Mcneill v. Burlington Resource Oil & Gas

• Decision Date: 04 December 2006
• Docket Number: No. 25,469.,25,469.
• Parties: William F. McNEILL, Page McNeill, Marilyn Cates and The Black Trust, Plaintiffs-Appellants/Cross-Appellees, v. BURLINGTON RESOURCE OIL & GAS COMPANY, Defendant-Appellee/Cross-Appellant.
• Court: Court of Appeals of New Mexico

153 P.3d 46

2007 NMCA 024

William F. McNEILL, Page McNeill, Marilyn Cates and The Black Trust, Plaintiffs-Appellants/Cross-Appellees, v. BURLINGTON RESOURCE OIL & GAS COMPANY, Defendant-Appellee/Cross-Appellant.

No. 25,469.

Court of Appeals of New Mexico.

December 4, 2006.

Certiorari Granted, No. 30,162, February 9, 2007.

Law Offices of James P. Lyle, P.C., James P. Lyle, Albuquerque, NM Branch Law Firm, Turner W. Branch, Albuquerque, NM, for Appellants/Cross-Appellees.

Lynch Chappell & Alsup, P.C., Harper Estes, Steven C. Kiser, Midland, TX, Maddox & Holloman, P.C., Scotty Holloman, Hobbs, NM, for Appellee/Cross-Appellant.

OPINION

BUSTAMANTE, Chief Judge.

{1} The Defendant-Appellee/Cross-Appellant filed a motion for rehearing. This Court has considered the motion and the motion is hereby denied. The opinion filed in this case on October 26, 2006, is withdrawn and the following opinion is substituted therefor.

{2} This case requires us to determine the correct measure of damages for injury to real property. We conclude that the correct measure of damages depends on whether the injury is permanent or temporary, which is an issue of fact for the jury. Where the injury is permanent, the correct measure of damages is the diminution in the fair market value of the property. Conversely, where the injury is temporary, the correct measure of damages is the cost of repair or remediation, as long as the cost is less than the diminution in fair market value. Furthermore, the Plaintiff should be allowed to present evidence on the cost of repair or remediation in either situation because such evidence will normally be relevant in both cases. Finally, when determining the diminution in value of damaged property, the jury should consider the decrease in value to the entire property, not just the damaged portion of land. We therefore reverse and remand for proceedings consistent with this opinion.

BACKGROUND

{3} Plaintiffs are the owners of the surface rights of the McNeill Ranch, a cattle ranch in Lea County, New Mexico. The McNeill Ranch covers approximately 31,000 acres over two large tracts. Defendant, Burlington Resource Oil and Gas Co., is the former oil, gas, and mineral lessee under a portion of Plaintiffs' property. Defendant's predecessor-in-interest owned and operated an oil well on a tract of land on the McNeill Ranch, known as Tract 2, since approximately 1950. Standard practice when operating an oil well is to dig a pit in the ground in the immediate vicinity of the oil well in order to contain waste by-products of oil production. These by-products, known as "produced water," may contain many types of petroleum, hydrocarbons, salt water, and other contaminants.

{4} The oil well ceased production in 1986, and in 1992 Defendant closed the pit. After closure of the pit, the surface area looked like any other abandoned oil field operation, and it was not evident to the untrained eye that an old pit was buried at the site. In 1996, Plaintiff William McNeill received information leading him to suspect that there might be an old pit buried under Tract 2 of his ranch. After learning of the pit and possible contamination, Plaintiff William McNeill contacted Defendant and asked for the contaminated materials to be removed. Defendant did not remove or replace the contaminated materials. Although there have been no additional deposits into the pit since 1986, the existing contaminants had been accumulating on the property since 1950 and will not disappear or abate on their own. Instead, the contaminants will require removal and replacement of a large amount of contaminated soil. It is not disputed that Defendant is the successor-in-interest to the companies that drilled, operated, plugged, and cleaned up this well and the associated pit.

{5} Plaintiffs filed suit on June 1, 1999, then filed a second amended complaint on January 13, 2000, alleging negligence, trespass, and private nuisance for contamination of their property resulting from Defendant's operation of an oil well. Specifically, Plaintiffs allege that Defendant's failure to properly close the associated pit resulted in subsurface contamination of their property. Furthermore, Plaintiffs assert that the contamination has affected the water supply in the area and that, as a result, Plaintiffs' cattle will not drink the water.

