LEWIS, Circuit Judge.
Appellant brought action for damages for breach of an option contract for the sale and purchase of appellee’s capital stock, alleging federal jurisdiction by reason of diversity of citizenship. Ap-pellee, by answer, admitted the breach in that it refused to issue stock under the stock option, but asserted that the agreement in its inception was violative of 18 O.S.A. § 1.46
and further alleged
both a lack of consideration and an accord and satisfaction.
The District Court for the Western District of Oklahoma found the stock option valid and in full compliance with the Oklahoma statute, but found that contract rights were compromised for consideration and that the failure of appellant’s promised performance was so substantial as to justify rescission by the appellee. Appellant asserts on appeal that the evidence does not justify the court’s rulings against him and that ap-pellee is precluded by its failure to take a cross-appeal from seeking affirmance of the judgment by appellate examination of the ruling concerning the Oklahoma statute.
In view of our conclusion that the stock option rights granted to the organizers of appellee were in fact and law violative of the Oklahoma statute, we deem it unnecessary to delineate evidence .of occurrences subsequent to the execution of that contract or examine the value of the consideration promised or given.
Labor Investment Corporation was organized March 26, 1956, for the purpose of raising capital for the formation of a life insurance company to be managed as a wholly-owned subsidiary. Appellant, one of seven organizers, subscribed ■ for 5,000 shares of stock, for which he paid $5,000 in cash. With the qualifying 28,000 shares subscribed by the in-corporators, the company through its shareholders elected its board of directors, including appellant, and proceeded to pass resolutions which would enable it to make public offering of its stock.
At this first meeting, it was resolved that the corporation should enter Stock Option Agreements
with each of seven incorporators. The consideration given
and to be given by all individuals was therein recited to be “the time, effort and expense incurred by said persons in the pre-organization and organization of the Corporation and other considerations,” and additionally as to the four men charged with the sales of the corporate stock, among whom was appellant, “the consummation of the said Securities Sales Agreement.”
Some of the stock option rights have been exercised and stock issued under the Emerson agreement. Also, portions of the option rights were assigned to various individuals and the assignments were accepted and recorded by the corporation.
Disharmony among the directors brought about the resignation of appellant and another and resulted in the repudiation of the option agreement by the corporation and the present suit.
Although the appellee did not take a cross-appeal, it urges that the clear reading of the Oklahoma statute, cited supra footnote 1, justifies the court’s dismissal of the cause although the court specifically decided that the options were granted in conformity to 18 O.S.A. § 1.46. Appellant contends that since the issue was decided adversely to appellee in the findings and judgment of the District Court the company cannot attack the findings and decree of the lower court without having filed a cross-appeal.
Appellant relies upon the rule that without a cross-appeal, an appellee may not seek to enlarge his own rights' nor diminish the rights of appellant but must content himself with argument to justify the findings in his favor, citing Timken-Detroit Axle Co. v. Alma Motor Co., 3 Cir., 163 F.2d 190; Hall v. Keller, 5 Cir., 180 F.2d 753, certiorari denied 340 U.S. 818, 71 S.Ct. 48, 95 L.Ed. 601; Morley Construction Co. v. Maryland Casualty Co., 300 U.S. 185, 57 S.Ct. 325, 81 L.Ed. 593. With ipse dixit assertions that appellee is here trying to overthrow findings by the trial court and enlarge its own rights without proper hearing on the matter,.appellant ignores the distinguishing language of the Morley case at 300 U.S. at page 191, 57 S.Ct. at page 327:
“ * * * Without a cross-appeal, an appellee may ‘urge in support of a decree any .matter appearing in the record although his argument may involve an attack upon the reasoning of the lower court or an insistence upon matter overlooked or ignored by it.’ United States v. American Railway Express Co., 265 U.S. 425, 435 [44 S.Ct. 560, 68 L.Ed. 1087]. What he may not do in the absence of a cross-appeal is to ‘attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary, whether what he seeks is to correct an error or to supplement the decree with respect to a matter not dealt with below.’ * *
*»
The judgment here is not divisible; its sole effect was to dismiss the plaintiff’s action and discharge ■ the defendant with its costs. Further, the findings of fact are complete and in accord with the evidence and the issue raised by the appellee is concerned with the application of the facts to the law as indicated in the court’s conclusions.
