Gulf Oil Corp. v. State
| Decision Date | 28 March 1961 |
| Docket Number | No. 38219,38219 |
| Citation | 360 P.2d 933,1961 OK 71 |
| Parties | GULF OIL CORPORATION, Plaintiff in Error, v. STATE of Oklahoma and Ferrill H. Reqers, Conservation Attorney for the Corporation Commission of the State of Oklahoma, Defendants in Error. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
1. It is a general rule that a corporation is a distinct legal entity separate and apart from other legal entities, but such distinct legal entity may be avoided if it appears from an examination of the entire facts that the separate corporate existence is a design or scheme to perpetrate a fraud, or that one corporation is so organized and controlled and its affairs so conducted that it is merely an instrumentality or adjunct of another corporation.
2. The authority of the Corporation Commission relating to the conservation of oil is definitely limited to the power expressly or by necessary implication granted to it.
3. Our laws do not by express terms or by necessary implication, empower or authorize the State Corporation Commission to require or direct a purchaser of crude oil, who is only a purchaser, to purchase all the oil allowed under an order fixing allowables, and an order attempting to require or direct a purchaser to make such purchase unless relieved from doing so by the Commission, is void.
4. Where the State Corporation Commission issues an order and a portion thereof is void, one may not be punished for contempt for disobedience of that portion of the order which is void.
Appeal from the Corporation Commission of the State of Oklahoma.
Appeal from an Order of the Corporation Commission of the State of Oklahoma, adjudging Gulf Oil Corporation to be in contempt, for violating one of said Commission's previous allowable orders, and assessing a fine against said corporation. From said Order, Gulf Oil Corporation appealed. Reversed.
Richard B. McDermott, Tulsa, Okl., James B. Diggs, Oklahoma City, Roger K. Allen, Denver, Colo., T. Murray Robinson, Oklahoma City, for plaintiff in error.
Ferrill H. Rogers, Conservation Atty. for Corp. Commission, Mac Q. Williamson, Atty. Gen., Jake Blevins, Ada, Sp. Atty., James C. Hamill and Charles R. Nesbitt, Oklahoma City, for defendants in error.
Busby, Stanfield, Deaton & West, by Orel Busby, Ada, for amicus curiae, Pontotoc County Producers Ass'n, and Board of County Com'rs of Pontotoc County.
Harry Johnson, Oklahoma City, for Oklahoma Education Association.
This is an appeal by Gulf Oil Corporation from an order entered on January 29, 1958, by the State Corporation Commission adjudging Gulf in contempt for violating Order No. 35172, entered by the Commission in July, 1957.
Order No. 35172, determined the market demand for crude oil of Oklahoma origin for the months of August and September, 1957, and well production allowables were fixed accordingly. Paragraph 26 of the order provided:
'That all takers and/or purchasers of crude oil in Oklahoma shall take the full amount of oil allowed by this order unless relieved therefrom by this Commission after notice and hearing as provided for by law or unless previously granted an exception to this paragraph for the specific month the purchaser proposes to initiate purchaser proration.'
Gulf did not make application nor was it granted permission to initiate purchaser proration and did not purchase the full amount of oil allowed by the order, although prior to entry of Order No. 35172, Gulf did advise the Commission that it would reduce its purchases. On October 9, 1957, a Complaint was filed and on the same date a Citation for Contempt was issued which charged Gulf will willfully and intentionally violating Order No. 35172, and specifically paragraph 26 set forth above.
The complete order adjudging Gulf to be in contempt is as follows:
Order'It Is Therefore Ordered Adjudged and Decreed That the respondent, Gulf Oil Corporation, be and it is assessed and ordered to pay a fine of $5,000.00 as for contempt on account of the disobedience and violation by respondent of Order No. 35172, commencing on August 1, 1957, wherein respondent reduced its purchases of crude oil from leases in Oklahoma to an amount less than the amount of oil allowed by such order to be produced therefrom, without having obtained permission from the Commission to make such reduction in purchases, all as set out at length in the preceding findings.
'It Is Further Ordered that on account of the continuation of such disobedience and violation of Order No. 35172 from August 2, 1957 to and including September 30, 1957, respondent is assessed and ordered to pay additional fines of $5,000.00 per day, as for contempt, for a total of sixty additional days the same violation and disobedience on the part of respondent continued.
'The total fines assessed against respondent for the disobedience and violation of Order No. 35172, commencing August 1, 1957, and continuing through September 30, 1957, shall be the sum of $305,000.00.
