Court Opinion

ID: 9768197
Source: CourtListenerOpinion
Date Created: 2023-08-29 05:47:04.870257+00
Date Added: 2024-06-11T07:30:37.434763
License: Public Domain

DISSENTING OPINION
SMITH, Justice.
I respectfully dissent. The Commission contends that the order under attack is not a penalty; that the order merely restricts Clark Sample from producing more oil than he is entitled to. The Commission says there is a “big distinction between a restriction and penalty.” It is the Commission’s position in this case that “under the statutory duties and obligations and the guidelines set down by this * * * [Supreme Court] that the Commission must not only prorate oil to prevent waste but must also prorate and restrict the production of oil to protect the correlative rights of all operators in an oil field.”
*346The appellees, Clark Sample et al., filed this suit on June 3, 1965, against the Railroad Commission of Texas and its members. On June 17, 1963, the Commission filed its answer alleging that Order No. 652,484, dated May 24, 1965, (the order involved) was not a penalty against Sample et al., but .was an attempt to adjust correlative rights in the East Texas Field. The Commission alleged that:
“ * * * after January 1,1961, the date Clark Sample became operator, development and production operations on the Caddie Fisher Lease were conducted in such manner that production from the lease was raised from a relatively static 3420 barrels of oil per month to a rate of approximately 10,474 barrels of oil per month; that in October, 1962 when the Commission made a thorough investigation of the lease which included individual well deviation and well status (productive capability) tests the lease returned to the approximate level of allowed production existing at the time Clark Sample became operator; that such increased production was the product of incorrect testing procedures and allowable assignments based thereon; that the overproduction was determined to be the difference between the tests volumes for certain wells, and the allowable volumes for such wells that were set by the filing of incorrect testing reports, * * [Emphasis added.]
On June 4, June 7 and July 8, 1965, the Sun Oil Company, the Amerada Petroleum Company, the Humble Oil and Refining Company and the Cities Service Oil Company filed petitions in intervention. Each intervenor alleged that at all material times it owned various interests in a number of oil and gas leases covering lands in the East Texas Field; that each was an operator of leases in said field and as such was an interested party and affected by the order under attack and “will be affected by any orders of this Court relating to said Railroad Commission Order.”
On June 18,1965, plaintiffs, Clark Sample et al., appellees here, filed a motion for summary judgment pursuant to Rule 166-A, Texas Rules of Civil Procedure. Plaintiffs-appellees moved the Court to enter summary judgment setting aside and declaring invalid the order dated May 24, 1965, “assessing a penalty of 58,061 barrels of oil against plaintiffs’ Caddie Fisher Lease.”
On July 19, 1965, the trial, court granted the motion for summary judgment and entered its judgment decreeing that the order was void and permanently enjoined the Commission, its members and employees from enforcing said order.
The motion for summary judgment was properly sustained. The Commission’s order shows on its face that the Commission charged the 58,061 barrels of oil back against Sample’s Caddie Fisher Lease not because it was overproduction, but for “filing incorrect test reports.” The recitations contained in the order lead to the conclusion that “the Clark Sample, Caddie Fisher Lease is overproduced in a total volume of 58,061 barrels of oil; that such total volume has been produced from said lease by virtue of incorrect testing and reporting. * * * ” [Emphasis added.] The order recites that the Commission made findings relative to test and allowable history of each of the 27 wells on the Caddie Fisher Lease. Then the order recites that the overproduction was charged to nine of those wells: wells 10, 11-A, 17-A, 22, 23, 24, 25, 26 and 27. Clark Sample was not charged with overproduction of these individual wells, but according to the “Notice of Hearing,” the Commission had predetermined that the Caddie Fisher Lease was being overproduced. At the hearing, the Commission’s preliminary finding was conclusively disproved. There was no overproduction from the lease as a whole in excess of the Commission-set allowable. On the other hand, the undisputed evidence shows that the Caddie Fisher Lease was underproduced during the relevant period by 2,322 barrels *347below the allowables set for the wells on the lease by the Commission. Sample’s testimony is undisputed that “during the entire period involved in this show cause hearing, * * * we underproduced this lease by 2,322 barrels below the allowables set by the Commission.” The evidence clearly affords the basis for the statement in Sample’s motion for summary judgment that “the fact is, as stated in Plaintiffs’ sworn original petition, that Plaintiffs’ Caddie Fisher Lease was not overproduced during the period January 1, 1961 — November 1, 1962, according to the Commission’s allowable schedule. The Commission, by its allowable schedules, authorized Plaintiff to produce every drop of this 58,061 barrels of oil.” The overproduction which the Commission found in its order was not overproduction in the sense that there was production in excess of allow-ables. “Overproduction” as used in the Commission’s order is not given this commonly accepted meaning. The order defines “overproduction” as follows:
“ * * * Overproduction is determined to be the difference between the test volumes for certain wells, and the allowable volumes for such wells that were set by the filing of incorrect testing reports.”