The appellant views the trial court’s short analysis of the law, conveyed by letter to counsel but not incorporated in its entirety into the findings, as setting in conflict the findings of the final judgment. The trial court wrote:
“1. That the stock option agreement was not void because in contravention of 18 O.S. Sec. 1.46(a). That statute allows stock options to be granted only (1) ‘ * * * in connection with the allotment of shares * * * ’ and (2) ‘ * * * only to the persons to whom such allotments (sic) * * * is made.’ The stock options here involved were granted in connection with the original allotment of shares and were granted to original share subserib-
ers obtaining shares under the allotment. Therefore, the stock options were valid, being in full compliance with the statute.”
The findings as signed by the trial court show, at least by inference and in accordance with the evidence, that the stock of the organizers was subscribed prior to the date of the stock option agreements, March 28, 1956. If there be conflict between these two statements of the court, the formal findings must control in the absence of an indication of fraud perpetrated on the court or other unusual and extenuating circumstances. The sole question, therefore, is whether the grant of stock options, subsequent to incorporation and authorized by the corporation to reward its incor-porators, is an option made in connection with the allotment of shares.
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LEWIS, Circuit Judge.
Appellant brought action for damages for breach of an option contract for the sale and purchase of appellee’s capital stock, alleging federal jurisdiction by reason of diversity of citizenship. Ap-pellee, by answer, admitted the breach in that it refused to issue stock under the stock option, but asserted that the agreement in its inception was violative of 18 O.S.A. § 1.46
and further alleged
both a lack of consideration and an accord and satisfaction.
The District Court for the Western District of Oklahoma found the stock option valid and in full compliance with the Oklahoma statute, but found that contract rights were compromised for consideration and that the failure of appellant’s promised performance was so substantial as to justify rescission by the appellee. Appellant asserts on appeal that the evidence does not justify the court’s rulings against him and that ap-pellee is precluded by its failure to take a cross-appeal from seeking affirmance of the judgment by appellate examination of the ruling concerning the Oklahoma statute.
In view of our conclusion that the stock option rights granted to the organizers of appellee were in fact and law violative of the Oklahoma statute, we deem it unnecessary to delineate evidence .of occurrences subsequent to the execution of that contract or examine the value of the consideration promised or given.
Labor Investment Corporation was organized March 26, 1956, for the purpose of raising capital for the formation of a life insurance company to be managed as a wholly-owned subsidiary. Appellant, one of seven organizers, subscribed ■ for 5,000 shares of stock, for which he paid $5,000 in cash. With the qualifying 28,000 shares subscribed by the in-corporators, the company through its shareholders elected its board of directors, including appellant, and proceeded to pass resolutions which would enable it to make public offering of its stock.
At this first meeting, it was resolved that the corporation should enter Stock Option Agreements
with each of seven incorporators. The consideration given
and to be given by all individuals was therein recited to be “the time, effort and expense incurred by said persons in the pre-organization and organization of the Corporation and other considerations,” and additionally as to the four men charged with the sales of the corporate stock, among whom was appellant, “the consummation of the said Securities Sales Agreement.”
Some of the stock option rights have been exercised and stock issued under the Emerson agreement. Also, portions of the option rights were assigned to various individuals and the assignments were accepted and recorded by the corporation.
Disharmony among the directors brought about the resignation of appellant and another and resulted in the repudiation of the option agreement by the corporation and the present suit.
Although the appellee did not take a cross-appeal, it urges that the clear reading of the Oklahoma statute, cited supra footnote 1, justifies the court’s dismissal of the cause although the court specifically decided that the options were granted in conformity to 18 O.S.A. § 1.46. Appellant contends that since the issue was decided adversely to appellee in the findings and judgment of the District Court the company cannot attack the findings and decree of the lower court without having filed a cross-appeal.
