Farjeon v. Indian Territory Illuminating Oil Co.

This is an' appeal by some of the defendants from an interlocutory judgment, which adjudges that the plaintiff is entitled to twenty per cent of the 3,000,000 shares of the capital stock of the- defendant Indian Territory Illuminating Oil Company, and to any. profits, emoluments or dividends thereon, and requires the defendants to account therefor. The plaintiff bases his right to recover upon the following paper writing:

“Referring to our various conversations on the subject of securing, through you, either a purchaser of all of the stock of the Osage Oil Company and a controlling interest in the stock of the Phenix Oil Company, which companies together control the Indian lease of the Osage Nation; or securing for us a financial negotiation whereby we can more fully develop the territory embraced in the said Indian lease; we hereby authorize you to secure for us either a purchaser for said stock or sufficient capital for development as before referred to, and we hereby agree that should we sell or conclude any financial arrangement'with or through the parties you introduce, we-will pay you a commission of twenty (20$) per cent on any sums we receive, whether in money, stock, bonds or other securities, the said commission to be paid to you as and when we receive the. consideration for said stock or funds to develop the. said-lease or leases, it being understood that during your negotia- ■ tions, we are to have the privilege of -seeking elsewhere for a purchaser, or for funds to develop as aforesaid and if we are successful in securing a purchaser before you do, we are simply to. notify you of the fact, which notification shall act as cancellation of this authority.

“PHENIX OIL COMPANY,

“June 5tii, J. A. S. By J. A. Simmons, President.

: “ 1901. E. B. F.

“Witness, 1 “H. L. JoueeriOu.”

It is claimed that that was delivered to him by the said Simmons, who was president of the Phenix Oil Company, soon after the 5th day of June, 1901, pursuant to a letter, of like, tenor, written to him on said date by said Simmons. The *25plaintiff introduced F. A. Bates and J. P. McCarthy to said Simmons and on the 9th day of November, 1901, a contract was entered into between Bates, McCarthy, Simmons, one E. B. Foster, the said Phenix Oil Company and the Osage Oil Company. That contract provided that Bates and McCarthy should organize a corporation to be known as the Indian Territory Illuminating Oil Company, with an authorized capital of $3,000,000, the' par value of the shares to be $1 each; that thereupon all of the capital stock of the Osage Oil Company and 1,500 shares, at least eighty per cent of the capital stock, of the Phenix Oil Company should be transferred to the said corporation; that the said 3,000,000 shares of stock of the Indian Territory Illuminating Oil Company should be divided into three equal parts, 1,000,000 shares to go to the stockholders of the Phenix Oil Company and the Osage Oil Company, 1,000,000 shares to go to Bates and McCarthy, and 1,000,000 shares to remain as treasury stock, 250,000 shares thereof to be pledged to the said Foster as trustee to secure the payment of $80,000, and the payment of any liabilities of the Phenix Oil Company and the Osage Oil Company, 250,000 shares to constitute what was termed a “utility fund” to be disposed of upon the order of the directors and 500,000 shares to be considered as “ treasury stock clear ” to be sold and disposed of for the benefit of the treasury; $10,000 of the said $80,000 was to be paid as soon as it was received from the sale of the stock. Out of every six shares of stock sold, one share was to be taken from the 500,000 shares of treasury stock, one share from the 250,000 shares to be held by the said Foster as trustee, two shares from the 1,000,000 shares belonging to Bates and McCarthy, and two shares from the 1,000,000 shares belonging to the stockholders of the Phenix Oil Company and the Osage Oil Company. When the said $80,000 was paid to Foster, the balance of 250,000 shares held by him was to be relieved of the trust. The entire 3,000,000 shares were to be held by Bates and Foster, as trustees, and deliveries thereof were to be made upon the order of Bates and McCarthy, who were termed selling agents. Whenever the trusteés should so determine, all "of the stock, except the treasury stock, was to be distributed to the persons entitled thereto. Bates and McCarthy agreed to *26secure subscribers to the stock of said company for the purpose of making the said payment of $80,000, and to develop the territory, they to retain twenty per cent of all sales to cover the expenses thereof. The plaintiff- asserts,, and bases his right to recover solely upon, the proposition that upon the’ execution of that contract he became' entitled to twenty per cent of the capital stock of the said new corporation to be' organized. He bases that contention upon the use of the words “ any financial arrangement ” in his alleged contract of June 5, 1901. That contract must receive a reasonable construction. The plaintiff was employed, if at all, to procure a purchaser of the stock of the Phenix Oil Company and the Osage Oil Company or sufficient capital to develop the properties of said oil companies. He was to receive twenty per cent of any amount received on the sale of the said stock or, if no sales were effected, twenty per cent of the capital procured . by him for development, • when “ the consideration for said stock or funds to develop the said lease or leases” was received. The words “any financial arrangement ” must be construed with reference to the sort of financial arrangement which the plaintiff was employed to negotiate.

