COMPANY, INC., Cross-Appellee.

Nos. 95-CA-1677-MR (DIRECT), 95-CA-1684-MR (CROSS).

Court of Appeals of Kentucky.

April 25, 1997.

Robert Lee Rose, Winchester, for Appellant/Cross-Appellee, Faulkner Drilling Company, Inc.

Ashley W. Ward, Lexington, for Appellees, Al Gross and Endicott & Associates.

Theodore E. Cowen, Lexington, for Appellee/Cross-Appellant, Robert S. Miller.

Before GUIDUGLI, HUDDLESTON and SCHRODER, JJ.

OPINION

SCHRODER, Judge:

This is an appeal and cross-appeal from a judgment entered pursuant to a bench trial regarding an oral contract to drill a water well. Upon considering the various arguments proffered by the parties, the record herein and the applicable law, we affirm on appeal and reverse and remand on cross-appeal for a determination as to punitive damages.

Since the mid-1980s, appellee/cross-appellant, Robert Miller ("Miller"), has been involved in a residential development called the Andover Subdivision in Lexington. Andover includes a golf course with ponds, and is at the outer edge of the urban service area for Lexington. Adjoining the Andover property was a 33-acre tract of land which was located outside the urban service area. Miller and one of his partners retained this land for themselves to develop homesites thereon. Part of Miller's plan for his property was to have an "amenity pond" that would be visible from his home and that would provide a source of water to irrigate his property, which included some 40,000 trees he planted. According to the evidence, there were two possible ways of obtaining the water for this pond. One was to drill a water well on the homesite property, and the other was to pump water from the Andover Golf Course lake.

Appellee, Endicott & Associates, was an engineering firm retained for the Andover development and also to help develop Miller's homesite. In the fall of 1988, appellee, Al Gross, an engineer with Endicott & Associates, contacted appellant/cross-appellee, Faulkner Drilling Company, about the prospect of drilling a water well on Miller's homesite property. In December of 1988, Gross, as an agent for Miller, met with Paul Faulkner, the president of Faulkner Drilling Company, on Miller's property to discuss the possibility of drilling such a water well. At this meeting, it is undisputed that Gross told Faulkner that the water was to be used to fill an amenity pond and for irrigation. Faulkner then explained that he could drill a shallow well (80 to 140 feet) and if they did not strike water, they would have to drill much deeper (approximately 1,000 feet) into the Knox formation. The Knox formation is a geologic formation originating some five hundred million years ago when much of the land was under sea and which today still contains some sea water. Faulkner told Gross that drilling to the Knox would cost between $12,000 and $13,000. However, according to Gross, Faulkner guaranteed that they would get water from the Knox.

This initial meeting with Faulkner was the first time Gross had ever heard of the Knox and he made notes of his conversation with Faulkner that day. At trial, Gross testified that Faulkner never mentioned the risk of getting salt water or even raised the issue of water quality at this initial meeting. Conversely, Faulkner testified that he told Gross at this meeting that he could guarantee he could get water in the Knox, but could not guarantee the quality of said water.

The evidence established that Paul Faulkner had 40 years' experience drilling water wells. In particular, he had some experience with drilling to the Knox in the Bluegrass area. Some of these wells contained water usable for the purposes for which it was sought, but at least two of these wells contained unusable water due to the total dissolved solids therein. Total dissolved solids are the minerals and other chemicals that are typically solids but will dissolve in water. These include salt (sodium chloride), sulphur, iron and many other minerals. With water from the Knox, the principal dissolved solid is salt and the expert opinion evidence established that there was more than a reasonable probability of getting salt water when drilling to the Knox. The evidence further established that Faulkner knew that the level of total dissolved solids in the water affected the purpose for which the water could be used.

Based on the information he learned in this first meeting, Gross, as an agent for Miller, entered into a verbal contract with Faulkner Drilling Company to drill a water well on Miller's homesite property. On August 17, 1989, Faulkner drilled 200 feet into the site selected by Gross. When water was not found at that depth, with Gross' approval, the drilling continued into the Knox formation where water was found at 948 feet.

Subsequently, Faulkner had a test run on a sample of the water obtained. The test results were available on October 5, 1989 and showed 3,456 parts per million of sodium--levels well above what could be used for an amenity pond and not including any other dissolved solids in the water. At trial, Faulkner asserted that at that time, he felt the water was of medium salinity and could be used through aeration as a settlement pond. However, in his deposition, Faulkner claimed he told Gross that the water was of such questionable quality that the well should be abandoned, which Gross denies.

After this first test on the water, Faulkner suggested that a pump be installed in the well. However, before installing the pump, Faulkner demanded payment from Gross for drilling the well. On October 10, 1995, Miller sent a check to Faulkner for $6,636. Faulkner then installed a pump in the well pursuant to the direction of Gross.

On October 25, 1989, the pump was installed, but the quality of the water obtained from the well was bad due to the high level of total dissolved solids. The well was pumped for a period of time thereafter, but the quality of water did not improve. Faulkner then demanded payment for the pump and a bill was sent to Al Gross and Endicott & Associates for $7,244.46 for the pump and installation.

Subsequently, Faulkner ran another test on the water which revealed a higher salt content than the prior test. Faulkner brought the results of this test to Gross' office on November 16, 1989 and suggested that Gross consult with Dr. Foree of Commonwealth Technologies, a company providing consulting services in various scientific areas. Gross testified at trial that this was the first time Faulkner had mentioned any problem with regard to water quality to him.

When Al Gross consulted with Commonwealth Technologies, Dr. Foree held out little hope for the usefulness of the water for Mr. Miller's purposes. More water was pumped and the water was repeatedly tested at a cost of $110. However, the water never reached a level even close to what could be used in an amenity pond or for irrigation.

By early January of 1990, it was apparent that the well could not be used and Faulkner offered at that point to drill two additional shallow wells, which Gross maintained Faulkner offered at his own expense. These wells were drilled in the winter of 1990 and both were dry. Faulkner then billed $2,170 for the two wells.

The evidence was in conflict as to whether or not Miller gave Faulkner an opportunity to remove his pump. In the end, Faulkner did not get the pump. Miller had the pump removed and also paid to have the well capped. Miller ultimately obtained the water for his pond by pumping it from the golf course lake.

On July 24, 1990, Faulkner Drilling Company filed a complaint against Gross...