Waggoner v. Zundelowitz

• Decision Date: 01 June 1921
• Docket Number: (No. 226-3400.)
• Citation: Waggoner v. Zundelowitz, 231 S.W. 721 (Tex. 1921)
• Parties: WAGGONER et al. v. ZUNDELOWITZ.
• Court: Texas Supreme Court

231 S.W. 721

WAGGONER et al. v. ZUNDELOWITZ.

(No. 226-3400.)

Commission of Appeals of Texas, Section B.

June 1, 1921.

Error to Court of Civil Appeals of Seventh Supreme Judicial District.

Suit by A. Zundelowitz against Ed Waggoner and another. From a judgment of the Court of Civil Appeals, reversing a judgment for defendants (211 S. W. 598), defendants bring error. Reversed, and judgment of district court affirmed.

Bullington, Boone, Humphrey & Hoffman, of Wichita Falls, for plaintiffs in error.

Carrigan, Britain & Montgomery, of Wichita Falls, for defendant in error.

POWELL, J.

This suit was filed in the district court of Wichita county, Tex., by A. Zundelowitz against Ed Waggoner and W. W. Silk, praying for a rescission and cancellation of a certain transfer and assignment of an oil and gas lease, executed by defendant in error on May 14, 1917, and further praying, in the alternative, for his damages in the sum of $18,000. All of the parties had been jointly interested in an oil lease covering 348½ acres of land, the interest of Zundelowitz being an undivided one-fourth. On the date last mentioned, the latter conveyed his interest therein to Waggoner for a cash consideration of $37.50 per acre. Waggoner then conveyed to Silk an undivided one-half of this interest he had purchased from Zundelowitz.

The petition alleged that an oil well was being drilled on the Burnett ranch about one mile from said lease; that about May 12, 1917, Waggoner and Silk became informed that the well above mentioned was being brought in, and was showing up for a good well; that they then conspired together to defraud Zundelowitz out of his interest in the lease on said 348½ acres; that in pursuance of said conspiracy they made certain false representations to him with reference to said well and lease, and concealed certain other information with reference thereto, thereby obtaining an option from the latter on May 13, 1917, covering his one-fourth interest in said lease; that the assignment was executed, as aforesaid, the next day; that at that time he was still in ignorance of the true facts about the oil well development near the lease.

Waggoner and Silk answered by general and special exceptions and general denial; they specially denied that they defrauded Zundelowitz, or concealed any information from him which it was their duty to impart; they further pleaded that Zundelowitz had the same opportunity to know of the development on the Burnett ranch and the bringing in of the Gulf Production well thereon, as they did, and that he was fully advised even before the option was signed; that in any event, before the final assignment was executed to Waggoner on May 14, Zundelowitz did have knowledge of all the material facts about the development on the Burnett ranch, and, even if he had been defrauded in the beginning, his act in executing the final assignment and completing the executory contract and option amounted to a waiver and condonement of the alleged fraud, and a ratification and confirmation of the option contract which he alleged Waggoner had secured by misrepresentation and concealment. The answer further alleged that the actions and conduct of Zundelowitz in the premises estopped him from seeking to cancel his transfer of his undivided interest in said lease, or to seek damages by reason thereof.

The case was tried before a jury, which, in response to a general charge of the court, returned a general verdict for Waggoner and Silk. Complying with the jury's verdict, the judgment of the court was that Zundelowitz take nothing by his suit, and that Waggoner and Silk go hence and recover their costs.

In due course, Zundelowitz appealed from the judgment of the trial court to the Court of Civil Appeals at Fort Worth, whence the case was transferred to the Court of Civil Appeals at Amarillo. The latter court entered judgment reversing the judgment of the trial court and remanding the case for another trial. See 211 S. W. 598. Waggoner and Silk, in due time, filed a motion for rehearing in the Court of Civil Appeals, which was overruled. In due course thereafter they sued out a writ of error to the Supreme Court, which was granted.

The controlling questions on this appeal involve paragraph 6 of the general charge of the court, and special charge No. 2, requested by Zundelowitz in connection therewith, and refused by the court. Said paragraph No. 6 is as follows:

"If you find and believe from the evidence that Ed Waggoner did make the representations as alleged by A. Zundelowitz, and that said representations were false, and that said Ed Waggoner knew them to be false, and that A. Zundelowitz did rely upon the same, and was induced thereby to sell said lease to the said Waggoner, nevertheless, if you further find and believe from the evidence that A. Zundelowitz discovered the falsity of said representations, if they were false, before he signed the transfer of said lease to the said Waggoner, and, having said knowledge and knowing the falsity of said representations, if they were false, signed and delivered the transfer of said lease to the said Waggoner, you will find for the defendants."

