R. P. Fuller v. C.M. & W. Drilling Company, Inc., a Corporation

BRATTON, Chief Judge. For convenience, reference will be made to C. M. & W. Drilling Company as the drilling company, and to Jaguar Oil Company as the oil company. The drilling company owned a part of the working interest in certain oil and gas leaseholds in Wyoming on which there were producing wells. The oil company desired to purchase the property. Negotiations resulted in the execution of a written contract of sale dated January 9, 1954. Under the terms of the contract the oil company was to pay $650,000 for the property. Of. that amount, $40,000 was to be and was deposited in escrow in a bank in Denver, Colorado; $260,000 was to be paid on or before January 26, 1954, the closing date of the contract; two promissory notes each for the sum of $50,000 were to be executed and delivered; and $250,000 was to be paid out of oil produced from the premises. The contract provided in substance that the escrow agent should deliver the $40,000 to the drilling company on the closing date unless the title to the property was found to be unmerchantable. Title to the property was found to be merchantable but the oil company was unable to make the payment of $260,000. The two parties joined in directing the escrow agent to deliver the $40,000 to the drilling company and that was done. The drilling company had in its possession two evaluation reports of the property made by E. A. Polumbus, Jr., a petroleum engineer of recognized ability, but these were not delivered to the oil company. The oil company assigned to R. P. Fuller its claim and cause of action against the drilling company. Fuller, as assignee of *863 the oil company instituted this action against the drilling company to recover restitution of the $40,000 delivered to the drilling company under the terms of the contract. Later, the oil company was made a party to the action. The cause was tried to the court without a jury; judgment was entered for the drilling company; and Fuller appealed. The essence of the cause of action asserted against the drilling company was wrongful concealment of the existence and substance of the Polumbus reports. It is argued that the reports were material to the contract; that silence on the part of the drilling company respecting their existence and substance amounted to misrepresentation which constituted fraud; and that restitution of the $40,000 should have been granted. Suppression or concealment of a material fact which is designed to produce and does produce a false impression upon the mind of the purchaser of property concerning the property being purchased constitutes actionable fraud. But asserted fraud of that nature must be proved by evidence which is clear and convincing. Pacific Royalty Co. v. Williams, 10 Cir., 227 F.2d 49, certiorari denied 351 U.S. 951, 76 S.Ct. 847, 100 L.Ed. 1474. It would not serve any useful purpose to detail the evidence at length. It is enough to say that the evidence presented a sharp issue of fact as to whether there was any suppression or concealment of the existence and substance of the reports. The trial court saw the witnesses while testifying, observed their demeanor, appraised their credibility, weighed their evidence, and resolved the crucial issue of fact by expressly finding that at the time of the execution of the contract the oil company knew of the existence and substance of the reports. The finding was a sweeping negation of fraudulent suppression or concealment on the part of the drilling company concerning the existence and substance of the reports. The finding is adequately supported by substantial evidence, is not plainly erroneous, and therefore must stand on appeal. United States v. National Association of Real Estate Boards, 339 U.S. 485, 70 S.Ct. 711, 94 L.Ed. 1007; Jones v. Grinnell, 10 Cir., 179 F.2d 873; Brown v. American National Bank, 10 Cir., 197 F.2d 911; Yokley v. Santa Fe Trail Transportation Co., 10 Cir., 227 F.2d 534. And in the-absence of clear and convincing tokens of concealment concerning the existence and substance of the reports, there was. no sustainable basis for the action. The judgment is affirmed.