Peterson v. Grayce Oil Co.

• Decision Date: 31 January 1931
• Docket Number: No. 12419.,12419.
• Parties: PETERSON et al. v. GRAYCE OIL CO. et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

37 S.W.2d 367

PETERSON et al. v. GRAYCE OIL CO. et al.^*

No. 12419.

Court of Civil Appeals of Texas. Fort Worth.

January 31, 1931.

Rehearing Denied March 7, 1931.

Appeal from District Court, Wichita County; W. W. Cook, Judge.

Suit by the Grayce Oil Company and another against Ed Peterson and others. Judgment for plaintiffs, and defendants appeal.

Reversed, and remanded for new trial.

De Montel & Sanford, of Wichita Falls, for appellants.

Kilgore & Rogers, of Wichita Falls, for appellees.

DUNKLIN, J.

The Grayce Oil Company and J. H. Cottom, plaintiffs in the trial court, owned an oil lease on about 49 acres of land situated in Wichita county, designated in the record as the Grayce-Cottom lease. Ed Peterson, J. A. McCarty, and F. B. Jackson, Jr., defendants in the trial court, owned another oil lease on about 100 acres of land adjoining that of the plaintiffs, and designated in the record as the McCarty lease. On both of those leases wells had been drilled which produced oil in paying quantities. In order to increase the production of oil from their wells, defendants installed what is known as a vacuum pump, and as a result of the use of the same the production from those wells was increased. The pump so installed was used for about 90 days, and during all of that time there was a decrease in the production from plaintiffs' wells. The plaintiffs then complained to the Railroad Commission of Texas of the action of the defendants in installing and using the vacuum pump, and, after an investigation by a representative of the Railroad Commission of the complaint so made, and which investigation disclosed the use of the vacuum pump by the defendants, the commission ordered a discontinuance of the pump, which order was respected by the defendants.

The plaintiffs instituted this suit against the defendants to recover the value of the oil which they alleged they had lost by reason of the operation by the defendants of the vacuum pump; also for the alleged depreciation in the market value of their lease by reason of the using of the vacuum pump, upon the theory, as reflected in the allegations, that the increased flow of oil caused by the pump had opened subterranean channels between the two leases through which the oil from plaintiffs' lease would and did continuously flow and thereby drain the plaintiffs' lease of oil in excess of any possible drainage through natural agencies which would be operative in the absence of such pump; also for exemplary damages upon allegations that the defendants' action in installing and using the vacuum pump was taken knowingly and with the willful intention of wrongfully appropriating to the defendants oil from plaintiffs' lease to which they were entitled and which they would have enjoyed but for the use of such vacuum pump.

This appeal has been prosecuted by the defendants from a judgment awarding plaintiffs both actual and exemplary damages.

The trial of the case was before a jury, and the following are the issues submitted to them, with their findings thereon, together with the court's instructions to the jury in connection with those issues:

"1. You are instructed that the term `proximate cause,' as that term is used in this charge, means the moving and efficient cause, without which the injury in question would not have happened; an act or omission becomes the proximate cause of an injury whenever such injury is the natural and probable sequence of the act or omission in question, and one that ought to have been foreseen by a person of ordinary care and prudence in the light of the attending circumstances.

"2. You are instructed that in law malice denotes a wrongful act intentionally done without just cause or excuse. If an act is committed deliberately with a present consciousness of invading another's right, such act is deemed in law to have been committed maliciously. Malice may be inferred from circumstances which show either a reckless disregard of the rights of another or a reckless disregard of consequences to another.

"3. You are instructed that if you find actual damage from a preponderance of the evidence, and you further find that such damage resulted proximately from the malicious acts of the defendants, then you may in your discretion, assess exemplary damages by way of punishment and for the purpose of setting a wholesome example to others.

"Issues.

"1. Do you find from a preponderance of the evidence that the pump installed on the McCarty lease on or about April 6, 1929, as operated, created a vacuum? Answer: Yes.

"2. Do you find from a preponderance of the evidence that during the time the pump installed on the McCarty lease was operated there was a decline in the production of oil from the Grayce-Cottom lease?

