Atex Pipe & Supply v. Sesco Production

736 S.W.2d 914
CourtCourt of Appeals of Texas
DecidedAugust 31, 1987
Docket12-85-0024-CV
StatusPublished
Cited by17 cases

This text of 736 S.W.2d 914 (Atex Pipe & Supply v. Sesco Production) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atex Pipe & Supply v. Sesco Production, 736 S.W.2d 914 (Tex. Ct. App. 1987).

Opinion

736 S.W.2d 914 (1987)

ATEX PIPE & SUPPLY, INC., et al., Appellants,
v.
SESCO PRODUCTION CO., Appellee.

No. 12-85-0024-CV.

Court of Appeals of Texas, Tyler.

August 31, 1987.
Rehearing Denied October 12, 1987.

*915 Charles H. Clark, Tyler, Rex A. Nichols, Nichols, Merriman, Patterson & Allison, John M. Smith, Roberts, Harbour Law Firm, Longview, for appellants.

Ron Adkison, Henderson, Eugene W. Brees, Thompson & Knight, Dallas, for appellee.

Before SUMMERS, C.J., BILL BASS, J and STEPHEN F. PRESLAR, C.J. (Retired) 8th Court of Appeals, sitting for PAUL S. COLLEY, J.

SUMMERS, Chief Justice.

Our opinion of October 27, 1986, is withdrawn and the following opinion is substituted.

This is a products liability and breach of warranty case. On April 28, 1982, appellee[1] Sesco Production Company (Sesco) filed suit against appellant Atex Pipe & Supply, Inc. (Atex), alleging that Atex had sold Sesco defective tubing. Sesco asserted that this defective tubing collapsed in the Sesco-Bill Wilkerson No. 1 gas well (Wilkerson 1), causing damage to both the well and the gas-producing geological formation. Atex denied Sesco's allegations and, on January 7, 1983, filed a third party action for contribution and indemnity against nine pipe suppliers and manufacturers.[2] On September 14, 1983, third party defendant Crescent Pipe & Supply (Crescent) filed an action for contribution and indemnity against Mustang Production Company (Mustang), and on November 10, 1983, Atex filed a cross-action against Mustang for contribution and indemnity. The jury found that a joint of pipe collapsed in Wilkerson 1, that the joint of pipe was sold by Atex to Sesco, that the pipe was not merchantable, that the non-merchantable pipe was a proximate cause of the occurrence and resulting damages, that the pipe was defective, that the pipe reached Sesco without substantial changes in its condition from the time it was originally sold, that the defective pipe was the producing cause of the occurrence in question and the resulting damages, and that Sesco had suffered $1,880,000 in damages. Based on the jury's verdict and the stipulations of the parties, the trial court entered judgment that Sesco recover from Atex $1,880,000; that Atex recover from Crescent and Mustang, jointly and severally, $1,880,000; that Crescent recover from Mustang $1,880,000; that the judgment bear interest at the maximum rate allowed by law; and that the costs are adjudged against Atex, with right of indemnity against Crescent and Mustang, jointly and severally, with Crescent receiving indemnity from Mustang. We reverse and remand.

*916 In May of 1981, United Oilfield Rental, Inc. (United)[3] ordered 18,706.6 feet (607 joints) of "27/8th inch OD 8 round EUE N-80 6.50 api Prime seamless monogrammed Lone Star tubing, T & C R-2"[4] from Atex. Because Atex did not have sufficient tubing in stock, it ordered 607 joints of this tubing from Crescent. Crescent, which had insufficient stock to fill Atex's order, in turn ordered the 607 joints of tubing from Mustang. Mustang sold the tubing to Crescent; however, Crescent never took physical possession. Rather, the tubing remained in Mustang's possession at the storage yard of Turner Brothers Trucking Company in Oklahoma City until Crescent consigned the tubing, "F.O.B. Turner Bros. Yard Okla City, OK," to Atex. On May 8, 1981, at Atex's instruction, the tubing was transported to Kilgore Pipe & Supply (Kilgore Pipe) in Kilgore, where it was stored on Rack No. 3 for United. On August 24, 1981, 389 of the joints stored on Rack No. 3 were shipped to Wilkerson 1.

Wilkerson 1 was a Cotton Valley gas well, over 10,000 feet deep. The well was perforated and began production on September 1, 1981. Wilkerson 1 had an open flow capacity of 1,299,000 mcf per day, and initial production was very high. The well production, however, sharply decreased over the next month, and on September 30, 1981, Halliburton Services performed an acidizing job on Wilkerson 1 in an effort to increase production. On the same day, Marvin A. Smith Co., performed a swabbing job to lift the spent acid and acid water out of Wilkerson 1. On October 1, 1981, and October 6, 1981, a nitrogen job was performed on the well to aerate the fluids, improving the flow of the well. On October 14, 1981, Turner Consulting[5] pulled the tubing out of Wilkerson 1, and some of Turner's employees, none of whom testified at trial, observed a totally collapsed joint of tubing.[6] George Turner, President of Turner Consulting and Sesco's expert witness, testified that, as a result of the collapsed tubing, "spent acid [was] ... left on the formation ... causing swelling of [the] clays. . . .," effectively plugging the well. Turner pointed out that as a result, between 820 and 2347 million cubic feet of gas were lost. He testified that the value of those lost reserves, at the time of trial, was between $1.00 and $1.25 per thousand cubic feet.[7]

Several witnesses testified that the tubing was defective because it collapsed under less pressure[8] than its listed collapse resistance of 11,000 pounds per square inch. However, Dennis Stanfield, a metallurgist, testified that the tubing was welded and had no significant defects. Both *917 Bruce Dedman, a metallurgist and vice president of Lone Star Steel, and Samuel Bryan, Jr., also a metallurgist, testified that the tubing was welded and met all of the industrial requirements for this type of tubing. Furthermore, both Stanfield and Bryan testified that the tubing could have collapsed if it had been mishandled, and as a result, was out of round.

Atex brings twenty-six points of error; Crescent urges four points and Mustang nine.

Atex's twenty-fifth point of error contends that "the court erred in rendering judgment based on the jury's answer to Special Issue No. 8, because Special Issue No. 8 submits an improper measure of damage." Mustang's first point of error makes a similar challenge to this special issue. We shall discuss these points together. Special Issue No. 8 reads as follows:

Find from a preponderance of the evidence the sum of money, if any, that should be awarded to Plaintiff Sesco Production Company for its damages herein.

You are instructed in regard to this Special Issue that you may consider the following elements of damage and none other:

(A) Loss of production in the past;

(B) Loss of production in the future;

(Answer in Dollars and Cents, if any)

ANSWER: $1,880,000.00.

Sesco's interest in Wilkerson 1 is an interest in real property. Elliff v. Texon Drilling Co., 146 Tex. 575, 210 S.W.2d 558, 561 (1948); Veal v. Thomason, 138 Tex. 341, 159 S.W.2d 472, 476-77 (1942); Whitson Co. v. Bluff Creek Oil Co., 278 S.W.2d 339, 346 (Tex.Civ.App.—Fort Worth 1955), aff'd, 156 Tex. 139, 293 S.W.2d 488 (1956). Therefore, if the well can be reproduced by drilling another one, the proper measure of damages is the cost of drilling and equipping another such well, less the value of any salvage; provided that this cost does not exceed the reasonable cash market value of the well immediately before the tubing collapse.

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736 S.W.2d 914, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atex-pipe-supply-v-sesco-production-texapp-1987.