Fourth Nat. Bank & Trust Co., Wichita v. Mobil Oil Corp.

• Decision Date: 15 July 1978
• Docket Number: No. 48724,48724
• Parties: The FOURTH NATIONAL BANK AND TRUST COMPANY, WICHITA, Appellee, v. MOBIL OIL CORPORATION, Appellant.
• Court: Kansas Supreme Court

Page 236

582 P.2d 236

224 Kan. 347

The FOURTH NATIONAL BANK AND TRUST COMPANY, WICHITA, Appellee, v. MOBIL OIL CORPORATION, Appellant.

No. 48724.

Supreme Court of Kansas.

July 15, 1978.

Syllabus by the Court

1. When a case is submitted to the trial court on an agreed stipulation of facts and documentary evidence, this court is afforded the same opportunity to consider the evidence as the trial court.

2. Where the controlling facts are based upon written or documentary evidence by way of pleadings, admissions, depositions and stipulations, the trial court has no peculiar opportunity to evaluate the credibility of witnesses. In such situation, this court on appellate review has as good an opportunity to examine and consider the evidence as did the court below, and to determine De novo what the facts establish. (Following American States Ins. Co. v. Hartford Accident & Indemnity Co., 218 Kan. 563, 572, 545 P.2d 399 (1976).)

3. It is not the function of the courts to make contracts but to enforce them. The duty of courts is to sustain the legality of contracts when fairly entered into, and if reasonably possible to do so, rather than seek loopholes and technical legal grounds for defeating their intended purpose.

4. Where the terms of a contract providing for the sale of stock are plain, unambiguous and lead to no absurd result, they must control, and they are not affected by previous negotiations nor subsequent conduct of the parties.

5. When parties to a contract for the purchase of stock have specified the type of announcement or notice to be given, that provision will be enforced as written whether it results in actual notice or not.

6. A communicated offer creates a power to accept the offer that is made, and only that offer. Any expression of assent that changes the terms of the offer in any material respect may be operative as a counter-offer, but it is not an acceptance and constitutes no contract. Unless the original offeror subsequently expresses unconditional assent to the counter-offer, there will never be a contract. (Following Steele v. Harrison, 220 Kan. 422, 428, 552 P.2d 957 (1976).)

7. In a contract for the tender and purchase of corporate stock, which requires one party to give a "public announcement" to the other party, the press release given in the instant case under the factual conditions set forth in the opinion constituted the required public announcement.

Robert J. Roth, of Hershberger, Patterson, Jones & Roth, Wichita, argued the cause and Louis Hering, of Mobil Oil Corp., New York City, and Richard Jones, of Hershberger, Patterson, Jones & Roth, Wichita, were with him on the brief for appellant.

Jerry G. Elliott, of Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause and James M. Armstrong, Wichita, of the same firm, was with him on the brief for appellee.

HOLMES, Justice:

This was an action by The Fourth National Bank and Trust Company, Wichita (the Fourth), appellee, against Mobil Oil Corporation (Mobil), defendant-appellant, for damages based upon Mobil's refusal to purchase certain shares of stock of Marcor, Inc. (Marcor), pursuant to a written tender offer made by Mobil. The case was submitted on an agreed stipulation of facts and the Fourth was granted judgment for $64,991.43. Mobil appeals.

We will attempt to condense the facts from those submitted by the lengthy stipulation in the trial court.

On or about August 12, 1974, Mobil made a written offer to all of the shareholders of Marcor to purchase shares of preferred and common stock issued by Marcor. Mobil offered to acquire only so much of the outstanding stock as would give it control of Marcor. Paragraph 1(a) of the offer informed the shareholders of Marcor that Mobil would purchase 17,250,000 outstanding shares if that many were tendered by 5:00 p. m., August 23, 1974. Paragraph 1(b) stated that if more than 17,250,000 shares were tendered Mobil would buy at least 17,250,000 shares. It also provided that if more than 17,250,000 shares were tendered and Mobil decided not to buy the excess then Mobil would buy the 17,250,000 shares on a pro rata basis.

The offer prescribed two procedures for tendering shares. Any shareholder could tender his shares directly to the depositary, Continental Illinois National Bank and Trust Company of Chicago (Continental), by executing and transmitting a letter of transmittal, in a form designated by Mobil, together with the stock certificates. The letters and certificates had to be received by Continental by 5:00 p. m., August 23, 1974.

