Reconstruction Finance Corp. v. Service Pipe Line Co.

• Decision Date: 25 August 1952
• Docket Number: No. 4277.,4277.
• Parties: RECONSTRUCTION FINANCE CORP. v. SERVICE PIPE LINE CO. et al.
• Court: U.S. Court of Appeals — Tenth Circuit

198 F.2d 775 (1952)

RECONSTRUCTION FINANCE CORP. v. SERVICE PIPE LINE CO. et al.

No. 4277.

United States Court of Appeals Tenth Circuit.

February 29, 1952.

On Rehearing August 25, 1952.

David A. Richardson, Oklahoma City, Okl. (George E. McConley and Arthur J. Harvith, Washington, D. C., on the brief), for appellant.

Ray S. Fellows and T. W. Arrington, Tulsa, Okl. (Cecil L. Hunt and Charles R. Fellows, Tulsa, Okl., on the brief), for appellee.

Before HUXMAN, MURRAH and PICKETT, Circuit Judges.

MURRAH, Circuit Judge.

The Reconstruction Finance Corporation, as successor to the Defense Supplies Corporation, brought this action against the Stanolind Pipe Line Company, to recover $134,252.00 paid by the Defense Supplies Corporation to Stanolind (now Service Pipe Line Company) as subsidy on oil purchased by Stanolind from the Continental Oil Company, in the Montague Oil Field of Texas, from August 1944 to November 1946.

Within the framework of the pleadings, it is agreed that on June 28, 1944, the director of the Office of Economic Stabilization issued a valid directive to the Director of the Office of Price Administration, directing the Price Administrator to increase the existing price of crude oil produced from marginal oil fields. To avoid the impact of such increases on the war-time price structure, the Secretary of Commerce was directed to cause one of the corporations organized under Section 5d of the Reconstruction Finance Corporation Act, as amended June 25, 1940, 54 Stat. 573, to exercise its authority under Section 2(e) of the Emergency Price Control Act of 1942, 56 Stat. 26, 50 U.S.C.A.Appendix, § 902, to pay the producers or reimburse the purchasers of such oil, in the form of subsidies, the amount paid in excess of the established maximum price prior to the authorized increases.

Pursuant to the directive, and on July 10, 1944, the O. P. A. issued an amended RMPR 436, increasing the price of crude oil in stripper fields, and effective August 1, 1944, adopted another amendment to RMPR 436, listing the stripper fields and the amount of the increase in each, including the pools in Montague County, Texas, from which the oil in question was purchased by Stanolind. RMPR 436, as thus revised and amended, made such prices applicable to all sales and deliveries of crude petroleum, either by producers, sellers, refiners, or any other person, except crude petroleum sold to a customer for a purpose other than the production of more than one petroleum fraction thereof. In other words, the prescribed prices were applicable only to crude oil produced and sold for refinery purposes. The prices on all other petroleum products were regulated by MPR 88.

Also pursuant to the directive of the Office of Economic Stabilization, the Secretary of Commerce designated the Defense Supplies Corporation as the corporation to administer the payment of the subsidies, and the Defense Supplies Corporation thereupon issued its Regulation No. 7, effective August 1, 1944, providing the details and the conditions under which the subsidy would be paid.

While these regulations, as revised and amended, were in effect, and during the period involved here, Stanolind transported through its extensive pipe line network to refineries or connecting carriers, a total of 242,645,976 barrels of crude oil, 15,340,485 barrels of which was oil from stripper fields on which a subsidy was payable. All of such oil was propelled through the pipe line by pumps at pumping stations owned and operated by Stanolind at points along its lines. In the operation of such pumps, Stanolind used crude petroleum for fuel, taking the same from the stream of petroleum passing through its pipe lines. Included in the oil purchased and transported by Stanolind during this period were 435,937 barrels from leases operated by the Continental Oil Company in Montague County, Texas, for which it paid Continental the subsidy price prescribed by Amendment 4 to RMPR 436, or a total sum of $139,489.00. This particular oil was purchased to replace the crude petroleum taken from the lines and used for fuel to operate the pipe line pumps, or lost by temperature changes, leakage or evaporation. Such oil was run into Stanolind's pipe line and commingled with other petroleum being transported by it to refineries.

