Johnson v. Tri-Union Oil & Gas Co.
| Decision Date | 26 May 1939 |
| Court | United States State Supreme Court — District of Kentucky |
| Parties | Johnson v. Tri-Union Oil & Gas Co. Same v. Harris-Spencer Drilling Co. |
2. Mines and Minerals. — Evidence that president of company, conducting oil drilling operation, had burden of financing company during early days of its corporate existence, and that president indorsed company's notes, made numerous business trips on behalf of company, aided in making purchases for company and in selling oil, rendered legal services, and attended to making of tax reports and payment of taxes, showed that he performed duties outside of scope of his office for which he was entitled to $700, which was compensation at rate of $100 per annum.
3. Appeal and Error. — In action by company, consisting of only three stockholders, against its president for money allegedly wrongfully appropriated, wherein president filed cross-petition, on behalf of company, on claims against other stockholders for corporate funds paid to them, granting cross-appeal of one of stockholders against company was error, where only appeal taken was by president, individually.
4. Appeal and Error. — A cross-appeal can only be taken against an appellant.
5. Mines and Minerals. — In action by company which was conducting oil drilling operation and which consisted of only three stockholders against its president for money allegedly wrongfully appropriated, wherein president filed cross-petition, on behalf of company, on claims against other stockholders of company, one of stockholders who acted as lease manager for company would not be charged with board furnished by company during such time, where it was determined that board was part of compensation for services rendered to company.
6. Appeal and Error. — In action by company which was conducting oil drilling operation and which consisted of only three stockholders against its president for money allegedly wrongfully appropriated, wherein president filed cross-petition, on behalf of company, on claims against other stockholders for corporate funds paid to them, a finding that one of stockholders who served as lease manager of company was not liable for board furnished by company would not be disturbed on appeal, where no appeal was prosecuted by company.
7. Partnership. — In absence of express contract or facts creating contract by implication, a partner cannot recover salary or compensation, even though he had control of business and performed major portion of work.
8. Partnership. — Claim of one of partners against partnership for services rendered was denied, where proof failed to show express agreement that he was to receive any salary, or circumstances creating implication that such understanding existed.
9. Partnership. — Claim of one of partners against partnership for balance owing to him for money advanced to partnership prior to its incorporation was denied, on theory that incorporation and transfer of all partnership assets to corporation and issuance of capital stock to each of partners in equal shares operated as a dissolution and settlement of partnership affairs, where no claim was made by any of partners for period of more than seven years.
10. Appeal and Error. — In action by company which was engaged in conducting oil drilling operation and which consisted of only three stockholders against its president for money allegedly wrongfully appropriated, where president filed counterclaim for money advanced to one of other stockholders on behalf of company, after his claim in separate action against company had been denied, and both actions were consolidated on appeal, judgment denying president's claim in separate action was affirmed, and he was allowed credit for amount of his claim on judgment for allegedly wrongfully appropriating money of company.
11. Appeal and Error. — Whether judgment of trial court, in suit by company against its president for money allegedly wrongfully appropriated, was erroneous, in that it awarded lien to corporation against capital stock of president and directed sale to satisfy judgment, was moot and not required to be decided by the Court of Appeals, where purchaser at sale assigned purchase to president who executed purchase-money bond, and then superseded judgment, executing supersedeas bond with same surety who signed purchase-money bond, since, if sale was valid, president and surety would be liable on purchase-money bond, and, if sale was void, they would be liable for judgment on supersedeas bond.
Appeal from Breathitt Circuit Court.
E.C. O'REAR, ALLEN PREWITT, E.C. HYDEN and R.C. BACK for appellant.
M.C. REDWINE, WILLIAMS & ALLEN and A.H. PATTON for appellees.
Before J. Brack Howard, Judge.
Affirming in part and reversing in part.
Three appeals involving correlated questions were, pursuant to motion made in this court, heard together and are covered by this opinion.
Sometime prior to the year 1929, H.H. Spencer and C.E. Harris were engaged as a partnership under the name of Harris-Spencer Drilling and Producing Company, conducting drilling operations on leases in Lee County. The partnership, being in severe financial straits about the first of the year 1929, induced appellant A.S. Johnson to become a member of the partnership, and a new firm was formed styled Harris-Spencer Drilling Company. A written contract was entered into by which Johnson was to furnish $1500 to the partnership, this being the purchase price of his interest therein, and it was provided in this contract that should he furnish more than $1500, he was to have a lien on the interests of Harris and Spencer in the leases to secure him in such advancements.
The new partnership functioned until June 4, 1929, at which time the enterprise was incorporated under the name of Tri-Union Oil and Gas Company and the partnership conveyed to the corporation all of the partnership assets. The three partners subscribed to all the stock of the corporation, $5,000 in stock being issued to each of them; Johnson was elected president, Harris vice-president, and Spencer secretary-treasurer. Practically nothing in the way of corporate records was kept and, from the time of incorporation up to the institution of this litigation, the stockholders continued to operate it in the same manner as the partnership had been operated.
It appears that by mutual agreement of the directors, Spencer was designated as lease manager and placed in charge of operations. He continued in this position until the institution of this litigation. Harris also was employed verbally as a pumper and helper on the lease and worked as such for one year immediately after the formation of the corporation.
The First National Bank of Jackson was designated as trustee and depository for all funds of the company derived from the sale of oil, and all corporate money was deposited in that bank. A.S. Johnson, president, was authorized to sign checks on behalf of the company. No corporate books or records were kept, although Johnson appears to have kept a personal record of his own as to advances made to the company and to Harris and Spencer for the company by him. The company drilled some 12 or 14 wells and by the year 1936 had received approximately $34,000 from the sale of oil. There is no corporate record authorizing the payment of any dividends.
In June, 1936, action was instituted by the company against A.S. Johnson, president, to recover money which it was alleged was wrongfully appropriated by Johnson to his own use and benefit. In this action Johnson was permitted to prosecute by cross-petition, on behalf of the corporation, claims of the corporation against Spencer and Harris for corporate funds paid to them. Johnson attempted in this action to prosecute individual claims against Harris and Spencer and against the partnership, Harris-Spencer Drilling Company. The trial court, however, refused to permit him to prosecute these individual claims and he thereupon instituted the suits of A.S. Johnson v. Harris-Spencer Drilling Company and A.S. Johnson v. H.H. Spencer and the Tri-Union Oil and Gas Company, these three cases being the ones involved in these appeals.
An audit was made of the company's affairs by W. E. Davis, who examined the bank account of the corporation and listed all deposits made and all checks issued. His work appears to have been most excellently and fairly performed and, although there is a vast amount of evidence with reference to the financial transactions of the corporation and the individual stockholders, there is little or no attack made on the correctness of any of the items contained in Mr. Davis' audit, the real controversy in the case being as to the correct method of handling these items and the application of legal principles to the facts.
The trial court referred each of the three cases to Moss...
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