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RUSSELL v. MID-EAST OIL CO.

August 5, 1976

Fred J. RUSSELL, Plaintiff,
v.
MID-EAST OIL COMPANY and Charles M. Griffith, Defendants



The opinion of the court was delivered by: WEBER

 WEBER, District Judge.

 The plaintiff brought suit against the Defendants for selling interests in natural gas ventures in violation of the Securities Act of 1933, the Securities Exchange Act of 1934, and the common law of misrepresentation. Charles M. Griffith has served as President of Mid-East Oil Company (hereinafter "Mid-East") at all times relevant to the above matter.

 Russell has alleged that Griffith on two occasions, in trying to induce him to purchase participating leases in gas wells, affirmatively represented that Mid-East was at all times an owner, would continue to be an owner, and would always become an owner (with respect to future participations) of individual interests in each and every participation then issued or to be issued. Russell further avers that Griffith knew these representations were false and materially misleading and that Russell would rely on them in deciding to invest. Complaint [*] 10. Finally, Russell alleges that Griffith told him that Mid-East would be impelled by its investment in the wells to insure their profitability.

 Although the Defendants do not dispute that Mid-East never owned any interest in the gas wells, they move for summary judgment pursuant to F.R.Civ.P. 56 on the grounds that the Plaintiff's claim is barred by the statute of limitations in that Russell knew that Mid-East had no interest in the spring of 1974, more than one year before the complaint in the above matter was filed on February 26, 1976. In causes of action seeking recovery for fraud, the statute of limitations begins to run when the plaintiff discovers the fraud. The Defendants assume that the applicable statute of limitations is one year (the correctness of which we need not now decide) and conclude that because Russell evidently knew that Mid-East was not an owner and, consequently, that Griffiths alleged representations were false, more than a year before he filed his complaint, his claim is now barred by the one year statute of limitations.

 The Defendants move for Summary Judgment on the issue of when Russell discovered that Mid-East owned no interest in the gas wells. The Defendants assert that their Motion for Summary Judgment should be granted because there is "no genuine issue as to the material fact" of when Russell learned that Griffith's representations were false. In support of their Motion, the Defendants lean heavily on the Plaintiff's negative answer to the following, cryptic question posed to him on cross examination during his deposition.

 
Q Was there any information you received between the spring of 1974 and the filing of your lawsuit against Mid-East which corroborated your intimation that Mid-East was not an investor in the other wells?
 
A No.

 Additionally, the Defendants mention two letters and one memorandum concerning Mid-East's involvement in the acquisition and drilling of the natural gas ventures which Russell allegedly saw in 1973 and 1974 as further indicative of his knowledge.

 On the other hand, the Plaintiff states in his Complaint that he did not discover that Mid-East never had any interest in the gas wells until "sometime in early 1975." Complaint, [*] 34. Further, Russell affirms in an affidavit filed August 2, 1976 that he did not learn of the failure of Mid-East to invest until March 12, 1976, the date the Defendants filed their Answer.

 Rule 56(c) states in pertinent part:

 
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

 The acid test as to whether there is any "genuine issue as to any material fact" is that a moving party is entitled to summary judgment if the materials before the court would require a directed verdict in his favor unless the opposing party produces evidentiary material that show there is a triable issue of material fact, Adickes v. S. H. Kress & Co., 398 U.S. 144, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970); Olympic Junior, Inc. v. David Crystal, Inc., 463 F.2d 1141 (3rd Cir. 1972); Cousins v. Yaeger, 394 F. Supp. 595 (E.D.Pa.1975); Caldwell v. Wilson Freight Forwarding Co., 322 F. Supp. 43 (W.D.Pa.1971).

 We are first required, in applying the foregoing test, to decide whether the evidence on which the Defendants rely would sustain a motion for a directed verdict. The motion for summary judgment and the motion for a directed verdict are integrally related: the crux of both theories is that no genuine issue of material fact remains to be determined by the fact finder. 6 Moore's Federal Practice para. 56.02[10] at 43 (1975). As ...


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