Pure Oil Co. v. State ex rel. Johnson
| Citation | 111 P.2d 494,188 Okla. 575,1940 OK 193 |
| Decision Date | 09 April 1940 |
| Docket Number | 27316. |
| Parties | PURE OIL CO. et al. v. STATE ex rel. JOHNSON, Bank Commissioner. |
| Court | Oklahoma Supreme Court |
Rehearing Denied Dec. 17, 1940.
Application for Leave to File Second Petition for Rehearing Denied April 1, 1941.
As Corrected April 1, 1941.
Syllabus by the Court.
When the Bank Commissioner of Oklahoma takes possession of an insolvent state bank to liquidate its affairs he is authorized to compromise or settle all bad or doubtful claims in favor of or against the bank, subject to the power of the district court of the county where the bank did business to approve or disapprove; and when the Bank Commissioner petitions for the approval of a settlement of a bad or doubtful claim, and the district court approves, the order of approval has the effect of a final judgment and constitutes res adjudicata, and can be attacked upon the same grounds only that other judgments are subject to attack.
Appeal from District Court, Creek County; S. L. O'Bannon, Judge.
Action by the State of Oklahoma, on the relation of Howard C Johnson, the Bank Commissioner, against the Pure Oil Company and the Royalty Corporation of America, for the benefit of the depositors and creditors of the Sapulpa State Bank, an insolvent bank, to procure the vacation of certain orders of the district court in the matter of the liquidation of the affairs of the Sapulpa State Bank and for an accounting from the defendants for the value of certain stocks allegedly belonging to the Sapupla State Bank, and for which stocks the defendants allegedly failed to account to the Sapulpa State Bank. From an adverse judgment, the defendants appeal.
Judgment reversed, and cause remanded, with directions to render judgment for defendants.
Alvin Richards and Poe, Lundy, & Morgan, all of Tulsa, and Hayes Richardson, Shartel, Gilliland & Jordan, of Oklahoma City for plaintiffs in error.
Houston E. Hill, of Oklahoma City, Johnson & Jones, of Bristow, and Glenn O. Young, of Sapulpa, for defendant in error.
This is an appeal from the District Court of Creek County and involves the merits of an action prosecuted by the Bank Commissioner of Oklahoma for the benefit of the depositors and creditors of the Sapulpa State Bank, an insolvent bank against the Pure Oil Company, a corporation, et al.
The action was first filed by the State of Oklahoma on relation of Wm. H. Murray, Governor, but on appeal we held that the Bank Commissioner was the proper party plaintiff. See State ex rel. Murray v. Pure Oil Co., 169 Okl. 507, 37 P.2d 608.
When the matter had been remanded to the District Court the Bank Commissioner filed an amended petition and named Pure Oil Company, a corporation, Royalty Corporation of America, a corporation, John C. Ellinghausen, E. A. Ellinghausen, First National Bank of Tulsa, a corporation, and H. L. Payne as defendants.
The amended petition contained three causes of action, the first two being designed to procure the vacation of two certain orders of the District Court of Creek County case No. 18598 in the matter of the liquidation of the affairs of the insolvent bank; the third cause of action sought an accounting from the Pure Oil Company (hereinafter referred to as Pure) and the Royalties Corporation of America (hereinafter referred to as RCA) for the value of certain stocks which the Bank Commissioner contended belonged to the Sapulpa State Bank (hereinafter referred to as Bank) and for which stocks Pure and RCA allegedly failed to account to Bank.
At the conclusion of the trial plaintiff was permitted to amend his petition to conform to the proof by alleging in substance that neither Pure nor RCA had never taken steps to foreclose their purported liens but on the contrary had converted the securities referred to above to their own use.
The answers of defendant denied generally the allegations of plaintiff and relied upon the two orders of the court referred to above as constituting a defense to plaintiff's cause of action and also other defenses unnecessary to enumerate herein. A summarized statement of the evidence is hereinafter set out:
Pure owned a producing oil and gas lease. RCA owned a part of the royalty interest therein. Litigation concerning the title to the leased land arose, and Pure began to withhold payment of the royalty until the title should be settled. It intended to hold the royalties until the litigation was terminated but it did not intend to pay interest on the money so held.
