Anderson v. Vinson Exploration, Inc.

• Decision Date: 03 June 1992
• Docket Number: No. 08-91-00201-CV,08-91-00201-CV
• Citation: 832 S.W.2d 657
• Parties: Dee ANDERSON and T.C. Tubb, Appellants, v. VINSON EXPLORATION, INC. and M.C. "Morty" Vinson, Appellees.
• Court: Texas Court of Appeals

Page 657

832 S.W.2d 657

Dee ANDERSON and T.C. Tubb, Appellants, v. VINSON EXPLORATION, INC. and M.C. "Morty" Vinson, Appellees.

No. 08-91-00201-CV.

Court of Appeals of Texas El Paso.

June 3, 1992.

Rehearing Overruled July 8, 1992.

W. Clayton Gaston, Stubbeman, McRae, Sealy, Laughlin & Browder, Midland, for appellants.

Dick R. Holland, James P. Boldrick, Boldrick & Clifton, Midland, for appellees.

Before OSBORN, C.J., and WOODARD and KOEHLER, JJ.

OPINION

KOEHLER, Justice.

This is a suit for unpaid charges for goods and services incurred by the operator in connection with an oil and gas joint operating agreement. The trial court submitted questions to the jury on the operator's damages and attorney's fees and on the investors' counterclaim for common law fraud. However, the trial court refused to submit questions, definitions and instructions on the investors' other causes of action for damages under the Texas Securities Act, the Texas Deceptive Trade Practices Act and for breach of implied warranties, directing a verdict against investors on those causes of action. The investors appeal from an unfavorable verdict and judgment, claiming in forty-six points of error that the trial court erred by directing verdicts and by refusing to submit questions on such causes of action. We affirm in part and reverse and remand in part.

FACTS AND ALLEGATIONS

In late 1987, T.C. Tubb and his son-in-law, Dee Anderson, Appellants, met with M.C. "Morty" Vinson, owner along with his son, Bryan, of an oil and gas operating company, Vinson Exploration, Inc. (VEI or Appellees), on at least two occasions to discuss an oil and gas prospect and the purchase of the "Shannon 12-A Lease" located in Crockett County, Texas. The discussions culminated in Appellees agreeing to purchase the entire lease, then assigning it or a part of it with 100 percent of the working interest to Appellants and with VEI to receive a $10,000 finder's fee plus a 3 percent overriding royalty interest in the production and to act as operator of the lease. The parties subsequently entered into a joint operating agreement on December 1, 1987 and the lease was later assigned by VEI to Appellants.

VEI then located, drilled and operated four wells on the 12-A Lease. The actual cost of drilling the first well was approximately double the estimate made under the original Authority for Expenditure, the well having taken 82 days to complete by cable tool. Before completion of the first well, Morty Vinson advised the Appellants to drill a second well, although the first well was correctly predicted not to be a commercially viable well at that time. The second well was drilled with an air rig and was initially successful in its production. During this successful period, Morty Vinson encouraged the Appellants to drill wells three and four.

Appellants assert that they were led to believe the wells were to be probable producers and that the operating expenses would be greatly less. This apparently turned out to be untrue. Appellants then refused to pay any further invoices from the Appellees. VEI was removed as operator in August of 1988.

Appellees sued to recover the amount owed for goods and services under the joint operating agreement. Appellants counterclaimed for damages under the Texas Securities Act, under the DTPA, and for breach of contract, negligence, gross negligence, breach of warranty and common law fraud. The basic allegations were that the Appellees had misrepresented the profitability of the venture and their skills in discovering and producing oil.

Also in contention is an option that was exercised on an additional 160 acres known as the "12-B Lease" through the arrangement of Morty Vinson. Tubb exercised the option and paid $35,000 for the lease, but Anderson never committed himself to the purchase. No written assignment was executed and there was some question as to certain credits due Tubb. The trial court directed a verdict on all counterclaim causes of action except the one alleging fraud.

STANDARDS OF REVIEW

Many of the points of error complain of the directed verdict. A directed verdict is proper: (1) when a defect in the opponent's pleadings makes them insufficient to support a judgment; (2) when the evidence conclusively proves a fact that establishes a party's right to judgment as a matter of law; or (3) when the evidence offered on a cause of action is insufficient to raise an issue of fact. McCarley v. Hopkins, 687 S.W.2d 510, 512 (Tex.App.--Houston [1st Dist.] 1985, no writ); Rudolph v. ABC Pest Control, Inc., 763 S.W.2d 930, 932 (Tex.App.--San Antonio 1989, writ denied).

