089 Rogers v. Ricane Enterprises, Inc.

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
Rogers v. Ricane Enterprises, Inc., 884 S.W.2d 763 (Tex. App.—Amarillo July 24, 1996,
 
            ) was a decision written on remand under instructions to consider the conversion issues raised by Rogers. Production had occurred and had been taken by others from a property in which Rogers owned a working interest. The significant legal issue was to determine the applicable statute of limitations and whether the discovery rule applied. The court held that oil and gas once removed from the land becomes personalty and that conversion claims for personal property are governed by a two-year limitations period which runs “not later than two years after the cause of action accrues.”
 
When a cause of action “accrues” is to be determined by the courts, and the traditional rule in Texas is that the two-year statute begins to run as soon as the owner suffers some injury, regardless of when the injury becomes discoverable. The general rule in conversion cases is that limitations begins to run at the time of the unlawful taking. Rogers contended that the discovery rule should apply. “The rule provides that a statute of limitations does not run from a fixed date, but from the time a plaintiff knew or should have known of the existence of facts sufficient to constitute a cause of action.” Because drilling and production was not concealed, the wells were openly located on the premises, documents were of public record, and evidence of production was not only available by visual inspection, but also through Railroad Commission filings, the court held that the discovery rule did not apply.
 
The court then analyzed the application of the two-year statute to the various defendants under the specific facts applicable to each defendant. The Defendant under circumstances of most interest was the oil purchaser. Southern Union was the purchaser of the oil belonging to Rogers, but produced and sold by Torreyana. Rogers claimed that by purchasing the oil, Southern Union became a convertor. Southern Union claimed that it was a good faith buyer in the ordinary course of business and was not a convertor under TEX. BUS. & CODE § 2.403(b) and (c) (Vernon 1994) and the jury findings. The court agreed with Southern Union and determined that for this defense to be applicable three elements must be present: (1) an entrustment of goods to (2) a merchant who deals in goods of that kind, followed by a sale by such merchant to (3) a buyer in the ordinary course of business.
 
The significance of the case is that it determines the two year statute of limitations is applicable in cases involving production of another’s oil and gas, that the statute begins to run at the time of production, and that ordinary evidence of production (such as well locations and Railroad Commission filings) may defeat the application of the discovery rule. An oil and gas purchaser who purchases in good faith from the producer wrongfully producing the oil and gas of another may be protected under the UCC.