Thus, it is seen that the Commission in using this artificial definition as a guideline actually made no finding in its order of overproduction by the nine wells, as overproduction is ordinarily understood. I respectfully submit that this Court cannot successfully demonstrate that the Commission did, in fact, determine whether these nine wells produced more or less than their allowables. The only finding is that Sample obtained increased allowables by filing “incorrect testing reports” and the Commission chose to label this as “overproduction.” Clearly, the Commission’s order is a penalty order. It is not based upon any true finding of overproduction, either on a lease basis or an individual well basis. I agree with Sample’s argument that:
“[rjather it [the “order] is a penalty assessed against Appellees [Sample et al.] for filing what the Commission says were false test reports. The penalty is arbitrarily set by applying, the production levels which Wells 10, 11-A, 17-A, 22, 23,24, 25, 26 and 27 had in October, 1962, retroactively; i. e. by an ex post facto revision of the allowables which the Commission had previously set for these wells during the period January, 1961 — October, 1962.” '
Obviously, the Commission has assessed a penalty against Sample et al. for illegal production. In other words the Commission has found that Sample et al. committed an illegal act, when, in fact, they did not. (The Commission now claims that its action should be tested by the substantial evidence rule. The Court fails to deal with this contention, but it will be dealt with later in this dissent.) It is clear that Sample et al. were penalized not for producing in excess of scheduled allowables, but for obtaining increased allowables through tests and reports which the Commission considers to be false. While the Commission is not empowered to devise its own penalties for unlawful conduct or for violation of its rules and regulations, it is not powerless when it finds that an operator has been filing false reports. This Court pointed out in Harrington v. Railroad Commission, Tex.Sup.Ct., 375 S.W.2d 892 (1964), .that the correct procedure in a situation such as the Commission found existed, here was for the Commission to request the Attorney General to bring a penalty suit under Article 6036, Vernon’s Annotated Texas Civil Statutes.
- The Commission simply has no power to shut in wells or require make-up production — whether such illegal production was obtained through trespassing wells (as in the Harrington case) or through “filing incorrect testing reports” as to the productive capacity of wells, as is charged in this case. We said in Harrington that the State’s authority to penalize an operator is limited to the sanctions set out by the *348Legislature. This Court in Harrington discussed the Articles of the Statutes which expressly provide the sanctions and penalties which may be imposed for violating the conservation laws or the rules, regulations and orders of the Commission promulgated thereunder. We discussed the applicable provisions of Articles 6033, 6036, 6066a and Article 1111c, Sec. 2, Vernon’s Annotated Penal Code, and held:
“The sanctions and penalties thus expressly provided by the Legislature are exclusive, and the Commission has no power to impose different or additional sanctions or penalties of its own devising. The power is necessarily denied to the Commission by Art. 3, Vernon’s Ann. Penal Code, which provides that ‘no person shall be punished for any act < or omission, unless the same is made a penal offense, and a penalty is affixed thereto by the written law of this State’, which provision implements the design of the Penal Code declared in Article 1 to be ‘to define in plain language every offense against the laws of this State, and affix to each offense its proper punishment.’ ”
I think the Harrington case supports Sample’s position here. In the Harrington case this Court said there was “no evidence of overproduction.” It is my contention that there is no evidence of overproduction in this case, and the order is not based on a finding of overproduction. It is based on a finding of the filing of false reports. Whether the facts justified the order or not, the Commission has no statutory power to assess what clearly is an unauthorized penalty. In addition to the penalties provided by statute, the Commission has assessed a penalty which in dollars and cents amounts to $174,000, the value of 58,061 barrels of oil.
