# Petition — Phillips Petroleum Co. v. Adams > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_1046%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1975 - **Citation:** 423 U.S. 930 ## Text “te IN THE Ba csnecialalt Supreme Court of the United States OcToBER TERM, 1975 vg i . A N. %5-412 PHILLIPS PETROLEUM CoMPpaNy, Petitioner, v. J. H. Abas, et al., Riverview Gas COMPRESSION CoMPANy, et a/., and First National BANK OF BORGER, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT CLARK M. CLIFFORD CarRsSON M. GLass Ropert A. ALTMAN CLIFFORD, WARNKE, GLASS, McILwain & FINNEY 815 Connecticut Ave. Washington, D.C. 20006 Lioyp G. MINTER C. J. Roperrs Phillips Petroleum Company Bartlesville, Oklahoma 74004 JACK RITCHIE T. L. Cuppace I] Phillips Petroleum Company Amarillo, Texas 79105 Press or Byron S. ADAMS PrinTING, INC., WasHINcTo', D. C. INDEX Page ee oa rcp uke t ots decd bu dddhetoas 1 EY otitis bneabkedeee en wehakaneded 2 QUESTIONS PRESENTED 2.0.0 ccscccccccccccces ‘ehaeman 2 SraTuTEs AND REGULATIONS INVOLVED .............0055 3 SMART GP TH GAG én ioccccccccsccdecccocccessce 3 REASONS FOR GRANTING THE WRIT .............0ee00: 7 I. The Decisions of the Fifth Cireuit Are in Con- flict with the Applicable Texas Statutes and ee ee i dete deawebees i) II. The Decisions in the Instant Cases Are in Con- flict with a Prior Decision of the Fifth Cireuit .. 16 CON onc dda cccsencvccecicvs ee esbeseeussesnes 19 APPENDIX: Texas Revised Civil Statutes Annotated articles ES I EE Gb Shon 6ccuccsnacdveseesic la Rules of Decision Act, 28 U.S.C. § 1652 .............. la Natural Gas Act, 15 U.S.C. §§ 717-717w ............ 2a 18 C.F.R. § 154.102. Suspended changes in rate sched- ules; motions to make effective at end of period of I ove nn oxansonavecnedeceres 24a Hugoton-Anadarko Rate Cases, 44 F.P.C. 761 (1970), Ordering Paragraphs (D), (G) and (H) .......... 26a Phillips Petroleum Company v. J. H. Adams, et al., in the United States District Court for the Northern District of Texas. Judgment and Memorandum Opinion .......... 28a ii Index Continued Page Text of stipulations and admissions of the parties, numbers 1-32, incorporated by reference into the District Court’s Memorandum Opinion as Findings of Fact .........ccceeeccescceseees 37a Phillips Petroleum Company v. J. H. Adams, et al., in = United States Court of Appeals for the Fifth ircuit. Judgement ....ccccccccsccvccccccesencccccsecs 45a Opinion ....cccccccccsccccccvccvcsevecccvcccces 46a Petition for Rehearing ...........csceccccscess 73a Denial of Petition for Rehearing .............++- 85a First National Bank of Borger, et al., v. Phillips Petro- leum Company, in the United States District Court for the Northern District of Texas. Judgment and Memorandum Opinion .......... 86a Text of stipulations and admissions of the parties, numbers 1-17, incorporated by reference into the District Court’s Memorandum Opinion as Findings of Fact ........cccccsccvscccccvecs 9la First National Bank of Borger, et al., v. Phillips Petro- leum Company, in the United States Court of Ap- peals for the Fifth Circuit. Judgment ....cccscccccccccccccccccccecesccces 97a Opimion .....ccrcccccccccceccevccesscccesceees 98a Petition, for Rehearing ...........-eeee eee eeees 102a Denial of Petition for Rehearing .............. 105a Phillips Petroleum Company v. Riverview Gas Com- pression Company, et al., in the United States Dis- trict Court for the Northern District of Texas. Memorandum Opinion .........0.+eeeeeee eens 106a Text of stipulations and admissions of the parties, numbers 1-45, incorporated by reference into the District Court’s Memorandum Opinion as Findings of Fact ........ccceccesecccccceees 113a -_ ee Index Continued iii Page Phillips Petroleum Company v. Riverview Gas Com- pression Company, et al., in the United States Court of Appeals for the Fifth Circuit. SE - tte cae dndedshddedhendesevecesteess 130a EEL GN GR Gabdues ReebsdcesedeeN cde idcecscest 131la POUGem Ter MOMOATIME oon ccc cccccccscssccccces 133a Denial of Petition for Rehearing .............. 136a TABLE OF AUTHORITIES CASES: Allied Building Credits, Inc. v. Grogan Builders Sup- ply Co., 365 S.W. 2d 692 (Tex. Civ. App., Houston, | SU TE BID i vn poss citecssieesedeess 14, 15 City of Texarkana, Texas v. Arkansas Louisiana Gas Company, 118 F.2d 289 (5th Cir. 1941), vacated per stipulation, 315 U.S. 780 (1942) ............ 17,18 - Commissioner of Internal Revenue v. Estate of Bosch, i 19 Devers v. Mobil Chemical Corp., 488 F.2d 258 (5th Cir. _ 1973), cert. denied, 417 U.S. 947 (1974) ......... 16 Dickinson v. Petroleum Conversion Corp., 338 U.S. 507 EE. Soa eeuaadheeeda pa GCHCAEEEDEASSEANOSe 0% 0 19 Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) ... 7 ~~. L. Foley, Inc., 115 Tex. 222, 280 S.W. 499 GW Marine, Inc. v. Morris, 471 S.W. 2d 644 (Tex. 7 Civ. App., Beaumont, 1971, writ ref’d n.r.e.) .... 11 Gulf Pipe Line Co. v. Nearen, et al., 138 S.W. 2d 1065 Pe OR ME ED ok de cone ncncnccesces 15, 16 John Hancock Ins. Co. v. Bartels, 308 U.S. 180 (1930) 19 Kirkpatrick v. Great American Ins. Co., 299 S.W. 943 a ee 10 People of the State of California, et al. v. Federal Power Commission, 466 F.2d 974 (9th Cir. 1972) 5 Routon v. Phillips, 246 S.W. 2d 223 (Tex. Civ. App. Fort Worth, 1952, writ ref’d n.r.e.) ............ ' 12 Settegast v. Timmins, 6 S.W. 2d 425 (Tex Civ. A Beaumont, 1928, writ ref’d homie ee iv Index Continued Page Texas Highway Commission v. El Paso Bldg. & Const. Trades Council, 149 Tex. 457, 234 S.W. 2d 857 (1980) ..ccccccccedctccbecesgesseumeneeenuees 13 Thomas v. Western Car Co., 149 U.S. 95 (1893) ...... 14 Treon v. Richter, 265 S.W. 2d 125 (Tex. Civ. App., San Antonio, 1954, writ ref’d m.r.e.) .........ee eens Watkins v. Junker, 90 Tex. 584, 40 S.W.11 (1897) ..10,12 Watson Co. v. Shaw, 47 S.W. 2d 474 (Tex. Civ. App., Dallas, 1932), rev’d on other grounds, sub nom. American Surety Co. v. Shaw, 69 S.W. 2d 47 (Tex. Comm. App. I9GG) .occccocvecccsccscenseuseuen 11 STATUTES: Natural Gas Act, 15 U.S.C. §§ 717-717w ............. 3,4 Rules of Decision Act, 28 U.S.C. § 1652 .............. 3,7 Texas Revised Civil Statutes Annotated art. GOGD-1.G4 ...cccccccccccscéecceuneneneee 3, 10 art..SO0GD-1.68 ...cccccscccencescsnneeneee 3, 10, 11, 13 art. 1987-1, of 806. ..ccccccccsccccccssssesuneeen 12 art. 1907-8, 6.11 ...ccsocsecsssceneuen see 12 28 U.S.0. § 19B4(1) ... ccccccccccecccnsuceneeeeneee 2 REGULATIONS: r'ederal Power Comm »sion 18 C.F.R. § 164.308 ...coscocstesceusesseneeeen 3, 4 ADMINISTRATIVE DECISIONS: Hugoton-Anadarko Area Rate Cases, Opinion 586, 44 P.P.C. TGR (1000) .cecsecscesennneee 4, 5, 6, 9, 10, 18 Nationwide Gas Rate Cases, F.P.C. Opinion 699 (1975) 9 Permian Basin Gas Rate Cases, Opinion 662, 34 F.P.C. 150 (1965) ...cccccccccvcesesscenueensaennee » 9 MISCELLANEOUS: Opinion of the Attorney General of Texas, V-791 (1009) ..cccccccucecssceeneueenennnnE 11, 12, 14 aa A me Ne Aaa Ae IN THE Supreme Court of the United States OctToBerR TERM, 1975 No. PuHILLirps PeTroLEUM Company, Petitioner, v. J. H. Abas, et al., Riverview Gas COMPRESSION CoMPANY, et al., and First NATIONAL BANK oF Borcer, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT Petitioner Phillips Petroleum Company prays that a writ of certiorari issue to review three opinions and judgments of the United States Court of Appeals for the Fifth Circuit entered in these proceedings on May 22, 1975. OPINIONS BELOW I. Phillips Petroleum Company v. J. H. Adams, et al., No. 74-1777. Judgment of the District Court was accompanied by an unpublished memorandum opinion dated February 7, 1974, which appears in the Appendix hereto. (App. 28a). The opinion of the Court of Appeals for the Fifth Circuit is reported at 513 F.2d 355. (App. 45a). 2 II. Phillips Petroleum Company v. Riverview Gas Compression Company, et al., No. 74-2009. The opin- ion of the District Court is reported at 372 F. Supp. 282. (App. 106a). The opinion of the Court of Ap- peals for the Fifth Circuit is reported at 513 F.2d at 513 F.2d 374. (App. 130a). Ill. First National Bank of Borger v. Phillips Petroleum Company, No. 74-2330. The judgment of the District Court was accompanied by an unpublished memorandum opinion dated February 27, 1974, which appears in the Appendix hereto. (App. 86a). The opinion of the Court of Appeals for the Fifth Circuit is reported at 513 F.2d 371. (App. 97a). JURISDICTION The three judgments of the Court of Appeals for the Fifth Circuit were made and entered on May 22, 1975. Three separate timely petitions for rehearing en banc were denied on June 18, 1975 (App. 85a, 105a, 136a), and this petition for certiorari was filed within 90 days of that date. The Court’s jurisdiction is in- voked under 28 U.S.C. § 1254(1). QUESTIONS PRESENTED Whether the Court of Appeals for the Fifth Circuit in a diversity action may award interest to natural gas producers pursuant to percentage of proceeds con- tracts on monies collected by the Petitioner during the pendency of rate increase proceedings before the Fed- eral Power Commission when such sums were not due and payable to the gas producers until the rate increase was approved and when Texas statutes and state court decisions prohibit an award of interest for the period prior to the time money is due and payable. et ee ee re. er ee ee ee ee Pe er eres t : | ’ 3 STATUTES AND REGULATIONS INVOLVED The statutory and regulatory provisions involved are set forth in the Appendix beginning at page la. They include the following: 1. Texas Revised Civil Statutes Annotated, arts. 5069-1.01 and 5069-1.03. 2. Rules of Decision Act, 28 U.S.C. § 1652. 3. Natural Gas Act, 15 U.S.C. §§ 717-717w. 4. 18 C.F.R. § 154.102. STATEMENT OF THE CASE Phillips Petroleum Company (‘Phillips’) is a major petrochemical company which is engaged, among other things, in the purchase, transporta- tion, and sale of natural and casinghead gas. Dur- ing the time relevant to this action, Respondents were all engaged in the production and sale of oil and gas from mineral leases in the Texas Panhandle. Casing- head gas produced by Respondents was sold to Phil- lips pursuant to precentage-of-proceeds contracts which provided that the amount payable under the contract would be pegged as a percentage of the price at which Phillips sold gas to third parties. The price of gas charged by Phillips in its sales to pipeline companies for interstate transportation and resale was controlled by the Federal Power Commis- sion (‘*FPC”’ or ‘‘Commission’’) under its broad au- thority to fix just and reasonable rates for such sales. The Natural Gas Act allows a company such as Phillips to increase its rates without prior FPC approval, but the Commission may impose a five-month suspension period and require the refund to purchasers of all or 4 part of the increase if it ultimately finds the higher rate was unjustified. 15 U.S.C. § 717e(e) ; 18 C.F.R. § 154. 102. By statute the FPC may order payment of interest on the monies refunded to the pipeline companies. 15 U.S.C. §717e(e); 18 C.F.R. § 154.102(c). Phillips filed numerous proposed price increases with the FPC that were originally suspended by the Com- mission and later put into effect by Phillips subject to refund. Phillips was required to file a corporate undertaking with the FPC to make certain that such refunds would be made to purchasers if the FPC so ordered. Phillips made monthly payments to Re- spondents for its gas purchases on the basis of the ‘‘firm proceeds’’ of Phillips’ own sales (i.e., calculated on the rates which FPC had previously approved) and did not remit any of the monies attributable to the pro- posed rate increases waile FPC approval of the rates was still pending. This practice assured the availabil- ity of sufficient funds to pay any refunds to purchasers ordered by the FPC. If the higher rates were not ap- proved by the FPC, Phillips would have an obligation to refund all or part of the funds to purchasers, and neither Phillips nor Respondents would have any legal claim to the money. If, on the other hand, there were an FPC approval of the increases, Phillips would become legally obligated to account for a portion of the excess funds to Respondents. Prior to final FPC action, Phillips was thus in the nature of a stakeholder among interested parties. The FPC consolidated for hearing Phillips’ pending rate increase applications and those of other companies under the consolidated designation Docket No. AR 64- 1, et al., known as the Hugoton-Anadarko Rate Cases. —— Pree ee ee er ee) ee ee iid Ve wy Ne eet ae sate wn a 5 On September 18, 1970, the FPC issued Opinion 586 which approved a portion of the price increases re- quested by Phillips and established refund require- ments for those increases that were not approved. 