Weed v. Lyons Petroleum Co.

• Citation: 294 F. 725
• Decision Date: 14 November 1923
• Docket Number: 7.
• Parties: WEED v. LYONS PETROLEUM CO.
• Court: U.S. District Court — District of Delaware

294 F. 725

WEED v. LYONS PETROLEUM CO.

No. 7.

United States District Court, D. Delaware.

November 14, 1923

Charles F. Curley (of Saulsbury, Curley & Davis), of Wilmington Del., and Joseph A. Seidman, of New York City, for plaintiff.

James I. Boyce, of Wilmington, Del., O. D. Batchelor, of New York City, and C. F. Carnine, of Denver, Colo., for defendant.

MORRIS District Judge.

A verdict for $30,800 having been rendered in favor of Harold K. Weed in his suit against Lyons Petroleum Company, the latter now moves for a new trial. The verdict represents the amount of damages assessed against the defendant for its failure and refusal to deliver to Weed the 87,000 shares of its treasury stock specifically called for by the following contract:

'October 26, 1921.

'H K. Weed, 347 Madison Ave., New York City-- My Dear Mr. Weed: In accordance with our conversation to-day, we agree to sell you 67,000 shares treasury stock at 50 cents a share, and 20,000 shares treasury stock at 70 cents a share, same to be paid for at the above-stated prices on or before January 2, 1922. In the event that such shares are paid for and delivered, they are to be held in escrow until released by mutual agreement. Furthermore, until Saturday, October 29, noon, we agree to accept all sales made by you and paid for on a basis of 50 cents per share. Your signature affixed hereto is an acknowledgment of your acceptance of this agreement.

'Very truly yours,

Lyons Petroleum Company, '(Signed) C. S. Downing, Vice President.

'Accepted: (Signed) H. K. Weed.'

The reasons advanced by the defendant in support of its motion are: (1) That the contract was admitted in evidence upon insufficient proof that it was the contract of the defendant; (2) that the court should have directed a verdict for the defendant; (3) that the verdict was against the weight of the evidence; (4) that the verdict was for excessive damages; and (5) that the verdict was against the law. The more important grounds upon which the defendant sought a directed verdict were: (a) That there was not sufficient proof to go to the jury that the contract was the contract of the defendant; (b) that in any event it is merely an option, lacking consideration to support it and is therefore void; (c) that it is likewise void for uncertainty; and (d) that there was no sufficient proof that the plaintiff tendered performance, or was ready, willing, and able to perform his part of the agreement.

Inasmuch as any error in admitting the contract in evidence without sufficient proof of its being the contract of the defendant was cured if, after its admission, evidence was admitted amply sufficient to establish that fact (City of Anthony v. Woonsocket Institution for Savings, 71 F. 97, 17 C.C.A. 622; Swenson v. Bender, 114 F. 1, 51 C.C.A. 627), the first above mentioned reason for a new trial becomes merged in subdivision (a) of the second reason, namely, that there was not sufficient proof to go to the jury that the contract was the contract of the defendant, and needs no separate consideration. A re-reading of the entire record for the purposes of the pending motion has convinced me that the evidence upon this point was not only sufficient to be submitted to the jury, but is so overwhelming that it admits of but one conclusion-- that of the jury.

The corporation was formed in December, 1919, with a capitalization of 3,000,000 shares, of the par value of $1 each, for the purpose of purchasing the Oklahoma oil properties of James G. Lyons. Defendant's Exhibits Nos. 1 and 3. Lyons and Downing were the two men who organized the company. Lyons' property was transferred to the company, apparently, in consideration of the full amount of the authorized capital stock. On January 12, 1920, two agreements were entered into with respect to the stock (Defendant's Exhibit No. 2 and Plaintiff's Exhibit No. 7); the former between the defendant company, Lyons, and Downing of the first part, Weed, Edwards & Co., of which the plaintiff herein was president, of the second part, and Lawyers' Title & Trust Company of New York, of the third part. It recites the agreements of December 10 and 23, 1919 (Defendant's Exhibits Nos. 1 and 3), for the purchase by Weed, Edwards & Co. of 1,200,000 shares of the capital stock of the defendant company; the appointment of Lawyers' Title & Trust Company as the depository of the stock pending the consummation of the purchase; the receipt of the stock by the trust company being acknowledged. The defendant company, Lyons, and Downing agreed to sell, and Weed, Edwards & Co. agreed to buy, the 1,200,000 shares of stock at the price of 50 cents per share, to be paid for in installments ending August 15, 1921. The trust company was authorized to deliver to Weed, Edwards & Co. 2 shares of the stock held by it for each dollar paid. The contract was to terminate and become null and void if Weed, Edwards & Co. became in default for 60 days.

