Moore v. Pennsylvania Castle Energy Corp.
| Decision Date | 31 July 1996 |
| Docket Number | No. 95-6142,95-6142 |
| Citation | 89 F.3d 791 |
| Court | U.S. Court of Appeals — Eleventh Circuit |
| Parties | 134 Oil & Gas Rep. 1 Gladys MOORE, Plaintiff-Appellee, Cross-Appellant, v. PENNSYLVANIA CASTLE ENERGY CORPORATION, Defendant-Appellant, Cross-Appellee. |
Andrew P. Campbell, Charles M. Elmer, Birmingham, AL, for appellant.
Ronald L. Davis, James J. Sledge, Tuscaloosa, AL, for appellee.
Appeals from the United States District Court for the Northern District of Alabama.
Before ANDERSON and COX, Circuit Judges, and RONEY, Senior Circuit Judge.
In this diversity case involving Alabama law, Pennsylvania Castle Energy Corporation ("Penn Castle") appeals from a final judgment entered in the district court upon a jury verdict in favor of plaintiff Gladys Moore. The issue raised by Penn Castle on appeal concerns the introduction of parol evidence to vary the terms of a written agreement, which Penn Castle claims is complete and unambiguous. The cross-appeal by Moore raises the issue of the dismissal of her claim for punitive damages.
Because we conclude that the district court erred in admitting the parol evidence, we reverse the judgment entered in favor of Moore. With respect to the cross-appeal, we conclude that Moore's claim for punitive damages was properly dismissed, and we therefore affirm on that issue.
Moore owns the surface rights to several hundred acres of land in Tuscaloosa County, Alabama; however, she does not own the subsurface minerals and mineral rights. In 1907, Moore's predecessor-in-interest conveyed by severance deed the title to all minerals in the land, along with certain rights to use the surface land in the extraction of the minerals. Penn Castle is the lessee of the subsurface mineral estate and all rights appurtenant thereto. Penn Castle acquired this leasehold interest by assignment from TRW, Inc. ("TRW") in 1990.
Under Alabama law and the terms of the severance deed, TRW had the right to enter and to make reasonable use of Moore's land to explore, develop, and produce subsurface minerals, including coalbed methane gas. See, e.g., Vines v. McKenzie Methane Corp., 619 So.2d 1305 (Ala.1993). Notwithstanding this right of reasonable surface use, Penn Castle presented evidence that producers in the Alabama coalbed methane industry often negotiate "surface access and surface damage agreements" with surface estate owners. The purpose of such agreements is to avoid litigation by compensating surface estate owners for any damage that might be caused by the use of the surface property in the extraction of minerals.
In 1983, TRW became interested in drilling several wells on Moore's property, and in entering a surface access and surface damage agreement with Moore. As negotiations progressed during the spring of 1983, TRW representatives met with Moore and spoke to her by telephone several times. During this period, TRW sent Moore a map of her property, which indicated the locations of six proposed gas well drill sites. On August 2, 1983, Moore and her son Gene Moore met with several TRW representatives at Moore's house, with the map spread across a table. According to the trial testimony of Moore and her son, she and the TRW representatives reached an oral agreement after three hours of negotiation. The parties orally agreed to the following terms: (1) TRW would never drill more than six gas wells on Moore's property; (2) TRW would drill these gas wells in accordance with the six drill sites indicated on the map; and (3) TRW would never drill a gas well in a fifty-acre field on the Moore property (the "Field"). These three oral understandings were not reduced to writing that day.
On the next day, a TRW representative came to Moore's house and dropped off a proposed written contract. In this proposal, TRW promised to pay Moore $10,000 in exchange for a "perpetual easement with the right to construct six (6) drill sites for drilling and production of coalbed methane gas, construction of necessary access roads, installation of power lines and gathering systems and other coalbed methane gas recovery activity...." The $10,000 was to constitute "full and complete payment for any and all damages to and/or loss of trees and vegetation, easements and drill sites for six (6) coalbed methane gas wells." The locations of two of the six drill sites were specified in the written proposal. With respect to the four remaining drill sites contemplated, the written proposal provided as follows:
It is agreed and understood that TRW will discuss with Surface Owner the easement and drill site locations for the remaining four (4) coalbed methane gas wells of which TRW has the final decision for location. Each of the four (4) drill sites will not exceed one (1) acre and the associated easement for the four (4) drill sites will not exceed three (3) net acres. Should additional easement be required, TRW will remunerate Surface Owner at the rate of Six Hundred Dollars ($600.00) per net acre.
