Jarvis Drilling, Inc. v. Midwest Oil Producing Co., 82A04-9302-CV-49

• Decision Date: 29 December 1993
• Docket Number: No. 82A04-9302-CV-49,82A04-9302-CV-49
• Citation: 626 N.E.2d 821
• Parties: JARVIS DRILLING, INC., et al., Appellants-Plaintiffs, v. MIDWEST OIL PRODUCING CO., et al., Appellees-Defendants.
• Court: Indiana Appellate Court

Page 821

626 N.E.2d 821

JARVIS DRILLING, INC., et al., Appellants-Plaintiffs, v. MIDWEST OIL PRODUCING CO., et al., Appellees-Defendants.

No. 82A04-9302-CV-49.

Court of Appeals of Indiana Fourth District.

Dec. 29, 1993.

K. Richard Hawley, Hawley, Hudson & Almon, Mt. Vernon, for appellants-plaintiffs.

Patrick A. Shoulders, Steven K. Hahn, Ziemer, Stayman, Weitzel & Shoulders, Evansville, for appellee Crystal Oil Co.

Terry Noffsinger, Noffsinger, Price, Bradley & Shively, Evansville, and Peter J. Rusthoven, Barnes & Thornburg, Indianapolis, for appellees Midwest Oil Production Co., et al.

CONOVER, Judge.

Plaintiffs-Appellants Jarvis Drilling, Inc., James D. Kitchin, III, Ann Walton, and George Busler (Jarvis Drilling) appeal the Vanderburgh Superior Court's entry of summary judgment in favor of Defendants-Appellees Midwest Oil Producing Co., Pedro Enterprises, Inc., Perdue Enterprises, Inc., David A. Perdue, Doran E. Perdue, Jr., Ellmar Oil Co., Dale E. Perdue, Raylene L. Bordfeld, as Trustee of the J & M Trust, John T. Walsh and Mary G. Walsh, Debra Ruth Zisla, Mary Beth Perdue, Hugh E. Ralph, (Midwest Oil) and Crystal Oil Company (Crystal Oil) on the motions for summary judgment they filed in Jarvis Drilling's action seeking monetary damages for costs incurred in plugging a non-producing well.

We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

This appeal presents the following re-stated issues:

1. whether material issues of fact remain which require a trial on the merits;

2. whether some fractional share owners were represented by Midwest Oil as their agent; and

3. whether Crystal Oil, a former operator of the well, is liable for plugging costs.

Crystal Oil originally owned and operated several oil wells in Kentucky and Indiana, including the Egli # 1 well in Posey County, Indiana. When it quit producing, Crystal Oil abandoned that well without obtaining a temporary abandonment permit from the Indiana DNR. There was no pumping unit on the well, there was merely a pipe sticking out of the ground. (R. 158). Midwest Oil, an interim purchaser, hired a contractor who welded a cover on Egli # 1's casing and then buried it. Midwest Oil later sold the group of leases of which Egli # 1 was part to Perdue Enterprises. Midwest Oil then became the group's operator. Along the way, other appellees have purchased participating interests.

Later, Jarvis Drilling expressed an interest in purchasing a large number of wells in Kentucky and Indiana, ¹ including the group of which Egli # 1 was part, and negotiations for that proposed purchase commenced in March, 1987. Jarvis Drilling was and is a sophisticated oil and gas operator. (R. 554, 569). It had its own experts and paid professionals investigate the properties it sought to purchase from Midwest Oil. (R. 297, 569-570).

During negotiations, Midwest Oil furnished Jarvis Drilling's personnel with a property data document and an oil lease inventory, neither of which mentioned Egli # 1 or its condition. However, Jarvis Drilling was furnished a map showing it as having been plugged. (R. 377). During these negotiations, Jarvis Drilling had access to Midwest Oil's records (R. 392, 396), and they contained a separate file for Egli # 1. (R. 299). Also, other maps in those records showed Egli # 1 was not plugged. (R. 569, 336-337).

The contract for that sale was signed on May 20, 1987, and the permits required by the DNR for transfer of the wells and bonds required by law for unplugged wells were executed by Jarvis Drilling on June 1, 1987, as required by the contract. (R. 392). The transfer permit for Egli # 1 was included, and signed for by Jarvis Drilling's representative. The existence of a transfer permit and cost bond to guarantee the plugging of abandoned wells tells an expert an unplugged well exists. (R. 562).

Two years later in 1989, the DNR determined a well adjacent to Egli # 1 was contaminating the neighborhood's well water and ordered it plugged. At that time, DNR also ordered Jarvis Drilling to plug Egli # 1. It complied.

