Gulf Oil Corporation v. Lone Star Producing Co.

• Decision Date: 13 August 1963
• Docket Number: No. 20005.,20005.
• Citation: 322 F.2d 28
• Parties: GULF OIL CORPORATION, Appellant, v. LONE STAR PRODUCING COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

322 F.2d 28 (1963)

GULF OIL CORPORATION, Appellant, v. LONE STAR PRODUCING COMPANY, Appellee.

No. 20005.

United States Court of Appeals Fifth Circuit.

August 13, 1963.

Fred A. Lange, W. B. Edwards, Houston, Tex., for appellant.

Roy E. Pitts, Archie D. Kroney, D. L. Case, Jackson, Walker, Winstead, Cantwell & Miller, Dallas, Tex., Jack T. Life, Athens, Tex., for appellee.

Before HUTCHESON, RIVES and GEWIN, Circuit Judges.

RIVES, Circuit Judge.

By written contract of April 1, 1958, Gulf Oil Corporation (hereafter Gulf Oil) agreed to purchase and Lone Star Producing Company (hereafter Lone Star) agreed to sell certain crude oil described as Lone Star's "owned and controlled production from Opelika and LaRue Fields (currently approximately six hundred (600) barrels daily)." The agreement was to "remain in effect until canceled by either party giving to the other party thirty (30) days' written notice of cancellation." Deliveries were to be made from tankage "at such times and in such quantities as may be mutually agreeable." Gulf Oil was to pay Lone Star monthly "for all crude oil delivered during the preceding calendar month" at "a price per barrel equal to Gulf Oil Corporation's Northeast Texas Area posted price for the gravity received in effect on the date which said crude oil is allocated for pricing purposes, less any transportation cost in excess of five (5) cents per barrel as stipulated in pipe line tariffs of Gulf Refining Company for transportation of the crude oil to its Big Sandy Station."

During the entire period of the contract the applicable posted price was $3.15 per barrel. From May 8, 1958 the pipe line tariffs of Gulf Refining Company¹ for transportation of crude oil from lease tankage in Opelika Field to Big Sandy Station stipulated a rate per barrel of 15 cents. In each of the 31 months from May 1958 through November 1960, Gulf Oil paid Lone Star for oil delivered under the contract the full posted price of $3.15 per barrel without any deduction for transportation cost. On January 4, 1961, Gulf Oil wrote to Lone Star as follows:

"Contract dated April 1, 1958, under which Gulf purchased your LaRue and Opelika production, provides that Gulf Oil Corporation\'s posting for North East Texas Crude shall be reduced by any transportation cost in excess of five (5) cents per barrel as stipulated in pipe line tariffs of Gulf Refining Company presently in effect. On May 8, 1958 Gulf Refining Company issued Tariff No. 163 which provided for a rate of fifteen (15) cents per barrel on the movement of this crude. At this time, the price paid to you should have been decreased ten (10) cents per barrel. However, this decrease in price was inadvertently overlooked in our accounting to you.

"We are attaching our Invoice No. 0-12-X in the amount of $44,522.33 representing ten (10) cents per barrel overpayment for the period May 9, 1958 through November 30, 1960.

"This invoice shows in detail the runs which were incorrectly valued. We wish to apologize for any inconvenience caused you by our improper accounting, and would appreciate your reimbursing us for this overpayment in order that we may reconcile our records."

Gulf Oil then refused to pay Lone Star for the oil purchased during December 1960 without deducting the total amount of such claimed overpayment, and tendered the balance which it claimed to be due of $4,649.01. Lone Star refused to accept.

On December 15, 1961, Lone Star filed its complaint against Gulf Oil to recover for the oil sold during December 1960 at the price of $3.15 per barrel. Gulf Oil answered, denying such indebtedness but admitting the obligation for the December 1960 oil at the price of $3.05 per barrel and praying "that any recovery by the Plaintiff under the terms of the contract of April 1, 1958 be made subject to the ten cents per barrel transportation rate increase provided for in said contract." Gulf Oil also filed a counterclaim praying for judgment against Lone Star in the amount of the claimed overpayments of $44,522.33, or that it be deducted from and allowed as an offset against the acknowledged indebtedness of $49,171.34 for December 1960 crude oil purchases.