"3. If you have answered special issue No. 2 `No,' then you need not answer this issue, but if you have answered it `yes,' then answer:

"Do you find from a preponderance of the evidence that any part of such decline in production on the Grayce-Cottom lease was proximately caused by the operation of the pump on the McCarty lease? Answer: Yes.

"4. If you have answered the preceding interrogatory `Yes,' then answer:

"From a preponderance of the evidence what amount of such decline in production, if any, on the Grayce-Cottom lease, was proximately caused by the operation of such pump on the McCarty lease, giving your answer in barrels? Answer: 726 barrels.

"5. If you have answered special issue No. 3 `yes,' and have given a number of barrels in your answer to No. 4, then answer:

"From a preponderance of the evidence, what do you find to be the reasonable cash market value of the oil described in your answer to special issue No. 4? Answer: $1,065.87.

"6. If you have answered the preceding interrogatory setting an amount in dollars, then answer the following:

"From a preponderance of the evidence, what amount of money would have been reasonably necessary to have been expended by Grayce Oil Company and Cottom in producing and marketing such additional oil, if any, as you have found in answer to your special issue No. 4? Answer: $44.99.

"7. From a preponderance of the evidence, do you find that the operation of the pump on the McCarty lease proximately caused any decrease in the cash market value of the Grayce-Cottom lease at the time in July, 1929, when such pump on the McCarty lease was disconnected. Answer: Yes.

"8. If you have answered the immediately preceding question in the affirmative, then:

"What amount do you find from a preponderance of the evidence the operation of said pump reduced the cash market value of Grayce-Cottom lease as of the time in July, 1929, when said pump was disconnected? Answer: $10,320.00.

"9. Do you find from a preponderance of the evidence that defendants maliciously applied vacuum to their wells? Answer: Yes.

"10. What amount, if any, do you in your discretion assess against the defendants as exemplary damages? Answer: $5,000.00."

Upon those findings, the court rendered judgment in plaintiffs' favor against the defendants for the aggregate sum of $16,340.88.

The record in this case is voluminous, and the briefs of counsel cover several hundred printed pages, together with supplemental typewritten pages, all of which show diligent research and able presentation of authorities covering every possible phase of the issues involved. It would unduly prolong this opinion to give a discussion of the numerous propositions and counter propositions presented; nor do we deem it necessary so to do. Hence we will confine this opinion to a discussion of what we deem to be the controlling issues only.

The issues of fact so found by the jury were tendered in plaintiffs' pleadings, and they also specially pleaded Rule 40, adopted by the Railroad Commission of Texas, which reads as follows:

"Rule 40. Vacuum Pumps Prohibited Except in Certain Cases.—The future installation of vacuum pumps or other devices for the purpose of putting a vacuum on any gas or oil bearing stratum is prohibited, except as follows:

"(a) In the case of casinghead gas where the same is utilized vacuum may be used, but not more than sufficient to gather the same into the lines and deliver it at the plant. (b) In fields which are depleted or practically depleted, but no vacuum pump shall be installed under authority of subdivision `b' without a permit from the Railroad Commission after application first made and notice to adjacent lease owners or operators.

"Nothing in this rule shall prevent the use of vacuum in any field where the same is now in use, but the Commission shall have the right, upon complaint, or of its own motion to order the discontinuance or reduction of same, if it shall determine that such use is injurious to the producing formations or in conflict with the Conservation laws of this State."

It was further alleged that that rule was made and promulgated by the Railroad Commission in accordance with the statutes of the state; and an alleged violation of the provisions of that rule was the basis of plaintiffs' suit for damages.

The following are provisions of our Revised Statutes by virtue of which the Railroad Commission adopted the Rules and Regulations, including Rule 40 quoted above:

Article 6023. "Power and authority are hereby conferred upon the Railroad Commission of Texas, over all common carrier pipe lines conveying oil or gas in Texas, and over all oil and gas wells in Texas, and over all persons, associations or corporations owning or operating pipe lines in Texas, * * * and all such persons, associations and corporations and their pipe lines, oil and gas wells are subject to the jurisdiction conferred by law upon the Commission, and the Commission is authorized and empowered to make all necessary rules and regulations for the government and regulation of such persons, associations and corporations and their operations, and the Attorney General shall enforce the provisions of this title by injunction or other...