State ex rel. Derryberry v. Kerr-McGee Corp.

• Decision Date: 30 October 1973
• Docket Number: No. 45755,KERR-M,45755
• Citation: 1973 OK 132,516 P.2d 813
• Parties: STATE of Oklahoma ex rel. Larry DERRYBERRY, Attorney General of Oklahoma, Appellant, v.cGEE CORPORATION et al., Appellees.
• Court: Oklahoma Supreme Court

Page 813

516 P.2d 813

STATE of Oklahoma ex rel. Larry DERRYBERRY, Attorney General of Oklahoma, Appellant, v. KERR-McGEE CORPORATION et al., Appellees.

No. 45755.

Supreme Court of Oklahoma.

Oct. 30, 1973.

Rehearing Denied Dec. 18, 1973.

Appeal from the District Court of Oklahoma County; Carmon C. Harris, judge.

Appellant appeals judgment of the District Court which found that the Attorney General had the authority and capacity to compromise and dismiss the state court suit involving the "asphalt cases" and that lawful and adequate consideration supported the settlement agreement. Affirmed.

Larry Derryberry, atty. Gen., Odie A. Nance, Asst. Atty. Gen., for appellant.

Coleman Hayes, Oklahoma City, for appellees, Kerr-McGee Corp.

John J. Runzer, Philadelphia, Pa., John A. Ladner, Jr., Tulsa, for Sun Oil Co.

S. E. Floren, Bartlesville, Richard, B. McDermott, Tulsa, for Phillips Petroleum Co.

HODGES, Justice.

The main issue to be decided on an appeal is whether there was consideration for the dismissal with prejudice filed in the district court of Oklahoma County of the State 'asphalt price fixing case'. Appellant (Derryberry) argues that there was no consideration for the dismissal and therefore it was not within the lawful authority of the attorney general. Appellees (Oil Companies) assert that the Attorney General had lawful authority to compromise the case and that lawful and adequate consideration supported the settlement agreement. The question of actual or constructive fraud in the procurement of the dismissal with prejudice is also raised.

In October 1965, Charles Nesbitt, Attorney General, filed two actions on behalf of the State of Oklahoma seeking to recover damages against Kerr-McGee Oil Industries, Inc., Phillips Petroleum Company, D-X Sunray Oil Company (now Sun Oil Company), and other defendant companies. He asserted that the defendants had allegedly conspired to fix prices in the sale of asphalt to the State and sought to recover treble damages.

One of these actions was filed in Federal District Court to recover more than $37,000,000.00 for such alleged wrongful acts during the years 1961 to 1965, as a violation of Federal Anti-Trust statutes.

The other of the two actions was filed in the State District Court of Oklahoma County for recovery of $30,000,000.00 in treble damages asserting the same kind of conspiracy by the same three defendants, and others, during the years 1948 through 1961.

After he succeeded Nesbitt as Attorney General, G. T. Blankenship engaged private counsel as the State's Attorney in the cases, and the Federal case, was tried, while the State case, was left pending. Thereafter, on July 26, 1968, a verdict of $1,548,371.31 in actual damages was returned for the plaintiff State against the oil company defendants in the federal case. Judgmetn was entered in this case for treble that amount, or $4,612,063.93 in damages, $9,800.38 in court costs, and plaintiff's attorney's fees of $285,000.00

Some time after the defendants had filed motions for judgment notwithstanding the verdict, for a new trial, and to vacate the judgment in the federal case, the attorneys for Kerr-McGee, Phillips and Sun started negotiations for a settlement with the State of both cases, which culminated in a compromise agreement, on or about January 13, 1969. According to the undisputed testimony, this oral agreemetn contemplated that the Federal District Judge be asked to order a remittitur of $2,112,063.93 and all accrued interest on the damage judgment, and, if he did so, the State would remit the $2,112,063.93 and interest, and the judge would then enter a new judgment for (the remaining) $2,500,000.00 in damages, as well as the aforementioned plaintiff's attorney's fees and court costs.

The consent of the federal judge pertaining to this method of handling the federal court settlement was obtained, and he was fully informed of the settlement of the state case.

On January 15, 1969, the companies and the state executed a written covenant. The oil companies agreed to pay the court costs in the state case, relinquished their right to appeal the federal case, and paid the new remitted judgment in consideration for the state giving a satisfaction of the federal case and executing a covenant to dismiss the state case. The state acknowledged in the covenant that the sum paid was inf full settlement and compromise of all liability in both cases. The state also agreed to refrain from instituting, reinstating, maintaining, or prosecuting any action or proceeding growing out of the two cases which might have accrued or that was maintainable prior to January 15, 1969.

