Seeco Inc. v Hales

• Decision Date: 13 July 2000
• Docket Number: 99-800
• Citation: 22 S.W.3d 157
• Parties: SEECO, INC., Arkansas Western Gas Company, and Southwestern Energy Company v. Allen HALES, Mary Nelle Hales, Robert G. Jeffers, David P. Taylor, and Taylor Family Limited Partnership "A" 99-800 ___ S.W.3d ___ Opinion delivered
• Court: Arkansas Supreme Court

SEECO, INC., Arkansas Western Gas Company, and Southwestern Energy Company v Allen HALES, Mary Nelle Hales, Robert G. Jeffers, David P. Taylor, and Taylor Family Limited Partnership "A"

99-800 ___ S.W.3d ___

Opinion delivered June 22, 2000

[Substituted opinion delivered July 13, 2000.]

Supreme Court of Arkansas

Appeal from Sebastian Circuit Court, Fort Smith District; Don Langston, Judge; affirmed.

1. Motions -- directed verdict -- standard of review for denial. -- The standard of review for the denial of a motion for a directed verdict is whether the jury's verdict is supported by substantial evidence.

2. Evidence -- substantial evidence defined. -- Substantial evidence is evidence of sufficient force and character to compel a conclusion one way or the other with reasonable certainty; it must force the mind to pass beyond suspicion or conjecture.

3. Evidence -- sufficiency of -- appellate review. -- When determining the sufficiency of the evidence, the appellate court reviews the evidence and all reasonable inferences arising therefrom in the light most favorable to the party on whose behalf judgment was entered; in such situations, the weight and value of testimony is a matter within the exclusive province of the jury.

4. Judgment -- judgment notwithstanding verdict -- when JNOV may be entered. -- A trial judge may enter a judgment notwithstanding the verdict (JNOV) only if there is no substantial evidence to support the verdict and the moving party is entitled to judgment as a matter of law.

5. Oil & gas -- breach of leases -- administrative agency orders did not provide defense to royalty owners' claims. -- The supreme court concluded that the Arkansas Public Service Commission orders in question did not provide a defense to the royalty owners' claims for breach of leases as a matter of law; at the most, the orders presented evidence for the jury to resolve, and the jury resolved the issue of breach of the leases against appellants.

6. Oil & gas -- contract price -- prevailing market price. -- When a producer's lease calls for a royalty on gas based on the market price at the well and the producer enters into an arm's length, good-faith gas purchase contract with the best price and terms available to the producer at the time, that price is the "market price" and will discharge the producer's gas royalty obligation; under Hillard v. Stephens, 276 Ark. 545,637 S.W.2d 581 (1982), the contract price agreed to at the time the leases in question were entered into was the prevailing market price.

7. Oil & gas -- instruction on contract price -- trial court did not err in giving. -- Where the instruction at issue, which stated that the market value price is the contract price throughout the term of the contract, appeared entirely consistent with the relevant case law, and where the evidence presented by appellee royalty owners was sufficient for the jury to find that appellant accepted less than the market price over the term of contract in question, the trial judge did not err in giving the instruction.

8. Witnesses -- expert witnesses -- weight & value given within jury's province. -- The weight and value to be given expert witnesses lies within the exclusive province of the jury; it is the jury's decision whether to believe or disbelieve any witness.

9. Witnesses -- expert witnesses -- jury accorded more weight to testimony of appellees' witnesses. -- Where the jury accorded the testimony of appellee royalty owners' expert witnesses more weight than that of appellants' witnesses, the supreme court would not disturb that finding on appeal.

10. Witnesses -- expert witnesses -- conclusions explained with regard to law & facts of case. -- Once an expert witness is qualified, the weakness in the factual underpinning of the expert's opinion may be developed on cross-examination, and the weakness goes to the weight and credibility of the expert's testimony; here, the testimony of appellees' witness was based on the particular facts of the case, and the conclusions he reached were thoroughly explained with regard to the law and the facts surrounding the case.

