Mccray v. Sapulpa Petroleum Co.

• Decision Date: 25 September 1923
• Docket Number: Case Number: 11601,Case Number: 14084,Case Number: 11602
• Citation: 1923 OK 700,226 P. 875,102 Okla. 108
• Parties: McCRAY v. SAPULPA PETROLEUM CO. et al. SAPULPA PETROLEUM CO. v. McCRAY (two cases).
• Court: Oklahoma Supreme Court

1923 OK 700

226 P. 875

102 Okla. 108

McCRAY v. SAPULPA PETROLEUM CO. et al.

SAPULPA PETROLEUM CO. v. McCRAY (two cases).

Case Number: 14084

Case Number: 11601

Case Number: 11602

Supreme Court of Oklahoma

Decided: September 25, 1923

Syllabus

¶0 1. Corporations--Contract to Convey Property--Legal Informalities--Right to Assert -- Acts of Stockholders -- Binding Effect.

Unanimous consent and acquiescence of the stockholders of a corporation, acted on by the parties concerned to such an extent as to materially change their position, precludes the assenting stockholders as individuals and the corporation as such from afterwards setting up legal informalities in regard to the execution of a contract to convey property of the corporation; but the corporation will not be bound by the individual acts of the majority of the stockholders acting individually and without authority from the corporation where they do not own substantially all of the stock of the corporation.

2. Same -- Authority of Corporate Officer to Transfer Property to Satisfy Private Debt.

An officer of a corporation has no general authority to transfer property of a corporation in satisfaction of the officer's individual obligation, and any person entering into a contract with an officer of a corporation under such circumstances does so at his peril and must ascertain that special authority has been conferred.

3. Same -- Authority of Officer to Contract--Approval by Board of Directors.

Even though an officer of a corporation has general authority to enter into a contract for the corporation without the approval of the board of directors of the corporation, where such officer enters into such a contract with the express agreement that same is to be approved by the board of directors, it will not be binding on the corporation unless approved.

4. Same -- Estoppel of Corporation--Acts of Officers in Own Interest.

A corporation, as well as an individual, may by its acts and declarations estop its rights to deny the existence of certain facts, but the corporation is not estopped by the acts or misrepresentations of its officers where such officers are known by the other party to be acting for themselves and not for the corporation.

5. Same -- Ratification by Corporation--Requisites.

In seeking to hold a corporation liable for the acts of the officers of the corporation on the theory of ratification, it must be shown that the corporation knew of the material facts of the alleged original transaction before ratification will be implied, and where the officers of a corporation, having knowledge of the transaction, are adversely interested in the transaction, their knowledge cannot be considered knowledge of the corporation.

6. Same.

Ratification on the part of a corporation can never be made by the same persons who wrongfully assume the power to make the contract; in other words, corporate officers cannot ratify their own wrongful acts.

Error from District Court, Creek County; John L. Norman, Judge.

Action by W. S. McCray against the Sapulpa Petroleum Company and others. Judgment for plaintiff for less than asked, and he brings error. (Two appeals by the Sapulpa Petroleum Company against W. S. McCray consolidated therewith.) Affirmed.

Stuart, Sharp & Cruce and West, Sherman, Davidson & Moore, for plaintiff in error.

Carroll, O'Meara & Silverman, for defendant in error.

COCHRAN, J.

