Flowers v. Diamond Shamrock Corp.

693 F.2d 1146 (5th Cir. 1982)

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Nature of the Case

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Facts

D agreed to pay P royalties based on the 'market value' of the natural gas produced from a well it drilled on the property. In 1965 Shamrock committed the gas from P's well to a twenty-year sales contract with Southwestern. D has paid P a royalty based on this contract price, or at times a slightly higher price. D tendered monthly checks for royalty payments calculated upon the contract price, and P endorsed and cashed these checks. D tendered monthly checks for royalty payments calculated upon the contract price, and P endorsed and cashed these checks. A stub was attached to each check which showed lease numbers, a number that presumably showed the volume of production, the amount of severance tax deducted, and an amount labeled 'Your Part,' which was the amount of the check. The following small print appeared on the back of the check itself: ENDORSEMENTS This check is issued in full settlement of the account stated and the payee accepts it as such by his endorsement. If not correct, return without alteration and state difference. On February 15, 1974, D sent a form letter to P offering to pay higher royalties if P executed a contract agreeing to accept royalties directly based on the sales contract proceeds rather than on the market value method of computation set forth in the original leases. P declined the invitation and requested deficit funds owed to P since February 1974. D informed P that it would continue to pay the royalty in accordance with the lease provisions. P had endorsed D's monthly checks until February 1977. P sued D to recover the market price of the royalties vs. the contract price. D claimed accord and satisfaction. The jury found for P, but the trial court granted judgment notwithstanding the verdict on two counts in that P’s cashing the checks was an accord and satisfaction. P appealed.