State ex rel. Fatzer v. Sinclair Pipe Line Co.

• Decision Date: 08 December 1956
• Docket Number: No. 40271,40271
• Citation: 180 Kan. 425,304 P.2d 930
• Parties: , 17 P.U.R.3d 231 STATE of Kansas ex rel. Harold R. FATZER (John Anderson, Jr., Substituted), Attorney General of the State of Kansas, and the State Corporation Commission of the State of Kansas, Plaintiffs, v. SINCLAIR PIPE LINE COMPANY, a Delaware Corporation, Sinclair Crude Oil Company, a Delaware Corporation, Producers Pipe Line Company, Inc., a Kansas Corporation, and Marvin E. Boyer, Defendants.
• Court: Kansas Supreme Court

Page 930

304 P.2d 930

180 Kan. 425, 17 P.U.R.3d 231

STATE of Kansas ex rel. Harold R. FATZER (John Anderson Jr., Substituted), Attorney General of the State of Kansas, and the State Corporation Commission of the State of Kansas, Plaintiffs, v. SINCLAIR PIPE LINE COMPANY, a Delaware Corporation, Sinclair Crude Oil Company, a Delaware Corporation Producers Pipe Line Company, Inc., a Kansas Corporation, and Marvin E. Boyer, Defendants.

No. 40271.

Supreme Court of Kansas.

Dec. 8, 1956.

Rehearing Denied Jan. 4, 1957.

Syllabus by the Court.

1. In an action in mandamus in which the state on the relation of the attorney general and the state corporation commission seeks to compel certain pipe-line companies to ask approval of the commission before one company sells and the other buys a pipe line used for the transportation of crude oil, the record is examined and held the state statutes providing for the regulation of common carriers do not apply to oil lines being used solely in interstate commerce.

2. In an action such as that described in the first paragraph of this syllabus, the allegations of the petition are examined and held they state Sinclair Pipe Line Company was engaged in interstate commerce in the operation of its entire system, including the Paola-Humboldt and the Eureka-Humboldt systems.

3. In an action such as described in the first paragraph of this syllabus, where a pipe-line company buys oil at the well and transports it and no other oil than its own, such pipe-line company is not subject to the jurisdiction of the corporation commission.

4. In an action such as that described in the first paragraph of this syllabus, where the cause of action stated depends in a large measure on written instruments attached to the petition as exhibits and such exhibits conflict with general allegations of the petition, the written instruments govern.

5. In an action such as described in the first paragraph of this syllabus, where specific allegations conflict with general allegations, the specific allegations govern.

6. In an action such as that described in the first paragraph of this syllabus, where the corporation commission claimed that certain parties subject to its jurisdiction had failed to submit to it, mandamus was the proper remedy to adjudicate the question of whether they should do so.

C. C. Linley, General Counsel, Cimarron, and D. C. Martindell, Hutchinson, argued the cause and Charles R. Escoal, Asst. Gen. Counsel, state corporation commission, Topeka, John Anderson, Jr., Atty. Gen., Charles C. McCarter and Thomas Evans, Asst. Attys. Gen., and John F. Hayes, Hutchinson, were on the briefs with them for plaintiffs.

George Stallwitz, Wichita, argued the cause and W. F. Lilleston, Wichita, A. A. Davidson and Dudley C. Phillips, Independence, were with him on the briefs for Sinclair Pipe Line Co.

Stanley E. Toland, Iola, argued the cause and was on the briefs for Producers Pipe Line Co., Inc. and Marvin E. Boyer.

Malcolm Miller, Wichita, argued the cause and George B. Powers, Carl T. Smith, John F. Eberhardt, Stuart R. Carter, Robert C. Foulston, Robert N. Partridge and Robert M. Siefkin, Wichita; and Ralph W. Garrett, Cecil R. Buckles, and James H. McGowan, Tulsa, Okl., were with him on the briefs for Sinclair Crude Oil Co.

SMITH, Chief Justice.

This is an original action in mandamus by the state on the relation of the attorney general and the corporation commission. An alternative writ was issue. The four defendants filed motions to quash the writ. The cause was finally submitted on such motions pursuant to an order of this court.

The petition alleged various powers of the commission, among them the supervision of the disposition of franchises and properties and the termination of services and the fixing of rates and charges; that defendant Sinclair Pipe Line Company, which will be referred to herein as Pipe Line Company, was engaged in the transportation of petroleum products by pipe line within the state and was a public utility within the meaning of G.S.1949, 55-501, 66-104 and 66-105, and among the pipe-line systems operated by it in the state was one from the vicinity of Wellsville to the vicinity of Humboldt, known as the Paola-Humboldt system, and one from Eureka to Humboldt, known as the Eureka-Humboldt (these will be referred to as the Paola and Eureka systems); that defendants Sinclair Crude Oil Company, which will be referred to herein as Crude Oil Company, had for its primary business the purchasing of crude oil, including the purchasing along the above two pipe-line systems; that both the above systems were controlled and under the domination of the Sinclair Oil Corporation, a holding company which owned all the stock of each.

