TXO Production Corp. v. Alliance Resources Corp.

Decision Date14 May 1992
Docket NumberNo. 20281,20281
Citation187 W.Va. 457,419 S.E.2d 870
CourtWest Virginia Supreme Court
PartiesTXO PRODUCTION CORP., a Delaware Corporation Licensed to do Business in West Virginia, Appellant, v. ALLIANCE RESOURCES CORP., a Texas Corporation Licensed to do Business in West Virginia; Tug Fork Land Company, a West Virginia Corporation; George King, an Individual; and Grover C. Goode, an Individual, Appellees.

Syllabus by the Court

1. "The common law of England, so far as it is not repugnant to the principles of the constitution of this state, shall continue in force within the same, except in those respects wherein it was altered by the general assembly of Virginia before the twentieth day of June, eighteen hundred and sixty-three, or has been, or shall be, altered by the Legislature of this state." W.Va.Code, 2-1-1 [1923].

2. Slander of title is actionable under West Virginia common law.

3. The elements of slander of title are:

1. publication of

2. a false statement

3. derogatory to plaintiff's title

4. with malice

5. causing special damages

6. as a result of diminished value in the eyes of third parties.

4. A tenant in possession under a lease is estopped to deny the title of his landlord.

5. "In determining whether the verdict of a jury is supported by the evidence, every reasonable and legitimate inference, fairly arising from the evidence in favor of the party for whom the verdict was returned, must be considered, and those facts, which the jury might properly find under the evidence, must be assumed as true." Syllabus Point 3 of Walker v. Monongahela Power Company, 147 W.Va. 825, 131 S.E.2d 736 (1963).

6. Attorneys' fees incurred in removing spurious clouds from a title qualify as special damages in an action for slander of title.

7. Admission of extrinsic acts evidence under Rule 404(b) of the West Virginia Rules of Evidence [1985] may be critical to the establishment of the truth as to a disputed issue, especially when that issue involves the actor's state of mind and the only means of ascertaining that mental state is by drawing inferences from conduct.

8. Protection against unfair prejudice from evidence admitted under Rule 404(b) of the West Virginia Rules of Evidence [1985] is provided by: (1) the requirement of Rule 404(b) that the evidence be offered for a proper purpose; (2) the relevancy requirement of Rule 402--as enforced through Rule 104(b); (3) the assessment the trial court must make under Rule 403 to determine whether the probative value of the similar acts evidence is substantially outweighed by its potential for unfair prejudice; and, (4) Rule 105, which provides that the trial court shall, upon request, instruct the jury that the similar acts evidence is to be considered only for the proper purpose for which it was admitted.

9. " 'Rulings on the admissibility of evidence are largely within a trial court's sound discretion and should not be disturbed unless there has been an abuse of discretion.' State v. Louk, 171 W.Va. 639, 301 S.E.2d 596, 599 (1983)." Syllabus Point 2, State v. Peyatt, 173 W.Va. 317, 315 S.E.2d 574 (1983).

10. "Rules 402 and 403 of the West Virginia Rules of Evidence [1985] direct the trial judge to admit relevant evidence, but to exclude evidence whose probative value is substantially outweighed by the danger of unfair prejudice to the defendant." Syllabus Point 4, Gable v. The Kroger Co., 186 W.Va. 62, 410 S.E.2d 701 (1991).

11. "The language of Rule 804(b)(5) of the West Virginia Rules of Evidence and its counterpart in Rule 803(24) requires that five general factors must be met in order for hearsay evidence to be admissible under the rules. First and most important is the trustworthiness of the statement, which must be equivalent to the trustworthiness underlying the specific exceptions to the hearsay rule. Second, the statement must be offered to prove a material fact. Third, the statement must be shown to be more probative on the issue for which it is offered than any other evidence the proponent can reasonably procure. Fourth, admissions of the statement must comport with the general purpose of the rules of evidence and the interest of justice. Fifth, adequate notice of the statement must be afforded the other party to provide that party a fair opportunity to meet the evidence." Syllabus Point 5, State v. Smith, 178 W.Va. 104, 358 S.E.2d 188 (1987).

12. Petitions for review of punitive damages awarded before 5 December 1991 should address each and every factor set forth in syllabus points 3 and 4 of Garnes v. Fleming Landfill, 186 W.Va. 656, 413 S.E.2d 897 (1991) with particularity, summarizing the evidence presented to the jury on the subject or to the trial court at the post-judgment review stage.