Regarding plugging responsibilities, the May 20, 1987, contract provided, in part

... the parties will also execute and deliver such transfer forms pertaining to the well bonds ... so that the SELLERS shall be relieved in all respects of liability incident to plugging of the various wells on the leases described in Exhibit "C". ²

It also provided, in part

[Jarvis Drilling] specifically agrees that as of the Effective Date they will pay any and all costs and expenses of operation ..., and further that they will assume all claims, demands, actions, or causes of actions (sic) ... resulting from, connected with, or arising out of the use and operation of the PURCHASED INTERESTS in the oil and gas leases described in Exhibit "B" for the production of oil or gas. ³

From the entry of summary judgment for appellees, Jarvis Drilling appeals.

Summary judgment is appropriate only where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Any doubt as to the existence of a genuine issue of fact must be resolved in favor of the nonmovant. Lawlis v. Kightlinger & Gray (1990), Ind.App., 562 N.E.2d 435, 438-439, reh. denied, trans. denied. When acting upon a motion for summary judgment, the trial court may consider only those parts of the pleadings, depositions, answers to interrogatories, admissions, matters of judicial notice, and any other matters on which the movant relies specifically designated by the movant to the trial court at the time the motion is filed. Likewise, the opposing party must specifically designate to the trial court each material issue of fact and related evidence which that party asserts precludes entry of summary judgment at the time its response is filed. Failure to make the required evidentiary designations precludes the trial court from considering the failing party's position when making the required determinations prior to ruling on such motion. Rosi v. Business Furniture Corp. (1993), Ind., 615 N.E.2d 431, 434. The trial court can enter summary judgment only if the designated evidentiary matter shows there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Id.

In determining whether there is a genuine issue of material fact precluding summary judgment, all doubts must be resolved against the moving party and the facts properly designated by the party opposing the motion must be accepted as true. Lawlis, Id. Even if the facts are undisputed, summary judgment is inappropriate when properly designated evidence before the trial court reveals a good faith dispute as to the inferences to be drawn from such facts. However, factual disputes that are irrelevant or unnecessary will not be considered. A factual issue is "genuine" only when it cannot be foreclosed by reference to undisputed facts and requires a trier of fact to resolve the opposing parties' differing versions. Lawlis, Id.

When reviewing the grant of summary judgment, we stand in the shoes of the trial court and apply an identical standard. Ayres v. Indian Heights Volunteer Fire Department (1986), Ind., 493 N.E.2d 1229, 1234; Lawlis, Id. The court on appeal, however, may not search the record to affirm the trial court. The parties on appeal must specifically designate to this court by appropriate reference to the record on appeal (a) the location of all factual material and supporting evidence specifically designated to the trial court and upon which they rely, and (b) all the documents in which they specifically designated such materials to the trial court. Jackson v. Blanchard (1992), Ind.App., 601 N.E.2d 411, 415. Only when those materials demonstrate the basic requirements for entry of summary judgment below are or are not present will we affirm or reverse its entry on appeal.

Jarvis Drilling first argues the trial court erred as a matter of law "by ruling that the signing of an Application For a Permit Transfer precluded recovery for fraud" (Brief of Appellant at 1), then argues there are unresolved material factual issues requiring a trial on the merits. We will discuss the first as included in the second.

Jarvis Drilling claims Midwest Oil was guilty of actual fraud. The elements of actual fraud are

1. a material misrepresentation of past or existing fact by the party to be charged which

2. was false,

3. was made with knowledge or in reckless ignorance of the falsity,

4. was relied upon by the complaining party, and

5. proximately caused the complaining party injury.

Pugh's IGA v. Super Food Services, Inc. (1988), Ind.App., 531 N.E.2d 1194, 1197, reh. denied, trans. denied. ⁴ The simple question here is did the complaining party rely on the supposed "misrepresentation"? The clear answer is no, based on the undisputed evidence and reasonable inferences before the trial court when it entered summary judgment in favor of Midwest Oil.

It is a fundamental principle of the law of fraud the representee must have relied upon the statement or representation as an inducement to his action or injurious change of position. McClellan v. Tobin (1942), 219 Ind. 563, 39 N.E.2d 772, 775; Frenzel v. Miller (1871), 37 Ind. 1. Furthermore, over fifty years ago our Supreme Court defined actual notice as:

' "[a]ctual notice has been divided into two classes, (1) express and (2) implied, which is inferred from the fact that the person charged had means of knowledge which he did not use. Whatever fairly puts a person on inquiry is sufficient notice, where the means of knowledge are at hand; and if he omits to inquire, he is then chargeable with all the facts which, by a proper inquiry, he might have ascertained. This, in effect, means that notice of facts which would lead an ordinarily prudent man to make an examination, which, if made, would disclose the existence of other facts is...