Italo Petroleum Corp. v. Shingle

SPENCE, Acting P. J. Plaintiff sought by this action to obtain the cancellation of two promissory notes executed by plaintiff in favor of defendant Fred Shingle, syndicate manager, and to enjoin the prosecution of any action for the purpose of collecting upon said notes. From a judgment granting to plaintiff said relief, defendants have appealed. For the purpose of this discussion, defendant Fred Shingle, syndicate manager, may be treated as the sole defendant and appellant.

The transcript and the briefs are rather voluminous but the essential facts, as shown by the pleadings and the uncontradicted evidence, may be briefly stated. This action was brought in August, 1934, to cancel a note in the sum of $9,476.13 dated January 20, 1929, and a second note in the sum of $35,222.25 dated April 20, 1929. Said notes had been executed by plaintiff in favor of defendant Fred Shingle, syndicate manager, following certain conferences in which said defendant, as the manager of a syndicate of 78 persons, [424]had asserted a claim on behalf of said syndicate for dividends on certain preferred stock of the plaintiff corporation and in which said plaintiff had asserted claims in the sum of approximately $42,000 as an offset to said dividend claims. Those claims had arisen under the circumstances hereinafter set forth.

Plaintiff was incorporated in Delaware in 1928 and shortly thereafter it launched upon a plan for the acquisition of a number of oil properties. Agreements were entered into with various oil companies and plaintiff sought to obtain a permit for the issuance of 4,500,000 shares of its preferred stock and 7,500,000 shares of its common stock to Maurice C. Myers, as trustee, to be disposed of by him in the acquisition of the properties described in the application subject to liens, encumbrances and indebtedness of not to exceed $2,750,000. The agreements with the various oil companies provided for a consideration of approximately $3,500,000 in cash in addition to shares of stock of the plaintiff corporation and the raising of the necessary cash was undertaken by the syndicate under an agreement with plaintiff whereby the syndicate was to receive 3,000,000 shares of common and 3,000,000 shares of preferred stock of the plaintiff corporation from the trustee. The trustee was authorized to deliver the necessary shares of stock to consummate the agreements with the various oil companies and to deposit with Shingle, Brown & Co., as escrow holder, 3,000,000 shares of common and 3,000,000 shares of preferred stock “with instructions and authority to deliver the same to said Syndicate Manager ratably in the proportion that the sums advanced by the Syndicate in payment on said properties bear to the total syndicate obligation of $3,500,000”. A third supplemental permit was issued by the commissioner of corporations in August, 1928, authorizing the issuance of 4,500,000 shares of preferred and 7,500,000 shares of common stock to the trustee “for the uses and purposes recited in the application and the papers filed therewith, and in exchange for the transfer and assignment to applicant of the properties described in the application and the papers filed therewith, and in the manner recited therein, subject to liens, encumbrances and indebtedness of not to exceed $2,750,000.00”.