Silk v. Phillips Petroleum Co.

• Decision Date: 21 June 1988
• Docket Number: No. 57121,57121
• Citation: 760 P.2d 174,1988 OK 93
• Parties: Minnie Marie Hopkins SILK, Appellee, v. PHILLIPS PETROLEUM COMPANY, Appellant.
• Court: Oklahoma Supreme Court

Page 174

760 P.2d 174

1988 OK 93

Minnie Marie Hopkins SILK, Appellee, v. PHILLIPS PETROLEUM COMPANY, Appellant.

No. 57121.

Supreme Court of Oklahoma.

June 21, 1988.

Rehearing Denied Sept. 13, 1988.

An Appeal from the District Court of Beckham County; Giles C. Peterson, District Judge.

Appeal by defendant from judgment on jury verdict awarding plaintiff actual and punitive damages for alleged fraud in the procurement of a written option to renew an oil and gas lease, and cross-appeal from judgment of trial court, without a jury, denying plaintiff's prayer for rescission of the option to renew.

JUDGMENT OF TRIAL COURT AFFIRMED IN PART: REVERSED IN PART; AND CAUSE REMANDED WITH DIRECTIONS.

Kenneth Heady, C.J. Roberts, Galen E. Ward, Jim Hamilton, Phillips Petroleum Company, Harvey L. Harmon, Sr., Oklahoma City, Holland Meacham, Elk City, for appellant/cross/appellee.

Stanley Ell Niece, Elk City, John C. Niemeyer, Linda G. Alexander, P.C., Oklahoma City, for appellee/cross/appellant.

SIMMS, Justice:

Appeal from a jury verdict and judgment entered thereon against appellant, Phillips Petroleum Company (Phillips), for damages resulting from alleged fraudulent misrepresentation to plaintiff below, Minnie Marie Hopkins Silk (Silk). The jury apparently found that Phillips, acting through its agent, fraudulently induced Silk to sign an "option to renew clause" while she was executing a five-year oil and gas lease.

Silk's petition ¹ filed August 7, 1980, stated two claims for relief arising out of the alleged fraudulent misrepresentation. She asked for equitable rescission of the option to renew clause and that her title to the lease property be quieted. She also prayed for damages incurred as a result of Phillips' alleged fraudulent inducement to contract, for punitive damages, and for attorney's fees and costs.

Silk's legal claim for damages predicated upon fraud was tried first. At the conclusion of Silk's case in chief, Phillips demurred to her evidence and moved for a directed verdict. Phillips' demurrer was overruled, and its motion was denied. Phillips rested without presenting any evidence, preserving its right to complain of the insufficiency of the evidence to sustain the verdict and judgment.

The jury returned a verdict awarding Silk $18,092.00 in actual damages and $3,761,798.00 in punitive damages. In ruling on Silk's equitable claim for rescission, the trial court found that the damages awarded by the jury fully compensated Silk for Phillips' exercise of their option to renew the lease. Thus Silk's request for rescission of the option was denied.

After judgment was entered for Silk on her legal claim for damages, Phillips filed a motion for judgment notwithstanding the verdict and, alternatively, a motion for new trial. These motions were overruled, and the trial court entered judgment for Silk in the sum of $3,779,890.00, with post-judgment interest accruing pursuant to 12 O.S. 1979 Supp., § 727. Silk's motion for pre-judgment interest was denied.

Phillips' petition in error alleges 45 points of error. Generally, Phillips alleges that:

(1) Silk's action was barred by Oklahoma's two-year statute of limitations on tort actions;

(2) Silk's equitable claim for rescission should have been decided before her claim at law for damages;

(3) If Silk successfully proved fraud, the trial court had no authority to deny her request for rescission;

(4) The trial court erred in overruling Phillips' demurrer to the evidence because Silk's attempts to prove Phillips' liability based on a principal/agent relationship, and to prove fraud and accompanying damages were fatally deficient;

(5) The punitive damages award is grossly excessive;

(6) Prejudicial conduct of Silk's attorneys requires reversal; and

(7) The trial court erred in denying Phillips the right to introduce on cross-examination the allegations of Silk's petition that were contrary to her courtroom testimony.

Silk filed a cross-petition in error, appealing the trial court's denial of her equitable claim for rescission of the renewed lease. Silk's request for rescission was based on two theories: first, the fraud allegedly perpetrated; and second, total lack of consideration, or alternatively, gross inadequacy of consideration for the option to renew. Silk agrees that the oil and gas lease agreement, which she says consisted of one page, was properly signed, acknowledged and recorded. However, she insists that the "option to renew clause" constituted a separate instrument and thus was not supported by any consideration, that it was signed as a result of fraudulent misrepresentations, and was not duly acknowledged or properly recorded.

