Case Information

*1 OFFICE OF THE ATTORNEY GENERAL OF TEXAS GERALD C. MANN AUSTIN SERGEKERKEERNE ATTORNEY GENERAL

Mr. Olin Calberron, Commissioner Railroad Commisgion of Texas Austin, Texas

Dear Sir:

Opinion No. 0-4360 Re: Authority of the Railroad Commission to take an oil well off production while suit attacking the permit to drill said well in still pending.

This is in reply to your letter requesting an opinion. Your letter reads as follows: "With reference to Cause No. 9016, Stan- olind Oil and Gas Company versus Midas Oil Company, et al, in the District Court of Trevis County and with particular reference to the judgment of the court of Civil appeals of the Third Supreme Judicial District dated July 3, 1940, and reported in 143 S. W. (2nd) 138, and in which opinion the following language is used: 'The invalidity of said permit as not being au- thorized to prevent confiscation, and as being in violation of the Commission's own rule of May 29, 1934, relating to voluntary subdivisions, has now been twioe definitely adjudicated by this court; and is now forced used.' "I wish you would please answer the follow- ing question: "QUESTION "Does the opinion, as cited, authorize or justify the Commission in taking the well in question off production schedule?"

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In order to answer your question it is necessary to examine the history of the case about which you ask, to wit, the case of Stanolind oil & Gas Company v. Midas Oil Company, et al. That case was originally filled on October 19, 1935, by the Stanolind Oil & Gas Company to eanoel a permit issued on June 10, 1935, by the Railroad Commission of Texas to Midas Oil Company authorizing the drilling of an oil well in the East Texas field as an exception to the Railroad Commission's Rule 37. The well was drilled before the case was filled. On the original trial of the case in the District Court, judgment was entered for the defendants, the Midas Oil Company, and the Railroad Commission of Texas, up holding the permit. That judgment was appealed to the Court of Civil Appeals at Austin; and that court wrote an opinion reversing the judgment and remanding the case for new trial. That opinion is reported as Stanolind oil & Gas Co. v. Midas Oil Co., 123 S. W. (2d) 911. From that judgment of the Court of Civil Appeals application for writ of error was dismissed by the Supreme Court of Texas.

The case was tried a second time in the District Court, and judgment was again entered for the defendants upholding the permit. The judgment was on the motion of the defendants at the close of the plaintiff's evidence. The case was again appealed to the Court of Civil Appeals at Austin; and the Court of Civil Appeals again reversed the trial court's judgment and remanded the case for new trial on the sole issue of estoppel, that is, on the sole issue of whether or not the plaintiff, Stanolind Oil & Gas Company, was estopped by its conduct from complaining about the permit to drill said oil well. The court held that the permit to drill the well was impelled, but that in view of the fact that no one complained about the permit for more than four months and that the plaintiff, Stanolind oil & Gas Company, did not file said suit to eanoel the permit for more than four months after it was granted and that in the meantime the permittee, Midas Oil Company, "imourred heavy expense towards drilling such well" it was a question of fact "to be determined under all the facts and circumstances" whether the plaintiff waited an unreasonable length of time before filling its suit and thereby permitted the Midas Oil Company to actu oder the permit and incur such heavy expense that the plaintiff was barred under the doctrine of estoppel from complaining. That opinion of the Court of Civil Appeals is reported as Stanolind Cilabos Co. v. Midas Oil Co., 243 S. W. (2d) 136; and the court, speaking through Justice Beugh, said:

*3 Mr. Olin Galbarsoa, Page 3 " . . . The perait in question was . . . . olearly iavalid. "The only remaining question is that of eatoppel . . . . "Can the Stanolind, whose primary interest and objective in bringing such aait is to proteet in own property rights, ait allently by for four months after such perait is granted, apparently acquiescing in ita presumed validity, until the holder thereof has, as he had a olear legal right to do, insurred heavy expense towards drilling such well, and then be permitted to assert that drilling it will ingire Stanolind's property rights? . . . "On the second trial hereof the defendants pleaded astoppel against appellant's right to have said perait aet aside for the protection of its own property rights. Manifestly that constituted an affirmative defense. And when the appellant showed, as it olearly did, that the perait was arbitrarily granted by the Commission, it was entitled to have it aet aside auless the Midas by pleading and proof showed that Stanolind had, by its own conduct, beocme astoppel from doing so. This burden, as an affirmative defense, therefore clearly rested upon the Midas. It was predieated upon aete and conduct oesurring subsequent to the granting of the perait, " . . . Appoliec did not by proof andertake to show astoppel as against an invalid order. Its oontention in the trial court, and its motion for an instructed verdict at the close of plaintiff's evidence, was predicated entirely on the oontention, andits motion affirmatively so above, that 'the plaintiff has wholly failed to discharge the burden of proof placed upon it,' to show that there was not before the Railroad Commiasion sufficient evidence to sustain said permit. Manifestly this was the ground on which the trial

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Mr. Olin Culbergon, Page 4

court based his judgment. On that ground it cannot be sustained, and the issue of estoppel, wherein the burden rested upon appolles, was not adjudieated. "What constituted a reasonable time, none being fixed by atatute, in which a protestant must act in suing to set aside such permit; and whether an unreasonable delay in doing so has damaged the holder of such a permit, are fact questions to be determined under all the facts and circumstances of the particular case. "The invalidity of said permit as not being authorized to prevent condiscation, and as being in violation of the commission's own rule of May 29, 1934, belating to voluntary subdivisions, has now been twice definitely adjudicated by this court; and is now foreclosed. Since, however, the trial court erroneounily rendered judgment in favor of the defendant without requiring it to make any proof on its affirmative defense of estoppel, a defense available to it as against Stanolind even on an invalid permit, we think it should be permitted to have that issue determined. The judgment will therefore be reversed and the cause remanded for trial solely upon the issue of estoppel pleaded by the defendant . . . ."