The other contract of January 12, 1920 (Plaintiff's Exhibit No. 7), was between the defendant company, Lyons, and Downing, of the first part, and Weed, Edwards & Co., of the second part. It recited the agreement with respect to the 1,200,000 shares; that 'the parties of the first part own and hold all of the shares of the capital stock of said corporation, other than qualifying shares held by the directors of said corporation, namely, 7 shares. ' It provides that the parties of the first part shall deposit with the Citizens' National Bank of Okmulgee, Okl., as trustee, 1,799,993 shares of the capital stock of defendant to be held as therein provided, the purpose being to keep those shares off the market so long as Weed, Edwards & Co. performed its contract with respect to the 1,200,000 shares. On April 12, 1920, the rights of Weed, Edwards & Co., a Delaware corporation, were acquired by a New York corporation of the same name, and new contracts were executed. A still further agreement changing the price to 75 cents per share was entered into on November 16, 1920. Plaintiff's Exhibit No. 1. On September 14, 1921, the price was again reduced to 50 cents per share, and the trust company was notified accordingly. Plaintiff's Exhibit No. 2 and Defendant's Exhibit No. 6. Up to October 26, 1921, the only stock sold was that sold under the Weed, Edwards & Co. contracts. On the last mentioned day the Lawyers' Title & Trust Company held on deposit, under the terms of the agreement of November 16, 1920, 290,450 shares; on November 1, 1921, it had 169,750 shares, which remained on deposit with it until May 1, 1922. 'The Lyons Petroleum Company was and always was Mr. Lyons and Mr. Downing; no one else. ' 'You mean those two men largely controlled it? ' 'Did control it.' Lyons 'directed the affairs of the Lyons Petroleum Company with reference to its finances and with reference to its field operations. ' From the beginning Lyons attended to the field operations in Oklahoma. Downing remained in New York, taking care of the New York business of the corporation. Downing 'was looking after the marketing of the Weed-Edwards stock'-- 'the main business of the corporation in New York for a year preceding December 1921. ' He 'was in charge of the stock operations in New York City. ' The contracts with Weed, Edwards & Co., to which the corporation's seal was affixed, attested by the secretary, were signed on behalf of the defendant by Lyons. Weed, says Lyons, 'was familiar with every act of the officers of the corporation,' 'and was just as familiar with the situation as I was. ' Weed says, 'I am quite sure that no formal meetings (of the board of directors) were held. ' During October, 1921, Lyons became desirous of supplanting the Weed, Edwards & Co. contract of November 16, 1920 (Plaintiff's Exhibit No. 1), as modified September 14, 1921 (Plaintiff's Exhibit No. 2; Defendant's Exhibit No. 6), by a contract with Ehrich Company. To do this it was necessary to eliminate the Weed-Edwards contract. On October 24th Lyons sent to Downing the following telegram (Defendant's Exhibit No. 13):

'Okmulgee, Oklahoma, October 24th, 1921.

'Chas. S. Downing, 100 West 59th Street, New York City, N.Y. Ehricks proposition satisfactory subject to our approval contract in written form subject to confining within bounds of following instructions: Instruction No. 1, Weed-Edwards proposition, must be disposed of in an equitable manner and to their liking as well as our own. We cannot arbitrarily cut loose from them by notifying the bank to make no further delivery of stock. This course will only be the beginning of a misunderstanding which might seriously retard progress any new transaction. Discuss the proposition forcibly, but candidly, with Weed, and arrive at some definite understanding Tuesday. It would be a serious mistake to junk the good will and friendly relationship existing between Weed Edwards and ourselves. Hence the advisability of a peaceable termination of our business relationship. Instructions Number two New Ehrick contract to terminate without further notice on expiration of specified sixty days or on the thirty days first specified in event of default of commitment. Instructions number three All bonus stock and stock owned by insiders or officers of company must be continued in escrow in the Citizens National Bank under some equitable contract satisfactory to all of us. Do not see the necessity of employing New York attorney at this time. Have Ehrick submit contract to us. Have Ehrick's attorney draw up contract based on your mutual understanding same to be forwarded here for approval our attorneys. Keep me advised daily progress.

'James G. Lyons.'

Downing replied (Defendant's Exhibit No. 7), October 26th, thus:

'New York, Oct. 26, 1921.

'James G. Lyons,...