The second procedure for tendering certificates, and the one here involved, allowed the submission of a tender without the concurrent deposit of stock certificates. This method permitted the tender of shares through certain financial institutions, such as brokerage firms, commercial banks and trust companies. As in the direct tender procedure, a duly executed letter of transmittal had to be received by Continental by 5:00 p. m., August 23, 1974. The only difference was that the certificates were not transmitted or delivered with the letter of transmittal but, instead, the bank or other institution was required to execute the guarantee of delivery contained in the letter of transmittal. The certificates could be subsequently deposited or delivered pursuant to the following provision contained in the offer:

"Payment (by Mobil) for Shares so tendered and purchased will be made only against the deposit with the Depositary of the certificates and any other documents required by the Letter of Transmittal No later than eight business days after public announcement by Mobil that a specified number of Shares will be purchased under this Offer if all of the terms and conditions of this Offer are satisfied." (Emphasis added)

The guarantee portion of the letter of transmittal provided:

"We . . . a commercial bank . . . guarantee to deliver to the Depositary certificates for the shares of Common Stock tendered by this Letter of Transmittal in proper form for transfer within Eight business days after public announcement by Mobil that a specified number of shares of common stock will be purchased by Mobil if all the terms and conditions of the Offer are satisfied." (Emphasis added)

Regardless of which method was used the institution would receive a commission from Mobil of 55cents per share for all shares purchased.

The Fourth did directly and properly submit certificates representing 1,134 shares of Marcor stock. These shares belonged to five trusts and one estate administered by the Fourth. In those instances the Fourth did not retain custody of the certificates but forwarded them to Continental with the letters of transmittal prior to the expiration date. Mobil did buy a pro rata number of these shares pursuant to the terms of the offer and those purchases are not involved in this appeal.

Two customers of the Fourth delivered stock certificates to it for the purpose of tendering their shares to Continental. 6,062 shares of Marcor common stock were to be tendered. Both shareholders properly executed letters of transmittal. The Fourth then executed the guarantees and forwarded the letters of transmittal without the certificates to Continental prior to the August 23, 1974, expiration date. It is these certificates which the Fourth subsequently failed to deliver to Continental and which form the basis of this action.

Mobil contends the Fourth did not deposit the certificates within time to be accepted by Mobil. By forwarding the letters of transmittal, without also forwarding or depositing the certificates at the same time, the Fourth guaranteed to Mobil that 6,062 shares would be deposited within eight business days after "public announcement by Mobil that a specified number of shares" would be purchased.

Mobil's offer was oversubscribed by Marcor shareholders. On August 26, 1974, Mobil issued the following press release:

"MOBIL TENDER OFFER FOR MARCOR OVERSUBSCRIBED

"Mobil Oil Corporation announced today that its offer to purchase shares of common stock and convertible cumulative preferred stock, Series A, of Marcor, Inc. had been oversubscribed and will not be extended.

"A preliminary count shows that as of 5:00 P.M. E.D.T. on Aug. 23, 1974, approximately 24.6 million shares of common stock and approximately 4.3 million shares of preferred stock had been tendered. The majority of these tenders is still in the process of review to confirm their compliance with technical requirements.

"Subject to the terms and conditions of the offer, Mobil will purchase a total of 17,250,000 shares, counting each share of common stock as one share and each share of preferred stock as two shares. Based on the preliminary count, approximately 52 percent of the tendered shares will be purchased on a pro-rata basis if the terms and conditions of the offer are met.

"Institutions that have guaranteed delivery of certificates for shares must deliver all guaranteed shares to the depositary, Continental Illinois National Bank and Trust Company of Chicago, on or before Sept. 6, 1974. Certificates representing the balance of the tendered shares, including those guaranteed, will be returned as soon as practicable after Sept. 6, 1974."

Mobil contends that this press release, and its subsequent dissemination and publication constituted the "public announcement" contemplated by paragraph 4 of the offer and by the letter of transmittal.

The Mobil announcement of August 26, 1974, was delivered to the news media, including the Dow Jones Wire Service; Reuter's Wire Service; P. R. News Wire; Associated Press; United Press International; The Wall Street Journal; Platt's Oil Gram; The Oil and Gas Journal; Petroleum Intelligence Weekly; and to various special industry publications, such as The American Banker, Standard & Poor's, and Moody's Industrial.

The press release was carried in full on the Dow Jones Broad Tape, which reaches virtually every brokerage office...