Sartor v. Arkansas Natural Gas Corporation

• Decision Date: 11 May 1943
• Docket Number: No. 10517.,10517.
• Citation: 134 F.2d 433
• Parties: SARTOR et al. v. ARKANSAS NATURAL GAS CORPORATION.
• Court: U.S. Court of Appeals — Fifth Circuit

134 F.2d 433

SARTOR et al. v. ARKANSAS NATURAL GAS CORPORATION.

No. 10517.

Circuit Court of Appeals, Fifth Circuit.

March 29, 1943.

Rehearing Denied May 11, 1943.

G. P. Bullis, of Ferriday, La., for appellants.

Elias Goldstein, of Shreveport, La., for appellee.

Before HUTCHESON, HOLMES, and McCORD, Circuit Judges.

HUTCHESON, Circuit Judge.

The suit as originally brought in 1933 was for the value of gas (calculated at the market price) taken by defendant from wells in the years 1927 to 1933, inclusive, under an oil and gas lease in what is known as the Richland Field. The claim was that though the lease secured to plaintiffs, payment at the market price for all gas taken, defendant, during the years in question, had paid them only 3 cents per 1,000 cubic feet, which plaintiffs alleged was much less than the market price.

The defenses were: a denial that the market price was as claimed by plaintiffs, and an affirmation that defendant had for all the years in suit paid plaintiffs the full market price for all the gas it had taken under the lease; a plea of prescription as to all gas produced and sold prior to March 21, 1930; and pleas in reconvention. Plaintiffs' exception of vagueness to defendant's reconventional demand was sustained, and there was a trial to a jury on the theory advanced by plaintiffs that what in these litigations has come to be known as pipe line contracts were in and of themselves proof of market price. There was a verdict and judgment rejecting defendant's plea of prescription, a finding based on the pipe line contracts, awarding plaintiffs a substantial recovery of a market price considerably above 3 cents for the whole period in suit and a judgment for them.

Appealed to this court, the judgment was reversed¹ because of the error in admitting the pipe line contracts as proof of market price, the court holding, for the reasons stated in the opinion, that the prices stated in these contracts were not, and could not be taken as, the market price stipulated for in the lease. There was also a holding that defendant's plea of prescription should have been sustained. Tried again after the remand, defendant's plea of prescription was sustained, and there was a verdict for plaintiffs for the period from March, 1930, to March, 1933, of $3852.92, and for defendant, on its reconventional demand, for $3,547.35. From the judgment on that verdict, plaintiffs appealed. On that appeal² this court determined that in view of the issues tendered on that trial, the plea of prescription should not have been sustained, and affirming the judgment for the period beginning March 20, 1930, and ending March 20, 1933, it sent the cause back for trial on the issues tendered in respect of the years 1927, 1928, 1929 and 1930, as to which defendant's plea of prescription had been sustained. The cause again coming on for trial, the district judge again ruled that the claims for these years were barred by prescription, and the cause appealed again, was reversed again³ because of this ruling with directions to proceed in accordance with the mandate entered on the prior appeal. In the meantime, this court, in Sartor v. United Gas Public Service Co., 5 Cir., 84 F.2d 436, again holding as it had held in Arkansas Natural Gas Co. v. Sartor, 5 Cir., 78 F.2d 924, that the pipe line contracts were not admissible to prove market price, and that plaintiffs were entitled to receive for the gas not the pipe line prices but the market price at the well, laid down the rule that the object and purpose of the inquiry in a case of this kind is to determine (1) the market price at the well, or (2) if there is no market price at the well for the gas, what it is actually worth there. In the same opinion it was also declared that plaintiffs were entitled to, and defendant should pay them for, one-eighth of the gas taken, the market value at the well if there was a market value there, and if there was not, its actual value there. In determining this actual value, said the court, every factor properly bearing upon its establishment should be taken into consideration. Included in these are the fixed royalties obtaining in the leases in the field considered in the light of their respective dates, the prices paid under the pipe-line contracts, and what elements, besides the value as such of the gas, were included in those prices, the conditions existing when they were made, and any changes of conditions, the end and aim of the whole inquiry, where there was no market price at the well, being to ascertain, upon a fair consideration of all relevant factors, the fair value at the well of the gas produced and sold by defendant.

Also, the Supreme Court of Louisiana in Sartor v. United Gas Public Service Co., 186 La. 555, 173 So. 103, 107, held in full accord with our opinions in the two earlier Sartor cases, that the pipe line contracts did not represent, and were not admissible to prove, the market value at the well under a lease providing for the payment of market price. Saying: "The theory that royalty owners should receive settlements based upon pipe-line prices has been rejected by the federal court in two recent cases. Arkansas Natural Gas Co. v. Sartor 5 Cir., 78 F.2d 924, 928; and Sartor v. United Gas Public Service Co. 5 Cir., 84 F.2d 436, 440", the court declared⁴ that the evidence in the case established that there was a market price at the well, and that this being so, the pipe-line contracts were not admissible to overcome or affect the market price so established. Subsequent to the decision of this case, there were three other gas recovery cases decided in this court.⁵ In all of these cases, the rules heretofore...