Foree v. Crown Central Petroleum Corporation

431 S.W.2d 312, 30 Oil & Gas Rep. 374, 11 Tex. Sup. Ct. J. 462, 1968 Tex. LEXIS 304

• Court: Texas Supreme Court
• Decided: June 19, 1968
• Docket: B-460
• Status: Published

Opinions

CALVERT, Chief Justice.

In this suit by petitioners, as plaintiffs, against respondents, as defendants, for damages for unjust discrimination in the purchase of crude oil, the trial court granted respondents’ motion for summary judgment and rendered judgment that plaintiffs take nothing. The court of civil appeals affirmed. 417 S.W.2d 499. We reverse the judgments of both courts and remand the cause to the trial court.

The instant case represents one phase of rather lengthy litigation growing out of a complaint filed with the Railroad Commission of Texas by B. A. Duffy charging that respondents, who are common carrier-common purchasers of crude oil as defined by Art. 6049a, Vernon’s Tex.Civ. Stats., were discriminating against complainant in the purchase of crude oil. The Commission, after hearing, entered its order on February 21, 1962 directing respondents to extend their pipeline transportation system and to make connection with Duffy’s tank batteries. Respondents appealed by filing suit in the 126th District Court of Travis County to set aside the order. The Attorney General answered for the Commission and was joined in his defense of the validity of the order by certain intervenors, including some of the petitioners in the case before us.

A short time after respondents filed their suit, the Attorney General filed a separate suit against respondents in the 53rd District Court of Travis County in which he sought to recover statutory penalties of from $100 to $1000 for each day of discriminatory practices and for a mandatory injunction directing respondents to comply with the Commission’s order. Some of our petitioners intervened in this suit and sought an award of one-half of any penalties recovered by the Attorney General and a recovery of actual damages. Respondents filed a plea of privilege to the phase of the suit which sought a recovery of damages and the trial court granted the plea and ordered that phase of the suit transferred to Harris County. The court of civil appeals affirmed. Duffy v. Crown Central Petroleum Corp., 366 S.W.2d 956 (Tex.Civ.App. — Austin 1963, no writ).

Respondents filed a motion for summary judgment with respect to the phase of the suit in the 53rd District Court of Travis County in which penalties and mandatory injunctive relief were sought. The trial court granted the motion and rendered judgment that the plaintiff and intervenors take nothing, but provided that the judgment should not be a bar to their right to re-file if the Commission’s order then under attack in the 126th Court should finally be adjudged a valid order. The court of civil appeals affirmed. State of Texas v. Crown Central Petroleum Corp., 369 S.W. 2d 458 (Tex.Civ.App. — Austin 1963). We refused writ of error, no reversible error.

After petitioners’ suit for damages was transferred to Harris County, the Railroad Commission entered an order on August 21, 1964 withdrawing its former order of February 21, 1962. The withdrawal order was entered upon a finding that Service Pipe Line Company had made a proposal, at the request of respondents, to extend its facilities and connect to the tank batteries of the parties in whose favor the original order was entered. The withdrawal order recited that the purpose of the order of February 21, 1962 had been accomplished and that the matter of extension and connection as theretofore ordered “now presents only a moot question.” Service Pipe Line Company made the connection on November 1, 1964. Thereafter, respondents’ suit in the 126th District Court of Travis County challenging validity of the Commission’s original order was dismissed.

Following dismissal of the suit in the 126th District Court of Travis County, respondents, on June 14, 1966, filed their motion for summary judgment in this case in the district court of Harris County. In their amended petition in the suit, plaintiffs, petitioners .here, alleged that they were the owners of interests in various producing leases in Haskell County Regular Field, and that Crown Central Petroleum Corporation was a producer and purchaser of crude oil in the Haskell County Regular Field and in the adjoining Sojourner Sand Unit Field in Haskell County. They further alleged that Crown Central was a common purchaser as defined by Art. 6049a and in its purchase of crude oil had discriminated against the plaintiffs in favor of its own production from October 15, 1959 to November 1, 1964. They sought damages of $85,998 measured by transportation charges of 11 cents per barrel for trucking their oil to Crown Central’s Teague Receiving Station. Crown Central Pipe Line Company was alleged to be a common carrier of oil produced in Haskell County and a wholly owned subsidiary of Crown Central Pipe Line and Transportation Company which, in turn, was a wholly owned subsidiary of Crown Central Petroleum Corporation.

