Court Opinion

ID: 3909065
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:38:05.907612+00
Date Added: 2024-06-11T07:42:33.510878
License: Public Domain

Prior to January 22, 1924, Camp Oil  Gas Company, an unincorporated association, Ross R. Robertson, and other parties owned certain oil leases in Archer county, among them being two leases, designated in the record as lease G and lease C. Under contract between the owners, the Camp Oil  Gas Company, hereinafter called the Camps, were developing and operating the leases. This contract provided, generally, that the Camps had the exclusive right to develop and operate said leases, to make all expenditures necessary in drilling wells, etc., and that each party should be liable, pro rata for such expenses; that the oil runs from such leases should be deposited in the First National Bank of Wichita Falls for the protection of the Camps against liability incurred on account of the interest of the other parties, and that the Camps should have the right to use such funds in developing and operating the leases; that, if the proceeds from oil runs for one *Page 995 
month should be more than sufficient to discharge obligations for the preceding month, the bank should distribute the balance amongst the owners ratably; but that as much as $5,000 should be at all times retained by said bank for the purpose of taking care of the current and emergency expenditures. After the leases had been operated for some time and the proceeds deposited in the bank under said contract, Robertson became dissatisfied with the charges being made by the Camps, and objected to certain items of expense, and on January 2, 1924, gave the bank written notice not to permit the Camps to withdraw any part of his interest in the deposits theretofore or thereafter made. This order was obeyed by the bank.
On the 13th day of June, 1924, Robertson contracted to assign his interest in lease G to the Prairie Oil  Gas Company, which will hereinafter be designated as the Prairie. The consideration named in the assignment was $12,000 cash. The assignment contained this stipulation:
"The lease is to be made and possession given as of April 29. 1924, at 7 o'clock a. m. First party (Robertson) is to discharge all claim or liens against said interest up to said date, and is entitled to all the in-coming revenue therefrom prior to said date. Party of the second part (the Prairie) is to assume and pay all operating and developing costs and expenses chargeable against said interest subsequent to April 29, 1924, at 7 a. m., and is entitled to the revenue and income accruing to said interest since said date."
On the 31st day of July, 1924, Robertson made a written assignment of lease G to the Prairie, in which it is recited:
"It is hereby agreed that the delivery of the interest hereby conveyed shall be made as of April 29, 1924, at 8 o'clock a. m., and the undersigned agrees to discharge all claims or liens against said interest up to said time, and shall account to the Prairie Oil  Gas Company for all revenue or income since said date. On its part, said purchaser assumes all charges, costs, and expenses chargeable against said interest arising out of the operation and development of said leased premises since said date."
On the same day, Robertson, as principal, and the Southern Surety Company, as surety, delivered to the Prairie his bond in the sum of $5,000, agreeing to save the Prairie and its assigns harmless from all loss, cost, charges, or expenses to be imposed on or demandable from it of any and every kind or character whatsoever. The bond recites:
"Whereas, the Camp Oil  Gas Company, a trust estate, is asserting some right, title, lien, or claim to the said five forty-eighths leasehold interest by virtue of said original and supplemental contracts, and the above-bounden R. R. Robertson and the Southern Surety Company have agreed jointly and severally to have said claim or lien canceled of record."
This bond was required by the Prairie because the Camps, on June 25, 1924, had written the Prairie, in substance, that if it purchased Robertson's interest in lease G, the Camps would not agree to any change in the running of Robertson's pro rata oil runs until he had paid all charges due from him to the Camps for operation and development upon said lease, and further notified the Prairie that, when it had consummated its purchase of Robertson's interest, and he had paid all such expenses and charges due them, the Camps would contract with the Prairie to run all the oil from said lease and procure a release from the crude contract upon the same, "to become effective June 4, 1924, the date he tied into the tanks upon said lease." This letter has the following postscript: "The amount due us up to April 29, 1924, by the said Robertson, is, upon said lease, $2,392.53."
There is a stipulation in the record that from and after April 29, 1924, to June 4, 1924, oil was run from lease G to the interest owned by Robertson the sum of $2,102.43, which sums had been paid into the First National Bank of Wichita Falls.
