Pan-American Petroleum Co. v. United States

• Decision Date: 04 January 1926
• Docket Number: No. 4651.,4651.
• Parties: PAN-AMERICAN PETROLEUM CO. et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

9 F.2d 761 (1926)

PAN-AMERICAN PETROLEUM CO. et al. v. UNITED STATES.^*

No. 4651.

Circuit Court of Appeals, Ninth Circuit.

January 4, 1926.

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Frederic R. Kellogg, of New York City, Joseph J. Cotter, of Washington, D. C., Dean Emery, of New York City, Harold Walker, of Washington, D. C., Charles Wellborn, Olin Wellborn, Jr., Henry W. O'Melveny, and Walter K. Tuller, all of Los Angeles, Cal., and Frank J. Hogan, of Washington, D. C., for appellants and cross-appellees.

Atlee Pomerene, of Cleveland, Ohio, and Owen J. Roberts, Sp. Counsel, of Philadelphia, Pa., and Samuel W. McNabb, U. S. Atty., of Los Angeles, Cal., for the United States.

Before GILBERT, HUNT, and RUDKIN, Circuit Judges.

GILBERT, Circuit Judge (after stating the facts as above).

The defendants assign error to certain of the findings of fact of the trial court, certain of the rulings of that court upon the admission of evidence, and certain of the court's conclusions of law. We find no ground for disturbing the findings of fact which we deem essential to the decision of the case, and, while the evidence may be insufficient to support certain contested findings, the disputed facts, in view of our conclusions upon the law applicable to the case, become of little importance.

Particular objection is made to the admission in evidence of statements made by Doheny before the Senate Committee. Those statements were offered in evidence after Doheny had been called as a witness for the plaintiff to testify as to the $100,000 payment to Fall by him, and had availed himself of his constitutional privilege by declining to answer on the ground that his testimony might tend to incriminate him. The offer in evidence of the statements so made before the Senate Committee was accompanied with a proffer of proof that Doheny had voluntarily appeared and made the statements before the committee. Objection was interposed, on the ground that the said statements were not shown to have been made as part of any transaction of the defendant corporations, or as part of the res gestæ of any corporate transaction, or under circumstances showing that Doheny had any express or implied authority to appear before the Senate Committee and speak for said corporations. The court held that, at the time of making the declarations, Doheny was acting within the scope of his authority as an agent of his corporations and admitted the testimony. There having been a preliminary showing before the court that the leases were negotiated by Doheny on behalf of the defendants, and as their agent and that those matters were the very matters brought for investigation before the Senate Committee, we are not convinced that the court's ruling was erroneous.

There can be no question but that the declarations of an officer or agent of a corporation, even though they consist of a narrative of past facts, may, under appropriate circumstances, be admitted in evidence against the corporation, nor does the admissibility of such declarations necessarily depend upon the length of time that has elapsed between the occurrences and the declarations, 10 R. C. L. 978. Clearly if any officer of the defendant corporations was authorized to bind them by declarations after the event, it was Doheny. As president of both companies, he had negotiated the agreements and had executed the same. The scheme to pay for tankage facilities construction and fuel oil by government royalty oil originated with him and Fall. He was the dominating figure and the administrative officer by whom the business of the corporations was conducted, and acts done by him within the scope of the corporate powers were presumably duly authorized. At the time when the declarations were made, there were pending transactions between the plaintiff and the defendants to which the declarations were pertinent, for the contracts and leases were in active operation, and their validity was being investigated by the Senate Committee. The defendants were interested in vindicating the contracts, and it was to their interest to show that the $100,000 transaction was a purely personal one, and in no way related to the procurement of the contracts. The declarations were also against the interest of the declarant, and no other means of obtaining the evidence were available to the plaintiff. Among the cases tending to support the ruling of the trial court are Chicago v. Greer, 9 Wall. 726, 19 L. Ed. 769; Xenia Bank v. Stewart, 114 U. S. 224, 5 S. Ct. 845, 29 L. Ed. 101; Fidelity & Deposit Co. v. Courtney, 186 U. S. 342, 22 S. Ct. 833, 46 L. Ed. 1193; Joslyn v. Cadillac Automobile Co., 177 F. 863, 101 C. C. A. 77; C., B. & Q. R. R. Co. v. Coleman, 18 Ill. 298, 68 Am. Dec. 544. In Rosenberger v. H. E. Wilcox M. Co., 145 Minn. 408, 177 N. W. 625, the court said:

"The fact that this transaction occurred some time after the contract of sale of the stock, and that the statement was an admission as to facts existing when the contract was made, is not decisive. An agent of a corporation, if acting within the scope of his authority, may make an admission in behalf of the corporation as to a past transaction, just as a natural person or his authorized agent may do so."

