DocketNumber： Nos. 85-1698, 85-1803
Judges： Barrett, McKay, Tacha
Filed Date： 5/21/1986
Status： Precedential
Modified Date： 11/4/2024
This appeal and cross-appeal is from a judgment containing an interlocutory order, duly certified pursuant to Fed.R.Civ.P. 54(b). Our jurisdiction vests pursuant thereto and by virtue of 28 U.S.C. § 1292(b). There are many issues presented in this complex diversity based case. However, only one is dispositive. That involves a party’s failure to object to a jury’s general verdict on the ground of inconsistency prior to the discharge of the jury.
I.
Factual Background
Appellees John Hamilton and Martha Francis own three-fourths of the mineral estate underlying a 640 acre tract situate in Ellis County, Oklahoma, described as Section 33, Township 23 N., Range 26 W. Their interest was leased to Diamond Shamrock. The remaining one-fourth interest is owned by appellee Morris Richardson, who leased his interest to Zinke and Trumbo, Ltd. The Oklahoma Corporation Commission established Section 33 as a 640 acre drilling and spacing unit for production from the Morrow formation.
In 1981, Diamond Shamrock, as 100 percent working interest owner, drilled and completed a well producing from the Morrow formation situate in Lipscomb County, Texas, known as the Travis Well. This well is adjacent to Section 33, supra. In September of 1981, Diamond Shamrock proposed the drilling of the Hamilton No. 1-33 at a location in the SWV4 of Section 33. Zinke and Trumbo requested that Diamond Shamrock drill the well as an offset to the Travis Well in order to protect them from drainage resulting from production from the Travis Well. Diamond Shamrock agreed and obtained a location exception from the Commission to drill the Hamilton No. 1-33 Well 317 feet from the south line and 367 feet from the west line in the SWV4 of Section 33. Diamond Shamrock and Zinke and Trumbo entered into a Joint Operating Agreement whereby Diamond Shamrock was designated as operator. The well was drilled by Diamond Shamrock to the Morrow formation and completed in September, 1982. It was reported by Diamond Shamrock as a shut-in gas well awaiting a pipeline connection. No gas has been produced and sold from the Hamilton 1-33 Well.
In the course of completion operations, a dispute arose between Diamond Shamrock and Zinke and Trumbo relative to completion procedures. This resulted in the instant litigation. On October 12, 1982, Diamond Shamrock sued Zinke and Trumbo under the terms of the Operating Agreement (breach of contract claim) for the proportionate share of costs and expenses incurred in the drilling and completion of Hamilton 1-33 Well in amount of $133,-551.71, together with further accruing costs, interest thereon, costs of the action and a reasonable attorney’s fee. In addition, Diamond Shamrock sought an order of foreclosure on Zinke and Trumbo’s leasehold interests in satisfaction of the claim.
Zinke and Trumbo answered and denied any liability. On June 28, 1983, Zinke and Trumbo, as defendant, joined by Morris A. Richardson, John Hamilton and Martha N.
The Counterclaim further alleged that: due to the limited size of the reservoir and geological and economic conditions, a replacement well cannot be drilled on Section 33; Hamilton 1-33 Well is noncommercial; counterclaimants own no interest in the Travis # 1 Well and therefore do not share in production therefrom; Travis # 1 Well has been producing from the same common reservoir as the unproductive Hamilton 1-33 Well due solely to Diamond Shamrock’s gross neglect; and Travis # 1 Well will drain all of the hydrocarbons from the reservoir to the detriment of counterclaim-ants. Id. at 59-61.
The Counterclaim alleged, based on log calculations and production in the area, that the reserves of Hamilton 1-33 Well and values to counterclaimants were: $906,100.00 to Zinke and Trumbo; $209,-100.00 to Morris A. Richardson; $522,-750.00 to John Hamilton; and $104,550.00 to Martha N. Francis. Id. at 61. A jury demand was made by the counterclaimants.
In Answer to the Counterclaim, Diamond Shamrock alleged that the Hamilton 1-33 Well “[i]s capable of producing gas in paying quantities from the Morrow formation, but that said well is shut in awaiting a pipeline connection” and that its every action with regard to Hamilton 1-33 Well has been that of a prudent operator, including every action necessary to market production from the well but, notwithstanding, no market has been located. Further, Diamond Shamrock denied that a replacement well cannot be drilled upon Section 33, and that production from the Travis # 1 Well has or will cause drainage to Section 33. Id. at 65-67.