On July 29, 1924, the Prairie notified the bank in writing that it had purchased Robertson's interest in lease G, effective April 29, 1924, at 7 o'clock a. m., and was claiming Robertson's interest in the proceeds of oil runs from said lease, then in the hands of the bank, and which was being held by the bank because of some disagreement between Robertson and the Camps. In this letter they notified the bank that the Prairie was claiming all of that fund deposited since April 29, 1924, and denied the right of the Camps to have said sum.
On October 24, 1924, the Camps claimed that Robertson owed as his part of the expenses of development and operation, the total sum of $5,661.15. On that date there was a credit to Robertson's interest on account of oil runs, then being held by the bank, the sum of $2,535.32. Of this amount $2,199.66 was credited to lease G, and $336.26 to lease C. On that date Robertson assigned to the Camps his interest in lease C, as part of a compromise and settlement agreement made by them.
It was stipulated therein that the assignment of lease C should take effect as of September 30, 1924. In addition to the $7,000 which the Camps paid Robertson for lease C, it was stipulated that the Camps released all debts and claims and expenses due them from Robertson for the operation and development of leases G and C. As a part of the compromise and settlement agreement, Robertson delivered to the Camps a letter dated the same day, addressed to the First National Bank, telling them that he had sold lease C to the Camps, and further says:
"I have no further interest in the money now being held by your bank under my direction. I therefore now direct that you release said *Page 996 
money to the Camp Oil  Gas Company on the Camp Oil  Gas Company leases G and C."
The next day Camp delivered this letter to the bank, and the deposit of $2,535.32 to the credit of said leases was paid to him.
On April 13, 1925, the Prairie filed this suit against Ross R. Robertson, the Camps, and the First National Bank, to recover the amount of the deposit in the bank to the credit of lease G after April 29, 1924, amounting to $2,002.43. The Prairie set up the facts in virtue of which it became the owner of lease G and of the funds sued for, and further alleging that on the 29th day of October, 1924, there was a settlement between Robertson and the Camps whereby the Camps' lien on the lease and fund was released, but that the bank had paid said sum to the Camps. It also sued the Southern Surety Company upon the indemnity bond.
Robertson answered that he was not liable upon the bond, since it was given only to secure his obtaining from the Camps a release of their lien, and was not intended to secure to the plaintiff the payment of the money in the bank. By cross-action against the Camps, he sought to recover the sum claimed by the plaintiff, and alleged that he had sold his interest in lease G on June 13, 1924, effective as of April 29, 1924; that at the time of said sale the Camps were claiming an indebtedness against him for operating expenses on lease G prior to April 29, 1924, and on lease C, but that there was a disagreement between the parties as to the amount of this indebtedness; that on October 24, 1924, he, acting by and through his attorney, E. C. De Montel, and the Camps, acting by and through the president of the association, A. L. Camp, entered into a settlement agreement, as follows:
(1) Robertson sold to the Camps his one-fifth interest in said C lease for $7,000.
(2) The Camps agreed to release all claims against Robertson for operating expenses on both leases G and C.
(3) That a sum of money then in the bank, of about $300, being the proceeds from Robertson's one-fifth interest in lease C then being sold, and also from what had been his interest in lease G prior to April 29, 1924, was released to the Camp Oil  Gas Company. He alleged that the exact amount of this fund was unknown to him or his attorney, but that Camp represented that the amount was $300 or $400, and that it was made up of the proceeds from leases C and G prior to April 29, 1924.
