Wise v. Anderson

• Decision Date: 18 July 1962
• Docket Number: No. A-8425,A-8425
• Citation: 163 Tex. 608,359 S.W.2d 876
• Parties: Clarence WISE, Petitioner, v. M. E. ANDERSON et al., Respondents.
• Court: Texas Supreme Court

Page 876

359 S.W.2d 876

163 Tex. 608

Clarence WISE, Petitioner, v. M. E. ANDERSON et al., Respondents.

No. A-8425.

Supreme Court of Texas.

July 18, 1962.

Rehearing Denied Oct. 3, 1962.

Orrin W. Johnson, Harlingen, for petitioner.

Kelley, Looney, McLean & Littleton, Edinburg, for respondents.

GREENHILL, Justice.

Clarence Wise brought this suit against M. E. Anderson and the Anderson Oil and Gas Company of Texas. He alleged that he was fraudulently induced by Anderson to execute an oil and gas lease. Among other things, Wise asserted that Anderason falsely promised him orally that he would begin the drilling of a well on his land within 90 days. His action was for damages under Art. 4004 of Vernon's Civil Statutes of Texas dealing with actionable fraud. In a jury trial, Wise recovered actual and exemplary damages. The judgment was reversed by the Eastland Court of Civil Appeals and judgment was rendered that plaintiff take nothing. It held that Wise's cause of action was barred by the two-year statute of limitations. 345 S.W.2d 803. We have determined that the correct result was reached by the Court of Civil Appeals and that its judgment should be affirmed. This opinion, therefore, will be confined to the limitations questions.

On October 25, 1954, Wise executed an oil and gas lease to Anderson. It was for a primary term of five years. It provided that it should terminate after one year unless Anderson drilled a well on the land within one year or paid specified delay rentals to a depository bank. The lease further provided that 'In like manner and upon like payments or tenders, the commencement of a well may be further deferred for like periods' of one year.

Wise testified that before the signing of the lease, Anderson promised him a test well would be drilled on Wise's property within 90 days from the execution of the lease; i. e., by January 23, 1955. He also testified that Anderson represented that he had previously secured a lease from the owners of the other half of the minerals under the Wise land, and that he, Anderson, had enough acreage to secure a permit from the Railroad Commission to drill on the Wise property. Wise alleged that his property is in a gas field and that he had been suffering drainage from other wells in the field for several years because there was no well on his property. For these reasons and because a well on his property would have the effect of stopping or minimizing the drainage, Wise alleged that he was induced to execute the lease to Anderson by reliance on Anderson's oral representations which indicated that Anderson had the ability and intention to drill on the Wise land within 90 days after the execution of the lease.

The jury made findings which support these allegations of Wise. As particularly applicable here it found that Anderson orally promised that he would drill a well within 90 days from the date of the lease that the promise was made without any intention to perform it; that it was made to induce Wise to execute the lease; that it was a material inducement but for which Wise would not have executed the lease.

It is undisputed that a well was not drilled on the Wise property on January 23, 1955, 90 days after the execution of the lease. Wise was farming this land. During the 90-day period, he observed that no roads were built or other operations performed to indicate that Anderson was about to drill. He admitted in his pleadings that when Anderson did not have a rig on the land within the 90-day period, he 'decided at once to inquire into the entire matter.'

Wise instituted this suit on July 12, 1957, more than two years from January 23, 1955, by which date Anderson had promised Wise that he would drill a well.

On November 18, 1955, Anderson assigned the Wise lease to the Anderson Oil and Gas Company of Texas. This company was not in existence on the date of the execution of the lease of October 25, 1954, or at the time on which the well was supposed to have been drilled. It was not formed until about a year after lease was executed. The Anderson Oil and Gas Company of Delaware, according to Anderson's testimony, owned all of the stock in the Anderson Oil and Gas Company of Texas, and Anderson was the principal stockholder of the Delaware company and the president and a director of both companies. On May 16, 1957, Anderson Oil and Gas Company of Texas, over the protest of Wise, assigned the Wise lease to Coastal States Gas Producing Company. The consideration for the assignment was $3,000 and the reservation of an overriding royalty. Wise concedes that Coastal States had no knowledge of the alleged oral fraudulent representations of Anderson.