Zinke and Trumbo filed an amendment to its Answer setting up Affirmative Defenses by virtue of an alleged oral agreement on February 16, 1982, with Diamond Shamrock “[a]s to the manner in which the subject well was to be completed and that Diamond Shamrock Corporation breached that agreement by completing the well in a manner different from that agreed to by Zinke & Trumbo, Ltd. and Diamond Shamrock Corporation with the result that the pay zone in the subject well was irreparably damaged and has subsequently been cemented off.” Id. at 76. Zinke & Trumbo also filed a Second Amendment to Answer which alleged two additional affirmative defenses: (1) the offer of Zinke & Trumbo to participate in the completion attempt by Diamond Shamrock was conditioned upon a particular manner of completion which was rejected by Diamond Shamrock, thus relieving Zinke & Trumbo from any liability for completion costs, and (2) Diamond Shamrock’s employees took bribes and kickbacks from suppliers and others concerning materials, supplies, and work, resulting in improper charges to Zinke and Trumbo. Id. at 78. An Amended Counterclaim was thereafter filed incorporating the aforesaid affirmative defenses with four additional causes of action, seeking punitive damages of $10 million. Id. at 80-92. These allegations were joined in denial by Diamond Shamrock’s Answer. Id. at 101-109.
First Trial
The case proceeded to trial on October 27, 1983. The jury returned a verdict on November 2, 1983, as follows:
(1) for Diamond Shamrock against Zinke & Trumbo for breach of the Joint Operating Agreement (balance owing of drilling and completion costs) in amount of $212,-805.60;
(2) for Diamond Shamrock and against Zinke & Trumbo upon Zinke & Trumbo’s claim for breach of a new agreement (no damages awarded);
(3) for Zinke & Trumbo upon its claim against Diamond Shamrock for gross negligence and/or willful misconduct in the operation of the well in amount of $995,-196.00;
(4) for counterclaimants John Hamilton, Martha Francis and Morris Richardson against Diamond Shamrock for negligence in the operation of the well in amount of $971,179.00;
(5) for Diamond Shamrock and against counterclaimants John Hamilton and Martha Francis for breach of the implied covenant to market (no damages awarded); and
(6) for counterclaimants John Hamilton and Martha Francis against Diamond Shamrock for breach of the implied covenant to protect against drainage in the amount of $32,499.00 and punitive damages in amount of $1,000,000.00.
The parties did not object to the verdict form. (R., Yol. X, p. 43.) The court, prior to returning the jury, addressed counsel and stated that “[I] understand we have a verdict and I have sent for the jury. Due to the length of deliberation and the somewhat complexity of the verdict form, I will want to have a bench conference before I read and record the verdict and allow you all to examine it. That will be particularly true if there appears to be any inconsistencies in the verdict form.” Id. at 45, 46. When the jury reported in, the jury’s verdict was handed to the court and counsel were then called to the bench to examine the verdict before it was read and recorded. The following colloquy then occurred:
THE COURT: Any reason why the Court should not read and record the verdict?
MR. WATSON: (Counsel for Diamond Shamrock): I can think of a lot of reasons, but none that are valid.
Id. at 46.
Thereupon, the clerk read and recorded the verdict and the jury was polled. When the court inquired whether either party had any objection or any reason why the court should not then discharge the jury, respective counsel advised that there was none. Id. at 48. The jury was then discharged.
B.
Posttrial Proceedings
On November 14, 1983, Diamond Shamrock filed an “Alternative Motion for Judgment Notwithstanding the Verdict or for New Trial.” (R., Vol. II, pp. 274-281.) In its Motion for New Trial, Diamond Shamrock relied upon the ground of inconsistent verdicts. Following hearing on the motion, the trial court, after Journal Entry of Judgment, entered its “Order Granting New Trial and Vacating Judgment” on January 11, 1984, based upon Diamond Shamrock’s Motion for New Trial. Id. at 286.
C.
