3-C Oil Co. v. Modesta Partnership

• Decision Date: 11 January 1984
• Docket Number: No. 13655,13655
• Citation: 668 S.W.2d 741
• Parties: 3-C OIL COMPANY, Appellant, v. MODESTA PARTNERSHIP, et al., Appellees.
• Court: Texas Court of Appeals

Page 741

668 S.W.2d 741

3-C OIL COMPANY, Appellant, v. MODESTA PARTNERSHIP, et al., Appellees.

No. 13655.

Court of Appeals of Texas Austin.

Jan. 11, 1984.

Rehearing Denied March 14, 1984.

William David Deaderick, Gibbins, Burrow & Bratton, Austin, for appellant.

Mark H. How, Lawrence M. Wells, Rohde, Chapman, Ford & How, Dallas, for appellees.

Before PHILLIPS, C.J., and EARL W. SMITH and GAMMAGE, JJ.

EARL W. SMITH, Justice.

This appeal involves complex and competing claims to oil field equipment located on three oil and gas leases known as the E.B. White, G.C. Walker and P.L. Walker leases in Caldwell County. The cause originated on October 18, 1978, when E. Dale Hartley (Hartley) sued 3-C Oil Company, a partnership composed of William A. Cox, Woodson Cox and John Cox (3-C). Hartley claimed title to equipment on the E.B. White and P.L. Walker leases.

3-C, by a series of pleadings and counter-claims, joined, as third-party defendants; Modesta Partnership (Modesta), Palo Pinto Limited Partnership (Palo Pinto) 1. Ordered, adjudged and decreed that ... plaintiffs' title to and ownership of the equipment identified in the inventory attached to the judgment [the equipment on the three leases] "is hereby in all things ratified and confirmed"; and

Judgment Oil and Gas Company, a partnership (JOG) and Jim Burden, Lionel Aiken and Jeffrey Munsuy, as trustees (Trustees). All third-party plaintiffs filed answers and counter-claims against 3-C, claiming title in various ways to the equipment on the three leases and alleging that 3-C converted such equipment to the damage of third-party plaintiffs. Hartley took a nonsuit as to 3-C and the parties were realigned at trial, with Modesta, Palo Pinto, JOG, and Trustees as plaintiffs and 3-C and its three partners as defendants. Based partially on the jury's verdict and partially on the trial court's own findings of fact and conclusions of law, the court rendered judgment in which it, inter alia:

2. Awarded Modesta, Palo Pinto, JOG, and Trustees judgment in the total sum of $289,299.40 with interest against 3-C (the partnership), John Cox, Woodson Cox and William Cox, and 3-C Oil Company, Inc., jointly and severally.

Appellants, 3-C (3-C Oil Company, Inc.--John Cox, Woodson Cox and William Cox), assign twenty-one points of error. In points six and seven 3-C contends that the trial court erred in awarding damages to Modesta, et al. because there is no evidence or insufficient evidence of the fair market rental value of the equipment in question and that there is insufficient evidence linking any rental values of the equipment to the dates or time period of the alleged conversions. In point fifteen, 3-C contends that the court erred in entering judgment that JOG owns the equipment in question because JOG had never appeared in this cause. In this connection, 3-C argues that JOG did not plead that it acquired title and right to any of the property in question. In point fourteen 3-C avers that the trial court erred in adjudging that Palo Pinto owns the equipment in question because there is no evidence to support that aspect of the judgment. Point sixteen raises the argument that the trial court erred in adjudging that Modesta owns all of the equipment in question because Modesta did not claim the equipment on the P.L. Walker lease and there are no pleadings to support that aspect of the judgment. In points seventeen and eighteen 3-C contends that the trial court erred in holding that Modesta owned all of the equipment in question, and in particular the E.B. White lease. As to the E.B. White lease, 3-C argues that the evidence is insufficient to show that Oil, Gas and Mineral Developments, Corp. (OGMD) owned the equipment on such leases at the time of a United States Marshal's sale under which Modesta claims. It is contended in point nineteen that the trial court erred in holding that the Trustees owned all the equipment in question because the Trustees did not claim the equipment on the G.C. Walker lease, and there are no pleadings or evidence to support that aspect of the judgment. In their final point, number twenty-one, 3-C says that the trial court erred in computing the damages from the verdict and in awarding all plaintiffs money damages. We sustain these points of error, reverse the judgment and remand this cause. In view of our disposition of the case we need not discuss the remaining points of error of 3-C.

