Amen v. Black, 4962-4964.

• Decision Date: 19 June 1956
• Docket Number: No. 4962-4964.,4962-4964.
• Citation: 234 F.2d 12
• Parties: A. M. AMEN et al., Appellants, v. William H. BLACK, Appellee. A. M. AMEN et al., Appellants, v. William H. BLACK and Ruth F. Black, Appellees. D. Arthur WALKER and Fred D. Windish, Co-Receivers of Black-Marshall Oil Company, Appellants, v. William H. BLACK and Ruth F. Black, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

234 F.2d 12 (1956)

A. M. AMEN et al., Appellants, v. William H. BLACK, Appellee.

A. M. AMEN et al., Appellants, v. William H. BLACK and Ruth F. Black, Appellees.

D. Arthur WALKER and Fred D. Windish, Co-Receivers of Black-Marshall Oil Company, Appellants, v. William H. BLACK and Ruth F. Black, Appellees.

Nos. 4962-4964.

United States Court of Appeals Tenth Circuit.

May 4, 1956.

Rehearing Denied June 19, 1956.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

D. Arthur Walker, Arkansas City, Kan., and Martin M. Lucente, Chicago, Ill. (Jack O. Brown, Chicago, Ill., Burrel Barash, Galesburg, Ill., Robert Martin, Wichita, Kan., Edward G. Knowles, Denver, Colo., W. F. Lilleston, Wichita, Kan., Douglas F. Smith, Chicago, Ill., and Henry V. Gott, Wichita, Kan., on the brief), for appellants.

Malcom Miller, Wichita, Kan. (George B. Powers, Carl T. Smith, John F. Eberhardt, Stuart R. Carter, Robert C. Foulston, Robert N. Partridge and Robert M. Siefkin, Wichita, Kan., on the brief), for appellees.

Before PHILLIPS, Chief Judge, MURRAH, Circuit Judge, and WALLACE, District Judge.

Rehearing En Banc Denied June 19, 1956.

MURRAH, Circuit Judge.

Stripped of their duplicity and redundancy, the pleadings in these consolidated cases state four separate contested claims with a common factual background.

The first is a spurious action by the appellant stockholders of the Black-Marshall Oil Company, generally known as the Aledo Group, who claim to have been induced to part with their stock in the company by the false and fraudulent representations of the appellee, Black, acting through his agent, Ives, to the effect that producing properties of the company were being sold to yield the stockholders $10 and $12 a share, when in truth and in fact, the properties were not being sold as represented, and were not sold until 1947, when Black had acquired all of the stock of the appellants with corporate funds; that after having so acquired the stock and retiring part of it, he sold the remaining majority stock to yield himself and his family $51.06 a share. The prayer is for a decree setting aside the sale of the stock to Black, and the recovery of the profits realized by him in a subsequent sale.

The second stated claim is in the nature of a derivative action by the individual stockholders and an original action by the co-receivers of Black-Marshall to recover on behalf of the corporation 32,457.50 shares of the company stock alleged to have been surreptitiously issued to Black and sold by him in 1947 for $51.06 a share. The consolidated claims seek to impress a constructive trust upon the proceeds of the sale of the stock for the benefit of the corporation and its shareholders.

The third claim asserted by the corporate receivers is for a recovery of the profits allegedly realized by Black and his wife from the use of company funds in personal business ventures. The fourth claim is also for proceeds realized by Black in transactions in which company funds were used for personal profit. This appeal is from a judgment of the trial court in favor of the defendants on all tendered issues.

A preliminary question is whether the claims of the appellant stockholders may be maintained as a spurious action under Rule 23(a) (3) of the Federal Rules of Civil Procedure, 28 U.S.C.A. The appellees challenge the propriety of the suit as such on the grounds that the claims being independent and based upon separate and distinct allegations of fraudulent representations, are not maintainable in one action.

The original complaint alleged requisite diversity of citizenship and amount in controversy and these jurisdictional elements are unchallenged. The other appellants are either parties plaintiff or interveners in one of the consolidated actions over which the court had jurisdiction. And while their claims and demands were separate, they alleged substantially the same facts and sought common relief. The court's jurisdiction of the original claim was not impaired or impeded by the subsequent interventions, irrespective of citizenship or amount claimed. Shipley v. Pittsburgh & Lake Erie Ry. Co., D.C., 70 F. Supp. 870; Dickinson v. Burnham, 2 Cir., 197 F.2d 973. The parties were multitudinous and the trial court commendably permitted them to join as plaintiffs or interveners in the several suits and consolidated the related litigation for trial and judgment as to each of the parties plaintiff or interveners. Indeed, this very situation was in the minds of the drafters when Rule 23(a) (3) was adopted. See Vol. 3, Moore's Federal Practice, p. 3448.