{6} Defendant filed an answer to the second amended complaint on September 28, 2004, raising the defenses of statute of limitations, estoppel, waiver, and release, among others. The district court ruled, in response to a motion in limine filed by Defendant, that the appropriate measure of damages in the case is diminution in value, if any, to the fair market value of the property involved. The district court further ruled that Plaintiffs' experts could only testify as to the applicable standard for permanent damage to real property, which the court determined to be the diminution in the fair market value of the land involved, and that Plaintiffs' experts could not testify regarding the remediation costs. The case went to trial before a jury. At the close of the evidence, Defendant moved for a directed verdict on the private nuisance claim, arguing that the New Mexico Supreme Court declined to adopt private nuisance as a theory of recovery. The district court granted the motion for directed verdict. The jury then returned a verdict for Plaintiffs on the theories of negligence and trespass and awarded damages in the amount of $135,000. Plaintiffs appeal on the issues of the jury instructions for damages and private nuisance. Defendant cross-appeals, raising several other issues.

DISCUSSION

{7} Plaintiffs argue that the district court erred in ruling that the injury was permanent, thus preventing the jury from considering whether the cost of removal of the contaminated material exceeded the value of the property, as well as stigma damages. Plaintiffs also argue that the district court erred in directing a verdict in favor of Defendant on the private nuisance claim. Defendant cross-appeals, raising three issues: (1) all claims for surface damages have been waived by deed, (2) the Black Trust Plaintiffs do not own the causes of action they have asserted, and (3) Plaintiffs' claims are barred by the statute of limitations. We address Defendant's issues on cross-appeal first, because if there is merit to any of Defendant's contentions, Plaintiffs' claims on appeal are moot.

DEFENDANT'S ARGUMENTS ON CROSS-APPEAL

1. Estoppel by Deed or Waiver

{8} We address this issue summarily by noting that Defendant failed to raise it in a timely manner. Defendant raised the issue of estoppel by deed or waiver for the first time as an affirmative defense in an answer to Plaintiffs' second amended complaint, which was filed on January 13, 2000. Defendant filed its answer to the second amended complaint on September 28, 2004, more than four and a half years after Plaintiffs filed the second amended complaint. Defendant therefore waived the defense of estoppel by deed or waiver by operation of Rule 1-012(A) (providing that a defendant shall serve an answer within thirty days of service of the complaint). Alternatively, if we view the untimely answer to the second amended complaint as an attempt to amend the original answer, Defendant failed to comply with the deadlines applicable to the amendment of pleadings, which are required by Rule 1-015(A) NMRA.

{9} Rule 1-015(A) sets forth the relevant deadlines for amendments to pleadings and states that, where such deadlines have passed, "a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Id. Defendant failed to move for leave to amend the original answer, as required by Rule 1-015(A). Moreover, Defendant does not challenge the district court's pretrial ruling precluding Defendant from presenting evidence on the issue of estoppel by deed or waiver. Rather, Defendant asserts that the district court considered the issue anew when Defendant reintroduced it by motion for directed verdict and during Defendant's post-trial motion for judgment as a matter of law and alternative motion to alter or amend the judgment. This argument is without merit.

{10} The district court summarily denied each of Defendant's motions regarding the defense of estoppel by deed or waiver without explaining its reasons for doing so. Defendant asserts that the district court, despite its pretrial ruling, agreed to weigh the merits of Defendant's legal argument at a later time and that the court did so in the process of denying Defendant's motions on the issue. However, the record is far from clear on this point and we can find no indication that the court ever limited or vacated its prior ruling. Without more, we must assume that the district court was simply upholding the prior ruling by denying the motions.

{11} In sum, we decline to entertain Defendant's appeal on the estoppel by deed or waiver issue because to do so would frustrate the purpose of our Rules of Civil Procedure. Holding otherwise would allow any litigant to "sneak in" an appropriately barred claim or defense by simply reintroducing the issue by motion at trial and, if the motion is denied, appealing the denial of the motion. We therefore conclude that the affirmative defense of estoppel by deed or waiver in the answer was not properly raised, and thus will not be addressed on appeal. We next turn to Defendant's second claim of error on cross-appeal.

2. The Black Trust Plaintiffs Own the Causes of Action

{12} Defendant next argues that the Black Trust Plaintiffs do not own the causes of action in this case because the language in the quitclaim deed by which the property was conveyed to them was insufficient to convey personal causes of action. Defendant moved for a directed verdict on the issue, contending that Plaintiffs presented no evidence of title or...