Ill. Oil Co. v. Pender

• Citation: 1928 OK 735,277 P. 1026,137 Okla. 82
• Decision Date: 18 December 1928
• Docket Number: Case Number: 18229
• Parties: ILLINOIS OIL CO. v. PENDER et al.
• Court: Oklahoma Supreme Court

1928 OK 735

277 P. 1026

137 Okla. 82

ILLINOIS OIL CO. v. PENDER et al.

Case Number: 18229

Supreme Court of Oklahoma

Decided: December 18, 1928

Syllabus

¶0 1. Appeal and Error--Fraud--Existence of Fraud as Question for Jury.

When fraud is properly alleged upon the one hand and denied upon the other, the existence or nonexistence of such fraud becomes a question of fact for the jury to determine, under proper instructions, and upon appeal, the verdict of the jury upon such facts will not be disturbed by this court, if there is any evidence reasonably tending to support such verdict.

2. Limitation of Actions--Action Founded on Fraud.

A cause of action founded upon fraud may be brought at any time within two years after discovery of the fraud.

3. Same--question when Fraud Discovered or Could Be Discovered One of Fact.

The question as to when fraud is discovered, or could, with reasonable diligence, have been discovered, under the third subdivision of section 185, Comp. Stat. 1921, is one of fact, to be determined from the relation of the parties, the nature of the acts involved, and all the facts and circumstances of the particular case.

4. Corporations -- Presumption Against Validity of Transactions Between Corporations Conducted by Officer Acting for Both.

There is a strong presumption against the validity of transactions between corporations, where conducted entirely through the agency of officers acting at the same time for both corporations, and the burden is on those who would maintain the transactions to show their entire fairness.

5. New Trial--Language of Trial Court Held not to Indicate Disapproval of Verdict.

In overruling a motion for new trial, trial court used the following language: "I am not satisfied that the verdict of the jury is right, and I am not satisfied that the verdict of the jury is wrong." Held, the language used does not indicate disapproval of the verdict by the trial court and not sufficient ground compelling the granting of a new trial.

6. Sufficiency of Instructions.

Instructions given and refused, examined. Held, the court neither erred in the instructions given nor those refused.

Commissioners' Opinion, Division No. 2.

Error from District Court, Oklahoma County; T. G. Chambers, Judge.

Action by T. A. Pender and others against the Illinois Oil Company. Judgment for plaintiffs, and defendant appeals. Affirmed.

Arrington & Evans and Wilcox & Swank, for plaintiff in error.

Mason, Honnold & Harper, for defendants in error.

HERR, C.

¶1 This is an action by T. A. Pender and numerous others, as stockholders of the Illinois Refining Company, against the Illinois Oil Company, to recover damages because of alleged fraud growing out of transactions between these companies. The trial resulted in a verdict and judgment in favor of plaintiffs. Defendant appeals.

¶2 Both parties to this litigation are Illinois corporations having their principal offices at Rock Island, Ill. The Illinois Oil Company owned and was operating an oil refinery at Cushing, Okla., and the Illinois Refining Company was operating a refinery under a lease at Bristow, Okla. It appears that Charles E. Welch was president, director and manager of the Illinois Refining Company, and was also manager of the Illinois Oil Company's refinery at Cushing.

¶3 The gist of the action is that Charles E. Welch, as manager of the oil company, purchased large quantities of crude oil, and resold the same to the Illinois Refining Company at fraudulent and grossly excessive prices, whereby large profits were made by the said oil company at the expense of the refining company; that these transactions were conducted by Mr. Welch in behalf of both companies, and as manager for both, and that the same were by him concealed from the stockholders of the refining company.

¶4 It is contended that the board of directors of the refining company were under the control and domination of the oil company, and that such board of directors, therefore, took no action to protect the interests of the stockholders of the refining company; that, upon the discovery of the alleged fraud, the stockholders of the refining company brought this action making the refining company a party defendant. It appears, however, that, subsequent to the commencement of the action, the personnel of the board of directors of the refining company changed, and, thereafter, upon its motion, the refining company was realigned as a party plaintiff.

¶5 If the facts are as contended by plaintiffs, they were undoubtedly entitled to recover. There was no contract entered into between the two companies authorizing the Illinois Oil Company to purchase crude oil for the benefit of the refining company, but, except as to certain dealings hereinafter to be mentioned, it is conceded that certain quantities of oil were purchased by the oil company on its account, by and through its manager, Charles E. Welch, and by him resold and delivered to the refining company as, in his judgment, as manager of the said refining company, the same was needed to supply the demands of its refinery at Bristow.

