Court Opinion

ID: 9763938
Source: CourtListenerOpinion
Date Created: 2023-08-29 03:02:20.154305+00
Date Added: 2024-06-11T07:29:51.560334
License: Public Domain

CAYCE, Chief Justice,
dissenting.
I dissent. The majority’s holding that a lessee may continue to operate an oil and gas well in violation of a Railroad Commission shut-in order to avoid reversion of the lease and then obtain recovery against the lessor on a cause of action predicated on the illegal production is contrary to settled Texas law and sound public policy.
The Railroad Commission ordered the McCluskey No. 1 well shut-in for alleged violations of Statewide Rule 36 pursuant to the authority granted to it under sections 86.042 and 85.202(b) of the Natural Resources Code.9 Duncan admits operating the well in violation of the shut-in order, and it is undisputed that Duncan must rely on evidence that it produced gas in violation of the shut-in order to prevail on its causes of action against Littlepage. Therefore, Duncan is barred from recovering against Littlepage, as a matter of law, because its causes of action are predicated on Duncan’s illegal operation of the well in violation of the shut-in order.
The Supreme Court of Texas has long held that Railroad Commission orders have the same force and effect of law and that the violation of such rules and orders is illegal.10 Another well-established rule enunciated by the supreme court over a century ago is that “no action will lie to recover a claim for damages, if to establish it the plaintiff requires aid from an illegal transaction, or is under the necessity of showing or in any manner depending upon an illegal act to which he is a party.”11 Applying these settled rules of law, the trial court was constrained to find that, notwithstanding the jury’s verdict, Duncan is barred from recovery because its causes of action against Lit-tlepage were established by evidence that Duncan illegally produced gas in violation of a Railroad Commission shut-in order.
Although the majority acknowledges the continued validity of the rule of law derived from long-standing supreme court decisions prohibiting recovery for causes of action based on illegal acts, they wholly abandon the precedent of those decisions. As an inferior court, we are absolutely bound to follow *336and apply the rules of law established by higher courts.12 We have no discretion to do otherwise, even though we may abhor the result in a case.13
Moreover, the weight of intermediate appellate court authority in this state is uniformly contrary to the majority’s holding.14 While we are not bound by the decisions of our sister courts, they “should be accorded such a measure of weight and influence as they may be intrinsically entitled to receive, the duty of the court being to conform its decision to what is called the ‘general current of authority1 or the ‘preponderance of authority.’”15 However, there is no indication in the majority opinion that the decisions of our sister courts were consulted, or accorded any weight whatsoever.
Yet, the most egregious aspect of the. majority’s opinion is its holding that an illegal act may be excused when it is committed for the purpose of protecting private contract or property interests. Notwithstanding the fact that this rationale has been squarely rejected by the courts of this state in analogous cases,16 the majority concludes that when faced with the “complex Catch 22 situation” of obeying the law and losing the lease, or violating the law and keeping the lease, Duncan was justified in violating the law to keep from losing the lease. This result diminishes the rule of law and will engender disrespect for state agencies entrusted with the responsibility of enforcing the law.
It is our constitutional duty to encourage observance of the law and respect for those who uphold and enforce it,17 not find excuses for those who deliberately choose to transgress the law. The Railroad Commission shut-in order had the force and effect of law; thus, Duncan’s intentional production of gas in violation of this order was illegal. Texas law does not condone this illegal act because it was committed to protect a property or contractual right.18 Nor is it a defense that the shut-in order was issued on the basis of information that was false or incorrect.19 By excusing Duncan’s violation of the shut-in order for such reasons, and then rewarding Duncan for illegally flaunting the order by allowing Duncan to recover money damages for claims based on its illegal conduct, the majority encourages others to treat the orders of state regulatory agencies with the same contempt as Duncan.20
*337Contrary to the majority’s characterization of the record, Duncan was not faced with a “Catch 22 situation.” Duncan’s predicament was largely self-made; the consequence of its own failure to seek available legal remedies to challenge the shut-in order. For instance, Duncan could have sought to have the shut-in order enjoined.21 Duncan could have also obtained expedited judicial review of the shut-in order.22 Under section 85.242, had Duncan sought judicial review, a decision of the court would have been rendered “as expeditiously as possible.”23 Duncan, however, took no action other than to continue operating the well in violation of the shut-in order.24
The majority argues that “equity should allow Duncan to recover against Littlepage, notwithstanding Duncan’s illegal actions, because Littlepage’s actions were found by the jury to be malicious.25 This assertion stands a well-known principle of equity on its head, and reveals the confusion that lies behind the majority’s rationale. In Whittington v. Smith,26 which applied Texas law, the federal district court held that production in violation of the rules of the commission was illegal because the mineral lease owner drilled a well without first obtaining a drilling permit, as required under Statewide Rule 37.27 Refusing plaintiffs request to enjoin the Railroad Commission from enforcing whatever penalty warranted under the law, the court stated:
Plaintiff is .. .asking that the hand of the commission, officers of the state, enforcing the state’s conservation laws and its lawful orders thereunder against his unlawfully drilled well, be stayed. This, a court of equity will not do. This is but stating a well-known principle of equity; i.e., that equity will not aid one who comes as a law violator,28
As a law violator, Duncan is not entitled to equity. More importantly, however, Duncan has not come to court seeking equity; its causes of action seek legal, not equitable, remedies. Consequently, Littlepage’s actions are irrelevant to our determination of whether Duncan is precluded from recovering on causes of action based on the illegal production of gas.
Finally, the majority’s reliance on Estate of Grimes v. Dorchester Gas Producing Co.29 is misplaced. In Grimes, there was no shut-in order prohibiting production, and, unlike the lessor in Grimes, Littlepage is not seeking to *338have his agreement with Duncan declared void on the basis of illegality.
Furthermore, Grimes simply does not stand for the proposition for which it is cited in the majority opinion. Relying on Grimes as direct authority, the majority states that “public policy and the illegal acts rule” do not preclude Duncan from recovering against Littlepage because “the determination of, and penalization for” the violation of a shut-in order is the exclusive province of the Railroad Commission.30 The court in Grimes, however, did not address the question of whether public policy should prevent a law violator from recovering money damages on a cause of action based on the violation of a Railroad Commission order. Nor does Grimes support the majority’s proposition that the existence of statutory penalties for violating Railroad Commission orders precludes the courts of this state from denying recovery to a law violator for the alleged breach of an oil and gas contract on the basis of common law. Rather, the Grimes court merely reiterated the well-recognized rule that the actions of the Railroad Commission “are not, of themselves, determinative of contractual questions,” and held that a pooling agreement was not rendered illegal simply because it may have been performed in an illegal manner.31 Littlepage has not contended that the farmout agreement with Duncan was rendered illegal because Duncan performed the agreement in an illegal manner; Littlepage only contends that Duncan’s production of gas in violation of the shut-in order was illegal and, therefore, should not serve as the basis for the recovery of damages against Littlepage. The Grimes opinion does not address this issue.
The trial court was right to set aside the verdict in favor of Duncan because it was based on its admittedly illegal conduct in knowingly and willfully operating a well in violation of a Railroad Commission shut-in order. The majority opinion reversing this ruling is potently wrong; it disserves public policy and undermines the authority of the state agency responsible for regulating the oil and gas industry and protecting the public from potentially hazardous, unsafe practices in the industry. I would hold that Duncan is barred from recovering against Littlepage on those causes of action predicated upon Duncan’s admittedly illegal conduct; that the generally accepted definition of production in “paying” or “commercial” quantities does not include “illegal” production; and, therefore, that the evidence of illegal production did not support a finding of production in commercial quantities in this case, as a matter of law. For these reasons, I would affirm the trial court’s judgment.

