Oil Fields Corporation v. Meek

• Decision Date: 07 November 1927
• Docket Number: 298
• Citation: 299 S.W. 29,175 Ark. 318
• Parties: OIL FIELDS CORPORATION v. MEEK
• Court: Arkansas Supreme Court

299 S.W. 29

175 Ark. 318

OIL FIELDS CORPORATION v. MEEK

No. 298

Supreme Court of Arkansas

November 7, 1927

Appeal from Ouachita Chancery Court, Second Division; George M LeCroy, Chancellor; reversed.

Decree reversed and cause remanded.

Albert L. Wilson, for appellant.

H. E Meek and L. B. Smead, for appellee.

OPINION

WOOD, J.

On the 10th day of March, 1924, J. H. Meek was appointed receiver in a case pending in the chancery court of Ouachita County, in which Frank W. Lowe was plaintiff and Gordon Ingalls and others, including the Oil Fields Corporation, were defendants. J. H. Meek duly qualified as receiver by taking the oath and executing a bond as such receiver in the sum of $ 100,000, which had been fixed by the court in that sum. As a result of the litigation, the Oil Fields Corporation was adjudged to own certain properties, consisting of oil and gas leases producing oil wells, oil in storage, and equipment of the leases. As receiver, Meek was directed to take an inventory of the property and to continue the business of managing and operating the property during the litigation, and was authorized to do any and all acts to properly conduct such business under the orders and directions of the court. Among other directions was the following:

"The receiver is ordered and directed to make a report of all his acts as receiver herein, on or before the first day of each succeeding month hereafter, said report to be filed with the clerk of the Ouachita Chancery Court, where it shall remain and be in the files of said court, subject to the inspection of all parties in interest."

On the 19th day of May, 1924, the receiver filed a report, in which he had made an inventory of the assets and liabilities of the Oil Fields Corporation, and stated the total value of the property involved in the litigation to be $ 311,855.29, against which were bills and accounts payable in the sum of $ 85,934.03. In this inventory the oil storage was estimated at 190,523.66 barrels, of the value, at that date, of $ 1 per barrel, which the receiver was disposing of, the same being run through the Standard Pipe Line Company at the rate of 5,000 barrels a day. The total assets above included accounts receivable in the sum of $ 80,281.91, $ 75,000 of which the receiver reported was due from the Arkansas Pipe Line & Navigation Company, which was of remote and doubtful value, as that company was in a state of bankruptcy. Among other items the receiver reported that the McKenzie and Laney leases were producing 800 barrels of oil per day, of the value of $ 1 per barrel. The report is too voluminous to set out in detail, and it is unnecessary to do so. The above are the salient features thereof. The court approved the report, embracing the inventory of the property, on May 19, 1925.

The first monthly report embraced the operations of the receiver from March 11, 1924, to March 31, 1924. In this report the receiver stated that he expected to run from 100,000 to 125,000 barrels per month, pipe-line oil, at $ 1 per barrel, during the month of April; that the leases in his hands were making on an average from 800 to 1,000 barrels of oil per day, and he stated that he would thereafter make regular monthly reports and file the same with the clerk of the court. The receiver thereafter made reports covering his management each successive month to and including July, 1925. The last report showed receipts for the month of July in the sum of $ 41,809.99, and the report for the month of April, 1925, showed that the receipts were $ 24,569.08. The report ending July 31, 1925, included an "accumulative trial balance for the general ledger period," showing the debits and credits to be $ 404,109.61. This accumulative trial balance showed that the oil sales were $ 372,176.41, gas sales $ 647.58, and miscellaneous earnings $ 4,526.81.

On August 19, 1925, being the third day of the August term, the court entered the following order: "Now on this day comes the receiver herein, by his attorneys, and files herewith the report of the receiver in this cause, which is by the court in all things approved."