The petition further alleged that the Producers Pipe Line Company (hereinafter referred to as Producers) did not produce oil but purchased and sold it and maintained pipe lines and was a public utility within the meaning of G.S.1949, 55-501, 66-104 and 66-105, and as such was within the jurisdiction, authority and control of the corporation commission; that defendant Boyer was instrumental in the incorporation of Producers and was a stockholder and was also engaged in trucking oil from the territory served by the two pipe lines and was jointly involved with the two pipe lines in the matters set forth. The petition alleged also that under order of a federal court of three judges, Boyer had been for several months trucking to Humboldt the crude oil available along the Eureka line, which prior to September 30, 1955, had been transported through the pipe-line system; that the Pipe Line Company was incorporated about November 9, 1950, and about that time it acquired the two pipe lines and also acquired a trunk line for transportation of oil from Humboldt to Illinois, where a refinery of the Sinclair Refining Company was located; that both the Paola and the Eureka had been used for over thirty-five years to transport the flush production of crude oil produced along the two systems; that the Pipe Line Company did not produce any oil but used the systems to transport oil purchased by other Sinclair companies from various producers; that each of the systems was used exclusively to transport oil produced in Kansas to Humboldt, and at Humboldt the oil was placed in tanks and then introduced into the pipe lines of the Pipe Line Company, which transported it to Sinclair's consignees; that on April 22, 1953, the Sinclair Oil Corporation caused the Crude Oil Company to be incorporated and soon thereafter it began purchasing oil from producers along the Paola and Eureka systems; that prior to September 30, 1955, the oil purchased by the Crude Oil Company was transported by the Pipe Line Company from the leaseholders' tank batteries to working tanks at Humboldt, all within the state of Kansas, and then placed in the trunk line of the Pipe Line Company for transportation to Sinclair consignees; that in the summer of 1955, the Pipe Line Company began negotiations for the sale of the two pipe-line systems lying wholly within the state of Kansas and as a result Producers was incorporated and thereafter entered into a contract to purchase the two pipe-line systems from Sinclair; that the Crude Oil Company joined Producers in negotiations for the sale of the two systems to Producers; that Producers agreed to pay the Pipe Line Company $275,000 for the two pipe-line systems and certain equipment and agreed to pay $80,000 for oil in the Paola line at the time it was to take place, also to pay $25,000 for other equipment; that $105,000 was to be paid at the time of transfer and the balance was to be paid at the rate of five cents per barrel for each barrel of oil delivered through the Paola line and arriving at Humboldt, so that the operators would actually pay the balance owing; that it was agreed Producers would only ship its own oil through the lines and it would be sold to the Crude Oil Company at Humboldt and Sinclair would pay ten cents per barrel above their posted price to Producers for the oil so delivered; that it was agreed no oil would be shipped through the Eureka line but Boyer would truck all the oil lying along that line and charge the leaseholders much in excess of the charge for carrying oil in the pipe-line system and it was agreed that the Eureka system would be salvaged and abandoned and a trucking system substituted at increased charge to producers; that Sinclair Crude Oil Company agreed to purchase oil from wells along either pipe line, which was first purchased and then transported by Boyer or Producers and the Pipe Line Company and Producers agreed not to transport any oil in the two systems unless it was oil purchased by the Crude Oil Company or its predecessors; that the Pipe Line Company agreed to transport such oil from Humboldt to the Sinclair refinery in Illinois; that by this plan the Crude Oil Company would continue to purchase the oil but would do so at Humboldt rather than at the lease level.

The petition then alleged that the Pipe Line Company prior to October 1, 1955, refused to transport any oil in either system except that purchased by the Crude Oil Company and there was no practical way to transport oil produced along the two systems other than by such pipe lines; that by the acts described the Pipe Line Company and Crude Oil Company had established what amounted to a monopoly of the oil purchases in the territory; that there was no other qualified buyer of crude oil in the area who was in a position to buy the quantities of oil necessary for continued operation of the stripper wells in question and defendants by their mutual and joint arrangement had controlled the purchase, transportation, sale, hauling and indirectly the production of oil in the vicinity; that pursuant to the arrangement the Crude Oil Company served notice that after September 30, 1955, it would not purchase oil along the two pipe-line systems other than...