Brooks Gas Corp. v. Sinclair Oil & Gas Co.

• Decision Date: 17 November 1966
• Docket Number: No. 14970,14970
• Citation: 408 S.W.2d 747
• Court: Texas Court of Appeals
• Parties: BROOKS GAS CORPORATION, Appellant, v. SINCLAIR OIL & GAS CO. et al., Appellees. . Houston

Page 747

408 S.W.2d 747

BROOKS GAS CORPORATION, Appellant, v. SINCLAIR OIL & GAS CO. et al., Appellees.

No. 14970.

Court of Civil Appeals of Texas Houston.

Nov. 17, 1966.

Rehearing Denied Dec. 8, 1966.

Ben G. Sewell, McGregor, Sewell, Junell & Riggs, Houston, and James W. Wilson, Shannon H. Ratliff, McGinnis, Lochridge, Kilgore, Hunter & Wilson, Austin, for appellant.

Richard J. Dent, Tulsa, Okl., Richard P. Keeton, David T. Searls, J. Evans Attwell, William H. Drushel, Jr., Houston, for appellee Skelly Oil Co.; Vinson, Elkins, Weems & Searls, Houston, of counsel.

Horace N. Burton, John R. Scott and Rush Moody, Jr., Midland, for appellee Sinclair Oil & Gas Co.; Stubbeman, McRae, Sealy & Laughlin, Midland, of counsel.

WERLEIN, Justice.

In its motion for rehearing appellant complains that some of the language used in our opinion handed down on November 17, 1966, might be construed as an expression of opinion by this Court as to certain disputed facts and the law applicable thereto and that appellant could be prejudiced thereby upon a trial of the case on its merits. In order to avoid any possibility of such construction of the language used in said opinion, we are withdrawing the same and are subsituting the following opinion in lieu thereof.

This is an appeal from an order of the trial court denying appellant, Brooks Gas Corporation, a temporary injunction sought against Sinclair Oil & Gas Co., hereinafter called Sinclair, Skelly Oil Company, referred to herein as Skelly, Sinclair Oil & Gas Company and Skelly Oil Company, alleged to be a partnership or a joint venture, Tenneco Oil Co., and Mallard Petroleum, Inc. In its judgment the trial court made certain fact findings and conclusions of law. Such findings are substantially as follows:

Appellant is the owner and operator of a gas processing plant located near Mertzon, Irion County, Texas, and of an associated system of gas gathering pipelines and facilities for the collection of casing-head and gas-well gas from wells located in the Mertzon and Brooks Field area in Irion County, Texas, and the Velrex Canyon, Velrex Upper Henderson, Velrex Henderson, Velrex Southwest, Velrex South, Case Canyon and Eldorado Canyon Fields area in Schleicher County, Texas, and purchases gas from producers in those areas, extracts the butane, propane and other liquid hydrocarbons from the gas and sells the residue gas to Northern Natural Gas Co., a gas pipeline company. The Mertzon gas processing plant and the gas gathering facilities associated with such plant constitute appellant's only business operation.

Appellees, Sinclair and Skelly, each own a one-half interest in a gas processing plant located near Hulldale in Schleicher County, Texas, and an associated System of gas gathering pipelines and facilities. Appellee Sinclair is the operator of said facilities under a joint operating agreement authorizing Sinclair to operate such facilities on behalf of both Sinclair and Skelly, except that Skelly's approval is required for any capital improvement costing in excess of $5,000.00. The Sinclair-Skelly Hulldale gas processing plant is similar in function to that of appellant except larger since appellees obtain gas from wells in a number of fields in Schleicher, Irion and several other counties for their Hulldale plant; that at the time of the negotiations hereinafter referred to between appellant and Skelly and at the time of the hearing of the temporary injunction by the trial court, the Sinclair-Skelly Hulldale gas gathering pipelines and facilities did not extend into the gas supply areas served by appellant, but such plant was located in the same area as appellant's gas supply area, and only approximately 12 miles away from the area served by appellant in Schleicher County, and thus presented a competitive threat to appellant's position in such area.

