Cromwell v. Ream

• Decision Date: 17 September 1935
• Docket Number: Case Number: 25724
• Citation: 52 P.2d 752,1935 OK 792,175 Okla. 408
• Parties: CROMWELL v. REAM et al.
• Court: Oklahoma Supreme Court

1935 OK 792

52 P.2d 752

175 Okla. 408

CROMWELL v. REAM et al.

Case Number: 25724

Supreme Court of Oklahoma

Decided: September 17, 1935

Syllabus

¶0 1. FRAUD--Question of Fact--Burden of Proof.

Where fraud is charged, it becomes a question of fact and must be proved by the party alleging fraud, and cannot be inferred from facts which may be consistent with honesty of purpose.

2. SAME--Fraud not Presumed--Degree of Proof.

Fraud is never presumed, but must be proved by clear and satisfactory evidence, and when a transaction is fairly susceptible of two constructions, the one which will free it from the imputation of fraud will be adopted.

3. APPEAL AND ERROR--Disposition of Equity Case Where Judgment Against Clear Weight of Evidence.

In causes of equitable cognizance, where the judgment of the trial court is against the clear weight of the evidence, the same will be reversed and such judgment rendered by this court as should have been rendered by the trial court.

Appeal from District Court, Muskogee County; W. J. Crump, Judge.

Action by G. Franklin Ream et al. against Joseph I. Cromwell. Judgment for plaintiffs, and defendant appeals. Reversed.

West & Davidson, Blakeney, Ambrister & Wallace, and P. J. Carey, for plaintiff in error.

Joseph C. Stone, Charles A. Moon, Francis Stewart, and A. J. Mauldin, for defendants in error.

PHELPS, J.

¶1 On January 25, 1922, a contract was entered into between Elam E. Neal, S. S. Glasscock, Geo. E. Strauss, Allen L. Porter, and S. B. Hibbard, parties of the first part, and Joseph I. Cromwell, party of the second part, in which contract the parties, in effect, formed a partnership for the purpose of acquiring, developing, and selling oi1 and gas leases and royalties. All of the parties of the first part lived in or near Kansas City.

¶2 It appears that Geo. E. Strauss divided his interest in the partnership with Fred Strauss, and Glasscock divided his interest with G. F. Ream, and while neither Fred Strauss nor G. F. Ream signed the contract, they were mutually considered as having an interest in the partnership and they proceeded upon the basis that Elam H. Neal had a one-fifth interest, S. S. Glasseock and G. F. Ream had a one-fifth interest, Geo. E. Strauss and Fred Strauss had a one-fifth interest, and Allen L. Porter and S. B. Hibbard had a one-fifth interest, and Joseph I. Cromwell had a one-fifth interest.

¶3 In this contract parties of the first part agreed to procure and furnish necessary funds and credits to secure lands, leases, and royalties and to pay all the expenses of acquiring and developing the same, and that Cromwell, the party of the second part, should have exclusive control of acquiring, developing, and disposing of the properties, and he was authorized to make contracts necessary to carry out the purposes of the partnership. Immediately following the execution of the contract, Cromwell set about securing, in Hughes and Seminole counties, acreage in which, in his judgment, there were oil possibilities, and for a part of this acreage thus secured he made a contract with Cosden & Company to drill a well, and in order to secure some other desirable acreage he contracted with the H. F. Wilcox Oil & Gas Company to drill an offset well to the Cosden well, providing the Cosden well was a producer, and for compensation for drilling this well the Wilcox people were to transfer to him certain acreage, this well to be started within 45 days after the completion of the Cosden well, provided the Cosden well was a producer.

¶4 It appears that Mr. Cromwell entered actively upon his duties as general manager of the company and Glasscock and Ream furnished him $ 4,200 and Strauss furnished $ 3,000, making a total of $ 7,200 furnished for the enterprise, the other parties failing to furnish any money whatever.

¶5 Before the completion of the Cosden well lawsuits were filed attacking title to the property, and drilling operations were suspended, necessitating a delay, during which time the money paid in by the parties had been spent and debts accumulated and Glasscock and Ream, particularly Ream, who had paid in $ 2,400 of the money, became anxious about their investments, and a deal was made whereby Glasscock and Ream, on October 10, 1922, transferred, assigned, and relinquished to Cromwell all their interest in the partnership.

¶6 The Cosden well was completed as a producer and Cromwell drilled the offset well according to his contract with Wilcox. This well opened what is known in Oklahoma as the Cromwell pool in Seminole county and made the partnership properties very valuable.