Moore expressed disagreement about the last sentence of the above-quoted paragraph, and it was changed to read: "Should additional easement be required, TRW will remunerate Surface Owner at a rate to be negotiated per net acre."
On August 5, 1983, Moore and her son met with the TRW representatives again. After making and initialling a correction to a description of the location of "Well Site 1" in paragraph two, Moore signed the proposed contract (hereinafter, the "written agreement"). The written agreement includes the modified language in paragraph two, and an attached "Exhibit A," referred to in paragraph two, which more specifically describes the locations of the two drill sites and associated easements. The written agreement does not incorporate or otherwise refer to the map, nor does it mention TRW's oral promise never to drill more than six wells. The written agreement also does not mention the oral promise not to drill in the Field. To the contrary, the written agreement states that "TRW has the final decision for location" with respect to the four remaining drill sites contemplated by the written agreement. Nevertheless, Moore and her son testified that at the August 5, 1983, meeting, TRW representatives repeated the oral assurances that TRW would drill its gas wells only in accordance with the drill sites indicated on the map, and that it would never drill in the Field. After hearing these oral assurances, Moore signed the written agreement.
Between December of 1983 and August of 1984, TRW and Moore executed three supplemental letter agreements, each of which described an additional drill site on Moore's property (for a total of five). Although none of the supplemental letter agreements mentioned the map or the oral promise not to drill on the Field, all five of the drill sites chosen by TRW roughly corresponded to the sites on the map, and TRW did not drill on the Field. TRW completed its drilling on the Moore property in late 1984, apparently without having chosen a sixth drill site. 1
In 1990, TRW assigned its lease to the defendant, Penn Castle. Beginning in October of 1992, a representative of Penn Castle contacted Moore in an effort to negotiate additional drill sites. However, Moore and her son told Penn Castle that they were not amenable to additional wells. Several subsequent attempts to negotiate additional drill sites failed. Unable to reach a compromise, Penn Castle began constructing an access road and drill pad in the middle of the Field on December 26, 1992.
On August 24, 1993, Moore filed this action against Penn Castle in Alabama state court, stating claims for breach of oral contract and trespass. Penn Castle removed the case to federal court based on diversity of citizenship. See 28 U.S.C. § 1332. The case proceeded to trial.
During the trial, the district court admitted evidence of the oral conversations between Moore and TRW over Penn Castle's objection that such negotiations were merged into the written agreement. Penn Castle similarly objected to the admission of the map into evidence, but the district court overruled the objection.
At a break in the trial testimony, the district court considered Penn Castle's motion for judgment as a matter of law, which was based in part on the parol evidence rule. After hearing argument, the district court denied the motion, concluding "that there is a latent ambiguity in the contract, in the written contract, and that it is for the jury to determine whether there was a separate oral agreement." At the close of all the evidence, the district court summarily denied the motions for judgment as a matter of law by Moore and Penn Castle. However, the district court granted Penn Castle's motion for judgment as a matter of law as to Moore's claim for punitive damages.
On February 1, 1995, the jury returned a general verdict of $159,000 in favor of Moore, and the district court entered final judgment. Penn Castle repeated its arguments to the district court by filing a Rule 50(b) motion for judgment as a matter of law, or, in the alternative, a Rule 59 motion for new trial or remittitur. On February 13, 1995, the district court entered an order summarily denying Penn Castle's post-judgment motions. Penn Castle filed a notice of appeal from the $159,000 final judgment entered by the district court. Moore filed a notice of cross-appeal from the order of the district court granting Penn Castle's motion for judgment as a matter of law on her claim for punitive damages.
We address only one issue on appeal: whether the district court erred in permitting Moore to present evidence of her alleged oral agreement with TRW. 2 Under Alabama law, once the parties to a contract have reduced their agreement to writing, all prior statements, promises, and negotiations are merged into the resulting written document. See Guilford v. Spartan Food Systems, Inc., 372 So.2d 7 (Ala.1979) (...
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