Baucum v. Texam Oil Corporation

• Decision Date: 27 December 1967
• Docket Number: No. 5933,5933
• Citation: 423 S.W.2d 434
• Parties: Delma BAUCUM, Appellant, v. TEXAM OIL CORPORATION, Appellee. . El Paso
• Court: Texas Court of Appeals

Page 434

423 S.W.2d 434

Delma BAUCUM, Appellant, v. TEXAM OIL CORPORATION, Appellee.

No. 5933.

Court of Civil Appeals of Texas El Paso.

Dec. 27, 1967.

Rehearing Denied Jan. 24, 1968.

Finley & Scogin, Kermit, for appellant.

Boyd Laughlin, W. B. Browder, Jr., Milton L. Bankston, Midland, for appellee; Stubbeman, McRae, Sealy & Laughlin, Midland, Hill, Betts, Yamaoka, Freehill, & Longcope, New York City, of counsel.

OPINION

FRASER, Chief Justice.

This is an appeal from the granting of a temporary injunction by the trial court restraining one Delma Baucum from disposing of a number of different kinds of assets and properties. The original petition prayed for relief, an accounting, and judgment for all sums due and owing to the plaintiff, along with a lien upon any assets acquired by Baucum in derrogation of his duties to the corporation.

The plaintiff-appellee, Texam Oil Corporation, hereinafter referred to as 'Texam', is the surviving corporation of a merger between itself and Santiago Oil and Gas Company, and is a corporation active in all phases of the oil business, such as drilling and producing oil and gas, obtaining and promoting leases, etc. From 1959 through the early fall of 1966 the officers of Texam consisted of Leland Redline, President; Delma Baucum, Vice-President; and J. Kirk Cansler, Secretary-Treasurer. Each of these men served on the Board of Directors of the corporation. The duties and obligations of the three gentlemen above named were as follows. Mr. Redline was in charge of administrative duties, and, as an experienced geologist, screened or passed on the various oil deals and was responsible for locating leases, farmouts, etc., and participated with Delma Baucum in the actual planning of the drilling operations, such as matters pertaining to the type of equipment used, etc. Mr. Baucum was the production superintendent, and his duties consisted of supervising of the drilling and producing wells and the purchasing of equipment and supplies for the drilling operations and the manner and conduct of the acquisition of said equipment. Mr. Cansler, as secretary-treasurer, performed the duties of general office manager and accountant and was in charge of the invoicing and paper work relating to the acquisition of leases and lands. It is alleged that after Cansler's enployment by Santiago, the predecessor of Texam, he instructed that a 'purchase order' system be inaugurated within the company. This system provided that authorized personnel should write up a purchase order describing the equipment to be purchased and from whom, and where and how the equipment was to be utilized. A copy of this purchase order was to be tendered to the vendor who would invoice the equipment to the company upon delivery of same. Cansler would compare the purchase order with the invoice and approve same, and after approval of the invoice, checks would be issued by the company in payment for the equipment. Mr. Redline, Mr. Baucum and Mr. Cansler were the officers authorized to issue purchase orders and to sign the checks in payment of the invoices tendered pursuant to the transaction.

According to the record, in the latter part of 1960 there was a discussion between Redline, Baucum and Cansler to the effect that they could make money by purchasing equipment required by the corporation and sell it to the corporation at a higher price, which maneuver would, of course, produce profit for the three men. The record indicates that this plan or schme was agreed upon by the aforesaid three officers of the corporation, and put into effect. In order to carry out this plan, the three men put into operation an invoicing vehicle known as 'D. Webber & Co.'. It was agreed that Baucum, in conjunction with Redline, would determine the equipment required by the company, then Baucum would locate the equipment and buy it in the name of D. Webber & Co., and then issue the purchase order from Texam to Webber under the procedure outlined above. D. Webber & Co. would then invoice Texam, and Cansler would authorize purchase after matching the invoice with the purchase order, and authorize the preparation of a check by Texam in payment of the Webber invoice. The three men then, in turn, would execute the checks payable to D. Webber & Co. and forward them to it. It appears that the invoices of D. Webber & Co. were prepared by Cansler at his home pursuant to a memorandum from Baucum as to the price to be charged for the goods. Further carrying out this plan, the three men established an account with the First State Bank, Odessa, Texas, and all three men executed guarantee agreements with the bank for D. Webber & Co. It appears that neither the stockholders nor the directors of the corporations were ever informed of this operation by the three officers, Cansler testifying that it was 'implicit in the thing because of the nature of the thing' (apparently meaning that the three men thought the operation should be kept secret). It appears from the record that D . Webber & Co. did not possess any warehouse or office and never purchased any equipment or supplies except in response to a need for same by Texam. The record further reveals that D. Webber & Co. received as income from Texam Oil Corporation during the period from July 11, 1961 through September 29, 1965 the sum of $552,311.85. It is also in the record that disbursements of profits from this operation during said period of time was the sum of $181,195.00, Cansler and Baucum each receiving profit from Webber Co. in the sum of $60,365.00, and Redline receiving $60,465.00. There is testimony from a Mr. Paul Nelson, a certified public accountant, that his examination of the records of Texam revealed other unexplained disbursements, unsupported by the records and unaccounted for as to disposition.