The case was tried to the court without a jury. The district court, in a full opinion reported at 208 F.Supp. 85, held that "the price Gulf Oil, under the contract in question, was required to pay Lone Star for the oil it purchased from it during the existence of said contract, including the oil purchase during the month of December 1960, was the applicable posted price per barrel for said oil, less 10¢ per barrel." Accordingly, the district court restricted Lone Star's recovery for the December 1960 oil to the $3.05 contract price. As to the oil delivered during the preceding 31 months, however, the district court permitted Lone Star to retain the overpayments totaling $44,522.33, upon a holding that Gulf Oil had "voluntarily" paid the money to Lone Star "with full knowledge of all the facts." In the alternative, the district court ruled that recovery of $31,298.26 was barred by the Texas two-year statute of limitations.²

We disagree with both rulings and reverse and remand for a recomputation at the $3.05 contract price and the making of certain equitable adjustments.

The Contract Price.

There is no question but that, under the provisions of the contract of April 1, 1958, which have been quoted, the contract price was $3.15 per barrel "less any transportation cost in excess of five (5) cents per barrel as stipulated in pipe line tariffs of Gulf Refining Company for transportation of the crude oil to its Big Sandy Station."

The district court found that:

"Although the evidence does not show under which Tariff Gulf Refining Company charged Gulf Oil it did charge Gulf Oil and Gulf Oil paid 15¢ for each barrel of oil Gulf Refining Company moved or transported from Lone Star\'s Opelika Plant to Gulf Refining Company\'s Big Sandy Station from May 8, 1958, through December 1960. The 15¢ per barrel so charged Gulf Oil by Gulf Refining Company was a transportation cost within the meaning of the pricing clause of the April 1, 1958, contract between Gulf Oil and Lone Star above quoted * * *."

The district court thought that the crude oil moved in interstate commerce and that the applicable tariff was Gulf Refining Company's I.C.C. No. 44, filed May 6, 1958. Lone Star does not question the validity of Tariff I.C.C. No. 44 or that it was effective at all pertinent times, but contends that the oil did not move in interstate commerce.

Lone Star contended in the district court that Texas Local Tariff No. 163 was not filed until June 28, 1961. The district court found:

"This contention of Lone Star is without merit. Under the finding above made to the effect that said Tariff No. 163 was received by the Railroad Commission of Texas on May 8, 1958, for filing and thereafter remained in the office of the Railroad Commission, said Tariff was filed with the Railroad Commission on May 8, 1958, even though for some reason the Railroad Commission did not formally place the file mark thereon until June 28, 1961."

Lone Star also contended in the district court that if Texas Local Tariff No. 163 is applicable, it provides for a gathering charge and not a transportation charge. In response to that contention, the district court held:

"The transportation cost, referred to in said quoted paragraph of said contract can have but only one meaning and that is the amount Gulf Refining Company charged Gulf Oil for moving or transporting the oil from Lone Star\'s Opelika Plant to Gulf Refining Company\'s Big Sandy Station, and that is true irrespective of whether such, under the rules and regulations of the Railroad Commission of Texas, is to be considered a charge for gathering of oil or a charge for transporting oil."

On appeal Lone Star makes a third contention, that both tariffs apply only to "lease tankage" in Opelika Field to Big Sandy Station. It insists that "lease tankage" refers to the tanks into which the flow lines from the wells on the lease are directed. Its insistence continues:

"In this case, the oil produced from Opelika Field was gathered from `lease tankage\' into storage tanks by Lone Star, not by Gulf Oil or Gulf Refining (R. 141), and the oil from the LaRue Field was accumulated by a gathering system into central storage in LaRue Field, from which it was hauled by trucks to the storage tanks at Opelika Field. (R. 141-142.) From the storage tanks, the oil was pumped into Gulf Refining\'s pipelines. (R. 1-142.) Thus, it is undisputed that the oil in this case did not move from `lease tankage\' in Opelika Field to Big Sandy Station and these tariffs simply do not apply to it."

The contract of April 1, 1958 contained the following provision:

"DELIVERY: The crude oils sold and purchased hereunder shall be delivered by Lone Star Producing Company from tankage at its Opelika Plant into facilities of Gulf Refining Company for the account of Gulf Oil Corporation. Deliveries shall be made at such times and in such quantities as shall be mutually convenient. Title to the crude oil sold and purchased hereunder shall pass to Gulf Oil Corporation upon delivery into the above-mentioned facilities of Gulf Refining Company."

Both tariffs applied: "FROM Lease tankage within the territory of the Gulf Refining Company's gathering facilities in Opelika Field, Henderson County, Texas, TO Big Sandy Station, Upshur County, Texas." We think that the tariffs were applicable whether the tankage from which the oil was delivered into the facilities of Gulf Refining Company belonged to Lone Star or to Gulf Oil. It actually cost Gulf Oil 15 cents per barrel to transport the crude oil to its Big Sandy Station. Lone Star does not suggest any tariff which would provide a lower cost of transportation. We are in agreement with the district court's finding that the contract price was $3.05 per barrel.

Voluntary Payment.

While the...