Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp.

• Decision Date: 13 November 1968
• Docket Number: No. B-443,B-443
• Citation: 435 S.W.2d 854
• Parties: SCHLUMBERGER WELL SURVEYING CORPORATION, Petitioner, v. NORTEX OIL AND GAS CORPORATION, Respondent.
• Court: Texas Supreme Court

Page 854

435 S.W.2d 854

SCHLUMBERGER WELL SURVEYING CORPORATION, Petitioner, v. NORTEX OIL AND GAS CORPORATION, Respondent.

No. B-443.

Supreme Court of Texas.

Nov. 13, 1968.

Rehearing Denied Jan. 29, 1969.

Baker, Botts, Shepherd & Coates, Joseph C. Hutcheson, III and John F. Heard, Houston, for petitioner.

Fritz Lyne and Erich F. Klein, Jr., Dallas, Ralph Balasco, Houston, for respondent.

CALVERT, Chief Justice.

Nortex Oil & Gas Corporation sued Schlumberger Well Surveying Corporation for damages alleged to have been sustained as a result of a fraud practiced upon it by the sellers of certain oil and gas leasehold estates. Schlumberger was not one of the sellers of the leasehold estates and owned no interest therein; its liability was asserted on the ground that it had participated in a conspiracy to commit certain unlawful acts which made the fraud possible.

Trial was begun to a jury, but at the conclusion of Nortex's evidence, the trial judge withdrew the case from the jury and rendered judgment that Nortex take nothing. The court of civil appears reversed the judgment of the trial court and remanded the cause for trial. 417 S.W.2d 603. We reverse the judgment of the court of civil appeals and affirm the judgment of the trial court.

This is primarily a 'no evidence' case. The evidence in the record leaves little doubt that Nortex was the victim of a fraud perpetrated on it by the sellers of the leasehold estates. However, inasmuch as Schlumberger was not a party to the fraudulent transaction and its liability is asserted solely on the basis of a conspiracy, the first question to be decided is whether Nortex tendered admissible evidence at the trial which was legally sufficient to raise a fact issue as to Schlumberger's status as a conspirator. An incidental problem, argued by the parties, concerns admissibility of certain evidence tendered by Nortex but excluded by the trial judge. Holding the excluded evidence to be admissible, the court of civil appeals then held the evidence legally sufficient to raise fact issues as to Schlumberger's status as a conspirator and as to Nortex's loss being a natural and probable consequence of the conspiracy. For purpose of this opinion, we will also treat the excluded evidence as admissible, without so holding. Considering both the evidence introduced and that tendered by Nortex but excluded, we nevertheless conclude that it is not legally sufficient to raise a fact issue that Schlumberger was a conspirator. We do not reach other questions on which the parties join issue.

A summary of the evidence, viewed most favorably in support of Nortex's case, is in order. The facts to be recited are uncontroverted, or they are proved by direct evidence, or they could be reasonably inferred by a jury from other facts and circumstances in evidence.

In February and July, 1961, Nortex purchased certain interests in mineral leasehold estates in producing leases in Rusk and Gregg Counties from Ebro Oil Company, Inc., Burk Royalty Company and other owners. Nortex was furnished data showing that all of the oil being produced from the leases was legally produced, and it had no reason to believe otherwise. When the East Texas 'slant hole' scandal broke in 1962, it was discovered that a number of the producing wells with surface locations on the Nortex leases were bottomed beyond lease lines and were thus illegally deviated and illegally producing oil, and that a number of other wells on the leases which had been treated as producing wells and were assigned allowables as such were 'dummy' wells. Loss of production from the deviated and dummy wells made the leasehold interests purchased by Nortex worth far less than was paid for them.

Schlumberger is a well servicing company specialization in logging and perforating oil wells. 'Logging' is a service performed by lowering an electronic device into a well to locate the point in the bore hole at which the producing sands life. 'Perforating' is a service performed by lowering a mechanical device into a well to perforate holes in the well casing at the point where the logging shows the producing sands to lie, so that oil can seep from the sands into the well and be recovered by natural or artificial lift. Schlumberger logged and perforated a large number of wells in the East Texas Field, many of which were deviated, and logged, or logged and perforated, four of the illegally deviated wells located on the leases purchased by Nortex. Production allowables were secured for the four wells by furnishing false information concerning them to the Railroad Commission.

Oil production in the East Texas Field is from the Woodbine Sand. It is common knowledge to those closely associated with the oil industry in the East Texas Field that the Woodbine Sand lies at a depth of from 3,500 to 3,800 feet below the surface of the soil, and Schlumberger thus knew at the time it serviced the four Nortex wells that the bore hole of a well which had been bottomed at more than 4,000 feet in order to reach the Woodbine Sand was deviated from a normal vertical course. The length of the bore holes in the four Nortex wells was, respectively, 4,225, 4,421, 5,100 and 5,200 feet, and Schlumberger knew the approximate length of each of the bore holes from its own measurements and knew that these were deviated wells.

Schlumberger took steps calculated to protect its customers who might be subjected to investigation or to prosecution for drilling illegally deviated wells and producing oil therefrom. It developed a billing procedure by which the depth of a well it had logged was not shown on its bill for its services, and was shown to its accounting department only on a separate paper which could be destroyed. When the...