In reviewing the granting of a directed verdict by the trial court on an evidentiary basis, the reviewing court will "determine whether there is any evidence of probative force to raise fact issues on the material questions presented." Collora v. Navarro, 574 S.W.2d 65, 68 (Tex.1978). The appellate court should consider all of the evidence in a light most favorable to the party against whom the verdict was instructed and disregard all contrary evidence and inferences arising therefrom. White v. Southwestern Bell Telephone Company, Inc., 651 S.W.2d 260, 262 (Tex.1983). If there is any conflicting evidence of probative force on any theory of recovery, the issue is for the jury; an instructed verdict is improper and the case must be reversed and remanded for the jury's determination on that issue. White, 651 S.W.2d at 262; Jones v. Tarrant Utility Company, 638 S.W.2d 862, 865 (Tex.1982); Collora, 574 S.W.2d at 68. Where no evidence of probative force on an ultimate fact element exists or where the probative force of the testimony is so weak that only a mere surmise or suspicion is raised as to the existence of essential facts, the trial court has the duty to instruct the verdict. University National Bank v. Ernst & Whinney, 773 S.W.2d 707, 709-10 (Tex.App.--San Antonio 1989, no writ).

The same "no evidence" standard of review of directed verdicts exists for refusing to submit jury questions. Phillips Pipeline Company v. Richardson, 680 S.W.2d 43, 48 (Tex.App.--El Paso 1984, no writ). To determine if the trial court has erred in refusing to submit requested questions, the reviewing court reviews the evidence as if the court had instructed the verdict. Id.

The trial court has more discretion when submitting instructions and definitions to the jury than it has in submitting jury questions. Harris v. Harris, 765 S.W.2d 798, 801 (Tex.App.--Houston [14th Dist.] 1989, writ denied). The trial court should issue explanatory instructions and definitions so as to enable the jury to render a verdict. Mobil Chemical Company v. Bell, 517 S.W.2d 245, 256 (Tex.1974). Where an instruction is requested and refused, the question on review is whether there was abuse of discretion on the part of the trial court. Lumbermens Mutual Casualty Company v. Garcia, 758 S.W.2d 893, 894 (Tex.App.--Corpus Christi 1988, writ denied). The test for determining whether a trial court has abused its discretion in refusing to submit instructions or questions to the jury is that an error on failing to instruct must have caused or can be reasonably calculated to have caused the rendition of an improper verdict. Tex.R.App.P. 81(b); Atlantic Mutual Insurance Company v. Middleman, 661 S.W.2d 182, 187 (Tex.App.--San Antonio 1983, writ ref'd n.r.e.).

TEXAS SECURITIES ACT

In Points of Error Nos. One through Four, Six through Nine, Eleven through Fifteen and Seventeen through Twenty-Three, Appellants allege error by the trial court in directing a verdict against them on their anti-fraud claim under the Texas Securities Act, Tex.Rev.Civ.Stat.Ann. art. 581-33 A(2) (Vernon Supp.1992), and in the trial court's failure to submit jury questions, instructions and definitions relating to that claim. Points of Error Nos. Five, Ten and Sixteen relate to the court's actions in directing a verdict and refusing to give a requested question and instruction relating to damages connected with the Securities Act cause of action.

The elements of an action arising under the anti-fraud provision of the Securities Act include an offer or sale of a security by means of either an untrue statement of a material fact or an omission of a material fact which is necessary in order to make the statement made, in light of all of the circumstances, not misleading. The buyer of the security may sue at law or in equity for rescission, or for damages if the buyer no longer owns the security. Id.

An assignment of an interest in an oil and gas lease is a "security" as defined in Article 581-4 A of the Texas Securities Act. Dunbar v. RKG Engineering, Inc., 746 S.W.2d 314, 315 (Tex.App.--Texarkana 1988, no writ). An "investment contract" is also included within the definition of a security. An "investment contract" is defined as (1) an investment of money, (2) in a common enterprise or scheme, (3) with the expectation of profits, (4) which profits will be derived solely from the efforts of others. Searsy v. Commercial Trading Corporation, 560 S.W.2d 637, 640 (Tex.1977).

It is uncontested that VEI conveyed the 12-A Lease by assignment. The Appellants had a working interest in the oil and gas lease. There was testimony that the Appellants invested substantial amounts of money with an expectation of profits from their investment. Tubb and Anderson pooled their funds in a common enterprise, and there was evidence that these Appellants were dependent solely upon the efforts of VEI and Morty Vinson as operators, to obtain a profit. Tubb stated that their objective was a low-risk investment with someone to manage it for them. However, there is some evidence that Tubb exercised some control over the operation on various occasions. Anderson discussed with Vinson the need for him to manage their entire operation because of his expertise. Appellants expected Vinson to make the decisions, and they only wanted to be informed. Vinson selected the...