Woods v. Big Sky Energy, Inc.

[Cite as Woods v. Big Sky Energy, Inc., 2020-Ohio-5309.]
COURT OF APPEALS
MUSKINGUM COUNTY, OHIO
FIFTH APPELLATE DISTRICT
DALE R. WOODS, ET AL., : JUDGES:
: Hon. William B. Hoffman, P.J.
Plaintiffs - Appellees : Hon. W. Scott Gwin J.
: Hon. Craig R. Baldwin, J.
-vs- :
:
BIG SKY ENERGY, INC., ET AL., : Case No. CT2020-0017
:
Defendants - Appellants : OPINION
CHARACTER OF PROCEEDING: Appeal from the Muskingum County
Court of Common Pleas, Case No.
CH2016-1061
JUDGMENT: Affirmed in part; Reversed
and Remanded in part
DATE OF JUDGMENT: November 16, 2020
APPEARANCES:
For Plaintiffs-Appellees For Defendants-Appellants
W. EVAN PRICE, II GINO PULITO
Law Office of W. Evan Price II, LLC Pulito and Associates, LLC
P.O. Box 20244 230 Third Street
Columbus, Ohio 43220-0244 Elyria, Ohio 44035
Muskingum County, Case No. CT2020-0017 2
Baldwin, J.
{¶1} Defendants-appellants Big Sky Energy, Inc., Big Sky Petroleum, LLC and
Robert Barr, in his individual capacity and dba Big Sky Petroleum, LLC appeal from the
February 25, 2020 Judgment Entry of the Muskingum County Court of Common Pleas.
STATEMENT OF THE FACTS AND CASE
{¶2} The facts, as set forth in our Opinion in Woods, et al. v. Big Sky Energy, et
al, 5th Dist. Muskingum No. CT2017-0031, 2019 -Ohio- 554, are as follows.
{¶3} On May 22, 1968, appellees' predecessor in title, Russell and Marjorie
Sandel, granted an oil and gas lease to Weaver Oil and Gas Corporation (hereinafter the
“Weaver Lease”). The Weaver Lease had a primary term of ten years, and provided in
paragraph seven as follows:
If, after the expiration of the primary term of this lease, production on
the leased premises shall cease, this lease shall not terminate, provided
that Lessee commences operations for drilling, reworking, plugging back,
or deepening a well within 60 days from such cessation, and this lease shall
remain in force during the prosecution of such operations or additional
drilling, reworking, plugging back, or deepening operations commenced
while such operations are in progress or within 30 days after the cessation
thereof, and if production results therefrom, then until it is marketed and so
long as production continues.
{¶4} The Weaver Lease was subsequently assigned several times, including an
assignment to Dover Atwood Corporation. Dover Atwood Corporation assigned and sold
Muskingum County, Case No. CT2020-0017 3
its interest in the Weaver Lease to appellant Barr on July 11, 2001, who used appellant
Big Sky Energy to operate the well.
{¶5} Marjorie Sandel conveyed the property subject to the Weaver Lease to her
daughter, Marlene Woods, in the 1990s. Robert Woods acquired the property from the
estate of his wife, Marlene Woods, in 2008. Robert Woods conveyed the property to his
son and his wife, appellees herein, on July 14, 2008.
{¶6} Subsequent to the transfer, appellee Dale Woods began trying to obtain
production records from the well from appellants, who failed to produce records. After
years of struggling to obtain information regarding the well and the Weaver Lease,
appellees filed the instant action in the Muskingum County Common Pleas Court on May
11, 2016, including causes of action for quiet title, conversion, unjust enrichment,
trespass, breach of contract, breach of implied covenant to reasonably develop, breach
of implied covenant to explore further, and declaratory judgment.
{¶7} The case proceeded to bench trial. At trial, appellees elected not to proceed
on the counts for breach of the Weaver Lease, and the implied covenants thereunder and
the trial court dismissed these counts. The trespass claim also was dismissed.
{¶8} At trial, appellees presented evidence the well ceased production in
December 2015, and had not resumed operations. Production ceased because the Ohio
Department of Natural Resources (ODNR) refused to approve a bond from appellants'
preferred insurance company. Appellants were ordered by ODNR to stop production on
all wells until a replacement bond was posted. Appellant Barr admitted appellant Energy
could have sought the requested bond from another insurer, but refused to do so as a
matter of principle because Barr disagreed with ODNR's decision.
Muskingum County, Case No. CT2020-0017 4
{¶9} The order from ODNR barring appellant Energy from operating under the
former bond remained in litigation when trial commenced in the instant case. Appellant
Barr further admitted failing to notify appellees production had ceased on the well.