From that judgment of the Court of Civil Apper 18 application for writ of error was refused by the Supreme Court of Texas.

The case was tried a third time in the District Court on the sole question of whether or not the plaintiff, Stanolind oil &; Gas Company, was barred by estoppel from maintaining the suit. The Railroad Commission of Texas and its members, althou $h$ named as defendants in the plaintiff's petition and having appeared in the two previous trials, did not appear or participate in the third trial. The plaintiff, Stanolind oil &; Gas Company, and the defendant, Hidas Cil Company, eed, appeared by their attorneys, and each offered evidence, on the third trial. The jury answered two special issued, finding that (1) "the plaintiff, Stanolind Cil &; Gas Company, delayed for an unreasonable time the bringing of

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this suit against the defendant, Midas Oil Company," and (2) "that defendant, Midas Oil Company, has incurred heavy expense which it otherwise would not have incurred." Based upon those findings, the trial court entered judgment against the plaintiff and for the defendant, Midas Oil Company, said judgment being dated December 3, 1941.

The case was again appealed by "tamolind Oil & Gas Company, and is now on appeal in the Court of Civil Appeals at Austin.

As we interpret your question, you want to know whether or not the Railroad Comnised on of Texas has authority by virtue of what was said in the opinion of the Court of Civil Appeals to take the well in question off production schedule. In other words, does the Railroad Commission have authority to enter an order or to take action that will stop production of oil from the well in question?

In view of the appellate court decisions in this state we are convinced that the Railroad Commission does not have authority at this time to enter an order or to take any action that will stop production of oil from this particular well, other than to enter an order that will apply to all wells generally. The Commission does not have authority at this time to enter an order that has the effect of modifying or changing the terms of the permit to drill the well, that was originally issued by the Commission on June 10, 1935, because the Commission does not have jurisdiction over the subject matter by virtue of the fact that the suit attacking the validity of the permit is still pending. Such was the holding of the Supreme Court of Texas in the case of Stewart v. Smith, 126 Tex. 292, 83 S. W. (2d) 945, in which the Court said:

"Flaintiff in error suggests that this cause may be moot, because after the trial of the cause in the district court, and while it was pending in the appellate courts, the Railroad Commission granted plaintiff in error a permit to drill a well on the land in coatroversy, and the well has been drilled. We presume from the foregoing statement that after the judicial arm of the state had assumed jurisdiction of the matter, the Railroad Commission undertook to act again thereon. If this

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be true, the Railroad Commission was without jurisdiction."

The same holding was made by the Court of Civil Appeals at Austin, in the case of Edgar v. Stanolind oil & Gas Co., 90 S.W. (2d) 656, in which it was said:

"After procuring two wells on said strip of land, Edgar applied to the Railroad Commission for a permit to drill-well No. 3, here involved. This application was by the commission refused on October 21, 1933. Edgar thereupon filled suit in the district court of Travis County to enjoin the commission from interfering with his drilling said Well No. 3. That suit was filled on April 6, 1934. While that suit was pending, Edgar filled a motion with the Railroad Commission for a rehearing of his application. That motion was heard by the commission, and on September 24, 1934, the Railroad Commission, by what it designated as an amended order, granted Edgar a permit to drill said well No. 3.

Thereafter Edgar dismissed his suit in the district court of Travis County, obviously on the assumption that he had after he had filled it obtained from the Railroad Commission the re-lief he had theretofore invoked the jurisdiction of the district court to obtain.

"The reunion the appellate herein brought this suit to annul the so-called 'amended order' of the commission dated September 23, 1934, and to restrain the operation by appellant of the well drilled thereunder."

"From the facts above recited it is manifest and has been expressly so held, that while the suit involving the subject-matter of this controversy was pending in the district court of Travis County, the Railroad Commission lost jurisdiction of its order of October 21, 1933.

... the order of the commission dated September 24, 1934, and herein attacked, was void for

*7 Mr. O1in Culbergon, Page 7 want of Jurisdietion in the comnission over the subjeot-matter thereof. Stewatt v. Suth (Tex. Sup.) 83 S. W. (2d) 945." A similar holding was made in the case of Narnadall oil Co. v. Reilroad Comnission, 90 S. W. (9d) 663, in which the court aited the cases of Stewart v. Suth, supra, and Edger v. Stanolind O11 &; Cas Co., supra, as authority.

Our answer to your question is that the Railroad Commission of Texan does not have authority a this time to take the well in question off production sehedule.

Yours very truly ATTORNEY GENERAL OF TEXAS

By (Signed) Cecil C. Rotach Assistant.

APPROVED MAY 2, 1942 (Signed) Grover Sellers FIRST ASSISTANT ATTORNEY GENERAL

CCR:db:JJ:c AJ1 ROVJD OPINICN CONJITTES BY B. W. B. CHAIREAM.