Opinion ID: 1777204
Heading Depth: 1
Heading Rank: 15

Heading: The Chancery Court Erred in Awarding Punitive Damages in the Amount of $40,000

Text: Wilmena argues two points under this assignment of error. First, she argues that there was no proof that she intentionally withheld Clyde's share of the bonus payment because she had no bonus to share. She presses this point under the theory that she purchased the 5% overriding royalty from Launius rather than receiving the assignment as her entitlement under the side-letter agreement. However, this argument must fall in light of the lower court's finding that Wilmena did not purchase the overriding royalty. The lower court further found that Wilmena did not meet her obligation of good faith and fair dealing to the owner of the non-executive rights under the lease, Clyde. Wilmena breached her duty in this regard by deliberately concealing her entitlement to a bonus for the execution of the lease by Launius by entering into an unrecorded side-letter agreement. Further, when Wilmena received her 5% overriding royalty, she immediately sold it to Baker and Newman without first assigning to Clyde his portion of the bonus. Having made these findings, the chancellor then found that Clyde was entitled to one-fourth (1/4) of the 5% overriding royalty, the production from that portion of the overriding royalty from the date Wilmena acquired the overriding royalty, and to one-fourth (1/4) of one-half (1/2) of the 3% working interest, less production costs, which Launius acquired in the farmout from Coquina to Jacobs and the joint venture. Having assessed Clyde's actual damages, the chancellor moved on to consider the appropriateness of punitive damages. He first acknowledged, correctly, that under Tideway Oil Programs v. Serio, 431 So.2d 454 (Miss. 1983), the chancery courts may award punitive damages in an appropriate case. He then stated, It would be difficult to conceive of a set of facts and circumstances where an award of punitive damages would be more justified than those before the court. He awarded punitive damages in the amount of $40,000. As to the conduct for which punitive damages are appropriate, this Court has stated: [t]here are two circumstances wherein a party may be assessed with punitive damages: where the evidence establishes that this party acted with malice and where the evidence shows that the defendant acted with gross negligence or reckless disregard for the rights of others. Scott v. Transport Indemnity Co., 513 So.2d 889, 896 (Miss. 1987). See also Weems v. American Security Insurance Co., 486 So.2d 1222, 1226 (Miss. 1986); Blackwell Chevrolet Co. v. Eshee, 261 So.2d 481, 485 (Miss. 1972); Seals v. St. Regis Paper Co., 236 So.2d 388, 392 (Miss. 1970); Fowler Butane Gas Co. v. Varner, 244 Miss. 130, 150, 141 So.2d 226, 233 (Miss. 1962). The question in this case, then, is whether or not Wilmena's conduct amounted to a willful and intentional wrong against Clyde or whether or not she acted in reckless disregard to Clyde's rights. In finding that punitive damages were appropriate in this case, the chancellor reasoned: There was substantial testimony concerning the benefits which Mrs. Whittington has received from the numerous oil wells which have been successfully completed on this property with the probability that more will be completed, as well as the substantial sums received from overriding royalty. In receiving these benefits no thought was given to her responsibility to plaintiffs or their rights. For these wrongs, the court determined that Wilmena should be severely punished. Under this Court's now familiar scope of review of a chancellor's findings, this Court will not disturb the finding that this is an appropriate case for award of punitive damages, for there is substantial credible evidence on the record that Wilmena willfully concealed her bonus entitlement from Clyde, and denied Clyde his rightful share of the bonus. See, e.g., Dunaway v. Bushin, 498 So.2d 1218, 1221 (Miss. 1986); Richardson v. Riley, 355 So.2d 667 (Miss. 1978). As to the appropriate amount of punitive damages to assess for the conduct, this Court has set out various considerations, considerations which we synthesized, as follows in Bankers Life & Casualty Co. v. Crenshaw, 483 So.2d 254 (Miss. 1985), aff'd, ___ U.S. ___, 108 S.Ct. 1645, 100 L.Ed.2d 62 (1988): 1) Such amount as is necessary for the punishment of the wrongdoing of the defendant and deterring the defendant from similar conduct in the future, Standard Life Co. of Indiana v. Veal, 354 So.2d 239, 249 (Miss. 1977); 2) Such amount as is reasonably necessary to make an example of the defendant so that others may be deterred from the commission of similar offenses. Reserve Life Insurance Co. v. McGee, 444 So.2d 803, 808 (Miss. 1983); T.C.L., Inc. v. LaCoste, 431 So.2d 918, 923 (Miss. 1983); Tideway Oil Programs, Inc. v. Serio, 431 So.2d 454, 460 (Miss. 1983); Snowden v. Osborne, 269 So.2d 858, 860 (Miss. 1972); and 3) The pecuniary ability or the financial worth of the defendant. Collins v. Black, 380 So.2d 241, 244 (Miss. 1980); Allen v. Ritter, 235 So.2d 253, 256 (Miss. 1970); Standard Life Insurance Co. of Indiana v. Veal, 354 So.2d 239, 249 (Miss. 1978); Jones v. Carter, 192 Miss. 603, 610, 7 So.2d 519 (1942). Id. at 278. The chancellor awarded punitive damages of $40,000 based upon the testimony and the financial resources of the defendant as reflected in the record... . The record indeed reflects that Wilmena received $8,800 for sale of part of her 5% overriding royalty acres to Newman; $100,105.44 from sale of another part of the 5% overriding royalty acres to Baker; $685,000 for sale of her land and one-half of her minerals to Kleinpeter ($100,000 in cash, $179,000 payable in 15 annual installments at a 7% per annum interest rate, and assumption of a $406,000 secured debt against the land); $100,000 on her landowners' royalty reserved in the lease; and funds held in suspense by Shield Resources of $30,819.45 and by Santa Fe of $105,537.25. While $40,000 may be a reasonable amount for the punishment of this wrongdoing and for deterring this defendant from similar future conduct, and while it may be a reasonable amount to serve as an example and deterrent for others, these financial resources relied upon by the chancellor reflect only part of Wilmena's financial picture. Showing assets is only a part of the equation in arriving at net worth or financial worth of an individual or legal entity. The defendant's proof failed to adequately establish her net worth  assets minus liabilities  so as to serve as a measure for the Court to consider in arriving at a sum to award as punishment in this case. T.C.L., Inc. v. Lacoste, 431 So.2d 918, 923 (Miss. 1983). See also Employers Mutual Casualty Co. v. Tompkins, 490 So.2d 897, 908 (Miss. 1986); Bankers Life & Casualty Co. v. Crenshaw, 483 So.2d at 279; First American National Bank of Iuka v. Mitchell, 359 So.2d 1376, 1379 (Miss. 1978); Snowden v. Osborne, 269 So.2d 858, 861 (Miss. 1972). Therefore, we reverse and render on this point. C.