Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-01210/USCOURTS-ca10-88-01210-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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' 

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

DEPEX REINA 9 PARTNERSHIP, an Ohio ) 

general partnership; DEPEX REINA 10 ) 

PARTNERSHIP, an Ohio general partner- ) 

ship; REINA F PARTNERS, an Ohio limited) 

partnership, ) 

) 

Plaintiffs, ) 

) 

and ) 

) 

DEPEX 19 INC., a Delaware corporation, ) 

) 

Plaintiff-Appellee, ) 

) 

v. ) 

) 

TEXAS INTERNATIONAL PETROLEUM CORPORA- ) 

TION, a Delaware corporation, ) 

) 

Defendant-Appellant. ) 

FILED 

United St#Jef C.wn of Appeals 

Tenth Grrui: 

FEB 2 7 1 90 

&OBERT L. HOECKER 

Clerk 

No. 88-1210 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

{CIV-82-2339-P) 

Kirk D. Fredrickson of Watson & McKenzie, Oklahoma City, Oklahoma, 

for Plaintiff-Appellee. 

Matthew L. Standard (James M. Chaney with him on the briefs) of 

Kirk & Chaney, Oklahoma City, Oklahoma, for Defendant-Appellant. 

Before TACHA and BRORBY, Circuit Judges, and BROWN,* District 

Judge. 

BRORBY, Circuit Judge. 

* The Honorable Wesley E. Brown, United States District 

for the District of Kansas, sitting by designation. 

Judge 

Appellate Case: 88-1210 Document: 01019964518 Date Filed: 02/27/1990 Page: 1 
Texas International Petroleum Corporation (TIPCO) appeals the 

judgment of the district court awarding Depex 19, Inc., a Delaware 

corporation, $478,757.42 together with interest and costs. 

Determining the trial court did not have subject matter 

jurisdiction, we REVERSE and REMAND. 

FACTS 

This appeal marks the second time the parties have sought 

resolution before this court. Depex Reina 9, Depex Reina 10, and 

Reina F (the Depex Partnerships) filed their complaint in the 

United States District Court for the Western District of Oklahoma 

on December 30, 1982 seeking specific performance of a contract 

and punitive damages for breach of fiduciary duty. They claimed 

that TIPCO had breached a contractual obligation to offer them the 

opportunity to participate in certain oil and gas wells drilled by 

TIPCO. Appellant's Brief at 2. The Depex Partnerships asserted 

jurisdiction under 28 U.S.C. § 1332, diversity of citizenship, and 

alleged they were partnerships formed under Ohio law with no 

Oklahoma citizens as partners, and the defendant, TIPCO, was a 

Delaware corporation with - its principal place of business in 

Oklahoma City, Oklahoma. In its answer, TIPCO admitted that each 

of the plaintiffs were partnerships formed under the laws of the 

State of Ohio, but stated it was "without sufficient information 

or belief to admit or deny the residency of the partners of each 

Plaintiff." In June 1982, answering TIPCO'S interrogatories, the 

Depex Partnerships stated they were general partnerships formed 

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under Ohio law, each consisting of two partners; a West German 

limited partnership and a Delaware ~orporation, Reina Oil & Gas 

Corporation (ROGC). 

On May 31, 1983 the trial court entered the Pretrial Order 

which stated "[j]urisdiction exists pursuant to the complete 

diversity of citizenship of the parties." The trial judge 

determined that the trial of the case should be bifurcated as to 

liability and damages. 

the jury determined 

Following a three-day trial on the merits, 

that two of the Depex Partnerships were 

entitled to participate in additional wells drilled in the "Parks 

Prospect" of Mitchell County, Texas. The trial court set aside 

this jury determination of liability and subsequently entered 

judgment in favor of TIPCO, holding the claims of the Depex 

Partnerships were barred by a three-year statute of limitation. 

The Depex Partnerships appealed this judgment to our court. 