CONFLICTING CLAIMS OF TITLE TO THE EQUIPMENT ON THE THREE LEASES

The three oil and gas leases and all equipment thereon were owned by OGMD in the early 1970's. Numerous California investors, clients of Trustees, had entered into agreements with OGMD to make certain investments in oil and gas properties in Caldwell County. As stated, this case involves conflicting claims as to ownership of equipment on the E.B. White, G.C. Walker and P.L. Walker leases. As to the equipment on the leases, the common source of title originated in OGMD. An agreement was reached with the California investors whereby OGMD would sell the equipment On August 28, 1978, Equico conveyed the equipment on the P.L. Walker and E.B. White leases to E. Dale Hartley. Apparently, this left title in the equipment on the G.C. Walker lease in Equico.

to one of the JOG partners (T-VESTCO) for cash. T-VESTCO would then sell the equipment to an equipment leasing firm known as IDS; then, IDS would lease the equipment back to T-VESTCO, as one of the partners of JOG. A firm known as Equico became the successor in interest to IDS and the lease contracts held by IDS. JOG defaulted on its lease payments on the IDS lease contracts and worked out an agreement with OGMD whereby the latter agreed to "assume the position of JOG"--i.e. OGMD became the lessee and was obligated on the lease to IDS and its successor Equico. This agreement whereby OGMD, as transferee of the leases became obligated to IDS and/or Equico, occurred May 14, 1973.

On February 16, 1980, Hartley Associates, a partnership, conveyed title to the equipment on the P.L. Walker and E.B. White leases to Trustees.

OGMD did not perform its obligations under the lease contracts or its investment contracts with the California investors and the Trustees were employed as attorneys for the various investors. They filed ten separate lawsuits against OGMD in California and judgments in the total sum of $4,200,000.00 were obtained. The agreement between the investors and the trustees was an "all for one--one for all" arrangement whereby all investors would share pro-rata in any sums recovered by any one of them from OGMD.

In 1978 all of the investors became a partnership known as JOG, represented by the attorneys as Trustees. On April 21, 1976, judgments were obtained by Modesta and Palo Pinto (in their separate suits) against OGMD. Palo Pinto and Modesta became partners in JOG under the "all for one--one for all" arrangement. Abstracts of judgment were filed in Caldwell County on such judgments. In an attempt to realize something from their judgments, an agreement was reached whereby JOG, Inc. operated OGMD leases (including the three in question) for a short period of time. This agreement came to an end when a foreclosure sale was conducted on September 5, 1978 under a THC Financial Corporation judgment, execution, levy and notice of sale. 3-C, the partnership, purchased the three oil and gas leases in question and received a sheriff's deed dated September 6, 1978. The deed from the sheriff to 3-C contained the following recitation:

"There is excluded from this conveyance all personal property located on the three above described leases."

A United States Marshal, pursuant to writ of execution issued under Modesta's judgment, on December 20, and 27, 1978, levied upon the equipment on the E.B. White and G.C. Walker leases. Notice of sale was posted and on January 17, 1979, the Marshal conducted the sale of the equipment on such leases. Modesta was the high bidder and the Marshal delivered a bill of sale to Modesta, dated February 8, 1979.

A second writ of execution was issued on the Palo Pinto judgment. The United States Marshal levied on equipment on the P.L. Walker lease and posted notice of sale which was scheduled for December 27, 1979. However the sale was not conducted, being temporarily enjoined pursuant to an agreement by the parties (3-C and Palo Pinto) and the United States district court for the Western District of Texas.

PLEADINGS AS TO TITLE, DAMAGES AND ANCILLARY RELIEF

In the pleadings upon which the parties went to trial, the claims of the various parties as to title, damages and other relief are as follows:

1. 3-C claims title to the equipment on the three leases by virtue of their purchase of the three leases at the sheriff's sale on September 5, 1978. 3-C contends that the equipment on the leases was "fixtures" and was conveyed

as a part of their leases that they purchased.

(A) Modesta, et al., concedes that if the equipment was fixtures, it was included within the sale of leases, but insists that, under the undisputed evidence, the property was personalty.

(B) The trial court held, as a matter of law, that the equipment was personalty and that 3-C did not acquire title to same by its purchase of the oil and gas leases.

3-C sought injunction against Modesta, et al. to prevent removal of the equipment on the leases, and sought damages for wrongful execution, levy and sale.

2. Modesta claims title to the equipment on the G.C. Walker and E.B. White leases by virtue of its judgment against OGMD on April 21, 1976 in the United States district court of California, writ of execution issued thereon December 15, 1978, levy on the equipment by the U.S. Marshal on December 20, and 27, 1978 and sale by the Marshal on January 17, 1979, at which Modesta purchased the equipment. The Marshal's bill of sale to Modesta is dated February 8, 1979.

Modesta alleges that it made demand upon 3-C to deliver their property to it or give it...