Second Trial
The second jury trial began on February 11, 1985, and on February 19, 1985, the jury returned a verdict in favor of Diamond Shamrock only on its claim against Zinke & Trumbo for breach of the Joint Operating Agreement in amount of $220,830.34. Thereafter, Zinke and Trumbo and the ap-pellees filed a motion to reinstate the verdict in the first trial or, in the alternative, for new trial on the ground that the second verdict was defective in that the jury did not fill in any of the blanks pertaining to any of the counterclaims. On March 19, 1985, the trial court denied the motion to reinstate the first verdict or for new trial.
At the hearing on the adequacy of the second jury verdict ordered by the trial court, Diamond Shamrock urged the court to stand by the general verdict. The trial court stated that, as between Diamond Shamrock and Zinke and Trumbo he had no difficulty because, by the jury verdict, “[Y]ou won the case ... and by so doing, the jury found that you drilled the well in a prudent way. You were not negligent, either grossly or otherwise” but “[I] do have serious reservations about the — you could be the most prudent operator in the world ... in drilling the well ... but still failed to market as the operator should do.” (R., Vol. XVIII, p. 6.) The court concluded that it had erred in its oral instructions to the jury when “[I] told the jury if they found for the plaintiff [Diamond Shamrock] on the first item in the verdict, that ended it. And I just shouldn’t have done it. Now, there’s no way to cure my mistake. But I’m a little bit disappointed in you [counsel for counterclaimants] not jumping up and telling me that I was making a mistake, and I could have cured it in a moment.” Id. at 15.
II.
This Appeal and Cross-Appeal
This appeal and cross-appeal is from a judgment entered April 18, 1985, following the second trial to jury and return of a general jury verdict with findings, which rendered all claims final except those at issue here. In that respect, the judgment certified the entry of final judgment for plaintiff-appellant Diamond Shamrock Corporation (Diamond Shamrock) and against all defendants except counterclaimants-de-fendants John Hamilton and Martha Francis. The court found that the jury failed to return a verdict on the counterclaims of John Hamilton and Martha Francis for breaches of the implied covenants to market gas and to protect against drainage. The judgment was certified as final pursuant to Fed.R.Civ.P. 54(b).
III.
Our Disposition
It is our view that the dispositive issue for our resolution is whether Diamond Shamrock’s failure to object to the first trial jury’s general verdict on the ground of inconsistency before the jury was discharged constituted a waiver of that challenge. We will hold that it did. This holding necessarily impacts upon the appeal in No. 85-1653 and the cross-appeal in No. 85-1765 docketed in this court, both of which arise from the final judgment of April 18, 1985, awarding Diamond Shamrock $220,830.34 on its breach of contract claim against Zinke and Trumbo, Ltd. (Zinke and Trumbo) and the adjudication that the defendant, Zinke and Trumbo, recover nothing on its counterclaim against Diamond Shamrock for gross negligence and that the counterclaimants, John Hamilton, Martha Francis and Morris Richardson recover nothing on their claim of negligence against Diamond Shamrock.
It is interesting to note that both parties urge that we hold that the verdict of a jury be upheld in those cases where a party does not object to the verdict form after the verdict is returned and before the jury is discharged.
Diamond Shamrock asserts that the counterclaimants waived any objection to
Cross-appellants and appellees, Morris A. Richardson, John Hamilton and Martha Francis in turn assert that during the first trial, before the jury verdict was read and entered, it was shown to counsel for all parties, who were invited by the court to object to inconsistencies, and none was lodged. Notwithstanding, the trial court granted Diamond Shamrock’s Motion for New Trial on the basis of inconsistent verdicts. Thus, they assert that failure to object to a jury verdict prior to discharge of the jury constitutes a waiver of inconsistency. (Brief of Cross-Appellants and Appellees, pp. 8-10.)
Fed.Rules Civ.Proc. rule 59(a) and (d), 28 U.S.C.A. provides, in relevant part:
(a) Grounds
A new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States; ... ******
(d) On initiative of court
Not later than 10 days after entry of judgment the court of its own initiative may order a new trial for any reason for which it might have granted a new trial on motion of a party. After giving the parties notice and an opportunity to be heard on the matter, the court may grant a motion for a new trial, timely served, for a reason not stated in the motion. In either case, the court shall specify in the order the grounds therefor.
