# Appendix — Phillips Petroleum Co. v. Adams > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_1552%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1975 - **Citation:** 423 U.S. 930 ## Text 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, assuciation 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 Natural Gas Act, 15 U.S.C. §§717-717w provides: § 717. Necessity for regulation of natural gas companies. (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 publie 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. (ec) 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. PE RERET IN Te OOS AL TIA CREB aR reas Wer es ee mye _ LE TIES NEM LIES NE TLE S TOT NINES Uhr E Sg PRO NE ee rey . a # 3a § 717a. Definitions. When used in this chapter, unless the context other- 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 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- eeived 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. (ce) 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 rates 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 natural-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, cither 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 Ga 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- we shall go into efYeet. 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 inerease, 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 inereased rate or charge is just and reason able shall be upon the naturalgas 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 TSE OD FO TEA eke et production or transportation. (a) Whenever the Commission, after a hearing had upon its ewn motion or upon complaint of any State, municipality, State commission, or gas distributing company, shall tind that any rate, charge, or classiti- eation demanded, observed, charged, or collected 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 diserim-. inatory, or preferential, the Commission shall deter- mine the just and reasonable rate, charge, chissitics tion, rule, regulation, practice, or contract to be there- after observed and in foree, and shall tix the same by order: Provided, however, That the Commission shall 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 such increase is in accordance with a new schedule tiled 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 ean do so without prejudice to the eficient and proper conduet of its affairs, may investigate and determine the cost of the production or transportation of nat ural gas by a natural gas company in eases where the Commission has no authority to 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 ain the actual legitimate cost of the property of every naturalgas company, the depreciation therein, and, When found necessary for rate-making purposes, other facts whieh 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 uaturalgas company to extend er improve its trans. portation facilities, to establish physical connection of its transportation facilities with the facilities of, and sell natural gas te, any person er municipality engaged or legally authorized to engage in the local distribution of natural or artificial gas to the publie, and for such purpose to extend its transportation facilities toe 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 9a the determination of any such aplication, the continu- ance of such operation shall be lawful. In all other cases the Commission shall set the matter for hearing and shall give such reasonable notice of the hearing thereon to all interested persons as in its judgment may be necessary under rules and regula- tions to be prescribed by the Commission; and the ap- plication shall be decided in accordance with the pro- cedure provided in subsection (e) of this section and such certificate shall be issued or denied accordingly: Provided, however, That the Commission may issue a temporary certificate in cases of emergency, to assure maintenance of adequate service or to serve particular customers, without notice or hearing, pending the de- termination of an application for a certificate, and may by regulation exempt from the requirements of this section temporary acts or operations for which the issuance of a certificate will not be required in the pub- lic interest. (d) Application for certificates shall be made in writing to the Commission, be verified under oath, and shall be in such form, contain such information, and notice thereof shall be served upon such interested parties and in such manner as the Commission shall, by regulation, require. (e) Except in the cases governed by the provisos contained in subsection (c) of this section, a certificate shall be issued to any qualified applicant therefor, authorizing the whole or any part of the operation, sale, service, construction, extension, or acquisition covered by the application, if it is found that the appli- cant is able and willing properly to do the acts and to perform the service proposed and to conform to the provisions of this chapter and the requirements, rules, and regulations of the Commission thereunder, and that the proposed service, sale, operation, construe- tion, extension, or acquisition, to the extent authorized by the certificate, is or will be required by the present or future public convenience and necessity ; otherwise such application shall be denied. The Comission shall have the power to attach to the issuance of the certif.- cate and to the exercise of the rights granted there- 10a under such reasonable terms and conditions as the public convenience and necessity may require. (f) The Commission, after a hearing had upon its own motion or upon application, may determine the service area to which each authorization under this section is to be limited. Within such service area as determined by the Commission a natural-gas company may enlarge or extend its facilities for the purpose of supplying increased market demands in such service area without further authorization. (g) Nothing contained in this section shall be con- strued as a limitation upon the power of the Commis- sion to grant certificates of public convenience and necessity for service of an area already being served by another natural-gas company. (h) When any holder of a certificate of public con- venience and necessity cannot acquire by contract, or is unable to agree with the owner of property to the compensation to be paid for, the necessary right-of-way to construct, operate, and maintain a pipe line or pipe lines for the transportation of natural gas, and the necessary land or other property, in addition to right- of-way, for the location of compressor stations, pres- sure apparatus, or other stations or equipment neces- sary to the proper operation of such pipe line or pipe lines, it may acquire the same by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts. The practice and procedure in any action or proceeding for that purpose in the district court of the United States shall conform as nearly as may be with the practice and pro- cedure in similar action or proceeding in the courts of the State where the property is situated: Provided, That the United States district courts shall only have jurisdiction of cases when the amount claimed by the owner of the property to be condemned exceeds $3,000. § 717g. Accounts; records; memoranda. (a) Every natural-gas company shall make, keep, and preserve for such periods, such accounts, records of cost-accounting procedures, correspondence, memo- lla randa, papers, books, and other records as the Com- mission may by rules and regulations prescribe as necessary or appropriate for purposes of the adminis- tration of this chapter: Provided, however, That noth- ing in this chapter shall relieve any such natural-gas company from keeping any accounts, memoranda, or records which such natural-gas company may be re- quired to keep by or under authority of the laws of any State. The Commission may prescribe a system of accounts to be kept by such natural-gas companies, and may classify such natural-gas companies and prescribe a system of accounts for each class. The Commission, after notice and opportunity for hearing, may deter- mine by order the accounts in which particular outlays or receipts shall be entered, charged, or credited. The burden of proof to justify every accounting entry ques- tioned by the Commission shall be on the person mak- ing, authorizing, or requiring such entry, and the Com- mission may suspend a charge or credit pending sub- mission of satisfactory proof in support thereof. (b) The Commission shall at all times have access to and the right to inspect and examine all accounts, records, and memoranda of natural-gas companies; and it shall be the duty of such natural-gas companies to furnish to the Commission, within such reasonable time as the Commission may order, any information with respect thereto which the Commission may by order require, including copies of maps, contracts, re- ports of engineers, and other data, records, and papers, and to grant to all agents of the Commission free ac- cess to its property and its accounts, records, and mem- oranda when requested so to do. No member, officer, or employee of the Commission shall divulge any fact or information which may come to his knowledge dur- ing the course of examination of books, records, data, or accounts, except insofar as he may be directed by the Commission or by a court, (c) The books, accounts, memoranda, and records of any person who controls directly or indirectly a natural-gas company subject to the jurisdiction of the Commission and of any other company controlled by such person, insofar as they relate to transactions with ————— ee rT a a eS | eee ee 12a or the business of such natural-gas company, shall be subject to examination on the order of the Commission. § 717h. Rates of depreciation. (a) The Commission may, after hearing, require natural-gas companies to carry proper and adequate depreciation and amortization accounts in accordance with such rules, regulations, and forms of account as the Commission may prescribe. The Commission may from time to time ascertain and determine, and by order fix, the proper and adequate rates of deprecia- tion and amortization of the several classes of property of each natural-gas company used or useful in the pro- duction, transportation, or sale of nautral gas. Each natural-gas company shall conform its depreciation and amortization accounts to the rates so ascertained, de- termined, and fixed. No natural-gas company subject to the jurisdiction of the Commission shall charge to operating expenses any depreciation or amortization charges on classes of property other than those pre- scribed by the Commission, or charge with respect to any class of property a percentage of depreciation or amortization other than that prescribed therefor by the Commission. No such natural-gas company shall in any case include in any form under its operating or other expenses any depreciation, amortization, or other charge or expenditure included elsewhere as a depreci- ation or amortization charge or otherwise under its operating or other expenses. Nothing in this section shall limit the power of a State commission to deter- mine in the exercise of its jurisdiction, with respect to any natural-gas company, the percentage rates of de- preciation or amortization to be allowed, as to any class of property of such nautral-gas company, or the com- posite depreciation or amortization rate, for the pur- pose of determining rates or charges. (b) The Commission, before prescribing any rules or requirements as to accounts, records, or memo- randa, or as to depreciation or amortization rates, shall notify each State commission having jurisdiction with respect to any natural-gas company involved and shall give reasonable opportunity to each commission to pre- es 13a sent its views and shall receive and consider such views and recommendations. § 717i. Periodic and special reports. (a) Every natural-gas company shall file with the Commission such annual and other periodic or spe- cial reports as the Commission may by rules and regu- lations or order prescribe as necessary or appropriate to assist the Commission in the proper administration of this chapter. The Commission may prescribe the manner and form in which such reports shall be made, and require from such natural-gas companies specific answers to all questions upon which the Commission may need information. The Commission may require that such reports shall include, among other things, full information as to assets and liabilities, capitaliza- tion, investment and reduction thereof, gross receipts, interest due and paid, depreciation, amortization, and other