Case Name: CONTINENTAL RESOURCES, INC., Plaintiff and Appellee v. P&P INDUSTRIES, LLC I d/b/a United Oilfield Services and P&P Industries, LLC, and Pauper Industries, Inc., Defendants and Appellants and Parka, Inc., Defendant
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 2018-01-22
Citations: 906 N.W.2d 105
Docket Number: No. 20160452
Parties: CONTINENTAL RESOURCES, INC., Plaintiff and Appellee v. P&P INDUSTRIES, LLC I d/b/a United Oilfield Services and P&P Industries, LLC, and Pauper Industries, Inc., Defendants and Appellants and Parka, Inc., Defendant
Judges: [¶ 41] Lisa Fair McEvers
Reporter: North Western Reporter 2d
Volume: 906
Pages: 105–120

Head Matter:
2018 ND 11
CONTINENTAL RESOURCES, INC., Plaintiff and Appellee v. P&P INDUSTRIES, LLC I d/b/a United Oilfield Services and P&P Industries, LLC, and Pauper Industries, Inc., Defendants and Appellants and Parka, Inc., Defendant
No. 20160452
Supreme Court of North Dakota.
Filed 1/22/2018
Rehearing Denied Mar. 1, 2018
Andrew D. Sims (argued), Paul T.- El-kins (on brief), and Russell R. Barton (on brief), Fort Worth, TX, and Lawrence Bender (appeared) and Danielle M. Krause (on brief), Bismarck, N.D. for plaintiff and appellee.
Peter M. King (argued) and William H; Jones (appeared), Chicago, IL, and Lance D: Schreiner (appeared), Bismarck, N.D. for defendants and appellants.

Opinion:
McEvers, Justice.
[¶ 1] P&P Industries, LLC, doing business as United Oilfield Services, and Pauper Industries, Inc., appeal from a judgment entered in favor of Continental Resources, Inc., after a jury returned a verdict finding United and Pauper's conduct constituted fraud but they did not breach their contracts with Continental. United and Pauper argue the verdicts are inconsistent and the ' district court erred in limiting the amount of damages United could seek oh its counterclaim. We reverse and remand.
I
[¶ 2] Continental is an oil producer doing business in North Dakota. United was created in 2012 when it acquired Pauper and related companies along with' the assets of a third company. United and Pauper provided transportation, water hauling, and related services and materials to Continental in North Dakota, Pauper signed a Master Service Contract with Continental in 1998, and United signed a Master Service Contract with Continental in 2013.
[¶ 3] In 2014, Continental sued United and Pauper, seeking damages for claims of breach of contract, tortious breach of contract,- breach of fiduciary duty, fraud, and deceit. Continental alleged United and Pauper violated state and federal limits and regulations on the number of hours a truck driver may drive; they violated Continental's policy limiting the number of hours an employee may work in a day; and they engaged in improper and fraudulent billing.
[¶ 4] United answered and counterclaimed, seeking damages for breach of contract, tortious breach of contract, breach of fiduciary duty, constructive fraud, and promissory estoppel. United alleged Continental breached the contract by failing to pay for services United provided and terminating the contract without giving 30 days' notice. United sought damages for the full value of its business, the unpaid amounts for services and materials United provided to Continental, and other damages. Pauper also answered Continental's complaint, but did not bring any counterclaims against Continental.
[¶ 5] In December 2015, Continental moved to amend its complaint to additionally claim United and Pauper breached their contracts by allowing liens to attach to Continental properties as a result of failing to pay subcontractors and failing to defend and indemnify Continental for the claims or liens the subcontractors filed. The amended complaint was filed in July 2016.
[¶ 6] Continental and United moved for summary judgment. After a hearing, the district court dehied United's motion for summary judgment on Continental's claims; denied Continental's motion, for summary judgment on United's breach of contract, promissory estoppel, and tortious breach of contract counterclaims; and denied Continental's motion for summary judgment on its fraud and breach of contract claims. The court granted Continental's motion for summary judgment against United's breach of fiduciary duty and constructive fraud counterclaims. The court also granted summary judgment on Continental's motion related to damages and ruled, if United prevails at trial, its damages would be limited to the net profits it could have earned during the 30-day termination notice period, overall expenses of preparation, and its expenses in pursuit of reasonable efforts to avoid or minimize the damaging effects of the breach. United moved the court to reconsider the damages issue, and the court denied the motion.
