Okla. Natural Gas Corp. v. Douglas

• Decision Date: 20 November 1934
• Docket Number: Case Number: 23208,Case Number: 23207,Case Number: 23205,Case Number: 23206
• Citation: 39 P.2d 578,170 Okla. 284,1934 OK 651
• Parties: OKLAHOMA NATURAL GAS CORPORATION v. DOUGLAS, and three other cases.
• Court: Oklahoma Supreme Court

1934 OK 651

39 P.2d 578

170 Okla. 284

OKLAHOMA NATURAL GAS CORPORATION v. DOUGLAS, and three other cases.

Case Number: 23205

Case Number: 23206

Case Number: 23207

Case Number: 23208

Supreme Court of Oklahoma

Decided: November 20, 1934

Syllabus

¶0 1. Corporations--Sale of Stock With Contemporaneous Parol Contract to Repurchase at Option of Vendee--Vendee Entitled to Recover Contract Price and not Limited to Damages Measured by Difference in Market Value of Stock.

Where stock in a corporation is sold, and a contemporaneous parol contract entered into to repurchase the stock at the option of the vendee at the same price, with interest, the vendee in electing to resell to the vendor may recover the price fixed in the contract and is not limited to damages measured by the difference between the market value of the stock at the time of the breach and the sum fixed by the contract.

2. Same--Representation by Authorized Agent That Stock Would Be Repurchased at Par Value Held Binding on Corporation.

Where a corporation maintained a par market for a certain issue of stock and represented to the public and to its agents that a purchaser of said stock might dispose of said stock to the corporation at any time, through its market so maintained, and receive par value therefor, a representation by a duly authorized agent to induce a sale of said stock, that the corporation would repurchase the stock at par value at the option of the purchaser, created a valid and binding contract enforceable against the corporation.

3. Evidence--Parol Evidence to Prove Separate Contemporaneous Parol Contract not Contradictory to Written Contract.

While parol testimony is inadmissible to change or contradict the terms of a written contract, yet a parol contract may be made between the parties contemporaneously with the execution of the written agreement, providing it is separate and independent, its terms in no way conflicting with or contradictory to the written stipulation.

4. Corporations--Purchase Price of Stock as Consideration for Contemporaneous Parol Agreement to Repurchase.

A sum of money paid for stock by a buyer is sufficient consideration for an agreement to repurchase by the seller, where the buyer seeks to enforce a parol contract entered into at the time of the sale for a repurchase thereof by the seller at the option of the buyer.

5. Frauds, Statute Of--Cash Sale of Stock on Oral Agreement to Repurchase Held not Within Statute.

A cash sale of stock with a contemporaneous oral agreement whereby the seller corporation agrees to repurchase at the buyer's option constitutes an entire and indivisible transaction sufficiently performed to take the contract out of the statute of frauds (section 9455, O. S. 1931).

6. Corporations--Corporation's Contract for Sale and Repurchase of Stock Held not Ultra Vires.

Where the duly authorized agent of a corporation, in order to induce a purchaser to buy stock in said corporation, made an oral representation that said corporation would repurchase the stock at the option of the purchaser, at the price paid therefor, and the corporation had knowledge of said agreement and accepted the benefits of the sale, in an action to enforce the contract, the plea of ultra vires is not available to said corporation.

Appeal from District Court, Okmulgee County; Mark L. Bozarth, Judge.

Action by Joe Douglas against the Oklahoma Natural Gas Corporation. Judgment for plaintiff, and defendant appeals. Similar action by M. A. Dennis, Nora B. Hopkins, and the McCracken-Mitchell Hardware Company consolidated. Affirmed.

Allen, Underwood & Canterbury and Paul Pinson, for plaintiff in error.

Bailey E. Bell and M. A. Dennis, for defendants in error.

A. M. Widdows, amicus curiae.

OSBORN, J.

¶1 This action was filed in the district court of Okmulgee county by Joe Douglas, hereinafter referred to as plaintiff, against the Oklahoma Natural Gas Corporation, hereinafter referred to as defendant, and was a suit to recover the purchase price of certain stock in the defendant corporation by virtue of certain agreements hereinafter set out. A jury was waived and the cause tried to the court, and a judgment was rendered for plaintiff, from which defendant has appealed.