reserves, cost of facilities, cost of maintenance and operation of facilities for the production, trans- portation, or sale of natural gas, cost of renewal and replacement of such facilities, transportation, delivery, use and sale of natural gas. The Commission may re- quire any such natural-gas company to make adequate provision for currently determining such costs and other facts. Such reports shall be made under oath unless the Commission otherwise specifies. (b) It shall be unlawful for any natural-gas com- pany willfully to hinder, delay, or obstruct the mak- ing, filing, or keeping of any information, document, report, memorandum, record, or account required to be made, filed, or kept under this chapter or any rule, regulation, or order thereunder. § 717j. State compacts; reports on. (a) In case two or more States propose to the Con- gress compacts dealing with the conservation, produc- tion, transportation, or distribution of natural gas it shall be the duty of the Commission to assemble per- tinent information relative to the matters covered in any such proposed compact, to make public and to report to the Congress information so obtained, to- l4a gether with such recommendations for further legis- lation as may appear to be appropriate or necessary to carry out the purposes of such proposed compact and to aid in the conservation of natural-gas resources within the United States and in the orderly, equitable, and economic production, transportation, and distri- bution of natural gas. (b) It shall be the duty of the Commission to assemble and keep current pertinent information rela- tive to the effect and operation of any compact be- tween two or more States heretofore or hereafter ap- proved by the Congress, to make such information publie, and to report to the Congress, from time to time, the information so obtained, together with such recommendations as may appear to be appropriate or necessary to promote the purposes of such compact. (c) In earrying out the purposes of this chapter, the Commission shall, so far as practicable, avail itself of the services, records, reports, and information of the executive departments and other agencies of the Government, and the President may, from time to time, direct that such services and facilities be made available to the Commission. § 717k. Officials dealing in securities. It shall be unlawful for any officer or director of any natural-gas company to receive for his own bene- fit, directly or indirectly, any money or thing of value in respect to the negotiation, hypotheeation, or sale by such natural-gas company of any security issued, or to be issued, by such natural-gas company, or to share in any of the proceeds thereof, or to participate in the making or paying of any dividends, other than liquidating dividends, of such natural-gas company from any funds properly included in capital account. § 7171. Complaints. Any State, municipality, or State commission com- plaining of anything done or omitted to be done by any natural-gas company in contravention of the pro- visions of this chapter may apply to the Commission lda by petition, which shall briefly state the facts, where- upon a statement of the complaint thus made shall be forwarded by the Commission to such natural-gas company, which shall be called upon to satisfy the complaint or to answer the same in writing within a reasonable time to be specified by the Commission. § 717m. Investigations by Commission; attendance of wit- nesses; depositions. (a) The Commission may investigate any facts, con- ditions, practices, or matters which it may find neces- sary or proper in order to determine whether any person has violated or is about to violate any provi- sion of this chapter or any rule, regulation, or order thereunder, or to aid in the enforcement of the provi- sions of this chapter or in prescribing rules or regula- tions thereunder, or in obtaining information to serve as a basis for recommending further legislation to the Congress. The Commission may permit any per- son to file with it a statement in writing, under oath or otherwise, as it shall determine, as to any or all facts and circumstances concerning a matter which may be the subject of investigation. The Commission, in its diseretion, may publish in the manner authorized by section 825k of Title 16, and make available to State commissions and municipalities, information concerning any such matter, (b) The Commission may, after hearing, determine the adequacy or inadequacy of the gas reserves held or controlled by any natural-gas company, or by any- one on its behalf, including its owned or leased prop- erties or royalty contracts; and may also, after hear- ing, determine the propriety and reasonableness of the inclusion in operating expenses, capital, or surplus of all delay rentals or other forms of rental or compensa- tion for unoperated lands and leases. For the pur- pose of such determinations, the Commission may re- quire any natural-gas company to file with the Com- mission true copies of all its lease and royalty agree- ments with respect to such gas reserves. (c) For the purpose of any investigation or any other proceeding under this chapter, any member of 16a the Commission, or any officer designated by it, is empowered to administer oaths and affirmations, sub- pena witnesses, compel their attendance, take evidence, and require the production of any books, papers, cor- respondence, memoranda, contracts, agreements, or other records which the Commission finds relevant or material to the inquiry. Such attendance of witnesses and the production of any such records may be re- quired from any place in the United States or at any designated place of hearing. Witnesses summoned by the Commission to appear before it shall be paid the same fees and mileage that are paid witnesses in the courts of the United States. (d) In ease of contumacy by, or refusal to obey a subpena issued to, any person, the Commission may invoke the aid of any court of the United States within the jurisdiction of which such investigation or pro- ceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of books, papers, correspondence, memoranda, contracts, agree- ments and other records. Such court may issue an order requiring such person to appear before the Com- mission or member or officer designated by the Com- mission, there to produce records, if so ordered, or to give testimony touching the matter under investiga- tion or in question; and any failure to obey such order of the court may be punished by such court as a contempt thereof. All process in any such case may be served in the judicial district whereof such person is an inhabitant or wherever he may be found or may be doing business. Any person who willfully shall fail or refuse to attend and testify or to answer any lawful inquiry or to produce books, papers, corres- pondence, memoranda, contracts, agreements or other records if in his or its power so to do in obedience to the subpena of the Commission, shall be guilty of a misdemeanor and upon conviction shall be subject to a fine of not more than $1,000 or to imprisonment for a term of not more than one year, or both. (e) The testimony of any witness may be taken at the instance of a party, in any proceeding or investi- 17a gation pending before the Commission, by deposition at any time after the proceeding is at issue. The Commission may also order testimony to be taken by deposition in any proceeding or investigation pending before it at any stage of such proceeding or investi- gation. Such depositions may be taken before any person authorized to administer oaths not being of counsel or attorney to either of the parties, nor inter- ested in the proceeding or investigation. Reasonable notice must first be given in writing by the party or his attorney proposing to take such deposition to the opposite party or his attorney of record, as either may be nearest, which notice shall state the name of the witness and the time and place of the taking of his deposition. Any person may be compelled to appear and depose, and to produce documentary evidence, in the same manner as witnesses may be compelled to appear and testify and produce documentary evidence before the Commission, as hereinbefore provided. Such testimony shall be reduced to writing by the person taking deposition, or under his direction, and shall, after it has been reduced to writing be sub- scribed by the deponent. (f) If a witness whose testimony may be desired to be taken by deposition be in a foreign country, the deposition may be taken before an officer or person designated by the Commission, or agreed upon by the parties by stipulation in writing to be filed with the Commission. All depositions must be promptly filed with the Commission. (g) Witnesses whose depositions are taken as au- thorized in this chapter, and the person or officer taking the same, shall be entitled to the same fees as are paid for like services in the courts of the United States. § 717n. Hearings; rules of procedure. (a) Hearings under this chapter may be held be- fore the Commission, any member or members thereof, or any representative of the Commission designated by it, and appropriate records thereof shall be kept. In any proceeding before it, the Commission in ac- 18a cordance with such rules and regulations as it may prescribe, may admit as a party any interested State, State commission, municipality or any representative of interested consumers or security holders, or any competitor of a party to such proceeding, or any other person whose participation in the proceeding may be in the public interest. (b) All hearings, investigations, and proceedings under this chapter shall be governed by rules of prac- tice and procedure to be adopted by the Commission, and in the conduct thereof the technical rules of evi- dence need not be applied. No informality in any hearing, investigation, or proceeding or in the manner of taking testimony shall invalidate any order, deci- sion, rule, or regulation issued under the authority of this chapter. § 7170. Administrative powers of Commission; rules, regula- tions, and orders. The Commission shall have power to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules, and regulations as it may find necessary or appropriate to carry out the provi- sions of this chapter. Among other things, such rules and regulations may define accounting, technical, and trade terms used in this chapter; and may prescribe the form or forms of all statements, declarations, applications, and reports to be filed with the Commis- sion, the information which they shall contain, and the time within which they shall be filed. Unless a different date is specified therein, rules and regula- tions of the Commission shall be effective thirty days after publication in the manner which the Commission shall preseribe. Orders of the Commission shall be effective on the date and in the manner which the Commission shall prescribe. For the purposes of its rules and regulations, the Commission may classify persons and matters within its jurisdiction and pre- seribe different requirements for different classes of persons or matters. All rules and regulations of the Commission shall be filed with its secretary and shall be kept open in convenient form for public inspection and examination during reasonable business hours. 