Vick v. George

• Decision Date: 20 July 1983
• Docket Number: Nos. 04-81-00417-C,04-81-00241-CV,s. 04-81-00417-C
• Citation: 671 S.W.2d 541
• Parties: Blue Sky L. Rep. P 72,005 Jack V. VICK, Appellant, v. Elton and Leslie GEORGE, Et Al., Appellees.
• Court: Texas Court of Appeals

Page 541

671 S.W.2d 541

Blue Sky L. Rep. P 72,005

Jack V. VICK, Appellant, v. Elton and Leslie GEORGE, Et Al., Appellees.

Nos. 04-81-00417-CV, 04-81-00241-CV.

Court of Appeals of Texas San Antonio.

July 20, 1983.

Rehearing Denied April 19, 1984.

Bernie Martinez, Frederick R. Zlotucha, San Antonio, for appellant.

Lewin Plunkett, Jerry Morell, Ty Griesenbeck, Jr., Robert Strickland, John Bell, San Antonio, for appellees.

Before BUTTS, TIJERINA and DIAL, JJ.

OPINION

BUTTS, Justice.

This is a suit for rescission and damages brought by Walter and Sharon Stellges and Elton and Leslie George, against Calvin V. Vick, Jack V. Vick, Penny McLean Smith (McLean), John Askew and James Baxter, an attorney. The suit arose from the sale of interests in an oil and gas venture and proceeded under common law theories of fraud and rescission, the Texas Securities Act (T.S.A.), TEX.REV.CIV.STAT.ANN. arts. 581-1--581-39 (Vernon Supp.1982-1983), the Deceptive Trade Practices--Consumer Protection Act (D.T.P.A.), ¹ and the Federal Securities Act of 1933, 15 U.S.C. §§ 77a--77bbbb (1983). After trial to a jury, the court entered judgment for rescission and restoration of the purchase price with interest under the T.S.A. in favor of plaintiffs against Jack Vick, Askew and McLean. It further entered judgment against all plaintiffs in favor of Calvin Vick and Baxter and awarded Baxter attorney's fees under the D.T.P.A. Calvin Vick, McLean and Askew do not appeal. The Stellges and the Georges plaintiffs, appeal as does Jack Vick, defendant. We reverse and remand.

Plaintiffs assert eighteen points of error: (one through four) it was error not to enter judgment on the verdict against Calvin Vick; (five) Calvin Vick ratified the sales; (six and seven) Calvin Vick was a control person or material aid; (eight) Calvin Vick was liable as a principal; (nine through eleven) the sales were not exempt under the T.S.A.; (twelve) the commissions exceeded the statutory limits; (thirteen through seventeen) recovery under the D.T.P.A. was proper, and; (eighteen) the award of attorney's fees to Baxter was invalid. Basing our decision on points of error one, two, four, sixteen and seventeen, we reverse and remand the cause to the trial court.

Jack Vick, who answered but was not present at trial, brings five points of error: (one) certain special issues were multifarious and unsupported by the evidence; (two and five) the court erred in not allowing Vick's counsel to object orally to the charge or to present closing argument; (three) certain jury answers should have been disregarded, and; (four) the jury's answers to the submitted special issues fail to support the judgment.

A farmout agreement covering the subject property, the Nelson-Simpson well located near Eagle Pass, derived from an oil and gas lease held by Winn Exploration Company, Inc. Subsequent to a previously terminated farmout agreement, Winn Exploration executed a farmout agreement with attorney Baxter who then held the agreement for the use and benefit of Jack Musteen (not a party herein). The farmout agreement provided for recovery of 55% of the revenues and for payment of 100% of the costs of drilling and production. At the direction of Musteen, Baxter transferred 50% of the right to revenues, with the attendant 100% of the cost of drilling and completing, to the defendant Vicks. Baxter and Musteen retained, respectively, a 1% and a 4% overriding royalty. Calvin Vick paid the purchase price of $25,000.00 to Winn and reserved 4% of the revenue interest. Baxter confirmed by letter he held the farmout agreement in trust for Calvin's use and benefit.

The Vicks then entered into an agreement with Harley Barnes, d/b/a DeBar Well Service (not a party to the suit), to deepen the well 75 feet. The agreement provided that Barnes would bear the expense for the initial 75 feet and, if further drilling was required, costs would be divided equally between the three parties. It was further agreed that Barnes' one-third interest, which had depth limitations, would vest when commercial production was obtained provided his share of the exploration costs had been paid. Production was not obtained within the initial 75 feet. During the course of continued drilling, Barnes encountered financial problems, and he abandoned the drilling project. Because he had failed to pay his appropriate share of costs, the Vicks sent a letter to Barnes on April 24, 1978, notifying him of the forfeiture of his rights absent an immediate payment of his costs due under the contract. No payment being made, all costs were borne solely by Jack and Calvin Vick. In March and April, 1978, the plaintiffs purchased interests in the well and these purchases constitute the basis of this suit.