[¶ 7] A jury trial was held. The jury was given a 19-question special verdict form, requiring the jury to make findings about Continental's claims for each defendant, United's counterclaims, and alleged defenses. In deciding Continental's claims, the jury found neither United nor Pauper breached its contract-obligations to Continental, both United and Pauper's conduct was fraudulent or accompanied by fraud, both United and Pauper's conduct was deceitful or accompanied by deceit, and the jury awarded Continental $2,415,000 in damages for its claims against United but did not award Continental any damages for its claims against Pauper.' In deciding United's counterclaims, the jury found Continental breached its contract with United, but Continental was excused from performing based on United's prior material breach, United's failure to perform a condition precedent, United's fraud or deceit, and equitable estoppel.
[¶ 8] United and Pauper moved for judgment to be entered in their favor or for a new trial under N.D.R.CÍV.P. 50(b), 58, and 59. United and Pauper argued they were entitled to judgment in their favor or a new trial because the jury's verdict was inconsistent, Continental did not present sufficient evidence to support its claims of fraud and deceit, and Continental did not present sufficient evidence to support its alleged defenses to United's breach of contract claim. The district court denied the motion.
[¶ 9] Judgment in the amount of $2,415,000 was entered against United. Judgment on the jury's findings was entered against Pauper. Continental was awarded its costs and disbursements against United and Pauper, jointly and severally.
II
[¶ 10] United and Pauper argue they are entitled to a new trial because the jury verdict is inconsistent and cannot be reconciled.
[¶ 11] A court may vacate a jury verdict and grant a new trial "if the jury has plainly disregarded the court's instructions or the evidence in the case is such that it convinces the court the verdict was rendered under a misapprehension of the instructions." N.D.R.Civ.P. 59(g); see also Moszer v. Witt, 2001 ND 30, ¶ 10, 622 N.W.2d 223. The district court has discretion in deciding a motion for a new trial, and the court's decision will not be overturned on appeal unless it manifestly abused its discretion. Moszer, at ¶ 10. A court abuses its discretion when it acts in an arbitrary, unreasonable, or unconscionable manner, when it misinterprets or misapplies the law, or when its decision is not the product of a rational mental process leading to a reasoned determination. Johnson v. Buskohl Constr. Inc., 2015 ND 268, ¶ 12, 871 N.W.2d 459.
[¶ 12] A jury's special verdict will be reversed on appeal only if it is perverse and clearly contrary to the evidence. Moszer, 2001 ND 30, ¶ 11, 622 N.W.2d 223. This Court has adopted the following test for reconciling apparent conflicts in a jury's verdict:
[Wjhether the answers may fairly be said to represent a logical and -probable decision on the relevant issues as submitted. If after a review of the district court's judgment no reconciliation is possible and the inconsistency is such that the special verdict will not support the judgment entered below or any other judgment, then the judgment must be reversed and the ease remanded for a new trial.
Id. (quoting Barta v. Hinds, 1998 ND 104, ¶ 6, 578 N.W.2d 553). "Reconciliation of a verdict, therefore, includes an examination of both the law of the case and the evidence in order to determine 'whether the verdict is logical and probable and thus consistent, or whether it is perverse and clearly contrary to the evidence.' " Baria, at ¶ 6 (quoting Grenz v. Kelsch, 436 N.W.2d 552, 554-55 (N.D. 1989)). Jury instructions become the law of the case unless there is an objection to the instructions. Baria, at ¶ 8,
[¶ 13] On the special verdict form, the jury found Continental failed to prove United breached its contract obligations to Continental. The jury also found Continental did not prove Pauper breached its contract obligations to Continental. The jury found there was clear and convincing evidence both United and Pauper's conduct was fraudulent or accompanied by fraud. In deciding United's counterclaims, the jury found Continental breached the contract but was excused from performing by United's prior material breach.