On or about February of 1964, B. R. Nunn, assistant to Skelly's gasoline plants Division Manager, approached W. M. Dow, appellant's President, on Skelly's behalf for the purpose of entering into negotiations looking to the purchase of plaintiff's gas processing plant and gas gathering system. Dow advised Nunn that though appellant would be interested in negotiating with Skelly for an interest in appellant's system, it would not divulge to Skelly the detailed confidential information including trade secrets necessary to an evaluation by Skelly of appellant's system because of Skelly's ownership of a one-half interest in the Sinclair-Skelly Hulldale plant, and the potentional threat presented to appellant's gas purchase and gas processing position in Irion and Schleicher Counties by such plant. Nunn advised Dow that Sinclair-Skelly had no plan or intention of extending its gas gathering system into any of the gas supply areas served by appellant and that Skelly would give appellant any assurance required by appellant to protect appellant's position. Dow advised Nunn that in addition to an agreement not to divulge information provided by appellant and the agreement not to use such information to appellant's detriment, appellant would require an agreement that the Sinclair-Skelly Hulldale system would not be extended into the gas supply areas served by appellant, and that appellant would not furnish any information unless such conditions were agreed to by Skelly. Nunn agreed to such conditions on Skelly's behalf and stated that Sinclair's concurrence would be unnecessary since Skelly would have to approve any extension of the Hulldale system into the areas of appellant's gas supply.

On April 10, 1964, Nunn came to Dow's office to obtain the information requested by Skelly for the purpose of evaluating appellant's plant, but before Dow would release such information he required that Nunn sign a letter setting forth specifically the purpose for which the information was provided and the agreements and conditions under which the information was to be given Skelly. This letter was signed and agreed to on behalf of Skelly by Nunn, and reads as follows:

'We are submitting to you herewith on a confidential basis a report entitled, 'Description of Mertzon-Brooks Gas Gathering and Processing System, Irion and Schleicher Counties, Texas,' together with Appendix I containing system maps and gas reserve isopach maps, and Appendix II containing copies of gas purchase and residue gas sales contracts. This material is being furnished at your request so that Skelly Oil Company can evaluate its desires to purchase an interest in our operations.

'It is agreed that the information furnished on the Mertzon-Brooks system will be held by Skelly Oil Company in strict confidence and will be revealed only to the necessary and authorized representatives of Skelly Oil Company. Skelly agrees to promptly notify Brooks the names and positions of all Skelly representatives to whom the enclosed information on the Mertzon-Brooks system is revealed.

'It is further agreed that Skelly will in no manner use the information furnished on the Mertzon-Brooks system to the detriment of Brooks Gas Corporation and/or Mertzon Corporation, nor will in any way hinder or undermine Brooks Gas Corporation's gas purchase and gas processing position in Irion and Schleicher Counties, Texas.

'It is agreed that one copy only of the information as described by the attached lists of contents has been furnished to Skelly Oil Company and that this information will not be reproduced in whole or in part. It is further agreed that all of this information will be returned to Brooks by Skelly within 90 days from this date, along with either a purchase proposal or an expression of no interest by Skelly. It is further agreed that Brooks Gas Corporation has willingly furnished this information to Skelly on the above conditions and that Skelly has no obligation to purchase any part of the Mertzon-Brooks System, nor to pay any fee to Brooks Gas Corporation.'

The written information submitted by appellant after Nunn signed said letter included the narrative statement setting forth a general description of appellant's processing plant and gas gathering system and its operations, description of all processing and gathering equipment, a summary of all gas purchase contracts and appellant's gas sales contract, detailed information on the plant's processing capacity, the plant's record for recovery of products from gas, information on product sales contracts and products sales, and detailed information on gas reserves and potential filed development in the fields served by appellant, and a summary of past, current and projected economics of appellant's system. In addition, Skelly was given two large folders of written instruments including a list of equipment utilized in appellant's plant and system, and various system maps and gas reserve isopach maps and copies of appellant's gas contracts, some of such material being of a confidential nature and consistuting trade secrets.

The court further found that the language of said letter to the effect that Skelly would not 'in any way hinder or undermine Brooks Gas Corporation's gas purchase and gas processing in Irion and Schleicher Counties, Texas,' considered in the light of all of the surrounding circumstances constituted an agreement and covenant on the part of Skelly that the Hulldale system would not be extended in appellant's gas supply area in said counties and that Skelly would not approve any extension of the said system into appellant's gas supply area. The court found that appellant and Skelly negotiated in good faith concerning the possible sale of an interest in appellant's system to Skelly, but no sale was consummated.

The court also found that sometime late in 1965, Nunn acting on Skelly's behalf, approved an extension of the Hulldale system into the Eldorado Canyon Field in Schleicher County, Texas, within appellant's gas supply area as contemplated by the agreement of said parties. Although appellant's gas gathering...