According to the record, in 1965 the three men had a meeting in the company offices where they discussed an extensive drilling program to be conducted by Texam on the Rocker 'B' ranch in Reagan County, Texas, which would require an extensive need for drilling equipment of all types. Apparently the three men again agreed to participate in an operation similar to that of D. Webber & Co. in order to generate a personal profit to themselves, and again the three men made financial arrangements for funds in order to purchase equipment and decided that they would operate this time under the name of 'Athens Equipment Company'. According to the record, the funds deposited for this new company came from the closing out of the D. Webber & Co. account, as well as a check from Texam Oil Corporation. In this new venture it appears that Cansler and Baucum determined that they had a need for billings through companies with state sales tax numbers, and Mr. Baucum stated that he was aware of the availability of such numbers; so on February 11, 1966 the billings ceased from Athens Equipment Company and commenced to flow to Texam from the multitude of approximately 26 or more new companies, all with different names. It is alleged that Texam purchased through these new companies or vehicles merchandise in the sum of $2,055,761.01. The accountant testified that he was able to trace a profit of $24,525.50 to each of the three men from the Athens operations. This certified accountant, Mr. Nelson, further testified that he was unable to account for disbursements in the sum of $457,761.30. Texam Oil Corporation introduced voluminous records including invoices, ledger cards, checks, etc., to reflect their payment.

It seems that one of the Texam Board of Directors members, a Mr. Charles C. Green, became curious about the operations of D. Webber & Co. and the Athens Equipment Company, as well as the various other vendors, and brought these matters to the attention of Mr. Cansler. It seems that Mr. Green also became curious when he noted that the postoffice box numbers of the various vendor companies were, in many cases, the same; and upon investigation Mr. Green learned that the post-office boxes were connected with Delma Baucum. He reported this to Mr. Redline and insisted that he be allowed to send an accountant to the offices of the company to examine the records, which was done. After this examination the Board of Directors meeting was conducted in New York City, wherein Mr. Green produced voluminous material he had gathered. Thereafter, a national accounting firm was employed to review the personal records of Mr. Cansler, Mr. Redline and Texam, pertaining to the D. Webber and Athens operations. Before this Board meeting, and as a result of a conference between the three men, they decided that they would remit to Texam the 'profits' they had derived. Baucum contributed $50,000.00, and Cansler and Redline each contributed $15,000.00, to purchase a cashier's check from the First State Bank, Odessa, Texas, in the total sum of $80,300.00, which check was deposited in the Texam Oil Corporation account and credited to the Rocker 'B' leases and distributed to the joint participants in the leases in proportion to the interests they owned therein. Appellee points out in its brief that the transactions by and between Texam and the so-called vendors were well documented by Exhibits 547 through 2834.

In addition to these matters, in 1961 and 1962 the three men, Redline, Baucum and Cansler, formed a corporation called 'Maljamar, Inc.' Cansler was President; Baucum, Vice President; and Redline, Secretary-treasurer. According to the record, in addition to performing well servicing activities for Texam, this new corporation also acquired interests in oil and gas leases and developed same in Texas and New Mexico. When the corporation was dissolved, some of its equipment was sold at a profit to Texam. The assets were assigned one-third each to Redline, Baucum and Cansler. It is in the record that in addition to the oil and gas interests obtained by the officers, in competition with Texam, this operation produced income to the...