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U.S. Supreme Court

Mammoth Oil Co. v. United States, 275 U.S. 13 (1927)

Mammoth Oil Company v. United States

No. 140

Argued April 12, 13, 1927

Decided October 10, 1927

275 U.S. 13


1. The lease and contract in this case -- which involve, inter alia, the letting of a Naval Petroleum Reserve for exploitation by a private corporation and a scheme for obtaining fuel oil and elaborate storage facilities for the Navy by means of the royalties of crude oil provided for the United States in the lease -- were without authority of law, and the United States is entitled on that ground to have them cancelled. Pan American Petroleum Co. v. United States, 273 U. S. 456. Pp. 275 U. S. 35, 275 U. S. 53.

2. The facts and circumstances in evidence require a finding that, pending the making of the lease and agreement, the representative of the government (former Secretary of the Interior) who dominated the transactions, and the representative of the lessee corporation, contrary to the government's policy for the conservation of oil reserves for the Navy and in disregard of law, conspired to procure for the company all the products of the reserve on the basis of exchange of royalty oil for construction work, fuel oil, etc.; that the former so favored the latter and the making of the lease and agreement that it was not possible for him loyally or faithfully to serve the interests of the United States or impartially to consider the applications of others for leases in the reserve, and that the lease and agreement were made fraudulently by means of collusion and conspiracy between them. P. 275 U. S. 35.

3. Evidence is to be weighed according to the proof which it was in the power of one side to produce, and in the power of the other to contradict. P. 275 U. S. 51.

4. Having introduced evidence which, uncontradicted and unexplained, was sufficient to sustain its charge that the lease and contract were procured for the defendant corporation through fraud participated in by the principal representative of the company, the United States was not required to call him as a witness, and his silence makes strongly against the company. It is as if he personally held the lease, were defendant, and failed to testify. P. 275 U. S. 52. chanroblesvirtualawlibrary

Page 275 U. S. 14

5. While the failure of such representative to testify cannot properly be held to supply any fact not reasonably supported by the substantive evidence in the case, it justly may be inferred that he was not in a position to combat or explain away any fact or circumstance so supported by evidence and material to the government's case. P. 275 U. S. 52.

6. There is no occasion to consider, and the Court does not determine, whether the former Secretary of the Interior was bribed. P. 275 U. S. 53.

7. It was not necessary for the government to show that it suffered or was liable to suffer loss or disadvantage as a result of the lease or that the former Secretary of the Interior gained by or was financially concerned in the transaction. P. 275 U. S. 53.

8. An oil-purchasing company bought from the fraudulent lessee in this case the tanks which the latter had built or was building on the demised naval reserve under the lease and in pursuance of the fraudulent scheme, and used them for storing oil from an adjacent oil field. The purchaser was owned half and half by two companies whose boards of directors were headed, respectively, by S, who represented the lessee in obtaining the fraudulent lease, and by another person who had acted with him, shortly before the purchase, in controlling the purchasing company in respect of other important transactions

Held, that the purchasing company must be presumed to have known that there was no law authorizing the lease; that the circumstances disclosed in the case were sufficient to impute to it S's knowledge of the fraud, and that it was not entitled to use or remove the tanks. P. 275 U. S. 54.

9. A pipeline company which, as the lessee's nominee, built a pipeline and related improvements on the naval reserve for transportation of oil therefrom in pursuance of the fraudulent lease, and which was owned half and half by the two companies referred to in the preceding paragraph as owners of the purchasing company therein mentioned, was chargeable with notice that the use of reserve oil to procure the construction of the pipeline was a part of the plan for the unauthorized exhaustion of the reserve; that such use furthered the violation of law and was contrary to the established conservation policy. It stands on no better ground than the lessee would have occupied if it had made the improvements in question. P. 275 U. S. 55.

14 F.2d 705 affirmed.

Certiorari, 273 U.S. 686, to a decree of the circuit court of appeals, which reversed a decree of the district chanroblesvirtualawlibrary

Page 275 U. S. 15

Court, 5 F.2d 330, dismissing a suit brought by the United States to cancel an oil and gal lease covering a Naval Petroleum Reserve in Wyoming, and to set aside also a supplementary agreement between the same parties. There were prayers for possession of the leased lands, for an accounting, and for general relief. The grounds of the suit were fraud and corruption and lack of legal authority to execute the instruments. The court below sustained the government's contention on the ground of fraud and corruption. Compare Pan American Petroleum Co. v. United States, 273 U. S. 456. chanroblesvirtualawlibrary

Page 275 U. S. 30

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