Pinnacle Gas Res. v. Diamond Cross Prop., DA 08-0037.

• Decision Date: 21 January 2009
• Docket Number: No. DA 08-0037.,DA 08-0037.
• Citation: 2009 MT 12,201 P.3d 160
• Parties: PINNACLE GAS RESOURCES, INC., Plaintiff and Appellee, v. DIAMOND CROSS PROPERTIES, LLC, Defendant and Appellant.
• Court: Montana Supreme Court

201 P.3d 160

2009 MT 12

PINNACLE GAS RESOURCES, INC., Plaintiff and Appellee, v. DIAMOND CROSS PROPERTIES, LLC, Defendant and Appellant.

No. DA 08-0037.

Supreme Court of Montana.

Submitted on Briefs September 24, 2008.

Decided January 21, 2009.

For Appellant: Loren J. O'Toole, II, O'Toole Law Firm, Plentywood, Montana.

For Appellee: Christopher Mangen, Jr., Crowley, Haughey, Hanson, Toole & Dietrich, PLLP, Billings, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Defendant Diamond Cross Properties, LLC (Diamond Cross) appeals from the District Court's entry of a preliminary injunction in favor of Plaintiff Pinnacle Gas Resources, Inc. (Pinnacle). We affirm.

¶ 2 We restate the issues on appeal as follows:

¶ 3 1. Did the District Court err by allowing Pinnacle to present testimony in support of its motion for preliminary injunction after presenting its case-in-chief, and by issuing an injunction in reliance upon that testimony?

¶ 4 2. Did the District Court err by granting Pinnacle's request for a preliminary injunction despite Pinnacle's failure to fully give the statutory notice of entry upon Diamond Cross' property?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 Pinnacle holds an oil and gas lease to a portion of the mineral interests in land owned by Diamond Cross. In conjunction with the lease agreement, a Surface and Damage Agreement (SDA) between the parties gives Pinnacle the right to enter the land in order to exercise its right to drill for oil and gas. The primary term of the lease was written to expire on January 11, 2008, but the term could be extended by the commencement of drilling operations on the land by Pinnacle before that date.

¶ 6 On November 15, 2007, Pinnacle's senior landman, Larry Sare, spoke with Lonnie Wright on the telephone concerning Pinnacle's intention to commence drilling on the Diamond Cross property, and scheduled a meeting of the parties on the land to discuss the location of drilling. Lonnie Wright is a part owner of Diamond Cross, the principal shareholder's son-in law, and apparent manager of the ranchland at issue. That same day, Sare mailed a letter concerning the drilling to "Diamond Cross Ranch, Attn: Lonnie Wright" at Wright's address. Sare intended the letter to satisfy the notice requirements for drilling contained in § 82-10-503, MCA ("Per Title 82, Chapter 10, Part 5, MCA, please be notified that Pinnacle Gas Resources ("PGR") plans to begin drilling operations. ..."). However, instead of sending the letter to the address for Diamond Cross listed on county records, as required by the statute, Sare sent it to Wright's address.

¶ 7 On November 27, 2007, Sare, Wright, and others met at the property to discuss access for and location of the drilling. On December 7, 2007, Sare sent another letter to Wright at Wright's address. This letter reviewed what the parties had discussed during their meeting on the property and included a check for the drilling fee of $300, as required by the SDA.

¶ 8 On December 14, 2007, counsel for Diamond Cross sent a letter to Sare which stated that Pinnacle had not satisfied the notice requirements under the statute and that, until Pinnacle did, Diamond Cross would consider Pinnacle a trespasser, not permit entry, and "pursue all legal remedies should Pinnacle breach the peace and attempt entry onto the Diamond Cross Ranch."

¶ 9 On December 17, 2007, Sare responded by mailing a letter to Diamond Cross' counsel at counsel's law office address. Sare's letter addressed the alleged notice shortcomings mentioned in counsel's letter of December 14, and stated that drilling would begin on January 7, 2008.

¶ 10 On December 31, 2007, Pinnacle filed a Verified Complaint and moved for a preliminary injunction to enjoin Diamond Cross from preventing Pinnacle from entering and drilling on the property. Diamond Cross filed a brief in opposition, arguing that Pinnacle failed to satisfy the statute because it had sent notice to Wright's address and to Diamond Cross' counsel's address, but not to the address for Diamond Cross listed on county records.¹

¶ 11 On January 8, 2008, the District Court conducted a hearing on Pinnacle's motion for preliminary injunction. Relying upon the allegations of its Verified Complaint, Pinnacle offered no evidence, but provided only argument to the court. Diamond Cross then argued that the motion should be denied because Pinnacle's Verified Complaint was insufficient under the statute to constitute evidence, noting it had warned Pinnacle of this potential insufficiency in chambers prior to the hearing. Diamond Cross further argued that Pinnacle's failure to comply with the statute left it without a right of entry. Pinnacle then requested leave to call a witness to verify the facts in the Complaint, which the District Court granted over Diamond Cross' objection. After hearing the testimony, the District Court granted Pinnacle's motion for preliminary injunction, concluding that Pinnacle would be irreparably harmed without relief and that Diamond Cross could not prevent Pinnacle from entering to drill on the land. Diamond Cross appeals.

