KELLY et al. v. SHAMROCK OIL & GAS CORPORATION et al., 171 F.2d 909

SIBLEY, Circuit Judge. The suit, removed from the State court, sought to cancel for fraud a conveyance made June 16, 1941, by plaintiffs Henry M. Kelly and wife to the defendant Shamrock Oil & Gas Corporation of certain mineral land, and to secure an account of the gas taken therefrom.

The fraud alleged was that the plaintiffs, living in Michigan, having previously made a gas lease on the land, and defendant Shamrock having acquired the lease, had as their agent and adviser in Texas regarding this and other land one Fowlston on whose advice they relied; the lessee Shamrock desired to buy this land, and knowing of Fowlston’s connection with the plaintiffs colluded with him and hired him as its agent to secure a deed at an inadequate price, concealing this double agency in the transaction from plaintiffs; that Fowlston visited the plaintiffs in Michigan and ostensibly representing them only he by misrepresenting the value of the property, aided by Shamrock’s reducing the quantity of gas currently produced in order to indicate approaching . exhaustion, and concealing the 'fact that the gas had recently been classed as sweet gas rather than sour gas as previously, sweet gas being more valuable, and by other misrepresentations, induced the plaintiffs to sell the property for much less than its true value.

Shamrock’s answer admitted that Fowlston was the trusted agent of plaintiffs, but denied that he at any time was the agent of Shamrock, or that Shamrock was responsible for any statements Fowlston may have made, or that it had conspired with him, or had concealed or misrepresented anything or breached any duty to plaintiffs, and averred it had dealt at arm’s length with Fowlston as plaintiffs’ agent; that the consideration paid was adequate; and if Fowlston’s conduct was improper in any way plaintiffs rather than Shamrock were chargeable with it, he being their agent.

By stipulation the issue as to the validity of the conveyance was first separately tried. Though this issue, as indeed 'the whole complaint, seems to be equitable, it was tried to a jury and a verdict was rendered for Shamrock. Plaintiffs having moved in the trial for an instructed verdict and after verdict having moved for a judgment non obstante veredicto, and for a new trial, these motions were denied, and upon the verdict judgment was entered for ,the defendant. This appeal followed.

As to the sufficiency of the evidence the main question is whether Fowls-ton, concededly the agent of plaintiffs, was also employed secretly by Shamrock. Fowlston was paid by plaintiffs’ son immediately after the transaction a commission of thirty-two hundred dollars. He was also paid by Shamrock on July 2, 1941, five hundred dollars, which Shamrock’s vice-president testified was a commission, and a smaller sum for half the expenses of Fowlston’s trip to see plaintiffs, the checks and stubs therefor so showing.

The plaintiff Kelly testified that he was ignorant of this, so that there was seemingly a secret employment by Shamrock of the agent acting for the other party which would amount to a fraud in itself. Hawkins v. Byrn, 150 Tenn. 1, 261 S.W. 980, 982; Peeples v. Georgia Iron & Coal Co., 5 Cir., 248 F. 886, 892; contrast Dockstader v. Brown, Tex.Civ.App., 204 S.W.2d 352, 356.

But the expense sharing by Shamrock was mentioned in a letter from Fowlston to Kelly in January, 1941, just before the trip and several months before the trade was closed, and the vice-president of Shamrock also testified and proved by two letters from Kelly to Fowlston which Fowlston showed 'him that Kelly, was asking Fowlston to get an offer of a net price to him, which meant that Fowlston was to get his commission by Shamrock’s adding it to the price submitted to plaintiffs, and that the check for $500 was made to Fowlston on his statement that this was what plaintiffs owed him as commission; and that Fowlston was not employed by Shamrock and not authorized to do any act or make any representation for Shamrock.

This evidence made a jury issue on this point and an instructed verdict and a judgment non obstante veredicto were properly refused. Also the requested charges to the effect that the mere receipt by Fowlston of money from both parties unknown to plaintiffs would invalidate the, transaction, whether or not Shamrock colluded with Fowlston or employed him to act -for it, were properly denied.

The court’s charge on this point that “Fowlston is to be regarded as the agent of the Shamrock Oil & Gas Corporation only if the plaintiffs have proven by a preponderance of the evidence that it employed Fowlston to act for it as its agent in this very matter” was correct; as was the general charge that if fraud on Shamrock’s part was not proven there could be no recovery.

Shamrock’s reduction of gas output and its failure to advise plaintiffs of the recent use of the gas as sweet gas were circumstances for consideration by the jury, along with Shamrock’s explanation 'that the change from sour to sweet gas classification occurred in December, 1940, before this negotiation started, by a public order of the Railroad Commission affecting .ninety, gas wells and was not private information which ought to have been disclosed, and that the reduction in production resulted from complications in pipe line connections which resulted from the change.

The charges refused and those given with respect thereto show no error. We think -the case was fairly and fully presented to the jury on the essential issues. Fowlston, who was not called to testify though available, appears to have acted wrongly, but if he was neither employed by Shamrock, nor colluded with, but dealt with at arm’s length as the agent of plaintiffs, his wrong conduct is not chargeable to Shamrock. The good faith of Shamrock in what it said and did apart from Fowlston is also established by the verdict on sufficient evidence. No reversible error appearing, the judgment is affirmed.