¶7 On December 10, 1931, Ream, the defendant in error here, filed his suit against Cromwell in the district court of Muskogee county, in which he alleged fraud on the part of Cromwell in procuring the release, assignment, and transfer of Ream's interest in the partnership property and prayed for judgment canceling, setting aside, and holding for naught said assignment and that he be adjudged to have an interest in the partnership property; that an accounting be had and that he have judgment for his interest therein and that the partnership be dissolved.

¶8 The case was tried to the court, resulting in judgment in favor of plaintiff and against defendant in the sum of $ 296,793.07, to reverse which this appeal is prosecuted.

¶9 Counsel for plaintiff in error in their brief present 34 assignments of error. As we view it, however, the vital issue in the case is whether the assignment bearing date of October 10, 1922, was a valid assignment of Ream's interest in the partnership and partnership properties, and if this question is answered in the affirmative, it is not necessary to consider the other assignments of error. The record in this case consists of approximately 2,000 pages, the briefs are necessarily voluminous, and in an effort to reach the prover conclusion we have not limited our research to the matters and things set out in the briefs, but have gone into the record with great care. In the first place it is necessary to determine whether the evidence was sufficient to impeach the document of October 10, 1922, executed by Ream and Glasscock, and upon this subject we have reached the conclusion that the judgment of the trial court was against the clear weight of the evidence; or, differently stated, that the plaintiff in the trial court failed beyond question to prove the fraud and concealment relied upon by him to cancel the written instrument.

¶10 Having reached this conclusion, it is not necessary to consider other questions presented, but for the purpose of the foundation for our conclusion a brief review of the facts as reflected by the record may prove helpful, particularly in view of the fact that the case has an unusual background and reflects the happening of some very unusual events.

¶11 It will be observed that this contract of partnership was entered into on January 25, 1922. It was terminated, in so far as Ream was concerned, by the transfer of his interest to Cromwell on October 10th of the same year. It is a matter of common knowledge that the discovery and development of the Cromwell pool marked an epoch in the petroleum industry in Oklahoma, and this suit was not commenced until December 10, 1931, more than nine years after the execution of the instrument sought to be set aside. Plaintiff in error pleaded the statute of limitation and laches, but in view of our conclusion herein it is not necessary to consider these defenses except in so far as they reflect the facts surrounding the entire transaction.

¶12 It was and is the contention of Gromwell that the contract of October 10, 1922, was entered into in good faith for a valuable consideration, and the inference is that, after the venture proved profitable to Cromwell almost beyond comprehension, Ream was disappointed in seeing a vast fortune slip away from him when it was almost at his fingers' tips, and that his feeling of disappointment and the advice of others who sought to profit by the lawsuit was the motivating force prompting the litigation.

¶13 After the execution of the partnership agreement, Hibbard, Porter, and Neal failed to put any money into the enterprise, and Cromwell repaid to them certain moneys which they claimed they had been out for expenses, and also assumed all of their liabilities under the partnership and contracts executed on behalf of the partnership, and on May 6, 1922, they released, relinquished, and transferred, by a written instrument, their interest in the partnership to Cromwell. Hibbard and Porter later prosecuted as unsuccessful lawsuit against Cromwell for what they claimed to be an interest ia the partnership.

¶14 The record shows that several years after these events and after the development of the Cromwell pool, Mr. Cromwell had in his employ, as bookkeeper or secretary, a man by the name of A. W. Lawrence, and sometime during the year 1929, after he had been discharged by Cromwell, Lawrence went to Kansas City and interviewed Hibbard for the purpose of ascertaining the whereabouts of Neal and Ream. According to Hibbard's testimony, Lawrence made the statement that he had been in the employ of Cromwell, that he had much information concerning Cromwell's dealings, that he had contacted some lawyers in Oklahoma who could get some money from Cromwell for Neal and Ream if he could get them to bring suit against Cromwell.

¶15 Lawrence finally located, and made a visit to Neal in Indiana and Ream in Ohio, shortly after which time suit was brought by Neal against Cromwell, claiming that he still had an interest in the partnership property.

¶16 Cromwell then discovered that the release, receipt, or transfer to him of the interest of Porter, Hibbard, and Neal in the partnership property of May, 1922, had disappeared from his files. He offered $ 1,090 reward for its return, but not being able to secure its return, he compromised and settled with Neal for a large sum of money, of which...