Assuming arguendo that we have an “overproduction” case, I still maintain that “overproduction” means production in excess of the Commission-set allowable. Overproduction of oil in excess of allowable is a felony under Article 1112b, Section 7a,1 Vernon’s Annotated Penal Code. Section 9 of Article 1112b provides that any person who shall violate the provisions of Section 7a “ * * * shall upon conviction be deemed guilty of a felony, and upon conviction shall be punished by confinement * * I think the Legislature realized that these penal statutes would be calculated to effectively deter persons from attempting to produce from oil properties under their control oil in excess of the amount lawfully allowed to be produced. The purpose of these penal statutes is not only to punish the offender, but to deter others from committing like offenses. On the other hand, the order under consideration recites that the “Commission is of the opinion that the correlative rights of all parties owning an interest in the East Texas Field have been adversely affected * * * ”, yet, the Commission makes no effort to determine the correlative rights of all of the owners in the field. We find that four major oil companies have intervened. May I ask what disposition is the Railroad Commission going to make of this oil ? Will this matter be adjudicated in another law suit or can the adjustment of correlative rights be made as though only the four major oil companies have been affected? I raise these questions to point up the untenable position of the Commission and the intervenors.
Assuming overproduction, the Commission has no power to require make-up of past overproduction out of future production. There is no statute applying to oil production comparable to Article 6008, Section 14, which applies only to gas. The *349Attorney General relies on Section 7 of Article 6049c for statutory authority. I do not find any provision in Section 7 or in any other statute under Title 102, Oil and Gas, which authorizes the Commission to adjust or restrict future oil production to make up for past overproduction. Article 6008, Section 14 limits the Commission’s make-up-for-overproduction power to gas. I contend that the Commission had no statutory authority to enter the involved order. I concede that the Commission is empowered to make initial allocations among producers and to prorate production to prevent waste, but the Commission is wholly without power to adjudicate charges of violations and, in effect, reallocate to compensate for overproduction.
This leads me to consider the contention of the Commission that we have a case where there is not involved punishment or penalty for crime and that the concept of burden of proof, as argued by Sample et al. has no application whatsoever to a Railroad Commission hearing where the test of validity is whether the order is supported by substantial evidence. The Commission in its answer to the motion for summary judgment says that “[hjere, the Railroad Commission simply reviewed certain factual data relating to production history, allowable assignments, and well capability test reports filed by the operator as compared to those conducted by the Commission and called a hearing of all interested parties, giving them an opportunity to present any evidence bearing on .the subject. At the hearing the basic facts were undisputed, and these facts were sufficient to prove that the Sample lease was overproduced by 58,061 barrels. In issuing the present order, the Commission considered all evidence presented. Since the validity of its action must be tested by the substantial evidence rule, the manner by which it initiated the hearing is immaterial.” The Commission has taken the position that no constitutional question is involved. I cannot agree with the position of the Commission. If the Court maintains its present position and finally holds that the Commission has the statutory authority to assess penalties as an alternative to a suit by the Attorney General, then the Court should require the same