19a §717p. Use of joint boards; cooperation with State com- missions. (a) The Commission may refer any matter arising in the administration of this chapter to a board to be composed of a member or members, as determined by the Commission, from the State or each of the States affected or to be affected by such matter. Any such board shall be vested with the same power and be subject to the same duties and liabilities as in the case of a member of the Commission when designated by the Commission to hold any hearings. The action of such board shall have such foree and effeet and its proceedings shall be conducted in such manner as the Commission shall by regulations prescribe. The Board shall be appointed by the Commission from persons nominated by the State commission of each State affected, or by the Governor of such State if there is no State commission. Each State affected shall be entitled to the same number of represenatives on the board unless the nominating power of such State waives such right. The Commission shall have diseretion to reject the nominee from any State, but shall thereupon invite a new nomination from that State. The members of a board shall receive such allowances for expenses as the Commission shall pro- vide. The Commission may, when in its discretion sufficient reason exists therefor, revoke any reference to such a board. (b) The Commission may confer with any State commission regarding rate structures, costs, accounts, charges, practices, classifications, and regulations of natural-gas companies; and the Commission is au- thorized, under such rules and regulations as it shall prescribe, to hold joint hearings with any State com- mission in connection with any matter with respect to which the Commission is authorized to act. The Commission is authorized in the administration of this chapter to avail itself of such cooperation, services, records, and facilities as may be afforded by any State commission, (ec) The Commission shall make available to the several State commissions such information and re- 20a ports as may be of assistance in State regulation of nautral-gas companies. Whenever the Commission can do so without prejudice to the efficient and proper con- duct of its affairs, it may, upon request from a State commission, make available to such State commission as witnesses any of its trained rate, valuation, or other experts, subject to reimbursement of the compensation and traveling expenses of such witnesses. All sums collected hereunder shall be credited to the appropria- tion from which the amounts were expended in carry- ing out the provisions of this subsection. § 717q. Appointment of officers and employees. The Commission may, subject to civil-service laws, appoint such officers and employees as are necessary for carrying out its functions under this chapter and fix their salaries in accordance with chapter 51 and subchapter III of chapter 53 of Title 5. § 717r Rehearing; court review of orders. (a) Any person, State, municipality, or State com- mission aggrieved by an order issued by the Commis- sion in a proceeding under this chapter to which such person, State, municipality, or State commission is a party may apply for a rehearing within thirty days after the issuance of such order. The application for rehearing shall set forth specifically the ground or grounds upon which such application is based. Upon such application the Commission shall have power to grant or deny rehearing or to abrogate or modify its order without further hearing. Unless the Commis- sion acts upon the application for rehearing within thirty days after it is filed, such application may be deemed to have been denied. No proceeding to review any order of the Commission shall be brought by any person unless such person shall have made application to the Commission for a rehearing thereon. Until the record in a proceeding shall have been filed in a court of appeals, as provided in subsection (b) of this see- tion, the Commission may at any time, upon reasonable notice and in such manner as it shall deem proper, modify or set aside, in whole or in part, any finding or 21a order made or issued by it under the provisions of this chapter. (b) Any party to a proceeding under this chapter aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order in the court of appeals of the United States for any cir- cuit wherein the natural-gas company to which the order relates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such court, within sixty days after the order of the Commission upon the application for rehearing, a written petition praying that the order of the Commission be modified or set aside in whole or in part. A copy of such petition shall forthwith be transmitted by the clerk of the court to any member of the Commission and thereupon the Commission shall file with the court the record upon which the order complained of was entered, as pro- vided in section 2112 of Title 28. Upon the filing of such petition such court shall have jurisdiction, which upon the filing of the record with it shall be exclusive, to affirm, modify, or set aside such order in whole or in part. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is reasonable ground for failure so to do. The finding of the Com- mission as to the facts, if supported by substantial evidence, shall be conclusive. If any party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the proceedings before the Commission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts by reason of the additional evidence so taken, and it shall file with the court such modified or new findings. which if supported by substantial evidence, shall be conclusive, and its recommendation, if any, for the modification or setting 22a aside of the original order. The judgment and decree of the court, affirming, modifying, or setting aside, in whole or in part, any such order of the Commission, shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in sections 346 and 347 of Title 28. (c) The filing of an application for rehearing under subsection (a) of this section shall not, unless specific- ally ordered by the Commission, operate as a stay of the Commission’s order. The commencement of pro- ceedings under subsection (b) of this section shall not, unless specifically ordered by the court, operate as a stay of the Commission’s order. § 717s. Enforcement of chapter; regulations and orders. (a) Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute a vio- lation of the provisions of this chapter, or of any rule, regulation, or order thereunder, it may in its discretion bring an action in the proper district court of the United States, or the United States courts of any Ter- ritory or other place subject to the jurisdiction of the United States, to enjoin such acts or practices and to enforce compliance with this chapter or any rule, regu- lation, or order thereunder, and upon a proper showing a permanent or temporary injunction or decree or re- straining order shall be granted without bond. The Commission may transmit such evidence as may be available concerning such acts or practices or concern- ing apparent violations of the Federal antitrust laws to the Attorney General, who, in his discretion, may institute the necessary criminal proceedings. (b) Upon application of the Commission the district courts of the United States and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have jurisdic- tion to issue writs of mandamus commanding any per- son to comply with the provisions of this chapter or any rule, regulation, or order of the Commission thereunder. 23a (c) The Commission may employ such attorneys as it finds necessary for proper legal aid and service of the Commission or its members in the conduct of their work, or for proper representation of the public inter- est in investigations made by it, or cases or proceed- ings pending before it, whether at the Commission’s own instance or upon complaint, or to appear for or represent the Commission in any case in court; and the expenses of such employment shall be paid out of the appropriation for the Commission. pa § 717t. General penalties. (a) Any person who willfully and knowingly does or causes or suffers to be done any act, matter, or thing in this chapter prohibited or declared to be un- lawful, or who willfully and knowingly omits or fails to do any act, matter, or thing in this chapter required to be done, or willfully and knowingly causes or suffers such omission or failure, shall, upon conviction thereof, be punished by a fine of not more than $5,000 or by imprisonment for not more than two years, or both. (b) Any person who willfully and knowingly vio- lates any rule, regulation, restriction, condition, or order made or imposed by the Commission under authority of this chapter, shall, in addition to any other penalties provided by law, be punished upon convic- tion thereof by a fine of not exceeding $500 for each and every day during which such offense occurs. § 717u. Jurisdiction of offenses; enforcement of liabilities and duties. The District Court of the United States and the United States courts of any Territory or other place subject to the jurisdiction of the United States shall have exclusive jurisdiction of violations of this chapter or the rules, regulations, and orders thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, this chapter or any rule, regulation, or order thereunder. Any criminal proceeding shall be brought in the district wherein any act or transaction 24a constituting the violation occurred. Any suit or action to enforce any liability or duty created by, or to enjoin any violation of, this chapter or any rule, regulation, or order thereunder may be brought in any such dis- trict or in the district wherein the defendant is an in- habitant, and process in such cases may be served wherever the defendant may be found. Judgments and decrees so rendered shall be subject to review as pro- vided in sections 225 and 347 of Title 28. No costs shall be assessed against the Commission in any judi- cial proceeding by or against the Commission under this chapter. § 717v. Separability of provisions. If any provision of this chapter, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of the chapter, and the application of such provision to persons or circum- stances other than those as to which it is held invalid, shall not be affected thereby. § 717w. Short title. This chapter may be cited as the ‘‘ Natural Gas Act.’’ 18 Code of Federal Regulations § 154.102 provides: § 154.102 Suspended changes in rate schedules; motions to — effective at end of period of suspension; proce- ure. (a) If a rate suspension proceeding initiated under section 4(e) of the Natural Gas Act has not been con- cluded and an order made at the expiration of the suspension period, the proposed change of rate, charge, classification, or service shall go into effect upon mo- tion of the independent producer proposing the change as the legally effective rate and shall be charged, effective as of a date not earlier than the date of receipt of such motion by the Commission or the ex- piration of the suspension period, whichever is later. Three copies of the motion and any accompanying papers shall be filed. The Secretary, upon receipt of such a motion, shall, if the motion is legally adequate 25a for the purpose, notify the movant that the proposed change shall be effective as provided in this section: Provided, That the Secretary shall refer to the Com- mission any motion requesting that a change in rate, charge, classification, or service be made effective, if in his judgment the motion should receive the specific attention of the Commission; (b)(1) Unless otherwise ordered by the Commission, increased rates or charges shall be charged and col- lected pursuant to paragraph (a) of this section and there shall be filed by the independent producer a surety bond, or other undertaking, to be approved by the Secretary, to comply with the provisions of para- graph (c) of this section. (2) In compliance with subparagraph (1) of this paragraph, an independent producer may file a gen- eral undertaking affording blanket refund coverage of any present and future rate increases suspended under section 4(e) of the Natural Gas Act and col- lected subject to refund thereunder. Upon acceptance of such general undertaking, the producer need not file further refund assurance when filing a motion to make increased rates effective unless specifically required to do so by order of the Commission. (c) Upon an increased rate being made effective pursuant to the provisions of this section the inde- pendent producer shall be obligated to keep accurate accounts in detail of all amounts received by reason of the increased rates or charges for each billing period, and for each purchaser; the billing determi- nants of natural gas sales to such purchasers and the revenues resulting therefrom, as computed under the rates in effect immediately prior to the effective date of the change, and under the rates which become effective pursuant to the motion, together with the differences in the revenues so computed; and to refund at such times and in such amounts to the persons en- titled thereto, and in such manner as may be required by final order of the Commission, the portion of any increased rate found by the Commission in that pro- ceeding not justified, together with interest thereon at the rate of seven percent per annum for all rate filings 26a tendered prior to October 10, 1974, and nine percent per annum for ali rate filings tendered on or after October 10, 1974, from the date of payment to the producer until refunded, except as provided in para- graph (f) of this section; and to bear all costs of any such refunding. (d) If the producer, acting in conformity with the terms and conditions of the bond or undertaking, makes the refunds as may be required by order of the Commission, the bond or undertaking shall be discharged ; otherwise it shall remain in full force and effect ; (e) The bond or undertaking required by paragraph (b) of this section