"That, in the course of the negotiations in which the settlement above described was made, the said A. L. Camp, acting as aforesaid for the Camp Oil  Gas Company, stated and represented to this defendant and to the said E. C. De Montel, that there was on deposit in the First National Bank of Wichita Falls, Tex., a sum of money amounting to approximately $300, which was the proceeds from the oil runs from lease G prior to April 29, 1924, and proceeds from oil runs from lease C, and as a part of the said negotiations and settlement, it was agreed between the parties thereto that the bank might deliver and pay to the Camp Oil  Gas Company the said sums so on deposit with it, and which had been held by said bank as a credit to this defendant's interest in said leases, and, although the said A. L. Camp well knew that at that time there was on deposit in said bank the sum of $2,002.43, the proceeds credited to the five forty-eighths interest in said lease G for oil runs subject to April 29, 1924, and prior to July 31, 1924, and which was being held by said bank under the direction of the Prairie Oil  Gas Company. He wholly failed to advise this defendant or the said E. C. De Montel of that fact, but, on the contrary, as this defendant now believes, concealed that fact from them. This defendant, relying upon the aforesaid statements and representations of A. L. Camp, that there was on deposit in the said bank, as proceeds of said lease G and lease C, approximately $300, and, believing the same to be true, on October 24, 1924, wrote a letter to the First National Bank, and delivered it to the said A. L. Camp, advising said bank that he had no further interest in the money then being held in said bank under his direction, and authorized said bank to release the money to the said Camp Oil  Gas Company, on leases G and C, and through which letter the said A. L. Camp received from said bank the sum of $2,535.32, which sum included the oil runs from lease G prior to April 29, 1924, the proceeds from oil runs credited to lease C, and also the $2,002.43 representing proceeds of the oil runs from April 29, 1924, to July 31, 1924, credited to lease G."
He further alleges that the exact amount of this fund was unknown to him or his attorney, and prays that, if plaintiff recover a judgment against him for said sum, he have judgment over against the Camps for the same amount.
In reply to Robertson's cross-action, the Camps set up: The operating agreement between them and Robertson and other co-owners, which authorized them to use said funds and draw checks on the First National Bank for the purpose of paying expenses. That Robertson had not paid his pro rata part of the expenses of either of said leases at the time of the sale of his interest in lease G to the plaintiff, and that he owed the Camps on operating expenses much more than the amount on deposit in the bank credited to Robertson's interest in said leases. That because of said facts the Camps were the owners of said fund credited to Robertson's interest. That the Camps were in no wise privy to the sale by Robertson of his interest in lease G to the plaintiff, and that plaintiff took said lease subject to the *Page 997 
rights of the Camps under the operating contract. That prior to April 29, 1924, Robertson had notified the bank to withhold from the Camps all his interest in the proceeds from lease G, and prior to final settlement on October 24, 1924, gave the bank a similar notice with reference to lease C, and that the bank, in compliance with said notices, had withheld all such funds up to final settlement, all of which was well known to Robertson. That on the 24th day of October, 1924, the Camps purchased from Robertson his interest in lease C, effective as of September 30, 1924, for a consideration of $10,125.83 which was paid as follows: $7,000 cash, $5,561.51 by a cancellation of that amount due the Camps from Robertson for operating expenses on both of the leases, and the transfer to the Camps by Robertson of all the funds then on deposit in the bank credited to what had been Robertson's interest in leases G and C. That thereupon Robertson gave the Camps an order authorizing the bank to pay said funds to the Camps. That both Robertson and De Montel had full and correct information at the time of said settlement as to the amount of said funds in the bank, and that the said Camp did not conceal or misrepresent anything in the making of said compromise and settlement.
There was a trial before the court without a jury, and judgment was rendered for the plaintiff, the Prairie Company, against Robertson for $2,002.43, and in favor of Robertson over against the Camp Oil  Gas Company for a like amount. The Camps alone have appealed.
Robertson's action against the Camps, as shown by the quoted paragraph from his cross-action, is one for fraud and deceit. The findings of fact show that the court considered it as an action based upon fraud, and the evidence introduced shows that the case was tried upon that theory in the lower court. We are therefore bound to consider it as a case of fraud and deceit in so far as the appellants and the appellee are concerned.