Said special charge No. 2 is as follows:

"In connection with paragraph 6 of the court's charge, you are charged that, before you can find for the defendants under said paragraph, you must believe that A. Zundelowitz, before he executed and delivered the transfer of the lease, knew all the facts with reference to the transaction; that is, he must have known that the representations were false, and he must have known that Ed Waggoner at the time said representations were made knew the facts with reference to said well, or had information with reference to same, and failed to communicate the facts within his knowledge, and it would not be sufficient simply for you to find that A. Zundelowitz had information before he made said transfer that the well had been brought in."

The Court of Civil Appeals, apparently ignoring the fact that both the pleadings and evidence account for many fraudulent representations as being involved in the issue of waiver, or ratification of the alleged fraud, limits its discussion of the correctness of the above charge to only one phase of the testimony, to wit: Zundelowitz testified:

"I wanted to set this trade aside because he [Waggoner] said it was to be a dry hole, and on the basis of that he was going to sell it. It made a big difference to me whether it was going to be a dry hole. If I had known the well was a producing well, I would not have sold it for $37.50."

In line with the above limitation of the evidence, said court announces the following general principles of law:

"1. Ordinarily, misrepresentation of a material fact will be sufficient to support an action for fraud, whether the person making it knew that it was false or not. One making a statement of fact as a basis of negotiations is bound to know whether it is true, and bad faith is not in such cases a necessary element of an action for fraud. In this case, however, the statement in reference to the well was made in the form of the expression of an opinion, and it is generally true that a statement of an opinion will not form the basis of an action for fraud. There are exceptions to this rule, however. Where an opinion is expressed for the purpose of deceiving as to a matter which has within the knowledge of the person expressing it ceased to be a matter of opinion, and is thereby made the means of a misrepresentation or concealment of a fact, it may form the predicate for actionable fraud. Houston v. Darnell Lumber Co., 146 S. W. 1063; Olston v. Oregon Water Power & R. Co., 52 Or. 343, 96 Pac. 1095, 97 Pac. 538, 20 L. R. A. (N. S.) 926; 20 Cyc. 18; 12 R. C. L. p. 248; Mudsill Mining Co. v. Watrous, 61 Fed. 163, 9 C. C. A. 415.

"2. Fraud which renders a contract voidable may be waived or condoned, and the contract ratified by the party defrauded, but acts relied upon as ratification must be done after the person defrauded `has obtained full knowledge of all the material facts involved in the transaction, has become fully aware of its imperfection and of his own rights to impeach it, or ought and might, with reasonable diligence, have become so aware.' 2 Pomeroy (3d Ed.) par. 964; North American Accident Insurance Co. v. Miller, 193 S. W. 758; Ingram v. Abbott, 14 Tex. Civ. App. 583, 38 S. W. 626; Black on Rescission and Cancellation, par. 591.

"3. If bad faith on the part of Waggoner in making the representation as to the well was material in determining whether fraud had been committed, it necessarily follows that knowledge on the part of Zundelowitz as to such bad faith was also a material fact in determining whether he had waived the fraud by executing the transfer. The charge of the court does not therefore correctly present the issue of ratification as made by the evidence. This was called to the court's attention, both by objections to the charge and by the request for instructions referred to. We think the charge requested should have been given."

Said court assigns no other reason for reversing and remanding the judgment of the trial court.

According to the view of the Court of Civil Appeals, before Zundelowitz can be held to have waived the alleged fraud, three things were necessary: (1) False representations must have been made; (2) Waggoner must have known that they were false when he made them; (3) Zundelowitz must have known, not only their falsity, but also that Waggoner knew they were all false when made.

If none of the alleged misrepresentations involved an opinion, but all were statements of actual facts, then we are sure no one will contend for a moment that paragraph 6 of the court's general charge is erroneous, so far as Zundelowitz is concerned. Numerous authorities can be cited in support of this proposition, but we content ourselves by referring to a very excellent opinion by Justice Lurton of the ...