Fed.Rules Civ.Proc. rule 49(b), 28 U.S.C.A. provides:
(b) General Verdict Accompanied by Answer to Interrogatories. The court may submit to the jury, together with appropriate forms for a general verdict, written interrogatories upon one or more issues of fact the decision of which is necessary to a verdict. The court shall give such explanation or instruction as may be necessary to enable the jury both to make answers to the interrogatories and to render a general verdict, and the court shall direct the jury both to make written answers and to render a general verdict. When the general verdict and the answers are harmonious, the appropriate judgment upon the verdict and answers shall be entered pursuant to Rule 58. When the answers are consistent with each other but one or more is inconsistent with the general verdict, judgment may be entered pursuant to Rule 58 in accordance with the answers, notwithstanding the general verdict, or the court may return the jury for further consideration of its answers and verdict or may order a new trial. When the answers are inconsistent with each other and one or more is likewise inconsistent with the general verdict, judgment shall not be entered, but the court shall return the jury for further consideration of its answers and verdict or shall order a new trial.
The above rules, and others, must be read and construed together and harmonized whenever possible.
We have observed that both parties, at the first trial, were called to the bench after the jury returned its verdict. The trial court had previously informed counsel that the jury’s general verdict should be
In Stancill v. McKenzie Tank Lines, Inc., 497 F.2d 529 (5th Cir.1974), the court, dealing with an alleged inconsistency in a general verdict observed:
Rule 49(b) does endorse a new trial as one option open to a trial court when an actual inconsistency does occur. But in determining whether rule 49(b) requires a new trial in this case, a number of serious questions arise ...
* * * * * *
By failing to object to the form of the verdict and answers at the time they were announced by the jury, both parties waived any objection to inconsistencies under Rule 49(b) ... the trial judge was careful to solicit objections from both counsel after the verdict was rendered and the interrogatories answered.... Had an objection been raised as to the inconsistency of the answers at that time, the district court could have elected to “return the jury for further consideration of its answers and verdict....”
497 F.2d at pp. 533-35.
We agree with the reasoning of the Stancill court. In an analogous setting, we held in Kirkendoll v. Neustrom, 379 F.2d 694, 699 (10th Cir.1967), that appellant waived his objection to special interrogatories:
The record reflects that after the special answers and verdict were read, the court asked if there was any reason why the jury should not be discharged. Both appellant and appellee answered in the negative. The jury was discharged. Under this rule, [49(b) Fed.R.Civ.P.], as well as by acquiescence of counsel in the action of the court, no reversible error occurred. ...
Cundiff v. Washburn, 393 F.2d 505 (7th Cir.1968), dealt with the question whether a party who is disenchanted with the general verdict but who did not move for resubmission pursuant to Rule 49(b) before the jury was discharged waives the right to have alleged inconsistencies in the general verdict remedied by a new trial. The Cundiff court observed that our Kirkendoll v. Neustrom, supra, was “closely analogous,” and held:
Consistent with the rationale of these cases, we hold that appellant waived any objection to the verdict on the ground of inconsistency with the special finding by failing to move the resubmission of the verdict and finding to the jury. Any other decision would hamper the just and efficient operation of the federal courts. It would encourage jury-shopping by litigants, permitting them to decide whether to take their chances on resubmitting the verdict and findings to the jury sitting or remain silent thereby allowing the entry of judgment and moving for a new trial before a new jury....
... [t]he rule that objection on the ground of inconsistency is waived by failure to move for resubmission promotes the fair and expeditious correction of error. It requires the error be corrected in the proceeding in which it is made, by the jury which made it unless the trial court determines in the exercise of its discretion under Rule 49(b) to enter judgment on the special findings or to order a new trial.
Our interpretation of Rule 49(b), in the absence of objection by counsel, leaves to the trial court alone the discretion to choose the means of correcting inconsistency, subject to review by this Court on appeal.