13. "When the trial court instructs the jury on punitive damages, the court should, at a minimum, carefully explain the factors to be considered in awarding punitive damages. These factors are as follows:

(1) Punitive damages should bear a reasonable relationship to the harm that is likely to occur from the defendant's conduct as well as to the harm that actually has occurred. If the defendant's actions caused or would likely cause in a similar situation only slight harm, the damages should be relatively small. If the harm is grievous, the damages should be greater.

(2) The jury may consider (although the court need not specifically instruct on each element if doing so would be unfairly prejudicial to the defendant), the reprehensibility of the defendant's conduct. The jury should take into account how long the defendant continued in his actions, whether he was aware his actions were causing or were likely to cause harm, whether he attempted to conceal or cover up his actions or the harm caused by them, whether/how often the defendant engaged in similar conduct in the past, and whether the defendant made reasonable efforts to make amends by offering a fair and prompt settlement for the actual harm caused once his liability became clear to him.

(3) If the defendant profited from his wrongful conduct, the punitive damages should remove the profit and should be in excess of the profit, so that the award discourages future bad acts by the defendant.

(4) As a matter of fundamental fairness, punitive damages should bear a reasonable relationship to compensatory damages.

(5) The financial position of the defendant is relevant."

Syllabus Point 3, Garnes v. Fleming Landfill, 186 W.Va. 656, 413 S.E.2d 897 (1991).

14. "When the trial court reviews an award of punitive damages, the court should, at a minimum, consider the factors given to the jury as well as the following additional factors:

(1) The costs of the litigation;

(2) Any criminal sanctions imposed on the defendant for his conduct;

(3) Any other civil actions against the same defendant, based on the same conduct; and

(4) The appropriateness of punitive damages to encourage fair and reasonable settlements when a clear wrong has been committed. A factor that may justify punitive damages is the cost of litigation to the plaintiff.

Because not all relevant information is available to the jury, it is likely that in some cases the jury will make an award that is reasonable on the facts as the jury know them, but that will require downward adjustment by the trial court through remittitur because of factors that would be prejudicial to the defendant if admitted at trial, such as criminal sanctions imposed or similar lawsuits pending elsewhere against the defendant. However, at the option of the defendant, or in the sound discretion of the trial court, any of the above factors may also be presented to the jury." Syllabus Point 4, Garnes v. Fleming Landfill, 186 W.Va. 656, 413 S.E.2d 897 (1991).

15. The outer limit of the ratio of punitive damages to compensatory damages in cases in which the defendant has acted with extreme negligence or wanton disregard but with no actual intention to cause harm and in which compensatory damages are neither negligible nor very large is roughly 5 to 1. However, when the defendant has acted with actual evil intention, much higher ratios are not per se unconstitutional.

Timothy R. Miller, Charles R. McElwee, Robinson & McElwee, Charleston, for appellant.

G. David Brumfield, Wade T. Watson, David L. White, Sanders, Watson & White, Bluefield, for appellee.

NEELY, Justice:

In this case, TXO Production Corporation, a subsidiary of USX, knowingly and intentionally brought a frivolous declaratory judgment action against the appellees to clear a purported cloud on title. TXO's real intent, however, was to reduce the royalty payments under a 1,002.74 acre oil and gas lease. Appellees counterclaimed alleging that TXO's actions were a slander of appellees' title. TXO now appeals the verdict against it for $19,000 in compensatory damages and $10,000,000 in punitive damages assigning three primary errors: (1) no cause of action for slander of title exists in West Virginia, and even if it does, the appellees did not prove the essential elements of slander of title at trial; (2) the circuit court erred in admitting testimony of lawyers involved in suits against TXO in other states to show plan, knowledge and intent in contravention of the West Virginia Rules of Evidence; and (3) the award of punitive damages in this case is a violation of due process as enunciated in Haslip v. Pacific Mutual Life Ins. Co., 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991) and Garnes v. Fleming Landfill, 186 W.Va. 656, 413 S.E.2d 897 (1991). We find no reversible error in the lower court's conduct of the trial and, because appellant and its agents and servants failed to conduct themselves as gentlemen, we decline to enter a remittitur. Thus, we affirm.


This case centers in the oil and gas development rights to 1,002.74 acres in McDowell County known as the "Blevins Tract." Tug Fork Land Company manages the Blevins Tract. In 1984,...

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