In re DeSoto Crude Oil Purchasing Corporation

• Decision Date: 01 October 1940
• Docket Number: No. 6281.,6281.
• Parties: In re DeSOTO CRUDE OIL PURCHASING CORPORATION.
• Court: U.S. District Court — Western District of Louisiana

35 F. Supp. 1

In re DeSOTO CRUDE OIL PURCHASING CORPORATION.

No. 6281.

District Court, W. D. Louisiana.

October 1, 1940.

G. C. Parker and Robert B. Keenan, both of Longview, Tex., and Lamont Seals, of Homer, La., for movants.

Philip H. Mecom, of Shreveport, La., for trustee Harry E. Harper.

Leon O'Quin and Blanchard, Goldstein, Walker & O'Quin, all of Shreveport, La., for DeSoto Crude Oil Purchasing Corp., bankrupt.

J. M. Grimmet, of Shreveport, La., referee.

PORTERIE, District Judge.

The petition was one in voluntary bankruptcy, filed on July 2, 1940; adjudication in bankruptcy was on July 3; trustee was elected on July 20, at first meeting of creditors. Motion to dismiss was filed on August 10, alleging the want of jurisdiction of this district court, based mainly on the ground that the principal place of business of the bankrupt was in the eastern district of Texas. Hearing was had on the motion before a special master (the Referee for the District) on August 30; on this same day, August 30, previous election of trustee was ratified by creditors; recommendation of the special master was filed on September 7; movants excepted to the report, and appealed; hearing on the motion to dismiss was had before the district court on September 19, 1940. The court is now to rule on the motion to dismiss.

After reading the record of the evidence in this case, the court finds that the statement of facts as made by the special master is correct. Summarizing and condensing: The bankrupt is a Delaware corporation. Its by-laws provide that it may have offices in Shreveport, Louisiana, and Overton, Texas, and such other places as the board of directors may appoint or the business of the corporation require. Its business was the purchase and sale of crude oil. The corporation established offices at Shreveport and the board of directors held meetings in these offices, in the First National Bank Building. All of the officers and employees who managed and conducted the business of the corporation were housed in the offices in the First National Bank Building, where all business transactions were had. All books, records, division orders, contracts, documents and papers relating to the business were kept in the Shreveport office. The business of purchasing and selling crude oil was, with very few exceptions, carried on at Shreveport, and was usually passed on by Mr. J. E. Marshall, the vice-president. All banking business was with the First National Bank of Shreveport, from which bank, by check, all bills and obligations were paid. Even at moment of bankruptcy, there was cash in bank in the amount of over $10,000. A petty cash fund, never exceeding $250, was kept for the convenience of the field office, at Overton. All material and supplies were purchased through the office at Sheveport, where the purchasing agent of the company was located; the exception being that in an emergency some material might be bought elsewhere, in which event the purchase was later approved by the purchasing agent.

Property owned by the corporation and situated in Louisiana consisted of the office furniture and fixtures, records, and cash in bank. Property owned in East Texas consisted of pipe line, rights of way over which the pipe line was run, connections necessary to producers' tanks, pump stations, and buildings to house them, storage tanks, a small field office at Overton, some furniture and fixtures, an automobile, a dwelling house and a small apartment.

The pipe line, approximately fifty-six miles in length, was situated in Rusk and Smith Counties, Texas. The oil which was purchased by this corporation was produced from wells located in Rusk and Smith Counties and was transported through this line to the purchaser. The ownership of the oil was vested in persons domiciled in Texas, Oklahoma, Florida, New York, Maine, New Mexico — in fact, in twenty-four states and in Cuba and Canada.

There was a field office at Overton, Texas, used for the convenience of contacting and reporting to the Federal Tender Board and the Railroad Commission of Texas, and in communicating with the office in Shreveport. Most of the time there was a superintendent in charge, whose duty it was to see that the men were on the job, that the station was run properly and that the equipment was taken care of, and, in general, whose duty it was to take care of the mechanics of the operation of the pipe line, under the direction of the Shreveport office. No one located in the field office at Overton was authorized to buy or sell oil. This was done solely in the office at Shreveport. For some time prior to bankruptcy, there was no superintendent at the Overton office.