procedural safeguard as required of the Attorney General in a penalty suit brought under Article 6036, supra. The Commission’s (Penalty) Order is invalid as a matter of law in that it is the result of an administrative hearing prior to which the Plaintiff, Sample, was presumed guilty and put under the burden of “show[ing] cause why he should not be required to make up the above described overproduction. * * * ” The procedure followed in this case offends due process. If the Attorney General had sought the sum of $174,000, the value of the 58,061 barrels of oil, as penalties in a District Court action under Article 6036, supra, or if proceedings were instituted under the proper Article of the Penal Code, the State would have had the burden of proof and Sample would have been presumed innocent of any wrongdoing until proven guilty by a preponderance of the evidence in proceedings under Article 6036, supra, and would have been presumed innocent until proven guilty beyond a reasonable doubt, if proceedings were under a proper penal code. Sample’s motion for summary judgment clearly states the effect of a shifting of the burden of proof at the administrative level. The motion contains the following unanswerable argument:
“That due process can be denied by a shifting of the burden of proof at the administrative level was emphasized by the United States Supreme Court in Speiser v. Randall, 357 U.S. 513, 78 S.Ct. 1332 [2 L.Ed.2d 1460] (1958) in these words:
“ ‘In all kinds of litigation it is plain that where the burden of proof lies may be decisive of the outcome. Cities Service Oil Co. v. Dunlap, 308 U.S. 208, 60 S.Ct. 201, 84 L.Ed. 196; United States v. New York, N.H. & H.R. Co., 355 U.S. 253, 78 S.Ct. 212, 2 L.Ed.2d 247; Sampson v. Channell, 1 Cir., 110 F.2d 754, 758, 128 A.L.R. 394. There is always in litiga*350tion a margin of error, representing error in factfinding, which both parties must take into account. Where one party has at stake an interest of transcending value —as a criminal defendant his liberty— this margin of error is reduced as to him by the process of placing on the other party the burden of producing a sufficiency of proof in the first instance, and of persuading the factfinder at the conclusion of, the trial of his guilt beyond a reasonable doubt. Due process commands that no man shall lose his liberty unless the Government has borne the burden of producing the evidence and convincing the factfinder of his guilt. Tot v. United States, supra [319 U.S. 463, 63 S.Ct. 1241, 87 L.Ed. 1519], Where the transcendent value of speech is involved, due process certainly requires in the circumstances of this case that the State bear the burden of persuasion to show that the appellants engaged in criminal speech. Cf. Kingsley Books, Inc., v. Brown, supra [354 U.S. 436, 77 S.Ct. 1325, 1 L.Ed.2d 1469]. “ ( * * *
“ ‘Accordingly, though the validity of § 19 of Art.' XX of the State Constitution be conceded arguendo, its enforcement through procedures which place the burdens of proof and persuasion on the taxpayer is a violation of due process.’
“To the same effect is the very recent United States Supreme Court decision in Armstrong v. Manzo, 33 U.S. Law Week 4349 [380 U.S. 545, 85 S.Ct. 1187, 14 L.Ed. 2d 62] (April, 1965). These decisions echo earlier holdings by the 5th Circuit in Magnolia Pet. Co. v. N.L.R.B., 112 F.2d 545 (5th Cir. 1940) and N.L.R.B. v. Riverside Mfg. Co., 119 F.2d 302 (5th Cir. 1941) in both of which Judge Hutch-eson wrote:
“ ‘In its capacity as accuser, the Board, under the genius of our institutions, is held to the same burdens and obligations of proof as any other litigant who takes the affirmative. It may not by accusing put the accused upon proof. As accuser it must prove its charge.
" ‘In its capacity as a trier of facts, the Board stands on the footing of a jur>. Like a jury it must be impartial. Like a jury, it may not make findings without evidence to support them and as in the case of a jury, it is for the courts to say whether there is or is not evidence in support.’