44 F.P.C. 761 (1970). The State of California challenged the legality of the FPC Opinion, but on July 31, 1972, the Ninth Circuit Court of Appeals affirmed the FPC’s decision. People of the State of California, et al. v. Federal Power Commission, 466 F.2d 974 (9th Cir. 1972). No petition for writ of certiorari was filed by any party during the 90-day period following the court’s decision and on October 28, 1972, FPC Opin- ion 586 became final. After the FPC Opinion become final, Phillips divided the excess funds it was holding subject to refund into two categories: (i) ‘‘refundable monies’’ which were based on rate increases disallowed by the FPC and which Phillips was obligated to return to purchasers with interest, and (ii) ‘‘sustainable monies’’ which Phillips was entitled to retain except that there now existed under the percentage-of-proceeds contracts an obligation by Phillips to account for a portion of the sustainable monies to the Respondents. Phillips there- fore recomputed the weighted average price on each month’s gas sales in the Texas Panhandle field to determine the difference between the firm proceeds which had been disbursed on a month-by-month basis and the amount to which the supplier of natural gas was now entitled as a result of the price increases just approved. During the period the gas had been produced and sold to Phillips, the mineral leases were held by per- sons who, before FPC Opinion 586 was issued, as- 6 signed their leasehold interests to other parties. When FPC Opinion 586 became final, and Phillips’ obliga- tion to account for the additional funds matured, both the former owners and the present holders of the leases asserted conflicting claims to the funds which Phillips was prepared to pay. Phillips brought a diver- sity interpleader action in District Court to ascertain which claimant was entitled to receive the additional proceeds. Each of the Respondents not only asserted claims to the additional funds but also filed counter- claims against Phillips seeking interest on the money that had been held by the Company prior to the time the FPC action approving the rate increases became final. ; Upon trial of these cases the District Court deter- mined the ownership of the principal sum, but rejected the claims for interest. In disallowing the interest claims, the District Court stated that the claimants had no enforceable right to receive any of the money collected by Phillips subject to refund until the FPC approved the rate increases. Inasmuch as the money did not become due and payable until October 28, 1972, when the time for final challenge to FPC Opinion 586 had expired, the District Court held that the Com- pany was not liable under Texas law for interest prior to that time. Further, from October 28, 1972, until December 21, 1973, when Phillips paid the money into the registry of the Court, there existed a bona fide dis- pute among the claimants to the money and Phillips was therefore not liable for interest during that time. The District Court noted that none of claimants had demanded that the money be paid into the registry of the Court following the final effective date of the FPC Opinion. —— tit Pg OO ate Mame AR AO em I i AN Real Oe Wiel ne hh te il es i Se at Genk lite Te ee ee ee ee ee ee CS een ee een etn ay 7 The District Court’s ruling on the matter of interest was appealed to the United States Court of Appeals for the Fifth Circuit which reversed the District Court on this issue. The Court of Appeals held that notwith- standing the fact that the principal sum did not become due and payable until the FPC’s Order became final, Phillips should nevertheless pay interest for the money collected prior to that time on equitable grounds. REASONS FOR GRANTING THE WRIT The Texas statutes and controlling judicial precedents of the State permit interest to be awarded only after the date that the principa! sym of money owed becomes _. due and payable. These legal requirements, under the Rules of Decision Act, 28 U.S.C. § 1652 and the law of Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), control the disposition of the instant diversity cases. The District Court faithfully followed this State law and denied Respondents the right to insist on interest during the period the FPC was deciding whether, and to what extent, the increase in rates would be ap- proved. The Fifth Circuit Court of Appeals, in over- ruling the District Court, did not follow the interpreta- tive criteria used by the Texas courts in determining when interest is to be paid; instead the Fifth Cireuit superimposed on the clear statutory directive its own “equity’’ test. The decisions of the Court of Appeals are in direct conflict with the Texas statutory law and decisions of the Texas state courts. In addition, these decisions are in conflict with a prior decision of the Fifth Circuit which interpreted the Texas interest stat- ute, but which was not cited in the Court of Appeals’ opinions, While these cases themselves involve large amounts of money, their outcome has an importance far greater 8 than the financial self-interests of the particular liti- gants. Failure to follow the state courts’ interpreta- tion of Texas law will subject Phillips and numerous other companies in the industry to thousands of claims aggregating many millions of dollars. In the Pan- handle field of Texas alone, Phillips had 966 outstand- ing percentage-of-proceeds gas purchasing contracts with more than $9.7 million in additional proceeds at- tributable to these contracts." The same legal issue in controversy here has already been raised in numer- ous pending cases; and the large financial stakes at risk make certain that hundreds of additional cases will be filed.” 1 Phillips Petroleum Company v. J. H. Adams, 513 F.2d at 397. 2A demand against Phillips for interest has been made in the following cases pending in federal or state courts: Phillips Pe- troleum Company v. Grady Hazelwood, et al., No. CA-2-1398, U.S.D.C., N.D. Tex., Amarillo Div.; Bolton, et al. v. Phillips Pe- troleum Company v. Glass, No. CA-2-1478, US.D.C., N.D. Tex., Amarillo Div.; Van Norman Oil Company v. Phillips Petroleum Company v. Van Norman Oil Company and American Petrofina Company of Texas, No. CA-2-1492, U.S.D.C., N.D. Tex., Amarillo Div.: R. P. Fuller, et al. v. Phillips Petroleum Company, No. CA- 5-74-140, U.S.D.C., N.D. Tex., Lrobock Div.; Dunn, et al. v. Phil- lips Petroleum Company v. Barker, No. CA-2-75-46, U.S.D.C., N.D., Tex., Amarillo Div.; Lubell Oil Co. v. Phillips Petroleum Company, et al., No. C73-86, in the District Court in and for Tulsa County, Oklahoma; Mitchell, et al. v. Phillips Petroleum Company v. Service Drilling Co., No. 53830A, in the 47th District Court in and for Potter County, Texas; Shutts, et al. v. Phillips Petroleum Com- pany, No. 5309, in the District Court of Kiowa County, Kansas (a class action). In addition, various other class actions have been filed against other companies in District Court in the State of Kansas in which the issue of interest is being litigated: Gray, et al. v. Amoco Production Company, No. 3125, in the District Court of Grant County, Kansas; Helmley, et al. v. Cities Service Oil Company, No. 10,998, in the District Court of Stafford County, Kansas; Maddoz, et al. v. Gulf Oil Curporation, — Ltt lh ON Re et EE eR al A OI le oe one MEF ee reek oe eet ee. ek 9 A Supreme Court determination is needed to put this legal question to rest and avoid a multiplicity of bur- densome, expensive and needless lawsuits. Since the issue in dispute has widespread and continuing im- portance, not only to an essential segment of American industry, but also to the orderly administration of justice, these cases merit the attention of the Supreme Court. I, The Decisions of the Fifth Circuit Are in Conflict with the Applicable Texas Statutes and State Court Decisions. A. Texas Statutory and Case Law Do Not Allow an Award of Interest for the Period Prior to the Time the Interpleaded Funds in These Three Cases Became Legally Due and Payable. Under Texas state court decisions, it was not legally proper for the Court of Appeals to disregard the ex- plicit statutory criteria and hold, on broad equity grounds, that Phillips was legally obligated to pay interest on the money for the entire period the legal status of the proposed rate increases was being adjudi- No. 11,230 in the District Court of Seward County, Kansas; Niz, et al. v. Northern Natural Gas Producing Company, et al., No. 3116, in the District Court of Grant County, Kansas; Sterling, et al. vy. Marathon Oil Company, No. 10,764, in the District Court of Rice County, Kansas; Sterling, et al. v. Superior Oil Company, No. 2715, in the District Court of Stanton County, Kansas; Coffey v. Atlantic Richfield Co., No. 3115, in the District Court of Grant County, Kansas; Helmley v. Ashland Oil Company, No. 125,388, in the District Court of Shawnee County, Kansas. The instant three cases relate to FPC Opinion 586 governing rates in the Hugoton-Anadarko area. FPC Opinion 662 also has been issued regarding rates in the Permiah Basin area of Texas and it is estimated that $7,500,000 in additional proceeds is attri- butable to natural gas transactions by Phillips in that area. Fur- ther, Phillips presently is collecting money subject to refund under the provisions of FPC Opinion 699, as amended (Docket R-389-B, Nationwide New Gas Rate) and collects approximately $500,000 per month at current rates. 10 cated by the FPC. Admittedly, no amount was due and payable to anyone until after the FPC Opinion became final and under the Texas statute this was the controlling factor. Interest is defined under the Texas statute as ‘‘the compensation allowed by law for the use or forebear- ance or detention of money... .’’ Tex. Rev. Civ. Stat. Ann. art. 5069-1.01. The Texas statute further pro- vides that: ‘‘When no specified rate of interest is agreed upon by the parties, interest at the rate of six per- cent per annum shall be allowed on all written contracts ascertaining the sum payable, from and after the time when the sum is due and pay- able. . . .”’ (Tex. Rev. Civ. Stat. Ann. art. 5069-1.03. ) The parties have stipulated and admitted that the interpleaded funds did not become legally available for distribution until October 28, 1972, the date on which FPC Opinion 586 approving certain rate increases and disapproving others became immune from further legal attack. From that date until December 21, 1973, when Phillips paid the disputed funds into court, the Company was a stakeholder faced with the conflicting claims to the monies being held. The Court of Appeals acknowledged that no award of interest should be made ‘‘except in such cases as come within the terms of the enabling legislation. Watkins v. Junker, 1897, 90 Tex. 584, 40 S.W. 11; Kirkpatrick v. Great American Ins. Co., Tex. Civ. App. 1927, 299 S.W. 943, no writ.’? 513 F.2d at 365. The Court of Appeals held in this regard that the claimants could seek interest from Phillips only as ‘‘compensa- tion allowed by law for the use... of money,”’ and that ca A Nem Set eth ON bwin chad Bi ete alles eh —_ ee ee eed 11 the principal sum owed here was ‘‘neither ascertain- able nor due and payable until after the FPC Order became final... .’’* 513 F.2d at 365. The Texas courts have consistently held that interest not be awarded for the period prior to when the debt became due and payable. As far back as 1932 in Watson Co. v. Shaw, 47 S.W. 2d 474 (Tex. Civ. App. Dallas, 1932), rev’d on other grounds, sub nom. Ameri- can Surety Co. v. Shaw, 69 S.W. 2d 47 (Tex. Comm. App. 1934) the Texas Court of Civil Appeals explained the rule by means of a short question: ‘But when did the principal sums become d and payable? For it is from this date that ietee- est should be caleulated.’’ (47 S.W. 2d at 481.) In G&4W Marine, Inc. vy. Morris, 471 S.W. 2d 644 (Tex. Civ. App., Beaumont, 1971, writ ref’d n.r.e. ) an employee had brought an action against a corporate employer to recover amounts claimed to be due under an employment contract. The court awarded the em- ployee additional compensation but held that under Tex. Rev. Civ. Stat. Ann. art. 5069-1.03, the statute in- volved here, interest could only be awarded “from the date the sum became due and payable....’’ 471 S.W 2d at 649 (Emphasis added). fice In a somewhat analogous situation to the instant cases, the Attorney General of the State of Texas is- sued an opinion regarding the potential liability of pipeline companies for interest under the Texas inter- 3 The Court of Appeals also noted that ‘‘Phillips has done the Adams family no wrong, so that the Adamses cannot claim in- terest as an item of damages, nor does this case fall within the Statutory rubric of ‘forebearance or detention’ ’ ping etention’ of money.’’ 513 12 est statute for nonpayment of royalties to the State. The Attorney General indicated that no interest can legally be awarded when the principal sum to be ascer- tained depends on action of a third party which has not occurred. Interest only accrues in that case after the amount has been ascertained and has become due and payable. Op. Att’y Gen. Tex. V-791 (1949). The Fifth Circuit acknowledged that the Texas courts have been ‘‘strict in refusing interest for periods prior to the time when an obligation becomes due and payable’’ but concluded that interest could be awarded for a period prior to the due date of the debt for equit- able reasons. 513 F.2d at 365-366. The only authority cited in support of this view is one case which did not even involve the Texas interest statute at issue here. Treon v. Richter, 265 S.W. 2d 125 (Tex. Civ. App., San Antonio, 1954, writ ref’d nr.e.). Treon is an interest as damages case * and dealt with an interpreta- tion of the provisions of the Agricultural Protective Act, Tex. Rev. Civ. Stat. Ann: art. 1287-1, et seg. The Court held only that under that statute where the buyer defaulted on a crop purchase payment, interest would start to accrue from the date the crop was delivered, even though a separate section of the statute permitted a 30-day payment delay. Tex. Rev. Civ. Stat. Ann. art. 1287-3, § 11. The Fifth Circuit stated that this decision 4The four cases cited in Treon all dealt with interest awarded as damages. Routon v. Phillips, 246 S.W. 2d 223, 227 (Tex. Civ. App., Fort Worth, 1952, writ ref’d n.r.e.) ; Settegast v. Timmins, 6 S.W. 2d 425, 429-430 (Tex. Civ. App., Beaumont, 1928, writ ref’d n.r.e.); Ewing v. Wm. L. Foley, Inc., 115 Tex 222, 280 S.W. 499, 503-504 (1926) ; and Watkins v. Junker, 90 Tex. 584, 40 S.W. 11, 12 (1897). Here, as the Court of Appeals itself noted, we are not concerned with interest as damages. 513 F.2d at 365. 13 was ‘‘apparently for equitable reasons.’’ 513 F.2d at 366. The controlling provision of the Texas interest stat- ute states clearly that interest shall not be awarded until an obligation is ‘‘due and payable.’’ Tex. Rev. Civ. Stat. Ann. art. 5069-1.03. The Court of Appeals cites no Texas state court decision where interest on the principal sum was awarded pursuant to this statute for a period prior to the time the obligation became due and payable.° The Court of Appeals does cite a num- ber of cases where the Texas courts had to ascertain as a factual matter the amount actually owed on the date the legal obligation to pay matured. JIn those cases the sums due were found in fact also to be ascer- tainable and the decisions are therefore consistent with the literal requirements of the statute. By contrast the decisions in our cases cannot be reconciled with the statutory language because until the FPC decision became final, not only was the amount to be paid not ascertainable, but there was no legal obligation to pay anything at all—and there might never be such an ®* The Texas courts have explained that in construing State stat- utes, the ordinary meaning of words shall be used: ‘‘Courts must take statutes as they find them. More than that, they should be willing to take them as they find them. They should search out carefully the intendment of a statute, giving full effect to all of its terms. But they must find its intent in its language, and not elsewhere. They are not the law-making body. They are not responsible for omissions in legislation. They are responsible for a true and fair in- terpretation of the written law. It must be an interpreta- tion which expresses only the will of the makers of the law, not forced nor strained, but simply such as the words of the law in their plain sense fairly sanction and will clearly sustain.’’ Texas Highway Commission v. El Paso Bldg. & Const. Trades Council, 149 Tex. 457, 234 S.W. 2d 857 (1950) (Emphasis added). 14 obligation. Thus, there was no due and payable date within the meaning of the statute. B. Interest on the Interpleaded Funds Is Barred Under Texas Law for the Period Following the Effective Date of the FPC Order. The Fifth Circuit held that interest to Respondents should be awarded not only for the period prior to when the FPC Order became final, but also from that date until December 21, 1973, when the Company ten- dered the interpleaded funds into the Registry of the District Court. The District Court refused to award interest for this period, holding that since there was ‘a bona fide dispute among the claimants to the money, Phillips Petroleum Company was not obligated in any respect for the payment of interest on said money up until December 21, 1973’’ when the money was depos- ited with the Clerk of the Court. In so ruling, the District Court correctly applied the law in Texas that a stakeholder who is uncertain to whom to pay a fund because of conflicting claims is not liable for interest for use of the funds during the period of uncertainty. For this ruling the District Court relied on Allied Building Credits, Inc. v. Grogan Builders Supply Co., 365 S.W.2d 692 at 696 (Tex. Civ. App., Houston, 1963, writ ref’d n.r.e.), among other cases. See also, Op. Att’y Gen. Tex. V-791 (1949). ® We note the well-established rule prohibiting an award of interest in bankruptey cases. As stated by the Supreme Court in Thomas v. Western Car Co., 149 U.S. 95, 116-117 (1893), and followed thereafter in a long line of cases: ‘“‘after property of an insolvent passes into the hands of a receiver or of an assignee in insolvency, interest is not allowed on the claims against the funds. The delay in distribution is the act of the law; it is a necessary incident to the settle- ment of the estate.’’ (Emphasis added) 15 The Fifth Circuit Court of Appeals ignored the ap- plicable law of Texas as expressed by the courts of the State and instead based its ruling in this regard on its reading of cases in other jurisdictions. In so doing the Court stated: ‘*We do not believe that the Texas law in this area is different from that in other jurisdictions, but see Allied Building Credits, Inc. v. Grogan Build- ers Supply Co....’’ (513 F.2d at 369.) While Phillips neither disputes nor concedes that the Court’s interpretation of the law of other jurisdictions is correct, we submit that the only relevant law is that of the State of Texas and Texas law provides that a bona fide dispute over the title to funds bars any award of interest. In Allied Building Credits, Inc. v. Grogan Builders Supply Co., 365 8.W.2d 692 (Tex. Civ. App., Houston, 1963, writ ref’d n.r.e.), the Texas appellate court held that ai: award of interest for a time prior to the re- lease of a federal tax lien was improper. The court thus stated: ‘*Grogan was not entitled to any payment from the reserve account until that date. Prior to that date Grogan had become subject to a federal tax lien, so that Allied, which was served with such lien, could not make payment to Grogan with impunity until such tax lien was released. We are of the opinion that the trial court erred in allowing in- terest as was done, and that the amount of $4,532.00 should bear interest from October 18, 1960, when such lien was released. ...’’ (365 S.W. 2d at 696.) Similarly, in Gulf Pipe Line Co. v. Nearen, et al., 138 S.W.2d 1065 (Tex. Comm. App. 1940), the Court held 16 that the purchase price of oil did not become due and payable until a dispute as to ownership was resolved and the amount due would not commence to draw in- terest until adverse claims to the funds were settled. The Fifth Circuit’s decision to overturn the District Court interpretation of State law on the issue of in- terest constituted an abrupt departure from settled principles of appellate review. In a diversity action the determination by a district court as to questions of the local law of the state where it sits is to be ac- corded great weight by the Court of Appeals, which will not adopt a contrary view unless clearly convinced of error. In this regard in another case involving the interpretation of Texas law, the Fifth Circuit stated: ‘Tt is not our function to expand the law of Texas. Rather, we must apply the interpretation which most likely would be applied by the Texas court of last resort. In this effort, due to his experience and familiarity with Texas law, precedent directs us to extend great deference to the Trial Judge’s understanding of it....’’ (Devers v. Mobil Chem- ical Corp., 488 F.2d 258, 260 (5th Cir. 1973), cert. denied, 417 U.S. 947 (1974).) The Court of Appeals in the instant cases has improp- erly refused to follow the clear mandate of Texas de- cisional law which, as the District Court determined, bars any award of interest. II. The Decisions in the Instant Cases Are in Conflict with a Prior Decision of the Fifth Circuit. The Fifth Cireuit has not only refused to follow the applicable law of the State of Texas regarding the award of interest, but in addition, has ignored a prior decision in which the Court of Appeals had occasion 17 to construe the Texas interest statute. The facts of the earlier Fifth Circuit case, City of Texarkana, Texas v. Arkansas Louisiana-Gas Company, 118 F.2d 289 (5th Cir. 1941), vacated per stipulation, 315 U.S. 780 (1942), bear a striking similarity to the facts pre- sented here, although this contrary decision was not even cited in the Court of Appeals’ opinions. In the Texarkana case the Appellee served as a public utility for the distribution of gas in both the City of Texar- kana, Texas and the City of Texarkana, Arkansas. The Gas Company was required under the terms of its Texas franchise to charge no higher rates in Texas than it collected in Arkansas. The Gas Company had been compelled in litigation to establish lower rates in Arkansas and an action was brought to order the Gas Company to maintain in Texas these lower gas rates and to refund to Texas consumers any amounts that had been overcharged plus interest. Upon trial of the case the District Court held that refunds to Texas consumers were due but that no in- terest would be allowed. The sole issue on appeal to the Fifth Circuit related to the disallowance of inter- est claims by the District Court. Since the case was a diversity action, the Fifth Circuit reviewed Texas law to determine whether interest should have been awarded the Texas consumers and held that interest was not required by statute, nor could it be awarded as damages for the detention of money. The Court thus stated: ‘*The amount of each refund due in this case de- pended on simple fixed factors, to-wit, the rate charged and the rate finally established in Arkan- sas .... [T]he refund in this case was not due to be made as soon as the money was collected, for 18 under the contract an involuntary lower rate was not to be put into effect in Texas until it was finally established in Arkansas. [citations omit- ted] Until then the Gas Company could collect and keep the money under the current Texas rate.”’ (118 F.2d at 294-295.) The Fifth Cireuit explained that interest was not owing under the Texas interest statute since ‘‘the rates collected were collected under a bona fide claim of right ...’’ and the refunds were not due and payable until the rates established in Arkansas became final. 118 F.2d at 291. Similarly, no interest can properly be awarded under Texas law in the instant cases until FPC Opinion 586 became final since Phillips had no duty to pay any sums to Respondents until that time. Indeed, the factual context here requiring the denial of interest is even more compelling than in the Texarkana case since no money was ever collected from claimants, held for a period, and subsequently refunded as in Tez- arkana, but rather the money was collected by Phillips from third parties and ultimately paid to Respondents when the amounts became due and payable. The decisions of the Fifth Cireuit in the instant eases are thus in direct conflict with the decision of the same Court of Appeals in the Terarkana case. Under Texas law the Fifth Cireuit determined in Texarkana that interest could not be awarded for a period during which sums were collected from consumers under a bona fide claim of right, but would only aecerue from the date that the sum were to be refunded, the due and payable date. In the instant cases the Fifth Circuit construed the virtually identical interest statute and held that interest should be paid prior to the due date for equitable reasons despite an explicit statutory pro- 19 hibition. Under these circumstances, this intracireuit conflict on a question of local law that is of great and recurring importance to the natural gas industry re- quires the exercise of the Supreme Court’s power of supervision. Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456 (1967); Dickinson v. Petroleum Conversion Corp., 338 U.S. 507, 508 (1950). As this Court stated in John Hancock Ins. Co. v. Bar- tels, 308 U.S. 180, 181 (1930): ‘* Because of conflict in the rulings of the Court of Appeals of the Fifth Circuit, due to the differing views of the judges composing the court in the eases cited, and because of the importance of the question, we granted certiorari... .’’ CONCLUSION For the reasons stated, the petition for writ of cer- tiorari should be granted. Respectfully submitted, CLARK M. CLIFFoRD Carson M. Grass Ropert A. ALTMAN CLIFFORD, WARNKE, GLAass, McIiwain & FINNEY 815 Connecticut Ave. Washington, D.C. 20006 Lioyp G. MINTER C. J. Roperts . Phillips Petroleum Company Bartlesville, Oklahoma 74004 JACK RITCHIE T. L. Cuppace IT Phillips Petroleum Company Amarillo, Texas 79105 APPENDIX la APPENDIX Texas Revised Civil Statutes Annotated, Articles 5069-1.01 and 5069-1.03 provides: Article 5069-1.01. Definitions (a) ‘‘Interest’’ is the compensation allowed by law for the use or forbearance or detention of money; provided however, this term shall not include any time price differential however denominated arising out of a credit sale. (b) ‘‘Legal Interest’’ is that interest which is al- lowed by law when the parties to a contract have not agreed on any particular rate of interest. (c) ‘*Conventional Interest’’ is that interest which is agreed upon and fixed by the parties to a written contract. (d) ‘*Usury”’ is interest in excess of the amount allowed by law. (e) ‘*Person’’ means an individual, partnership, corporation, joint venture, trust, association or any legal entity, however organized. Article 5069-1.03. Legal rate applicable When no specified rate of interest is agreed upon by the parties, interest at the rate of six percent per an- num shall be allowed on all written contracts ascer- taining the sum payable, from and after the time when the sum is due and payable; and on all open accounts, from the first day of January after the same are made. Rules of Decision Act, 28 U.S.C. § 1652 provides: The laws of the several states, except where the Con- stitution or treaties of the United States or Acts of Con- gress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply. 2a 3a Natural Gas Act, 15 U.S.C. §§717-717w provides: § 717a. Definitions. § 717. Necessity for regulation of natural gas companies. | When used in this chapter, unless the context other- (a) As disclosed in reports of the Federal Trade Commission made pursuant to S. Res. 83 (Seventieth Congress, first session) and other reports made pur- suant to the authority of Congress, it is declared that the business of transporting and selling natural gas for ultimate distribution to the public is affected with a public interest, and that Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign com- merce is necessary in the public interest. (b) The provisions of this chapter shall apply to the transportation of natural gas in interstate com- merce, to the sale in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, and to natural-gas companies engaged in such