White v. Thwing
| Decision Date | 20 November 1923 |
| Docket Number | No. 22482.,22482. |
| Citation | 300 Mo. 680,256 S.W. 216 |
| Parties | WHITE et al. v. THWING et al. |
| Court | Missouri Supreme Court |
Appeal from Circuit Court, Jackson County; Clarence A. Burney, Judge.
Action by James H. White and another against F. H. Thwing and others, in which the defendants filed a cross-bill. Judgment for defendants, and plaintiffs appeal. Affirmed.
I. J. Ringolsky, M. L. Friedman, Wm. G. Boatright, Ringolsky & Friedman, and Frank M. Lowe, all of Kansas City, for appellants.
R. R. Brewster and Edward Ellison, both of Kansas City, and Strop & Mayer, of St. Joseph, for respondent F. H. Thwing.
McCune, Caldwell & Downing, of Kansas City, for respondents D. T. Riley and J. T. Riley.
JAMES T. BLAIR,
Appellants brought this suit to secure the cancellation of a note and certain assignments of a lease and a deed of trust thereon given to secure the note. The grounds set up are that the execution of the several instruments was induced by fraudulent representations. Respondents filed a cross-bill praying judgment on the note and for foreclosure. The trial court rendered judgment as prayed in the cross-bill, and this appeal followed. Appellants contend the judgment must be reversed for several reasons, one of which is that the finding is wrong on the facts. This will require some details of the evidence, which covers many hundreds of pages.
The note in question was given for the price of 22,000 shares of Union Oil Company stock which appellant James H. White purchased. The petition alleges that to induce White to purchase the stock respondent Thwing falsely represented to him that (1) the capital stack of the Union Oil Company in the sum of $1,500,000 was fully paid and nonassessable; (2) the "whole of the capital stock was paid up in full in good faith with cash and property actually worth the amount of the capital of" the company; (3) "the company was not indebted in any sum except small monthly obligations for work, labor, and supplies," and "could pay all its debts on demand"; (4) the company "then had a daily production of oil from its wells of over 1,800 barrels per day, * * * then being sold at the prevailing market price"; (5) "well No. 18, on Denny lease, was in a lake of oil 37 feet deep, and didn't know how wide it was but knew it was large;" (6) "said Union Oil Company was then the owner of leases to 80,000 acres of good oil and gas producing land in Kansas." It is then alleged that White knew nothing of the condition of the company, and relied upon Thwing's representations, and bought the stock and gave the notes and security on the faith of them; that all representations were false. It is also alleged that Thwing was engaged with others in a stock jobbing business "principally for the purpose of defrauding people in Kansas City, including" appellants. The petition alleges in detail the facts and circumstances asserted to have accompanied the execution of the note in suit and one for a less sum Previously executed. Further reference to the petition may become necessary in another connection.
White is a man of intelligence and energy and of wide experience and pronounced success in the business world. He had lived in Kansas City 37 years, and was about 55 years of age at the time of the transactions in question. .He was first in the furnishing goods business and later organized the Baltimore Shirt Company, which operates three stores in Kansas City. He has bought and sold stores. He established one man in the wall paper business and was interested in a shoe business at one time. He dealt extensively and successfully in real estate. He helped promote and build and is part owner of the Elms Hotel, at Excelsior Springs. He owns the Washington Hotel, the White Hotel, and a half interest in the Dreyfoos Hotel, in Kansas City, all large and valuable properties. His interest in the last of the last three is worth $100,000. He owns other real estate. He took a little flyer in the Joplin zinc district at one time, and once assisted in promoting a life insurance company in Kansas and became half owner of it. He says he owns property worth about a quarter of a million dollars in addition to his interest in the Baltimore Shirt Company. In his list are 2,925 acres of Texas land, acquired in 1010, which he has taken off the market because there is some indication of oil. In the fall of 1917 White and King, one of his witnesses, organized the Towanda-El Dorado Oil Company. They first bought a lease on 320 acres of land in Butler county, Kan., for $50,000. Each put up $5,000 in cash, and the balance they borrowed on their note. They also agreed to pay $20,000 additional for the lease, in oil, if oil was struck. Their next step was to sell one-half interest in the lease to a Denver group for $80,000, and then the two interests joined and formed the company named, and put in the 320-acre lease in full payment of the capital stock of $1,000,000. This was in October or November, 1917. The 320-acre lease thus capitalized adjoined one of the leases of the Union Oil Company, the Sargeant lease, and is about two miles from the Denny lease of the Union Oil Company, which plays an important part in this case. White visited the 320-acre lease in 1917.