. See 16 Tex. Admin. Code § 3.36 (effective Apr. 7, 1995), chttp://
www.sos.state.tx.us/tac/16/1/3/3,36.html>. Section 86.042 provides:
The commission shall adopt and enforce rules and orders to:
(1) conserve and prevent the waste of gas;
(2) prevent the waste of gas in drilling and producing operations and in the piping and distribution of gas;
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(9) otherwise accomplish the purposes of this chapter.
Tex. Nat. Res.Code Ann. § 86.042 (Vernon 1993). Section 85.202(b) states:
(b) The commission shall do all things necessary for the conservation of oil and gas and prevention of waste of oil and gas and may adopt other rules and orders as may be necessary for those purposes.
Id. § 85.202(b). Section 86.221 states: “No person may produce gas from a gas well in violation of the valid orders of the commission." Id. § 86.221 (emphasis supplied).

. Harrington v. Railroad Comm’n., 375 S.W.2d 892, 898 (Tex.1964); see L & G Oil Co. v. Railroad Comm’n., 368 S.W.2d 187, 193 (Tex.1963) (“Rules and orders of the Railroad Commission made under authority of a statute are considered under the same principles as if they were the acts of the Legislature_”); Automatic Gas Co. v. Dudding, 189 S.W.2d 780, 782 (Tex.Civ.App.-Texarkana 1945) ("The rules and orders of the Railroad Commission ... are legal and have the force of law_"), aff'd, 145 Tex. 1, 193 S.W.2d 517 (1946).

. Gulf, C. & S.F. Ry. Co. v. Johnson, 71 Tex. 619, 9 S.W. 602, 603 (1888) (emphasis supplied); see Kokernot v. Gilstrap, 143 Tex. 595, 187 S.W.2d 368, 370 (1945); Beer v. Landman, 88 Tex. 450, 31 S.W. 805, 806 (1895).