Damages were sought by the plaintiffs under authority of Sec. 11c, Art. 6049a, which reads:

“When any person, persons, association or corporation is discriminated against by a common purchaser as defined herein in favor of the production of said common purchaser, a cause of action for damages, when such has occurred, shall lie against said common purchaser and said person, persons, association or corporation may bring suit for same in any court of competent jurisdiction in the county in which the damage occurred.”

The trial court’s take-nothing judgment was affirmed by the court of civil appeals on the ground that primary jurisdiction to determine the issue of discrimination was conferred upon the Railroad Commission by Art. 6049a, and that in the absence of a final order of the Commission determining that issue the suit for damages could not be maintained. If a final order of the Commission determining the issue of discrimination is prerequisite to the right to maintain all suits for damages for discrimination under Sec. 11c, Art. 6049a, and if no such order exists, the judgments of the courts below should be affirmed. We hold that such an order is not prerequisite to the right to maintain all statutory suits for damages.

The question of whether a Railroad Commission order finding discrimination is prerequisite to a suit for damages as authorized by Sec. 11c, Art. 6049a, has not heretofore been squarely presented to or directly decided by the appellate courts of this state. In support of its decision of the question, the court of civil appeals in this case cited Deep South Oil Co. of Texas v. Texas Gas Corp., 328 S.W.2d 897 (Tex.Civ.App. — Beaumont 1959, writ ref., n.r.e.) and State v. Crown Central Petroleum Corp., 369 S.W.2d 458 (Tex.Civ.App.— Austin 1963, writ ref. n.r.e.). Respondents cite the same cases.

In Deep South, Texas Gas Corporation, a common purchaser of gas, sought a declaratory judgment as to its obligations under a contract to purchase gas from Deep South. By cross-action, Deep South sought cancellation of the contract for fraud and because of discrimination against it in the taking of gas, and because of the discrimination sought damages after the date of cancellation. The court of civil appeals, in discussing the right of Deep South to recover damages because of discrimination, held, broadly, that Art. 6049a and related statutes required that the issue of discrimination be first submitted to the Railroad Commission. 328 S.W.2d 897, at 907-908. Considered in the factual context of the case, the holding, although apparently a dictum, has no application to the facts of this case. Immediately before making the quoted holding, the court pointed out that the discrimination, if any, against Deep South was not the type of discrimination for which Secs. 11c and lie, Art. 6049a, expressly conferred a right to sue for damages.

State v. Crown Central Petroleum Corp., as heretofore noted, was another phase of the litigation between the parties to this appeal and involved the right of the Attorney General to sue for and recover statutory penalties, to be shared with intervenors, and his right to obtain a mandatory injunction requiring Crown Central to extend its pipeline and connect with Duffy’s tank batteries. The summary take-nothing judgment was rendered by the trial court and was affirmed by the court of civil appeals on grounds that (1) no cause of action for penalties and mandamus existed independently of the Commission’s order, because the Commission had exclusive primary jurisdiction to determine the issue of discrimination; and (2) no cause of action for penalties and mandamus for refusal to comply with the Commission’s order existed, because Crown Central had a right to appeal from the order without being subjected to the heavy penalties and mandamus. 369 S.W.2d 458, at 462-463. Justice Hughes dissented. 369 S.W.2d 955.

