Booth v. Greer Inv. Co.

• Decision Date: 17 October 1931
• Docket Number: No. 663.,663.
• Parties: BOOTH et al. v. GREER INV. CO. et al.
• Court: U.S. District Court — Northern District of Oklahoma

52 F.2d 857 (1931)

BOOTH et al. v. GREER INV. CO. et al.

No. 663.

District Court, N. D. Oklahoma.

October 17, 1931.

Moss, Breckinridge & Young, of Tulsa, Okl., for complainants.

Poe, Lunday & Morgan, of Tulsa, Okl., for Petroleum Royalties Co., of Oklahoma.

Herbert D. Mason and H. R. Williams, N. A. Gibson, and Joseph L. Hull, all of Tulsa, Okl., for Greer Inv. Co. and others.

KENNAMER, District Judge.

This action was removed to this court from the state district court of Tulsa county, Okl. The complainants seek to cancel certain transfers and conveyances made by the trustees of the Petroleum Royalties Company of Oklahoma, a trust estate, to the Petroleum Royalties Company of Oklahoma, a Delaware corporation, and for an accounting from said corporation, F. H. Greer, L. L. Greer, and J. A. Ruffer, trustees of the trust estate, the Greer Investment Company, and the Oils Properties Company; and the appointment of trustees for the trust estate.

The material facts established by the evidence may be summarized as follows:

The Petroleum Royalties Company, the trust estate, was created by written declaration of trust dated September 19, 1925; F. H. Greer, L. L. Greer, and J. A. Ruffer were designated as and became trustees of the trust estate; the declaration of trust was amended on June 25, 1926, and on June 29, 1928, the original declaration of trust and the amendments thereto were filed for record in the office of the county clerk of Tulsa county, Okl. Paragraphs 6, 7, and 8 of the trust agreement provide:

"Sixth: The Petroleum Royalties Company and its trustees as such, are hereby prohibited from engaging in any business other than the purchase and sale of oil and gas royalties. It shall have none of its funds tied up in oil wells, or in oil lease equipment or operation, or engage in any other business whatsoever, except the royalty business."

"Seventh: This trust is capitalized at Six Million shares, divided into 5,000,000 preferred shares of the par value of $1.00 each, and 1,000,000 common shares of no par value, all to be issued fully paid and non-assessable."

"Eighth: All preferred shares shall be sold by the trustees for the benefit of the trust, at such time and for such price, subject to the limitations herein provided, as shall by them be deemed most beneficial to the said trust. The common shares shall be disposed of by the trustees in their discretion for the benefit of the trust, their decision as to the value thereof and as to any disposition thereof to be final and conclusive in all respects and as to all parties whomsoever."

Paragraph 25 of the trust agreement provides the period of the trust shall be for twenty years; that the trustees may at their discretion terminate the trust hereby created by dividing the trust funds thereof among the shareholders, and, in case of a decision by the trustees to terminate the trust, all property interests owned by the trust shall be converted into money and the proceeds of sale, less actual expenses, distributed in accordance with the respective interests to the shareholders. "That should it seem judicious to the trustees so to do, they may, at their discretion, convey the trust fund and other assets to trustees of a new trust, or to a corporation, being first fully indemnified for any outstanding obligations or liabilities. In such event the new trustees, should conveyance be made to trustees, or the corporation, shall succeed to all the powers conveyed by this trust."

Paragraph 30 of the trust agreement provides: "The ownership of shares hereunder shall not entitle any shareholder to any title in or to the trust property, or right to call for a partition, division or an accounting of the same."

The Greer Investment Company was an Oklahoma corporation, organized by F. H. Greer, and its board of directors was composed of L. L. Greer, wife of F. H. Greer, J. A. Ruffer, bookkeeper, and F. H. Greer. It was provided in the trust agreement: That, in consideration of the Greer Investment Company bearing all expenses of organization of the Petroleum Royalties Company, the trust, "salaries of trustees, office rent, expenses of procuring royalties (exclusive of the purchase price thereof and the fees and expenses of attorneys, geologists or other technical advisers), traveling expenses and other individual expenses of the trustees in connection with the sale of preferred shares (but not including commission paid, if any, to brokers or agents) there shall be issued to said Greer Investment Company, or its assigns, in the discretion of the trustees, in full settlement and in exchange of services and expenditures, certificates of common shares in an amount not exceeding 250,000 shares for each year's service, or in lieu thereof a sum not exceeding ten cents (10) for each preferred share sold."

F. H. Greer caused to be sold 2,187,973 preferred shares of the trust estate, the major portion of which was sold for $1.50 per share, and approximately $2,400,000 was the net amount received on said shares of the trust estate. Many valuable properties were purchased for the trust estate. During all of the activities of the trustees from the time of the organization of the trust estate until the transfer of all of its assets and properties by the trustees to the Petroleum Royalties Company, of Oklahoma, a Delaware corporation, about January 1, 1931, F. H. Greer and L. L. Greer, trustees of said trust estate, individually and personally engaged in the royalty business.

In the month of September, 1930, F. H. Greer, being desirous of retiring from the royalty business, approached J. Edward Jones, president of the Consolidated American Royalty Corporation, a Delaware corporation, on the subject of purchasing the interest and control of the trust estate; Jones declined to consider the purchase of the control of a trust estate until after such estate had been converted into corporate ownership. Thereafter, about January 1, 1931, F. H. Greer caused to be organized under the laws of Delaware the Petroleum Royalties Company, of Oklahoma, and immediately transferred and conveyed all of the royalty interest, property, and assets of the trust estate to said corporation. The conveyance was made without consultation with the shareholders of the trust estate, and the first notice the shareholders had of the transfer and conveyance of the properties of the trust estate to the corporation was in the form of a letter sent out by F. H. Greer to such shareholders advising them that he had converted the trust estate into a corporation, and they could exchange their shares of stock in the trust estate for an equal number of preferred shares of stock in the corporation. Subsequent to the transfer of the assets of the trust estate to the Petroleum Royalties Company of Oklahoma, F. H. Greer caused to be issued to him and his associates all of the common shares of stock of the Petroleum Royalties Company, of Oklahoma, and sold said shares of stock for a consideration of $250,000 to the Consolidated American Royalty Corporation, of Delaware, of which corporation, J. Edward Jones was the president and active managing officer.

Many of the complainants herein exchanged their shares of stock in the trust estate for shares in the corporation, relying upon the representation that their rights would be the same in the corporation as in the trust estate. They seek to have the property restored to...