Hinger v. Parker & Parsley Petroleum Co.

• Decision Date: 31 May 1995
• Docket Number: No. 14621,14621
• Citation: 1995 NMCA 69,120 N.M. 430,902 P.2d 1033
• Parties: Jeffrey L. HINGER, David Cupps, and George B. Valencia, Plaintiffs-Appellees/Cross-Appellants, v. PARKER & PARSLEY PETROLEUM CO. and Evergreen Resources, Inc., Defendants-Appellants/Cross-Appellees.
• Court: Court of Appeals of New Mexico

Page 1033

902 P.2d 1033

120 N.M. 430

Jeffrey L. HINGER, David Cupps, and George B. Valencia Plaintiffs-Appellees/Cross-Appellants, v. PARKER & PARSLEY PETROLEUM CO. and Evergreen Resources Inc., Defendants-Appellants/Cross-Appellees.

No. 14621.

Court of Appeals of New Mexico.

May 31, 1995.

Certiorari Denied Aug. 24, 1995.

[120 N.M. 434] Jerrald J. Roehl, Corbin P. Hildebrandt, Mark E. Komer, The Roehl Law Firm, P.C., Albuquerque, for plaintiffs-appellees/cross-appellants.

W.R. Logan, Civerolo, Wolf, Gralow & Hill, P.A., Albuquerque, Carl J. Butkus, Butkus & Reimer, P.C., Albuquerque, for defendants-appellants/cross-appellees.

OPINION

BOSSON, Judge.

On September 20, 1990, a natural gas well (Rosa 282) exploded in the San Juan Basin severely burning Plaintiffs, who were employees of a subcontractor working at the wellsite. Plaintiffs collected workers' compensation from their employer and filed a complaint for personal injuries against Parker & Parsley Petroleum Company (Parker) and Evergreen Resources, Incorporated (Evergreen), the general partners that leased and operated the well. Plaintiffs also sued other subcontractors but settled with them prior to trial. A jury awarded Plaintiffs substantial compensatory damages against Parker and Evergreen and punitive damages against Parker. On appeal, Defendants raise various challenges to the theories of negligence presented to the jury, and Parker challenges the submission to the jury of punitive damages. Defendants also question the applicability of strict liability to this case under Saiz v. Belen School District, 113 N.M. 387, 827 P.2d 102 (1992). Plaintiffs cross-appeal from a trial court decision reducing the verdict by the amount of their settlement with the subcontractors. In post-trial proceedings, Defendants argued to the trial court that Saiz had been applied to the case, over their objection, and therefore joint and several liability and a right to indemnification or contribution necessarily applied. The trial court ruled for Defendants based on the court's view that Saiz applied. Our discussion of Saiz and Defendants' issues on appeal is dispositive of our resolution of the cross-appeal. We affirm the verdict for Plaintiffs and reverse the trial court on the cross-appeal.

FACTS

We state the facts in the light most favorable to Plaintiffs and ignore many of the facts, the conflicting evidence, and the reasons to ignore Plaintiffs' evidence on which Defendants rely at length in their briefs. See Clovis Nat'l Bank v. Harmon, 102 N.M. 166, 168-69, 692 P.2d 1315, 1317-18 (1984).

The Rosa 282 well is located on federal land in Rio Arriba County at a site commonly referred to as the Rosa Unit. In March 1990, Evergreen acquired the rights to drill on the Rosa Unit and thereafter prepared predrilling estimates regarding the amount of cubic feet of gas expected. Evergreen then solicited Parker as a general partner in the development of the well, and the two companies entered into a joint operating agreement naming Parker "operator" of the project and Evergreen "non-operator" or "consultant."

One of Parker's first initiatives was to appoint Buddy Knight "pointman" of the project. Knight was Parker's division operations manager. As pointman, Knight managed and had the right to control the operations in the Rosa Unit. Parker contracted with Drew Bates, a local New Mexico consultant, for his knowledge of the gas formation and his contacts with local contractors. Bates, in turn, hired Sam Billington to act as "company man" for Parker. As company man, Billington exercised supervision on behalf of Parker over contractors at the work site. Plaintiffs worked for Basin Well Servicing, one of the contractors.

The Rosa 282 well was drilled in August of 1990. As with other wells, two steel pipes were inserted into the drilled hole, one inside the other. The outside pipe is the casing and the inner pipe is the tubing. The space between the two pipes is known as the annulus. At ground level, the casing and tubing are enclosed by two encasements, the casing spool and the tubing spool. The tubing passes first through the casing spool and then the tubing spool. Inside the tubing spool a circular piece of rubber (the wrap-around donut) is inserted between the casing and the tubing to prevent gas from escaping through the annulus. On top of the tubing spool, a series of pipelines connect to the tubing which is collectively referred to as the "Christmas tree." The Christmas tree distributes the gas to storage and refining facilities.