From a careful re-examination of the record in State v. Crown Central, we are now convinced that the judgment rendered in that case was erroneous. In no event should a take-nothing judgment have been entered. The reasons for our present conclusion concerning the judgment in State v. Crown Central will be manifest from our discussion of the right of petitioners to maintain their suit for damages.

We find no express provision in Art. 6049a or related statutes which denies to a complainant his statutory right to prosecute a suit for damages in the absence of a final and subsisting Commission order finding discrimination. Indeed, the plain wording of Sec. 11c, Art. 6049a, seems clearly to authorize such a suit without regard to Commission action. If, therefore, an order of the Commission finding discrimination is prerequisite to the right to sue for and recover damages, it must be made so by the judicially created doctrine of “primary jurisdiction”. According to one writer, “Questions of primary jurisdiction arise only when the statutory arrangements are such that administrative and judicial jurisdiction are concurrent for the initial decision of some questions”. Davis, Administrative Law Doctrines, 28 Tex.L.R. 376 (1950), at 400. That is the situation here.

The statutes confer no jurisdiction upon the Railroad Commission to award damages or statutory penalties; liability for these exactions is to be determined exclusively by the courts. On the other hand, the courts are not vested with original jurisdiction to order that common carrier pipelines be extended and connected to particular wells; that jurisdiction is confided to the Commission by Secs. 7, 8b and lid, Art. 6049a, upon findings that the extension is “reasonable and required in the public interest and that the expense involved will not impair the ability of such common carrier * * * to perform its duty to the public”. In both forums, a preliminary finding of discrimination is prerequisite to the granting of relief. Jurisdiction of the courts and the Commission is thus concurrent on the issue of discrimination. In such situations, the general rule, as stated by Davis in Administrative Law Text, Sec. 19.07 (Hornbook Series 1950), at 352, is as follows:

“The theory seems reasonably clear that the test for applying the principle of primary jurisdiction is not whether some parts of the case are within the exclusive jurisdiction of the courts but whether some parts of the case are within the exclusive jurisdiction of the agency. Because the purpose of the doctrine is to assure that the agency will not be bypassed on what is especially committed to it, and because resort to the courts is still open after the agency has acted, the doctrine applies even if the agency has no jurisdiction to grant the relief sought. Thus, the doctrine was applied in Thompson v. Texas, Mexican Railway [328 U.S. 134, 66 S.Ct. 937, 90 L.Ed. 1132 (1946)], even though the suit was for damages and even though the ICC could not award damages. When an agency cannot grant the relief sought, the court may stay the judicial proceeding pending the administrative determination; this is what was done in the Tex-Mex case.”

There are exceptions to the general rule.

We had occasion in Gregg v. Delhi-Taylor Oil Corp., 162 Tex. 26, 344 S.W.2d 411 (1961), to review the problem of primary jurisdiction of administrative agencies in considerable depth. In that case, we held that although clothed with extensive powers to make rules and regulations to prevent waste of oil and gas and to protect correlative rights of owners of interests therein, the Railroad Commission did not have primary Jurisdiction to- prevent a trespass by one operator upon the property of another. The rationale of our holding that the courts had original jurisdiction to ascertain whether a trespass was being committed and to enjoin it was that the questions presented were “primarily judicial in nature”. We said: “Where the issue is one inherently judicial in nature (as we think the question of trespass is), the courts are not ousted from jurisdiction unless the Legislature, by a valid statute, has explicitly granted exclusive jurisdiction to the administrative body”. By enunciating that particular exception to the primary jurisdiction rule, we did not mean to hold, and did not hold, that there could be no other exceptions.

The cause of action for damages in the instant case illustrates another necessary exception to the general rule, to wit: when the administrative agency is powerless to grant the relief sought and has no authority to make incidental findings which are essential to the granting of the relief. We have purposely stated the exception narrowly because we do not have before us a case in which the administrative agency is powerless to grant the relief sought, but does have authority to make incidental findings which are essential to the granting of the relief. The effect incidental findings, in the latter situation, should have on judicial action in granting or denying relief which only the courts can give need not be decided. We will save the problem for another case and another day.