. See Henry Campbell Black, The Law of Judicial Precedents 10-11 (1912), reprinted in Ruggero J. Aldisert, The Judicial Process 778 (1976).

. See id.

. See Johnson v. Odom, 949 S.W.2d 392, 394 (Tex.App.-Houston [14th Dist.] 1997, pet. denied) (public policy barred plaintiff’s malpractice claims against his criminal defense lawyer because the proximate cause of plaintiff's conviction was his unlawful conduct, not his lawyer’s alleged negligence); Saks v. Sawtelle, Goode, Davidson & Troilo, 880 S.W.2d 466, 469-70 (Tex.App.-San Antonio 1994, writ denied) (recovery based on plaintiff's knowing and willful illegal acts precluded by public policy); Rodriquez v. Love, 860 S.W.2d 541, 544 (Tex.App.-El Paso 1993, no writ); Dover v. Baker, Brown, Sharman & Parker, 859 S.W.2d 441, 450-51 (Tex.App.-Houston [1st Dist.] 1993, no writ) (public policy barred claims which were “inextricably intertwined” with illegal acts); Plumlee v. Paddock, 832 S.W.2d 757, 759 (Tex.App.-Fort Worth 1992, writ denied); Stevens v. Hallmark, 109 S.W.2d 1106, 1106 (Tex.Civ.App.-Austin 1937, no writ) (“no legal right, which will form the basis of a cause of action ... can be asserted in the courts, the foundation of which must be predicated upon the admittedly unlawful act of the party asserting it”).

. Black, supra note 12, at 779.

. See, e.g., Kokernot, 187 S.W.2d at 370 (court held plaintiff barred from recovery on cause of action to enforce a lien on property due to false loan application, even though illegal application was necessary to avoid losing the lien); Rodriquez, 860 S.W.2d at 544 (court held plaintiff's unlawful act of driving with a suspended license barred recovery against insurer, even though insurer wrongfully caused license suspension).

. See Ex parte Hughes, 133 Tex. 505, 129 S.W.2d 270, 279 (1939); State v. Ferguson, 133 Tex. 60, 125 S.W.2d 272, 279 (1939); Argonaut Southwest Ins. Co. v. Morris, 420 S.W.2d 760, 774 (Tex.Civ.App.-Austin 1967, writ ref’d n.r.e.); see also Vargas v. State, 838 S.W.2d 552, 557-58 (Tex.Crim.App.1992) (Benavides, J., concurring).

. See Kokernot, 187 S.W.2d at 370.

. See Rodriquez, 860 S.W.2d at 544.

. The holding of this case, of course, is not limited to cases involving violations of orders issued by state agencies. Logically extended, the majority's rationale would permit a party who commits any type of illegal act to recover against another party on a cause of action based on the illegality, if the complaining party can show that the illegal activity was necessary to avoid economic loss.

. See Tex. Nat. Res.Code Ann. § 86.224 (Vernon 1993).
A violation or threatened violation of this chapter may be enjoined by any court of competent jurisdiction in which the suit for penalty may be brought. The court may issue mandatory or prohibitory writs of injunction that the facts justify.

Id.

. See id. §85.241.
Any interested person who is affected by the conservation laws of this state or orders of the commission relating to oil or gas and the waste of oil or gas, and who is dissatisfied with any of these laws or orders, may file suit against the commission or its members in a court of competent jurisdiction in Travis County to test the validity of the law or order.

Id.

. Id. §85.242.
A suit brought under Section 85.241 of this code shall be advanced for trial and shall be determined as expeditiously as possible. No postponement or continuance shall be granted except for reasons considered imperative by the court.

Id.

. The majority asserts that Duncan could not afford the legal expenses necessary to challenge the order. However, there is no support in the record for this assertion. The record actually shows that Duncan did have the means to take action, but that it only did so by filing suit against Littlepage after the shut-in order was no longer in effect.

. See majority op. at 330. The rationale upon which the majority relies is similar to economic duress. See Brown v. Cain Chem. Inc., 837 S.W.2d 239, 244 (Tex.App.-Houston [1st Dist.] 1992, writ denied); State Nat'l. Bank v. Farah Mfg. Co., 678 S.W.2d 661, 686 (Tex.App.-El Paso 1984, writ dism’d by agr.). However, Duncan neither pleaded nor proved that it was acting under duress when it produced gas in violation of the shut-in order.

. 16 F.Supp. 448 (E.D.Tex.1936).

. See id. at 451-52.

. Id. at 452 (emphasis supplied).

. 707 S.W.2d 196 (Tex.App.-Amarillo 1986, writ ref d n.r.e.).

. Majority op. at 330.

. Grimes, 707 S.W.2d at 203.