trans- portation or sale, but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to the facilities used for such distribution or to the production or gather- ing of natural gas. (c) The provisions of this chapter shall not apply to any person engaged in or legally authorized to en- gage in the transportation in interstate commerce or the sale in interstate commerce for resale, of natural gas received by such person from another person within or at the boundary of a State if all the natural gas so received is ultimately consumed within such State, or to any facilities used by such person for such transportation or sale, provided that the rates and service of such person and facilities be subject to regulation by a State commission. The matters ex- empted from the provisions of this chapter by this sub- section are declared to be matters primarily of local concern and subject to regulation by the several States. A certification from such State commission to the Federal Power Commission that such State commis- sion has regulatory jurisdiction over rates and service of such person and facilities and is exercising such jurisdiction shall constitute conclusive evidence of such regulatory power or jurisdiction. wise requires— (1) ‘‘Person’’ includes an individual or a corpor- ation. (2) ‘*Corporation’’ includes any corporation, joint- stock company, partnership, association, business trust, organized group of persons, whether incorpor- ated or not, receiver or receivers, trustee or trustees of any of the foregoing, but shall not include munici- palities as hereinafter defined. (3) ‘‘Municipality’’ means a city, county, or other political subdivision or agency of a State. (4) ‘‘State’’ means a State admitted to the Union, the District of Columbia, and any organized Territory of the United States. (5) ‘*Natural.gas’’ means either natural gas un- mixed, or any mixture of natural and artificial gas. (6) ‘‘Natural-gas company’? means a person en- gaged in the transportation of natural gas in interstate commerce, or the sale in interstate commerce of such gas for resale. (7) ‘‘Interstate commerce’? means commerce be- tween any point in a State and any Point outside there- of, or between points within the same State but through any place outside thereof, but only insofar as such commerce takes place within the United States. (8) ‘*State commission’’ means the regulatory body of the State or municipality having jurisdiction to regulate rates and charges for the sale of natural gas to consumers within the State or municipality. (9) ‘*‘Commission’’ and ‘‘Commissioner’’ means the Federal Power Commission, and a member thereof, respectively. § 717b. Exportation or importation of natural gas. After six months from June 21, 1938, no person shall export any natural gas from the United States to a foreign country or import any natural gas from a a 4a a foreign country without first having secured an order of the Commission authorizing it to do so. The Commission shall issue such order upon application, unless, after opportunity for hearing, it finds that the proposed exportation or importation will not be con- sistent with the public interest. The Commission may by its order grant such application, in whole or in part, with such modification and upon such terms and con- ditions as the Commission may find necessary or ap- propriate, and may from time to time, after oppor- tunity for hearing, and for good cause shown, make such supplemental order in the premises as it may find necessary or appropriate. § 717c. Rates and charges; schedules; suspension of new rates. (a) All rates and charges made, demanded, or re- ceived by any natural-gas company for or in con- nection with the transportation or sale of natural gas subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges, shall be just and reasonable, and any such rate or charge that is not just and reasonable is declared to be unlawful. (b) No natural-gas company shall, with respect to any transportation or sale of natural gas subject to the jurisdiction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or dis- advantage, or (2) maintain any unreasonable differ- ence in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service. (c) Under such rules and regulations as the Com- mission may prescribe, every natural-gas company shall file with the Commission, within such time (not less than sixty days from June 21, 1938) and in such form as the Commission may designate, and shall keep open in convenient form and place for public inspection, schedules showing all rates and charges for any transportation or sale subject to the jurisdic- tion of the Commission, and the classifications, prac- 5a tices, and regulations affecting such ratés and charges, together with all contracts which in any manner affect or relate to such rates, charges, classifications, and services, (d) Unless the Commission otherwise orders, no change shall be made by any natvral-gas company in any such rate, charge, classification, or service, or in any rule, regulation, or contract relating thereto, ex- cept after thirty days’ notice to the Commission and to the public. Such notice shall be given by filing with the Commission and keeping open for public inspection new schedules stating plainly the change or changes to be made in the schedule or schedules then in force and the time when the change or changes will go into effect. The Commission, for good cause shown, may allow changes to take effect without requiring the thirty days’ notice herein provided for by an order specify- ing the changes so to be made and the time when they shall take effect and the manner in which they shall be filed and published. (e) Whenever any such new schedule is filed the Commission shall have authority, either upon com- plaint of any State, municipality, State commission, or gas distributing company, or upon its own initiative without complaint, at once, and if it so orders, with- out answer or formal pleading by the natural-gas company, but upon reasonable notice, to enter upon a hearing concerning the lawfulness of such rate, charge, classification, or service; and, pending such hearing and the decision thereon, the Commission, upon filing with such schedules and delivering to the natural-gas company affected thereby a statement in writing of its reasons for such suspension, may sus- pend the operation of such schedule and defer the use of such rate, charge, classification, or service, but not for a longer period than five months beyond the time when it would otherwise go into effect; and after full hearings, either completed before or after the rate, charge, classification, or service goes into effect. the Commission may make such orders with reference thereto as would be proper in a pro- ceeding initiated after it had become effective. If the proceeding has not been concluded and an order made 6a at the expiration of the suspension period, on motion of the natural-gas company making the filing, the proposed change of rate, charge, classification, or serv- ice shall go into effect. Where increased rates or charges are thus made effective, the Commission may, by order, require the natural-gas company to furnish a bond, to be approved by the Commission, to refund any amounts ordered by the Commission, to keep ac- curate accounts in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts were paid, and, upon com- pletion of the hearing and decision, to order such na- tural-gas company to refund, with interest, the portion of such increased rates or charges by its decision found not justified. At any hearing involving a rate or charge sought to be increased, the burden of proof to show that the increased rate or charge is just and reason- able shall be upon the natural-gas company, and the Commission shall give to the hearings and decision of such questions preference over other questions pending before it and decide the same as speedily as possible. § 717d. Fixing rates and charges; determination of cost of production or transportation. (a) Whenever the Commission, after a hearing had upon its own motion or upon complaint of any State, municipality, State commission, or gas distributing company, shall find that any rate, charge, or classifi- cation demanded, observed, charged, or eollected by any natural-gas company in connection with any trans- portation or sale of natural gas, subject to the juris- diction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discrim- inatory, or preferential, the Commission shall deter- mine the just and reasonable rate, charge, classifica- tion, rule, regulation, practice, or contract to be there- after observed and in force, and shall fix the same b order: Provided, however, That the Commission sha have no power to order any increase in any rate con- tained in the currently effective schedule of such na- tural gas company on file with the Commission, unless 7a such increase is in accordance with a new schedule filed by such natural gas company; but the Commission may order a decrease where existing rates are unjust, un- duly discriminatory, preferential, otherwise unlawful, or are not the lowest reasonable rates. (b) The Commission upon its own motion, or upon the request of any State commission, whenever it can do so without prejudice to the efficient and proper conduct of its affairs, may investigate and determine the cost of the production or transportation of nat- ural gas by a natural-gas company in cases where the Commission has no authority w establish a rate gov- erning the transportation or sale of such natural gas. § 717e. Ascertainment of cost of property. (a) The Commission may investigate and ascer- tain the actual legitimate cost of the property of every natural-gas company, the depreciation therein, and, when found necessary for rate-making purposes, other facts which bear on the determination of such cost or depreciation and the fair value of such property. (b) Every natural-gas company upon request shall file with the Commission an inventory of all or any part of its property and a statement of the original cost thereof, and shall keep the Commission informed regarding the cost of all additions, betterments, ex- tensions, and new construction. § 717f. Construction, extension, or abandonment of facili- ties; certificate of convenience and necessity; condem- nation proceedings. (a) Whenever the Commission, after notice and op- portunity for hearing, finds such action necessary or desirable in the public interest, it may by order direct a natural-gas company to extend or improve its trans- portation Fac ilities, to establish physical connection of its transportation facilities with the facilities of, and sell natural gas to, any person or municipality engaged or legally authorized to engage in the local distribution of natural or artificial gas to the public, and for such purpose to extend its transportation facilities to com- 8a munities immediately adjacent to such facilities or to territory served by such natural-gas company, if the Commission finds that no undue burden will be placed upon such natural-gas company thereby: Provided, That the Commission shall have no authority to com- pel the enlargement of transportation facilities for such purposes, or to compel such natural-gas company to establish physical connection or sell natural gas when to do so would impair its ability to render adequate service to its customers. (b) No nautral-gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained, after due hearing, and a finding by the Commission that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the pres- ent or future public convenience or necessity permit such abandonment. (c) No natural-gas company or person which will be a nautral-gas company upon completion of any pro- posed construction or extension shall engage in the transportation or sale of natural gas, subject to the jurisdiction of the Commission, or undertake the con- struction or extension of any facilities therefor, or acquire or operate any such facilities or extensions thereof, unless there is in force with respect to such natural-gas company a certificate of public convenience and necessity issued by the Commission authorizing such acts or operations: Provided, however, That if any such natural-gas company or predecessor in inter- est was bona fide engaged in transportation or sale of natural gas, subject to the jurisdiction of the Commis- sion, on February 7, 1942, over the route or routes or within the area for which application is made and has so operated since that time, the Commission shall issue such certificate without requiring further proof that public convenience and necessity will be served by such operation, and without further proceedings, if appli- cation for such certificate is made to the Commission within ninety days after February 7, 1942. Pending én oe OAD Pn eet abe Mend W. Wapsworts, Clerk /s/ by Barnpara Krer Deputy Clerk 106a IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS AMARILLO DIVISION Civil Action No. 2-1365 Puruirs Petroteum Company, Plaintiff, v. Riverview Gas CoMPRESsION Company, et al., Defendants. (March 11, 1974) Memorandum Opinion The above-styled cause was heard by the court on March 6, 1974 in Amarillo, Texas and all parties were represented in open court by counsel. This Memorandum Opinion shall serve as the court’s Findings of Facts and Conclusions of Law. The admissions and stipulations contained in the Pre-Trial Order on file in this case are incorporated herein as part of the Findings of Fact. A summary description of the circumstances attending this case is given below, but the court refers to the above-described parts of the Pre-Trial Order for further specific findings of fact. This case was instituted by a Complaint in Interpleader