393 F.2d at 506, 507. Accord: Itel Capital Corp. v. Cups Coal Co., Inc., 707 F.2d 1253 (11th Cir.1983) (appellants waived objection to alleged inconsistencies in verdict by failure to object at the time the verdict
With respect to answers inconsistent with the general verdict, it is recognized that the trial court has three courses of action available under Rule 49(b). The court may order the jury to deliberate further, order a new trial, or disregard the general verdict and order judgment on the basis of answers to interrogatories. Wright and Miller, Federal Practice & Procedure: Civil § 2513. The first option was clearly available in the instant case. During the first trial, the court specifically invited counsel to carefully examine the jury’s verdict before it was announced and entered and to voice any objections thereto prior to discharge of the jury. Diamond Shamrock’s counsel did not object to the jury verdict until after the jury had been discharged, notwithstanding the trial court’s caveat that any objections to the jury verdict should be lodged before the verdict was formally returned and entered. Supra, p. 1419. We hold that failure on the part of Diamond Shamrock’s counsel to object to the jury verdict on the alleged ground of inconsistency constituted a waiver of such contention on appeal. Diamond Shamrock’s failure to so object was, apparently, a measured, calculated trial tactic.
We are aware that the trial court could have, sua sponte, granted Diamond Shamrock a new trial pursuant to Rule 50(b). Kain v. Winslow Mfg., Inc., 736 F.2d 606 (10th Cir.1984), cert. denied, — U.S. —, 105 S.Ct. 1360, 84 L.Ed.2d 381 (1985). Such action is required if a verdict reflects inconsistencies on its face indicating either that the jury was in a state of confusion or abused its power. Under such circumstances, not present here, a new trial must be granted. Global Van Lines, Inc. v. Nebeker, 541 F.2d 865 (10th Cir.1976); Hopkins v. Coen, 431 F.2d 1055 (6th Cir.1970); Cheney v. Moler, 285 F.2d 116 (10th Cir.1960) (verdict returned with “no damages” even though plaintiff lost ear as result of fight with defendant was nullity under the circumstances requiring retrial on all issues notwithstanding failure of plaintiff to object to the verdict). Unlike the determination in Cheney, the instant case is a proper case to invoke the harsh impact of the waiver rule.
In our view the trial court erred in setting aside the verdict of the jury returned at the first trial. The general verdict was not objected to prior to the jury’s discharge. Contrary to Diamond Shamrock’s contention, the verdict is not inconsistent on its face. The claimed inconsistency rests upon the jury’s finding for Diamond Shamrock on its breach of contract claim against Zinke and Trumbo (balance owing for drilling and completion costs) and the express finding of negligence
The trial court also erred in finding that the jury's verdict was inconsistent in fact. The claim of inconsistency advanced by Diamond Shamrock, adopted by the trial court, was that the jury, by finding for Diamond Shamrock on its contract claim impliedly found that Diamond Shamrock, as the operator under the Joint Operating Agreement, had performed the drilling and completion work in a good and workmanlike manner and, accordingly, could not have been liable on the tort claims advanced against it. Diamond Shamrock contended as follows:
The verdicts entered by the jury are inconsistent on their faces and indicate that the jury was either in a state of confusion or that the jury abused its power. Specifically, it is impossible for the jury to find that DIAMOND SHAMROCK performed conditions in a good and workmanlike manner and at the same time find that DIAMOND SHAMROCK had been negligent and grossly negligent. The verdict awarding DIAMOND SHAMROCK $212,805.60 under the Joint Operating Agreement is irreconcilably inconsistent with the verdict awarding ZINKE & TRUMBO, LTD. $995,196.00 for gross negligence or willful misconduct and verdict awarding John Hamilton, Martha Francis and Morris Richardson, $971,179.00 for negligence.
(R., Vol. II, pp. 274-75.)
The defect in this argument is that Diamond Shamrock’s claim of inconsistency rests upon its contention that the jury, by its finding for Diamond Shamrock on its contract claim, impliedly found that Diamond Shamrock had performed its drilling and completion operations on Hamilton No. 1-33 well in a good and workmanlike manner. Such is not the case. Diamond Shamrock’s theory of the case was that under the terms of the Joint Operating Agreement non-operators were unconditionally obligated to pay their proportionate share of the costs of drilling and completion. This was clearly evidenced by Diamond Shamrock’s cross-examination of Mr. Robert M. Zinke, who, after stating that Zinke and Trumbo were obligated under the Joint Operating Agreement to pay their share of the costs of work done by Diamond Shamrock in a “good workmanlike manner” without “gross negligence or wilful misconduct” was asked:
Q. And does the operating agreement provide that if the work is not in a workmanlike manner or gross negligence occurs, that you’re not obligated to pay?
