Polusky v. Allstate Petroleum, Inc.

• Decision Date: 06 December 1965
• Docket Number: No. 1968,1968
• Citation: 180 So.2d 815
• Parties: Dr. George POLUSKY v. ALLSTATE PETROLEUM, INC., et al.
• Court: Court of Appeal of Louisiana — District of US

Page 815

180 So.2d 815

Dr. George POLUSKY v. ALLSTATE PETROLEUM, INC., et al.

No. 1968.

Court of Appeal of Louisiana, Fourth Circuit.

Dec. 6, 1965.

Gibson Tucker, New Orleans, for plaintiff-appellee.

Charles A. Kronlage, Jr., New Orleans, for defendants-appellants.

Before McBRIDE, HALL and BARNETTE, JJ.

HALL, Judge.

Plaintiff, a resident of New York, brought this suit to recover the sum of $2,000.00 paid by him to Allstate Petroleum, Inc., for the purchase of an undivided 1/256 share of the working interest owned by Allstate Petroleum Inc. in three Louisiana mineral leases known as the El Dorado Nicholson and Buehler leases. Named as solidary defendants are Allstate Petroleum, Inc., Milton J. Helmke, its president; Joseph Messina, its secretary; and Henry L. Hahn, Jr., who was employed by the corporation as general manager. The petition charges that the corporation and the three individual defendants 'acted jointly and in concert' and 'conspired' to make certain representations to him as an inducement to purchase the fractional interest; that the representations were false and fraudulent; and that as a result of his reliance upon such representations he suffered the loss of his investment. Following trial on the merits judgment was rendered in plaintiff's favor and against all defendants in solido in the sum of $2,000.00 together with legal interest thereon from September 17, 1962, until paid, and for costs. Defendants Helmke and Hahn appealed suspensively. Defendants Allstate Petroleum, Inc. and Messina appealed devolutively. The corporation's appeal has been abandoned, the corporation's indebtedness being acknowledged in appellants' brief and reversal of the judgment being prayed for therein only insofar as it holds the three individuals liable.

Plaintiff's petition charges that the following representations were made to him by the defendants acting jointly and in concert:

1) That the corporation owned an undivided 4/5ths of the working interest in the leases.

2) That all funds received from the sale of fractional interests in the corporation's lease holdings would be deposited in escrow in a New York bank, said funds not to be withdrawn except to pay the expense of drilling an oil well on each of said leases, the said wells to be commenced no later than September 17, 1962.

3) That in the event defendants were unable through the sale of fractional interests to obtain sufficient funds to finance the drilling of such wells, the amount paid in by plaintiff would be returned to him.

The petition further alleges in substance that all of such representations were false and fraudulent to the knowledge of each of the defendants, all of whom acted jointly and in concert to perpetrate a fraud on petitioner by failing to live up to their agreement with him and by failing properly to use the funds which he advanced.

The record leaves no doubt that the representations, as alleged, were made to plaintiff; that the representtions were made as to all three leases; and that plaintiff relied thereon and was induced thereby to invest $2,000.00 for a 1/256 interest in the three leases . The record also reveals that instead of the proceeds of the sale of lease interests being deposited in an escrow account, as it was represented they would be, all of such proceeds, including the $2,000.00 invested by plaintiff, were deposited in an ordinary checking account in the name of Allstate Petroleum, Inc., from which account funds could be withdrawn at will by Mr. Hahn, as agent of the corporation on his sole signature. Nor were any of the sales proceeds kept intact pending cumulation of sufficient funds to drill the wells but were withdrawn by Hahn as fast as collected and used to pay sales commissions, office expenses, and all manner of other expenses which the corporation, and not the investors, was obligated to pay as its contribution toward the project. Sufficient interests to realize the necessary funds for drilling were never sold. No wells were ever drilled. The corporation's promotional project was discontinued after complaints were made to the Securities and Exchange Commission; the corporation closed its offices and moved out; and plaintiff's funds, instead of being available for reimbursement to him had been spent for purposes other than that for which they had been given. The corporation, through Mr. Hahn, had withdrawn and used for ordinary corporate expenses all of the funds collected from investors.

In his written 'Reasons for Judgment' the Trial Judge found that a fraud had been perpetrated on plaintiff, and that the three individual defendants participated in the fraud.

Defendants contend that none of the representations made to plaintiff related to a present or existing fact, and that fraud must relate to a present or pre-existing fact, and cannot ordinarily be predicated on unfulfilled promises or statements as to future events (citing Swann v. Magouirk, La.App., 157 So.2d 749, which quotes extensively from annotations in 51 A.L.R. 59 and 91 A.L.R. 1296; Farwell v. Milliken and Farwell, Inc., La.App., 145 So.2d 644; Orr v . Walker, La.App., 113 So.2d 485; Green v. Louisiana Highway Commission, La.App., 3 So.2d 236; Brenard Manufacturing Company v. Gibbs, 9 La.App. 137, 119 So. 483 and Brinker v. Feist, 14 La.App. 101, 129 So. 416.)

The three individual defendants further contend that since the representations, relating as they do to future events, cannot serve as a basis for a finding of fraud, plaintiff is relegated to a claim against the corporation only, since in the absence of fraud an officer or agent acting on behalf of a corporation within the scope of his express or implied authority will not incur personal liability for the obligations of the corporation (citing Orleans Shoring Company v. DeVillentroy, La.App., 92 So.2d 274; La Parie v. Totora, La.App., 62 So.2d 658; and Air Waves v. Link, La.App., 89 So .2d 422.)

Defendants overlook the fact that the general rule regarding fraud as stated in Swann v. Magouirk and other cases cited by them supra is subject to exceptions, one of them being stated in the annotation in 51 A.L.R. at page 63 as follows:

'The weight of authority holds that fraud may be predicated on promises made with an intention not to perform the same, or, as the rule is frequently expressed, on promises made without an intention of performance.' See also 91 A.L.R. at page 1297 et seq.

In 23 Am.Jur. 798 et seq. the exception is stated in the following language:

'* * * According to the weight of authority, if the person making the statement as to a future event is guilty of an actual fraudulent intent, and makes the misrepresentation with the intention of deceiving and defrauding the other party, and accomplishes this result, to the latter's injury, fraud may, under many circumstances, be predicated thereon, notwithstanding the future nature of the representation. This result is reached frequently on the theory that a person's intention or belief is a matter of fact and that, therefore, if a misrepresentation is made with regard to the same, the misrepresentation is one of fact. * * *

'Where a promisor has no intention of performing his promise when it is made, in the view taken by a majority of courts, a fraud has been committed by deliberate deception and...