[¶ 14] United and Pauper argue both the fraud and breach of contract claims were based on improper billing practices and therefore it was inconsistent for the jury to find the conduct did not constitute a breach of contract but did constitute fraud. They claim the jury determined United did not engage in the alleged conduct when it found United did not breach the contract, but the same conduct formed the basis for Continental's fraud claim.
[¶ 15] -For Continental's breach of contract claims against United and Pauper, the jury was instructed:
Continental is required to prove by the' greater .weight of the evidence the following in order to' recover on the claim for breach of contract against the Defendants:
1. Formation of a contract between Continental and the Defendants;
2. The Defendants breached the contract by presenting inaccurate oi-false charges to Continental and/or by billing for services in violation of the parties' contract and allowing liens to be filed on wells operated by Continental; and
3. Continental suffered damages as a direct result of the breach.
You are hereby instructed that the Master Service Contracts constitute validly formed contracts between Continén-tal and each defendant.
The jury was instructed, "Unless a party is excused from performing, a contract is breached or broken when the party does not do what it promised to do in the contract." The jury was also instructed that a material breach1 of a contract was' a bar to recovering under the contract, stating:
A party that materially breaches a contract cannot seek performance of the contract by the other contracting party. A party in material breach of a contract cannot enforce or recover on the contract. In other words, a party that com: mits a first breach of the parties' contract that is not justified by the conduct of the other, excuses the latter's duty to give, the agreed exchange under the contract.
The jury was instructed "fraud" is:
[A]ny of the following acts committed by a party to a contract, or with the party's connivance, with intent to deceive another party thereto or to induce the other party to enter into the contract. "Fraud" is:
1. the suggestion- as a fact of that which is not true by oné who does not believe it to be true;
2. the positive assertion,-in [a] manner not warranted by the information of the person making it, of that which is not true though that person believes it to be true;
3. the suppression of that which is true by one having knowledge or belief of the fact;
4. a promise made without any intention of performing it; or
5. any other act fitted to deceive.
[¶ 16] On appeal, United and Pauper argue the jury was not properly instructed on all of the elements of fraud, but they do not contend the alleged error is relevant in deciding whether the verdicts are consistent. Rather, they claim the verdict' is irreconcilable under the instructions given and would be irreconcilable even if the court had properly instructed the jury on the elements. United and Pauper proposed using a general verdict form and not a special verdict form, but there are no'specific objections to the final verdict form or to the breach of contract instructions in the record, and any issues related to these instructions were not raised on appeal. The jury instructions, therefore, are the law;, of the case. See Duma v. Keena, 2004 ND 104, ¶ 7, 680 N.W.2d 627 (stating party did not raise any issues about jury instructions on appeal and the unopposed instructions became the law of the case).
[¶ 17] At trial, Continental argued the contract requires all work be performed in a good and workmanlike manner and to Continental's satisfaction, and a good and workmanlike manner included following Continental's rules and doing what it asked to be done. Continental claimed United and Pauper, breached the contract by submitting its billings in such a way to work around Continental's rules. The jury was informed United employees filled out field tickets providing information' about the employee, including name, job performed, and hours worked; the field tickets were collected and attached to. an invoice; and the invoice and field tickets were sent to Continental for review and payment. Continental argued there was evidence of various breaches, including one employee who submitted three field tickets with different names and for different wells for the same day, which resulted in Continental being billed for 36 hours of work.for that employee for one day. Continental asserted the contract required United and Pauper to comply with all DOT rules and regulations, but there was evidence they did not comply with all the rules and regulations. Continental argued the contract required United not to allow liens to be attached to Continental's properties and to indemnify Continental for any liens, but evidence established liens had been placed on Continental's properties and Continental had been left to resolve the issues. Continental asserted there was "no doubt" United breached the contract because it was undisputed liens were placed on Continental's properties and there were billings that were not done to Continental's satisfaction and in violation of its rules. United argued its actions were proper and did not violate any rules or terms of the contract, Continental's alleged rules did not exist, and Continental knew about United's billing practices and agreed to them.