¶6 Defendant contends that the evidence wholly fails to show that unconscionable profits were made by it through sales to the refining company, but, on the contrary, asserts the evidence establishes that these sales were made at cost, and that no profit whatever was made by it in these transactions. At the close of all the testimony, defendant requested a peremptory instruction in its favor, and assigns as error the denial of this motion.

¶7 The transactions complained of cover a period beginning November 6, 1921, and ending November 25, 1922. This period is divided by the parties, for convenience, into two parts, the first beginning November 6, 1921, and ending July 4, 1922, and the second beginning July 5, 1922, and ending November 25, 1922.

¶8 It is conceded by all parties that the oil furnished and delivered during the first period mentioned was oil purchased by the oil company on the open market in the Cushing field, and by it resold to the refining company. As to the transactions covering this period, we are of the opinion that the evidence wholly fails to establish fraud, and we shall, therefore, dismiss this branch of the case without further discussion.

¶9 We next consider the transactions covering the second period, that is, those from July 5, 1922, to November 25, 1922. It appears that on July 5, 1922, Mr. Welch entered into a contract with the Cosden Pipe Line Company, whereby he agreed to and did purchase from said company for future delivery 200,000 barrels of crude oil at $ 2.50 per barrel. The oil called for in this contract was delivered by the Cosden Company to the Illinois Oil Company, and 40,573 barrels thereof were delivered by said oil company to the refining company, and said refining company was charged therefor prices ranging from $ 2 to $ 2.65 per barrel.

¶10 Shortly after entering into the contract above mentioned, there was a marked decline in the market price of crude oil, and the refining company suffered a loss on the oil delivered it under the Cosden purchase in an amount in excess of $ 30,000, this amount representing the difference between the market price and the price charged the refinery by the oil company. The verdict of the jury was for the sum of $ 20,287.

¶11 It is the contention of plaintiffs that the oil company had no right to deliver and charge this oil to the refining company at a price grossly in excess of the market price, and in this manner shift a part of the loss, flowing from the Cosden contract, to the refining company.

¶12 On behalf of the defendant, it is contended that this contract was a joint contract entered into between the Cosden Company and Mr. Welch, in behalf of both the Illinois Oil Company and the Illinois Refining Company, and that the refining company should, therefore, be compelled to suffer its part of the loss.

¶13 The contention of plaintiffs is that this contract was not a joint contract, but was entered into between the Cosden Company and the Illinois Oil Company; that the refining company was not a party thereto, but after it was discovered that such contract resulted in a loss, it was then attempted to unload a part of such loss upon the refining company.

¶14 On this proposition the evidence discloses that, on July 5, 1922, Mr. Graham, manager of the Cosden Pipe Line Company, called Mr. Welch over the phone at Cushing and offered him 200,000 barrels of crude oil at the then market price; that this offer was accepted by Mr. Welch; that Mr. Graham later confirmed this telephonic conversation by a letter, which letter was addressed to the Illinois Refining Company at Cushing. To this letter, Mr. Welch, as manager of the Illinois Oil Company, replied as follows:

"In reply to your favor of July 5th, in which you confirm phone conversation, in which you agree to sell and deliver 200,000 barrels of crude oil at a gravity of 37 or better at a price of $ 2.50 per barrel, regardless of whether the market goes up or down.

"It is also agreed that we expect delivery of a minimum, of 2,500 barrels and a maximum of 4,000 barrels per day. Payments to be made on regular crude payment days, which are the 25th of the month for the oil run from the 1st to the 15th, and the 10th of the month preceding month for the oil run from the 15th to the 31st.

"In your letter of July 5th you advise the acknowledgment of your letter is sufficient contract upon which to deliver this oil.

"Thanking you very kindly for your courtesies in this matter, and trusting that our business relations will always continue in the same pleasant manner, I remain

"Yours very truly,

"Illinois Oil Company,

"Per. Chas. E. Welch, Mgr."

¶15 Mr. Graham testifies that he knew of but one company at the time he made the deal; that he was dealing with the refinery at Cushing, and that so far as he knew the oil was purchased to run through the refinery at Cushing. The run tickets show that this...