By Order and Judgment dated June 2, 1986, we reversed the trial 

court decision, and held that TIPCO was estopped from asserting 

the bar of the oral contract limitation period when it had an 

affirmative : obligation to place the necessary-· contract terms .in 

writing. On December 23, 1986, we denied the Petition for 

Rehearing. TIPCO did not seek additional review of our Order and 

Judgment. 

On June 30, 1987, after the case returned to the district 

court, TIPCO for the first time filed a motion to dismiss the 

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Appellate Case: 88-1210 Document: 01019964518 Date Filed: 02/27/1990 Page: 3 
action for lack of subject matter jurisdiction because at the time 

of the filing of the action, one of the general partners of each 

of the Depex Partnerships was a Delaware Corporation. TIPCO 

argued that because TIPCO was also a Delaware corporation, 

complete diversity between the parties never existed. This 

jurisdictional challenge arose more than five years after the 

Depex Partnerships filed their lawsuit. The trial court, however, 

denied the motion to dismiss. The parties then tried to the court 

the issue of damages. At the direction of the court, the parties 

stipulated to the amount of money owed by TIPCO to the Depex 

Partnerships under the court's Findings of Fact and Conclusions of 

Law. On January 15, 1988, the trial court entered the Journal 

Entry of Judgment based upon 

the stipulation of the 1 parties, and awarded Depex 19, Inc., a 

Delaware corporation, $478,757.42 together with interest and costs 

against TIPCO. From this judgment TIPCO appeals, asserting: 

The District Court erred in holding that Tipco was 

precluded by principles of res judicata from raising the 

issue of lack of subject matter jurisdiction. 

The District Court erred in holding that alienage 

jurisdiction existed. 

The District Court erred in ruling that TIPCO was 

not entitled to a set-off_ for ·sums expended on the Depex 

Partnerships' behalf for costs of obtaining production 

from the wells. 

Appellant's Brief at 7,17, 19. 

1 On August 24, 1987 the trial court entered an Order 

substituting Depex 19, Inc., a Delaware corporation, as the proper 

party plaintiff in the action in lieu of the presently named 

plaintiffs. 

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Appellate Case: 88-1210 Document: 01019964518 Date Filed: 02/27/1990 Page: 4 
part: 

DIVERSITY JURISDICTION 

At the time of the lawsuit, .28 U. s. C. § 1332 provided in 

(a} The district court shall have original jurisdiction 

of all civil actions where the matter in controversy 

exceeds the sum or value of $10,000, exclusive of 

interest and costs, and is between--

(1} citizens of different States; 

(2) citizens of a State and citizens or subjects 

of a foreign state; 

(3) citizens of different States in which citizens 

or subjects of a foreign state are additional parties; 

and 

(4) a foreign state, defined in section 1603(a} of 

this title, as plaintiff and citizens of a State or of 

different States. 

Thus, diversity jurisdiction attaches only when all parties on one 

side of the litigation are of a different citizenship from all 

parties on the other side of the litigation. In the case of a 

partnership, the partnership is a citizen of each state in which a 

partner is a citizen. See Annotation, Determination of 

Citizenship of Partnership, For Purposes of Diversity Jurisdiction 

Under 28 U.S.C.S. § 1332(a), 83 A.L.R. Fed. 136 (1987). In the 

case of corporations, the corporation is a citizen of "any State 

by :which · it ·has been incorporate-a-·and of · the State ·where it has 

its principal place of business II 28 u.s.c. § 1332(c}. 

Because both TIPCO and one of the general partners of the Depex 

Partnerships were Delaware corporations, complete diversity was 

lacking. 

RES JUDICATA 

TIPCO first argues the trial court erred in holding that 

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principles of res judicata precluded TIPCO from raising the issue 

of lack of subject matter jurisdiction. Appellant's Brief at 7. 

We review this legal issue de novo, Boise City Farmers Coop. v. 

Palmer, 780 F.2d 860, 866 (10th Cir. 1985), and hold that 

principles of res judicata did not preclude TIPCO from raising 

lack of subject matter jurisdiction. 