11. Oil & gas -- failure to enforce contract -- no basis for reversal of award of damages. -- Where there was simply no evidence that had appellant A elected to enforce the contract in question, the Public Service Commission would have prohibited pass-through of the prices to appellant gas producer's ratepayers and thus allowed appellant public utility to terminate the contract; where the affiliated relationship between appellants gas producer and public utility raised additional questions about appellant gas producer's lack of enforcement; and where the jury credited appellees' witness's testimony over that of appellants' witness, awarding damages based on appellant gas producer's failure to enforce the contract, there was no basis for reversal on the point.

12. Oil & gas -- "prudent operator" standard -- test for determining lessee's breach of implied covenants. -- The "prudent operator" standard is the test for determining whether a lessee has breached any implied covenants, including the implied duty to market.

13. Oil & gas -- "prudent operator" standard -- defined & discussed. -- The "prudent operator" standard is what an experienced operator of ordinary prudence would do under the same or similar circumstances, having due regard for the interests of both the lessor and the lessee; it is not the place of courts, or lessors, to examine in hindsight the business decisions of a gas producer; the greatest possible leeway should be indulged the lessee in his decision about marketing gas, assuming no conflict of interest between lessor and lessee; ordinarily, the interests of the lessor will coincide; the lessee will have everything to gain and nothing to lose by selling the product.

14. Oil & gas -- "prudent operator" standard -- conflict of interest resulting from appellants' affiliation. -- The supreme court concluded that the jury was required to judge the actions of appellant gas producer at the time the contract was entered into and to judge whether another operator in the same or similar circumstances at that time would have enforced the terms of the contract against appellant public utility; there was a conflict of interest because of appellant gas producer's affiliation with appellant public utility; had there been no affiliation, the jury would have been free to conclude that appellant gas producer would have attempted to get the best price possible, thus benefitting appellee royalty owners.

15. Motions -- directed verdict & JNOV -- trial court did not err in denying where proof constituted substantial evidence to support verdict. -- Where appellees' witness supported with specific references to documentary proof and relevant events his conclusions that appellant gas producer did not act as a reasonably prudent operator in protecting the interest of appellee royalty owners and that, from almost the beginning, appellant public utility paid less than the contract price, this proof constituted substantial evidence to support the verdict, and the trial court did not err in denying appellants' motion for directed verdict and their motion for judgment notwithstanding the verdict.

16. Appeal & error -- authority not cited -- issue not addressed. -- Where appellants cited no case law in support of their argument, the supreme court would not address the issue.

17. Fraud -- elements -- justifiable reliance. -- To establish fraud, a party must show as an element justifiable reliance on the false representation.

18. Fraud -- reliance -- actual reliance defined. -- The supreme court has defined actual reliance to mean that the plaintiff acted or did not act by reason of the defendant's misrepresentation.

19. Fraud -- reliance -- substantial evidence of. -- Where letters mailed to a large number of the royalty owners represented to appellees that they would receive a fair price for their royalty interest and that appellant gas producer was simply looking out for the best interests of the royalty owners, it was reasonable to conclude that, based on those letters, the royalty owners would believe that appellant gas producer was working in their interest, particularly since that is what they were told; not only was there was a failure to disclose the contract prices in the letters, but the royalty check stubs and the monthly royalty statements were also misleading; all of this was relied on by the royalty owners to their detriment, and the supreme court concluded that it amounted to substantial evidence of reliance.

20. Fraud -- confidential relationship -- existence is question for trier of fact. -- Whether a confidential relationship exists is a question of fact for the trier of fact to decide.

21. Fraud -- duty to disclose -- supreme court affirmed on issue. -- Because the jury returned verdicts for fraud, constructive fraud, and fraudulent concealment, the supreme court presumed that it had found that a confidential or special relationship existed giving rise to a duty on the part of appellant gas producer to speak and clarify misinformation upon which others might rely; a producer occupies a fiduciary relationship with respect to its royalty owners; where appellants' witness testified that he agreed in the past that appellant gas producer owed afiduciary duty to its royalty owners and added that appellant gas producer had always tried to act as a fiduciary towards them, that supported the jury's verdict; the supreme court affirmed on the issue of duty to disclose.

22. Fraud -- due diligence -- no basis for reversing jury's determination that appellees exercised due diligence. -- Where the jury returned a special verdict finding fraudulent concealment, it disagreed with appellants and found that the royalty owners exercised due diligence; the supreme court discerned no basis for reversing the jury's determination.

23. Corporations...