may be filed concurrently with the motion to make the increased rates effective. If with his motion the producer has not filed a satisfactory bond or undertaking such bond or undertaking must be filed within 30 days after the issuance of the Sec- retary’s notice provided for in paragraph (a) of this section. Unless notified to the contrary by the Secre- tary of the Commission within 30 days from the date of filing, such bond or undertaking shall be deemed to be satisfactory and to have been accepted for filing. (f) No interest is required to be paid on any portion of a refund which represents payments of royalties or taxes to Federal or State governmental authorities, except to the extent that such authorities pay interest to the producer when refunding overpayments of roy- alties or taxes. Hugoton—Anadarko Rate Cases, 44 F.P.C. 761 (1970), Opinion 586, Docket No. AR 64-1, et al. Ordering paragraphs (D), (G) and (H) provide in pertinent part: (D) The applicable area rate as defined in ordering paragraph (A) above, shall be effective from and after October 1, 1970, and any amounts collected in excess thereof on or after that date shall be collected subject to refund plus interest at 7 percent. * * * (G) Refund Reports. On or before November 2, 1970, a refund report shall be filed with this Com- 27a mission in triplicate, and one copy served on the buyer, by each respondent invelved in one or more of the Section 4(e) proceedings set out in Appendix A to this decision and as to which refunds are required un- der the terms of this decision. Within 20 days from the filing of the refund report the buyer shall file its written concurrence or disagreement with such report. The report shall set forth the following information (if more than one rate schedule is involved the re- spondent shall supply the information for each sched- ule separately) : (i) The rate collected during the period subject to refund and the periods during which each rate was collected. (ii) The volume of gas sold at each such rate. (iii) The difference between the total amount col- lected during the period subject to refund and the amount that would have been collected at the appli- cable area rate as defined herein subject to the pro- visoes of ordering paragraph (D). (iv) The computation of the applicable area rate and the basis for any difference between it and the base area rate. (v) The interest, at rates as specified in each Section 4(e) proceeding, on the above refundable excess revenues, subject to the limitation by Section 154.102(f) of the Commission’s Regulations under the Natural Gas Act. The interest shall be calculated to September 1, 1970. (If) Treatment of Refunds. Each respondent shall retain the amounts shown in the report required under ordering paragraph (G) subject to further order of the Commission directing the disposition of those amounts. If a respondent elects to commingle these retained refunds with its general assets and use for its cor- porate purposes, it is authorized so to do after notice to the Commission; and it shall pay interest thereon at the rate of 8 percent per annum on all funds thus available from the effective date of this order to the date on which they are paid over to the person ultimately determined to be entitled thereto in a final 28a order of the Commission. If a respondent elects to deposit the retained refunds in a special escrow ac- count, the respondent shall make such deposit and shall tender fur filing on or before the date of the filing of the refund report an executed Escrow Agreement, or a certificate attesting to the fact that it has exe- ected such an agreement, in the form provided by Sec- tion 250.12 of Part 250 of the Regulations under the Natural Gas Act (18 CFR Part 250). IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS Civil Action No. CA-2-1356 Purturrs PerroLeum Company, Plaintiff, Vv. J. H. Apvams, et Au., Defendants. Judgment and Memorandum Opinion (February 7, 1974) On this the 7th day of February, 1974 came on to be heard the above-entitled and numbered cause and there appeared in court by and through their attorneys the plaintiff, Phillips Petroleum Company, the defendants, J. H. Adams, Waylon Adams and Arlwone H. Adams, and the defendants, Robert O. Schnell, W. S. Etchieson, and L. Jack Gross, and all other parties having settled and compromised their claims, and the parties having an- nounced ready for trial before the court without a jury, and introduced their evidence, and the court having con- sidered the evidence, the entire record in this case, and the briefs and argument of counsel, has this day filed its Memo- randum Opinion which constitutes the court’s Findings of Fact and Conclusions of Law, here referred to and incor- 29a porated herein for all purposes. It therefore appears that judgment should be entered as follows: I That the said Robert O. Schnell, W. S. Etchieson and L. Jack Gross have no right, title or interest in and to the sum of $16,161.88 heretofore deposited by Phillips Petro- leum Company with the Clerk of this court in this case, and all relief prayed for by these parties is Dentep. II That the following parties are hereby Apsupcep to be entitled to and own and the Clerk of this court shall pay such sum of $16,161.88 to the parties of this suit as fol- lows: A. To Mary Ardath Thomson (formerly Mary Ardath Dunning, widow of Earnest H. Dunning, deceased,) the sum of $1,288.36. B. To Patricia Nelson (formerly Patricia I. White, widow of Oadus White, deceased,) the sum of $2,576.71. C. To J. H. Adams, Waylon Adams, and Arlwone H. Adams the sum of $12,296.81. Il The counterclaim of J. H. Adams, Waylon Adams, and Arlwone H. Adams against Phillips Petroleum Company for interest is Dentep. IV Rosemary J. Walker and Don Walker, although duly served with summons, have failed to answer or appear herein, and it is hereby Founp and Apsvupcep that the said Rosemary J. Walker and Don Walker are in default and it is further Apsupcep that they have no right, title or interest in and to any of the funds in dispute in this case. 30a V All relief prayed for by any of the parties hereto not granted specifically herein is Denrep. VI Costs are assessed against J. H. Adams, Waylon Adams and Arlwone H. Adams. The Clerk will furnish a copy hereof to each attorney. E\ntTereED this 7th day of February A.D. 1974. /s/ Hausert O. Woopwarp Halbert O. Woodward United States District Judge MemoranpvuM OPINION On the 7th day of February, 1974 there appeared in open court the plaintiff, Phillips Petroleum Company, its coun- sel, and there also appeared, by and through their attorney, the defendants, J. H. Adams, Waylon Adams and Arlwone H. Adams, hereinafter referred to as ‘‘Adams Family,’’ and there also appeared in open court by and through their attorney the parties to this suit, Robert O. Schnell, W. S. Etchieson, and L. Jack Gross, hereinafter called the ‘‘Schnell Group.’’ It had been previously stipulated and agreed that all of the other parties to the controversy in question had agreed and compromised their respective claims as will hereinafter be more detailed. This Memorandum Opinion shall serve as the court’s Findings of Fact and Conclusions of Law, the case being tried before the court without a jury, and in addition to this opinion the stipulations and admissions of the parties set forth in the court’s Pre-Trial Order dated January 31, 1974 are here adopted as a part of these Findings of Fact. The dispute in this case concerns the production of gas from a lease containing 86.52 acres of land in Hutchinson 3la County, Texas. The gas in question, as stipulated to by the parties, was actually produced hetween the dates of July 1, 1963 when the Adams Family purchased this lease, Adams Ex. 4, and the date of June 1, 1967 when the Adams Family sold the lease in question to Robert O. Schnell. Adams Ex. 1. On December 21, 1973 the plaintiff, Phillips Petroleum Company, deposited in the registry of this court the sum of $16,161.88 which sum of money represents additional moneys for the purchase price of the gas produced and sold between the above dates. At the time of the produc- tion of the gas in question Phillips Petroleum Company had paid the leasehold owners, pursuant tc certain casing- head gas purchase contracts, Adams Exs. 2 and 3, the amount then approved as the correct amount to be paid by the Federal Power Commission. Subsequently, by a decision of the Federal Power Commission, Pltf’s Ex. 3, effective October 1, 1970, an increase in the price of the gas produced was allowed for the periods involved in this case. The sum on deposit with the registry of this court repre- sents this allowed increase in price for the gas produced and sold between July 1, 1963 and June 1, 1967, being the dates respectively that the Adams Family purchased the lease in question and sold the lease in question. The decision of the Federal Power Commission was ap- pealed to the courts, was affirmed, The People of State of California, et al. v. Federal Power Commission, 466 F.2d 974 (9th Cir. 1972), and the last date for the application for writ of certiorari by the parties to said case to the Supreme Court of the United States expired on October 28, 1972. On January 26, 1972 a suit was filed in this court, Spear- man, et al. v. Phillips, et al., number CA-2-1159, to recover the moneys in question in this suit as well as certain other moneys not in dispute in this particular suit. Cause 2-1159 was compromised and settled among some of the parties 32a thereto and the lawsuit now under consideration was placed on the docket of this court to determine the dispute as to the ownership of the $16,161.88. The pleadings in this cause show that the plaintiff herein, Phillips Petroleam Company, tendered the money into the court and these pleadings do not reveal that any of the parties ever demanded a deposit of the moneys with the Clerk although the plaintiff did deposit same on December 21, 1973 and they now remain on deposit. The Schnell Group claims that the assignment of the lease to them, Adams Ex. 1, the division order signed by Adams and Schnell, page 3 of Pitf’s Ex. 2, and certain prior actions of the Adams Family do in effect assign not only the oil and gas lease in question but operate to assign the funds in question in this case even though these funds represent part payment for gas produced and severed from the land prior to the effective date of the assignment from the Adams Family to the Schnell Group. The prior action relied upon is that when the Adams Family purchased the lease in 1963 from the Spearmans and subsequent to the purchase thereof, Phillips Petroleum Company had sent the Adams Family a check for four hundred plus dollars, which funds were similar to the funds in this case, and that the Adams Family’s acceptance of this $400 check from their seller in 1963 constitutes evidence that when the Adams Family sold to the &chnell Group in 1967 that all similar funds would then be conveyed to the Schnell Group. Two other matters remain in dispute; first, that is the claim of the Adams Family that Phillips Petroleum Com- pany should be required to pay interest on the amount now on deposit with the Clerk of this court from the effective date of the Federal Power Commission decision on Octo- ber 1, 1970 until the time that said sum was deposited with the Clerk of this court on December 21, 1973. Secondly, Phillips Petroleum Company, in its prayer for relief, asks 33a for its costs, but did not specifically mention attorney’s fees. The Pre-Triai Order entered in this cause and agreed to by the attorneys for the parties hereto did not mention any claim for attorney’s fees for the plaintiff and it was not until the hearing on the 7th day of February, 1974 that the plaintiff informed the court of its claim and presented evidence that it was entitled to $1,450 attorney’s fees as a stakeholder. Even though the court finds that the amount of the fees is a reasonable amount, the court will deny re- covery of any attorney’s fees because the plaintiff did not specifically plead for same nor did it indicate a claim for attorney’s fees in the proposed pre-trial order submitted to the court. Further, the court does not feel that attor- ney’s fees are properly allowable in this case because, as admitted by counsel for plaintiff in argument, this partic- ular case was in the nature of a ‘‘test’’ case that would control this court’s rulings on similar issues in many other cases now pending that involve sums of money held and owed for the purposes as the funds in this case are. Ac- cordingly when the judgment is entered this plea for at- torney’s fees will be denied. Other evidence introduced for consideration by the court indicates and this court finds as a fact that at all material times hereto there has been a bona fide dispute between the Adams Family and the Schnell Group as to the true ownership of the money now held by the Clerk. Based on the record in this case, the evidence introduced, the briefs and argument of counsel, the court is of the opin- ion that the Adams Family is the righful owner of the $16,161.88 subject to certain amounts to be paid out of said fund as stipulated in the Pre-Trial Order and that the Schnell Group has no interest in such sum. The money in question is in part payment of gas severed from the lease- hold estate and sold therefrom prior to any assignment of the lease by the Adams Family. The documents assigning such lease pass only the leasehold title and the personal 34a property and equipment used or obtained in connection therewith and located thereon, Adams Ex. 1, and none of these documents can be construed to nor do they constitute an assignment of the moneys in question. Further, as 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, and when it paid the money into the registry of the court on said date it was relieved from any payment of interest subsequent thereto. Had the claimants previously made a demand, after the final effective date of the Federal Power Com- mission’s decision, that the money be placed in the registry of the court, and had Phillips Petroleum Company refused to do so within a reasonable time, then the question of interest might be determined differently, but such are not the facts in this case. Accordingly judgment will be entered distributing the money and awarding the money as follows: 1) To Mary Ardath Thomson (formerly Mary Ardath Dunning, widow of Earnest H. Dunning, deceased,) $1,288.36. 