Based on Evergreen's predrilling estimates of anticipated gas, Parker selected the well-head equipment for Rosa 282. However, the estimates proved considerably lower than the amount of gas actually realized, and therefore Parker had to replace the wrap-around donut and the Christmas tree with larger, higher-pressure equipment. According to evidence presented, removal of the wrap-around donut in a functioning well is potentially very dangerous and requires meticulous care and planning. If flammable gas escapes through the annulus, there is the distinct possibility of an explosion or a "blow-out."

Experienced operators often utilize a piece of equipment known as a blow-out preventer (BOP) when removing the wrap-around donut. The BOP replaces the Christmas tree and attaches to the tubing spool. The wrap-around donut is then pulled out and replaced through the BOP. If gas leaks, the BOP can be manually closed to prevent a blow-out. The BOP is an effective, well-known safety device for working on gas wells like the Rosa 282 and Parker made one available on a neighboring well.

However, Parker did not require use of the BOP. Billington, Parker's company man, decided not to use the BOP but chose instead to change the wrap-around donut by another technique. Billington ordered water pumped into the annulus through a valve on the tubing spool. In theory, the weight of the water prevents the gas from escaping and allows the wrap-around donut to be safely removed. After pumping water into the annulus, Billington declared the well safe and ordered Plaintiffs to replace the equipment. Plaintiffs removed the Christmas tree and the wrap-around donut. Water immediately began shooting from the annulus. Plaintiffs testified that they were frightened and ran away from the well because they were afraid of a blow-out. There was evidence that Billington then ordered Plaintiffs back to the well. Plaintiffs lowered the wrap-around donut in an effort to seal the annulus but there was too much pressure. The water gave way to gas which exploded into flames severely injuring the three Plaintiffs.

Plaintiffs sued Parker, Evergreen, and four subcontractors. All except Parker and Evergreen settled their claims for a total of the $2.2 million. Plaintiffs presented the jury with three theories of negligence against Parker and Evergreen: (1) negligent failure to provide a safe place to work; (2) negligent failure to exercise retained control over the wellsite in a responsible manner; and (3) per se negligent failure to comply with certain government regulations pertaining to gas well safety. Plaintiffs also argued for strict liability under Saiz arising from an inherently dangerous activity. Plaintiffs sought punitive damages against Parker and Evergreen but on motion for directed verdict the district court dismissed the punitive damages claim against Evergreen.

The jury returned a verdict for Plaintiffs finding Parker 90% at fault, Evergreen 9% at fault, and Billington 1% at fault. The jury found no fault in Plaintiffs or the other contractors. The jury awarded compensatory damages to Plaintiff Cupps in the amount of $4,477,549; Plaintiff Hinger in the amount of $342,936; and Plaintiff Valencia in the amount of $304,167. The jury awarded $5,000,000 in punitive damages to Cupps and $1,000,000 in punitive damages each to Hinger and Valencia. In an amended judgment the court reduced the jury verdict by the amount of the $2.2 million pretrial settlement.

SAIZ LIABILITY

Defendants object that (1) there was insufficient evidence of an inherently dangerous activity to justify strict liability under Saiz; (2) Saiz should not be applied retroactively to the facts of this lawsuit; and (3) Plaintiffs are confined to their remedies under workers' compensation because an employee of an independent contractor cannot sue the owner/operator of the project for inherently dangerous activity under Restatement (Second) of Torts, Sections 416 and 427 (1965), which is the theoretical foundation for Saiz. See New Mexico Elec. Serv. Co. v. Montanez, 89 N.M. 278, 281, 551 P.2d 634, 637 (1976). Although Plaintiffs meet each of these objections on their merits, they emphasize that this case was presented to the jury on the basis of ordinary care and negligence, and not on strict liability. Plaintiffs argue, therefore, that these objections to Saiz are purely academic and need not be answered on appeal. We agree.

In Saiz, our Supreme Court applied Restatement (Second) of Torts Sections 416 and 427 and held that an employer of an independent contractor, engaged in activity which is "inherently dangerous," has a nondelegable duty to ensure that reasonable precautions are taken by contractors to prevent injury to third parties. An employer who breaches this nondelegable duty must answer under strict liability, not mere negligence; reasonable care by the employer is no defense. Saiz liability is not vicarious; the employer is liable for 100% of the damages proximately caused regardless of whether the individual contractor may also be at fault. Saiz, 113 N.M. at 400, 827 P.2d at 115. Saiz further instructs the trial court to decide, as a matter of law, whether the evidence proves that the activity in question is "inherently dangerous." If so, the jury is to be given special interrogatories asking (1) what precautions would be deemed reasonably necessary by one to whom knowledge of all the...