I am unable to approve the finding of the honorable trial judge upon the issue of fraud. In the matter of the compromise and settlement, the Camps and Robertson dealt upon equal terms. No confidential relations existed between them. A. L. Camp, the active head and president of the Camps, had disagreed with Robertson upon the question of charges for expenses, which the Camps had made against Robertson's share of the income from the leases, and A. L. Camp and Robertson were not upon speaking terms. Because they were not friendly, De Montel was representing Robertson in the settlement of October 24, 1924. It appears that, from a minute and critical inspection of the expense accounts rendered to him from time to time by the Camps, Robertson had concluded that certain items charged to him were not proper, and, after refusing to allow them, he notified the bank not to permit the Camps to draw upon his share of the deposit for the payment of any part of the expense accounts. This notice was given in January, 1924, and this condition continued to exist for about 9 months prior to the settlement, during which time the Camps had continued to operate the lease and deposit Robertson's share of the gross income in the bank. They also rendered him monthly statements showing the condition of the account, and in some of the last statements Robertson's balance in the bank was written in red ink, showing that there was to his credit from lease G, $2,199.06, and from lease C, $336.26. I am Unable to believe that the same business acumen and diligence manifested by Robertson which led him to detect the alleged errors in charges for expenses, did not also enable him to learn the amount to his credit upon the rendition of each account. Especially, am I not willing to believe that he contracted to sell lease G to the Prairie in June, and later consummated the deal in July, without both of said parties learning from the bank the state of that account as shown by the bank's books. I am confirmed in my views that Robertson and the Prairie both knew how much money there was to Robertson's credit in the bank from lease G by the fact that the Prairie required of Robertson an indemnity bond to secure the payment of that very fund. The bond is in the sum of $5,000. Why did they happen to make it about twice the amount of Robertson's credit if they had no information upon that point? Upon what basis did they estimate the sale value of Robertson's interest in the lease? Why was the sale consummated about the last of July made to relate back to April 29th, at 8 o'clock a. m., if the condition of the bank account concerning which they contracted was unknown to them? These, I think, are pertinent questions. Reasonable business men do not ordinarily invest $12,000 in a producing oil lease and date the sale back so as to cover previous oil runs then in a bank, without first knowing the amount to the credit of the lease, when such information is not only in the hands of one of the parties in the form of monthly statement, but the exact amount could be obtained in a moment by telephoning the bank.
All these considerations apply with much greater force in relation to the settlement contract between A. L. Camp and De Montel, as the agent of Robertson. The negotiations between Camp and De Montel continued over a period of two or three weeks before the deal was closed in October. If Robertson and De Montel had ground for believing that Camp was charging Robertson unfairly in the matter of expenses, this was a fact sufficient to arouse their suspicions and cause them to proceed cautiously in any further transaction with the Camps. Neither Robertson nor De *Page 998 
Montel deny the fact that they had received the monthly statements, but they seek to avoid the force of that evidence by saying that they were not auditors and could not understand the statements. If the statements were unintelligible, then, for a stronger reason they should have applied to the bank for definite information as to the amount of money on deposit there to Robertson's credit. Several of the original statements, however, are before us in the record, including the very one used by A. L. Camp and De Montel during their negotiations prior to the settlement. According to the testimony of A. L. Camp, his son, and Miss Hardwick, their bookkeeper and stenographer, this statement, with some yellow sheets of paper, are the identical ones used by Camp and De Montel in arriving at the terms and conditions of the settlement. De Montel denies that he ever saw the yellow sheets of paper, but the fact remains that the statement is plain and simple, containing two items which show the debits, oil runs, and balance from each lease, and, under these, two more items showing the oil runs, and balance from the same two leases then in escrow. The statement is so short, simple, and clear that a child can understand it. According to the language of the bond, it is clear that Robertson and the Prairie knew that the Camps were making certain claims for expenses, payable out of Robertson's interest in the fund, and it appears that the Camps notified the Prairie by letter prior to the time the sale from Robertson to the Prairie was consummated that Robertson was indebted to them up to April 29, 1924, in the sum of $2,392.53, for the lease they were buying. It seems to me incredible that neither Robertson nor the Prairie, in a deal involving $12,000 cash, made any effort to ascertain what was to the credit of the lease, which was being assigned, when such an item must necessarily have entered very largely into the matter of fixing the sale price. Robertson and A. L. Camp were unfriendly, and the confidential relation which might have existed between them as owners in common of the property, therefore, did not exist. As heretofore stated, Robertson suspected the Camps of unfairly and unjustly charging expenses to which they were not entitled, and this was enough to put Robertson upon his guard and to require him to investigate before closing the deal. Wortman v. Young (Tex.Com.App.) 235 S.W. 559. The law never presumes fraud; on the contrary, the presumption is against it, and he who alleges it must prove it, and in my opinion this burden has not been discharged in this case by Robertson. Wells Fargo  Co. v. Neiman-Marcus Co. (Tex.Civ.App.) 125 S.W. 614; Reed v. Holloway (Tex.Civ.App.) 127 S.W. 1189; Burchill v. Hermsmeyer (Tex.Civ.App.) 212 S.W. 767; Tatum v. Orange  N.W. Ry. Co. (Tex.Civ.App.) 198 S.W. 348.