2) To Patricia Nelson (formerly Patricia I. White, widow of Oadus White, deceased,) the sum of $2,576.71. 3) To J. H. Adams, Waylon Adams, and Arlwone H. Adams the sum of $12,296.81. A judgment will be entered accordingly. The Clerk will furnish a copy hereof to each attorney. Enrterep this 7th day of February A.D. 1974. /s/ Harsert O. Woopwarp Halbert O. Woodward United States District Judge 35a SupPLEMENTAL Finpinc or Fact Supplementing the findings of fact set forth in the Court’s Memorandum Opinion, filed in the above entitled action on February 7, 1974, the Court finds as a fact that the Four Hundred Dollars plus check mailed by Phillips Petroleum Company to the Adams Family was accom- panied by a written statement reading as follows: “NOTICE ‘*The enclosed check represents additional payment for royalties or for prior purchases of gas from you. This payment is based on rate increases for various sales of gas by Phillips Petroleum Company which have been finally approved by the Federal Power Com- mission. These increases were originally suspended by the Commission and later put into effect by Phillips subject to refund. The Commission’s decision allow- ing these increases was appealed to the U.S. Supreme Court by other parties, and the decision of the court affirming the Commission’s decision has just recently become final. ‘*The increases on which the enclosed payment is based were filed at various times prior to January 1, 1957. Each of these increases has been superseded by a later increase which was also suspended by the Commission. The enclosed payment covers only that period from the time each of these increases became effective until the following increase became effective subject to re- fund. None of the later increases has vet been con- sidered by the Commission. Further additional pay- ments will be made to you from time to time if and when such later increases are approved in whole or in part. “This payment will not result in any change in the price currently being paid you for royalties or for gas purchased from you. Phillips Petroleum Company Bartlesville, Oklahoma’’ Enterep this 5th day of March, 1974. /s/ Harsert O. Woopwarp Halbert O. Woodward United States District Judge 36a SUPPLEMENTAL ConcLusions oF Law Supplementing the Conclusions of Law set forth in the Court’s Memorandum Opinion, filed in the above-entitled action on February 7, 1974, the Court finds, as an initial determination, that the counterclaims are proper under Rule 13, Federal Rules of Civil Procedure, and that the court has jurisdiction to hear and determine the counter- claims. 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 be dis- charged from all liability in connection with the fund, which would, of course, include discharge from any liabil- ity for interest. Phillips is asking for affirmative relief against the defendants and, therefore, this court feels com- pelled to characterize them as opposing parties for the purposes of Rule 13, supra. Further, the court finds that defendants’ counterclaims are ‘‘compulsory’”’ within the meaning of Rule 13(a). Clearly, the claims for interest arose ‘‘out of the transaction or occurrence that is the subject matter of the opposing party’s claim.’’ Accord- ingly, 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). Datep this 11th day of March, 1974. /s/ Harzsert O. Woopwarp Halbert O. Woodward United States District Judge 37a Text oF STIPULATIONS AND ADMISSIONS OF THE ParTIEs, NumBers 1-32, IncorporaTED BY REFERENCE INTO THE D1s- TRicT Court’s MemMoraNpUM OpINIon as FinpINGs oF Fact. The parties admit the following: 1. That on January 22, 1951, Neil Johnson, et al., as lessor, executed and delivered to Earl C. H. Walker, as lessee, an Oil, Gas and Mineral Lease covering the follow- ing described property, to wit: The North and East 86.52 acres out of the East One- Half (E/2) of Survey 4, Exciupine the South and West 42.93 acres of said survey, Block ‘‘V’’, Dave Blaker, Original Grantee, Astract Number 1167, S. F. 7941, described by metes and bounds as follows: BEGINNING at a point, the same being the Southwest corner of Section 71, H&TC Railway Company Survey, Hutchinson County, Texas; Tuence East 2640 feet along the South line of Section 71 to a point, the same being the Southeast corner of Section 71; TuHence North 338 feet along the East line of said Section 71 to a point, the same being the Southwest corner of Section 70; Tuence East 1,072.2 feet along the South line of Sec- tion 70 to a point; TueENceE South 1,334.2 feet along the East line of Sur- vey 4, Block ‘‘V’’, Dave Blaker, Original Grantee Survey, to a point; THence West 1,557.8 feet along the North line of the Cody Oil Company lease to a point; THence North 86° 14’ 13” West a distance of 2,148.3 feet to a point, the same being the Southeast corner of Section 72; Tuence North along the East line of Section 72 a dis- tance of 800 feet to the point of beginning, and con- sisting of 86.52 acres, more or less; 38a which lease, hereinafter called the ‘‘Neil Johnson Lease’’, is recorded in Volume 144, at page 3 of the Deed Records of Hutchinson County, Texas. The above-described tract is referred to hereinafter as ‘‘subject property.’’ 2. That by assignment dated December 8, 1952, and re- corded in Volume 151 at page 505 of the Deed Records of Hutchinson County, Texas, the said Earl C. H. Walker assigned to Blanard W. Spearman all of the gas rights (except casinghead gas) and an undivided 1/32 to 8/8 over- riding royalty interest on oil and other minerals produced under the terms of the Neil Johnson lease. 3. That by assignment dated February 20, 1960, and re- corded in Volume 242 at page 641 of the Deed Records of Hutchinson County, Texas, the said Earl C. H. Walker assigned to the said Blanard W. Spearman all of the right, title and interest owned by the said Farl C. H. Walker in the Neil Johnson lease. 4. That by assignment dated February 20, 1960, and re- corded in Volume 244 at page 644 of the Deed Records of Hutchinson County, Texas, Blanard W. Spearman assigned to Rosemary J. Walker and her hushand, Earl C. H. Walker, an undivided 17/144 of an 8/8 overriding royalty interest on the casinghead gas produced and sold from the Neil Johnson lease. 5. That on July 1, 1963, Blanard W. Spearman owned a 49/64 working interest in the Neil Johnson lease, subject to the overriding royalty interest described in paragraph IV, hereinabove. 6. That by assignment dated July 11, 1963, recorded in Volume 288 at page 39 of the Deed Records of Hutchinson County, Texas, to be effective July 1, 1963, the said Blanard W. Spearman assigned all of his right, title and interest in the Neil Johnson lease (being a 49/64 working interest subject to an overriding royalty interest) to J. H. Adams. 39a 7. That the said J. H. Adams, in turn, assigned an un divided 1/4 interest in the Neil Johnson lease to Waylon Adams by assignment dated May 21, 1964, recorded in Volume 300 at page 36 of the Deed Records of Hutchinson County, Texas. 8. That additional undivided 1/4 interest in the Neil Johnson lease was assigned by the said J. H. Adams to Arlwone H. Adams by assignment dated May 21, 1964, and recorded in Volume 300 at page 39 of the Deed Records of Hutchinson County, Texas. 9. That J. H. Adams, Waylon Adams, and Arlwone H. Adams, by instrument of assignment dated June 5, 1967, recorded in Volume 336 at page 126 of the Deed Records of Hutchinson County, Texas, a true copy of which is at- tached hereto and marked Exhibit ‘‘A’’, assigned the sub- ject property and certain rights, title and interests enu- merated in said instrument to Robert O. Schnell. 10. That by assignment dated June 6, 1967, recorded in Volume 336 at page 129 of the Deed Records of Hutchin- son County, Texas, Robert O. Schnell assigned all of his right, title and interest in the Neil Johnson lease to W. S. Etchieson and L. Jack Gross. 11. That W. S. Etchieson and L. Jack Gross, by assign- ment dated September 27, 1968, recorded in Volume 349 at page 106 of the Deed Records of Hutchinson County, Texas, reassigned their interest in the Neil Johnson lease to Rob- ert O. Schnell. 12. That on January 2, 1964, by virtue of an execution issued out of the District Court of Hutchinson County, Texas, on November 30, 1964, in Cause No. 11,428, wherein Oadus White and James Blair were plaintiffs and Earl C. H. Walker was defendant, the Sheriff of Hutchinson County did levy on the 17/144 of 8/8 overriding royalty interest, described hereinabove in paragraph IV, and on the Ist Tuesday in January 1964, sold the same at publie 40a auction to Oadus White, as evidenced by the Sheriff’s Deed dated January 5, 1965, recorded in Volume 308 at page 699 of the Deed Records of Hutchinson County, Texas. 13. That by assignment dated January 5, 1965, and re- corded in Volume 310 at page 17 of the Deed Records of Hutchinson County, Texas, Oadus White assigned to Ear- nest H. Dunning an undivided one-third (1/3) interest in and to that certain overriding royalty interest conveyed to Oadus White by the Sheriff of Hutchinson County, Texas. 14. That on January 12, 1968, Earnest H. Dunning died in Borger, Texas. Presently, Mary Ardath Thomson (for- merly Mary Ardath Dunning, widow of Earnest H. Dun- ning, deceased) owns an undivided one-third (1/38) inter- est in and to that certain overriding royalty interest con- veyed in and to that certain overriding royalty interest conveyed to Oadus White by the Sheriff of Hutchinson County, Texas. 15. That on October 26, 1972, Oadus White died in Bor- ger, Texas. Presently, Patricia Nelson (formerly Patricia I. White, widow of Oadus White, deceased) owns an un- divided two-thirds (2/3) interest in and to that certain overriding royalty interest conveyed to Oadus White by the Sheriff of Hutchinson County, Texas. 16. That while the Adams Family owned and operated subject property, the produced casinghead gas which was sold to Phillips under certain casinghead gas purchase agreements, more particularly described hereinafter. 17. That on or about March 29, 1957, Phillips, as buver, entered into a Casinghead Gas Contract (recorded in Vol- ume 200 at page 178 of the Deed Records of Hutchinson County, Texas. a true copy of which is attached hereto and marked Exhibit ‘*B’’) with B. W. Spearman and G. E. Hatton, as seller, to purchase casinghead gas produced from wells located on subject property. Said contract, in paragraphs 7 and 8, provided that seller was to receive 4la as a part of the payment due him, for the gas sold by him to Phillips, a sum computed in relation to the price for which Phillips sold any gas within the Panhandle Field of Texas to third parties. Said contract was superseded and terminated by a Casinghead Gas Contract dated Septem- ber 1, 1966, described hereinbelow. 