Mitchell v. Derby Oil Co.

232 P. 224, 117 Kan. 520, 1925 Kan. LEXIS 44
CourtSupreme Court of Kansas
DecidedJanuary 10, 1925
DocketNo. 25,628
StatusPublished
Cited by14 cases

This text of 232 P. 224 (Mitchell v. Derby Oil Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mitchell v. Derby Oil Co., 232 P. 224, 117 Kan. 520, 1925 Kan. LEXIS 44 (kan 1925).

Opinions

The opinion of the court was delivered by

Dawson, J.:

This was an action to recover a broker’s commission for plaintiff’s services in obtaining an underwriting for a million dollars’ worth of bonds issued by the defendant corporation.

The principal facts giving rise to this lawsuit are as follows:

In 1921 the plaintiff, F. H. Mitchell, was engaged as a broker of oil stocks in Wichita. He had formerly been an organizer of syndicates for handling Canadian real estate, and a stock and bond dealer in New York. He had several years’ acquaintance with R. E. Wilsey & Company, a Chicago firm of underwriters of industrial securities, a brother of a member of that firm, Clarke, having been in plaintiff’s employ in Canada. In 1921 A. L. Derby, president, and Dan F. Callahan, treasurer, of the Derby Oil Company, desired to sell half a million dollars’ worth of oil stocks of the Derby Oil Company owned by them individually. They enlisted the services of a Wichita Trust Company, and the latter entered into an arrangement with Mitchell to dispose of this stock, but owing to unfavorable market conditions and the attitude of certain “blue-sky boards,” the sale of this stock was not accomplished. The trust company which had been advancing $500 per month to Mitchell as a drawing account chargeable against his commissions, terminated that arrangement; and Mitchell, although apparently a man of some considerable means, became embarrassed for want of funds for personal expenses because his assets had been hypothecated to banks in Kansas and Oklahoma. Mitchell explained his financial embarrassment to Derby, and the latter, on behalf of himself and Callahan, offered to provide him with office room and to provide a drawing account for him until conditions improved. Derby said:

“‘Now, Frank, things are not as bad as you think, and as regards your loans you are well secured, . . . and the bank people are friendly towards you, and you are good friends and they are good friends of yours, and I don’t think that you ought to worry about that; commissions are getting a little better, and as regards making some money, Dan Callahan and I are working on a deal, framing up a deal that we will want to use you on, and until — a deal that will give you an opportunity to make some money, and if you need any money in the interim ... I will speak to Mr. Moriarty, [522]*522and at the end of the month you ask Moriarty [Derby’s secretary] and he will bring you in a check. . . . ’
“. . . You need not have any worry about that, because we are framup this deal, will be ready in a few days, and we will want to use you, and it will give you an opportunity to make quite a good deal of money.’ . . . He said he didn’t know whether I could make that much money or not, but he said I would probably be able to make ten, fifteen or twenty thousand dollars.”

Pursuant to this arrangement Mitchell moved his desk into the Derby Oil Company’s offices to save office rent, and for three or four months Derby’s secretary, who was also secretary of the oil company, furnished him with funds of the company, charging the same to Derby and Callahan personally. These sums were $250 in August, 1921, $200 in Septembér, and $200 in October. On the voucher for one of these sums the word “loan” appeared; on another “on acc’t F. H. Mitchell” was written. By this same arrangement for funds, Mitchell’s office rent for May and June was paid and likewise charged to the personal account of Derby and Callahan. During July, August and September Mitchell continued his efforts to sell the half million dollars’ worth of Derby Oil stock owned personally by Derby and Callahan. About August 25 plaintiff Mitchell asked Derby if the defendant company would be interested in putting out a million-dollar bond issue. Derby answered in the affirmative. Mitchell inquired to what uses the proceeds would be put. Derby told him. Mitchell made a memorandum of the purposes outlined by Derby, and on August 30 wrote Wilsey & Company, explaining the proposed issue, and suggested that that firm should underwrite the issue, and invited investigation. On September 8 Wilsey & Company replied, discussing the dullness of the bond market, giving instances of unsatisfactory results of underwriting industrial bond issues during that year, expressing the hope that business would soon improve, and suggested that the Derby Company should borrow money for its temporary needs and await an upward trend of the oil business and then decide on a program of financing. On September 13, as Mitchell was about to leave Wichita for Philadelphia in an effort to dispose of that half million dollars.’ worth of oil stocks which belonged to Derby and Callahan, he asked Derby, president of the defendant company, what compensation he would receive if he secured an underwriting for a million-dollar bond issue. Derby replied that he would make it right with Mitchell. [523]*523En route for Philadelphia, Mitchell called on Wilsey & Company in Chicago and discussed the proposed bond issue and wrote to Derby:

“Chicago, III., Sept. 15, 1921.
“Wilsey has just returned from New York this morning and I have been with him for about an hour. While in New York he talked with the Daugherty people and a number of banking concerns. He states that they all feel very confident that the oil conditions will be greatly improved within possibly the next sixty days. He states that he would be very glad to handle a million-dollar bond issue for the Derby Company just as soon as conditions look at all favorable in the oil industry itself.”

Mitchell went on to New York and called on a firm of underwriters there in regard to the proposed million-dollar bond issue, carrying with him a letter of introduction from a New York bank obtained for Mitchell by Callahan. Returning from New York, Mitchell again called on Wilsey & Company and discussed with that firm the proposed bond issue and then wired Derby:

“Sept. 28,1921, Chicago, 111.
“If you want to put out million of bonds Wilsey is interested and Clarke will return with me to Wichita after I get through at Appleton to complete arrangements for issue. Instruct me at Appleton.”

Derby wired Mitchell to meet him in Chicago on his return from Appleton, Wis., and accordingly on October 4, pursuant to an engagement made by Mitchell, Derby and Mitchell went to the offices of Wilsey & Company, where the projected bond issue was discussed and preliminary plans outlined. Pursuant thereto and in the usual course of a transaction of such magnitude, the million-dollar bond issue, was authorized. Wilsey & Company did not bind themselves to underwrite the whole million-dollar issue. Their proposition dated October 12, 1921, was to underwrite $100,000 of this issue, upon condition that if successful in that underwriting they should have a sixty day’s option on the second hundred thousand, and if it were also successful they were to have a similar option on the third hundred thousand, and on the same terms an option on the fourth hundred thousand. The written offer of Wilsey & Company containing this proposition included no stipulation for the underwriting of the balance of the issue; nevertheless, and although no further formal contract was ever made between Wilsey & Company and defendant, in about a year Wilsey & Company successfully underwrote and disposed of the entire million-dollar issue.

[524]*524The plaintiff testified:

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Bluebook (online)
232 P. 224, 117 Kan. 520, 1925 Kan. LEXIS 44, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mitchell-v-derby-oil-co-kan-1925.