[¶ 18] Continental claimed United and Pauper's billing practices also constituted fraud. It argued evidence established a United owner admitted there were falsified field tickets but then told Continental it was just bad paperwork, a United supervisor directed employees to use different names;,on field tickets to avoid, confusion and questions, and United's billing specialist knew she was sending out bills to deceive Continental and to charge for work that was not allowed.
[¶ 19] Continental argued it did not breach the contract, but if the jury determined it did and found in favor of United's breach of contract claim, the breach was excused by United's prior breach. Continental argued United breached the contract first by failing to comply with Continental's rules, sending improper- billings, and overbilling.
[¶ 20] United and Pauper claim the verdict is inconsistent and irreconcilable because the same conduct was the basis for Continental's breach of contract and fraud claims and the jury found their conduct was fraudulent or accompanied by fraud but found they did not engage in that same conduct for purposes of the breach of contract claim. Continental argues the verdict is consistent because the contract does not contain any specific billing procedures and therefore the jury could determine there was no breach of the contract based on any claims about billing, but that same conduct related to billing could be the basis for the jury's finding in favor of Continental on the fraud claim.
• [¶ 21] Considering the law of the case and the evidence, the jury could have decided the conduct related to billing was not a breach of contract. The contract does not specifically address billing. The contract states,, "Contractor will begin each particular job at such time as is agreed upon between Contractor and Continental's representatives and, once having commenced .any such job, Contractor will perform all such service or work in a good and workmanlike manner and when the job is completed such service or work will have been performed to the full and complete satisfaction of Continental." Continental argued the overbilling and other related issues violated the terms of the contract because United and Pauper did not perform the work to Continental's satisfaction. The jury could have found the billing practices were not a breach of contract but did constitute fraud.
[¶ 22] The jury also could have found the billing practices did not constitute a breach of contract or fraud, but found other conduct constituted fraud. Continental argued United- made misrepresentations to Continental to persuade it to resume payments in December 2013 after Continental stopped payments based on audit findings about inaccurate billings and falsified field tickets. Continental claimed evidence established United made assurances that it would not find any overbillings for other months to persuade Continental to resume payments, Continental relied on those assurances and resumed payments, but United's statements were not true. The jury could have determined there was clear and convincing evidence the December 2013 conduct constituted fraud but was not a breach of contract.
[¶ 23] The findings on Continental's breach of contract and fraud claims can be reconciled. However, the jury also found Continental breached the contract with United but it was excused from performing the contract by United's prior material breach of the contract.
[¶ 24] Continental contends the verdicts are reconcilable by a literal reading of the jury instructions. Continental argues the jury instruction for its breach of contract claim refers to both defendants and uses the word "and" before the lien element, but it never claimed Pauper breached the contract by allowing liens. Continental claims the jury could have read the instruction to require it to find-, that both United and Pauper entered into one contract with Continental, that both parties breached their contracts, or that Continental suffered damages from breaches by both defendants. Continental contends the jury could have found Pauper did not breach the contract by allowing liens to be filed, because Continental never claimed Pauper allowed - liens, and that finding would preclude a finding of breach against both defendants but would not preclude a finding that United breached the contract for purposes of Continental's defense for United's breach of contract claim.
[1125] Although it is possible the jury could have read the instruction on the elements of Continental's breach of. contract claim as technically as Continental claims, the verdict form specifically required the jury to make findings about Continental's breach of contract cláims against each defendant separately. The verdict form required the jury to specifically find whether United breached its Master Services Contract obligations to Continental and whether Pauper breached its Master Services Contract obligations to Continental.
[¶26] The jury found Continental was excused from performing the contract with United because United committed a prior material breach. That finding is not consistent with the jury's finding that the greater weight of the evidence did not establish that United breached its contract obligations to Continental. The jury found Continental did not meet its burden of proof for its breach of contract claims against United and Pauper, but then found United's breach excused Continental's subsequent breach. The same conduct was the basis for Continental's breach of contract claim and Continental's excuse for United's breach of contract counterclaim. The spe cial verdict answers are inconsistent, and therefore not logical and probable.