{¶10} Appellants failed to produce the requested production records on the well
until ordered to do so on March 7, 2017, during a status conference in the instant litigation
on a motion to compel. The records demonstrated discrepancies between the amount of
royalties paid and the amount of royalties due based on revenue generated from the well.
{¶11} Following trial, the trial court found appellants liable for conversion of
royalties in the amount of $ 28,066.39. Because of appellants' attempts to conceal
records which would demonstrate their failure to pay the full amount of royalties due
appellees, the court found an award of punitive damages justified, and awarded punitive
damages in the amount of $ 28,066.39. The court declared the Weaver Lease terminated
by its terms for failure of production effective March 1, 2016, and quieted title in appellees
as of March 1, 2016. The court dismissed all remaining causes of action set forth in the
complaint.
{¶12} Appellants then appealed from the April 20, 2017 judgment of the court,
raising the following assignments of error on appeal error:
{¶13} “I. THE TRIAL COURT ERRED AS A MATTER OF LAW AND FACT
WHICH WAS UNSUPPORTED BY THE MANIFEST WEIGHT OF THE EVIDENCE BY
TERMINATING THE WEAVER OIL AND GAS LEASE BASED UPON
NONPRODUCTION WHEN THE LEASE INCLUDED A FORCE MAJEURE CLAUSE
WHICH EXPRESSLY PROHIBITED SUCH TERMINATION.”
Muskingum County, Case No. CT2020-0017 5
{¶14} “II. THE TRIAL COURT ERRED AS A MATTER OF LAW AND FACT
WHEN IT AWARDED COMPENSATORY DAMAGES IN THE AMOUNT OF $ 28,066.39
AND PUNITIVE DAMAGES IN THE AMOUNT OF $ 28,066.39.”
{¶15} This Court, as memorialized in an Opinion filed on February 6, 2019, in
Woods, et al v. Big Sky Energy, et al, 5th Dist. Muskingum No. CT2017-0031, 2019 -
Ohio- 554, affirmed the judgment of the trial court in part and reversed and remanded in
part as to damages only. This Court, in our Opinion, stated, in relevant part, as follows:
{¶16} “The measure of damages in a conversion action is the value of the
converted property at the time it was converted. United Bank, Div. of the Park Natl. Bank
v. Expressway Auto Parts, Ltd., 5th Dist. No. 15CA51, 2015-Ohio-4554, 49 N.E.3d 776,
¶ 34; Congress Lake Club v. Witte, 5th Stark App. No. 2007CA00191, 2008-Ohio-6799,
2008 WL 5340219, ¶ 66.
{¶17} “The trial court awarded compensatory damages for conversion in the
amount of $ 28,066.39, and awarded punitive damages in the same amount. However,
we cannot determine from the record how the trial court arrived at this figure for
compensatory damages. The amount of compensatory damages appears to be derived
from Appellees' Summary Exhibit No. 1, which shows the amount of lost revenue, not
converted royalties, for the time period. In explaining this damage figure, counsel for
Appellees stated in closing argument:
So what this does is, it goes back four years, to June of 2012, adds
up the oil revenue – gas revenue, the oil revenue, and then it subtracts out
the royalties that would have been paid on that – on the assumption that all
those royalties were indeed paid during that period. I don't think that is an
Muskingum County, Case No. CT2020-0017 6
accurate statement, but again, for purposes of calculating the damages, that
gives us 28,000...
THE COURT: Is the $ 20,000, $ 28,066.39, is that the exact amount? Is that
the number you're going—
MR. PRICE: Yes. That is the first number. That's for the – the lost revenue.
Tr. 239.
The trial court's damage award appears to be based on revenue from the
well, rather than the correct measure of damages for conversion, which is
the amount of royalties owed on that revenue converted by Appellants in
this case. Appellees are not entitled to revenue from the well, but rather for
the converted royalties only. We therefore remand this case to the trial court
to determine damages in an amount not exceeding the royalties due
pursuant to the lease, during the time period not barred by the statute of
limitations for conversion, up to March 1, 2016 (the date the lease was
terminated), less any royalties found actually paid pursuant to the lease for
that time period. Because the court based its award of punitive damages on
an incorrect measure of compensatory damages, the trial court must also
adjust the punitive damage award according to the new calculation of
damages.”
Id. at paragraphs 20-23 (footnotes omitted). We and reversed in part as to damages [for
conversion] only remanded for a “determination of damages , consistent with this opinion.”
