Enterprise Products Co. v. Tenneco Inc.

929 S.W.2d 444, 1995 WL 412814
CourtCourt of Appeals of Texas
DecidedJuly 13, 1995
DocketNo. 01-93-00829-CV
StatusPublished
Cited by2 cases

This text of 929 S.W.2d 444 (Enterprise Products Co. v. Tenneco Inc.) 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
Enterprise Products Co. v. Tenneco Inc., 929 S.W.2d 444, 1995 WL 412814 (Tex. Ct. App. 1995).

Opinion

OPINION

ANDELL, Justice.

The appellants, the owners of respective shares in a gas processing plant that total 75 percent, have sued the appellees for, variously, breach of contract, breach of fiduciary duty, and tortious interference with contract. The appellants’ claims arise from and/or otherwise relate to their former co-owner’s transfer of the other 25 percent of the plant to its subsidiary; and from two subsequent, successive transfers of 100 percent of the subsidiary’s stock. Appellants sought damages or specific performance (1) from the new co-owner, for alleged breach of a duty to supply a specified minimum volume of raw material to the plant; (2) from other appel-lees, for allegedly breaching a duty to secure the new co-owner’s express agreement to supply that minimum volume; and (3) from each appellee, for allegedly breaching and/or interfering with the appellants’ contractual preferential right to purchase their former co-owner’s share of the plant. The court below granted summary judgment for the appellees on all of the appellants’ claims. We reverse and remand.

The background to the series of three transfers at issue in this case begins in 1982. That year, appellant Enterprise Products Company (Enterprise) put a natural gas liquids fractionation plant (the Plant) into service in Mont Belvieu, Texas. After transactions taking place between 1982 and 1985, Enterprise owned 68.75 percent of the Plant, and appellant Texaco Exploration and Production, Inc. (TEPI) and two other entities, El Paso Hydrocarbons Company (El Paso) and Champlin Petroleum Company (Champ-lin), owned respective shares totalling the remaining 31.25 percent.

The provisions of the three agreements governing the rights of the parties to this appeal are shown by uncontradicted summary judgment evidence, and are not in dispute. All three were executed on July 17, 1985.

First, Enterprise and appellee Tenneeo Oil Company (TOC) signed the articles of partnership (Partnership Agreement) that formed Mont Belvieu Associates (MBA) — a general partnership, of which TOC was the managing partner. The purpose of the partnership was to effect an indirect transfer of an interest in the Plant from Enterprise to TOC. Enterprise and TOC each owned 50 percent of MBA, and MBA purchased a 50 percent interest in the Plant from Enterprise. Section 9.3 of the Partnership Agree[448]*448ment provides that “The Partners expressly acknowledge that any sale or other transfer of their respective Partnership Interest is subject to a right of first refusal held by all other Owners as set forth in [the other two agreements executed that day].” Section 9.5 provides, in pertinent part, that either partner may transfer, assign or convey its rights in MBA to any affiliate, without the consent of the other partner, so long as any such transfer, assignment or conveyance does not cause a termination of the MBA partnership for federal income tax purposes, and certain other specified conditions are met. The terms of the Partnership Agreement are not otherwise material here.

Next, Enterprise and TEPI — along with El Paso and Champlin — entered into a “Restated Operating Agreement for the Mont Belvieu Fractionation Facilities, Chambers County, Texas” (the Restated Operating Agreement or ROA). The ROA was made retroactively effective as of January 1, 1985. Under section 5.4 of the ROA, each owner was obligated, under certain conditions, to bring unprocessed natural gas liquid mixtures 1 it owned or controlled to the Plant and have them fractionated at the Plant.2

Finally, MBA and the parties to the ROA executed an instrument captioned Ratification and Joinder Agreement (RJA). The RJA made MBA a party to the Restated Operating Agreement, and provided that TOC would be deemed to be an owner of a share of the Plant for purposes of article 12 of the ROA.3 The terms of the RJA are not otherwise material here.

The parties’ dispute arises under article 12 of the ROA, which set out provisions addressing transfer of ownership interest in the Plant. In pertinent part, article 12 states:

12.1 When Transfer of Oimership Interest Permitted. Subject to the provisions of Section 12.5 ... hereof, an Owner shall have the right to sell, transfer, assign, or otherwise convey all or any portion of its Ownership Interest, either in favor of another Owner or a third party.
12.2 When Transfer Effective, (a) No sale, transfer, or assignment of Ownership Interest authorized by Section 12.1 shall be effective hereunder until: (i) a duly executed counterpart original or certified copy of the recorded instrument or instruments evidencing such change in Ownership Interest has been delivered to Operator, together with a like counterpart original of an instrument acceptable in form to Operator wherein the assignee adopts and ratifies this Agreement for all purposes as an Owner, and (ii) the assignee enters into an agreement with Operator to put through the Facilities a volume of raw [449]*449make per day at least equal to the volume set forth opposite the name of the Selling Owner on Schedule C hereto.[4]
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12.5 Preferential Right to Purchase. Except as provided in Section 12.6 hereof, if any Owner should desire to sell, transfer or assign all or any part of its Ownership Interest, the other Owners shall have the prior and preferential right and option to purchase proportionately the interest to be sold by such Owner upon the same terms and conditions as the bona fide prospective purchaser or purchasers (collectively “Offeror”) are offered by such Owner (the “Selling Owner”) ....
12.6 Transfer Permitted. The prior and preferential right of the Owners to purchase the interest of any Owner desiring to sell or transfer all or any part of its Ownership Interest shall not apply to (a) a transfer occurring by reason of the merger or reorganization of any Owner, (b) a transfer by any Owner to any Affiliate[5] or to all of its shareholders (e) a transfer in connection with a sale or other conveyance of all or substantially all of the assets of any corporate Owner, (d) a transfer of an interest (i) to Mont Belvieu Associates (a Texas general partnership) which is not more than fifty percent (50%) of the total Ownership Interests and which is made of even date, and (ii) by Mont Belvieu Associates of all or any part of its Ownership Interest to Tenneco or Enterprise, or (e) a transfer of an interest which (i) is not more than twelve and one-half percent (12.5%) of the total Ownership Interests, and (ii) is sold, transferred or assigned to El Paso on or before December 31, 1986.

(Emphasis added.)

The series of three transfers at issue in this case began in 1989, with the transaction (the First Transfer) in which TOC transferred its interest in MBA to an affiliate called Tenneco Natural Gas Liquids Corporation (TNGL).

The second transfer at issue here (the Second Transfer) occurred in the fall of 1991. Originally, appellee Tenneco Inc. offered several packages of assets for sale, including TNGL’s interest in MBA.6 Enron Gas Processing Company (EGP), a subsidiary of ap-pellee Enron Corp., submitted the winning bid on November 19,1991, accompanied by a proposed form of agreement to purchase [450]

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Related

4N International, Inc. v. Metropolitan Transit Authority
56 S.W.3d 860 (Court of Appeals of Texas, 2001)
Tenneco Inc. v. Enterprise Products Co.
925 S.W.2d 640 (Texas Supreme Court, 1996)

Cite This Page — Counsel Stack

Bluebook (online)
929 S.W.2d 444, 1995 WL 412814, Counsel Stack Legal Research, https://law.counselstack.com/opinion/enterprise-products-co-v-tenneco-inc-texapp-1995.