¶2 Plaintiff alleges that during the month of June, 1930, he purchased of defendant 10 shares of its six and one-half per cent. preferred stock of the par value of $ 100 per share, and for which he paid $ 1,000 and was issued a certificate therefor; that at the time of the purchase of said stock the defendant, through its agent and employee, C. C. Almy, expressly agreed to repurchase the same at the same consideration paid by plaintiff therefor, less a small carrying charge. It is further alleged that defendant maintained a finance department at Tulsa, Okla., for the purpose of repurchasing stock sold by its various agents and employees; that plaintiff tendered the stock so purchased by him to defendant and requested defendant to repurchase the same pursuant to the agreement and that defendant refused to do so. The prayer of the petition was for $ 1,000, with interest at six and one-half per cent.

¶3 Prior to the date of the transaction herein involved, the defendant corporation had initiated a stock selling program to float an issue of treasury stock, and as a part of the scheme sold a great portion of the stock through its regular employees and advertised through the newspapers and radio the various advantages of its issue of six and one-half per cent. preferred "customer-ownership" stock. One of the advertisements appearing in the newspapers is as follows:

"In making your personal investments, you desire above everything else--SAFETY--; second, the ability to withdraw your principal without loss or delay; and, third, a fair rate of interest on your investment.

"The Oklahoma Natural Gas Corporation offers you all of the above desired qualities in its six and one-half per cent. customer-ownership shares. A market is maintained at par on these shares when purchased through our securities department."

¶4 In addition, a pamphlet was prepared, entitled "My Company and Your Company," and was circulated extensively among the employees. The principal purpose of the pamphlet was to instruct the employees how to sell stock, but it is admitted that a number of these pamphlets were read by the buying public. The various statements and representations contained in the pamphlet and referred to by the parties herein are as follows:

"The company is offering these shares for sale to finance important extensions and improvements that require capital. In making betterments, the company increases its revenue and the increased revenue or earnings will be an added safeguard to the investor's money. These shares are being offered at home to interest home people in the success of the company and to keep local money invested at home, which will help materially in the prosperity of the communities served by this company.

"What Will the Company Do With the Money Brought in by the Sale of Preferred Shares?

"Large sums of money are required each year for the purchase of equipment to meet the ever-growing demand for gas service. This requires the permanent investment of large sums of money which must come from the sale of securities.

"Will the Payments be Returned if Needed?

"Yes! On the easy payment plan, you may withdraw your money with interest at 6 per cent. on the accumulated payments at any time before making final payment, however, a nominal charge of $ 2 per share will be made for this service.

"In making your personal investments, you desire above everything else--SAFETY; second, the ability to withdraw your principal without loss or delay; and, third, a fair rate of interest on your investment.

"Oklahoma Natural Gas Corporation offers you all of the above-desired qualities in its 6 1/2 per cent. customer-ownership shares. A market is maintained at par on these shares when purchased through our securities department."

¶5 Plaintiff testified that he was informed by the agent of the company who sold him the stock that the investment was safe and that the company would repurchase the stock at any time he needed the money. On January 1, 1931, plaintiff received a letter signed by W. K. Cotteral, treasurer of the Oklahoma Natural Gas Corporation, in which it was stated that for the past two years the company had maintained a par value market on its 6 1/2 per cent. preferred stock, but due to the necessity of investing money in extensions and betterments of the gas service and the general decline and the depression of the market value of all stock and securities, it had become impractical to maintain the par market. The letter further stated that it was hoped that conditions would improve so that the privilege might again be put into effect. Upon receipt of the letter plaintiff made immediate demand upon defendant to repurchase his stock at par value. The demand was refused, and this suit was instituted.

¶6 It is shown that at various times prior to the receipt of the above letter the stock was selling on the market at a price considerably below par, but the defendant company continued to maintain the par market and bought and sold the stock in question at par and was enabled to secure par for its stock due to the fact that it did maintain a par market, and the plaintiff, as well as other customers, relied upon the representations made by the agents and employees of the company, as well as the fact that the company, for approximately two years, carried out the agreements entered into.

¶7 The first proposition advanced by defendant is that plaintiff's remedy is for damages for breach of contract, and that plaintiff should have sold the stock at the best price obtainable and then brought an action at law for the difference between the market price and the contract price. Plaintiff contends that this is not an equitable action for specific performance of a contract, but is an action for...