Holland v. Mayfield, 96-CA-01169-SCT.
| Decision Date | 03 June 1999 |
| Docket Number | No. 96-CA-01169-SCT.,96-CA-01169-SCT. |
| Citation | 826 So.2d 664 |
| Parties | Robert M. HOLLAND, Jr. v. J.D. MAYFIELD, R. Roy Ward, Eric E. Lindstrom, John T. Ferguson, George C. Wright, Mark Massey, Malcolm Campbell, Betty Campbell, Robert Lindsey, Jr., Tom Saucier, Tobias Robinsky, Florine Phillips, Estate of Al Fornea and David McMullan. |
| Court | Mississippi Supreme Court |
C. Ted Sanderson, Jr., Ridgeland, Attorney for Appellant.
Walter J. Batla, George S. Shaddock, Attorneys for Appellees.
EN BANC.
BANKS, Justice, for the Court:
¶ 1. Here, investors in oil and gas properties sued the person who solicited their investments alleging fraud. The Chancellor, sitting without a jury, awarded actual and punitive damages. Finding no reversible error, we affirm.
¶ 2. The Appellees ("Investors") filed their Complaint in the Chancery Court of the Second Judicial District of Jones County against the Appellant ("Holland") on April 10, 1993. The lawsuit involved the Investors' investments in oil and gas properties. The Complaint alleged fraud on the part of Holland in connection with the investments in the Chandeleur Prospect, offshore Louisiana.
¶ 3. The Chandeleur Prospect consisted of offshore wells, including an operating well, and the opportunity of obtaining some blocks of leases for potential drilling. The wells were located in the Chandeleur Sound area offshore Louisiana.
¶ 4. The Investors testified that their understanding of the deal from Holland was that the Investors were buying the property at BT Operating Company's ("BT") cost, and that BT and Holland would get a reversionary interest on the back-end, after the Investors recovered their original investments. There were to be no front-end profits paid. The fact that there was no front-end cost built into the purchase price made the Chandeleur Prospect more attractive than other oil and gas deals. ¶ 5. At some point in 1990, one of the investors did an accounting of the project from BT's books because the Investors had been unable to get information from BT on how the project was going. From the accounting, it appeared that there were some discrepancies between what the Investors had paid into Chandeleur and what had actually been paid by BT for the property. The Investor who did the accounting testified that the Investors did not know exactly what had happened until approximately a year and a half after the accounting. Eventually, the Investors learned that BT had actually paid approximately $2.3 million for Chandeleur, while the Investors had been led to believe the cost was $3.1 million.
¶ 6. Around that same time, several of the Investors formed a corporation, Chandeleur Limited, for the purpose of taking over and operating the Chandeleur Prospect on behalf of the owners because the Investors felt that BT was not doing a competent job.
¶ 7. The Chandeleur Prospect was the subject of a federal diversity action in the United States District Court for the Southern District of Texas. That suit was filed by three of the Investors in the case sub judice (J.D. Mayfield, Roy Ward, and Malcolm Campbell) against BT and its principals Roger Evans and Campbell Evans. In that suit against BT, the operator of the Chandeleur Prospect, fraud was also alleged. The Investors never made a claim against Holland in the Texas case.
¶ 8. Also, BT had filed a lawsuit against the Investors and Holland in Louisiana state court. That case was removed to federal court by the Investors and then transferred to the Texas federal court where the two causes were consolidated. For the sake of brevity, we will refer to these two actions as simply the "Texas case." For a while, Holland was represented by the same attorneys as the Investors, and Chandeleur Limited paid for that representation.
¶ 9. Holland never appeared in the Texas case. Holland was dismissed from the Texas case sua sponte. On that same day, the federal court conducted a settlement hearing, at which the parties announced that they had agreed to settle the case. On February 8, 1993, the parties filed an Agreed Motion to Dismiss. On February 12, 1993, the court, through written order, dismissed the Texas case with prejudice.
¶ 10. The Investors filed this action against Holland on April 10, 1993. In April or May 1992, as a result of a deposition in the Texas case and an audit of the project, the Investors learned that the discrepancy in the price was the result of profits being paid on the front-end. Those profits amounted to approximately $800,000. The front-end profit was split four ways between Roger Evans and Campbell Evans, who were BT principals, Robert Holland, and Bill Gaskin, a geophysicist. Holland received approximately $220,000 in front-end profit. Most of the Investors testified that had they known of the front-end profit they would not have invested in Chandeleur. A couple of Investors stated that they were unsure whether they would have still invested in the project if the front-end profit had been disclosed.
