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Law360 (May 20, 2020, 4:51 PM EDT) -- An oilfield chemical company has asked a Texas state court to help it collect more than $1.3 million for the sale of mixing plants even though the chemical company can't acquire a title for one due to governmental shutdowns during the coronavirus pandemic.
Dallas-area Downhole Chemical Solutions LLC said in a Dallas County District Court petition on Tuesday that San Antonio-based PetroStar Services LLC had defaulted on a contract that called for it to pay $1.5 million for seven chemical mixing plants, with a $200,000 down payment. PetroStar was supposed to pay $125,000 monthly to Downhole for one year, but has made no payments, according to the petition.
After PetroStar defaulted on its first payment, it raised a question about Downhole's not holding the title to one plant, which PetroStar knew about and did not object to before entering the contract, according to the petition.
"[Downhole] continues to work to obtain title to final unit and believes it will be able to do so, but its efforts have been hampered by closures of governmental offices due to the COVID-19 pandemic," Downhole said in its Tuesday petition.
Downhole claims that PetroStar has refused to pay its $1.3 million debt even though it has taken possession of five plants and used spare parts from the other two to conduct business.
The plants Downhole sold to PetroStar all consist of a trailer, generator, three centrifugal pumps, a control room, flow meters, two blender mixers, a hydraulic pump and additional equipment, according to court documents.
The two companies entered into the purchase agreement in late January, with monthly payments set to begin Feb. 28, according to the petition. Downhole said that before signing the contract, it and PetroStar had discussed Downhole's not holding titles to two of the seven plants that were part of the agreement. Since the contract was signed, Downhole has acquired the title for one of those two, the company said.
PetroStar objected to Downhole's failure to hold titles to all the plants only after it received an April letter from the chemical company notifying it of its defaulted payment, according to the petition.
Downhole sent a letter to PetroStar on April 9 with notice of the company's default that had an April 25 deadline for PetroStar to pay off its debt, according to the petition. But PetroStar failed to do so.
Downhole is now seeking to collect the entire $1.3 million payment plus interest in full, instead of the monthly payments, according to the petition.
"Despite the notices, PetroStar has and continues to fail and refuse to remedy its defaults and pay the entire outstanding indebtedness due under the [promissory note]," Downhole said.
Counsel for Downhole and a representative for PetroStar did not immediately respond to requests for comment Wednesday.
Downhole is represented by Tate L. Hemingson and R. Price Anderson of Clark Hill Strasburger.
Counsel information for PetroStar was not immediately available Wednesday.
The case is Downhole Chemical Solutions LLC v. PetroStar Services LLC, case number DC-20-07026, in the 191st District Court in Dallas County, Texas.
--Editing by Peter Rozovsky.
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