As has been stated, Wise brought this action against Anderson individually and the Anderson Oil and Gas Company of Texas. We shall consider the claims against the two defendants separately. We consider first the claim against Anderson.

The statute of limitations which is applicable to the claim of Wise against Anderson is one which says that a suit shall be commenced within two years after the cause of action accrues 'and not afterward.' Art. 5526, Vernon's Texas Civil Statutes Annotated. It is undisputed that this suit was not brought within two years after the expiration of the 90-day period within which Anderson promised to drill. The problems, therefore, are (1) when the two-year statute began to run, and (2) whether Wise established that the two-year limitations period was interrupted or tolled by the absence of Anderson from the State of Texas.

We have concluded that the statute of limitations began to run immediately upon the expiration of the 90-day period. This was the time when Wise knew that a well had not been drilled on his land within 90 days as promised. While fraud will prevent the running of the statute of limitations until it is discovered, or by the exercise of reasonable diligence should have been discovered, Sherman v. Sipper, 137 Tex. 85, 152 S.W.2d 319, 137 A.L.R. 263 (1941), knowledge that no well had been commenced was 'knowledge of facts that would cause a reasonably prudent person to make inquiry which would lead to a discovery of the fraud.' Glenn v. Steele, 141 Tex. 565, 61 S.W.2d 810 (1933). Such knowledge is in law knowledge of the fraud itself. The holding of this Court in Glenn v. Steele is particularly strong when considered in the light of the opinion of the Court of Civil Appeals in that case, 57 S.W.2d 908.

Since Wise did not file this lawsuit until July 12, 1957, more than 2 years and 5 months after he had acquired the knowledge just discussed, the two-year statute of limitations bars his cause of action against Anderson unless the statute was interrupted or tolled for a sufficient period of time. Wise contends that the statute was tolled by virtue of Anderson's absence from the state; that Anderson was absent about six months during the period in question. Art. 5537, V.A.C.S., provides that absence of the defendant from the state 'shall not be accounted or taken as a part of time' of the limitations period. Anderson was not a resident of Texas. Whild it has been held that the above article has no application, as a general rule, to nonresidents, Simonds v. Stanolind Oil & Gas Co., 134 Tex. 332, 114 S.W.2d 226, at 233, 163 S.W.2d 207 (1938), it does apply to nonresidents who were present in the state at the time the cause of action accrued or had its inception and who later leave the state. Gibson v. Nadel, 164 F.2d 970 (5th Cir.1947).

Neither the absence of Anderson from the state for sufficient time to avoid the running of the statute of limitations nor the suspension statute, art. 5537, was pleaded by Wise. As we interpret the voluminous statement of facts, this issue was not deliberately tried. Such evidence as there is on Anderson's presence in, or absence from, the state came in on other issues, such as whether Anderson was a nonresident and whether Wise exercised diligence in discovering the fraud. This evidence can be summarized as follows: Anderson admitted in his deposition, taken on February 14, 1958, that he was then and had constantly been for 55 years a resident of Warren County, Pennsylvania. His testimony at the trial shows that he was present in Texas when the alleged fraud was committed, and that the meetings during which he made the fraudulent representations to Wise took place on the Wise farm in Texas prior to the execution of the lease on October 25, 1954. He remained in Texas after October 25, 1954, and did some additional work on his oil operations until he 'left the latter part of April to go back home.' He thus testified that, except for a trip out of Texas during this period 'for a week or some such matter,' he was present in the state from October 25, 1954, until the latter part of April, 1955. The record is then virtually silent as to his whereabouts after April, 1955. Wise points out that there is no evidence to indicate that Anderson returned to Texas during the remainder of 1955 or until April, 1957; but it is equally true that there is no evidence that he continuously or generally remained out of Texas, or which shows where he was during this perior.

There is some evidence that Anderson was not present in Texas on certain specific dates during the months and years following April, 1955. Anderson's Texas lawyer, Higdon, testified that he told Wise that Anderson was in Pennsylvania in October, 1955. Higdon states that Wise came to see him about...