Skelly Oil Co. v. Corp.
| Decision Date | 20 September 1938 |
| Docket Number | Case Number: 28151 |
| Parties | SKELLY OIL CO. v. CORPORATION COMMISSION |
| Court | Oklahoma Supreme Court |
¶0 1. OIL AND GAS - Proration Orders of Corporation Commission Made in Capacity at Least Quasi-Judicial - Review of Orders by Supreme Court.
When the Corporation Commission attempts to enforce its proration orders to prevent waste or to regulate production, or to make readjustments against alleged offenders, it acts in a capacity at least quasi-judicial; and its orders so made are subject to review by this court, which may inquire into the competency, relevancy, and materiality of the evidence, and determine whether the charge of unreasonableness or incorrectness of the commission's order is sufficiently supported by the evidence to overcome the presumption of reasonableness or correctness that attends its orders.
2. SAME - Fraud Alleged as Basis of Order Lowering Previous Potential of Accused Oil Operator - General Rules of Evidence Applicable - Burden and Degree of Proof.
Where misconduct amounting to fraud is alleged as the basis of an order of the Corporation Commission in curtailing or lowering a previous potential of an accused oil operator, the general rules for considering and weighing evidence offered to support such claim will apply. Fraud may be proved by direct or circumstantial evidence or both, is not presumed but must be proved, and the evidence thereof must be clear and convincing.
3. SAME - Insufficiency of Evidence to Establish Fraud of Oil Operator in Obtaining Potentials.
An order of the Corporation Commission based upon alleged fraud of an oil operator in obtaining potentials cannot stand where the evidence upon which the charge or alleged fraud is based is inherently improbable, self-contradictory, and is irreconcilable with admitted or undisputed facts.
Appeal from an order of the Corporation Commission granting an application of the commission's attorney to reduce the potentials of the Skelly Oil Company on a lease in the Fitts pool. Order reversed, with directions.
Hayes, Richardson, Shartel, Gilliland & Jordan, and W.P.Z. German (Alvin F. Molony, Hawley C. Kerr, Ernest V. Potter, and James Marberry, of counsel), for appellant.
Earl Foster, Conservation Attorney (J.B. Harper and James C. Hamil, of counsel), for appellees.
¶1 As a result of rumors and charges that the oil wells of the Skelly Oil Company located on what is known as the Parks College lease in the Fitts pool in Pontotoc county had unusual high potentials, the attorney for the Corporation Commission, after some investigation, instituted a proceeding before the commission to correct the potentials and to adjust the "allowables" allocated to the company for operation of this lease. After a hearing the commission made numerous findings of facts against the company, and entered an order reducing the potentials on all wells producing from the Upper Simpson series 29.22 per centum, and on all wells producing from the Hunton sand 28.62 per centum, making the order retroactive and requiring the company to run only 50 per centum of its monthly allowable according to the new potentials until the other 50 per centum had made up the "overage."
¶2 It was charged that the original high potentials were obtained by the use of a separate hilltop tank, ordinarily of service for water. Into this tank, it was asserted, the company, without the knowledge of the conservation officers taking the potentials, stored oil which, while the potentials were being taken, was allowed by the use of secret valves to run down hill by force of gravity into the lines leading from the well then being tested and thus to augment the natural flow. The charge amounts to a claim of absolute fraud and deception. According to numerous statements made in the brief of the commission's attorney, the order is punishment for this fraud and deceit. In fact, the attorney declares that the setup maintained by the company and the attitude of its employees
¶3 Furthermore, under chapter 131, S. L. 1933 (52 Okla. St. Ann. sec. 115), the employees and company might be guilty of conspiracy. These charges require careful consideration.