[¶ 27] When there are apparent inconsistencies in a special verdict, we look to the trial court for its insight into the jury's verdict. Fontes v. Dixon, 544 N.W.2d 869, 872 (N.D. 1996). The district court must file a written memorandum concisely stating the different grounds on which its ruling granting or denying a motion for a new trial is based. N.D.R.Civ.P. 59(f). The district court, however, did not give any explanation for denying United's motion for a new trial on this issue. The court said it was denying the motion after considering the motion, Continental's response, counsels' submissions and briefing, and being fully advised on the matter. The court gave no explanation of its decision for denying the motion, and therefore we are not enlightened by the trial court's failure to provide any insight on the verdict. See Fontes, at 872.
[¶ 28] The verdict is inconsistent and perverse and cannot be reconciled. We conclude the district court's decision to deny the motion for a new trial constituted a manifest abuse of discretion. Because the breach of contract, fraud, and deceit claims are largely based on the same allegations, we conclude a new trial is required on Continental's breach of contract, fraud, and deceit claims against United and Pauper and United's breach of contract claim against Continental.
Ill
[¶ 29] United argues the district court erred in limiting the damages it could recover on its breach of contract claim against Continental. United claims it should be allowed to recover its enterprise value because Continental's breach caused United's complete destruction.
[¶ 30] United's answer and counterclaim sought damages for the full value of United's business, profits lost as a result of Continental's wrongful conduct, amounts due for services rendered that Continental refused to pay, the cost of equipment United purchased on Continental's promise to continue doing business'with United, and the cost of acquiring water and additional rights. In deciding Continental's motion for summary judgment against United's counterclaims, the district court ruled United's damages, if it prevailed at trial, would be limited to the net profits it could have earned during the 30-day notice period for termination of the contract and to overall expenses of preparation, as well as its expenses in pursuance of reasonable efforts to avoid or minimize the damaging effect of the breach.
[¶ 31] "Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law." THR Minerals, LLC v. Robinson, 2017 ND 78, ¶ 6, 892 N.W.2d 193 (quoting Markgraf v. Welker, 2015 ND 303, ¶10, 873 N.W.2d 26). The moving party has the burden of showing there are no genuine issues of material fact and they are entitled to judgment as a matter of law. THR, at ¶ 6. In reviewing the court's decision on a motion for summary judgment, we view the evidence in the light most favorable to the party opposing the motion and decide "whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law." Id. (quoting Markgraf, at ¶ 10). A court's decision on summary judgment is a matter of law, which we review de novo on the entire record. THR, at ¶ 6.
[¶ 32] United alleges its company was completely destroyed as a result of Continental's refusal to pay over $4.5 million for services and materials United provided and Continental's failure to give 30 days' notice of termination as the contract required. United argues a victim of a breach of contract is entitled to recover damages sufficient to put it .in the position it would have occupied had the contract been fully performed, including lost profits and to recover its enterprise value if the company is destroyed by the breach of contract.
[¶ 33] The contract states that it is governed by the laws of the State of Oklahoma, The parties agree Oklahoma law governs the breach of. conteact claims. The Oklahoma statute' providing the general rule for damages for a breach of contract states:
For the breach of .an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this chapter, is the amount which will compensate the party aggrieved. for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom. No damages can be recovered for a breach of contract, which are not. clearly ascertainable in both their nature and origin.
23 Okla, Stat. § 21. "The detriment caused by the breach of an obligation to pay mon-. ey only is deemed to be the amount due by the terms of the obligation, with interest thereon." 23 Okla. Stat. § 22.
[¶ 34] Oklahoma courts follow these general rules on recovery of damages for breach of contract:
1) [W]here no special circumstances distinguish the contract involved from the great mass of contracts of the .same kind, the damages recoverable are those as would naturally and generally result from the breach according to the usual course of things, and 2) where there are special circumstances in the contract, damages which result in consequence of the special circumstances are recoverable, if, and only if, the special circumstances were communicated to or known by both parties to the contract at the time they entered the contract.
Florafax Int'l, Inc. v. GTE Mkt. Res., Inc., 933 P.2d 282, 292 (Okla. 1997).