filed by plaintiff, Phillips Petroleum Company. The Com- plaint alleged that Phillips was a stakeholder of a certain sum of money in the amount of $275,220.53 upon which conflicting claims were made by the various defendants. Plaintiff alleged that it was uncertain as to which of the defendants were entitled to the fund, so it interpleaded all the claimants to the fund in the present action for the pur- pose of having the court decide who was entitled to receive the money and for the purpose of releasing itself from any further liability in relation to the fund. This fund represents payments which accrued under casinghead gas contracts executed between Phillips and 107a some of the defendants as the sellers for the purpose of purchasing natural gas produced from tracts of land in Hutchinson County, Texas. Phillips, between June 26, 1955 and September 30, 1970, resold the gas purchased under the casinghead contracts to third parties at a price above the maximum then allowed by the Federal Power Commission. The lease owners then received from Phil- lips the sum then allowed by the Federal Power Commis- sion and the difference between the maximum allowed by the Federal Power Commission and the actual sales price was held subject to refund to the purchasers by Phillips under Section 4(e) of the Natural Gas Act or, if the Fed- eral Power Commission subsequently approved the higher sales price, Phillips would then be required to pay such difference to the original producers. Under the casing- head contracts Phillips was to pay defendants-sellers a sum computed as a percentage of sales to third party pur- chasers. But, as above stated, Phillips only paid the de- fendants-sellers a percentage of the ‘‘firm proceeds,’’ which were the portions of the sales prices not subject to possible refund. Phillips had petitioned the Federal Power Commission for a ruling sustaining the sales prices in the amounts by which they exceeded the published maximum. Opinion 586 of the Federal Power Commission, dated Sep- tember 18, 1970 which had sustained a portion of the ex- cess sales prices, became final on October 28, 1972. Under that decision, Phillips was then bound to recompute the amounts due the sellers under the casinghead contracts and pay the additional amounts to them. However, be- tween June 7, 1954 and September 30, 1970 the title to the mineral estate of the tracts in question changed hands several times. The dispute over the fund in Phillips’ pos- session arose because of the changes in ownership. The dispute among the various defendants as to entitle- ment to the fund has now been settled among the parties. Therefore, the only question left before the court is whether Phillips is liable for interest on the moneys they have held 108a as a stakeholder for the past several years. Each of the defendants named by Phillips in their Complaint, except for two who disclaimed any interest in the fund, has filed a counterclaim against Phillips for interest on the portion of the fund which was sustained by the Federal Power Commission. Phillips has filed a Motion to Dismiss the counterclaims. As an initial determination, this court finds that the coun- terclaims are proper under Rule 13, Federal Rules of Civil Procedure, and that the court has jurisdiction to hear and determine the counterclaims. Phillips’ technical argument that they are not an ‘‘opposing party’’ within the meaning of Rule 13 is not persuasive.. Phillips in its Complaint prays that it is discharged from all liability in connection with the fund, which would of course include discharge from any liability for interest. Phillips is asking for af- firmative relief against the defendants and, therefore, this court feels compelled to characterize them as opposing parties for the purposes of Rule 13, supra. Further, the court finds that defendants’ counterclaims are ‘‘compul- sory’’ within the meaning of Rule 13(a). Clearly, the claims for interest arose ‘‘out of the transaction or occur- rence that is the subject matter of the opposing party’s claim.’’ Accordingly, there is no jurisdictional amount requirement as to the counterclaims and the court has ancillary jurisdiction over them. Childress v. Cook, 245 F.2d 798 (5th Cir. 1957). The substance of defendants’ position with regard to the interest question is that Phillips is liable for interest eo nomine on the fund in order to place defendants on a par- ity with Phillips under the gas purchase agreements, to compensate defendants for Phillips’ use of their money between the date of accrual and the date it became payable and to prevent the unjust enrichment of Phillips. Phillips’ position, essentially, is that defendants’ right to this fund did not accrue until October 28, 1972, that, even upon ac- crual of defendants’ right to the fund, Phillips was unable 109a to safely disburse the fund because of the conflicting claims thereon and that, therefore, Phillips should not be required to pay interest during any of the period in which it held the fund. The law is not entirely clear in Texas whether a stake- holder who is uncertain to whom to pay a fund because of conflicting claims to the fund is liable to pay interest to the prevailing claimant for use or possession of the fund dur- ing the period of uncertainty. There is a genral rule that interest will not be allowed on a fund while it is in litiga- tien. 47 C.J.S., Ivrerest § 25. Bergendahl v. Blanco Oil Cvu., 440 S.W.2d 81 (Tex.Civ.App—Eastland 1969, writ ref’d n.r.e.), was a suit by the life tenant against the remainder- men to establish that the life tenant’s interest in the min- eral estate was subject to the application of the ‘‘open mine doctrine’’ and against the lessee oil companies for interest on royalties on oil produced from the mineral estate. The defendant oil companies held the royalties but did not invest them for the benefit of the royalty own- ers. The court held that the oil companies were not under a duty to invest the retained royalties and were not liable for interest thereon because no proper demand was ever made upon them for the funds by any of the other parties. More in point is the Court of Appeals’ decision in the Louisiana diversity case of Gulf Oil Corporation v. Olivier, 412 F.2d 938 (5th Cir. 1969). In that case the plaintiff sued Humble Oil to recover overriding royalty payments under an oil and gas lease. Humble contended that it could not safely make payments under its assignment of over- riding royalties to Olivier because of a conflicting lease which carved out overriding royalties to a third party. Humble filed a motion for interpleader of the parties in the conflicting chain of title. The motion was granted by the District Court because it found that Humble could not safely make the payments until title to the lease had been adjudicated. However, the District Court awarded inter- est on the interplead fund to the prevailing royalty owner. 110a The Court of Appeals reversed this award of interest on the ground that it was inconsistent with the lower court’s finding that Humble could not safely disburse the funds. The court flatly held that Humble correctly withheld the payments pending the outcome of the litigation. The case at bar is closely analogous to Olivier and this court is per- suaded by its reasoning. Although the ownership of the fund in question has not been in litigation during the en- tire existence of the fund, there has been a continual dis- pute over it up through the present. Until the October 28, 1972 affirmance of the Federal Power Commission’s ruling allowing the excess charges, there was genuine doubt in Phillips’ mind whether the money was to be refunded to the third party purchasers or disbursed to the sellers un- der the casinghead contracts. And since at least April 2, 1971 through the present there has been a dispute over the fund among the various defendants herein. Thus at no time during its existence has this fund been free from con- flicting claims to its ownership. Similarly, in Atwood v. Humble Oil & Refining Company, 338 F.2d 502 (5th Cir. 1964), the Court of Appeals upheld a decision of the trial court that the lessor un er an oil and gas lease was not entitled to interest on funds retained by the lessee because of the trial court’s finding of fact that: ‘*{t}he lessee paid plaintiffs all sums due them under the lease as early as it reasonably could do so under all the circumstances associated with and resulting from the institution and prosecution by the plaintiffs of this and earlier litigation asking for cancellation or attacking the validity of the lease and seeking to set aside the partition of the King Estate and the [2023] Trustee’s computation of fractional division of inter- est among the persons sharing therein.’’ Defendants rely heavily on Kishi v. Humble Oil & Re- fining Company, 10 F.2d 356 (5th Cir. 1926), for their con- tention that a stakeholder is liable to the ultimate owner llla for interest for the use of the money held by him. Kishi, however, can be distinguished from the present case. Ash- land Oil & Refining Company v. Staats, Inc., 271 F. Supp. 571 (D. Kansas 1967), established that a party in the posi- tion occupied by defendants in this case has no right to receipt of such funds until it is finally determined that the money does not have to be refunded to the purchaser. The court there stated that: ‘*Defendants’ right to royalties from those receipts can be no greater than the lessee’s right to the monies from which those royalties derive. Ashland has no final enforceable right to these funds, for they have not been approved, and may be rescinded. Plaintiff holds them subject to refund, and are responsible for any refund which may be ordered. We perceive no ground on which Ashland should be compelled to pay out sums, for the refund of which it may be liable, and as to which its own right is not finally determined, to royalty owners whose own right to royalties from those funds will be finally determined only when Ashland’s own right is determined.”’ Unlike the Kishi situation, there is a judicial determina- tion governing the present case that defendants had no right to possession of the fund until October 28, 1972. And there is a general rule in Texas that interest is not payable until the debt on which it accrues becomes due. 33 Tex. Jur. 2d Interest § 5 (1962). Here, the sum could not have become due to defendants until October 28, 1972. Further, a dispute over the fund existed among the defendants here- in from sometime prior to October 28, 1972 until the recent settlement of that dispute. Thus, during none of the time that Phillips held the fund would it have been safe for them to disburs¢ the money to the defendants. At all times during its existence this fund has been the subject of conflicting claims of ownership. Logic and the rules of law discussed above persuade this court that Phil- lips was under no duty to invest the fund for the benefit 112a of defendants or to pay interest thereon. Accordingly, it is here Oxperep that any recovery on defendants’ counter- claims for interest shall be Denrep. The court further notes that the defendant-claimants were aware of the existence of this fund and the evidence does not show that any of them made a demand that the money be placed in the Registry of this court. The ruling in this case should not be construed as a denial of interest in other cases where the claimants had no knowledge that the funds were available for payment and where the stake- holder may have failed to reasonably notify the owners or claimants that the funds were available for distribution under the ruling of the Federal Power Commission. Plaintiff further prayed for costs and a reasonable attor- ney’s fee. Olivier, supra, also considered this question. The court, in affirming the trial court’s denial of these items, there stated that ‘‘[t]hough costs and attorney’s fees are ordinarily awarded to the disinterested stake- holder in an interpleader proceeding, the matter is ulti- mately vested within the sound discretion of the trial judge.’’ It is the court’s opinion that the circumstances surrounding this case do not call for the award of these sums. As a matter of discretion, therefore, the court hereby Denres Phillips’ claim for costs and a reasonable attorney’s fee. _— —_— The attorneys for the defendants are directed to prepare a proposed judgment in accordance with the above, submit such instrument to attorneys for the plaintiff for approval as to form, and then present such approved judgment to the court in Lubbock, Texas on or before March 25, 1974. The Clerk will furnish a copy hereof to each attorney. Ewterep this 11th day of March A.D. 1974. /s/ Harsert O. Woopwarp Halbert O. Woodward United States District Judge 113a Text oF SrrPuLATIONS AND ADMISSIONS OF THE PartiEs, Numpers 1-45, Incorporatep py RererENce Into THE Dis- trict Court’s Memoranpum OPpINion as FrnpinGs or Fact. The parties admit the following: 1, That on or about March 28, 1955, Pumuirs, as buyer, entered into a Casinghead Gas Contract (recorded in Vol- ume 176 at page 386 of the Deed Records of Hutchinson County, Texas), to wit: an area bounded on the north by the north line of Block 47, H&TC RR. Co. Survey; on the east by the east line of Section 19, Block 47, H&TC RR. Co. Survey and the east line of Section 62, Block 46, H&TC RR. Co. Survey; and on the south by Electric City, Texas; and on the west by the east line of Section 29, Block 47, H&TC RR. Co. Survey and the east line of Section 73, Block 46, H&TC RR. Co. Survey. Said contract provided that seller was to receive as the payment due the prices shown in said contract. Said contract was superseded and terminated by a Casinghead Gas Contract dated April 1, 1957, described hereinbelow. 