It is contended that the Act of June 4, 1920 (41 Stat. 812), conferred upon the Secretary of the Navy ample authority to enter into the exchange contracts of April and December, 1922. We cannot think that by the use of the word "exchange" in the act, which was a rider to the appropriation bill of June 4, 1920, it was the intention of Congress to bestow upon the Secretary of the Navy power to dispose of the oil products of the naval reserves in the manner in which it was done in the contracts and leases here in question. The act, after giving the secretary possession of the naval reserve lands, etc., authorized him "to conserve, develop, use, and operate the same in his discretion, directly or by contract, lease, or otherwise, and to use, store, exchange, or sell the oil and gas products thereof, and those from all royalty oil from lands within the naval reserves, for the benefit of the United States. * * * Provided further, that such sums as have been or may be turned into the Treasury of the United States from royalties on lands within the naval petroleum reserves prior to July 1, 1921, not to exceed $500,000, are hereby made available for this purpose until July 1, 1922." Section 1 (Comp. St. Ann. Supp. 1923, § 2804i).

The power to lease, following as it does the authority to conserve, was evidently to be used as a protective measure to prevent drainage of the naval reserve lands from adjacent oil drilling. The power to sell, so conferred, necessarily carried with it the legal obligation to turn into the Treasury of the United States the proceeds of sales. If anywhere in the act there is authority to justify the execution of the contracts and leases in question here, it must be found in the word "exchange." The opinion of the Judge Advocate General of the Navy was that the authority thus granted to exchange was "unrestricted," which could only mean that the Secretary of the Navy could exchange all oil in the naval reserve and all royalty oils for any purpose for which he saw fit. The defendants do not go so far as that. They assume that the authority to exchange is limited to exchanges for fuel reserve purposes. We find nothing in the act which imposes such a limitation, and we think it clear that the word "exchange" embraces either the broad authority which was found by the Judge Advocate General, or that the intention was to limit the exchange by the words of the accompanying proviso "not exceeding $500,000," and that the exchange intended was an exchange of crude oil for fuel oil for the current use of the navy; the then existing depots of fuel oil for current use having been authorized by express acts of Congress. The Act of June 4, 1920, bestows no express authority to create fuel depots. If the power to exchange be extended beyond exchange for current fuel oil or facilities for the storage of royalty oils not to exceed $500,000, there is no limit to it. There can be no middle ground. Either the intention was that the power was thus to be limited, or it was absolutely without limit, and under it the Secretary of the Navy might have exchanged crude oil for battleships or airplanes, or anything else which he deemed to be of benefit to the navy, and all this in addition to the millions contracted to be expended for the storage facilities at Pearl Harbor and the filling of the same, the total estimate for which, according to the testimony of Admiral Robison, was $103,000,000.

As early as August 31, 1842, Congress, under its constitutional authority to provide and maintain a navy, enacted that "the Secretary of the Navy may establish, in such places as he may deem necessary, suitable depots of coal, and other fuel, for the supply of steamships of war." Rev. Stat. § 1552. On March 4, 1913, 37 Stats. 898, on account of the establishment of fuel depots by the Secretary of the Navy, which had subsequently been abandoned, Congress, on the recommendation of the House Committee on Naval Affairs, "in the interest of economy," repealed section 1552, R. S., and at the same time made an appropriation for the completion of a coaling plant and oil tanks at Pearl Harbor. Thereafter annual appropriations were made for fuel oil storage at various points; the largest appropriation for that purpose being $200,000. For the year 1921 an appropriation of $1,000,000 for storing oil at Pearl Harbor was requested by the Chief of the Bureau of Yards and Docks of the Navy, but the request was denied, and no appropriation for that purpose was made for that year; nor was any made for any subsequent year, obviously for the reason that none was applied for.

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