In a similar action by one of the Aledo Group of investors, we sustained the maintainability of the suit and thought that the plaintiff's proof standing alone showed that "Black did devise a scheme to defraud the stockholders of Black-Marshall * * * and that Ives was Black's agent in the perpetration of that scheme." Blazer v. Black, 10 Cir., 196 F.2d 139, 147. Based upon substantially the same pattern of proof, the trial court in this case made separate findings of fact with respect to the claims of specifically named appellants in which it found that in the summer of 1944 Ives falsely represented to these named appellants that the producing properties of Black-Marshall were being sold for an amount sufficient to yield the stockholders $10 per share; that the undeveloped properties of the company were being retained for development at a later propitious time; and that the stockholders should surrender fifty percent of their stock in order to bind the transaction. The court further found that in 1945 Ives falsely represented to the same appellants that the producing properties of Black-Marshall had been sold for which they should surrender the remainder of their stock for $12 per share. These representations were concededly false and undoubtedly induced the stockholders to part with their stock. The trial court further found, however, that Black did not solicit Ives to make such false representations and had no knowledge that they were being made as an inducement for the surrender of their stock. It was upon this basic finding that the trial court concluded that Ives was not Black's agent in the procurement of the stock; that Black was not therefore legally responsible for the false representations; and that he made no fraudulent representations to any of the plaintiffs and did not practice any fraud on any of them.

With respect to certain other specifically named appellants, hereafter noted and treated, the trial court found that no representations of any kind were made by any one to induce them to part with their stock.

We first consider whether Ives' false representations are legally imputable to Black, and in that regard the findings of the trial court on the disputed issues of fact are, of course, binding here; its ultimate appraisal of all the facts is entitled to great weight, and its conclusions thereon will not be disturbed unless from a consideration of the whole record we are convinced that they are clearly erroneous. United States v. United States Gypsum, 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746; United States v. Waymire, 10 Cir., 202 F.2d 550; McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6; United States v. Oregon State Medical Society, 343 U.S. 326, 72 S.Ct. 690, 96 L.Ed. 978.

The pertinent facts are that in 1938, Black, an oil promoter, went to Aledo, Illinois, where he met a well-respected lawyer named Ives. Through Ives he met some of the appellants, business and professional men and women living in and around Aledo. As a result of these contacts, Black, with Ives as his lawyer, formed the Petroleum Investment Company, a voluntary association through which Black entered into separate contracts with the investors providing in substance that Black would use the funds entrusted to him by the respective investors in exploration for oil. The contracts in identical terms provided that Black would receive one-fourth of the profits from the ventures and that he would have unlimited powers of management of the affairs of the respective ventures.

Acting through Ives as his attorney and agent, Black received approximately $21,000, most of which came from the appellants herein. These funds were unsuccessfully invested in several oil ventures in Southern Illinois. In the early part of 1939, Black left Aledo apparently for California. While en route, he was involved in an automobile accident and awoke in a Tulsa, Oklahoma, hospital to find Deering J. Marshall at his bedside. He had had previous dealings with Marshall, and while convalescing in Tulsa, he and Marshall made arrangements to acquire some oil leases in Barton County, Kansas. The first lease, known as the Esfeld, was acquired by Marshall as a farmout from the Sohio Oil Company with funds furnished by Black. A producing well was completed on the lease in the early part of July. Thereafter Black and Marshall working together acquired four other leases in Barton County, Kansas, known as the Weber, Dolechek, Hoffman and Krier. These leases were partially developed as producing properties during the latter part of 1939.

While the leases were being acquired and developed, Black commenced negotiations with the Landowners Oil Association, composed of a group of Chicago investors, looking toward the pooling of the resources of the two companies into a corporation, the stock of which would be divided between the investors in the two groups based upon the value of their respective assets. During all of these negotiations Black kept Ives advised of all developments, including the five oil and gas leases in Kansas, and on December 7, 1939 rendered a financial statement to Ives setting out the receipt of the money from the Aledo Group, its investment and results.

Pursuant to plan, the Black-Marshall Oil Company was incorporated by Ives on January 3, 1940 as an Illinois corporation with an authorized capital of 20,000 shares of...