Gulf Land Co. v. Atlantic Refining Co.

• Citation: 113 F.2d 902
• Decision Date: 16 September 1940
• Docket Number: No. 9514.,9514.
• Parties: GULF LAND CO. v. ATLANTIC REFINING CO. et al. RAILROAD COMMISSION OF TEXAS et al. v. SAME.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

113 F.2d 902 (1940)

GULF LAND CO. v. ATLANTIC REFINING CO. et al. RAILROAD COMMISSION OF TEXAS et al. v. SAME.

No. 9514.

Circuit Court of Appeals, Fifth Circuit.

July 23, 1940.

Rehearing Denied September 16, 1940.

COPYRIGHT MATERIAL OMITTED

W. B. Harrell and Russell Allen, both of Dallas, Tex., and W. W. Heath, of Austin, Tex., for appellant Gulf Land Co.

Gerald C. Mann, Geo. W. Barcus, James P. Hart, Ed. Roy Simmons, and Edgar W. Cale, all of Austin, Tex., for appellants Railroad Commission of Texas and others.

John W. Stayton, of Austin, Tex., for appellees Atlantic Refining Co. and others.

Before FOSTER, HUTCHESON, and HOLMES, Circuit Judges.

HUTCHESON, Circuit Judge.

Brought as a statutory suit under Section 8, Article 6049c, Vernon's Texas Statutes 1936,¹ and also as a suit in defense of rights granted by the First Article of the State Constitution, Vernon's Tex.St. 1936, and the 14th Amendment to the Federal Constitution, the suit was to hold invalid and cancel an order granting a drilling permit to the Gulf Land Company, and to enjoin the production of oil from the well it authorized. The claim was that the order, nominally "to prevent confiscation of property and to prevent physical waste," could not stand, because (1) the issues involved in the application and hearing had been finally adjudicated adversely in Atlantic Refining Company v. Gulf Land Company et al., Tex.Civ.App., 122 S.W.2d 197, and (2) if the judgment there was not res judicata, the finding and order that the granting of the permit would prevent waste or confiscation of property is without support in the evidence.

The defense was (1) lack of jurisdictional amount, (2) a denial that the former judgment was res judicata, and (3) an insistence that the commission's finding and order that the permit was necessary to prevent waste and confiscation was supported by evidence and so supported, must stand.

The District judge, agreeing with plaintiff that there was diversity and the requisite jurisdictional amount, that the pleaded judgment was a bar, and that if not, the commission's finding and order was without support in the evidence found, and entered judgment, for plaintiff, for cancellation of permit and for injunction as prayed. Defendants, appealing from the judgment, urge upon us that the court was without jurisdiction for want of a sufficient amount in controversy and that if there was jurisdiction, there was error in sustaining plaintiff's plea of res judicata and its claim that the order for the permit was entered without substantial evidence to support it.

We do not find it necessary to determine whether, as appellees insist, the jurisdictional amount is determined by the value of the well for which the permit was granted or, as appellants insist, by the amount of damage the operations under the permit will cause appellees. For, we think it certain that appellees' pleadings and proof satisfy the jurisdictional requirements of either theory, Chesbrough v. Northern Trust Co., 252 U.S. 83, 40 S. Ct. 237, 64 L.Ed. 470; Saint Paul Mercury Indemnity Co. v. Cab Company, 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845; American Smelting & Refining Co. v. Godfrey, 8 Cir., 158 F. 225, 14 Ann.Cas. 8; McNutt v. General Motors Acceptance Corporation, 298 U.S. 178, 179, 56 S.Ct. 780, 80 L. Ed. 1135; KVOS, Inc. v. Associated Press, 299 U.S. 269, 57 S.Ct. 197, 81 L.Ed. 183; and that the action of the District Judge in assuming and retaining jurisdiction was right.

But on the merits the matter stands differently. Under the settled law of Texas as carefully laid down in Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73, and in later cases citing it, it is beyond question that the commission is primarily charged with the duty of, and vested with a wide discretion in, determining whether a permit should be granted. It is equally beyond question that in the special statutory action, to set the order aside, provided by Article 6049c,² unless it appears that its finding and order is unsupported by substantial evidence, the order must stand. For the court may not substitute its judgment or opinion for that of the commission. It is settled too in the Gulf Land Case³ and in the later cases citing it⁴ that though the judicial rule of res judicata is not applied, where there has been no litigation, to prevent the commission from hearing again an application which it has denied once or even twice, it does apply in full force where there has been a judgment, unless the applicant shows that different conditions have arisen and are operative since the former hearing. But while these cases make it plain that the rule of res judicata is applied in these statutory suits, they make it equally plain that since what is in issue in them is the validity of the finding and order of the commission, there is res judicata only as to the issue or issues on which the commission actually rests its findings and order.⁵ In the Gulf Land Company case, relied on here, as res judicata or estoppel by judgment, the commission's order, then struck down, was based alone on prevention of confiscation, and it was there determined that only that matter was at issue in the suit. Appellants therefore are right in their contention that the judgment in that case is not res judicata as to the action of the commission, on this hearing in granting the permit on the grounds of waste. But it is appellees who are right and appellants who are wrong in respect of appellees' claim that the evidence shows new conditions upon the issue of confiscation which prevent the judgment relied on as res judicata on that issue from having that effect. What was really decided in that case was that under Rule 37 and the rule of May 29, 1934, the well permit must be considered as applied for, not for the segregated 1.11 acre tract, a subdivision of a 2.35 acre tract, itself a subdivision of a 6.88 acre tract, but for the 6.88 acre tract as a whole, and that the wells already on the 6.88 acre tract were in such disproportion to those on adjoining tracts that on the evidence it must be said as matter of law that it was not necessary to permit the drilling of another well thereon to prevent confiscation. The facts which appellants claim make the situation different now from what it was when the permit was granted before do not do so. They merely show that there has been a lessening of some of the great disadvantages, under which owners of tracts adjoining the 6.88 acre tract have been laboring. They do not show that all of these disadvantages have been taken away,...