[¶ 35] In Osborn v. Commanche Cattle Indus., Inc., 545 P.2d 827, 831 (Okla. Civ. App. 1975), the Oklahoma Court of Appeals decided whether there was a limitation on the- amount of lost profit damages a party could seek for breach of contract. The court noted other courts have held the "breach of a contract terminable, at any time upon notice entitles the aggrieved party to recover only those net profits which he could have earned during the notice period." Id. The court said a plaintiff "should. not 'by reason of the defendant's breach, acquire rights greater than those which the contract gave it,' " and "a party to a contract terminable by either party upon notice is never assured, of performance- for any time longer than the period of notice for which he bargained." Id. The damages a party recovers for lost profits is to protect the injured promisee's, expectation interest, his prospect of a net gain from- the contract; and the damages put the promisee injured by the breach in the position in which he would have been if the contract had been performed, the expectation interest does not extend any further, and the promisee may not recover more than the amount he might have gained by full performance. Id. The court said since the assurance of performance does not extend beyond the length of the termination notice period neither does the prospect of profit, and therefore the plaintiff may only recover lost profits for the length of the termination notice period. Id. at 831-82.
[¶ 36] United admits Continental could terminate its contract with United at any time upon 30 days' notice. But United contends this case is similar to Florafax, in which the Oklahoma Supreme Court held the plaintiff could seek. damages of. lost profits beyond the time for notice of termination.
[¶ 37] In Florafax, the plaintiff sued the defendant alleging the defendant breached its contract with the plaintiff to provide services. Florafax, 933 P.2d at 286. The jury awarded the plaintiff lost profits the plaintiff claimed it would have made from a collateral contract it had with a third party, which the plaintiff alleged it lost when the collateral contract was cancelled because the defendant breached its contract with the plaintiff. Id. at 286. The court held lost profits from a third party collateral Contract may be recovered in a breach of contract action if the damages can be said to have been within contemplation of the parties at the time of contracting. Id. at 293. The court also said the 60-day notice of termination clause in the collateral contract did not preclude the plaintiff from recovering lost profits beyond the 60-day period. Id. at 294-96.. The court stated the rule from Osborn, 645 P.2d at 831, that a non-breaching party may not receive more in damages than he might or could have gained from full performance and that lost profit damages are limited to profits that could be earned during the notice of termination period is sound, but the rule did not apply. Flora-fax, at 294. The court explained the two cases are different because the plaintiff was not relying on a violation of the notice of termination provision by the third party to support its lost profits claim, the plaintiff alleged the breach by the defendant caused the third party to terminate its relationship with the plaintiff, and the plaintiff would have received profits from the relationship with the third party well into the future if the defendant had not breached the contract. Id. at 296, The court also said the defendant did not have a right to terminate either the contract with the plaintiff or the contract between the plaintiff and the third party upon any specified notice provision, and therefore full performance could not have been supplied by complying with the notice provision to terminate the contract. Id.
[¶ 38] This case is different from Flora-fax. United is not claiming it is entitled to damages for lost profits from a third-party contract that was cancelled because Continental breached its contract with1 United. The contract states, "it being understood and agreed that either party hereto may cancel this Contract by giving the.other party thirty (30) days written notice of such cancellation^]" United claims it was completely destroyed by- Continental's breach of contract, including the refusal to pay over $4.6 million for services and materials United provided and Continental's failure to give 30 days' notice of termination as the contract required. United was not assured performance or profits from the contract beyond the 30-day notice requirement. Continental could cancel the contract at any time after giving United 30 days' notice. United may not recover more than the amount it would have received upon full performance.
[¶ 39] Under Oklahoma law, United is limited to recovering only those net profits which it could have earned during the 30-day notice period. United could also recover the > amount due for the services and materials it provided that it claims Continental failed to pay, if the jury finds-in United's favor on that breach of contract claim. See 23 Okla. Stat. § 22. We conclude the district court did not err in limiting the amount of damages United could seek on its breach of contract claim.
IV
[¶ 40] We need not address other arguments raised because they are unnecessary to our decision. We reverse the judgment and remand for a new trial.
[¶ 41] Lisa Fair McEvers
Dale V. Sandstrom, S.J.
Jon J. Jensen
Jerod E. Tufte
Daniel J. Crothers
[¶ 42] The Honorable Dale V. Sand-strom, S.J., sitting in place of VandeWalle, C.J., disqualified.