A. I’m not Marvin Wiggly. I’m not an expert on operating agreements. I don’t know. Possibly it does. I don’t know.
Q. Well, let’s look at it then. Now, on Page 1 of the accounting procedure, you’re required to pay your invoices within fifteen days. If you have any questions, you can audit the account; isn’t that right?
A. Yes, sir, that’s correct.
Q. So payment is not excused because you decide on your own that the operator’s been negligent.
A. That’s true.
(R., Yol. VII, pp. 322-23.) And during closing argument, counsel for Diamond Shamrock argued that the terms of the Joint Operating Agreement Diamond Shamrock, as operator, had sole decision making authority in the drilling of the well and that
The trial court accepted Diamond Shamrock’s contention that if it had substantially complied with the Joint Operating Agreement as operator, Diamond Shamrock was contractually entitled to recover for the work done in the drilling of the well. The jury was so instructed. (R., Vol. II, pp. 430-31.) The court clearly instructed separately, without objection, on Diamond Shamrock’s breach of contract claim and the counterclaims for gross negligence and negligence, and the general verdict contained findings on each. Thus, although each claim arose out of Diamond Shamrock’s operation of the well, the parties, under their respective theories of the case, elected to permit the jury to treat the breach of contract claim of Diamond Shamrock against Zinke and Trumbo separate and distinct from the counterclaims. (See jury instructions 4, 5, 6, 7, 8 and 9, Vol. II, pp. 430-39.)
Thus, we conclude that there were no inconsistencies in fact in the jury’s general verdict. The jury, as instructed, returned an award of damages for Diamond Shamrock and against Zinke & Trumbo on its breach of contract claim under the Joint Operating Agreement. By doing so, the jury adopted Diamond Shamrock’s theory of the case on this claim, i.e., that as operator it was entitled to receive payment from Zinke and Trumbo for all costs and expenses not challenged under the audit provision of the Joint Operating Agreement. By the same token, the jury, in accord with the court’s instructions, found for the defendant and counterclaimants on their claim of negligent and gross negligent operations of Diamond Shamrock and Diamond Shamrock’s breach of implied covenant to protect against drainage and to market.
In effect, then, the jury’s verdict “tracked” the theory-of-the-case exactly as Diamond Shamrock invited it to be considered by the jury. The record, largely due to Diamond Shamrock’s direct and cross-examination, reflects that the contractual obligation of Zinke and Trumbo to Diamond Shamrock for proportionate share of drilling and completion costs was treated and considered by the jury independent of the negligence claims and the failure to market and to prevent drainage claims. With regard to the latter, a cause of action for breach of an implied covenant to prevent drainage does not require proof of negligent operations. Spaeth v. Union Oil Co. of California, 710 F.2d 1455 (10th Cir.1983); Dixon v. Anadarko Production Company, 505 P.2d 1394 (Okl.1972).
Thus, the claimed inconsistency is between verdicts resolving entirely separate and distinct causes of action. The verdicts on the counterclaims were not required to be consistent with the verdict on Diamond Shamrock’s breach of contract claim because the parties and the court submitted the respective claims to the jury for sepá-rate, distinct consideration. Thus, there was no inconsistency on the face of the general verdict. The verdicts are not repugnant or in irreconcilable conflict. This trial involved separate causes of action and the relationship of the parties was not legally identical with regard to each cause of action.
Where several distinct causes of action, such as here, are tried together, verdicts awarding recovery to some of the parties on one theory or cause of action and to other parties on another theory or cause of action are not necessarily inconsistent. In those cases where the several causes of action are identical and defended on the same ground, a verdict for the plaintiff on one cause of action and for the defendant on another is inconsistent. Further, if two causes of action are of such a nature that recovery can be had only as to one, verdicts in favor of a plaintiff and against the defendants on both causes of action are inconsistent.
Notwithstanding the consistency among the parts of the verdict, we hold, in accord
We REVERSE and REMAND with instruction that the district court reinstate the general verdict of the jury returned at the first trial and enter judgment thereon.