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Texas American Energy Corporation v. Citizens Fidelity Bank & Trust Company

Supreme Court of Kentucky
736 S.W.2d 25 (1987)


Texas American Energy Corporation (Texas American) (plaintiff) was the successor by purchase to property of Western Kentucky Gas Company (Western). Western’s business model was purchasing natural gas from suppliers and reselling the gas to consumers. Western held purchased gas in underground storage facilities before the gas was resold. Texas American signed a loan agreement with Citizens Fidelity Bank & Trust Company (Citizens) in order to fund Western’s purchases of gas from its supplier. As security for the loan, Texas American put up an interest in the stored gas that Western has already purchased. Texas American filed a petition in the Hopkins Circuit Court seeking a declaratory ruling that the stored gas was personal property because it had been extracted from the ground. Citizens argued that because it was returned to the ground, the gas reverted to a real estate interest requiring a real estate mortgage. The parties did not dispute that once in Western’s storage reservoirs, gas could not escape. The trial court found in favor of Texas American and was reversed on appeal. The Supreme Court of Kentucky granted review.

Rule of Law


Holding and Reasoning (Per curium)

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