Appellate court vacates order denying Velvin Oil's motion for leave in fraud case

By Dee Thompson | Jan 31, 2018

HOUSTON – A Texas court of appeals has ruled in a dispute between two oil companies concerning mandamus relief challenging a lower court's order.

Velvin Oil had filed the relief petition in a case with A.J.P. Oil Co. with the appellate court regarding a motion to transfer.

The Court of Appeals of the 1st District of Texas concluded Jan. 23 that the trial court abused its discretion in failing to rule on the motion to transfer venue before it decided the Rule 202 petition. The appellate court conditionally granted the petition as it concerned the motion to transfer venue.

Under Texas law, a Rule 202 petition essentially allows a deposition to be taken to explore whether or not suit will be filed. The Dallas Bar Association defines it: “Rule 202 of the Texas Rules of Civil Procedure allows a person to ask a court for oral depositions or depositions on written questions to obtain testimony for use in anticipated suit or to investigate a potential claim.” Parties are not always allowed to take a deposition under this rule.

Mandamus relief is defined by the Legal Dictionary: “The legal term writ of mandamus refers to an order by a court to a lesser government official to perform an act required by law, which he has refused or neglected to do.” 

The underlying case is In re A.J.P. Oil Co. LLC, doing business as Grapeland Fuel & BBQ, pending in the 61st District Court of Harris County, Texas.

In June of 2017, Velvin Oil Co. Inc. filed a petition for writ of mandamus in the Court of Appeals for the 1st District of Texas and requested emergency relief, staying enforcement of the trial court’s May 19, 2017, order pending resolution of Velvin’s petition for writ of mandamus, according to the oder.

Real party in interest A.J.P. Oil Co. LLC had filed a letter stating it had reached an agreement with Velvin to not oppose the request for emergency relief. In June of 2017, the court granted Velvin’s motion for emergency relief. The trial court’s order of May 19, 2017, compelling Velvin to attend a Rule 202 deposition and produce documents, was stayed pending resolution of the petition for writ of mandamus, the order states.

The Jan. 23, 2018, court decision notes as background, “Velvin distributes diesel fuel, gasoline, and other related products to retailers across Texas, including AJP. AJP originally sued Velvin in Houston County alleging fraud, negligence, and other claims regarding the quality and merchantability of the diesel fuel sold by Velvin. AJP further alleged that Velvin committed fraud by overcharging AJP for fuel taxes and keeping the excess amount for itself.

"Velvin filed a plea to the jurisdiction in the Houston County suit on the overcharge claims, saying that the trial court lacked subject-matter jurisdiction because AJP had failed to exhaust its administrative remedies. “Specifically, Velvin argued that AJP’s overcharge claims fell under the statutory provisions requiring tax refund claims to be filed with the state comptroller,” the decision notes.

The Houston County trial court dismissed AJP’s claims concerning overcharges and its claims for common-law fraud and negligent misrepresentation. 

However, AJP later filed a Verified Rule 202 Deposition Petition in Harris County, seeking to investigate claims related to Velvin’s sale of diesel fuel and collection of state diesel fuel taxes. The appellate decision notes, “AJP argued that it was entitled to discovery on whether Velvin was collecting and keeping for its own benefit amounts represented to be fuel taxes paid to the refineries, but which included an excess amount that Velvin kept for itself. Velvin filed an opposition to the petition, a motion to transfer venue, and a motion to dismiss. Velvin responded that the issues raised in the Rule 202 petition mirrored those dismissed in the Houston County case.”

On the same date as the hearing on the Rule 202 petition, Velvin also filed a motion for leave to set the venue motion but the trial court denied this motion for leave. After a hearing, the trial court granted the Rule 202 petition. The trial court didn’t rule yet on Velvin’s motion to transfer venue. 

The appellate court concluded that “...we conditionally grant Velvin’s petition for writ of mandamus and direct the trial court to: (1) vacate its May 17, 2017, order denying Velvin’s motion for leave, and (2) set Velvin’s motion to transfer venue for a hearing and rule on the motion before proceeding with the Rule 202 deposition. The petition is otherwise denied because the trial court’s ruling on the merits before determining the venue issue was premature. We are confident the trial court will comply with this opinion and the writ will issue only if it does not.”

The appellate panel consisted of Justices Evelyn Keyes, Harvey G. Brown and Russell Lloyd.

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