In denying TIPCO'S motion to dismiss, the trial court 

reasoned that the facts upon which jurisdiction depends are "quasi 

jurisdictional," and "it matters not that the court's 

determination of its own jurisdiction is arrived at in error, even 

though the error of adjudication is apparent upon the face of the 

record." The trial court further reasoned that res judicata 

should apply because the jurisdictional issue did not surface 

until after trial and appeal. "[T]he court's jurisdiction has 

already been established over the parties and the subject matter 

upon entry of [the district court's journal entry of judgment and 

the order and judgment of the Tenth Circuit Court of Appeals] .... 

These judgments are not void on their faces to be subject to 

collateral attack for lack of jurisdiction." We do not agree with 

- ·····.-·the--:conclusio.n ·of. the tr ial-.:court. 

Several courts and commentators have observed that "diversity 

of citizenship is but a quasi-jurisdictional fact. A judgment 

based upon an erroneous finding of diversity is not void and is 

immune from collateral attack." Green v. Hale, 433 F.2d 324, 330, 

n.14 (5th Cir. 1970) (quoting Lester v. McFadden, 415 F.2d 1101, 

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1107 (4th Cir. 1969)). See also Kansas City So. Ry. Co. v. Great 

Lakes Carbon Corp., 624 F.2d 822, 825 (8th Cir.), cert. denied, 

449 U.S. 955 (1980) ("error in interpreting a statutory grant of 

jurisdiction does not render the judgment a complete 

nullity''); 7 Moore's Federal Practice~ 60.25[2] at 230-31 (2d ed. 

1987). This statement of law, however, does not apply to the 

instant case where the district court did not render a judgment 

into which a finding of diversity merged. 

the case to the district court, we did 

Further, by remanding 

not create a final 

judgment. Rather, under 28 U.S.C. § 1291, we reviewed and 

reversed the final decision of the district court and the issue of 

jurisdiction was still alive. After we reversed, the trial court 

determined the issue of damages. 

In Ramey 

Reservation, 

Constr. 

673 F.2d 

Co. 

315 

v. Apache 

(10th Cir. 

Tribe of 

1982), 

the Mescalero 

we reversed and 

remanded and subsequently upheld the determination by the trial 

court on remand that it lacked subject matter jurisdiction. In 

Ramey, a general contractor sued the tribe and others to recover 

damages for alleged breach of contract, misrepresentations and 

--negligence. The trial -· court entered - judgment against the 

contractor. On appeal, we reversed and remanded, whereupon the 

trial court reconsidered jurisdiction and dismissed for lack of 

jurisdiction. On subsequent appeal we held the district court did 

not exceed the scope of remand by reconsidering jurisdiction. As 

in Ramey, the trial court in the instant case properly could have 

considered jurisdiction on remand: "So long as a case is pending, 

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the issue of federal court jurisdiction may be raised at any stage 

of the proceedings either by the parties or by the court on its 

own motion." Id. at 318, citing 1 Moore's Federal Practice ,1 

0.60[4] (2d ed. 1981). See also Basso v. Utah Power & Light Co., 

495 F.2d 906, 910 (10th Cir. 1974) ("failure to raise the issue 

[of diversity jurisdiction] before final judgment did not amount 

to a waiver, since a court may dismiss a case for lack of 

jurisdiction at any stage of the proceeding"). Ramey is in line 

with our earlier pronouncement in Amalgamated Sugar Co. v. 

Bergland, 664 F.2d 818, 822 (10th Cir. 1981), that "the 

jurisdiction of a court over subject matter may be raised at any 

point in the proceeding." (Citations omitted). 

Supporting the trial court's determination that subject 

matter jurisdiction was res judicata, the Depex Partnerships 

attempt to distinguish Ramey. They argue that Ramey involved a 

jurisdictional challenge after a general remand of the case for 

determination on the merits whereas in the instant case the 

jurisdictional challenge arose after perfection of a final 

judgment; i.e., the Tenth Circuit Order and Judgment. Appellee's 

· Brief · at 11. Ci ting· Chicot County Drainage Dist. v. Ba·x·ter State 

Bank, 308 U.S. 371 (1940), they then assert that lack of subject 

matter jurisdiction is not a ground for collateral attack upon a 

final judgment. Appellee's Brief at 8. While in some cases the 

finding of jurisdiction which has become merged into a final 

judgment cannot be collaterally attacked, see 18 C. Wright & A. 

