Wilhelm v. Consolidated Oil Corporation

• Decision Date: 30 June 1936
• Docket Number: No. 1375.,1375.
• Citation: 84 F.2d 739
• Parties: WILHELM et al. v. CONSOLIDATED OIL CORPORATION et al.
• Court: U.S. Court of Appeals — Tenth Circuit

84 F.2d 739 (1936)

WILHELM et al. v. CONSOLIDATED OIL CORPORATION et al.

No. 1375.

Circuit Court of Appeals, Tenth Circuit.

June 30, 1936.

COPYRIGHT MATERIAL OMITTED

Lewis J. Bicking, of Tulsa, Okl. (C. R. Nixon and Guy Wilson, both of Tulsa, Okl., and Amidon, Hart, Porter & Hook, of Wichita, Kan., on the brief), for appellants.

Frederick H. Wood, of New York City (Summers Hardy, N. A. Gibson, and J. H. Maxey, all of Tulsa, Okl., and G. T. Stanford, Harold F. McGuire, and R. W. Ragland, all of New York City, on the brief), for appellees.

Before PHILLIPS and BRATTON, Circuit Judges, and VAUGHT, District Judge.

PHILLIPS, Circuit Judge.

This is an appeal from an order sustaining motions of the appellees, defendants below, to quash the respective personal services attempted to be made upon them and dismissing the bill of appellants, plaintiffs below.

The plaintiffs sue jointly, either as stockholders of the Prairie Oil & Gas Company, a Kansas corporation, hereinafter called the "Gas Company,"¹ or as former stockholders of that Company or of the Prairie Pipe Line Company, a Kansas corporation, hereinafter called the "Pipe Company,"¹ who have surrendered their stock in such companies for stock of defendant Consolidated Oil Corporation, hereinafter called "Consolidated." The suit is brought on behalf of plaintiffs and all others similarly situated, who may become parties to the suit and contribute to the expenses thereof. No plaintiff is alleged to be a stockholder of the Pipe Company.

The plaintiffs Wilhelm are alleged to be citizens of Kansas and stockholders of the Gas Company. Plaintiff Dana is alleged to be a citizen of Oklahoma and a stockholder of the Gas Company. Plaintiffs Drohen and Bauman are alleged to be citizens of Kansas and former stockholders of the Pipe Company or of the Gas Company or both, who surrendered their stock in such companies for stock of Consolidated. Plaintiffs Jaeger and Rose are alleged to be citizens of Oklahoma and former stockholders of the Pipe Company or of the Gas Company or both, who also surrendered their stock in such companies for stock of Consolidated.

The defendants are Consolidated, a New York corporation and a citizen and resident of that state, and its subsidiaries, Sinclair-Prairie Pipe Line Company, hereinafter called "Sinclair-Pipe," Sinclair-Prairie Oil Marketing Company, hereinafter called the "Marketing Company," both Delaware corporations and citizens and residents of that state, Sinclair-Prairie Oil Company, hereinafter called "Sinclair Oil," and Sinclair Refining Company, hereinafter called the "Refining Company," both Maine corporations and citizens and residents of that state.

Although the bill seeks inter alia to set aside transfers to the defendant corporations of the assets of the Prairie Companies, both of which are existing Kansas corporations, neither of the Prairie Companies is made a party to the suit.

Plaintiffs complain of the execution and carrying out of a tri-party agreement dated January 14, 1932, between the Gas Company, the Pipe Company and Consolidated, in which contract it was mutually agreed that the three companies should unite all their assets by the Prairie Companies transferring all their assets to Consolidated, or one or more of its controlled corporations, in consideration, among other things, of the assumption by Consolidated of the liabilities of the Prairie Companies and the issuance of stock of Consolidated to be delivered directly to stockholders of the Prairie Companies.

The obligations of the Prairie Companies to transfer their assets and of Consolidated to acquire the same were interdependent and conditioned upon the simultaneous transfer to Consolidated, or to one or more of its controlled corporations, of the assets of both Prairie Companies. The tri-party agreement in question was authorized and approved by the vote of the holders of more than four-fifths of the outstanding stock of each of the Prairie Companies as required by the statutes of Kansas,² and by the action of their respective boards of directors.

On or about March 30, 1932, the Gas Company, pursuant to the tri-party agreement, transferred its physical properties to Sinclair Oil and to Marketing Company, and its securities, cash and accounts receivable to Consolidated; and on or about the same date the Pipe Company, pursuant to the tri-party agreement, transferred its tangible properties to Sinclair Pipe, and its securities, cash and accounts receivable to Consolidated.

