H. & H. SUPPLY CO. v. United States

• Decision Date: 25 March 1952
• Docket Number: No. 4335.,4335.
• Parties: H. & H. SUPPLY CO. et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Tenth Circuit

194 F.2d 553 (1952)

H. & H. SUPPLY CO. et al. v. UNITED STATES.

No. 4335.

United States Court of Appeals Tenth Circuit.

February 21, 1952.

Rehearing Denied March 25, 1952.

G. C. Spillers, Jr., Tulsa, Okl., and Paul Brown, Oklahoma City, Okl. (G. C. Spillers, Tulsa, Okl., on the brief), for appellants.

S. Billingsley Hill, Atty., Department of Justice, Washington, D. C. (Wm. Amory Underhill, Asst. Atty. Gen., Curtis P. Harris, Special Atty., Department of Justice, Oklahoma City, Okl., and Roger P. Marquis, Atty., Department of Justice, Washington, D. C., on the brief), for appellee.

Before PHILLIPS, Chief Judge, and BRATTON and HUXMAN, Circuit Judges.

HUXMAN, Circuit Judge.

This was a condemnation proceeding instituted by the United States in the United States District Court for the Northern District of Oklahoma against the appellants, H. & H. Supply Company, a Corporation, and H. Waggoner, to acquire their interest in oil and gas leases covering 480 acres of land in Osage County, Oklahoma. A declaration of taking, accompanied by payment of $84,607, the estimated compensation, was filed in the court and this amount was paid over to appellants. Following preliminary proceedings not in issue, the cause ultimately came on for trial by jury to fix a fair and reasonable value of the estate taken by the Government. The jury fixed the fair cash market value of the leasehold estate, as of the time of taking, at $15,000. A motion for a new trial was overruled and judgment was entered for the Government for $69,607, the difference between the amount deposited in the registry of the court and the amount of the jury's verdict, and this appeal followed.

Fourteen assignments of error are set out in the abstract, but in the brief they are all stated under the one contention that the trial court committed reversible error in admitting incompetent, irrelevant and prejudicial evidence offered by the Government, over the objections of appellants, which resulted in a grossly inadequate award of damages. This general assignment is argued under four separate contentions, which will be discussed in paragraphs, numbered 1 to 4, inclusive.

The oil and gas leases were formerly owned and operated as oil producing properties by the Blackwell Oil and Gas Company from 1940 until April 1, 1948, when they were sold together with all the operating equipment thereon to appellants for $55,000. R. C. Jones, President of Blackwell Oil and Gas Company, testified that it advertised the property for sale; that there were several bidders; that appellants were the highest bidder and that in his opinion $55,000 was the fair market value of the property when sold. In addition, David Dooley and C. V. Sidwell, two expert oil and gas witnesses, testified for the Government. Dooley valued the property at $31,000. Of that value, he ascribed $17,000 to the equipment and the balance to the value of the leases. Sidwell valued the property at $32,500. Of this value, he ascribed $20,000 to the equipment and the balance to the value of the leases. The salvage equipment was subsequently sold by appellants for $34,000. Appellants called five witnesses to establish the value of the leases. Three testified that the property was worth from $150,000 to $200,000, one that it was worth $182,750 and another that it was worth $176,700. One witness who fixed the value at from $150,000 to $200,000 testified that appellants might realize $1,000,000 net from the property.

1. In the course of its opening statement to the jury, the Government stated that Blackwell Oil and Gas Company, the owner from whom appellants purchased the property, during its ownership and operation derived therefrom a net profit of $84,260. During the trial the Government was permitted to introduce in evidence a transcript in the nature of a balance sheet from the books and records of Blackwell Oil and Gas Company, purporting to show the income derived from the property during its ownership and operation thereof. In his argument to the jury, the attorney for the Government referred to the net profit which the former owner of the property derived from it. Objection was made to his statement to the jury, to the offered exhibit and to his argument to the jury, as outlined above. Each objection was overruled and error is assigned with respect to that ruling by the court. It is argued that evidence as to the profits realized by the Blackwell Oil Company was irrelevant to the issues presented to the jury for determination. The objections to this evidence and of the statements of Government's counsel to the jury with respect thereto and of his argument to the jury with respect to this evidence is that such evidence and statements by Government's counsel related to primary recovery of oil, while the question before the jury was the value of the leases for secondary recovery purposes by water-flood operations. Appellants, however, were contending that the leases had substantial value for both primary and secondary recovery purposes. They testified that they had been earning a net return of $700 per month from their operations and that the leases were being profitably operated at the time of taking. Counsel for appellants during the trial, in response to a question, stated that they were contending that the leases had substantial value for both primary and secondary recovery.

Profits derived from the use of property being condemned may be shown as evidence of value.¹ So also the price paid for property is likewise evidence of value, if not too remote in point of time.² Since the value of the property for both primary and secondary recovery was in issue, this evidence was properly received. There could be no objection thereto or to the statement of counsel to the jury in his opening statement or in his argument to the jury with respect to such evidence.

2. The witness, Dooley, was an experienced petroleum engineer. As pointed out, he testified that the total value of the property was $35,000; that in his opinion the property had no value for secondary recovery purposes from water-flooding operations. He gave his reasons for this testimony and outlined the factors upon which he based his conclusions. On direct examination, he testified that his opinion was based upon a visit to the property in question, upon available records, the same being the department's well records, and the geology and nature of the sand. On cross-examination, he testified that the geology must be satisfactory, both with respect to the dipping of the body as well as to the configuration of the field itself; that this formation was narrow, dipping toward the South end. Continuing his cross-examination he testified that a further consideration was that contrary to some testimony his belief was that pressure had been used to inject water into the wells. Asked where he got his information, he stated that in the field he saw the equipment and that the pressurized equipment was worn out from "the running thereof" and that in addition the pumper on the lease told him that the pressurized equipment had been used. A motion to strike all of the evidence of the witness on the ground that "It was at least admittedly partially based on hearsay" was overruled. The court carefully limited the testimony to informing the jury upon what the witness had relied in reaching his conclusions.

3. Sidwell testified that he examined this property, together with other property in the Hulah Dam project, many times with the idea of appraising the mineral values; that he secured his information from all available sources, including, in the case of this property, information available from the Blackwell Oil and Gas Company, from its records, from its employees, from the records of the core engineers, from the records of the Osage Indian Agency — production well log records, maps and from other companies in the area that had available information on the entire field, including the leases in question. He testified that he had had experience in secondary recovery and had investigated the possibility of such recovery in this field. He likewise gave it as his opinion that the leases had no value for secondary oil recovery. The objections to Sidwell's testimony were that he "predicated his opinion on his inspection of the leases in question, plus information which he assembled from various hearsay sources"; that "he made no attempt whatsoever to differentiate between his opinion based on his personal examination or to state what the same consisted of and the other information which he assembled from various hearsay sources."

The testimony of Dooley and Sidwell with respect to the sources of their information was not offered for the purpose of establishing the truth of the information received by them. They were testifying as valuation experts and the sole purpose of this testimony was to establish the sources upon...