18. That on or about September 1, 1966, Phillips, as buyer, entered into a Casinghead Gas Contract (recorded in Volume 331 at page 59 of the Deed Records of Hutchin- son County, Texas, a true copy of which ‘s attached hereto and marked Exhibit ‘‘C’’) with the Adams Family, doing business as J. H. Adams Oil Company, as seller, to pur- chase casinghead gas produced from wells located on sub- ject property. Said contract, in paragraphs 7 and 8, pro- vided that seller was to receive as a part of the payment due him, for the gas sold by him to Phillips, a sum com- puted in relation to the price for which Phillips sold any gas within the Panhandle Field of Texas to third parties. 19. That by various orders issued since the United States Supreme Court, on June 7, 1954, decided Phillips Petro- leum Company v. State of Wisconsin, et al., 346 U. .S. 672, 74S. Ct. 794, 98 L. Ed. 1036, and determined that Phillips, as an independent natural gas producer selling gas to interstate pipeline companies for interstate transporta- tion and resale, was a ‘‘natural gas company”’ within 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 upor 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. 20. That subsequent to June 7, 1954, Phillips sold gas obtained under the above-referenced casinghead gas con- tracts, and other contracts, subject to the jurisdiction of gist eae it toe ARID 42a 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 purckasers in the event the FPC failed to ap- prove the sales prices pursuant to Section 4(e) of the Natural Gas Act (15 U.S.C. - 717¢(e); and until such time as the FPC approved such increased sales prices or a por- tion of said prices, there was no right in the Adams Fam- ily, the Schnell Group, the Walker Family, Thomson or Nelson to recover from Phillips any such monies held sub- ject to refund. 21. That Phillips chose to collect the higher rates sub- ject to refund if the rates were not approved because in- creases in gas sales prices not made effective subject to FPC approval cannot be made retroactive. If Phillips had not collected the higher rates subject to refund, the owners of the casinghead gas contract rights could not receive, as part payment due them under said contracts, a sum computed in relation to the higher price for which Phillips sold gas within the Panhandle Field of Texas to third parties. 22. That Phillips had applications before the FPC re- questing permission to increase the prices for sales of residue gas and such applications, for this area, were con- solidated in FPC Dockets AR 64-1, et al. 23. 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 appli- cable to gas sales and established refund requirements; on July 31, 1972, the Court of Appeals for the Ninth Cir- cuit 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 Cireuit action. 43a 24. 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 ‘‘sustainable’’ monies are those which, according to Opin- ion 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, 25. 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. Such firm proceeds were all paid in a timely manner in accordance with paragraph 9 of each of the casinghead gas contracts referred to hereinabove. 26. That on and after October 28, 1972, and under the sales prices approved by the FPC in Opinion 586, a sum of money equal to the sustainable portion of the money col- lected subject to refund, attributed to a 49/64 working in- terest in the Neil Johnson lease covered by the casinghead gas contract referenced hereinabove for the period from July 1, 1963, through May 31, 1967, and to the gas con- tracts covering the subject property, that is, $16,161.88 became due and payable to the lawful owner or owners of said monies. 27. That of the $16,161.88, the sum of $1,006.85 is at- tributable to the overriding royalty interest prior to Jan- uary 1, 1965; the sum of $2,858.22 is attributable to the overriding royalty interest on and after January 1, 1965. The total sum attributable to the overriding royalty inter- “Vata ee 44a est is $3,865.07. The balance of the $16,161.88 which is $12,296.81, is the sum of the money, the ownership of which is in dispute between the Adams Family and the Schnell Group. 28. That by an instrument entitled Assignment of Oil and Gas Lease, dated June 5, 1967, recorded in Volume 336 at page 126 of the Deed Records of Hutchinson County, Texas, said instrument to be effective as of June 1, 1967, at 7:00 a.m., a true copy of which is attached hereto as Exhibit ‘‘A’’, the Adams Family assigned the subject property and certain rights, title and interests enumer- ated in the said instrument to the Schnell Group. 29. That the Adams Family has not been paid any por- tion of the above-said $12,296.81, and all parties admit and agree that either the Adams Family or the Schnell Group is entitled to this sum of money from Phillips. 30. That the Adams Family and the Schnell Group ad- mit and agree that they do not claim to be entitled to any part of the $$3,865.07 referenced hereinabove; and that Thomson and Nelson admit and agree that they do not claim to be entitled to any part of the $12,296.81 referenced hereinabove. 31. The Walker Family were served with summons on April 16, 1973, but have not filed an answer herein and are in default. The controversy between the Walker Family and Thomson and Nelson which existed as to the sum of $1,006.85 attributable to the overriding royalty interest prior to January 1, 1965, was resolved when the Walker Family declined to file their answer in this action. 32. That neither Thomson nor Nelson has been paid any portion of the above-said $3,865.07, and all parties admit and agree that Nelson is entitled to receive two-thirds (2/3) of the $3,865.07 or the sum of $2,576.71; and all parties agree that Thomson is entitled to receive one-third (1/3) of the $3,865.07 or the sum of $1,288.36. 45a UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 74-1777 Puituirps PetroLeum Company, Plaintiff-A ppellee, v. J. H. Apams, et au., Defendants. Rosert O. Scune.i, W. S. Ercutrson, and Jack Gross, Defendants-Appellants, Vv. J. H. Apams, Wayton Apams, and Artwone H. Apams, Defendants-A ppellees and Appellants. Appeals from the United States District Court for the Northern District of Texas Judgment (May 22, 1975) Before Turtiz, Gewrn and Goxpsere, 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 ConsweraTION WHEREOF, It is now here ordered and adjudged by this Court that the judgment of the said Dis- trict Court in this cause be, and the same is hereby, af- firmed in part and reversed in part; and that this cause be, and the same is hereby remanded to the said District Court in accordance with the opinion of this Court; It is further ordered that plaintiff-appellee and defend- ants-appellants pay equally to defendants-appellees-appel- lants, the costs on appeal to be taxed by the Clerk of this Court. 46a (Caption Omitted in Printing) Opinion May 22, 1975 Before TurrLe, Gewin and Gotpperc, Circuit Judges. Go.psereG, Circuit Judge: In this ease of first impression, and in two similar cases also decided today, First National Bank vy. Phillips Petrole- um Co., 5 Cir. 1975, 513 F.2d 371 [May 22, 1975, No. 74- 2230], and Phillips Petroleum Co. v. Riverview Gas Com- pression Co., 5 Cir. 1975, 513 F.2d 374 [May 22, 1975, No. 74-2009], we must determine the rightful owners of funds payable by a pipeline company under contracts for the sale of casinghead gas,’ where the gas underlying the debts was produced while the mineral leases were held by claim- ants who assigned their leasehold interests to other claim- ants before the debt owed by the pipeline company became due and payable.* After certain preliminary skirmishing, ***Casinghead gas"’ is a term used in the oil and gas industry to describe the gas which flows from the casinghead of an oil well. The production of this type of gas is usually considered incident to the production of oil from the same sourees. See generally Read v. Britain, Tex-Civ.App. 1967, 414 S.W.2d 483, aff'd, Tex. 1967, 422 S.W. 2d 902: Hardwicke, Evolution of Casinghead Gas Law, 8 Tex.L.Rev. 1 (1929). *The problem presented by these three cases has attained epi- demie proportions in the Texas Panhandle. By the time these cases were orally argued before this Court, in December, 1974, there were seven similar actions on the civil docket in the United States District Court for the Northern District of Texas, Amarillo Division, and three other snch eases in the Texas courts. Phillips says that it has 966 percentage-of-proceeds contracts of the type involved here in the Texas Panhandle alone; $9,700,000 in pay- ments is now due under these contracts. 47a the pipeline company brought this diversity interpleader action to obtain a judicial resolution of its contractual dif- ficulties. The assignor-claimants (those who held the leasehold interest at the time the gas was produced) counterelaimed against the pipeline company for interest on the funds held by the company. After a trial without a jury, the district court decided that the assignor-claimants ought to have the principal sum involved but that the pipe- line company owed them no interest ; the pipeline company, the assignor-claimants and the assignee-claimants all ap- peal. We affirm the district court’s decision as to the owner- ship of the principal sum; we believe, however, that equity requires that the assignor-claimants should receive in- terest as well, so we must reverse that portion of the judg- ment below relating to interest. I On July 1, 1963, the assignor-claimants [the Adams family] purchased an oil and gas lease on property situated in Hutchinson County, in the Texas Panhandle. At the time of this purchase, a casinghead gas contract was in force between Phillips Petroleum Company [Phillips] and the holders of the mineral rights to the property. This contract provided that Phillips would purchase the casing- head gas produced on the lease and would pay therefore a price based on the price which Phillips itself obtained for all gas sold by it which originated in the Panhandle Field of Texas. In September 1, 1966, the Adams family con- cluded another percentage-of-proceeds gas sales agreement with Phillips which was substantially similar to the one in force from 1963 until 1966. In 1967, one Schnell, a friend of one of the Adamses, expressed interest in purchasing the mineral leasehold interest in the Hutchinson County property. A deal was soon worked out, and on June 5, 1967, the Adams family conveyed to Schnell ‘‘all right, title and interest of the 48a Original Lessee and present owners in and to [the lease in question], and rights thereunder ... together with all per- sonal property and equipment used or obtained in connec- tion therewith, and located thereon ...’’ The assignment was to be effective as of June 1, 1967, at 7 a.m. The very next day, Schnell conveyed his interest in the property to two business associates, Etchieson, a recently-retired Phil- lips executive, and Gross. On September 27, 1968, Etchie- son and Gross reconveyed their interests to Schnell, who held title to the mineral rights in question when this law- suit commenced. We shall henceforth refer to Schnell, Etchieson and Gross as ‘*the Schnell group.’’ The difficulty in this case arises from the pricing provi- sion in the casinghead gas contracts, for just as the price Phillips undertook to pay to the holder of the mineral rights was pegged upon the average price of gas sold in the Panhandle Field, that field price was in turn dependent upon the rate that the Federal Power Commission allowed Phillips to charge for its gas, which latter variable was very variable indeed until long after the Adams family had assigned its lease to Schnell. In 1954, in Phillips Petrole- um Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035, the United States Supreme Court determined that the Natural Gas Act, 15 U.S.C. §717 et seq., [the Act] requires the Federal Power Commission to regulate well- head sales by producers of natural gas to interstate pipe- line companies for interstate transportation and resale. From that time, gas prices charged by pipeline companies such as Phillips have been subject to FPC approval. In the nature of things, pipeline companies desire to -9ise their gas prices from time to time, and, also in the nature of things, the wheels of the FPC’s rate-setting mech- anism grind slowly, at best. To add to the obvious difficul- ties attendant upon long waits for approval of price in- creases, a pipeline company may not file retroactive price increases, 15 U.S.C. §717c(d) and (e); Atlantic Refining 49a Co. v. Public Service Commission, 1959, 360 U.S. 378, 389, 79 S.Ct. 1246, 1253, 3 L.Kd.2d 1312, 1319-20; Shell Oil Co. v. FPC, 3 Cir, 1964, 334 F.2d 1002, 1009; see 18 C.F.R. § 154.102,* so that if a pipeline company were to wait for IPC approval of a proposed price hike, it might very well *Section 717e provides, in pertinent part: (a) All rates and charges made, demanded, or received by any natural-gas company for or in connection with the trans- portation 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 reason- able, and any such rate or charge that is not just and reason- able is declared to be unlawful. * hall * * * (e) Under such rules and regulations as the Commission may prescribe, every natural-gas company shall file with the Commission, . . . 