¶ 11. Holland testified that the information he gave the Investors came from Roger Evans with BT. Holland admitted that the representation that he had made to the Investors was false.
¶ 12. Holland filed a Motion to Dismiss the case sub judice, arguing that dismissal was warranted on the basis of the settlement agreement in the Texas case, res judicata, and certain statutes of limitation. The motion was denied. Holland later filed a Motion for Reconsideration of Defendant's Motion to Dismiss and Alternatively, to Amend Order to Grant Certification for Interlocutory Appeal. After hearing arguments on the Motion, the Chancellor denied the Motion and denied certification for an interlocutory appeal.
¶ 13. On November 27, 1995, Holland filed a Motion to Dismiss because of the alleged unauthorized practice of law by Lee Cline, a disbarred former Louisiana attorney who assisted the Investors' attorneys in this case. The court allowed discovery to be conducted on the unauthorized practice of law issue. After which the motion was denied.
¶ 14. At the conclusion of the trial, the Chancellor ruled from the bench that the Investors had proven a violation of the Mississippi Securities Act, Miss.Code Ann. §§ 75-71-101 et seq. (1991 & Supp.1998). He concluded that Holland was not a party to, or released by the settlement agreement. Likewise, he found that the doctrine of res judicata would not apply to this case because Holland had been dismissed from the Texas case shortly before the settlement was reached. He also found that the Investors had proven fraud on the part of Holland, and then he awarded compensatory damages in the amount of $221,645.
¶ 15. The Investors presented punitive damages evidence by recalling Holland to the stand. The Chancellor, after considering Miss.Code Ann. § 11-1-65 (Supp. 1996), ruled that punitive damages were warranted and awarded the Investors $1,108,225 in punitive damages, five times the amount of compensatory damages. Thereafter, the Chancellor awarded the Investors attorneys' fees of $82,698.80. After post-trial motions were denied, Holland perfected his appeal to this Court.
¶ 16. The standard of review for factual determinations made by a trial judge sitting without a jury is the substantial evidence standard. Hill v. Thompson, 564 So.2d 1, 10 (Miss.1989); UHS-Qualicare, Inc. v. Gulf Coast Community Hosp., Inc., 525 So.2d 746, 753 (Miss.1987). We will not disturb the findings of a chancellor when they are supported by substantial evidence unless the chancellor abused his discretion, was manifestly wrong, clearly erroneous or applied an erroneous legal standard. Herring Gas Co. v. Whidclon, 616 So.2d 892, 894 (Miss.1993).
¶ 17. Holland claims that the lower court should have dismissed the Investors' action on the basis of the settlement agreement reached in the prior litigation or on the basis of res judicata due to the final judgment in the prior litigation, or both. The complaint in the Texas case was filed by the Investors against BT, Campbell Evans, and Roger Evans on October 9, 1990. In November of 1990, BT, Campbell Evans, and Roger Evans sued the Investors and Holland in Louisiana state court. The Louisiana case was removed and transferred to the federal district court in Texas and consolidated with the Texas case.
¶ 18. Holland was dismissed from the Texas case sua sponte on January 6, 1993. On that same day, the Texas court conducted a settlement hearing in which the remaining parties announced that they had agreed to settle the case. The parties agreed to reduce the settlement to writing and to present it to the Court on January 7, 1993. It is unclear from the record whether Holland was dismissed before or after the settlement hearing. At any rate, on February 8, 1993, the remaining parties filed an Agreed Motion to Dismiss. On February 12, 1993, the court dismissed the Texas case with prejudice.
¶ 19. Holland contends on appeal that the Settlement Agreement settled all disputes between the parties concerning the Chandeleur Prospect, and that the trial court should have dismissed the Investors' suit against him.
¶ 20. The Investors argue that the Settlement Agreement in the Texas case has no bearing on the present case. They argue that Holland was joined as a third-party defendant by BT and that he never appeared in the Texas case. The Investors argue further that Holland was dismissed from the case and was not a party to the Settlement Agreement.
¶ 21. An examination of the Settlement Agreement shows that Holland's name appears in the style of the case as a third-party defendant. It then contains the following language: "Whereas the parties to such action have compromised and settled all disputes between them and now wish to memorialize their compromise and settlement by this Agreement." The Agreement goes on to say that, "[I]t is understood and agreed that this Settlement Agreement shall be...
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