W. E. Brown was president of RCA and John G. Ellinghausen was secretary and treasurer. John G. Ellinghausen was also vice-president of the Bank.
We think a fair inference of the evidence introduced warrants the statement that Bank and RCA agreed that if Bank would pay RCA 3% interest on the funds that RCA would try to make an arrangement with Pure whereby the funds would be invested in interest-bearing securities. RCA denies that they had any such agreement but does admit that they agreed upon the rate of interest to be paid.
Thereafter Bank induced Pure to part with these impounded and future royalty funds upon the following basis: Bank and its officers, as individuals, executed an indemnity bond to Pure conditioned: "*** they and each of them will save harmless *** Pure *** from and against all and every loss, cost, or damage, charge or expense *** which *** Pure *** may suffer or incur by or on account of the delivering to the said Principal, or to whomsoever the said Principal may direct, the proceeds of the oil ***." Pure agreed in return to deposit the funds covered in First National Bank, Tulsa, Oklahoma, to the credit of Bank. Bank further agreed to pledge with Pure, securities acceptable to it, of a value equal to each deposit made. In this manner Bank obtained the royalty funds, and Pure had an indemnity bond and securities to protect it against loss if it should be determined the funds accruing to the royalty interest and paid out for the benefit of RCA did not belong to RCA. As between RCA and Bank it was agreed that Bank should credit to RCA interest at the rate of 3%, and RCA should not attempt to withdraw the funds and interest credits until the litigation involving the lease was ended in favor of RCA. Contemporaneous therewith, RCA executed a transfer order directed to Pure authorizing Pure to pay the royalty funds accruing to RCA from this lease to Bank. There was no written contract embodying this three-cornered agreement, nor any substantial part of it. All of this must be gathered from such written instruments as have been referred to, and to letters, checks, and other writings passing between the parties, and from their conduct. RCA's president testified that the arrangement was made by Pure and Bank, and that his company had nothing to do with it. However, it is clear that RCA knew what was being done, participated in a part of the negotiations, executed some instrument, and made no protest if it was dissatisfied.
Pursuant to this arrangement, and from time to time beginning with March 30, 1928, Pure issued its checks, representing the royalty accrued to RCA's interest, payable to Bank and delivered these checks to First National Bank, Tulsa, Oklahoma. Each time such a deposit of money was made by Pure, the First National Bank would purchase securities acceptable to Pure in an amount substantially equal to the amount of the deposit, and hold these separately for Pure, and Pure left these securities at the First National Bank for safe-keeping. Charges were made against Bank's general deposit for the purchase. Custody receipts were issued by the First National Bank to Pure, and these securities were regarded as being completely under the control of Pure. Later, at Bank's request, duplicate custody receipts were sent to it by Pure. The making of these deposits and pledges continued for about eighteen months, and the amount of the royalty so deposited amounted to approximately $154,000, and the value of the securities pledged approximately equalled that sum.
First National Bank was a correspondent bank for Bank, and the latter maintained in the former a general deposit of assets. As promptly as the checks issued by Pure to the credit of Bank were received by First National Bank, it deposited said checks to the credit of Bank's general account. When these deposits were made, deposit slips were sent to Bank, which then set up on its records credits for a similar sum. Then Bank would enter like deposits upon its records in favor of RCA, and would send RCA deposit slips. RCA would then show upon its accounts receivable similar credits. Thus there was a regular, complete bookkeeping record on the part of all concerned of these royalty payments. No special directions were issued for the handling of these checks or the funds represented thereby, nor was any objection made to the method of handling the matter as outlined. As interest accrued on the deposits entered on the records of the Bank, it was credited to RCA in a separate account. RCA was advised of the interest credits and entered similar credits upon its records. However, Pure denied any knowledge of how the Bank and RCA handled the bookkeeping, and the evidence does not disclose any knowledge on its part.
The last deposit seems to have been made by Pure about September 21, 1929. Shortly after this the pending litigation over title to the lease was decided in favor of Pure and RCA. However, no immediate steps were taken to have Pure return the securities pledged, or to withdraw the deposit from Bank because the parties were awaiting the mandate of the court's decision in the title litigation.
About November 27, 1929, the Bank Commissioner of Oklahoma declared Bank to be insolvent, as...
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