¶4 There is an apparent agreement on the following principles of law involved. In conducting the hearing and making the order the commission was exercising judicial functions and could proceed only upon competent, relevant, and material testimony. H. F. Wilcox Oil & Gas Co. v. State, 162 Okla. 89, 19 P.2d 347. Fraud is never presumed; proof thereof must be clear, cogent, convincing, positive, and satisfactory, and must preponderate to the degree of overcoming all opposing evidence and repelling all presumptions of good faith. Brotherhood of Railroad Trainmen v. Brown, 180 Okla. 489, 71 P.2d 742. Where a transaction is fairly susceptible of two constructions, the one 'which will free it of the imputation of fraud will be adopted; and where fraud is alleged it must be proved and cannot be inferred from facts consistent with honesty of purpose. Id. See, also, Cromwell v. Ream, 175 Okla. 408, 52 P.2d 752. It is also true that fraud may be established by circumstantial evidence, and that circumstances altogether inconclusive, if separately considered, may by their number and joint operation, especially when corroborated by moral coincidences, be sufficient to constitute conclusive proof of fraud. Gordon v. Slate, 169 Okla. 399, 37 P.2d 270. The review here, therefore, resolves itself almost entirely into addiscussion of the evidence.
¶5 The Skelly company had been operating this lease for nearly a year and a half when it decided to discharge one of its roust-abouts, Hal D. Turk, because of some violation of its rules. After his dismissal he attempted to be reinstated. Failing in this he went before an attorney and notary public and made an affidavit which was taken to some of the companies operating offsetting leases. At the time Turk declared: Turk verified the application under consideration here, and was used as a witness at the hearing before the commission. The attorney for the commission here states that the evidence is sufficient if Turk's testimony is eliminated, but that the commission had the right to believe him. The company declares that the evidence of Turk is not credible enough to establish fraud and that without his evidence there is no semblance of a case.
¶6 Of course, the mere fact that Turk was a discharged employee seeking revenge does not of itself destroy his testimony, although a proper subject of inquiry as to motive touching his credibility. It frequently happens that information of misdoings of persons, firms, or corporations is not obtainable except through some disgruntled or discharged employee. The inquiry should be broad enough to cover the whole scope of his testimony and to test its reliability as weighed by all corroborating facts and circumstances or lack thereof, or contradictions, either actual or inherent. We necessarily, therefore, consider the facts and testimony somewhat in detail. A statement in narrative form of his testimony may serve to present the facts claimed. We state this narrative in the first person, but not as verbatim quotation.
¶7 I was employed by the Skelly Oil Company in September, 1933, going to the Park College lease November 17, 1935, first as a roustabout, then a switcher. I worked until March, 1937. No. 1 well had been completed when I went there; No. 2 was a gas well. In March, 1937, 18 wells were complete. I remember the taking of potentials on well No. 3 in January, 1936; if there was a prior test of No. 3 I know nothing of it. Mr. Hankins, head roustabout, said that the battery tank was run over in testing for a company test. The second hour of the potential of No. 3 was very high and Hankins said: "You know why that happened - that is the reason they get in a jam, running that tank over while they were testing the well; * * * because they got in a jam on the gate they opened on the hill like they did when they were testing the well." This was the gate at the oil tank at the water battery.
¶8 I was there the first two hours on the test of No. 5. The Skelly took a test on No. 5 eight or ten days before the official potential. The well made 160 barrels the first hour and 154 the second. I was at the warehouse cleaning around the tank battery when the potential was taken. Hankins came up, went to the gate at the water tank battery, opened the gate and went down to the tank. I then went to see the gate and saw it was open. Hankins told me a day or so before he opened the gate one-fourth to make 80 barrels going down hill. Later in the day, about 3:00 or 3:30, while I was cleaning out the warehouse, middle ways between the tank battery and separator, I saw Mr. Shrier (another employee) and he appeared to be turning off the gate. Hankins told me that he had used the gate on wells Nos. 3 and 4. After No. 8 Hankins told me there would be no more run, as Mr. Nunally was coming on. I saw Hankins turn the gate off while they were taking the potential on No. 8; that was the same gate I saw him turn off after the potential was over on No. 5. I was out back of the bunkhouse burning trash when I saw Shrier close the gate.
¶9 In my affidavit I stated I helped take potential on 5 and 8, that I watched John Shrier close the gate at the tanks when potential was over, and that later on I saw Hankins open and close the secret valve on the hill as potential was started and closed. I believe I'll change that to what I am swearing to. I am telling the truth now about it. On No. 5 Hankins opened the gate on the hill by the gravity tank and Shrier shut off the tank by...
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