Cox v. De Soto Crude Oil Purchasing Corp.

55 F. Supp. 467, 1944 U.S. Dist. LEXIS 2452
CourtDistrict Court, W.D. Louisiana
DecidedMay 24, 1944
DocketCiv. A. No. 293
StatusPublished
Cited by4 cases

This text of 55 F. Supp. 467 (Cox v. De Soto Crude Oil Purchasing Corp.) is published on Counsel Stack Legal Research, covering District Court, W.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cox v. De Soto Crude Oil Purchasing Corp., 55 F. Supp. 467, 1944 U.S. Dist. LEXIS 2452 (W.D. La. 1944).

Opinion

PORTERIE, District Judge.

This suit is a sequel to Civil Action No. 2805, styled Sweatt v. Oil Refineries, Inc., D.C., 29 F.Supp. 992, decided by jury on the 19th day of July, 1939, wherein a motion for new trial was overruled by the court, pleas, special defenses of prescription, etc., were overruled, and judgment rendered in favor of plaintiff receiver and against various defendants in solido, including M. J. Grogan and B. P. Crittenden in the sum of $90,000.

The issues in Civil Action No. 2805 were almost identical to the issues here, particularly as to the scheme and design to defraud; the parties defendant included all the parties here and others. It was the information that the defendants were compelled to disclose in this action that [469]*469"brought to light the facts upon which the present suit was based.

Plaintiffs, Box et al., allege that M. J. Grogan and B. P. Crittenden, residents of Shreveport, Caddo Parish, Louisiana, incorporated the Apex Pipeline Company, Inc., Centera, Inc., and the De Soto Crude Oil Purchasing Corporation, a Delaware corporation, as well as De Soto Crude Oil Purchasing Corporation of Louisiana, successors to the Delaware corporation, and became officers, stockholders and directors of each of the named companies; that these individuals dominated said corporations, directed their policies, and for all practical purposes, said corporations were the vehicles through and by which these two individuals carried out a plan and scheme to violate the proration regulations issued by the Texas Railroad Commission and at the same time defraud plaintiffs of their proportionate share (.0824228) of the royalty interest in the oil produced from the lease described in paragraph 13 of plaintiffs’ petition.

Paragraph 16 of plaintiffs’ petition alleges facts which constitute the structure of this case: “Plaintiffs would further show and allege that sometime prior to the month of June, 1933, the exact date which is unknown to plaintiffs but well known to defendants, that the defendants and W. M. Sullivan and Lynn Burch, or their agents and employees entered into an agreement and conspiracy to produce and transport oil from the above described property illegally and in excess of the allowable set by the Railroad Commission of Texas, and to convert plaintiffs’ proportionate share of such illegal oil, and to fraudulently conceal from plaintiffs the production, transportation and purchase of said oil; the purpose and intent of such fraudulent concealment being to convert plaintiffs’ proportionate share of said oil to their own use and benefit, and to avoid payment to plaintiffs for said oil.”

Paragraph 17 gives the number of barrels of illegal excess oil that was purchased and transported from plaintiffs’ property during the period of the alleged fraudulent scheme and conspiracy, as follows:

“In June, 1933 ........ 4,416.74 Barrels

In July, 1933 ......... 7,731.39 Barrels

In October, 1933 ...... 4,048.48 Barrels

In December, 1933 .... 6,960.40 Barrels

In January, 1934 ..... 21,520.42 Barrels

In February, 1934 .... 12,694.76 Barrels

In March, 1934 ....... 20,525.07 Barrels being a total of seventy-seven thousand, eight hundred ninety-two and 26/100 (77,-892.26) barrels of oil produced and transported from said tract of land in excess of the allowable set by the Railroad' Commission of Texas.”

Defendants answered after setting forth seven special defenses, admitting the incorporation of the various Grogan-Crittenden companies; admitting that Grogan and Crittenden were officers and directors of said corporations; admitting that the De Soto Crude Oil Purchasing Corporation, Centera, Inc., and Apex Pipeline Company, Inc., purchased crude oil from wells located on the said property owned by plaintiffs during the years 1933 and 1934 and then alleged: “Defendants show that all of said oil was purchased from the owner of the oil, gas and mining lease covering, affecting and applying to said property, and that for all oil received by them from said property, said defendants paid the prevailing price to the owner of the oil, gas and mining leases affecting said property, and obtained acquittance therefor.”

They further admit that the Apex Pipeline Company purchased from the property in question 64,382.10 barrels of crude oil and that Centera, Inc., purchased 1,366.1 barrels and that payment was made as set forth in Paragraph 12; it is especially denied that any of the facts and circumstances as depicted in plaintiffs’ petition were withheld or concealed from plaintiff, and it is further alleged “that for oil purchased from said land, payment was duly made to the mineral lease owner and operator, to the knowledge of plaintiffs and their agents, more than one year prior to the institution of this suit.” (Paragraph 23.)

The Apex Pipeline Company, Incorporated, and Centera, Incorporated, were in the process of liquidation at the time that this suit was filed. Subsequently to the filing of the suit, the De Soto Crude Oil Purchasing Company of Louisiana, successor to De Soto Crude Oil Purchasing Corporation of Delaware, went into bankruptcy. A settlement and compromise was made between the present plaintiff and Mr. M. J. Grogan. During the trial of this case, plaintiffs dismissed their demands as of voluntary non-suit against all the defendants except B. F Crittenden.

The defendant, consequently, claims that this suit represents a stale demand. He shows that it was filed in 1940 for the torts, [470]*470described above, that occurred in 1933 and 1934. The claim remained in court undecided from May, 1940, to March, 1944, answer having been filed June 12, 1940. The oral testimony adduced on the day of trial referred to transactions already ten years old. During the period that the suit was in court, three corporations had been liquidated and dissolved, and another corporate party had gone into bankruptcy. During the same period the person operating the oil lease for the plaintiff and receiving % of all production,1 and accused as one of the leading conspirators, Mr. Sullivan, died. One Carl Kennedy, plaintiff’s agent and gauger, living on the oil property, died, and so did Mr. C. H. Machen, attorney from Texas, legal representative, investigator, and original counsel for plaintiffs. This late marshaling of a stale demand against many grew into a belated demand against B. P. Crittenden alone. Summarizing, the defendant stresses that the suit is too late, or so stale and weak that it cannot be brought to that legal certainty which is required by law as a burden of the suing plaintiff.

There are two principal legal defenses in this suit, to-wit: lack of liability of Crittenden as an individual for corporate acts and the application of prescription.

The first and important questions of fact to decide before the application of legal principles arises are (a) whether or not there is proof of an actual scheme and design to defraud and whether or not Crittenden participated in it, and (b) whether or not that proof is of sufficient legal certainty, as required by Louisiana law to prove fraudulent acts, bearing in mind, through it all, that the burden of proof is upon the plaintiff.

After listening to the testimony, both on direct and cross-examination, of Mr.

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Bluebook (online)
55 F. Supp. 467, 1944 U.S. Dist. LEXIS 2452, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cox-v-de-soto-crude-oil-purchasing-corp-lawd-1944.