Appellant relies upon the rule that without a cross-appeal, an appellee may not seek to enlarge his own rights' nor diminish the rights of appellant but must content himself with argument to justify the findings in his favor, citing Timken-Detroit Axle Co. v. Alma Motor Co., 3 Cir., 163 F.2d 190; Hall v. Keller, 5 Cir., 180 F.2d 753, certiorari denied 340 U.S. 818, 71 S.Ct. 48, 95 L.Ed. 601; Morley Construction Co. v. Maryland Casualty Co., 300 U.S. 185, 57 S.Ct. 325, 81 L.Ed. 593. With ipse dixit assertions that appellee is here trying to overthrow findings by the trial court and enlarge its own rights without proper hearing on the matter,.appellant ignores the distinguishing language of the Morley case at 300 U.S. at page 191, 57 S.Ct. at page 327:
“ * * * Without a cross-appeal, an appellee may ‘urge in support of a decree any .matter appearing in the record although his argument may involve an attack upon the reasoning of the lower court or an insistence upon matter overlooked or ignored by it.’ United States v. American Railway Express Co., 265 U.S. 425, 435 [44 S.Ct. 560, 68 L.Ed. 1087]. What he may not do in the absence of a cross-appeal is to ‘attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary, whether what he seeks is to correct an error or to supplement the decree with respect to a matter not dealt with below.’ * *
*»
The judgment here is not divisible; its sole effect was to dismiss the plaintiff’s action and discharge ■ the defendant with its costs. Further, the findings of fact are complete and in accord with the evidence and the issue raised by the appellee is concerned with the application of the facts to the law as indicated in the court’s conclusions.
The appellant views the trial court’s short analysis of the law, conveyed by letter to counsel but not incorporated in its entirety into the findings, as setting in conflict the findings of the final judgment. The trial court wrote:
“1. That the stock option agreement was not void because in contravention of 18 O.S. Sec. 1.46(a). That statute allows stock options to be granted only (1) ‘ * * * in connection with the allotment of shares * * * ’ and (2) ‘ * * * only to the persons to whom such allotments (sic) * * * is made.’ The stock options here involved were granted in connection with the original allotment of shares and were granted to original share subserib-
ers obtaining shares under the allotment. Therefore, the stock options were valid, being in full compliance with the statute.”
The findings as signed by the trial court show, at least by inference and in accordance with the evidence, that the stock of the organizers was subscribed prior to the date of the stock option agreements, March 28, 1956. If there be conflict between these two statements of the court, the formal findings must control in the absence of an indication of fraud perpetrated on the court or other unusual and extenuating circumstances. The sole question, therefore, is whether the grant of stock options, subsequent to incorporation and authorized by the corporation to reward its incor-porators, is an option made in connection with the allotment of shares.
Appellee seeks no relief which was not granted it in the court below and properly may raise any issue which was there considered even though it asserts that the court was in error, Standard Acc. Ins. Co. v. Roberts, 8 Cir., 132 F.2d 794; Le Tulle v. Scofield, 308 U.S. 415, 60 S.Ct. 313, 84 L.Ed. 355.
The Oklahoma Supreme Court has not had occasion to pass upon or construe the wording of the statute here under examination and Oklahoma appears to be presently unique in retaining this restriction against the granting of options, although numerous states have attempted to prevent in one manner or another the notorious abuses provoked by the temptation of the option device. See Draftsman’s Note, 18 Oklahoma Statutes Annotated, p. 420. But the plain wording of the statute compels the conclusion that options to purchase shares of stock can only be granted by the corporation in response to and fulfillment of a stock purchase subscription or pursuant to the declaration of a stock dividend, 18 O.S.A. § 1.2(12).
In other words, the definition of “allotment” contained in 18 O.S. A. § 1.2(12) and the use of the phrase “only in connection with the allotment of shares or the issuance of bonds or other securities” in 18 O.S.A. § 1.46 prevent the corporation from entering an agreement such as this to compensate its officers or incorporators for past or future services, absent other considerations creating a situation within the definition of allotment.
Appellant urges however that the action taken was ratified by both the board of directors and all the shareholders and that the corporation has accepted the benefits of the contract and thus is precluded by 18 O.S.A. § 1.29
from asserting the defense of ultra vires.
This statute is concerned only with the definition of ultra vires to be drawn from the papers of the corporation’s inception. Although an illegal or unlawful act is sometimes said to be ultra vires the eor-
porate powers, see 13 Am.Jur., Corporations, § 755, the Oklahoma statute is clear that it should not be applied to any matter prohibited by law. It is of no significance that the contract was not immoral nor would it be unlawful except for the prohibition imposed by the Oklahoma legislature. The contract is void and incapable of ratification. United Order of Good Samaritans v. Meekins, 155 Ark. 407, 244 S.W. 439, 28 A.L.R. 89; In re Mutual Guaranty Fire Ins. Co., 107 Iowa 143, 77 N.W. 868.
The judgment is affirmed.