STANDARD OF REVIEW

¶ 12 "The grant or denial of a preliminary injunction is so largely within the discretion of the district court that we will not disturb its decision, barring a manifest abuse of discretion." Yockey v. Kearns Props., LLC, 2005 MT 27, ¶ 12, 326 Mont. 28, ¶ 12, 106 P.3d 1185, ¶ 12 (citing Shammel v. Canyon Resources Corp., 2003 MT 372, ¶ 11, 319 Mont. 132, ¶ 11, 82 P.3d 912, ¶ 11). "A manifest abuse of discretion is one that is obvious, evident, or unmistakable." Yockey, ¶ 12 (citation omitted). "[A] preliminary injunction does not determine the merits of the case" and our analysis "is not intended to express and does not express any opinion about the ultimate merits" of the case. Benefis Healthcare v. Great Falls Clinic, LLP, 2006 MT 254, ¶ 19, 334 Mont. 86, ¶ 19, 146 P.3d 714, ¶ 19 (internal citation and quotation omitted). "In addition, we review a district court's conclusions of law to determine whether its interpretation is correct." Yockey, ¶ 12 (citation omitted).

DISCUSSION

¶ 13 1. Did the District Court err by allowing Pinnacle to present testimony in support of its motion for preliminary injunction after presenting its case-in-chief, and by issuing an injunction in reliance upon that testimony?

¶ 14 At the preliminary injunction hearing, Pinnacle initially presented no evidence, stating it would rely upon its Verified Complaint as an affidavit pursuant to § 27-19-303(2), MCA, which provides, in pertinent part, as follows:

(2) Upon the hearing each party may present affidavits or oral testimony. An injunction order may not be granted on affidavits unless:

(a) they are duly verified; and

(b) the material allegations of the affidavits setting forth the grounds for the order are made positively and not upon information and belief.

(Emphasis added.)

¶ 15 Noting that the allegations of Pinnacle's Complaint were verified by the President and CEO of Pinnacle "to the best of my knowledge, belief and understanding," Diamond Cross objected to use of the Complaint as evidence in support of the injunction request, arguing it was insufficient under the statute. In response, the following exchange occurred:

[Counsel for Pinnacle]: [Diamond Cross] has raised a question about the sufficiency of the verification of the Complaint, so if the Court doesn't mind, I'd like to call Larry Sare to the stand for Pinnacle Resources.

THE COURT: All right. If you will be sworn.

[Counsel for Diamond Cross]: I guess I'm going to object, Your Honor, because procedurally, you know, you don't—I didn't put anything on. So now this is rebuttal testimony to what? There's—I mean, there's nothing to rebut.

THE COURT: [to Counsel for Diamond Cross] I'm going to allow it and if you care to have some testimony, I'll allow you the same privilege.

[Counsel for Diamond Cross]: I appreciate it.

THE COURT: Go ahead.

[Counsel for Pinnacle]: Yes, Your Honor. I'm calling Mr. Sare primarily because [Counsel for Diamond Cross] questioned the sufficiency of this verification. So I'm going to have him verify it.

THE COURT: I understand. Go ahead.

¶ 16 Diamond Cross argues that Pinnacle failed to present any proper evidence during its case-in-chief, and that the District Court erred by permitting Pinnacle to call a witness in what was essentially Pinnacle's rebuttal, except that Diamond Cross had submitted no evidence to rebut. Diamond Cross asserts that "[b]y permitting Pinnacle to call a witness at this stage of the proceeding, the district court granted Pinnacle an unwarranted second opportunity to present evidence."

¶ 17 A district court has general discretion to conduct the proceeding in an appropriate manner. "The order in which proof is admitted at trial is within the sound discretion of the trial court." Stockman Bank of Mont. v. Potts, 2006 MT 64, ¶ 18, 331 Mont. 381, ¶ 18, 132 P.3d 546, ¶ 18. "A determination of whether proposed testimony is admissible as rebuttal testimony in any given case is within the sound discretion of the District Court, and we will not reverse the District Court's ruling unless it abused this discretion." Massman v. City of Helena, 237 Mont. 234, 243, 773 P.2d 1206, 1211 (1989). Similarly, "[t]he reopening of a case for the introduction of further evidence after it has been closed is within the discretion of the trial court. Its ruling upon the request to reopen will not be disturbed by the appellate court, unless there has been a clear abuse of discretion." Stavenjord v. Mont. St. Fund, 2003 MT 67, ¶ 19, 314 Mont. 466, ¶ 19, 67 P.3d 229, ¶ 19 (citation and quotation omitted). After initial production of their respective evidence, "[t]he parties will then be confined to rebutting evidence unless the court, for good reasons in furtherance of justice, permits them to offer evidence in their original case." Section 25-7-301(4), MCA.

¶ 18 In...