By the terms of the agreement under which the funds were held in the bank, there was appropriated and set aside to the Camps so much of the money as was necessary to reimburse them for legitimate and proper expenditures by the Camps, shown to be $5,680, chargeable against Robertson's interest in the fund. The Prairie bought with full knowledge of these facts, and acquired no greater right than Robertson had. Ketchum v. City of St. Louis, 101 U.S. 319, 25 L.Ed. 999. The burden therefore rested upon Robertson to show by a preponderance of the evidence that in the settlement agreement Camp had reassigned the fund to him. No effort was made to discharge this burden. The $2,002.43 was a part of the fund which the bank had been holding since January 22, 1924, under the directions of Robertson, and his letter to the bank released all his claim upon it, and, since the Prairie occupies no better position with reference to it than Robertson, the fact that De Montel did not intend to release it, and failed to communicate that intention to either the Camps or the bank, does not alter the rule.
Aside from these matters, I think the judgment should be reversed and the cause remanded, for the reason that Robertson, in his pleadings, laid no predicate for the recovery of damages, in that no measure was set up and no evidence introduced from which the court could properly determine the measure. This being a suit based upon fraud and deceit in matter of inducement, Robertson's right to recover is governed by the rule announced in George v. Hesse, 100 Tex. 44, 93 S.W. 107, 8 L.R.A. (N. S.) 804, 123 Am.St.Rep. 772, 15 Ann.Cas. 456. The instant case, like that case, is one in which recovery is sought for fraudulent representations in matters of inducement, and not a suit for a breach of a contract, because the contract has been performed by both parties. In the George Case the Supreme Court said:
"Clearly we think the extent of his loss is the difference between the value of that which he has parted with, and the value of that which be has received under the agreement. * * * Logically, therefore, what he has lost by the transaction is the measure of his damages."
In entering a judgment in this case, the trial judge applied the rule which permitted Robertson to measure his damages by subtracting what he received from what he would have received if the representations had been true.
De Montel testified that he did not take the $2,002.43 into consideration in negotiating with Camp; that he refused to consider the figures and estimate which Camp had given him, but required Camp to make a lump sum proposition and wipe out all indebtedness. While this testimony was contradicted flatly by the evidence of A. L. Camp and his son, the court adopted De Montel's version of the matter. Then how did *Page 999 
the trial court conclude that the amount for which he gave judgment was the difference between the value of what Robertson had paid him and the value of that which he had received under the agreement?
Whatever may have been said between the parties prior to the consummation of the compromise and settlement agreement, I think it is clear that the contract as finally agreed upon was that Camp should pay Robertson $7,000, surrender his claim for expenses amounting to over $5,600, and that Robertson should convey him lease C and withdraw his contention as to the items of expenditure, and authorize the bank to pay all the money which had been held under his directions to Camp. This is the contract as actually executed and acquiesced in by the parties until the filing of this suit some months later. If the contention on the part of Robertson and De Montel, that they did not know the amount of the money in the bank, is entertained, then the minds of the parties did not meet, and there has been no contract of settlement, and the suit should have been one for rescission and cancellation, instead of an action for damages, based upon fraud and deceit.
For the reasons indicated, I think the judgment should be reversed and the cause remanded.