Reagan County Purchasing Co. v. State

• Decision Date: 18 October 1933
• Docket Number: No. 7850.,7850.
• Citation: 65 S.W.2d 353
• Parties: REAGAN COUNTY PURCHASING CO., Inc., et al. v. STATE et al.
• Court: Texas Court of Appeals

65 S.W.2d 353

REAGAN COUNTY PURCHASING CO., Inc., et al. v. STATE et al.

No. 7850.

Court of Civil Appeals of Texas. Austin.

October 18, 1933.

Rehearing Denied November 15, 1933.

Appeal from District Court, Travis County; J. D. Moore, Judge.

Suit by the State against the Reagan County Purchasing Company, Inc., the Continental Oil Company, and others. From orders overruling the pleas of privilege of the defendants named, they appeal.

Orders affirmed.

James J. Cosgrove, of New York City, G. B. Smedley, of Austin, and G. R. Pate and Burney Braly, both of Fort Worth, for appellant Continental Oil Co.

Hayes, Richardson, Shartel, Gilliland & Jordan and D. A. Richardson, all of Oklahoma City, Okl., for appellant Reagan County Purchasing Co.

James V. Allred, Atty. Gen., and R. W. Yarborough, Asst. Atty. Gen., for the State.

Nelson Phillips, of Dallas, J. C. Adams, of Tulsa, Okl., Hiner & Pannill, of Fort Worth, and Black & Graves, of Austin, for appellee Big Lake Oil Co.

C. R. Wharton, Brady Cole, and Baker, Botts, Andrews & Wharton, all of Houston, for appellee Texon Oil & Land Co.

BLAIR, Justice.

This is an appeal from an order overruling the pleas of privilege of appellants, Reagan County Purchasing Company, Inc., and Continental Oil Company, to be sued in Tarrant county. The pleas were in statutory form, and each appellant was shown to be a Delaware corporation with a permit to do business in Texas, and with its principal office in Fort Worth, Tarrant county; and neither appellant had an agent in Travis county when the state filed its suit there. The state controverted the general venue thus fixed in Tarrant county by the pleas of privilege, and sustained venue in Travis county under subdivisions 27, 29a, and 5 of article 1995.

The state's petition, which was attached to and made a part of its answers to the pleas of privilege, was introduced in evidence. The nature of the suit and facts alleged in the petition were as follows: That on December 17, 1931, the state of Texas sued nine corporations, appellant Reagan County Purchasing Company, Inc., herein called purchasing company, appellant Continental Oil Company, herein called Continental, appellees Group No. 1 Oil Company, Group No. 2 Oil Company, Texon Oil & Land Company, Texon Oil & Land Company of Texas, Big Lake Oil Company, herein called producing companies, Humble Oil & Refining Company and Humble Pipe Line Company, herein called Humble, seeking to recover $575,000 as "additional royalty" on oil produced from State University lands in the Big Lake oil field in Reagan county, between October 1, 1928, and December 1, 1931, under certain leases executed by the state to the producing companies; the leases providing that the producing companies should pay the state as royalty "a sum of money equal to one-eighth of the value of the gross production of petroleum." The petition alleged: That the producing companies sold the oil to purchasing company under what is designated "Purchasing Contract of November 24, 1924," which contract Continental guaranteed in writing by what is designated "Organization Contract of October 22, 1924," and that purchasing company resold the oil to Humble under what is designated "Resale Contract of December 15, 1924," the purchasing contract being made a part of the resale contract by reference. That after considerable operations of the aforementioned leases and contracts, the state of Texas filed its suit against all the aforementioned corporations and others in the district court of Travis county, in cause No. 42752, entitled State of Texas v. Reagan County Purchasing Company, Inc., et al., seeking to cancel the leases and contracts for certain alleged fraud attending their execution, and for alleged failure of lessees to comply with certain provisions of the statutes relating to the leasing of University lands for oil development; and, in the alternative if the leases and contracts were declared valid, the state sought to recover "its full one-eighth part of the full contract price required to be paid for the oil sold to Reagan County Purchasing Company, Inc., under said contract of November 24, 1924." That on October 12, 1928, judgment was entered in said cause, which was signed and agreed to by each of the aforementioned corporations. That the judgment referred to the organization contract, the purchasing contract, and the resale contract, and decreed that all "are contracts, as adjudicated by the court, beneficial to the State," and decreed that the state was not entitled to cancel them for the fraud and irregularities alleged. That the judgment further decreed that producing companies should pay the state $1,000,000 in satisfaction of its past claims to October 1, 1928, for its interest in the oil produced and sold under the leases and contracts, and further decreed that the state would be due in the future, as its one-eighth royalty, sums equal to one-eighth of the price paid by the purchasing company to producing companies under the purchasing contract and the resale contract, which sums should be paid the state in monthly payments. The judgment further decreed as to future operations of the leases and contracts as follows:

"* * * But this judgment is not to be taken as a construction of the Purchasing Contract of November 24, 1924, as applied to sales of oil under said contract, made prior to October 1, 1928, and the future construction of this contract shall remain open just as though this decree had not been rendered, except that no questions may be raised as to payments or liability claimed for oil delivered prior to October 1, 1928. In the future if the Reagan County Purchasing Company, Inc., shall ascertain and pay the Big Lake Oil Company and/or Group No. 1 Oil Corporation a price for said oil which said Big Lake Oil Company and/or Group No. 1 Oil Corporation should deem insufficient under a proper construction of the price clause of the said contract, and a controversy should arise as to the proper construction thereof, then the State shall join the Producing Company or Companies or intervene in such suit or suits as shall be necessary to construe the contract and recover the additional amount claimed, and shall be bound by any such final judgment which may be rendered by a court of competent jurisdiction construing said contract and decreeing the correct amount due thereon."

The petition further alleged that the state had a beneficial interest in the aforementioned contracts because the amount of its one-eighth royalty under the leases was made dependent upon and determined by the liability of appellant purchasing company to producing companies under the purchasing contract of November 24, 1924, and the judgment of October 12, 1928, which judgment had the effect of a contract in writing because it was signed and entered by agreement of the parties, and which judgment decreed the state a beneficial interest in the purchasing contract, particularly in its price clause, with the incidental right to question the construction placed upon the price clause, or the method or manner employed by the purchasing company for determining its net profits in any appropriate litigation. The petition alleged that a controversy had arisen between purchasing company and the producing companies concerning the true construction of the price clause of the purchasing contract, and further alleged the method or manner employed by the purchasing company in construing the price clause, that same was a misconstruction, and that it had resulted in the purchasing company paying the producing companies too small an amount for the oil, and that the state in turn had been underpaid on its one-eighth royalty, and that a proper construction would have entitled it to the additional royalty sued for.

The state proved substantially the foregoing allegations of its petition. An examination of the agreed judgment shows a prima facie basis for the constructions and interpretations placed upon it by the pleadings of the state, both as an adjudication and as a contract. The state also proved that, if its construction of the price clause of the purchasing contract is found to be correct, then under the facts alleged and proved it will be entitled to recover the additional royalty sued for. The state further alleged and proved that the additional royalty sued for was, by statute and the terms of the leases, payable in Austin, Travis county, Tex., and that the judgment of October 12, 1928, was agreed to and signed and entered in Travis county, Tex.

We have reached the conclusion that the state's suit against appellant purchasing company was maintainable in Travis county, because it was shown to be a foreign corporation and the cause of action asserted against it by the state was based in part upon the judgment of October 12, 1928, and upon the agreement of the parties as evidenced thereby, entered and made in Travis county, with the necessary result that a part of the cause of action arose in Travis county within the meaning of subdivision 27 of article 1995. By the judgment it was adjudicated by the court that the state had a beneficial interest in the purchasing contract of November 24, 1924. It was signed and entered upon agreement of the parties and consequently became a contract as well as an adjudication between them. Telluride Power Co. v. City of Teague (Tex. Civ. App.) 240 S. W. 950; Lessing v. Cunningham, 55 Tex. 231; Buffalo Bayou, etc., Railway Co. v. Ferris, 26 Tex. 588; Corpus Juris, vol. 34, pp. 133, 134; Evans v. Williams (Tex. Civ. App.) 194 S. W. 181; Missouri, K. & T. Ry. Co. v. State (Tex. Civ. App.) 275 S. W. 673. It was therefore adjudged by the court and agreed to by the parties, including appellant purchasing company, that the state had a beneficial interest in the purchasing contract, and particularly the price clause thereof; and concerning any future controversy with regard to a proper construction of the price...