'It Is Further Ordered that respondent pay all costs of this proceeding, hereafter to be taxed as provided by law.
'Done and Entered by the Corporation Commission of the State of Oklahoma this 29th day of January, 1958.'
The Commission and Gulf do not agree as to what alleged violation or violations formed the basis for the Complaint or what specific violation or violations formed the basis for the Order of Contempt. Commission addresses its brief to a 'Contempt Citation for Willful Definance of Order Enforcing Ratable Taking of Crude Oil', and in Proposition I contends that it is authorized by the Constitution and Statutes of Oklahoma to enter an order designed to enforce ratable taking, such as paragraph 26 of Order No. 35172.
On the other hand, Gulf addresses its brief to an appeal from a 'Contempt Citation for Violation of an Order to Buy Crude Oil.' In Gulf's Proposition I it is contended the Commission is without authority under the Constitution and Statutes of Oklahoma to enter the order which it has been charged to have violated, or to make any order regulating or making mandatory the purchase of crude oil. In this connection, Gulf argues that the contempt conviction cannot stand unless the order to purchase is valid as one may not be punished for contempt for disobedience of a void order of the Commission; that the conservation acts authorize the Commission to make rules, regulations, and orders for the prevention of waste and ratable taking in the production of oil, but they do not apply to the purchase, sale, or transportation of oil.
Before determining the violation or violations which formed the basis for the Complaint and the Order of Contempt, we must first determine if Gulf is a 'Common Carrier' and 'Common Purchaser' as contended by the Commission. This is necessary for the reason the allegations in the Complaint charge and the Commission now contends that Gulf Oil Corporation, plaintiff in error, and its wholly owned subsidiary, Gulf Refining Company, are takers and purchasers of crude oil, as defined by Paragraph 26, and are common purchasers and common carriers of crude oil, by pipe line and otherwise, as defined by statute. Also, in Commission's findings it was specifically found that Gulf is a purchaser and taker of crude oil as defined by paragraph 26, and also a common carrier and common purchaser of crude oil as those terms are used and defined in the Constitution and Statutes of Oklahoma.
In this connection, Commission contends Gulf clearly comes within the statutory definition of a common purchaser as a company 'exercising * * * the right to carry petroleum * * * by pipeline * * * as owner, lessee, licensee, or by virtue of any right of claim * * *, which is engaged in the business of purchasing crude oil * * *.' That Gulf purchases crude oil in the field and transports it by pipe line through its wholly owned subsidiary, Gulf Refining Company.
According to the stipulated facts Gulf Oil Corporation is a separate corporate entity from Gulf Refining Company, which owns and operates the pipe lines through which Gulf Oil Corporation's crude oil purchases are transported; Gulf Oil Corporation does not engage, either in Oklahoma or elsewhere, in the transportation of crude oil by pipe line for hire or otherwise, nor has it ever engaged in such transportation; Gulf Refining Company's activities and operations are those of an interstate common carrier of crude oil by pipe line for hire; Gulf Oil Corporation owns all of the corporate stock of Gulf Refining Co., except directors' qualifying shares, but the two corporations do not have the same directors, officers or operating personnel.
It is the general rule that a corporation is a distinct legal entity separate and apart from other legal entities, but this rule has its limitations. The distinct legal entity may be avoided if it appears from the examination of the entire facts, either (1) that the separate corprate existence is a design or scheme to perpetrate fraud, or (2) that one corporation is so organized and controlled and its affairs so conducted that it is merely an instrumentality or adjunct of another corporation. In other words, it must appear that one corporation is merely a dummy or sham. Wallace v. Tulsa Yellow Cab Taxi and Baggage Co., 178 Okl. 15, 61 P.2d 645; Gibson Products Co. of Tulsa v. Murphy, 186 Okl. 714, 100 P.2d 453, and Mid-Continent Life Ins. Co. v. Goforth, 193 Okl. 314, 315, 143 P.2d 154.
From an examination of the entire record we can find no evidence or reasons why the general rule that a corporation is a distinct legal entity separate and apart from other legal entities should not be applicable in the case at bar, for it does not appear that the corporate existence of these two Corporations was designed to perpetrate fraud, or that one is so organized that it is a mere instrumentality or adjunct of the other, or that one is merely a dummy or sham of the other.
Therefore, if Gulf is a 'Common Purchaser' ...
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