2. That on or about April 1, 1957, Pures, as buyer, entered into a Casinghead Gas Contract (recorded in Vol- ume 203 at page 380 of the Deed Records of Hutchinson County, Texas) with the Travis Group, as seller, to purchase casinghead gas produced from wells located on the following described tract of land in Hutchinson County, Texas, to wit: area bounded on the north by the north line of Block 47, H&TC RR. Co. Survey; on the east by the east line of Section 19, Block 47, H&TC RR. Co. Survey and the east line of Section 62, Block 46, H&TC RR. Co. Survey; and on the south by Electric City, Texas; and on the west by the east line of Section 29, Block 47, H&TC RR. Co. Survey and the east line of Section 73, Block 46, H&TC RR. Co. Survey. Said contract provided that seller was to receive as the payment due the prices shown in said contract. Said contract was superseded and terminated by ll4a a casinghead gas contract dated September 1, 1958, de- scribed hereinbelow. 3. That on or about September 1, 1958, Puruuips, as buyer, entered into a Casinghead Gas Contract (recorded in Volume 223 at page 431 of the Deed Records of Hutch- inson County, Texas) with the Travis Group, as seller, to purchase casinghead gas produced from wells located on the following described tract of land in Hutchinson County, Texas, to wit: an area bounded on the north by the north line of Block 47, H&TC RR. Co. Survey; on the east by the east line of Section 19, Block 47, H&TC RR. Co. Survey and the east line of Section 62, Block 46, H&TC RR. Co. Survey; and on the south by Electric City, Texas, and on the west by the east line of Section 29, Block 47, H&TC RR. Co. Survey, and the east line of Section 73, Block 46, H&TC RR. Co. Survey. On or about December 5, 1959, said contract was amended to add additional lands to the lands already covered by said contract, said new land being Sec- tion 73, Block 46 H&TC RR. Co. Survey, Hutchinson County, Texas. The amendment is recorded in Volume 242 at page 460 of the Deed Records of Hutchinson County, Texas. Said contract was also amended on July 24, 1962, and August 15, 1967. Said contract provided that seller was to receive as the payment due the prices shown in said contract. 4. That on or about March 7, 1950, Paruures, as buyer, entered into a Casinghead Gas Contract (recorded in Vol- ume 134 at page 325 of the Deed Records of Hutchinson County Texas) with Addison Warner, as seller, to purchase casinghead gas produced from wells located on the follow- ing described tract of land in Hutchinson County, Texas, to wit: the north 160 acres of Section 71, Block 46, H&TC RR. Co. Survey. Said contract provided that seller was to receive as the payment due the prices shown in said con- tract. Said contract was superseded and terminated by a 1l5a casinghead gas contract dated September 21, 1955, des- cribed hereinbelow. 5. That on or about September 21, 1955, Puriurps, as buyer, entered into a Casinghead Gas Contract (recorded in Volume 182 at page 98 of the Deed Records of Hutchin- son County, Texas) with Addison Warner, as seller, to purchase casinghead gas produced from wells located on the following described tract of land in Hutchinson County, Texas, to wit: the north 160 acres of Section 71, Block 46, H&TC RR. Co. Survey. Said contract provided that seller was to receive as the payment due the prices shown in said contract. Said contract was superseded and terminated by a casinghead gas contract dated May 29, 1957, des- cribed hereinbelow. 6. That on or about May 29, 1957, Purups, as buyer, entered into a Casinghead Gas Contract (recorded in Volume 267 at page 72 of the Deed Records of Hutchinson County, Texas) with Addison Warner as seller, to purchase casinghead gas produced from wells located on the follow- ing described tract of land in Hutchinson County, Texas, to wit: the north 160 acres of Section 71, Block 46, H&TC RR. Co. Survey. Said contract provided that seller was to receive as the payment due the prices shown in said con- tract. Said contract was superseded and terminated by a casinghead gas contract dated April 29, 1966, described hereinbelow, but was amended prior to termination on June 6, 1962, and supplemented on February 24, 1964, recorded in Volume 296, page 486 of the Deed Records of Hutchinson County Texas. 7. That on or about April 29, 1966, Pures, as buyer, entered into a Casinghead Gas Contract (recorded in Vol- ume 325 at page 423 of the Deed Records of Hutchinson County, Texas) with DAY, as seller, to purchase cas- inghead gas produced from wells located on the following described tract of land in Hutchinson County, Texas, to 1l6a wit: the north 160 acres of Section 71, Block 46, H&TC RR. Co. Survey. Said contract provided that seller was to receive as the payment due the prices shown in said con- tract. 8. That, from time to time, from June 26, 1955, to Sept- ember 30, 1970, Pxaitiies purchased casinghead gas under the aforesaid gas contracts. 9. That by various orders issued since the United States Supreme Court, on June 7, 1954, decided Phillips Petroleum Company v. State of Wisconsin, et al., 346 U.S. 672, 74 S. Ct. 794, 98 L. Ed. 1036, and determined that Phillips, as and independent natural gas producer selling gas to inter- state pipeline companies for interstate transportation and resale, was a ‘‘natural gas company’’ with the Natural Gas Act, the Federal Power Commission (FPC) suspended increases in prices for sales of residue gas filed by Phillips and permitted such increases to be collected beginning at some date subsequent to the original date proposed by Phillips, only upon Phillips’ filing a corporate undertaking with the FPC to refund all or any portion of such increases which the FPC might not find to have been justified. 10. That subsequent to June 26, 1955, Phillips sold gas obtained under the above-referenced casinghead gas con- tracts, and other contracts, subject to the jurisdiction of the FPC, at prices, a portion of which had not been ap- proved by the FPC; the increased sales prices of the gas were collected by Phillips subject to a duty to refund the same to the purchasers in the event the FPC failed to approve the sales prices pursuant to Section 4(e) of the Natural Gas Act (15 U.S.C. 717e(e); and until such time as the FPC approved such increased sales prices or a portion of said prices, there was no right in B. E. Hill, Addison Warner, the Travis Group, Day, Trustee or Bank to recover from Phillips any such monies held subject to refund. 117a 11. That Phillips collected the higher rates subject to refund. Increases in gas sales prices not made effective subject to FPC approval cannot be made retroactive. 12. That Phillips had applications before the FPC requesting permission to increase the prices for sales of residue gas and such applications, for this area, were con- - golidated in FPC Dockets AR 64-1, et al. 13. That on September 18, 1970, the FPC issued Opinion 586, Dockets No. AR 64-1, et al., Hugoton-Anadarko Rate Cases, 44 FPC 761, which established sales prices applica- ble to gas sales and established refund requirements; on July 31, 1972, the Court of Appeals for the Nnith Circuit affirmed the above-said Opinion 586 in The People of State of California, et al. v. Federal Power Commission, No. 71- 1036, reported at 466 F.2d 974, et seq., and, as of October 28, 1972, no writ of certiorari was filed by any of the parties to said Ninth Circuit action. 14. That after Opinion 586 became final, the monies col- lected subject to refund could be divided into two classes, ‘*sustainable’’ money and ‘‘refundable’’ money. The ‘‘su- stainable’’ monies are those which, according to Opinion 586, represent lawful proceeds from the sales of gas. It is from these lawful proceeds that the parties from which Phillips purchased casinghead gas receive, as their part payment, a sum computed in relation to the price for which Phillips sold gas within the Panhandle Field of Texas to third parties. The ‘‘refundable’’ monies are those which, according to Opinion 586, represent sums in excess of the just and reasonable rate;-i.e., the sums in excess of the lawful proceeds from the sales of gas. 15. That this action does not involve ‘‘firm proceeds’’; that is, the proceeds derived from sales of gas within the Panhandle Field of Texas to third parties at prices which were at or below the rate which had already been approved by the FPC. 118a 16. On and after October 28, 1972, and under the sales prices approved by the Federal Power Commission in Opin- ion 586, a sum of money equal to the sustainable portion of the suspense fund attributed to the working interests in the lease(s) covered by the casinghead gas contracts refer- enced hereinabove for the period between June 7, 1954, and September 30, 1970, as to the casinghead gas contracts covering the following described property, to wit: The north 160 acres of Section 71, Block 46, H&TC RR. Co. Survey, Hutchinson County, Texas; and for the period between June 26, 1955, and September 30, 1970, as to the casinghead gas contracts covering the following described properties, to wit: An area bounded on the north by the north line of Block 47, H&TC RR. Co. Survey; on the east by the east line of Section 19, Block 47, H&TC RR. Co. Survey and the east line of Section 62, Block 46, H&TC RR. Co. Survey; and on the south by Electric City, Texas; and on the west by the east line of Section 29, Block 47, H&TC RR. Co. Survey and the east line of Section 73, Block 46, H&TC RR. Co. Survey; and all of Section 73, Block 46, H&TC RR. Co. Survey, all in Hutchinson County, Texas; that is, $275,220.53 became due and payable to the lawful owner or owners of said monies. 17. On March 28, 1955, B. E. Hill, also known as Bernard E. Hill, was the owner of the working interest of the lease(s) covering an area bounded on the north by the north line of Block 47, H&TC RR. Co. Survey; on the east by the east line of Section 19, Block.47, H&TC RR. Co. Survey and the east line of Section 62, Block 46, H&TC RR. Co. Survey; and on the south by Electric City, Texas; and on the west by the east line of Section 29, Block 47, H&TC RR. Co. Survey and the east line of Section 73, Block 46, H&TC RR. Co. Survey, all in Hutchinson County, 119a Texas, hereinafter called the ‘‘Riverview Tract’’. At some time prior to April 1, 1957, Riverview Gas Compression Company, a partnership, acquired the interest of B. E. Hill in and to the said ‘‘ Riverview Tract’’. 18. On November 10, 1965, effective as of September 30, 1965, at 7:00 a.m. Arnold Travis, M. M. Travis, Julius Fi- gelman and Edward Meltzer, acting for and on behalf of Riverview Gas Compression Company, executed three in- struments, to wit: a. An untitled instrument, being a bill of sale, dated November 10, 1965, recorded in Volume 10 at page 541 ¢ the Bill of Sale Records of Hutchinson County, eXAas; b. An Assignment of Casinghead Gas Contracts dated November 10, 1965, recorded in Volume at page of the Deed Records of Hutchinson County, Texas; and e. An Assignment of Leases with Reservation of Production Payment date November 10, 1965, but effec- tive as of September 30, 1965, at 7:00 a.m., recorded in Volume 320 at page 201 of the Deed Records of Hutch- inson County, Texas. The buyer-grantee-assignee in all of the above-said three instruments was W. M. Day, Jr., also known as William M. Day, Jr., and the interest covered related to the ‘‘ Riverview Tract’’. In the Assignment of Leases with Reservation of Production Payment, the grantor excepted and reserved unto itself a production payment equal to an undivided fifty percent (50%) of the oil, gas and other minerals produced saved and sold from/or attributed to the subject interest. This reserved production payment is hereinafter referred to as the ‘‘Riverview Tract Production Payment’’. 19. On November 10, 1965, Arnold Travis, Edward Mel- tzer, Jr., Julius Fligelman, and M. M. Travis assigned the ‘Riverview Tract Production Payment’’ unto Pensco, Inc., 120a as Trustee, effective September 30, 1965, at 7:00 a.m. This Assignment of Production Payment is recorded in Volume 320 at page 220 of the Deed Records of Hutchinson County, Texas. 20. On March 7, 1950, Addison Warner was the owner of the working interest of the lease(s) covering a tract some- times described as the north 160 acres of Section 71, Block 46, H&TC RR. Co. Survey, Hutchinson County, Texas, and more particularly described as: All of that part of Section 71, Block 46, H&TC RR. Co. Survey, Hutchinson County, Texas, lying north of the south 480 acres thereof and south of a meandering line located 10 feet to the south of the south riverbed line of the Canadian River, containing 160 acres, more or less, hereinafter referred to as the ‘‘ Warner Tract”. 21. On June 13, 1966, Addison Warner assigned his in- terest in the ‘‘Warner Tract’’ to W .M. Day, Jr., effective April 1, 1966, at 7:00 a.m., reserving unto himself as gran- tor a production payment equal to an undivided sixty per- cent (60%) of the oil, gas and other minerals, produced, saved, and sold from or attributed to the subject interest, hereinafter referred to as the ‘‘Warner Tract Production Payment.’’ This Assignment of Lease with Reservation of Production Payment is recorded in Volume 326 at page 336 of the Deed Records of Hutchinson County, Texas. 22. On June 13, 1966, Addison Warner assigned the ‘*Warner Tract Production Payment’’ unto Pensco, Inc., as trustee, effective April 1, 1966, at 7:00 a.m. This Assign- ment of Production Payment is recorded in Volume 326 at page 345 of the Deed Records of Hutchinson County, Texas. 23. On October 10, 1966, W. M. Day, Jr., et ux., bargained, sold, transferred, assigned and conveyed unto Clinton Oil Company all of his interest in the ‘‘ Riverview Tract’’ and the ‘‘Warner Tract’’, effective September 1, 1966, at 7:00 12la a.m. The untitled transfer document is recorded in Vol- ume at page of the Deed Records of Hutchin- son County, Texas. 