Brannon v. Riffle, 23179

• Decision Date: 12 July 1996
• Docket Number: No. 23179,23179
• Citation: 197 W.Va. 97,475 S.E.2d 97
• Court: West Virginia Supreme Court
• Parties: Betty A. BRANNON, Executrix of the Estate of John V. Brannon, Robert B. Cleghorn, Jr., Albert Whaley and Betty Brannon, Plaintiffs Below, Appellees, v. Kenneth H. RIFFLE and Barbara Cleghorn Riffle, Defendants Below, Appellants.

Page 97

475 S.E.2d 97

197 W.Va. 97

Betty A. BRANNON, Executrix of the Estate of John V.

Brannon, Robert B. Cleghorn, Jr., Albert Whaley and Betty Brannon, Plaintiffs Below, Appellees, v. Kenneth H. RIFFLE and Barbara Cleghorn Riffle, Defendants

Below, Appellants.

No. 23179.

Supreme Court of Appeals of West Virginia.

Submitted May 1, 1996.

Decided July 12, 1996.

Syllabus by the Court

1. "When the plaintiff's evidence, considered in the light most favorable to him, fails to establish a prima facie right to recovery, the trial court should direct a verdict in favor of the defendant." Syl. Pt. 3, Roberts ex rel. Roberts v. Gale, 149 W.Va. 166, 139 S.E.2d 272 (1964).

2. " ' "Upon a motion to direct a verdict for the defendant, every reasonable and legitimate inference fairly arising from the testimony, when considered in its entirety, must be indulged in favorably to plaintiff; and the court must assume as true those facts which the jury may properly find under the evidence. Syllabus, Nichols v. Raleigh-Wyoming Coal Co., 112 W.Va. 85[, 163 S.E. 767 (1932) ]." ' Point 1, Syllabus, Jenkins v. Chatterton, 143 W.Va. 250(1957)." Syl. Pt. 1, Jividen v. Legg, 161 W.Va. 769, 245 S.E.2d 835 (1978).

3. The appellate standard of review for the granting of a motion for a directed verdict pursuant to Rule 50 of the West Virginia Rules of Civil Procedure is de novo. On appeal, this court, after considering the evidence in the light most favorable to the nonmovant party, will sustain the granting of a directed verdict when only one reasonable conclusion as to the verdict can be reached. But if reasonable minds could differ as to the importance and sufficiency of the evidence, a circuit court's ruling granting a directed verdict will be reversed.

4. "[O]ne who enters into a contract or performs some act while laboring under a mistake of material fact is entitled to have the transaction or the act set aside in a court of equity." Syl. Pt. 1, in part, Webb v. Webb, 171 W.Va. 614, 301 S.E.2d 570 (1983).

Jerald E. Jones, West & Jones, Clarksburg, for Appellees.

James A. Varner, Catherine D. Munster, Jeffrey S. Bolyard, McNeer, Highland & McMunn, Clarksburg, for Appellants.

WORKMAN, Justice:

Appellants Kenneth H. Riffle and Barbara Cleghorn Riffle seek the reversal of an adverse directed verdict entered by the Circuit Court of Harrison County. At issue below was the enforcement of three separate buy/sell agreements between Appellants, as purchasers, and Appellees, ¹ as sellers, of certain oil and gas leases and a pipeline. After reviewing this matter, we conclude that the entry of a directed verdict was improper due to the existence of genuine issues of material fact. Accordingly, we reverse and remand for further proceedings.

The background to the buy/sell agreements at issue centers on Appellees' leasehold interest in the oil and gas rights on land referred to as the Parker lease and the Eddy lease. ² In addition, Appellees also acquired certain rights of way and a gathering pipeline connecting the wells on the two leaseholds to a pipeline owned by Union Carbide. ³

Early in 1990, Appellant Barbara Riffle along with Steven Garvin and Thomas Small formed a corporation called Natural Resource Recovery Systems ("NRRS"). The corporation was created to fund, market, and develop a new oil and gas lift system developed by Mr. Garvin to boost production from marginal wells. Beginning in June or July of 1990, Appellants began discussing with Appellees the possible purchase of Appellees' interests in the subject oil and gas properties and pipeline. Appellees were aware that Appellants' interest in the purchase stemmed from the fact that the marginal production of the existing wells on the leased property presented a perfect opportunity to test the lift system developed by Mr. Garvin. These discussions were informal and characterized as being between family and friends. ⁴

The parties agree that during the course of these discussions Appellees never indicated to Appellants that there were any problems with the leases. An oral agreement to purchase the oil and gas assets from Appellees was reached and subsequently three separate brief writings memorializing the agreement were signed on or about August 14, 1990. ⁵ The agreements provided that Appellants had six months prior to the time payment was owed to Appellees for the purchase. ⁶

Apparently as a result of a title search performed for Appellants in October 1990, they discovered the existence of certain problems with the leases. The primary obstacle resulted from the fact that the Eddy lease had as a requirement to its continuation that either three wells be drilled within a two-year period following Appellees' execution of the lease in 1983 or alternatively, required a payment of liquidated damages. Because only two wells had been drilled during the initial two-year period and because liquidated damages had not been paid, Appellants realized that the lease had possibly expired. ⁷ When the six month period had passed and payment was due in connection with the buy/sell agreements, Appellants failed to pay Appellees pursuant to the terms of the three agreements.

