DuShane v. Union Nat. Bank, 49142
Decision Date | 01 April 1978 |
Docket Number | No. 49142,49142 |
Citation | 576 P.2d 674,223 Kan. 755 |
Parties | Kirk L. DuSHANE, Jr., et al., Appellees and Cross-Appellants, v. UNION NATIONAL BANK, Appellant and Cross-Appellee. |
Court | Kansas Supreme Court |
Syllabus by the Court
1. Actionable fraud may be based upon false representations made as to existing and material fact or upon a suppression of facts which the party is under a legal or equitable obligation to communicate and in respect of which he could not be innocently silent.
2. A suppression or concealment of the truth is not at all times such fraud or deceit as will be relieved against. It must be a suppression or concealment of facts which the party is under a legal or equitable obligation to communicate and in respect of which he could not be innocently silent.
3. In an appeal from judgments against a bank for fraud and deceit based upon alleged concealment or suppression of facts, concerning credit extended and the general business reputation of one of the bank's debtors, the record is examined and it is held no actionable fraud or deceit was established and the judgments are reversed.
Emmet A. Blaes of Jochems, Sargent & Blaes, Wichita, argued the cause, and Robert L. Heath, Wichita, was with him on the briefs for appellant and cross-appellee.
C. Robert Bell, Jr. of Brick & Bell, Wichita, argued the cause, and Gary M. Austerman, Wichita, was with him on the brief for appellees and cross-appellants.
The defendant, Union National Bank of Wichita, appeals from fraud judgments totaling $304,363.14. These judgments were entered in favor of Kirk L. DuShane, Jr. and eight other individual plaintiffs. Two other plaintiffs, whose claims were dismissed by the court prior to trial for failure to appear in person, have cross-appealed.
General background information will be helpful in understanding the question presented on appeal. The claims of fraud arose out of individual purchases of shares in working interests in oil and gas leases promoted by Albert J. Gebert. Gebert had been in the oil business in Kansas for many years. He had promoted and completed many oil and gas wells and was well-known in the Wichita area. Gebert had bank accounts in both the Fourth National and the Union National Bank in Wichita. Union National had been extending credit to Gebert on wells when oil was found in commercial quantities. Its principal loans to Gebert were secured by a mortgage on producing wells. In August, 1971, Gebert closed out the last of his three checking accounts with Union National. Union National continued to carry a consolidated loan, which was being paid from oil production, and one $10,000.00 note which had been guaranteed by Gebert's father and brother.
Sometime in 1971, Gebert met with plaintiff, Kirk L. DuShane, Jr., while in California, and they discussed investments and financing of future oil ventures in Kansas. In January or February, 1972, Gebert moved to California.
DuShane became sufficiently interested in Gebert's oil operations that he considered investing and interesting others in investing in these ventures. After giving Gebert a check for $2,000.00, DuShane decided to make inquiry as to Gebert's credibility and his general credit standing. On April 18, 1972, DuShane called long-distance from California and talked with Phillip C. Rader, a vice-president of the Union National Bank of Wichita. We will relate the substance of this conversation later but suffice it to say DuShane received favorable comments from Rader as to Gebert's credit and his general ability as an oil finder. DuShane also called another bank in Wichita and received favorable comments on Gebert's general ability as an oil finder.
Thereafter DuShane began talking with some of his friends and business acquaintances and between July, 1972, and April, 1973, DuShane and his business acquaintances invested considerable sums in working interests in Gebert's oil ventures. Some of these investments were in producing oil wells and some in wildcat drilling ventures. On each of the investments made by his business acquaintances DuShane received a commission from Gebert for arranging the sales. None of the money was deposited in the Union National and none was used to pay Gebert's indebtedness to the bank.
The investors began to experience some difficulty with Gebert as early as January, 1973. Checks issued by Gebert on a California bank representing the investor's shares in oil production were protested for insufficient funds. Assignments of oil interests made to some of the investors were found to be invalid. It appears that some of the interests owned by Gebert in Kansas oil leases had been oversold.
In August, 1974, one of the investors sued and obtained a judgment against Gebert in California. The other ten investors sued and obtained judgments against Gebert in the United States District Court in Kansas. Apparently these judgments were not collectible. Some of the Gebert leases had not been drilled within the proper time and had expired, so the working interests held by the investors in these leases terminated. Those leases on which there was production were apparently sold to satisfy secured debts of Gebert. At least one of the investors, Robert J. Miller, received $3,646.00 in oil runs from H-30 Inc., an oil company which purchased and took over some of Gebert's producing wells. At least eight of the nine investors who obtained the judgments below testified they received some income from their investments.
In April, 1975, DuShane and ten of the investors filed the present action alleging fraud on the part of the Union National Bank. The case was tried to the court and the judgments from which the present appeal was taken were entered.
The petition of the plaintiffs alleges the following facts in support of fraud:
The principal plaintiff, DuShane, testified at the trial as to the statements of Rader on which the allegations of fraud were predicated:
The remaining plaintiffs testified they had no contact with Union National but relied on the statements relayed to them by DuShane.
The trial court's findings of fact bearing on fraud, which we accept as being supported by the evidence, were:
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