Art. 6049a and related conservation statutes confer broad powers upon the Railroad Commission to hold hearings, make findings, promulgate rules and regulations and enter orders to prevent or to terminate discriminatory practices by common carriers and common purchasers of oil and gas. In none of the statutes, however, do we find authority for the Commission to hold hearings and make findings of discrimination except as incidental to the power to take official action, i.e., to promulgate rules and regulations or to enter and issue orders. In other words, no authority is conferred upon the Commission to make findings of discrimination in a vacuum or as a mere agent of a trial court. It follows, therefore, that the Commission does not have authority, and cannot have exclusive primary jurisdiction, to make findings of discrimination in a particular case when the alleged discrimination no longer exists and official action by the Commission is thereby mooted. That is the situation here.

The Legislature did not condition the right to damages or penalties upon a final, valid and subsisting Commission finding of discrimination. Conceivably, a course of gross discrimination continuing over a period of months of negotiation could be halted abruptly upon threat of complaint to the Commission; or, it could be terminated during a Commission hearing. In either event, authority of the Commission to enter an order would be mooted, and the Commission would have no authority to make findings of past discrimination. The situation in the case before us does not differ materially from those hypothesized. Here, the Commission made a finding that extension and connection of respondents’ pipeline to Duffy’s tank batteries was necessary to prevent discrimination. It also made the other statutory findings essential to its order to extend and connect. Before the issue of the order’s validity could be tried, it was rendered moot by the connection made by Service Pipe Line Company. The Commission expressly so stated when it withdrew its original order and the trial court impliedly so held when it dismissed the suit. When the order was expressly withdrawn, it could no longer be presumptively valid. If it were, respondents could still be subject to a court order to extend and connect its pipelines to petitioners’ wells, a result which would be wholly anomalous. When the issue of validity of the order became moot, all incidental findings were also moot. But mootness of the Commission’s order and its incidental finding of discrimination did not destroy petitioners’ cause of action for damages. Their suit stood on the court’s docket for trial of the issue of discrimination and the amount of their damages. The court of civil appeals erred in affirming the take-nothing judgment on the ground that a final and subsisting Commission order finding discrimination was prerequisite to petitioners’ right to sue for and recover damages.

Respondents assigned other reasons in their motion for summary judgment why petitioners’ claims for damages should be denied, in whole or in part, only two of which are not disposed of by what we have written. They are that (1) petitioners are not entitled to damages during the appeal from the order of February 21, 1962, because respondents have a right to safe judicial review without running the risk of having to pay substantial damages, and (2) petitioners are not entitled to damages after August 21, 1964, because petitioners entered into an agreement on that date for a connection with another pipeline company.

We can think of no sound reason for holding that respondents’ liability for actual damages did not continue during pendency of their appeal from the Commission’s order. Interest on contractual obligations and on damages which are certain and ascertainable continues to run during pendency of suits in which the right to recover on the primary obligation or wrong is seriously questioned. Damages for a continuing trespass up to the date of judgment are recoverable, although the trespass may be stoutly denied and contested. We are not concerned on this appeal with the right of the Attorney General to recover penalties during pendency of respondents’ suit. That question was finally decided in State v. Crown Central Petroleum Corp., Tex.Civ.App., 369 S.W.2d 458, and, whether correctly or incorrectly decided, is not open for review.

Respondents are not entitled to a partial take-nothing summary judgment as to damages sought by petitioners from August 21, 1964 to November 1, 1964. Their summary judgment proof that petitioners entered into an agreement with another pipeline company on August 21, 1964, to take their oil is controverted by an affidavit made on behalf of petitioners, and a fact issue is thus created.

The judgments of the court of civil appeals and trial court are reversed and the cause is remanded to the trial court for a conventional trial on the merits.