24. On September 25, 1967, Clinton Oil Company, as- signor, set over unto Union National Bank, Wichita, Kans- as, as Escrow Agent, an undivided thirty-six and two-thirds percent (3634%) of an undivided eleven-sixteenths (11/16) working interest in the oil and gas lease covering the ‘‘Warner Tract’’, hereinafter called the ‘‘Escrow Inter- est’’, effective October 1, 1967. The instrument of assign- ment is recorded in Volume 339 at page 485 of the Deed Records of Hutchinson County, Texas. 25. On March 15, 1971, Union National Bank, as Escrow Agent, assignor, set over unto Clinton Oil Company, the ‘‘Escrow Interest’’, effective March 1, 1971. The instru- ment of assignment is recorded in Volume 368 at page 564 of the Deed Records of Hutchinson County, Texas. 26. On March 18, 1971, Clinton Oil Company executed an Assignment of Leases to be effective April 1, 1971, at 7:00 a.m., C.S.T., wherein it assigned unto Pensco, Inc., Trustee, all of its interest in oil and gas leases covering the ‘‘ River- view Tract’’ and the ‘‘Warner Tract’’. Said document contains a non-merger clause which states that it is the in- tent of grantor and grantee that the interest conveyed by the March 18, 1971, assignment will not merge into the ‘*Riverview Tract Production Payment’’ and ‘‘Warner Tract Production Payment’’ interest already owned by Pensco, Inc., Trustee. This instrument is recorded in Vol- ume 368 at page 684 of the Deed Records of Hutchinson County, Texas. 27. On March 18, 1971, Clinton Oil Company executed an Assignment of Property, to be effective as of April 1, 1971, at 7:00 a.m., C.S.T., wherein it assigned unto Pensco, Inc., Trustee, all of its right, title and interest in and to the per- sonal property, contract rights and other property rights 122a located in, related or used in connection with the ‘‘ River- view Tract’’ and the ‘‘Warner Tract’’. Said document contains a clause which provides as follows: ‘*Grantee is hereby subrogated to all rights, powers and privileges of Grantor existing by virtue of prior warranties, representations, covenants, and agreements pertaining to the properties and interests covered here- by, and Grantor hereby expressly assigns and releases to Grantee all claims which Grantor may have (if any) for underpayment or nonpayment of production run proceeds and/or breach of gas purchase agreements.’’ This assignment of properties is recorded in Volume 368 at page 698 of the Deed Records of Hutchinson County, Texas. 28. On April 13, 1971, Pensco, Inc., Trustee, executed an Assignment of Leases and Properties, to be effective as of April 1, 1971, at 7:00 a.m., C.S.T., wherein assignor as- signed all of its rights, title and interest in and to the ‘**Riverview Tract’’ and the ‘‘ Warner Tract’’ to Santa Fe Oil Company, grantee, subject to the ‘‘Riverview Tract Production Payment’’ and the ‘‘Warner Tract Production Payment’’; however, the two said production payments are merged as one single production payment payable out of and from 50% of the net proceeds of production attribu- table to the subject leasehold estates, hereinafter called the ‘‘Merged Production Payment’’, assignor reserving unto itself, ‘‘the right to all proceeds from production runs up to the effective date hereof, including such proceeds (if any) which may be in suspense attributable to the leasehold es- tate.’’ This instrument is recorded in Volume 369 at page 991 of the Deed Records of Hutchinson County, Texas. 29. On January 19, 1966, Bernard FE. Hill (on behalf of Travis Group) sent, and in due course of the post, PHILLIPs received a letter which said, in pertinent part: ‘*While on the subject of the casinghead gas con- tract which we transferred to Mr. Day, please be ad- vised that there was reserved to the Seller by the origi- 123a nal contract of sale all right to the gas price increases impound under FPC direction for gas produced to the effective date of the sale, September 30, 1965. I will appreciate very much your letting us know the total amount of funds so impounded by you for the account of Riverview Gas Compression Co. for production to September 30, 1965, together with the total amount of interest accrued thereon to that date. In addition, I request you to acknowledge receipt of this notification that the price increases so impounded, with interest thereon until finally released, will be payable to River- view Gas Compression Co. (the old partnership), that transferred the booster contract to Mr. Day.’’ 30. On January 21, 1966, Robert J. Hearon, Jr. (on be- half of Day) sent, and in due course of the post, PHiiurps received, a letter which said, in pertinent part: ‘*As to the amounts in FPC Suspense referred to in the third paragraph of Mr. Hill’s letter, this will confirm that Mr. Hill accurately sets forth the agree- ment between the parties. Even though your company is utilizing a different effective date for current gas payments, we are sure that September 30, 1965, can be utilized as the effective date for the FPC Suspense Account. That is, all sums suspensed for gas pro- duced prior to September 30 belong to the M. M. Travis group, while suspense funds attributable to production from and after that date should be credited to Mr. Day.”’ 31. On June 14, 1966, Addison W. Warner sent, and in due course of the post, Phillips received, a letter which said, in pertinent part: ‘*This is to advise that I have sold the working in- terest in each of the above leases to W. M. Day, Jr., Austin, Texas, and Pensco, Inc., Trustee, care of The National Bank of Commerce, San Antonio, Texas, in accordance with instruments submitted to you herewith, and I ask that transfer orders be drawn reflecting this sale at the earliest convenient date. 124a **In addition, you are hereby advised that this sale includes any and all payments for gas attributable to the above property which may have been held in su- spense pending Federal Power Commission approval, and when and if any such sums held in suspense are released they shall be paid to the buyers in this trans- action without regard to the production period to which such sums are attributable.’’ 125a Please note also Mr. Warner’s statement that when and if any such sums held in suspense are released that they should be paid to the buyers (emphasis added) in this transaction without regard to the production pe- riod to which such sums are attributable. In view of this language, our Legal Department requires that we be furnished disclaimers from Pensco, Inc., Trustee, and from The National Bank of Commerce, San An- tonio, Texas, as to any F PC suspense accruals prior to their acquisition of interest. If you will provide same to the undersigned, we will immediately review the matter with our Legal Department.”’ 32. On October 10, 1966, Clinton Oil Company sent, and in due course of the Post, Day received a letter which said, in pertinent part: ‘**Reference is made to the transaction between us of even date herewith in which you have assigned to us those certain leases in Hutchinson County, Texas, more particularly described in Schedule ‘A’ in the assign- ment, together with the assets of Riverview Gas Com- pression Company. _ “This is to confirm that all proceeds of production, including any part of the proceeds of sale of casing- head gas which may be held in suspense by the pur- chaser of such gas pending Federal Power Commission approval of price, accruing prior to 7:00 a.m., C.S.T., September 1, 1966, are not included in the sale and assignment to us. Clinton Oil Company asserts no entitlement to any proceeds, including any F.P.C. Suspense items, which may be accrued prior to the above effective date.’’ 34. On January 27, 1967, W. M. Day, Jr., Pensco, Inc., Trustee, and The National Bank of Commerce of San An- tonio executed a written instrument relating to the Oil, Gas and Mineral Lease from J. A. Whittenburg, Jr., et al., to A. W. Warner, dated October 21, 1949, recorded in Volume 127, page 435, et seq., of the Deed Records of Hutchinson County, Texas, insofar as said lease covers from the sur- face down to a depth of 250 feet below sea level in the follow- ing described land in Hutchinson County, Texas: All that part of Section 65, Block 46, H&TC Ry. Co., ly- ing north of the south 467 acres thereof and south of a meander line located 10 feet to the south of the south riverbed line of the Canadian River, containing 142 acres, more or less; and All that part of Section 71, Block 46, H&TC Ry. Co., lying north of the south 480 acres thereof and south of a meander line located 10 feet to the south of the south riverbed line of the Canadian River, containing 160 acres, more or less; 33. On January 19, 1967, W. W. Ledlie (on behalf of Puiuips) sent, and in due course of the Post, R. J. Hearon (on behalf of Day) received, a letter which said, in per- tinent part: ‘“‘This replies to your letter of January 16, 1967, concerning verification of the sum paid Mr. W. M. Day, Jr. pursuant to his Indemnity Agreement. ‘*We are enclosing a copy of Mr. Warner’s letter to Phillips Petroleum Company dated June 14, 1966. Please note that Mr. Warner says that he has sold the working interest to Mr. Day and Pensco, Inc., Trustee. Said instrument recites, among other things, as follows: ‘*2. Pensco and the National Bank of Commerce hereby disclaim any interest in oil, gas or other mineral produced from said lease and the lands covered thereby, as described in Exhibit A, prior to 7:00 a.m. April 1, 1966, including specifically, but not by way of limitation, any proceeds of sale of gas produced prior to such date 126a held in suspense pending Federal Power Commission approval of a gas price increase.”’ 127a the Federal Power Commission, which are attributable to all of the working interests and production payment interests in the above captioned properties. Said prop- erties are described in the Assignment of Leases from Clinton Oil Company to Pensco, Inc., Trustee executed March 18, 1971, a copy of which has been furnished to your office. This request includes but is 35. On April 2, 1971, Charles D. Schultz (on behalf of The National Bank of Commerce of San Antonio) sent, and in due course of the Post, Phillips received, a letter which ‘‘Enclosed herewith please find a Xerox copy of each of the executed originals of instruments entitled ‘Assignment of Property’ and ‘Assignment of Leases’ both effective April, 1971, at 7:00 A.M. These instru- ments were executed by Clinton Oil Company as said, in pertinent part: not limited to the periods of time when the captioned properties were owned and/or operated by M. M. Travis, et al, Addison Warner, W. M. Day, Jr., and Clinton Oil Company. In addition please include in your schedule the amounts paid to W. M. Day, Jr., and the associated periods of time and interests to which those amounts were attributable.’’ Grantor, transferring their interests in certain Pro- perty and Leases in Hutchinson County, Texas to Pensco, Inc., Trustee. ‘‘In both instruments, Clinton Oil Company as 37. On August 15, 1972, Benard E. Hill (on behalf of the TRavIs Group) sent, and in due course of the Post, PuHILuips received, a letter which said in pertinent part: Grantor, expressly assigns and releases to Pensco, Inc., Trustee, as Grantee, all claims which Grantor may have for underpayment or nonpayment of pro- duction run proceeds and/or breach of gas purchase agreement. x7 e e ‘¢Pensco Inc., Trustee now claims under this assign- ment and prior assignments all suspended gas or oil (if any) proceeds that you may be holding but not limited to the date such interests were acquired. This claim includes any funds now held from the date Phillips first initiated such procedures in so far as these leases are concerned. We therefore request that these suspended proceeds be paid to us under condi- tions as may be required by Phillips.’’ ‘*Please be advised that our records show that when Pensco, Inc. acquired whatever interest it may have in the Riverview Gas contract with your company, it did so with full knowledge that such interest covered only gas run into your lines, after the effective date of the Riverview Gas et al/W. M. Day, Jr. transaction, to-wit, December 1, 1965. ‘**T assume that Pensco, Inc., in making a claim on you for the suspended gas price proceeds furnished _ a? some alleged claim of right or color of title ereto. ‘“‘Tf you will let me know what Pensco gave you as the basis for its claim, I believe it will expedite and facilitate the resolution of the purported controversy. 36. On November 29, 1971, James M. Wright (on behalf You will, of course, not release any of the pre-October of The National Bank of Commerce of San Antonio) sent, 1, 1965 suspended proceeds without our consent, pend- and in due course of the Post, Phillips received, a letter . ing such resolution.”’ which said, in pertinent part: 38. On January 23, 1973, Paul Smith (on behalf of Trustee and Bank) called Pumps and spoke with Clayton LaGrone of Phillips’ Legal Department. Mr. LaGrone dictated a memorandum of the conversation and ‘In accordance with the request of Mr. Schultz in his conversation with you, please furnish us with a schedule showing all amounts held in suspense pending and subsequent to approval of gas price increases by 128a the same was typed on January 25, 1973. The memorandum of conversation reads as follows, in pertinent part: ‘‘Mr. Smith stated the position of the Bank. He stated that the Bank had no knowledge (prior to mak- ing the loan) of the contract between the Riverview Group and Mr. Day in which the proceeds attributable to the interests involved which were held in suspense were to belong to the Riverview Group. The Bank is very definitely claiming that it is a bona fide purchaser for value. It is also the Bank’s position that the contract provision does not apply in any event since (under their interpretation) the Assignment assigns such funds and that the contractual rights merged in the Assignment. ‘‘Mr. Smith urged Phillips to hold onto the money or file an interpleader action. If Phillips pays the money to the Riverview Group the Bank will sue Phil- . lips along with the Riverview Group to obtain the funds. ‘‘T told Mr. Smith we would review the matter and I would let him know what we decided to do.’’ 39. On February 5, 1973, W. W. Ledlie (on behalf of Puruurs) sent, and in due course of the Post, Mr. Richard Carver (on behalf of the Travis Group) received a letter which read, in pertinent part: ‘‘The entire file including your letter of January 19, 1973, has been reviewed with our Legal Depart- ment. Both your clients and Pensco, Inc., Trustee are making claims to the funds held by Phillips repre- senting accrued gas proceeds which have now been approved by the Federal Power Commission. ‘‘Phillips cannot pay either party until this dispute is resolved. Further, since both parties are actively claiming the proceeds, Phillips cannot in fairness favor one side over the other by paying the funds under an indemnity agreement. ‘Phillips stands willing to pay these funds to the party entitled to them as finally determined by agree- 129a ment among the parties or by a court of competent jurisdiction. ‘*T trust that the controversy will be settled in the near future.’’ 40. Admissions Nos. 29 through 39, both inclusive, shall be considered as evidence solely for the purpose of show- ing the existence of a dispute among the answering de- fendants regarding the ownership of the funds involved in this action; except that Admissions Nos, 31 and 32 also shall be considered for the purpose of determining title. 41. That Defendants Santa Fe Oil Company and the Union National Bank of Wichita, Kansas, Escrow Agent, have disclaimed any interest in the above-said sum. 42. That the Travis Group, Day, Trustze and Bank have compromised and settled their claims in the above-said sum and all agree that the same should be divided as follows: a. To the TRAVIS GROUP: $154,270.95 b. To pay: $ 36,782.19 ce. To TRUSTEE and BANK: $ 84,167.39 43. That the Travis Group, Day, Trustee and Bank agree that if the Court awards attorney fees and costs to Puiuurrs, then each of the defendants shall bear such attorney fees and costs out of the entire fund in the follow- ing ratios: &. TRAVIS GROUP: 87% b. Day: 13% C. TRUSTEE and BANK: 0% 44. That for the purpose of this action, and this action only, Travis Group, Day, Trustee and Banx agree that each and all were (at all times relevant herein) a ‘‘natural 130a gas company’’ within the Natural Gas Act; that they were subject to the Natural Gas Act; and that they also were subject to the Regulations of the FPC promulagted under the Natural Gas Act, including (but not limited to) § 154.91(e) of the said regulations of the FPC. 45. That insofar as the printed portions thereof are con- cerned, each of the applicable printed Casinghead Gas Con- tract agreements are standard Phillips Petroleum Company forms prepared in their entirety by plaintiff, Phillips. UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 74-2009 Puitups Petroteum Company, Plaintiff-Appellee, v. Riverview Gas Compression CoMPANY, ET AL., Defendants-Appellants. Appeal from the United States District Court for the Northern District of Texas Judgment (May 22, 1975) Before Tutrie, Gewrn and GoxpBere, Circuit Judges. This cause came on to be heard on the transcript of the record from the United States District Court for the North- ern District of Texas, and was argued by counsel; On Consmeration WuHeEREor, It is now here ordered and adjudged by this Court that the judgment of the said Dis- triet Court in this cause be, and the same is hereby, re- versed; and that this cause be, and the same is hereby 13la remanded to the said District Court in accordance with the opinion of this Court; It is further ordered that plaintiff-aippellee pay to de- fendants-appellants, the costs on appeal to be taxed by the Clerk of this Court. (Caption Omitted in Printing] Opinion (May 22, 1975) Before Turtiz, Gewrn and Gotpsere, Circuit Judges. GotpseRe, Circuit Judge: This is the third case in today’s suspense money trilogy; here, as in Phillips Petroleum Co. v. Adams, 5 Cir. 1975, 513 F.2d 355 [May 22, 1975, No. 74-1777], and in First National Bank v. Phillips Petroleum Co., 5 Cir. 1975, 513 F.2d 371 [May 22, 1975, No. 74-2230], we are asked to de- termine whether interest should be paid on suspense money held by Phillips Petroleum Company [Phillips] in varying amounts since 1955, and now due as partial payment for gas produced pursuant to percentage-of-proceeds sales contracts similar to those involved in Adams and First National Bank. The district court ruled that Phillips was not liable for any interest. For the reasons stated in our Adams opinion, we believe that Phillips must pay interest on the suspense money that it held and used for so long; we reverse the judgment of the district court. From June 26, 1955, until September 30, 1970, Phillips took casinghead gas from lands belonging to the various claimants here, and situated in Hutchinson County, Texas. These purchases were made according to several percent- age-of-proceeds sales contracts, and, as in Adams and First National Bank, Phillips made monthly payments to the holders of the particular mineral estates on the basis of the ‘‘firm proceeds”’ of its sales to third parties. Phil- *. ’ 132a lips withheld payment of the suspense money which it col- lected pending Federal Power Commission approval of the higher rates which the pipeline company actually charged its own customers throughout the period of the disputed sales. The mineral rights to the two tracts of land in- volved in this case changed hands so often during this fifteen-year period, that we will not attempt to trace all of those transactions. Suffice it to say that the assignments were of the sort in controversy in Adams and First Na- tional Bank, and that after the FPC’s Hugoton-Andarko Rate Case, Op: 586, 44 F.P.C. 761, aff’d, 9 Cir. 1972, 466 F.2d 974, apprised Phillips of which portion of the sus- pense money it could keep, and which it had to refund to its customers, the assignor-claimants and assignee-claim- ants here besieged Phillips with conflicting demands for the $275,220.53 now due for the gas which the pipeline company had purchased between 1955 and 1970. Phillips commenced this interpleader action on March 12, 1973, and made an unconditional tender of the funds into court at that time, although it did not actually pay the money into the court registry until February 11, 1974. Before this case went to trial, the several claimants, assignors and assignees alike, adopted the salutary course of resolving their disagreements with respect to the prin- cipal sum of the suspense money, in settlement agreements dated June 1, 1973, and January 31, 1974, so that neither the district court nor this court has been forced to unravel the various entitlements to the principal sum. The only question submitted to the district court was whether Phil- lips should pay interest on the suspense money for the fif- teen years in which the pipeline company enjoyed the use of the money; for the reasons set out at length in Adams, we conclude that the law of Texas permits the award of interest here, and that equitable considerations require such an award. This case differs from Adams and First National Bank in that both assignors and assignees here demand interest, and that all these claimants ask for in- 133a terest for the entire period in which Phillips held and used the principal sum to which they are now entitled. Another distinguishing feature of this case is that the claimants have agreed on the division of interest in the settlement agreements referred to above. We now remand this case to the district court for a determination of the amount of interest which Phillips must pay to each of the various claimants, consistent with Adams and the settlement agree- ments. For the reasons stated in Adams, Phillips need not pay interest for tke period subsequent to March 12, 1973, the date of its unconditional tender of the principal sum into court. Reversed and remanded. [Caption Omitted in Printing] Petition for Rehearing of Phillips Petroleum Company and Request for Rehearing En Banc Comes Now the plaintiff-appellee, Phillips Petroleum Company [Pxrmuips], and respectfully prays this Court to grant a rehearing and that said rehearing be en banc. This Court, by its opinion entered on May 22, 1975, has held that Pumures was obligated to pay interest to both the assignors and the assignees on their respective shares of the ‘‘suspense money’’ so-called- which Pures col- lected from its purchasers during the pendency of numer- ous rate increase applications where Puruirs had the use of the supplier’s share of the money during the rate in- crease proceedings. Puruirs’ Request for Rehearing should be granted for the following reasons: 1. This Court has failed to follow the clear language of Tex. Rev. Crv. Star. Any. arts. 5069-1.01 and 5069- 1.03, and the Texas case law in ruling that interest should be awarded for that period prior to the time the principal sum became due and payable; 134a 2. In deciding that under the factual situation pres- ent here, equity compels that interest be awarded, this Court disregarded undisputed factual evidence and contract provisions and deprives Pur.ups of its prop- erty without due process; 3. The Trial Court was, and this Court is, without jurisdiction to entertain the counterclaim for interest, or to award interest, in this interpleader action, where Pxr.uips did not, and does not, claim title to the inter- pleaded fund; and 4. Finally, this Court errs when it repeatedly calls Puiuirs a ‘‘pipeline company’’, and this prejudicial characterization should be corrected. The rehearing requested by Puriurps should be heard en banc for the following reasons: 1. This proceeding involves questions of first im- pression and of exceptional importance, with regard to the law on interest, and a consideration en banc is necessary to rectify the erroneous decision of this Court on this issue; 2. Consideration en banc also is necessary to secure uniformity of this Court’s decisions with regard to the law in Texas, both statutory and decisional, in that notwithstanding the Rules of Decision Act, 28 U.S.C. § 1652 (1966) and Erie R. R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), this Court has failed, refused and neglected to follow the mandate of the Texas Legislature and the courts of the State of Texas in ruling that interest may be awarded prior to a time when an obligation becomes due and payable; 3. Consideration en banc is necessary to maintain a uniformity of this Court’s decisions, in that this deci- sion is in direct conflict with all of this Court’s prior decisions that hold that interest is caleulated only from the date the principal sum is due and payable, and not before; and for the further reason that the award of interest in this case is in direct conflict with the con- stitutional law pronouncement in Boutte, et al. v. Chev- ron Oil Company, 316 F.Supp. 524 (E. D. La. 1970), affirmed per curiam, 442 F. 2d 1337 (1971), in that the | 7 135a decision here obliging Pumuirs to pay interest on money held by it subject to possible refund to pipeline companies for the period prior to the time the FPC has established a just and reasonable rate deprives Puuirs of its property without due process, contrary to what was said in the Boutte case; and 4. Finally, consideration en bane is necessary to secure a uniformity of decisions among the Circuits with regard to whether or not the Court has jurisdic- tion to entertain a counterclaim for interest in an interpleader action, where the interpleader party does not assert a claim against the fund, the United States Court of Appeals for the Fourth and Tenth Circuits having ruled heretofore that no such jurisdiction exists. ARGUMENT In support of the foregoing, Puruirs adopts the argu- ment appearing in the Petition for Rehearing of Phillips Petroleum Company and Request for Rehearing En Banc filed contemporaneously with this instrument in Cause No. 74-1777, Phillips Petroleum Company v. Adams, which is one of the two companion cases to this action. ConcLUSION This Court’s judgment, as evidenced by the opinion, is erroneous in view of the matters herein set forth. PHr.ips renews all other issues and errors raised in its briefs and respectfully prays that a rehearing be granted and that the rehearing be en banc. Respectfully submitted, /s/ T. L. Cuspace IT P. O. Box 1751 Amarillo, Texas 79105 Attorney for Appellee Phillips Petroleum Company [Certificate Omitted in Printing] 136a UNITED STATES COURT OF APPEALS FIFTH CIRCUIT OrFICE OF THE CLERK June 18, 1975 To Att Counset or RecorD No. 74-2009—Phillips Petroleum Co. v. Riverview Gas Compression Co., Et Al. Dear Counsel: This is to advise that an order has this day been entered denying the petition( ) for rehearing, and no member of the panel nor Judge in regular active service on the Court having requested that the Court be polled on rehearing en bane (Rule 35, Federal Rules of Appellate Procedure; Local Fifth Cireuit Rule 12) the petition( ) for rehearing en banc has also been denied. See Rule 41, Federal Rules of Appellate Procedure for issuance and stay of the mandate. Very truly yours, Epwarp W. Wapsworts, Clerk by /s/ Barpara Krer Deputy Clerk --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_1046%3A1. Public record. Not legal advice.