Silk argues that the trial court should have rescinded the renewed lease and allowed Phillips a "set-off" in the amount of actual damages found by the jury; i.e., the amount the jury found the lease to have been worth. Silk also argues that the court erred in denying her motion for pre-judgment interest on the actual and punitive damages awarded.

I.

We address first Phillips' claim that the trial court erred in overruling Phillips' demurrer to Silk's evidence and its request for directed verdict at the conclusion of Silk's case in chief.

In passing upon alleged error in an action at law, we are committed to the rule that: where there is any competent evidence or reasonable inference from circumstances reasonably tending to establish a cause of action or to sustain the jury's verdict and judgment based thereon, such judgment will be sustained on appeal unless shown to be contrary to law. Oklahoma City v. Prieto, Okl., 482 P.2d 919 (1971); Walker v. St. Louis-San Francisco Ry.Co., Okl., 646 P.2d 593 (1982). However, if upon examination of the record it is found that there is no evidence reasonably tending to support the verdict and judgment for the plaintiff; such judgment will be reversed. Green v. Safeway Stores, Inc., Okl., 541 P.2d 200 (1975).

Assuming, without deciding, that Silk's claim is not barred by the statute of limitations and that vicarious liability may be imposed upon Phillips as principal if fraudulent misrepresentation by the person who procured the lease is proved, we examine Phillips' allegation that Silk's attempt to prove fraud was fatally deficient.

The elements of actionable fraud are that the defendant made a material representation that was false, that he knew when he made the representation that it was false, and that he made it with the intention that it should be acted upon by plaintiff, and that plaintiff acted in reliance upon it and thereby suffered detriment. D & H Co., Inc. v. Shultz, Okl., 579 P.2d 821 (1978); State ex rel., Southwestern Bell Telephone Co. v. Brown, Okl., 519 P.2d 491 (1974).

There must be evidence of each element of fraud presented before the issue may be properly submitted to the jury. P.E.A.C.E. Corp. v. Oklahoma Natural Gas Co., Okl., 568 P.2d 1273 (1977). As this Court stated in Johnson v. Caldwell, 180 Okl. 470, 71 P.2d 620, 623 (1937):

"... It is the rule that fraud is a question of fact to be determined by the jury, but there must appear some reasonable proof of fraudulent intent. The mere fact that fraud is claimed will not justify the submission of that issue unless facts are produced from which an irresistible deduction of fraud reasonably arises. Fraud may not be presumed by the jury from circumstances; it must arise as does any other issue of fact from a preponderance of all the evidence. Deceit, fraud, and fraudulent intent arise from acts and conduct inharmonious with good faith and must emanate from clear and convincing proof." [emphasis added]

Although fraud is never presumed, but must be proved, it may be proved by circumstantial evidence. Austin v. Wilkerson, Inc., Okl., 519 P.2d 899 (1974). Thus, this Court on review will consider evidence not only of the actual leasing transaction between Silk and Phillips' alleged agent, but also facts and circumstances surrounding this transaction. Prior similar dealings by the alleged wrongdoer may also be considered. Cates v. Darland, Okl., 537 P.2d 336 (1975).

Evidence of events leading up to the procurement of Silk's lease was introduced by way of adverse witnesses called in Silk's case in chief. Phillips orally contracted in 1974 with a lease broker, Mike Rainbolt, to acquire oil and gas leases in an area of Beckham County in western Oklahoma designated by Phillips as a "lease play".

Phillips provided Rainbolt with lease forms, including typewritten forms captioned "option to renew clause." Rainbolt, who operated an incorporated lease brokerage company, was not instructed on how to use or how to explain the forms. Phillips did specify the terms to be offered to prospective lessors: the lessor was to receive bonus payments of up to $35 per acre, retaining a 1/8 royalty interest. The lease term was for a five year primary term, and the option to renew clause allowed the lessee, upon expiration of the primary term, to renew the lease by timely payment of an additional bonus of $35 per acre. The lease also provided for $1 per acre per year delay rental in the event a well was not drilled on the property before the expiration date of the lease.

Thomas Williams, who procured the lease at issue in this suit, was one of several landmen employed by Rainbolt to acquire leases in the lease play area designated by Phillips. Rainbolt paid for the leases, and the leases were taken in his name. The leases were subsequently assigned to Phillips.

The Williams-Silk leasing transaction consisted of two brief meetings, to which they were the only witnesses. Silk testified that she was first contacted by Williams late in February, 1975. Williams approached Silk in the grocery store where she was employed and inquired whether she was interested in leasing the mineral interests she owned in Section 28, Township 9 North, Range 22 West, in Beckham County. Silk told Williams that she and two of her cousins--who had...