Miller, Federal Practice and Procedure, § 4428 at 271-286 (1981), 

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in the instant case there has been no final judgment to preclude 

the inquiry into jurisdiction. The Tenth Circuit's Order and 

Judgment reversing and remanding the case did not constitute 

judgment in favor of the Depex Partnerships. 

ALIENAGE JURISDICTION 

TIPCO next argues the district court erred in determining 

that it had alienage jurisdiction pursuant to 28 U.S.C. § 

1332(a) (2). We review this issue de novo, Boise City Farmers 

Coop. v. Palmer, 780 F.2d 860, 866 (10th Cir. 1985), and hold the 

district court did not have jurisdiction under this provision. 

28 u.s.c. § 1332(a)(2) provides the district courts shall 

have original jurisdiction of cases with the proper jurisdictional 

amount and in which the action is "between ... citizens of a State 

and citizens or subjects of a foreign state .... " The requirement 

of complete diversity, however, applies to the alienage provision 

of§ 1332(a)((2), F. & H.R. Farman-Farmaian Consulting Eng'rs Firm 

v. Harza Eng'g Co., 882 F.2d 281, 284 (7th Cir.), petition for 

cert. filed, 58 U.S.L.W. 3387 (U.S. Dec. 1, 1989) (No. 89-867) 

(1989), · and in . the .--·instant:---case, where TIPCO -;·· and the Depex 

Partnerships share Delaware citizenship, complete diversity is 

lacking, 2 even though one of the partners is a citizen of a 

foreign state. 

2 The fact that Depex 19, Inc., a Delaware corporation, was 

substituted for the Depex Partnerships does not affect our 

analysis. Because the substituted party is also a Delaware 

citizen under § 1332, the substitution does not remedy the 

jurisdictional defect. 

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The trial court recited that one . of . the two partners 

comprising Depex 9 and 10 general partnerships formed under Ohio 

law at the time the case was filed was "a West German equivalent 

of an American limited partnership." Order, July 8, 1987, at 6. 

Citing Sadat v. Mertes, 615 F.2d 1176 (7th Cir. 1980), the trial 

court noted: "[A]n alien domiciled in one of the United States is 

afforded access to the federal courts under 28 U.S.C. section 

1332(a)(2) even when he sues an American citizen residing in the 

same state." The trial court went on to say: 

[T]hese individual German nationals comprising this 

limited partnership entity having come to this country 

and formed the general partnerships of Depex Reina 9 and 

Depex Reina 10 in Ohio with Reina Oil & Gas Corporation, 

such citizens and/or entities did not lose their alien 

domicile. It is clear that for diversity of citizenship 

purposes a partnership is a citizen of each state of 

which a general partner is a citizen. Therefore, this 

court holds that it also has had jurisdiction throughout 

this action under 28 U.S.C. section 1332(a)(2). 

In its analysis, however, the trial court overlooked the Delaware 

citizenship of the other general partners of the Depex 

Partnerships, and did not discuss the requirement of complete 

diversity. Although the trial court appeared to use Sadat for the 

proposition that complete diversity is not a requirement under§ 

1332(a)(2), the Seventh Circuit clearly held to the contrary in 

Harza, 882 F.2d at 284. Consequently, Sadat is neither 

dispositive nor persuasive herein. 

DENIAL OF SET-OFF 

Finally, TIPCO argues the trial court erred in holding TIPCO 

was not entitled to a set-off for sums expended on Depex 

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Partnerships' behalf for costs of obtaining production from the 

wells. Because we hold the district court lacked subject matter 

jurisdiction, we do not address this issue. 

We REVERSE and REMAND to the district court with instructions 

to proceed consistent herewith. 

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