The Pipe Company on the date of the tri-party agreement and up to the time of the conveyances made thereunder, owned and operated a pipe line system in the states of Texas, Kansas, Oklahoma, Missouri, Iowa, Indiana and Illinois, and owned other properties, cash, securities and accounts receivable. The Gas Company, on the date of such agreement, owned and operated oil and gas properties located in various states, including the state of Oklahoma; and owned cash, securities and accounts receivable, some of which had a situs in the state of Kansas.

The tri-party agreement and the conveyances made thereunder are alleged to have been fraudulent, ultra vires and illegal for the following alternative reasons:

(1) Because procured as a result of a scheme participated in, among others, by certain stockholders of Consolidated, who, by means of various unfair devices and maneuvers and misleading statements to stockholders of the Prairie Companies, succeeded in securing such requisite stockholders' approval of such agreements and transfers.

(2) Because unauthorized by the Kansas statute under which they were effected and in violation of other statutory inhibitions.

(3) Because the Kansas statute³ under which the execution and performance of such agreement were effected "if construed to contemplate such action," is unconstitutional as to plaintiffs, who became stockholders of the Prairie Companies, or one of them, prior to the enactment of such statute, is "in violation of the Constitution of the United States of America article 1, § 10; Amend. 14, which provides that no state shall pass any law impairing the obligation of contracts," and deprives "these plaintiffs of their property without due process of law of equal protection of the law and privileges and immunities as citizens of the United States."

The primary relief sought by all of the plaintiffs may be summarized as follows: That the tri-party agreement, the conveyances made thereunder and all other transactions had under said agreement be "adjudged and decreed to be ultra vires, unfair, unlawful and void, and that said agreement, transfers and conveyances be set aside, held at naught and annulled as a cloud upon the title"; that the defendants be enjoined from claiming any interest in the properties transferred by the Pipe Company and the Gas Company "in the State of Oklahoma, and elsewhere subject to the jurisdiction of this court, and that the court decree and establish that said properties are the properties and assets of the stockholders of the two former Prairie Companies"; that said deeds, conveyances and transfers be delivered up and canceled; and that a receiver be appointed to take possession of said properties and the income received by the defendants therefrom, and "hold and operate the same under the jurisdiction of this court for the use and benefit of these plaintiffs and the other stockholders and creditors of said two Prairie Companies, until ordered liquidated and distributed under decree of this Court."

As to those plaintiffs who have exchanged their stock in the Prairie Companies and are now stockholders of Consolidated, the bill prays for a rescission of such exchange and for a decree permitting said plaintiffs to "stand in relation to their stock in the same position as prior to the said exchange."

The bill prays, in the alternative, for a decree nisi, to wit, that "if the court finds it to be equitable and proper" that it "issue its order whereby said defendants may void the relief herein prayed for by within a reasonably short period of time, paying to these plaintiffs and other stockholders similarly situated who join herein the real, fair and intrinsic value of their stock in the said two Prairie Companies * * * or their proportionate share of the value of all the property," of the Prairie Companies. Incidental to such decree nisi, the bill prays for discovery and accounting, the declaration of a trust in the properties transferred by the Prairie Companies and profits therefrom, and for the entry of a decree that plaintiffs have a lien on said properties in furtherance of such nisi decree.

Consolidated moved to quash the personal service attempted to be had upon it upon the ground, inter alia, that it is not doing business and was not found within the Northern District of Oklahoma. The issue presented was determined upon affidavits submitted by Consolidated in support of its motion, counter affidavits submitted by the plaintiffs, and reply affidavits by Consolidated.

The Consolidated, a New York corporation, has never applied for a license to do business in the state of Oklahoma, and has never itself maintained an office for the transaction of business or transacted business in Oklahoma. Dana H. Kelsey, the person upon whom a subpœna was served, although a director of Consolidated, is not an officer or agent thereof, has never been authorized to accept service of process on its behalf, or to transact business on its behalf in Oklahoma, and has never done so. The Consolidated is exclusively a holding company having its only office in the state of New York and transacting business only in that state; its income is derived solely from dividends and interest; it has never held or owned any physical properties in Oklahoma or elsewhere, and although it owns all the stock of the defendant subsidiaries operating in Oklahoma, the "corporate entity of the parent company, and that of each subsidiary has been...