Plaintiffs contend the trial court erred in failing to enter judgment on the verdict against Calvin Vick based on misrepresentations and omissions made by his agents in violation of the T.S.A. The trial court, upon motion and notice, may disregard any special issue jury finding that has no support in the evidence. TEX.R.CIV.P. 301. The factual determinations of the jury may not be disregarded if there is any evidence of probative force, together with such inferences issuing therefrom, which will reasonably support such findings. Frost National Bank v. Nicholas & Barrera, 534 S.W.2d 927, 932 (Tex.Civ.App.--Tyler 1976, writ ref'd n.r.e.). The trial court may not supplant a finding of the jury with its own factual determination where the jury's finding is supported by sufficient evidence. Highlands Insurance Co. v. Baugh, 605 S.W.2d 314, 319 (Tex.Civ.App. --Eastland 1980, no writ). In determining whether there is sufficient evidence, we must view the evidence in its most favorable light in support of the verdict. Texas & Pacific Railway Co. v. McCleery, 418 S.W.2d 494, 496 (Tex.1967).

Article 581-33(A)(2) delineates civil liabilities under the T.S.A. and states, in pertinent part:

A person who offers or sells a security (whether or not the security or transaction is exempt under Section 5 or 6 of this Act) by means of an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading, is liable to the person buying the security from him, who may sue either at law or in equity for rescission, or for damages if the buyer no longer owns a security.... [Emphasis added.]

Article 581-4 defines "person" as:

... a corporation, person, joint stock company, partnership, limited partnership, association, company, firm, syndicate, trust, incorporated or unincorporated, heretofore or hereafter formed under the laws of this or any other state, country, sovereignty or political subdivision thereof....

While it is accepted law that the sale of an interest in a joint venture by one joint venturer to another is not protected by the Act, Brown v. Cole, 155 Tex. 624, 291 S.W.2d 704, 709 (1956); Mummert v. Stekoll Drilling Company, 352 S.W.2d 526, 529 (Tex.Civ.App.--Dallas 1961, writ ref'd n.r.e.), that limitation is not applicable to the plaintiffs herein, nor is the argument presented.

The essential elements of "offer" or "sale" are defined in article 581-4(E) which states, in pertinent part:

The terms 'sale' or 'offer for sale' or 'sell' shall include every disposition, or attempt to dispose of a security for value. The term 'sale' means and includes contracts and agreements whereby securities are sold, traded or exchanged for money, property or other things of value, or any transfer or agreement to transfer, in trust or otherwise.... The term 'sell' means any act by which a sale is made, and the term 'sale' or 'offer for sale' shall include a subscription, an option for sale, a solicitation of sale, a solicitation of an offer to buy, and an attempt to sell, or an offer to sell, directly or by an agent or salesman.... [Emphasis added.]

Where an authorized agent of an entity sells securities, the entity sells vicariously. Smith v. Fishback, 123 S.W.2d 771 (Tex.Civ.App.--Texarkana 1938, writ ref'd).

The jury found in response to special issues three through six that McLean and Askew, who sold the interests, failed to disclose material facts in connection with the sales to plaintiffs, and that such failure was a producing cause of damages to them. George testified McLean represented the investment of the Vicks to be approximately $1,000,000.00, as opposed to the actual investment of $25,000.00. He also stated he was not informed the drilling operation constituted a deepening operation or that the well had previously been abandoned by another developer as a dry hole. He further testified McLean represented the well was "in" and ready for imminent production, it had a potential of 240,000,000 cubic feet of gas per day, and it would generate approximately $6,000.00 per month per one percent interest.

Stellges testified McLean represented the investment by the Vicks exceeded $1,000,000.00. He further testified Askew and McLean represented the well as the "biggest" in south Texas and Askew claimed the well would be commercially producing in several weeks. Stellges was told by McLean, in the presence of Jack and Calvin Vick, the well would produce 10,000,000 cubic feet of gas per day. He was not informed that the prior efforts to obtain production culminated in the abandonment of the well as a dry hole, that the current drilling effort constituted a deepening operation, or that a commercially productive stratum had not yet been reached. Sharon Stellges testified she was never informed of the prior unsuccessful efforts or that deepening operations were technically more difficult than original development or that "gas kicks" do not necessarily represent commercial gas production. She was told the well was "in" and that payment could be expected by "the end of the first month." We find the evidence adduced factually sufficient...