Id. at paragraph 25.
Muskingum County, Case No. CT2020-0017 7
{¶18} On remand, the parties filed briefs addressing the issue of damages.
Pursuant to a Judgment Entry filed on February 25, 2020, the trial court again found that
the Weaver Lease expired on or about March 1, 2016 due to lapse in production and held
that the Woods’ title to the property was quieted with respect to the Weaver Lease. The
trial court entered judgment in favor of appellees and against appellants on the conversion
claim in the amount of $28,066.39 for compensatory damages. The court also awarded
appellees $28,066.39 for punitive damages and for all court costs and ordered that
appellants were jointly and severally liable to appellees. The trial court also entered
judgment in favor of appellees and against appellants on the unjust enrichment claim in
the amount of $28,066.39 for compensatory damages and for all court costs. The trial
court held that appellants were jointly and severally liable. The remaining counts were
dismissed.
{¶19} Appellants now appeal from the trial court’s February 25, 2020 Judgment
Entry, raising the following assignments of error on appeal:
{¶20} “I. THE TRIAL COURT LACKED THE AUTHORITY TO REVERSE ITS
OWN PRIOR JUDGMENT DISMISSING WOODS’ CLAIM FOR UNJUST ENRICHMENT
AND GRANTING WOODS’ AN AWARD OF DAMAGES WHILE ON REMAND FROM
THE APPELLATE COURT.”
{¶21} “II. THE TRIAL COURT’S CALCULATION OF DAMAGES WAS
UNSUPPORTED BY THE EVIDENCE AND CONTRARY TO THIS COURT’S PRIOR
DECISION AND EXPLICIT INSTRUCTIONS.”
{¶22} “III. THE TRIAL COURT WAS BARRED FROM ORDERING APPELLANT
ROBERT BARR, INDIVIDUALLY, TO PAY ANY DAMAGES AS A RESULT OF HIS
Muskingum County, Case No. CT2020-0017 8
PERSONAL BANKRUPTCY PURSUANT TO CHAPTER 7 OF TITLE 11 OF THE
UNITED STATES CODE.”
I
{¶23} Appellants, in their first assignment of error, argue that the trial court, on
remand, had no authority to award damages to appellees on their unjust enrichment
claim. We agree.
{¶24} The law of the case “doctrine provides that the decision of a reviewing court
in a case remains the law of that case on the legal questions involved for all subsequent
proceedings in the case at both trial and reviewing levels.” Nolan v. Nolan, 11 Ohio St.3d
1, 3, 462 N.E.2d 410 (1984). “This is necessary to ensure consistency of results in a case,
to avoid endless litigation by settling the issues, and to preserve the structure of superior
and inferior courts as designed by the Ohio Constitution.” Id. The doctrine prevents lower
courts from disregarding the mandate of a superior court in a prior appeal in the same
case” Id. Likewise, it prohibits litigants from “mak[ing] new arguments to the trial court on
remand that were raised or could have been raised on the first appeal.” Neiswinter v.
Nationwide Mut. Fire Ins. Co., 9th Dist. Summit No. 23648, 2008–Ohio–37 at paragraph
10; Johnson v. Johnson, 5th Dist. Stark No. 2016CA00060, 2016–Ohio–7861 at
paragraph 14. Furthermore, “[a] trial court is without authority to extend or vary the
mandate given by the appellate court.” Scott v. Ohio Dept. of Rehab. & Corr., 10th Dist.
Franklin No. 14AP-105, 2014-Ohio-2796, ¶ 12, citing State v. Harper, 10th Dist. No.
06AP–733, 2007–Ohio–2590, ¶ 13.
Muskingum County, Case No. CT2020-0017 9
{¶25} In the case sub judice, the trial court, in its April 20, 2017 Judgment Entry,
dismissed the unjust enrichment claim (Count III) holding that “Woods failed to establish
that Defendants were unjustly enriched and any damages would be duplicative of the
amount awarded on their conversion claim.” Appellants then appealed from such
Judgment Entry and this Court, as is stated above, affirmed in part, but reversed and
remanded in limited part, and remanded for a “determination of damages, consistent with
this opinion.” The trial court, on remand, awarded damages for unjust enrichment.
{¶26} As noted by appellants, “[t]he issue of whether Woods proved their claim
for unjust enrichment was settled by the time the case returned to the trial court on
remand.” Pursuant to Nolan, supra., the law of the case doctrine prevented the trial court
from reversing its own prior judgment dismissing the unjust enrichment claim and from
revisiting the issue of damages for unjust enrichment on remand.