The principal purchaser of the crude oil was the Hurricane Petroleum Corporation, operating a refinery at Overton. At intervals oil was sold to others, but at the time of bankruptcy, the Hurricane Petroleum Corporation was purchasing all the oil. The Hurricane Petroleum Corporation is one of five companion companies operated out of the same office at Shreveport and under the same management as the DeSoto Crude Oil Purchasing Corporation.

Counsel for mover depends heavily upon the case of Dryden et al. v. Ranger Refining & Pipe Line Company et al., 5 Cir., 280 F. 257. We quote from the syllabus of the decision: "A Delaware corporation had its general office in Kansas City, Mo., where its general books and records, except its stock records, were kept. Its business was the producing and refining of petroleum and sale of its products. It also owned tank cars, which it used and sometimes leased, pipe lines, etc. It owned one refinery, and seven filling stations on leased ground in Kansas City, and some small wells in Kansas; but the greater part of its property and the chief seat of its production and sales were at Ranger, Tex., where it owned and operated wells, two refineries, loading racks, pipe and water lines, and where its bills were paid and most of its sales were made, though larger contracts were submitted for approval to the Kansas City office. Its gross revenue from its business there, exclusive of the production of its Texas wells, was 4½ times as great as that received in Missouri. Held, that its principal place of business, within the meaning of Bankruptcy Act, § 2(1), being Comp.St. § 9586 (1), 11 U.S.C.A. § 11(1) was in Texas, and that the court in that district had jurisdiction of proceedings in bankruptcy against it."

We believe the special master well says: "* * * Inanimate things such as oil, pipe lines, tanks, pumps, etc., may be the objects of commerce and of business, but they do not within themselves carry on business. Inanimate things cannot create a business. Therefore, the facts of this case clearly show that all business of the bankrupt corporation was transacted at the office at Shreveport, Louisiana, and that the oil produced (not by this bankrupt, however) in the eastern district of Texas, and the pipe lines through which it was transported to a market, were merely the objects of commerce, carried on by the animate beings located in the Shreveport office. The record discloses that the oil produced in east Texas and purchased by the bankrupt corporation was owned by persons in twenty-four states and two foreign countries. In the Ranger case, business was actually carried on at a particular place; that is, Ranger, Texas. No such condition prevails in the present case."

The main factual difference between the instant case and the Dryden case is that in this case the bankrupt corporation owned no wells, did not engage at all in the production of oil, owned no refinery to process the oil; contra in the Dryden case. The bankrupt in this case was only an oil factor. It was engaged in the purchase of crude oil on top of the ground for the purpose of resale of the same unprocessed crude oil to some purchaser, generally a refiner. The pipe line was used by the bankrupt to effectuate the factoring in crude oil. Factoring in crude oil was the sole and, consequently, the principal business of this bankrupt. The purchases and the sales were altogether made in the city of Shreveport in this district.

In the Dryden case, the drilling of wells, their subsequent operation in case of oil found, and the refining of the crude oil, followed by sales of the refined products, were all accomplished at Ranger, Texas, the very situs of the wells and the refineries and the location of the main offices. A large force was maintained at Ranger, Texas, a great part of which was engaged in the extensive manual labor involved, but also a substantial part of the local force was engaged in the mental effort necessary to sale and distribution. Nothing of the sort existed in the instant case.

Therefore, this fundamental difference of facts in the two cases brings a diametrically opposite legal conclusion. The special master so ruled, and we must approve.

To repeat: It is shown by the undisputed testimony in the record that the bankrupt DeSoto Crude Oil Purchasing Corporation was a factor or dealer in but one commodity, crude oil. Its very name implies that it was a crude oil purchasing corporation. It did not produce or mine from the ground any crude oil, but made purchases from owners of wells, who captured fugitive oil in the earth and brought it forth as a salable commodity. The bankrupt was not a common carrier, transported no crude oil or other product through its pipe line for hire, and published no rates for transporting crude oil or any other mineral for the public. The only use made by the bankrupt of its pipe line was in transporting its own crude oil, after buying it, from the tanks of the producer and seller to the refinery or storage tanks of the processor and buyer. The bankrupt did not process any crude oil. The market for its product was usually a refinery or refineries, situated at Overton, and the only use made of the pipe line it owned and operated was in the delivery of its purchases.

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