U.S. Pipeline Corp. v. Kinder, 18380

• Decision Date: 26 November 1980
• Docket Number: No. 18380,18380
• Citation: 609 S.W.2d 837
• Parties: U. S. PIPELINE CORPORATION, Appellant v. George N. KINDER and Harrell Petty, d/b/a Kinder & Petty, Appellee.
• Court: Texas Court of Appeals

Page 837

609 S.W.2d 837

U. S. PIPELINE CORPORATION, Appellant v. George N. KINDER and Harrell Petty, d/b/a Kinder & Petty, Appellee.

No. 18380.

Court of Civil Appeals of Texas, Fort Worth.

Nov. 26, 1980.

Rehearing Denied Dec. 31, 1980.

Pickering, Vendig & Starks, and Benjamin E. Pickering, Dallas, for appellant.

Jennings, Montgomery, Dies & Turner, and Elton M. Montgomery, Graham, for appellee.

OPINION

SPURLOCK, Justice.

This is a declaratory judgment suit. George N. Kinder and Harrell Petty d/b/a Kinder & Petty (seller) sued M. A. Riddle, individually and d/b/a Riddle Oil Company and U. S. Pipeline Corporation (buyer) for a declaratory judgment to cancel a gas purchase agreement. U. S. Pipeline Corporation, who was named as defendant, is the assignee of the Riddle parties who had purchased the rights from Ravenswood, the original purchaser in the gas purchase agreement. Seller contends that the contract is void because of the statute of frauds and that the contract had been abandoned by pipeline's predecessor. Trial court rendered judgment that the contract was void.

We affirm.

Ravenswood Gas Company as buyer entered into the initial contract on February 23, 1973, with Harrell Petty and George Kinder as seller, in which the seller agreed to sell gas to the buyer. Ravenswood Gas Company conveyed its interest in this contract to Riddle and U. S. Pipeline Corporation on February 18, 1977. The pipeline company was incorporated on February 10, 1977. The Riddle interest was conveyed to U. S. Pipeline, which will be referred to herein as buyer and as pipeline. The Riddles filed a disclaimer.

The case was tried before the court without a jury and the court filed findings of fact and conclusions of law.

The trial court found that the legal description in the contract was insufficient and therefore the contract was void because it does not meet the requirements of Tex.Bus. & Comm.Code Ann. sec. 26.01 (1968). This is usually referred to as the statute of frauds. It also did not meet the requirements of the statute of conveyances. Tex.Rev.Civ.Stat.Ann. art. 1288 (1980).

Buyer contends that it was buying severed gas which was personalty and was not an interest in the real estate. The seller contends the contract attempts to convey an interest in real estate that constitutes a covenant running with the land. The pertinent paragraphs and parts of the contract in summary form provide:

"(1) Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller, ... the natural gas that may be produced from Seller's entire dedicated acreage, ...." Here follows an inadequate description of the acreage. Pipeline in its brief admits the description is inadequate.

"(2) Seller shall build and maintain at its sole expense all necessary lines to connect its wells to Buyer's pipeline. Seller shall install the equipment necessary to separate the oil and other liquid from the gas before it enters Buyer's pipeline, compress the gas, and generally look after the gas delivered from the wells to said meter."

(3) It provides for the price of 18cents per thousand cubic foot of gas delivered to buyer at the meter during a 30 year term.

(6) Seller agrees to compress and pump the gas deliverable under this agreement at a designated pressure and if it failed to do so, the buyer could compress or pump it prior to its reaching the buyer's meter and deduct 10cents per thousand cubic foot of such compressed or pumped gas.

(9) The agreement became effective on the date of the contract and shall continue in effect for a period of 30 years.

"(11) All the terms, provisions, conditions and obligations of this agreement shall extend to and be binding upon the successors and assigns of the parties hereto. No assignment shall serve to relieve the assigning parties of its obligations hereunder."

(13) Seller warrants title before the title passes to the buyer.

(14) Title to the gas delivered shall pass to the buyer at the point of delivery and seller shall be deemed to be in exclusive control and possession of gas delivered until delivered to the buyer at the point of delivery.

Seller cites as authority Martin v. Amis, 288 S.W. 431, 434 (Tex.Comm'n App. Sec. A, 1926, opinion adopted). The court held that a buyer of raw gas had an agreement to convert it to gasoline and pay the lessor 1/8 of 1/4 of the proceeds of the sale of the gasoline and this was an executory contract of sale of personalty and the buyer held no interest in the state of the royalty from which the raw gas was produced.

Buyer cites Dashko v. Friedman, 59 S.W.2d 203 (Tex.Civ.App. Texarkana 1933, no writ), which is a statute of frauds case which held that if the intention of the parties was to the effect that if the conveyance was to an interest in minerals in place, it would be within the statute of frauds. If their intention was to deal only with the minerals after they had been produced then it would not be within the statute of frauds.

The seller relies upon Guffey v. Utex Exploration Company, 376 S.W.2d 1, 4-5 (Tex.Civ.App. San Antonio 1964, writ ref'd n. r. e.). This is a statute of frauds case concerning an oral contract concerning the sale of gas. That court held that Dashko v. Friedman, supra, with no writ history, held an oral sale of oil and gas when produced was not a sale of interest in real estate. The court ruled that although the case has never been expressly overruled by the supreme court, it has been overruled in effect. That court said, with approval:

"In Sheffield v. Hogg, 124 Tex. 290, 77 S.W.2d 1021, the Supreme Court held that an easement by a lessee to deliver to the credit of the lessor free of cost, in the pipeline to which he may connect his well the equal one-eighth part of all oil produced and saved from the leased premises, conveyed an interest in real property. The Court held that it would be inconsistent with the public policy of the State to hold that the contract created mere rights in personalty at some uncertain date in the future when the oil and gas would be produced at the surface. We can see no difference between selling a one-eighth interest in all the oil and gas...