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 jurisdiction of the Commission, and the classifications, practices, and regula- tions affecting such rates and charges, together with all con- tracts 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 natural-gas company in any such rate, charge, classification, or serviee, or in any rule, regulation, or contract relating thereto, except after thirty days’ notice to the Commission and to the public. * * ce * * (e) Whenever any such new schedule is filed the Commis- sion shall have authority, either upon complaint of any State, municipality, State commission or gas distributing company, or upon its own initiative without complaint, at once, .. . 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, . . . may suspend 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 hear- ings, . .. the Commission may make such orders with reference thereto as would be proper in a proceeding initiated after (Continued on next page) ee es ote. 50a lose ten years’ worth of increased prices. Congress has resolved this difficulty by allowing a pipeline company to increase its prices on its own initiative, subject to a five- month suspension period which may be imposed by the FPC, and subject to a duty to refund to its purchasers any portion of the increase that the FPC ultimately fails to approve. 15 U.S.C. §717e(e); 18 C.F.R. § 154.102.4 it had become effective. If the proceeding has not been con- cluded and an order made 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 service shall go into effect. Where increased rates or charges are thus made effective, the Commission may . . . require the natural-gas company to furnish a bond... to refund any amounts ordered by the Commission, to keep accurate ac- counts in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts were paid, and, upon completion of the hearing and decision, to order such natural-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 inereased, the burden of proof to show that the increased rate or charge is just and reasonable shall be upon the natural-gas company, and the Commission shall give to the hearing and decision of such questions pref- erence over other questions pending before it and decide the same as speedily as possible. 4 See generally Placid Oil Corp. vy. FPC, 5 Cir, 1973, 483 F.2d 80, aff'd sub nom, Mobil Oil Corp. v. FPC, 1974, 417 U.S. 283, 94 S.Ct. 2328, 41 L.Ed.2d 72; Phillips Petroleum Co. v. FPC, 10 Cir. 1965, 349 F.2d 535; Comment, Refund Beneficiaries and Refund Benefits Under the Natural Gas Act, 41 U.Chi.L.Rev. 792 (1974). 18 C.F.R. § 154.102 provides, in part: (a) If a rate suspension proceeding initiated under section 4(e) of the Natural Gas Act has not been coneluded and an order made at the expiration of the suspension period, the proposed change of rate, charge, classification, or service shall go into effect upon motion of the independent producer proposing the change as the legally effective rate and shall be charged, effective as of a date not earlier than the date of receipt of such motion by the Commission or the expiration of the suspension period, whichever is later. * . * * * (b)(1) Unless otherwise ordered by the Commission, in- creased rates or charges shall be charged and collected pur- (Continued on next page) 5la The FPC may also order the pipeline company to pay seven per cent interest on refunded monies if equitable con- siderations so dictate. 15 U.S.C. §717e(e); 18 C.F.R. § 154.102(c¢).5 The effect of this regulatory scheme is that the pipe- line company collects the increased prices for years and suant to paragraph (a) of this section and there shall be filed by the independent producer a surety bond, or other under- taking, to be approved by the Secretary, to comply with tne provisions of paragraph (c) of this section, (2) In compliance with subparagraph (1) of this para- graph, an independent producer may file a general undertak- ing affording blanket refund coverage of any present and future rate increases suspended under section 4(e) of the Natural Gas Act and collected subject to refund thereunder. Upon acceptance of such general undertaking, the producer need not file further refund assuranee when filing a motion to make inereased rates effective unless specifically required to do so by an order of the Commission. (c) Upon an increased rate being made effective pursuant to the provision of this section the independent producer shall be obligated to keep accurate accounts in detail of all amounts reecived by reason of the increased rates or charges of each bill- ing period, and for each purchaser, the billing determinants of natural gas sales to such purchasers and the revenues re- sulting therefrom, as computed under the rates in effect im- mediately prior to the effective date of the change, and under the rates which became effective pursuant to the motion, to- gether with the differences in the revenues so computed; and to refund at such times and in such amounts to the persons entitled thereto, and in such manner as may be required by final order of the Commission, the portion of any increased rate found by the Commission in that proceeding not justified, together with interest thereon at the rate of seven percent per annum from the date of payment to the producer until refunded. * See Hunt Oil Co. v. FPC, 5 Cir. 1970, 424 F.2d 982; Texas Eastern Transmission Corp. v. FPC, 5 Cir. 1962, 306 F.2d 345, cert. denied sub nom. Manufacturers Light & Heat Co. v. Texas Eastern Transmission Corp., 1963, 375 U.S. 941, 84 S.Ct. 347, 11 L.Ed.2d 273; Brooklyn Union Gas Co. v. Transcontinental Gas Pipe Line Co., S.D.Tex. 1960, 201 F.Supp. 679, aff'd sub nom. Socony Mobil Oil Co. v. Brooklyn Union Gas Co., 5 Cir. 1962, 299 F.2d 692, cert. denied, 371 U.S. 887, 83 S.Ct. 182, 9 L.Ed.2d 121. ore ee 52a years, using the funds thus collected as it pleases, although it will ordinarily characterize this ‘‘suspense money’’ as a liability for accounting purposes. See Ashland Oil & Refining Co. v. Staats, Inc., D. Kan. 1967, 271 F.Supp. 571, 578. Then, one fine day, the FPC tells the pipeline com- ~ pany Which portion of the funds it ean keep and which portion it must refund to its purchasers, with interest. At this point, the pipeline company, such as Phillips in this case, must recompute the price it must pay to its suppliers under pereentage-of-proceeds production agreements such as the ones involved here.° Where the ownership of the mineral leasehold interest does not change during the ten or fifteen years in which the FPC is pondering the pro- posed price increase, all the pipeline company need do is to send a check along to the current leaseholder. Where, as here, the leasehold has changed hands in the interim, the pipeline company’s task is more difficult. In this ease, Phillips filed a proposed price increase with the FPC subsequent to the Supreme Court’s decision in Phillips Petroleum Co. v. Wisconsin, supra, and charged its customers the higher price, subject to refund, during the period in which the Adams family held the leasehold interest in the property involved in this lawsuit. From 1963 until 1967, Phillips made monthly payments to the Adams family, based only on the ‘‘firm proceeds”’ of its own sales, that is, proceeds caleulated on the rate which the FPC had already approved; the pipeline company de- ferred any payments calculated on the basis of the higher, unapproved prices which Phillips was actually charging its ® Phillips urges that it really has no obligation to reecompute the price it must pay to its suppliers under percentage-of-proceeds contracts, and that the Adams family consequently ought not to question such beneficence as Phillips might demonstrate. We believe that the law of contract obliges Phillips to pay in full for the gas that it purchases, regardless of the time at which the full measure of payment may be revealed. a 53a customers throughout the period. On September 18, 1970, the FPC finally concluded its deliberations on Phillips’ proposed rate hikes, approving a portion of the price in- creases but rejecting another portion.?_ Hugoton-Andarko Rate Case, Op: 586, 44 F.P.C. 761, aff'd, 9 Cir. 1972, 466 F.2d 974. After the Ninth Cireuit affirmed the FPC’s or- der, Phillips divided the principal sum of the suspense money collected over the years into two categories: ‘re- fundable monies,’’ which it returned to its purchasers with interest, and ‘‘sustainable monies,’’ to which it now had certain entitlement. But a portion of these sustainable monies represented certain debts payable to all producers who had supplied Phillips with gas under percentage-of- proceeds contracts. With respect to the particular pro- perty involved here, Phillips determined that the Schnell group was the undisputed owner of all sustainable monies due on gas produced after June 1, 1967, and Phillips set- tled a dispute with the Adams family’s predecessors in interest with respect to monies collected before 1963. It was readily apparent, however, that the Adams family and the Schnell group were irremediably antagonistic with respect to the 1963-1967 funds so Phillips brought this interpleader action to determine title to $12,296.81, which sum was the amount that Phillips owed either to the Adams family or to the Schnell group for gas purchased during 1963-1967.8 II The district court ruled that the Adams family ought to receive the disputed suspense money, on the ground that the payments were ‘‘in part payment of gas severed 7 The effective date of the order was October 1, 1970. * Phillips actually deposited $16,161.88 into court, but $3,865.07 of this sum is attributable to an undisputed overriding royalty interest. Oda from the leasehold estate and sold therefrom prior te any assignment of the lease by the Adams family’? and that the document of assignment from the Adams family to Sehnell could not be eonstrued te constitute an assign mont of the suspense money. The Sehnell group and Phil lips * argue that the money was not due and payable until after the FPC order in Mugoton Andarko, and contend that since the order was not made until well after the : Adams family had conveyed its leasehold interest to : Schnell, the contingent right to the money attached to the ' mineral estate, In these eireumstanees, Sehnell and Phil F lips conclude that sinee the Adams family did not expressly reserve this contingent right in the instrument of assign ; “ment, the right to any suspense money passed to Schnell. Schnell urges that even though the gas for which the disputed) funds are partial payment) was produced while the Adams family held the leasehold interest, the right to payment did not become certain and enforce 2 able until after the FP'C order, so that this ease is analog ous to decisions involving dividends on stock, interest on notes and unacerued rent on real estate, where the income goes to the party who holds title to the principal property on the date the dividend, interest or rent is declared or be- comes due. Fen ero ae The Schnell group and Phillips are undoubtedly cor rect in their contention that the Adams family had no enforceable right to the suspense money during the time when they held the leasehold interest, for neither Phillips nor the Adams family had any reasonable expectation dur- ing 1963-1967 that the FPC would approve the higher prices upon which the suspense money was based. Neither party eould claim full title to any part of the disputed funds =pe” ® Although Phillips is the stakeholder in this interpleader action, the pipeline company has from the beginning urged the validity of the Schnell group’s claim as against that of the Adams family, for the reason that the Schnell group, unlike the Adamses, does not claim interest on the suspense money from Phillips. es) hoa until the PPC had determined the validity of the price in creases, In Ashland Oi & Refining Co. v. Staats, Ine, D Kan. 1967, 2717 FP Supp. 571 individuals situated similarly to the Adams family here demanded that a pipeline company pay them suspense money before the EPC had taken any action on the suspended price inerease which had produced the funds. The district court reasoned that the right to pay ment of the parties analogens to the Adame family : ean he no greater than the leese’s right