Fitz-Patrick v. Commonwealth Oil Company

• Decision Date: 30 December 1960
• Docket Number: No. 18130.,18130.
• Citation: 285 F.2d 726
• Parties: Dean Louise FITZ-PATRICK, Independent Executrix of the Last Will of J. E. Fitz-Patrick, Deceased, Appellant, v. COMMONWEALTH OIL COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

285 F.2d 726 (1960)

Dean Louise FITZ-PATRICK, Independent Executrix of the Last Will of J. E. Fitz-Patrick, Deceased, Appellant, v. COMMONWEALTH OIL COMPANY, Appellee.

No. 18130.

United States Court of Appeals Fifth Circuit.

December 30, 1960.

Sterling W. Steves, Tilley, Hyder & Law, Fort Worth, Tex., for appellant.

Thad Grundy, Hutcheson, Taliaferro & Hutcheson, Houston, Tex., for Commonwealth Oil Co., appellee.

Before RIVES, JONES and WISDOM, Circuit Judges.

WISDOM, Circuit Judge.

The appellant, plaintiff below, appeals from an order of the district court dismissing the complaint for failure to state a claim upon which relief may be granted.¹ The suit is for specific performance of a contract and, in the alternative, for damages. The sole issue for decision is whether the complaint alleged the happening of a condition precedent to the existence of the contract on which the complaint is predicated. The condition was the consent of the Republic of Haiti to the plaintiff's assignment to the defendant of a petroleum concession. The motion to dismiss is not grounded on a purely technical objection to the sufficiency of the pleadings, but rests on the contention that the pleadings show affirmatively that the plaintiff never obtained the Haitian Government's consent to the assignment in question.

We reverse. We hold that the complaint states a claim upon which relief may be granted. In reaching this result, we found it necessary to take a close look at the pleadings.

According to the original complaint, the Republic of Haiti, December 1, 1950, granted a fifty-year oil and gas concession to J. E. Fitz-Patrick covering the entire Republic of Haiti. May 11, 1951, Fitz-Patrick and others organized the Commonwealth Oil Company, defendant-appellee, under the laws of Florida. Fitz-Patrick was the president and a director of the company.²

June 1, 1951, Fitz-Patrick (and others having a beneficial interest in the concession) entered into a written agreement to assign the concession to Commonwealth "not only subject to royalties to be paid to the Haitian Government * * * but also subject to further royalties totaling two and one-half per cent to be paid concurrently with the payment of Haitian royalties" to J. E. Fitz-Patrick and three holders of a beneficial interest in the concession.³ Contemporaneously with the execution of this agreement, Fitz-Patrick and his associates executed an assignment of the concession to Commonwealth, "subject to the consent of the Government of Haiti." Commonwealth agreed to "take over said concession together with all the rights, privileges and interest of Fitz-Patrick * * * to assume all of the obligations of Fitz-Patrick * * * as set up in the contract between Haiti and Fitz-Patrick * * * creating such concession". The agreement recites that Commonwealth "agrees to and does hereby accept the complete transfer and assignment to it of the Haitian petroleum concession * * * as if * * * it had been the original party granted said concession by the Haitian Government". The agreement was executed in triplicate, one copy to be forwarded to the Haitian Government with "the understanding" that Commonwealth would execute any further documents the government would require.

A dispute arose between Fitz-Patrick and Commonwealth and in March 1956 he made written demand that Commonwealth turn over to him and to his associates the royalty Commonwealth held "in trust for them * * * in Commonwealth's 50-year concession". November 13, 1957, Fitz-Patrick brought suit, alleging that the defendant held the overriding royalty of 2½% in trust for the plaintiff (and the three others); that the defendant refused to turn over the royalty to the plaintiff and instead converted the royalty to its own use.

The two amendments to the complaint clarify the relationship between Fitz-Patrick and Commonwealth and the relationship between Commonwealth and its subsidiary, Commonwealth Oil Company of Haiti.

The first amendment alleges that the contract of June 1, 1951, was authorized by a resolution of the Board of Directors of Commonwealth May 11, 1951. The resolution states that it is understood and agreed that the concession is subject to a royalty of 2½% in favor of Fitz-Patrick. The plaintiff then states that on December 14, 1951, the Government of Haiti approved the assignment to the defendant. Continuing, the "plaintiff shows that defendant subsequently incorporated itself under the Haitian laws so as to fully comply with the condition of approval by the Haitian Government". The notice of approval, addressed to Fitz-Patrick, advised him: You will be able to transfer your rights, totally or in part to whichever company you deem fit, provided that said company has been incorporated under the Haitian laws".

The first amendment spells out the theory of the complaint that the overriding royalty was held in trust under the agreement of June 1, 1951, both as a continuing covenant, in the nature of a constructive trusteeship, inuring to the benefit of Fitz-Patrick, and as a condition of the assignment of the Haitian concession by Fitz-Patrick to Commonwealth. The plaintiff alleges that the value of the royalty, belonging to the plaintiff or held in trust for the plaintiff, has fluctuated; that on March 14, 1956, the date of demand, it was worth $100,000, while at the time of the amendment to the complaint it was worth only $50,000. The amendment asks for a declaration of the plaintiff's rights.

The second amendment is designed to meet squarely the motion to dismiss. First, in general language, the plaintiff states:

"Plaintiff shows that all conditions precedent have been performed or have occurred that were required by the terms of that certain agreement dated June 1, 1951, by and between J. E. Fitz-Patrick and Commonwealth Oil Company * * * *"

Then, going into particulars, the plaintiff alleges that the defendant satisfied the condition when it "incorporated itself in Haiti by causing a wholly owned subsidiary, Commonwealth Oil Company of Haiti, S.A. as a `shell' or `hull' corporation to be organized for the express purpose of securing the consent and approval of the Government of Haiti to the assignment and transfer of the oil concession from J. E. Fitz-Patrick to the defendant." Fitz-Patrick assigned the concession to Commonwealth Oil Company of Haiti in October 1952, without reservation or exception. The resolution of defendant's Board of Directors, authorizing the organization of the subsidiary corporation, states: "Whereas, this company * * * acquired oil, mineral and petroleum concessions covering the country of Haiti * * * and whereas, the Haitian Government requires that such concessions be held in the name of a Haitian corporation rather than in the name of this company itself. Now, therefore, be it resolved that the attorneys for this corporation be and they are hereby instructed to proceed with the proper organization under the laws of Haiti of a corporation or organization which will meet with the approval of the Haitian government for the purposes of owning, controlling and carrying out the contract between the Haitian government and Mr. J. E. Fitz-Patrick and others concerning said concessions; and be it further resolved that as and when said corporation is properly organized under the laws of Haiti that such documents be prepared and properly executed as will be necessary to transfer all concession rights of this company and the individuals holding the same for this company, to said Haitian corporation, which Haitian corporation shall be what is commonly known as wholly owned subsidiary. * * *"

The second amendment contains also a...