Tuthill v. Southwestern Public Service Co.

614 S.W.2d 205, 71 Oil & Gas Rep. 117, 1981 Tex. App. LEXIS 3456
CourtCourt of Appeals of Texas
DecidedMarch 27, 1981
Docket9200
StatusPublished
Cited by43 cases

This text of 614 S.W.2d 205 (Tuthill v. Southwestern Public Service Co.) 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
Tuthill v. Southwestern Public Service Co., 614 S.W.2d 205, 71 Oil & Gas Rep. 117, 1981 Tex. App. LEXIS 3456 (Tex. Ct. App. 1981).

Opinion

DODSON, Justice.

This case involves the construction and interpretation of a price escalation clause in an intrastate gas purchase contract. The appellants are S. Keith Tuthill, Bill J. Barber, Hugh L. Umphres, Jr., M. K. Woodward, Donald L. Bagwell, Robert C. Buck-miller, Robert Lee Cotton, Trustee of the Randall Lee Cotton Trust, the Robert Gregory Cotton Trust, and the Pamela Ann Cotton Trust, Edwin H. Flood, William P. Hale, Sharon Kelley Oeschger, Judy Kelley Morgan, Oliver Kendall Kelley, and The Kelley Company, a Partnership. The appellees are Southwestern Public Service Company and Tuco, Inc.

After a bench trial, the court rendered judgment for the appellants in the amount of $18,964.41 plus prejudgment interest in the amount of $3,897.41 and attorney’s fees in the amount of $20,000. Appealing from the judgment, the appellants claim, for various reasons, that the court should have rendered judgment for them in an additional amount of $521,916.14 plus additional attorney’s fees. By cross-points the appellees challenge the court’s award of attorney’s fees and prejudgment interest. We affirm.

In May of 1971 the appellants drilled and successfully completed a gas well known as the Thompson et al. No. 1 Well located in Moore County, Texas. By a contract dated 9 November 1971 the appellants agreed to sell and Southwestern Public Service Company agreed to purchase all of the natural gas produced from the well for a term of twenty years. Southwestern Public Service Company agreed that the gas would not be sold in interstate commerce. Subsequently, Southwestern Public Service Company assigned the contract to its subsidiary, Tuco, Inc.

The contract, among other things, provides for a purchase price of 22 cents per thousand cubic feet (MCF) for the first five years of the agreement plus escalations of 1 cent per MCF for each successive five-year period of the agreement with certain adjustments for the heating nature of the gas. Although the contract provides that the gas will not be sold in interstate commerce, the agreement further contains an additional price escalation clause which reads as follows:

If any applicable just and reasonable area ceiling rate or settlement rate is established by the Federal Power Commission for the pricing area which includes the acreage covered by this agreement, and such rate is higher than the price herein provided for, then the price to be paid by Buyer or Seller for the gas delivered hereunder shall be increased, effective as of the date such just and reasonable ceiling rate or settlement rate is prescribed or permitted, to equal such higher rate.

Subsequent to the date of the contract the Federal Power Commission issued several opinions establishing rates for the pricing area which includes the acreage covered by the agreement and nationwide rates.

By pleadings in the trial court the appellants claim that the price escalation clause *208 in question is triggered by FPC Opinions 699-H, 742 et seq., 749 and 770-A, and that the price to be paid for the gas sold under the contract should be increased to the amounts authorized by such opinions. In their pleadings, the appellants sought (1) an adjudication of the meaning of the price escalation clause, (2) an accounting of the gas already purchased under the agreement, (3) judgment for the additional amount alleged due on gas already purchased, (4) prejudgment interest, and (5) attorney’s fees.

By their live trial pleadings, the appellees maintained that the price escalation clause was not triggered by FPC Opinion Nos. 699-H and 770-A. Answering further the appellees plead the defense of accord and satisfaction to all alleged amounts due under the various rate opinions and maintained that the appellants were not entitled to recover any prejudgment interest or attorney’s fees.

The parties, among other things, stipulated as follows:

Although Defendants [appellees] now admit that the price for gas to be paid to Plaintiffs [appellants] under the contract in question should be the prices stated in Opinion Nos. 742, etc. and 749 of the Federal Power Commission from August 28, 1975, Defendants [appellees] did not begin paying such prices until November, 1977. In November, 1977 Defendants [appellees] paid to Plaintiffs [appellants] the total sum of $31,880.82 as stated in the schedule attached herein entitled “Tuthill-Barbee Thompson et al #1” in payment of the past due amounts.

In this connection, the parties agreed that the November 1977 payment was made and accepted without prejudice to their respective claims or defenses. The stipulation further shows that as of 31 May 1978, the sum of $18,964.41 remained unpaid under FPC Opinion Nos. 742 et seq. and 749.

The trial court made findings of fact and conclusions of law and determined, inter alia, that the escalation clause in question was not ambiguous, that such clause was not triggered by FPC Opinion Nos. 699-H and 770-A, that such clause was triggered by FPC Opinion Nos. 742 et seq. and 749, and that the appellees failed to establish their defense of accord and satisfaction. Accordingly, the court rendered judgment that the appellants recover from the appel-lees the amount of $18,964.41 plus prejudgment interest on such sum in the amount of $3,897.41 and attorney’s fees in the amount of $20,000.

The appellants bring fourteen points of error. In their third point they maintain that the trial court erred in failing to hold that the price escalation clause was triggered by FPC Opinion No. 699-H, and by their fourth point they claim the trial court erred in failing to hold that the price escalation clause was triggered by FPC Opinion No. 770-A. In connection with each point, the appellants affirmatively assert that, for the gas purchased under the contract, they are entitled to be paid the price authorized by each of such opinions. We do not agree.

FPC Opinion No. 699-H established “Just and Reasonable National Rates for Sales of Natural Gas From Wells Commenced On or After January 1, 1973, And New Dedications of Natural Gas to Interstate Commerce On or After January 1, 1973.” FPC Opinion No. 770-A established just and reasonable “National Rates for Jurisdictional Sales of Natural Gas Dedicated to Interstate Commerce On or After January 1, 1973, for the Period from January 1, 1975, to December 31, 1976.” The undisputed evidence is that the well in question was commenced and completed on or before January 1,1973. The natural gas from the well was not and could not be dedicated to interstate commerce on or after January 1, 1973, because the contract specifically provides that such gas would not be sold in interstate commerce during the term of the agreement.

Nevertheless, the appellants contend that, under the contract, a price increase is authorized if the FPC sets any price for gas sold in the area in which the well is located which is higher than the fixed price set out in the agreement, and that consistent with such interpretation, the price escalation *209 clause was triggered by Opinions 699-H and 770-A. In essence, the appellants maintain that they are entitled to the highest just and reasonable ceiling rate applicable to the area in which the well is located notwithstanding any vintage and dedication requirements as prescribed in the FPC orders in question.

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Bluebook (online)
614 S.W.2d 205, 71 Oil & Gas Rep. 117, 1981 Tex. App. LEXIS 3456, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tuthill-v-southwestern-public-service-co-texapp-1981.