{¶27} Appellants’ first assignment of error is, therefore, sustained.
II
{¶28} Appellants, in their second assignment of error, contend that the trial court’s
award of damages was unsupported by the evidence and contrary to this Court’s prior
decision and explicit instructions. We agree.
{¶29} “Because the award of damages is a discretionary matter, we will not
reverse a trial court’s decision regarding its determination of damages absent a showing
that the trial court abused its discretion.” Reinbolt v. Kern, 183 Ohio App.3d 287, 2009-
Ohio-3492, 916 N.E.2d 1100, ¶ 38 (6th Dist.) citing Roberts v. United States Fid. & Guar.
Co., 75 Ohio St.3d 630, 364, 665 N.E.2d 664 (1996). “An abuse of discretion occurs only
Muskingum County, Case No. CT2020-0017 10
if the court renders an unreasonable, arbitrary, or unconscionable judgment.” Id., citing
Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983).
{¶30} As is stated above, this Court, in our February 6, 2019 Opinion in Woods v.
Big Sky Energy, et al, 5th Dist. Muskingum No. CT2017-0031, 2019 -Ohio- 554, stated,
in relevant part, as follows:
The trial court's damage award appears to be based on revenue from
the well, rather than the correct measure of damages for conversion, which
is the amount of royalties owed on that revenue converted by Appellants in
this case. Appellees are not entitled to revenue from the well, but rather for
the converted royalties only. We therefore remand this case to the trial court
to determine damages in an amount not exceeding the royalties due
pursuant to the lease, during the time period not barred by the statute of
limitations for conversion, up to March 1, 2016 (the date the lease was
terminated), less any royalties found actually paid pursuant to the lease for
that time period. Because the court based its award of punitive damages on
an incorrect measure of compensatory damages, the trial court must also
adjust the punitive damage award according to the new calculation of
damages.
Id. at paragraph 23.
{¶31} On remand, the trial court awarded appellees $28,066.39 in compensatory
damages and $28,066.39 in punitive damages for conversion. Such figure represented
the net revenue and not the converted royalties. We find that the trial court failed to follow
the mandate of this Court in determining and ordering damages. As noted by appellants,
Muskingum County, Case No. CT2020-0017 11
pursuant to this Court’s prior Opinion, “the trial court was limited to awarding damages
equal to converted royalties, not net revenue.” Appellants are entitled to “damages in an
amount not exceeding the royalties due pursuant to the lease, during the time period not
barred by the statute of limitations for conversion, up to March 1, 2016 ( the date that the
lease was terminated), less any royalties found actually paid pursuant to the lease for that
time period.” Id at paragraph 23.1
{¶32} Appellants’ second assignment of error is, therefore, sustained.
III
{¶33} Appellants, in their third assignment of error, maintain that the trial court
was barred from ordering appellant Robert Barr, individually, to pay any damages as a
result of his personal bankruptcy. We disagree.
{¶34} Appellant Robert Barr filed a Chapter 7 personal bankruptcy in the United
States District Court for the Southern District of Ohio on or about December 15, 2017. At
the time, the first appeal in this case was pending. This Court, upon being notified of the
bankruptcy, closed the case due to the bankruptcy stay. Appellant Barr received his
discharge on May 16, 2018. Upon notice of the conclusion of the bankruptcy, this Court,
on appellants’ request, set the matter for oral argument on January 17, 2019.
{¶35} After the bankruptcy stay was lifted, appellant Barr never sought dismissal
of the personal judgment against him, never sought to amend his answer on remand to
assert bankruptcy as an affirmative defense pursuant to Civ.R. 8(C) and never sought a
ruling on whether it applied to the damages awarded in this case. We agree with appellees
that there is no record for this Court to examine.
1We note that pursuant to R.C. 2315.21(D), any award of punitive damages is limited to two times the
amount of compensatory damages.
Muskingum County, Case No. CT2020-0017 12
{¶36} We further note that the trial court, as memorialized in a Judgment Entry
filed on October 1, 2018, held that a garnishment hearing would go forward because
“Defendant failed to provide evidence that this debt was discharged in bankruptcy.” We
concur.
{¶37} Appellants’ third assignment of error is, therefore, overruled.
{¶38} Accordingly, the judgment of the Muskingum County Court of Common
Pleas is affirmed in part and reversed and remanded in part for a determination of
damages for conversion, consistent with this Opinion.
By: Baldwin, J.
Hoffman, P.J. and
Gwin, J. concur.