¶1 This was an action commenced by the plaintiff in error against the defendants in error for the specific performance of a contract to assign certain oil and gas leases owned by the Sapulpa Petroleum Company. The Sapulpa Petroleum Company is an Oklahoma corporation, and, prior to August, 1919, was owned by W. S. McCray, Birch C. Burnett, and Bates B. Burnett, each owning one-third of the stock in the corporation. In August, 1919, the owners of this corporation decided to incorporate the Cushing Petroleum Corporation, to have a capital stock of $ 6,000,000, all of which except 280,000 shares of common stock to be paid as the purchase price for the stock in the Sapulpa Petroleum Company, and. in pursuance of this arrangement, the Cushing Petroleum Corporation was incorporated under the laws of the state of Delaware with a capital stock of $ 6,000,000, consisting of 1,000,000 shares of common stock and 200,000 shares of preferred stock. It was agreed that a portion of the stock should be delivered to one Herd as promoter, and the remainder of the stock was to be divided equally between McCray and the two Burnetts, it being agreed that 280,000 shares of the common stock should be donated by the parties to the treasury of the Cushing Petroleum Corporation. The common stock retained by McCray and the Burnetts was to be pooled, but the preferred stock was to be delivered to the parties, McCray being entitled to one-third of the 200,000 shares of preferred stock. It was further agreed that the corporation should issue $ 600,000 of debenture notes. On September 25, 1919, McCray and the Burnetts delivered all of the stock of the Sapulpa Petroleum Company except one share retained by each of them to qualify them as directors in the Sapulpa Petroleum Company to Herd, and same was by him delivered to the Empire Trust Company to secure the debenture bonds of the Cushing Petroleum Corporation. On September 25, 1919, McCray entered into a written contract with O. S. Kelly, under the terms of which he contracted to sell to Kelly all of his stock in the Cushing Petroleum Corporation for the sum of $ 250,000, $ 25,000 of which was paid in cash and the remainder to be paid on a certain date. According to the testimony of McCray, this contract, while taken in the name of O. S. Kelly, was for the use and benefit of Herd and Bates B. Burnett and Birch C. Burnett. An extension of time was granted for the payment of the money due under the Kelly contract upon the payment of an additional $ 25,000 in cash, and at the expiration of this extension the remainder of the purchase price for the McCray stock was not paid according to the terms of the contract. McCray thereupon demanded of Herd and the Burnetts his stock in the Cushing Petroleum Corporation, but Herd and the Burnetts declined to deliver same to him. McCray contended that the contract was only an option to purchase and that the failure to comply with its terms by the payment of the balance of the purchase price terminated the contract, and that he was the owner of the stock. The Burnetts contended that the contract amounted to a sale of the stock and that they were simply due him the balance of the purchase price. After considerable negotiations between the Burnetts and McCray, McCray concluded that he could not procure an equitable adjustment of the matter and served notice on the Burnetts and Herd that he would bring suit against the Sapulpa Petroleum Company and Bates B. Burnett, Birch C. Burnett, Anderson T. Herd, Pyne and Quh, and the Cushing Petroleum Corporation for the cancellation of the contract of August 15, 1919, that being the contract under which it was agreed that the stock of the Sapulpa Petroleum Company should be delivered to the Cushing Petroleum Corporation, and that he would ask for the appointment of a temporary receiver for the Sapulpa Petroleum Company. When this notice was served, Birch C. Burnett entered into further negotiations with McCray for a settlement of the controversy between them relative to the purchase of the stock of McCray in the Cushing Petroleum Corporation, or, as contended by the Burnetts, for a settlement of the balance due to him for his stock. McCray proposed to settle the matter by accepting cash for $ 153,967.13, and to take the note of Anderson T. Herd for $ 50,000 to be secured by $ 100,000 of preferred stock of the Cushing Petroleum Corporation, and that the Cushing Petroleum Corporation should indemnify McCray in the sum of $ 11,563.93 on notes and accounts of the Sapulpa Petroleum Company which McCray had indorsed and any claims which the Cushing Petroleum Corporation, or its individual stockholders, had on certain leases in Creek county were to be released.

¶2 Birch C. Burnett advised McCray that he and Bates B. Burnett and Anderson T. Herd were unable to pay the cash mentioned in the McCray proposal, and agreed in lieu thereof to deliver to McCray two leases owned by the Sapulpa Petroleum Company, to wit, Timothy lease and Susan Cedar lease. McCray accepted this modification of the proposal and it was, agreed between Birch C. Burnett and McCray that Birch C. Burnett would communicate with the officers of the Cushing Petroleum Corporation and let McCray know what would be done. It was also agreed that the assignment of the two leases owned by the Sapulpa Petroleum Company was to be authorized by a resolution by the board of directors of the Cushing Petroleum Corporation and the board of directors of the Sapulpa Petroleum Company. This agreement was made about April 8, 1920. Birch C. Burnett then left for New York, and McCray immediately took charge of the two leases. Some days thereafter Birch C. Burnett wired McCray that the resolution had been passed by the board of directors of the Cushing Petroleum Corporation, and about April 24, 1920, mailed to McCray a copy of what purported to be a resolution adopted by the board of directors of the Cushing Petroleum Corporation. As a matter of fact, the board of directors of the Cushing Petroleum Corporation took no action in regard to this matter and the resolution had not been adopted by them. The purported resolution mailed by Birch C. Burnett to McCray did not purport to bear the signatures of the officers of the corporation or to be certified in any manner, the places for the signatures of the officers and signature to the certificate being blank. The record does not disclose that any of the other directors of the Cushing Petroleum Corporation had any knowledge of the mailing of this resolution by Birch C. Burnett to McCray. It does not appear...