The contract with Bates and McCarthy did not amount either' to a sale of the stock of the' Phenix Oil Company and of the Osage Oil Company, or to the procurement of capital ■with which to develop the properties of the said companies. It provided merely for their merger into a third company and for the exchange of their capital stock for the capital stock of the new company. Nothing was sold by that exchange or merger. The stockholders oJ: the old company acquired nothing whatever. Indeed, they parted with two-thirds of their property, one-third to Bates and McCarthy, and one-third to the treasury of the new company-to procure funds. By that contract they were to procure in exchange for their certificates, certificates evidencing a lesser interest in the property and, when it was made, they were no nearer a sale of their stock or the procurement of capital with which to develop their properties, than they were before. If the plaintiff’s construction of the contract, upon which he sues, is correct, the defendants agreed to' part with a controlling interest in their property, thirty-three and *27one-third per cent to Bates and McCarthy and twenty per cent to the plaintiff, without receiving a dollar for their stock or a dollar of capital with which to make their stock valuable. Manifestly, that was not the sort of financial arrangement which the parties hád in mind. If Bates and McCarthy had, under their contract, procured capital with which to develop the'properties, or if they had sold any of the 1,000,000 shares reserved to the original stockholders, it may be that the plaintiff would have been entitled to twenty per cent of the capital so procured and of the avails of sales so made, provided Simmons had the authority tó make the contract. However, the .plaintiff rested his case upon the right to receive twenty per cent of the entire capital stock of the said new company, regardless of the fact that it merely represented the same property as the stock for which it was exchanged.

While it was unnecessary for the defendants to do so, they showed that Bates and McCarthy failed to perform their contract. Soon after it was made Bates died, and McCarthy undertook to sell his interest in it on-January 25, 1902, to third parties, who obtained control of the corporation, and from whom the original owners regained control only after instituting suits in Oklahoma and New Jersey, and after parting with part of their property in compromise. While McCarthy claims to have expended some money in procuring the incorporation of the new company and in advertising, it does not appear that one dollar of capital was ever brought into the treasury by him or Bates, although they succeeded in disposing to bona fide purchasers of nearly 100,000 shares of stock. It is said that the properties were developed. The development appears to have consisted of a survey made, while the corporation was in the control of said third parties, for the purpose of enabling them to sell leases.

It- is unnecessary to consider the other questions involved in the case. The plaintiff failed to show either that he procured a purchaser of the stock of the said Phenix Oil Company and the said Osage Oil Company, or that he introduced any one who provided capital to develop the territory embraced in the Indian lease owned by said companies. There was, therefore, no basis whatever for any judgment in his favor, and the inter*28locutory judgment must be reversed and a new trial ordered, with costs to abide the final award of costs.

Ingraham, P. J., McLaughlin, Laughlin and Dowling, JJ., concurred.

Judgment reversed, new trial ordered, costs to abide event.