Stanolind filed monthly claims on prescribed forms under oath to the Defense Supplies Corporation, and later to the R. F. C. as its successor, for reimbursement of the subsidies, and was paid the total sum of $134,252.00. After an examination of Stanolind's books, the R. F. C. reached the conclusion that the subsidies in question, having been paid on oil purchased to replace oil taken from Stanolind's pipe line and used as fuel and for other purposes, it bore no subsidy under RMPR 436. The R. F. C. thereupon refused to pay the last submitted claim in the sum of $5,237.00 and demanded that Stanolind repay the sum of $134,252.00 previously paid as subsidies. When Stanolind refused to refund this amount, the R. F. C. brought this suit in the United States District Court for the Western District of Oklahoma, alleging substantially the foregoing facts. Stanolind answered denying that the oil in question was used for fuel, or that it bore no subsidy, and cross-claimed for the $5,237.00.

Noting that the oil used for the operation of the pumps was incidental to the transportation of the oil by pipe line, and in accordance with the established custom in the industry, the court was of the opinion that oil used for this purpose was not fuel oil within the meaning of RMPR 436. And, it also concluded that the R. F. C. had failed to sustain the burden of proving that the oil in question was in fact used for fuel.

On appeal, the R. F. C. challenges the jurisdiction of the court to render any judgment except for the amounts paid by the R. F. C. as subsidy, the refund of which is demanded. It is said in that connection that the determination by the R. F. C. that Stanolind was not entitled to a subsidy on the oil in question, and the demand for the repayment of the subsidy, was an order under Section 2(e) of the Emergency Price Control Act of 1942, the validity of which could be challenged only in the Emergency Court of Appeals; that the District Court was therefore without jurisdiction to consider the validity of the R. F. C.'s determination and demand for refund.

It is of course too well settled to admit of discussion that the Emergency Court of Appeals, and the Supreme Court on review, are vested with sole and exclusive jurisdiction to review the validity of orders, regulations and price schedules established or entered by the proper administrative body under Section 2 of the Emergency Price Control Act. Lockerty v. Phillips, 319 U.S. 182, 63 S.Ct. 1019, 87 L.Ed. 1339; Yakus v. United States, 321 U.S. 414, 64 S.Ct. 660, 88 L.Ed. 834; Bowles v. Willingham, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892. And, the jurisdictional limitations thus imposed may be noticed at any stage of the proceedings by either party or the court. If, therefore, the demand for refund of the subsidy by the R. F. C. can be said to be an order under Section 2(e) of the Emergency Price Control Act, its validity, force and effect were not open to attack in the trial court.

In defense of the trial court's judgment, appellee denies that this is a suit attacking or testing the validity of an order of the R. F. C., but says it is an action by the R. F. C. in its capacity to sue and be sued for a money judgment, with a compulsory counterclaim necessarily presented by Stanolind under Rule 13(a), F. R. C. P., 28 U.S. C.A. In short, it says that no order is invoked or involved as a basis for the suit.

Authority for the payment of the subsidies in question is found in Section 2(e) of the Emergency Price Control Act, Title 50 App. 902(e), and an order relative to the payment or nonpayment of that subsidy would therefore be an order issued under Section 2(e), of which the Emergency Court of Appeals would have exclusive jurisdiction. See Duncan Coffee Co. v. R. F. C., Em.App., 178 F.2d 926; Tambasco v. R. F. C., 2 Cir., 178 F.2d 283; Armour & Co. v. R. F. C., Em.App., 162 F.2d 918; Merchants Packing Co. v. R. F. C., Em.App., 176 F.2d 908. The subsidy in question was paid in pursuance of Regulation 7 of the Defense Supplies Corporation, under authority of Section 2(e), on a form prescribed by it. In the claim, Stanolind agreed to furnish, promptly upon request, such information, data or documents in substantiation of amounts claimed as might be required; and Regulation 7 specifically provided that the Defense Supplies Corporation might, at any time, cause to be made, an examination or audit of any books, records or other supporting data deemed necessary to verify further the validity and correctness of any claim filed under the Regulation. If any claim heretofore paid was found incorrect upon examination or audit, the amount of such payment became due and payable to the Defense Supplies Corporation, and "shall be returned to it upon demand."

The R. F. C. sought a judgment in the District Court for the amount of the subsidy paid, alleging in effect that Stanolind wrongfully and unlawfully received subsidies in the amount of $134,252.00. While no formal order or determination was directly or specifically pleaded, the complaint did allege that by letter dated October 18, 1946, the R. F. C. advised Stanolind that its claim in the amount of $5,237.00, filed subsequent to July 1946, was disallowed, and requested Stanolind to refund all sums previously claimed and paid to it. The parties stipulated for the trial that from an examination and audit of the books, "plaintiff reached the conclusion, the correctness of which is denied by defendant, that the oil which was the basis of said claims had been purchased and used as fuel, or to replace oil taken from defendant's pipe line and burned as fuel, and for other purposes which...