SE Texas Record

Thursday, December 12, 2019

Appellate court rejects Velvin Oil's request for rehearing in fraud suit

By Elizabeth Alt | May 29, 2018


HOUSTON – The 1st District Court of Appeals issued a ruling on May 8 that denied realtor Velvin Oil’s motion for a rehearing and reissued its previous order from January that found a Harris County trial court only erred in not issuing a ruling on a venue transfer motion before ruling on merits of the case.

“We are confident the trial court will comply with this opinion and the writ will issue only if it does not,” Justice Harvey Brown wrote in the opinion.

The court order denied most of Velvin Oil Co. Inc.’s appeal of the May 2017 trial court order, finding that the trial court did not abuse its discretion by failing to dismiss the case for lack of subject-matter jurisdiction, conditionally granting Velvin’s writ of mandamus.

Justices Evelyn Keyes and Russell Lloyd also sat on the panel.

A.J.P. Oil Co. LLC, as Grapeland Fuel & BBQ, sued Velvin in the Houston County trial court over allegations of “fraud, negligence, and other claims regarding the quality and merchantability of the diesel fuel sold by Velvin,” according to the opinion. AJP also claimed that “Velvin committed fraud by overcharging AJP for fuel taxes,” and claimed it believed Velvin kept fuel tax overcharges for its own personal benefit, the opinion states.

Velvin filed a plea for lack of jurisdiction for AJP’s alleged failure to exhaust 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 opinion states.

The Houston County court granted Velvin’s plea and dismissed AJP’s claims of “tax overcharges and its claims for common-law fraud and negligent misrepresentation,” the opinion states.

AJP filed a Rule 202 petition in the Harris County trial court requesting discovery to investigate the alleged overtaxes.

"Unlike in the Houston County petition, AJP alleged in its Rule 202 Petition that it did not know whether Velvin kept any overcharges for its own benefit," the opinion states.

Velvin moved to dismiss and to transfer venue, claiming that AJP’s petition filed in the Harris court was the same as the case dismissed in the Houston court, and that AJP is only petitioning for discovery to try and “circumvent the Houston County lawsuit and to avoid the statutorily-required administrative procedures.” 

The Harris County court ruled on AJP’s petition for Rule 202 but did not issue a ruling on Velvin’s motion to transfer venue.

AJP argues that Harris County was proper because Velvin sells to various retailers in Texas, including Harris County, and that it has the right to discovery to investigate the alleged tax overcharges.

Brown stated that Velvin “has not demonstrated that the trial court abused its discretion in failing to dismiss AJP’s petition for failure to exhaust its administrative remedies” because AJP has not had the opportunity for discovery regarding the alleged overcharges to the state, and the Tax Code statutory remedy does not apply.

The ruling stated that the trial court abused its discretion by first ruling on the merits of the case before properly determining venue, and conditionally granted Velvin’s petition for venue transfer. 

The court issued instructions for the trial court to hear and rule on Velvin’s motion to transfer venue “before proceeding with the request for a Rule 202 deposition.”

1st District Court of Appeals case number 01-17-00384-CV

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Court of Appeals for the 1st District of Texas