Appeal from the District Court of the United States for the Southern District of New York.
Before SWAN, AUGUSTUS N. HAND, and CHASE, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
The plaintiff, Dickinson, brought this suit to impress an equitable lien upon shares of stock of Petroleum Conversion Corporation, hereafter called "Petroleum," which were issued to the defendant Lloyd, and upon all increments thereto, and to compel the defendants to account for all shares of Petroleum acquired through or from Lloyd to the extent of the plaintiff's interest therein. At the close of the plaintiff's evidence, the trial judge granted the defendants' motion to dismiss for failure of proof.
the complaint alleges that the shares of stock standing in the name of Lloyd were issued under an agreement between Lloyd, the plaintiff Dickinson, and Petroleum; that one-half thereof belonged to the plaintiff and that, under a later amended agreement, all the stock in the name of Lloyd should be turned over to the plaintiff and be divided by the latter between himself and Lloyd as their interests should appear.
The trial judge dismissed the complaint upon the single finding of fact that "there was no agreement between the plaintiff * * * Dickinson and the defendant * * * Lloyd, pursuant to the terms of which * * * Dickinson was entitled to any interest whatsoever in any shares of stock of Petroleum * * * which may have been issued from time to time to or in the name of, * * * Lloyd."
The validity of the dismissal of the complaint depends on the correctness of the finding that there was no agreement between the plaintiff and Lloyd giving the former an interest in the stock, and we think that the evidence required a finding that the plaintiff had an interest. It is because of this erroneous finding of fact that we hold the judgment must be reversed.
The legal relatioins between the plaintiff, Dickinson, and the defendant, Lloyd, depend upon their activities in connection with three corporations, United States Gasoline Manufacturing Corporation, Knox Process Corporation and Petroleum Conversion Corporation. The first of the three was formed to exploit an oil cracking process invented by one William J. Knox. On May 22, 1923, the Gasoline Corporation made a contract with Lloyd to sell to him its letters patent and all its other assets. The contract also provided that Lloyd, having organized the Knox Process Corporation with an authorized capital stock of 600,000 shares of the par value of $3,000,000, was to receive the 600,000 shares in consideration for the transfer of the letters patent and other assets. It provided that he should hold 241,605 shares for United States Gasoline stockholders. That number of shares was subject to future adjustment and was subsequently adjusted at 244,041 shares. The agreement further provided that he should deposit the balance of the 600,000 shares with United States Mortgage & Trust Company to be delivered by it to W. W. Briggs & Co., syndicate managers, upon completion of a syndicate to underwrite Knox bonds. Under the agreement, Lloyd was given the right to become interested with the syndicate managers and to share in stock or commissions in such ratio as he and they might agree. For services rendered in connection with the organization and financing of Knox, Lloyd became entitled to a substantial portion of 111,466 shares held for the syndicate managers.
On March 2, 1925, Dickinson and Lloyd made a contract under which Lloyd agreed that all stock to which he might be entitled for services rendered or to be rendered in connection with the organization and management of Knox should be turned over to Dickinson, that the latter, for services rendered, should be entitled to 20,600 shares and that the 20,600 shares, as well as the stock received by Lloyd, other than stock delivered to him in connection with subscription for or purchase of bonds or stock for cash, should be held by Dickinson, who should account to Lloyd for such shares, and the income thereof, as Lloyd, in Dickinson's sole judgment, should be entitled to. It was further agreed that any future stock or security of the corporation which Dickinson and Lloyd might severally or jointly receive, similar in nature or manner of receipt to the aforesaid stock, should likewise be delivered to Dickinson and pooled with him and divided in the same way.
In 1926, creditors of Knox holding mechanics' liens against the Texas plant of Knox secured a judgment against it for $174,620.56 in the courts of Texas. At a sale of the plant, held under this judgment, Lloyd bid in the plant on behalf of Dickinson for half the amount of the face of the judgment in cash (or $87,310.28) and half in stock of Knox or of any corporation which might be formed to acquire the plant. Likewise, during the year 1926 mortgage foreclosure proceedings were had by the trustee for the bondholders of Knox upon its patents and 93 acres of land adjoining its Texas plant. These mortgage assets were bought in at foreclosure sales by one Rinke on behalf of the bondholders of Knox and certain agency subscribers.
In December, 1926, Petroleum Conversion Corporation was organized with an authorized capital stock of 1,200,000 shares of the part value of $5 each. It is apparent from the proof that Petroleum was considered by the parties to be in effect a reorganization of Knox. Its entire capital stock was to be issued as follows:
(1) 590,400 shares to Arthur W. Rinke as agent for Rinke Agency subscribers and as agent for the Protective Committee of Knox bondholders.
(2) 140,000 shares to F. B. Lloyd as Albert G. Dickinson's designee, and after issue to be returned to Petroleum ...