The order of remittitur and the new remitted judgment were filed on January 15, 1969. The judgemt was paid and satisfaction of judgment was filed. A dismissal with prejudice was filed in the State case.

No court costs were ever paid in this state case. It is still pending against a defendant other then the three involved here.

After Appellant succeeded Blankenship in the office of Attorney General, he obtained a letter dated September 23, 1971. from Governor Hall authorizing and directing him 'to bring an action to determine whether certain 'Dismissals With Prejudice' granted in the State case . . . should be vacated as being granted contrary to the laws of . . . Oklahoma.' On the same date, Appellant instituted the present action (No. CD--71--677) in the Oklahoma County District Court on behalf of the State as plaintiff against the oil companies. He alleged among other things:

'(1) That the State of Oklahoma received no consideration or no sufficient legal consideration, for the granting of the purported Dismissal With Prejudice;

'(2) That the attorneys then representing the State of Oklahoma were prohibited from granting, or had no legal authority to grant, the Dismissal With Prejudice;

'(3) That the actions of the attorneys representing the State constituted actual, constructive, or legal fraud because they were prohibited from granting, or had no legal authority to grant, the Dismissal With Prejudice;

'(4) That the purported Dismissal With Prejudice be vacated and set aside as being based upon actual, constructive, or legal fraud;

'(5) That the parties hereto be returned to the respective positions occupied by them prior to the filing of the purported Dismissals With Prejudice in Case No. 169,994 to determine what indebtedness obligation and liability is owing to the State by the defendants.'

After taking the case under advisement, the district judge filed a 'Decision and Judgment' on April 18, 1972, from whose caption it appears that Case No. 169,994, supra, and the new Case No. CD--71--677, supra, had been consolidated. The trial court after determining that there was no fraud, found that the issue which was dispositive of the case was whether there was consideration for the dismissal of Case No. 169,994 with prejudice. The court made the following 'conclusions of law' (among others):

'2. The agreements contained in the written covenant, to forego appeal and to pay the judgment in the United states District Court case, constituted consideration for the dismissal of the defenants in the State court case. It was not necessary, to constitute consideration to the plaintiff, that additional money be paid to the State for such dismissal. The agreement between the parties to settle all controversies then existing, was ample consideration for the settlement of the State court case. It is fundamental that detriment to one party, as well as benefit to the other, constitutes consideration. When the defendants gave up their right to appeal, and agreed to pay the judgment in the United States District Court case, the State received consideration for dismissal of the State court case.

'5. The Attorney General had the authority and capacity to compromise the suit, which is the subject matter of this judgment, and to dismiss the case. The Court adheres to the decision in National Bank of Commerce vs. State ex rel. Garison, County Attorney, (Okl.) 368 P.2d 997 (1962).'

The Appeallant has filed the present appeal from this judgment.

Appellant asserts that legal or constructive fraud existed in the agreement between the representatives of the State and the oil companies because the agreement resulted in the oil companies obtaining a dismissal with prejudice without consideration being paid therefore in violation of the provisions of Art. V. § 53 of the Oklahoma Constitution. This section provides in pertinent part:

'* * * the Legislature shall have no power to release or extinguish, or to authorize the releasing or extinguishing, in whole or in part, the indebtedness, liabilities, or obligations of any corporation or individual, to this State, or any county or other municipal corporation thereof.'

The trial court stated that 'There being no contention or evidence of fraud, misrepresentation, overreaching or dishonesty, in this case, we shall proceed to consider the legal aspects which govern the controversy.'

We have carefully examined the record, and are compelled to agree with the trial court. The evidence shows that all negotiations of the parties were conducted at arm's length in good faith over a substantial period of time. A full disclosure of all negotiations of the parties, including the stipulation that both the federal and state actions were to be disposed of, were made to the federal court in which the State and made its then challenged recovery.

Where fraud is charged, it becomes comes a question of fact, and must be proved by the party alleging the fraud. It cannot be inferred from facts which may be consistent with honesty of purpose. Davis v. Howe, 99 Okl. 118, 226 P. 316, 318 (1924). To the same extent that the court condemns a person for fraudulent conduct, it should be equally zealous in requiring proof of conduct before any condemnation. Jones v. Jones, 290 P.2d 757, 760 (Okl.1956). At law, fraud or collusion is...