“The shifting of the burden of proof at the administrative level in the present case can be sustained only if Plaintiffs are to be given a complete de novo review of the Commission’s Penalty Order in this Court. If this appeal is to be under the Substantial Evidence Rule, then clearly, Plaintiffs have never had the day in court that due process demands. The Commission’s procedure renders its Penalty Order void.”
I respectfully submit that the trial court’s summary judgment should be affirmed on the primary ground that the Commission Order under attack is a Penalty Order and is such an order as was beyond the Commission’s legal power to enter. If necessary, I would also hold that the order was the result of an administrative hearing prior to which Sample et al. were presumed guilty and was the result of a hearing in which they were shouldered with the burden of proof. The notice to show cause states, the Commission predetermined “that a volume in excess of 100,000 barrels of oil should be considered overproduction, subject to make-up from the Caddie Fisher Lease.” Sample et al. were presumed guilty and the hearing was merely “an opportunity to Clark Sample, Jr., to appear and show cause why he should not be required to make up the above-described overproduction or any part thereof.” The Commission has no precedent for the procedural course it has taken in this case. It has rejected an opinion written in 1939 by the Attorney General in answer to a question as to “[w]hat remedy does the Railroad Commission have against an operator who has *351produced 1500 barrels of illegal oil in violation of the Commission’s order?” The Attorney General advised that the Commission could not enter “an order reducing the production from ‘A’s’ well at a subsequent date or during the subsequent month * * * until the amount overproduced comes within or balances with the amount which ‘A’ can legally produce.” The Attorney General quoted at length from the case of Ortiz Oil Company v. Railroad Commission, Tex.Civ.App., 62 S.W.2d 376 (1933), no wr. hist. There was a second question dealt with in the opinion of the Attorney General. That question was: “Or in the above circumstances would the operator simply be subject to criminal prosecution or civil penalties for the violation of the Commission’s Order.” The Attorney General answered, in part: “As our answer to your first question is no, it follows, as a matter of course, that our answer to your second question is that the operator would be subject to the civil penalties and criminal prosecution provided by statute.” The Attorney General then discusses the applicable statutes. This Court, in Harrington, took cognizance of the 1939 opinion of the then Attorney General and analyzed some of the statutes referred to by the Attorney General. While we did say in Harrington that “[w]e need not, and do not, undertake to resolve the difference between the Commission and the [1939] Attorney General,” it also can be said that we did not repudiate the opinion of the Attorney General. When one reads the Harrington opinion in its entirety, it appears that this Court leaned toward the view expressed by the Attorney General.
I commend the Commission for making every legal effort to protect the public and to see that each operator in a given oil field gets his fair share of the production from that field, but I am compelled to conclude here as did the 1939 Attorney General that the rights and remedies involved were created by statute and did not exist at common law. I further agree that “[w]here a statute creates a new right or cause of action, as a purely statutory proceeding where none existed at common law, and also provides a remedy for its enforcement, it is ordinarily held that such statutory provisions are mandatory and exclusive.” Ortiz Oil Co. v. Railroad Commission, 62 S.W.2d 376, 379 (Tex.Civ.App. 1933, no wr. hist.). See Mingus v. Wadley, 115 Tex. 551, 285 S.W. 1084 (1926).
The summary judgment rendered by the trial court should be affirmed.
The Court’s opinion admits of no other construction than the Commission upon another trial will be entitled to a summary judgment. This Court is holding that as a matter of law, based upon the “facts now before us,” that the Commission did not exceed its statutory authority in requiring Sample to make up the 58,061 barrels of overproduction from the lease. Sample will be convicted of the offense of filing false reports without a lawful trial of the issue of his guilt or innocence.
The summary judgment should be affirmed.

. “It shall be unlawful for any person, as defined in this Act, owning, leasing, operating, producing, or controlling any oil property or oil well within this State to produce or cause to be produced on any day from any such oil property or oil well any oil in excess of the amount allowed to be produced per day from any such oil property or oil well under any order or orders of the Governmental Agency, theretofore promulgated and in force at the time.”