to the monies from which thoee Povalties derive. Ashland [the pipe line company | has no final enforceable right to these funds for they have not been approved, and may be rescinded, [The pipeline company] holds them snub Ject to refund, and is responsible for any refand which nay be ordered. We perceive no ground on which Ach land should be compelled to pay out sums, for the re fund of whieh 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 deter mined .... If Ashland were required to pay over funds which it now holds, and a refund of all or any part thereof were snbsequently ordered, it would have to demand repayments from a large number of royalty owners, and risk the necessity of a multiplicity of legal actions. Ashland has taken a conrse designed and in tended best to serve the interest of the royalty owners and of itself. As a resnit, it hold« the sums songht in what is roughly analogons to a fiduciary capacity. In our view, [the royalty owners have] stated no right to recover royalties on these funds, when it is not yet finally determined that they represent lawful proceeds from the sale of gas. 271 F.Supp. 571, 579. We believe that the Staats court correctly stated the law governing Phillips’ contractnal relations with the Adame family during 1963-1967. See Boutte v. Chevron Oi] Co., E.D.La. 1970, 316 F.Supp. 524 aff'd, 5 Cir. 1971, 442 F.2d 56a 1337." The fact that the Adams family had no final and enforceable right to the suspense money in 1963-1967, how- ever, does not foreclose the possibility that they retained the contingent right to the funds after their assignment to Schnell and that the FPC’s 1970 order converted that con- tingent right into a right presently enforceable against Phillips. The resolution of this question requires us to investigate the Texas law of contract and property. It is the law in Texas, as elsewhere, that where a contract is unambiguous, we must look solely to the terms thereof to determine its meaning. Hennigan v. Chargers Football Co., 5 Cir. 1970, 481 F.2d 308; Tenneco Oil Co. v. Alvord, Tex. 1967, 416 S.W.2d 385; Wahlenmaier v. Ameri- ean Quasar Petroleum Co., Tex.Civ.App. 1974, 517 S.W.2d 390, no writ. All of the parties here agree that the instru- ment of assignment is unambiguous, and that document alone can show which property interests passed to Schnell and which were retained by the Adams family. The Adams family conveyed to Schnell: all right title and interest ... in and to [the lease], and rights thereunder, ... together with all personal property and equipment used or obtained in connec- tion therewith, and located thereon ... [The Adams family also warranted that they] are the lawful own- ers of the interest in said oil and gas lease. ., and of 10 We note that Phillips does not always hold suspense money in its own accounts until the FPC approves or disapproves the under- lying rate increases. The record contains two form letters from Phillips, one written to Etchieson of the Schnell group, dated February 20, 1968, and the other written to the Adams family with regard to another piece of property, dated August 13, 1971, in which Phillips (apparently at the request of Etchieson and the Adams family) agreed to pay suspense money to the addressees as it was collected, on the condition that they would agree to reim- burse Phillips, with interest, for any suspense money which the FPC might require Phillips to refund to its customers. The ap- proach adopted by Phillips in those instances would obviate the difficulties presented by this case. 57a all personal properties thereon, or used im connection therewith; . . and that said rights, interest and prop- erty are free and clear from all liens and encum- brances, and that all rentals and royalties due and pay- able under said oil and gas lease have been fully paid. This oil and gas lease shall be effective as of June 1, 1967, at 7:00 A.M.. The assignment appears on its face to pass title to all realty interests, effective as of 7:00 A.M. on a day certain, and all personal property interests bound up with the operation of the wells; there is no mention of the right to the suspense money or of any other personally unrelated to the extraction process. In a conveyance of real property, all of the interests in land ordinarily pass to the grantee unless specifically exempted, for deeds are strictly con- strued against the grantor. Tenneco Oil Co. v. Alvord, supra; Humble Oil & Refining Co. v. Harrison, 1947, 146 Tex. 216, 205 S.W.2d 355; Melton v. Davis, Tex.Civ.App. 1969, 443 S.W.2d 605, writ ref’d n.r.e. On the other hand, it is usually the case that personal property does not pass in the assignment of an oil and gas lease unless it is ex- pressly passed. See e.g., Moore v. Carey Bros. Oil Co., Tex. Comm’n. App. 1925, 269 S.W. 75; Cox v. Rhodes, Tex.Civ. App. 1950, 233 S.W.2d 924; Continental Oil Co w. Gillespie, Tex.Civ.App. 1944, 178 S.W.2d 728, no writ; East Texas Refining Co. v. Helvir Oil Co., Tex.Civ.App., 1935, 82 S.W.2d 392, writ dism’d w.o.j.; 3 W. Summers Oil and Gas § 555. Thus, the problem in this case is whether the contingent right to the suspense money constituted a realty or a personalty interest. If the right to the money is a realty interest, the assignment passed that right to Schnell, but if the right is in the nature of personalty, the Adams family did not expressly convey the right and therefore retained it. Texas law provides that oil and gas are realty when in place and personalty when severed from the land by production. Harrington v. Texaco, Ine., 5 Cir. 1964, 58a 339 F.2d 814, cert. denied, 1965, 381 U.S. 915, 85 S.Ct. 1538, 14 L.Ed.2d 485; Humble Oil & Refining Co. v. West, Tex. 1974, 508 S.W.2d 812; Phillips Petroleum Co. v. Me- com, Tex.Civ.App. 1964, 375 S.W.2d 335, no writ; Lone Star Gas Co. v. Murchison, Tex.Civ.App. 1962, 353 S.W.2d 870, writ ref’d n.r.e. With respect to debt obligations in- curred as oil and gas are produced, unaccrued royalty inter- est, oil payments and bonus payments are deemed by Texas courts to be interests in realty, for such rights represent interests in the oil and gas still in place on the property. See Clyde v. Hamilton, Tex. 1967, 414 S.W.2d 434; Ten- nant v. Dunn, 1937, 130 Tex. 285, 110 S.W.2d 53; Sheffield v. Hogg, 1935, 124 Tex. 290, 77 S.W.2d 1021, on rehearing 124 Tex. 311, 80 S.W.2d 741; see generally Walker, Oil Payments, 20 Tex.L.Rev. 259 (1942). The rule is other- wise when the minerals giving rise to the right to payment have already been taken from the ground, for the right to future payments on past production cannot be said to burden the mineral estate in the same way as an interest in future production. The right to payment for past production obviously has no effect upon the value to the leaseholder of the oil and gas still in the ground at the time he mineral estate changes hands—which property is the usual object of leaseholder interest. So it is that ac- erued royalty interests are personal property, Miller v. Hathaway, Tex.Civ.App. 1972, 477 S.W.2d 655, no writ, as is the right to payment for severed minerals. Shell Oil Co. v. State, Tex.Civ.App. 1969, 442 S.W.2d 457, writ ref’d .T.¢. The district court here reasoned that since the disputed funds are partial payment for gas produced while the Adams family held the leasehold interest, those individuals also held a contingent personal right to payment during 1963-1967, and that the Texas rules of contractual construc- tion compelled the conclusion that the Adams family did not convey these personal property rights to Schnell. The Schnell group and Phillips argue that the disputed money 59a cannot represent a personalty interest founded on a debt because this purported debt did not become due and pay- able until after the FPC order, that is, long after the Adams family had conveyed its interest in the leasehold estate to Schnell. Although there are no Texas cases (nor cases from any other jurisdiction) which have dealt with the problem of suspense money not currently due and payable, com- mon sense and elemental fairness can lead only to the conclusion that the Adams family had a right to pay- ment in full for the gas they sold to Phillips, and that they have at no time reliquished their right to complete compensation. The Texas law, as set out above, dictates a like result. In East Texas Refining Co. v. Helvir Oil Co., supra, for example an assignor of an oil and gas lease quar- reled with the assignee over the right to payments for oil which had already been produced and sold to a third party at the time the assignment was made. The language of the instrument there was similar to that of the assign- ment here, and the Texas court held that the assignor had not conveyed its right to payment: If we give to the lease contract the construction most favorable to [the assignee’s] contention, it transfers to [the assignee] [the assignor’s] interest in the lease and all property incident to such lease. These prior oil runs had been taken from the lease and sold and delivered to [a2 third party] and were not, on [the date of the assignment] connected with or incident to the lease, and could not be transferred to [the assignee] by a mere transfer of such lease. 82 S.W.2d 392, 395." 11 We note that the Texas state tax on the production of oil, a tax payable by the producer of the oil, acerues when the oil is pro- duced—and not when it is paid for. Tex. Tax.-Gen. art. 4.01 et seq., V.A.T.S.; State v. Humphrey, Tex.Civ.App. 1942, 159 S.W.2d 162; see also Alexander v. Texaco, Inc., 5 Cir. 1973, 482 F.2d 1248; Fain-MeGaha Oil Corp. v. Murko Oil & Royalty Co., 1937, 128 Tex. 646, 101 S.W.2d 547. 60a We do not believe that our case should be decided differently from East Texas Refining simply because the assignor there had a right to payment in full by the time of the assignment, while the Adams family could not know the extent of its earnings until several years after the assign- ment to Schnell. The Adamses owned the gas in place at the time of extraction, at which point they exchanged their right to the gas for the right to be paid therefor. The fact that the debt was not liquidated on the date of assign- ment, and could not be ascertained for some time there- after, does not make it any less a personal property right. The Adams family did not convey this right to Schnell, and they are entitled to the suspense money now in the registry of the district court.’” 12 The Schnell group argues, in face of the rule of construction of unambiguous contracts, that the Adams family intended to convey their right to the suspense money. Ye believe that the evidence offers no support for this contention, and that the best evidence of the Adams family’s intentions is the assignment it- self, which makes no mention of the suspense money; that doen- ment compels the legal conclusion that the Adams family retained their right to the disputed funds. Finally, Phillips argues that ‘‘ public policy imperatives’’ require that the disputed funds go to the Schnell group, for the reason that *‘the practical effect of the decision of the trial court . . . will be to create more problems than it solves. Courts exist to resolve, not create, problems; consequently this portion of the decision is contrary to public policy.’’ This interesting argument is founded on the consideration that if we were to decide that the Schnell group should have the suspense money, all Phillips would have to do in order to fulfill its obligations with respect to its 900-odd percentage-of-proceeds contracts would be to determine who held the mineral leasehold interests on October 28, 1972 (the last date for appeal from the Ninth Circuit’s affirmance of the FPC’s Hugoton-Andarko order—the date on which Phillips believes its various debts became due and payable), and then to pay those parties. A decision that the Adams family holds title to the funds as personal property, however, would expose Phillips to (Continued on next page) 6la Ill With respect to interest, the district court found that Phillips could not safely disburse the suspense money un- til October 28, 1972, the date on which the FPC’s H ugoton- Andarko order became immune from further legal attack, and that from that time until December 21, 1973, the date on which Phillips paid the disputed funds into court, Phil- lips was a stakeholder faced with conflicting claims to a single fund. These circumstances, coupled with the failure of the Adams family to demand that Phillips pay the money into court, convinced the district court that neither equity nor Texas law supported an award of interest from Phillips to the Adams family based on the pri [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_1552%3A2. Public record. Not legal advice.