Willcutt v. Union Oil Co. of California

• Citation: 432 So.2d 1217
• Parties: Prentiss WILLCUTT and Judy B. Willcutt v. UNION OIL COMPANY OF CALIFORNIA. 81-665.
• Decision Date: 27 May 1983
• Court: Supreme Court of Alabama

Page 1217

432 So.2d 1217

Prentiss WILLCUTT and Judy B. Willcutt v. UNION OIL COMPANY OF CALIFORNIA.

81-665.

Supreme Court of Alabama.

May 27, 1983.

Frank McRight and Donald J. Stewart of McRight, Rowe & Stewart, Mobile, for appellants.

Charles J. Fleming and Edward G. Hawkins of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, for appellee.

ALMON, Justice.

This appeal involves a suit for rescission by the lessors (the Willcutts) of an oil and gas lease; the suit also seeks punitive damages and an accounting. The Willcutts contend that representatives of the lessee, Union Oil Company of California (Union), induced them to enter into the lease by fraud, misrepresentation, or failure to disclose material facts; these contentions are referred to herein as the fraud claims. The trial court granted partial summary judgment on the fraud claims--the prayer for an accounting remains pending--and directed entry of judgment under Rule 54(b), A.R.Civ.P.

The Willcutts filed this suit on November 14, 1979. They claim that they first learned of the alleged fraud in March 1979, after this court ruled in Trauner v. Lowrey, 369 So.2d 531 (Ala.1979), that the Trauners owned the mineral rights to their property. The Trauners were neighbors of the Willcutts and claimed under the same chain of title (the Hackmeyer chain).

On or about June 4, 1975, representatives of Union offered to lease from the Willcutts their mineral interest in their two-acre home lot in Mobile County. The Willcutts alleged in their complaint that

"Union represented to Plaintiffs that Plaintiffs had no mineral interest under the lands described and that Union wished to get a 'Security Lease' from Plaintiffs and that the purpose of Plaintiffs signing this 'Security Lease' to Union was that Union needed a release from any future claims by Plaintiffs for noise or bother of the drilling, or interference or spoliation of water and the like. Union did not disclose that Union knew or suspected that Plaintiffs had or might have a mineral interest in said lands."

The complaint sought to have the lease rescinded or to have an accounting rendered and damages paid to the Willcutts. It further sought punitive damages for "the willful and gross fraud of Defendant in fraudulently inducing Plaintiffs to execute" the lease.

Union filed a motion to dismiss on the grounds, inter alia, that the action was barred by the applicable statute of limitations. The Willcutts filed an amended complaint averring that they did not discover that they were possessed of a mineral interest in their lands, nor did they discover the fraudulent nature of Union's representations to them, until March of 1979.

The complaint included a count alleging that, by attempting to defeat the title of claimants under the Hackmeyer chain in Trauner, Union forfeited any right or claim it had under its lease from the Willcutts. The trial court granted partial summary judgment for Union under this count on December 5, 1980; the Willcutts have not appealed from this portion of the judgment.

After discovery and other proceedings, Union filed a motion for summary judgment on the fraud claims. The court granted this motion on March 26, 1982, holding that

"There is no genuine issue as to any material fact raised by the claims for relief in the plaintiffs' complaint for misrepresentation or failure to disclose material facts [and] Union is entitled to judgment, as a matter of law, dismissing all claims by the plaintiffs for misrepresentations or failures to disclose material facts."

The Willcutts raise the following issues:

"I. To the extent the date on which the plaintiffs discovered the fraudulent conduct complained of in the complaint is a material fact for limitations purposes, the record discloses a genuine issue of fact as to such date, creating a jury issue and making summary judgment improper as a matter of law.

"II. A claim for rescission of an oil and gas lease on the ground of fraud in the inducement as is alleged in the complaint before this court is a claim governed by the ten year limitation period of Ala.Code § 6-2-33 (1975) rather than by any lesser limitation period.

"III. An ancillary claim for punitive damages asserted in conjunction with a claim for rescission of an oil and gas lease on the ground of fraud in the inducement as is alleged in the complaint before this court is a claim governed by the ten year limitation period of Ala.Code § 6-2-33 (1975) rather than by any lesser limitation period."

The alleged fraud would have taken place on or before June 4, 1975, when the Willcutts signed the lease. An action for fraud must be commenced within one year of accrual of the cause of action. Code 1975, § 6-2-39(a)(5); Board of School Comm'rs v. Reynolds, 294 Ala. 21, 310 So.2d 876 (1975). A claim for fraud, however, "must not be considered as having accrued until the discovery by the aggrieved party of the fact constituting the fraud, after which he must have one year within which to prosecute his action." Code 1975, § 6-2-3. The courts of this state have uniformly held that "Fraud is deemed to have been discovered when it ought to have been discovered," and that "Facts which provoke inquiry in the mind of a man of reasonable prudence, and which, if followed up, would have led to a discovery of the fraud, constitute sufficient evidence of discovery." Johnson v. Shenandoah Life Insurance Company, 291 Ala. 389, 397, 281 So.2d 636 (1973); Butler v. Guaranty Savings & Loan Ass'n, 251 Ala. 449, 37 So.2d 638 (1948).

The trial court, in deciding Union's summary judgment motion, had before it the Willcutts' answers to interrogatories, an affidavit by Mr. Willcutt, and certain exhibits. One of these exhibits was the Willcutt-Union lease, which clearly states that the lessors

"do hereby grant, lease and let unto said Lessee ... all of their right, title and interest in and to all the lands and minerals owned or claimed in the SW 1/4 of Section 13, Township 1 South, Range 2 West, Mobile County, Alabama, whether such lands and/or minerals be correctly described and/or otherwise included herein or not."

Among the other evidence the trial court had before it were statements by Mr. Willcutt that a man named Blocker came to his house in 1976 offering to buy his mineral interest, and there was a letter sent in November 1976 by Union to the Willcutts and other property owners in the vicinity addressed to "Claimants of Royalty Interest in Referenced Property." This letter summarized the facts giving rise to the title dispute (see Trauner, supra ), and concluded,

"The above information is furnished to you for whatever action you may wish to take in resolving the ownership of royalties under the properties. Union will continue to hold the monies accrued to this interest and reserves the right to make payments into a court of competent jurisdiction, should any of the parties elect to file a court action to determine the ownership."

The Willcutts argue that none of these facts operated to cut off the tolling of the statute of limitations because the representatives of Union who visited them in 1975 convinced them they were not mineral interest holders. We find the most telling fact to be that Mr. Willcutt, in answering interrogatories, stated that he was aware of the Trauner litigation in 1976 from discussions with attorneys and his neighbors. The Willcutts' mineral rights derived from the same source as the Trauners'.

The record thus indicates not only that the facts were sufficient to provoke inquiry and lead to discovery of the alleged fraud, but also that Mr. Willcutt did in fact make inquiries. To allow him to wait until the Trauners prosecuted their suit to a successful conclusion and then claim that he was not aware of the situation would be to subvert the...