The Union Oil Company was organized in January, 1917, and incorporated March 2d of that year. Its offices are located at Wichita, Ran. Mr. F. C. Hoyt, early in 1917, owned or held options on leases covering approximately 80,000 acres. In some of these leases he had associates. Thirty-six hundred and seventy-three acres of these, or about 5¾ square miles, were in Butler county, which was the scene of much of the oil development at the time, and wherein were located the Shumway wells, which were producing or had produced oil in enormous quantities. A great number of other wells were then producing. The remaining leases covered land, in the main, in counties adjoining or near Butler county. Much of the land under lease was promising, but much of it was clearly not so. The Union Oil Company was incorporated for $1,500,000. The shares had a par value of $1. For his leases, which were made over to the company, Hoyt received 1,150,000 shares of the stock. The balance, 350,000 shares, became treasury stock, and was subsequently sold. The company afterwards expended $50,000 in acquiring additional leases. One 40-acre lease so purchased "was located within a baseball throw of big production," according to the vice president and treasurer of the company. The Hill lease, acquired from Hoyt in the first lot, was just across the road "from production." Two wells near by were producing about 300 barrels apiece. This lease alone cost Hoyt or his backers $277,000. The Denny lease was about one mile from the Shumway wells, two of which produced 15,000 barrels each per day. The Hill lease was at the center of original oil production in Butler county. In March, 1918, there were 7 producing wells on the Denny lease, and 7 deep wells and 14 shallow wells on the Hill lease. These shallow wells averaged about 50 barrels per day, according to' Mr. Jordan. Drilling was proceeding on the Sargeant lease with good prospects, and well No. 18 was being drilled on the Denny lease. Gas was being produced which yielded a cash return of $3,000, or $4,000 per month, and Jordan states that several other leases "had good promise." Twelve or fifteen brokers in Kansas City were buying and selling oil stock. No. 18 Denny did not begin producing oil until several days after March 6, 1918. The well was brought in on the 18th of March. The brokers' records show that Union Oil Company stock was selling at about $2 per share on March 8, 1918. On March 9th the sales ranged from $2.75 to $3.70. One broker on that day sold 6,600 shares at an average price of $2.89. A dozen or more brokers were handling the stock. These were actual sales, according to those of the brokers who testified. It was the price as thus fixed to which White referred when in his testimony he spoke of the market price. No. 18 Denny was doubtless playing its part in this, though not yet actually producing oil, since some information about what was happening there seems to have reached the city. At a depth of about 2,450 feet the sand was struck, and when a few inches deeper had been reached the tools were thrown upward 500 feet. The cable broke. The tools fell back, some swab heads were pulled off in the hole, and it sanded up. This trouble delayed actual flow, but promised much. The daily papers began to tell of the well. On the 19th of March they forecasted a production of 10,000 gallons per day or more, and gave the new well and its promise much publicity. Union Oil stock responded from a slight slump from the 13th to the 15th of March and began again to sell around. $3 per share. Thereafter it fell away somewhat until on the 26th the "market price" was $2.50 per share. On and near that date its indebtedness was about $475,000. This included current bills in a considerable sum. The rest was represented by loans. The daily production ran about 900 to 1,000 barrels.
Kelly was a real estate man. His firm was Kelly & Hoyt, with offices on the same floor with Thwing and the Evans-Thwing Refining Company. The company negotiated loans on commission. Kelly and Thwing were acquainted, and Kelly knew Thwing or his company had some Union Oil stock. In fact, Kelly had bought some of that stock through Thwing. Kelly also knew White. King, a witness for appellants, now residing in Minneapolis, had been in the oil business for some time. One of his principal activities was to buy leases and then interest others in them and dispose of them. He was White's partner in the purchase of the 320-acre lease which fruited into the $1,000,000 Towanda-El Dorado Oil Company a mile and a half from the Denny lease.
Thwing had been a farmer as a young man, and then a merchant. Subsequently he was engaged in banking in Kansas. The bank failed. Thereafter he was...
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