Appellees filed a civil action in circuit court against Appellants on June 18, 1991, seeking payment according to the terms of the buy/sell agreements plus interest. ⁸ In their answer to the complaint, Appellants averred that Appellees had substantially misrepresented the assets covered by the three agreements. Additionally, Appellants filed a counterclaim seeking to recover the amounts they expended in connection with "investigat[ing], test[ing] and try[ing] to operate the assets that were to be the subject of the purported agreement." ⁹

Following the conclusion of a two-day trial, the circuit court granted a directed verdict ¹⁰ in favor of Appellees on the grounds that Appellants were charged with constructive notice of the leases which were on file in the courthouse. Crucial to the trial court's ruling was its finding that Appellants had the opportunity to discover the problems about which they complained by investigating publicly-recorded documents. The order directing a verdict instructs Appellants to remit to Appellees the purchase prices agreed upon pursuant to the buy/sell agreements plus legal interest. Through this appeal, Appellants challenge the correctness of that ruling.

The standard for granting a directed verdict is well-established: "When the plaintiff's evidence, considered in the light most favorable to him, fails to establish a prima facie right to recovery, the trial court should direct a verdict in favor of the defendant." Syl. Pt. 3, Roberts ex rel. Roberts v. Gale, 149 W.Va. 166, 139 S.E.2d 272 (1964). In syllabus point one of Jividen v. Legg, 161 W.Va. 769, 245 S.E.2d 835 (1978), we recognized that

" 'Upon a motion to direct a verdict for the defendant, every reasonable and legitimate inference fairly arising from the testimony, when considered in its entirety, must be indulged in favorably to plaintiff; and the court must assume as true those facts which the jury may properly find under the evidence. Syllabus, Nichols v. Raleigh-Wyoming Coal Co., 112 W.Va. 85[, 163 S.E. 767 (1932) ].' " Point 1, Syllabus, Jenkins v. Chatterton, 143 W.Va. 250(1957).

The appellate standard of review for the granting of a motion for a directed verdict pursuant to Rule 50 of the West Virginia Rules of Civil Procedure is de novo. On appeal, this court, after considering the evidence in the light most favorable to the nonmovant party, will sustain the granting of a directed verdict when only one reasonable conclusion as to the verdict can be reached. But if reasonable minds could differ as to the importance and sufficiency of the evidence, a circuit court's ruling granting a directed verdict will be reversed. The question for us "is not 'whether there is literally no evidence, but whether there is any upon which a jury can properly proceed to find a verdict....' " Neely v. Mangum, 183 W.Va. 393, 395, 396 S.E.2d 160, 162 (1990)(quoting Littlejohn v. ACF Indus. Corp. 556 F.Supp. 70, 73 (S.D.W.Va.1982)); see also Barefoot v. Sundale Nursing Home, 193 W.Va. 475, 481, 457 S.E.2d 152, 158 n. 6 (noting that standard for granting both judgment notwithstanding the verdict and directed verdict is identical: "after considering the evidence in the light most favorable to the nonmovant only one reasonable verdict is possible").

Appellants argue that the lower court's ruling was improper due to the presence of numerous factual issues concerning when Appellees knew of the possible lapsing of the Eddy lease. The circuit court reasoned that even if there had been a mutual mistake of fact with regard to the validity of the Eddy lease, the doctrine of constructive notice precluded any reliance on such mistake. Conversely, Appellants maintain that these factual inquiries are not precluded by the doctrine of constructive notice. We agree.

The doctrine of constructive notice places subsequent purchasers on notice of all facts which could be discovered by searching the record of a duly-recorded instrument. Syl. Pt. 2, Smith v. Owens, 63 W.Va. 60, 59 S.E. 762 (1907); see also W. Va.Code § 40-1-9 (1982); see generally 15 Michie's Jurisprudence Recording Acts § 15 (West 1979). The circuit court expressly found that

The law of this State is that a purchaser of real property, which would include the oil and gas leases in question in this case, is charged with constructive knowledge of what the lease document contains even though such purchaser may never have seen it if the document is recorded in the office of the Clerk of the County Commission of the County in which the property is located. Therefore, the defendants were charged with the knowledge that the Eddy lease had expired by its own terms before they entered into the August 14, 1990, agreement to purchase.

The circuit court reasoned further that the

defendants' [Appellant...