Arkoma Associates v. Carden, s. 87-3624

• Decision Date: 07 December 1988
• Docket Number: 87-3917,Nos. 87-3624,s. 87-3624
• Citation: 874 F.2d 226
• Parties: ARKOMA ASSOCIATES, Plaintiff-Counter Defendant-Appellee, v. C. Tom CARDEN and Leonard L. Limes, Defendants-Appellants. MAGEE DRILLING COMPANY, INC., Intervenor-Counter Plaintiff-Appellant, v. David HEPBURN, et al., Third Party Defendants-Appellees. ARKOMA ASSOCIATES, Plaintiff Appellee Cross-Appellant, v. C. Tom CARDEN and Leonard L. Limes, Defendants-Appellants Cross-Appellee, and Magee Drilling Company, Intervenor-Appellant Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 226

874 F.2d 226

ARKOMA ASSOCIATES, Plaintiff-Counter Defendant-Appellee, v. C. Tom CARDEN and Leonard L. Limes, Defendants-Appellants.

MAGEE DRILLING COMPANY, INC., Intervenor-Counter Plaintiff-Appellant, v. David HEPBURN, et al., Third Party Defendants-Appellees.

ARKOMA ASSOCIATES, Plaintiff Appellee Cross-Appellant, v. C. Tom CARDEN and Leonard L. Limes, Defendants-Appellants

Cross-Appellee,

and

Magee Drilling Company, Intervenor-Appellant Cross-Appellee.

Nos. 87-3624, 87-3917.

United States Court of Appeals Fifth Circuit.

Dec. 7, 1988.

Richard K. Ingolia, Kenneth J. Berke, Berke & Ingolia, New Orleans, La., for Carden, Limes & Magee, etc.

Mitchell J. Hoffman, Lowe, Stein, Hoffman & Allweiss, New Orleans, La., for Arkoma Assoc. et al.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before POLITZ and JOHNSON, Circuit Judges, and BOYLE, ^* District Judge.

POLITZ, Circuit Judge:

In these consolidated appeals Magee Drilling Company (MDC), C. Tom Carden, and Leonard L. Limes challenge the judgments in favor of Arkoma Associates, a partnership, rendered July 27, 1987 and September 17, 1987. Finding no reversible error, we affirm.

Background

This litigation arises out of Arkoma's lease of two drilling rigs to MDC, a Texas corporation. MDC maintains that it was interested in buying or leasing two rigs capable of drilling to 7,500 feet. Discussions ensued between representatives of Arkoma and MDC. Arkoma avers that it made no representations as to drilling capacity and it gave MDC ample opportunity to inspect the rigs. MDC contends that Arkoma represented that the rigs were capable of drilling to 7,500 feet and that the principal rig components consisted of new or rebuilt parts.

On June 27, 1984 the parties executed a lease agreement which expressly declared that no warranties were given. Don Magee, president of MDC and an experienced oil and gas operative, signed the lease and initialed each page of an attached rig inventory list. Carden and Limes, also experienced oil men, joined Magee in personally guaranteeing the drilling company's obligations under the lease.

MDC employees inspected the rig equipment and supervised its transportation from Oklahoma to Texas. Upon arrival, damaged and missing parts and the wrong drill pipe were discovered, and the parties amended the lease to give MDC a credit of $45,000 and other concessions.

MDC used the rigs for over five months and drilled 19 wells. MDC contends that the rigs were defective and incapable of drilling to 7,500 feet, and that Arkoma knew of these defects. Arkoma counters that there is no evidence that the rigs could not drill to 7,500 feet because of defective equipment, that no unusual problems were encountered, and that MDC made no complaints until December 1984 when it tried to repudiate the lease.

On December 28, 1984 MDC notified Arkoma that it could no longer honor its obligations to its creditors. An attempt at compromise was unsuccessful and the following month MDC tendered the rigs to Arkoma. Arkoma accepted physical possession to protect its rigs from damage; however, it reserved its rights under the lease. MDC failed to make the February 1985 payment and Arkoma gave notice of default and accelerated the lease payments. Suit was then filed against Carden and Limes as MDC's guarantors. ¹

Carden and Limes, both Louisiana citizens, moved to dismiss for lack of diversity jurisdiction, contending that one of the partners of Arkoma was also a Louisiana citizen. The district court denied that motion but certified the jurisdictional question. We declined to accept the interlocutory appeal. Carden and Limes counterclaimed and MDC intervened, claiming violations of the Texas Deceptive Trade Practices Act.

Following a bench trial the court awarded Arkoma judgment in the amount of $467,806.25 plus interest and attorney's fees. The counterclaim and intervention were rejected. Carden, Limes, and MDC appeal.

Analysis

1. Jurisdiction

The threshold issue raised on appeal is whether Arkoma properly invoked diversity jurisdiction. As found by the trial court and uncontested on appeal, two of Arkoma's general partners are citizens of Arizona and the other two are citizens of Oklahoma. One partner--claimed by Arkoma to be a limited partner--is a citizen of Louisiana, as are Carden and Limes.

The citizenship of a general partnership is determined by the citizenship of all the partners. If Arkoma is a general partnership, complete diversity of citizenship between the parties-plaintiff and parties-defendant does not exist. On the other hand, if Arkoma is a limited partnership, the citizenship of the partnership is determined by the citizenship of the general partners only; the citizenship of limited partners is irrelevant. In the latter instance, the requirements of diversity jurisdiction are met. See Navarro Savings Association v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980); Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238 (5th Cir.1986).

The district court found that Arkoma, organized under the laws of Arizona, was a limited partnership under the laws of that state. The district court noted that while Arkoma did not comply with all of the requirements of Arizona Revised Statutes Section 29-302, ² it had, "in good faith, substantially complied with the provisions of the statute, and therefore is a valid limited partnership under Arizona law."

Appellants maintain that the district court erred in finding that Arkoma was a limited partnership because of its "substantial compliance" with Arizona law. The record reflects that Arkoma's certificate of partnership was filed with the recorder's office in Maricopa County, Arizona on September 1, 1981. An amended limited partnership agreement was filed with the office of the Arizona Secretary of State on September 10, 1982. A second certificate of amendment was filed after the instant suit was initiated. The limited partnership agreement describes the name, place of business and purpose of the partnership, the names of the four general partners, the capital contribution of the general and limited partners, the division of profits and losses between the general and limited partners, and the rights of the limited partners. The names and addresses of the limited partners were not listed.

To the extent that the district court's finding of substantial compliance is a finding of fact, it is not clearly erroneous; to the extent it is a conclusion of law it is not in error. Thus, the jurisdictional challenge falters. Our recent opinion in Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corp. is dispositive. It rejects the arguments advanced by appellants. We find the requisite federal jurisdiction.

2. Viability of lease and guaranty agreements

MDC, Carden, and Limes vigorously contend that the lease and guaranty agreements were vitiated by Arkoma's fraud and nondisclosures. This challenge founders on the shoals of Fed.R.Civ.P. 52(a), which directs that findings of fact by the trial court are to be accepted...