The only other report that had been approved up to this time was the report for the month of October, 1924. The report for October, 1924, showed the total oil production for that month to be 28,855.43 barrels and the total sales to be $ 17,470.82. The record shows that the receiver filed what are designated "accumulative trial balances" from the general ledger, for various periods from month to month. We have examined these statements from the receiver's report in the record. They are so confused it would require an expert accountant to determine their accuracy. The last report of the receiver, embracing the period ending December 31, 1925, and the trial balance from the general ledger ending at that time, showed the receipts to be $ 446,863.83, and a supplemental report was filed in vacation showing that, after all receipts and disbursements, the receiver had on hand at that time $ 27,456.51.

The final report is too lengthy to set forth in detail. It states that the receiver took charge of the property on March 24, 1923. Then there is a general statement to the effect that he had filed from month to month current financial statements, and a general statement to the effect that the receiver had managed the properties intrusted to his hands to the best of his ability, in a business-like manner, and that he had turned over all the property in his hands under the orders of the court to the Oil Fields Corporation. He refers to the cash on hand as shown by his report of December 31, 1925, and the remainder of the report explains in detail the various items set forth in his "accumulative trial balance from the general ledger," covering the period ending December 31, 1925, and referred to as Exhibit A, with schedules attached numbered from 1 to 10 inclusive.

The Oil Fields Corporation, on January 25, 1926, filed exceptions to the final report of the receiver. The exceptions are paragraphed and numbered from one to twelve, inclusive, the substance of which we will set forth.

No. 1 denies that the receiver took charge of the property on March 24, 1924, but alleged that he took charge on or about March 11, 1924.

No. 2 consists of general denials of the allegations of the report as to the faithful and correct manner of the management of the property, and denies that the statement or exhibit attached to the receiver's report showed the amounts of cash the receiver had on hand on December 31, 1925.

No. 3 sets up that, at the time the receiver took charge, the oil in storage amounted to fully 500,000 barrels and that the wells were producing at least 1,500 barrels per day; that these wells continued to produce during the entire period of his receivership more than 1,000 barrels per day, and that the amount of oil produced during his receivership was fully 1,130,000 barrels, whereas the receiver reported that he had received only 489,619.78 barrels. It was alleged that it was the duty of the receiver to keep an accurate daily record of the oil in storage and that produced, which the receiver had not done, and asked that such record be produced.

No. 4 alleged that the receiver had failed to return the furniture, fixtures, books and records of the Oil Fields Corporation in his possession as he had been directed to do by order of the court. It was alleged in this paragraph that, if the receiver procured an order of sale of this furniture, it was without notice to the corporation, and that each of the orders made by the court approving the action of the receiver in any manner was without a hearing and without notice to the corporation; that these orders of the court, being without notice or hearing, were obtained for the purpose of being used as a shield upon final settlement of the receiver.

No. 5 begins with general allegations that the manner of bookkeeping by the receiver was defective and therefore the books do not show the funds that were recklessly given away, belonging to the defendant, and do not show the necessary expenses incurred by him. This paragraph specifies the following items: $ 20 given away as pretended rentals due on the Telford lease for the year ending December, 1926, when the lease expired by its terms December, 1925; for stenographer and bookkeeper $ 6,387.76; J. H. Meek $ 2,750; H. C. Compton, $ 500; L. J. Wardlaw $ 500; H. C. Compton $ 500; L. J. Wardlaw $ 500; H. C. Compton $ 250; L. J. Wardlaw $ 250; Compton & Wardlaw $ 500; Compton & Wardlaw $ 2,000; Smead & Meek $ 150; Smead & Meek $ 6,000; Smead & Meek $ 2,000; Smead & Meek $ 4,000; L. B. Smead $ 1,800; all of which items and many others, it is alleged, were an improper charge against the funds in the hands of the receiver, and, if said receiver obtained an order of the court directing said payments, he did so without presenting the facts, or informing the court in the premises, and without any notice to this defendant, and the procuring of such an order from the court by said receiver was a violation of his duty and a fraud upon this defendant; that most of the items specified are for compensation for pretended legal services rendered the receiver, and this defendant alleges that said attorneys instituted or prosecuted or defended no suits of any kind whereby the estate in the hands of the receiver was benefited in any manner whatsoever. This paragraph then sets forth that the only litigation pending against the receiver for the property in the hands of the receiver was a...