Court Opinion

ID: 6878299
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:10:56.793128+00
Date Added: 2024-06-11T16:05:32.207762
License: Public Domain

PHILLIPS, Circuit Judge
(concurring).
The Imperial Royalties Company has 9600 shareholders. Its outstanding shares are as follows:
$1.00 Preferred 5,110,716 Shares
Class A Preferred 260,000 “
Class A Common 91,459 “
Common , 1,804,052 "'
The complainants herein, Lottie Ham-rick and L. D. Hamrick, hold 2000 shares of $1.00 Preferred and 7 shares of Class A Preferred. Lull filed an intervening petition herein. He alleged in his petition that he was the owner of common stock in the Imperial Company. There was no proof of the amount of stock owned by him.
The amended declaration of trust of the Imperial Company in part provided:
“28. * * * The trustees may at their discretion terminate the trust hereby created by dividing the trust funds or the proceeds thereof among the cestuis que trustent (shareholders), in case of decision by the trustees to terminate the trust as herein provided, all property interests owned by the trust shall be converted into money as speedily as they deem feasible and the proceeds, less actual expenses * * * shall be distributed, in accordance with their respective interests and proportions to all of the shareholders.”
. “29. Should it seem judicious to the Trustees so to do, they may at their discretion convey the Trust fund and other assets to Trustees of a New Trust or to a corporation, * * *. In such event the new Trustees should conveyance be made to Trustees, shall succeed to all the.powers of the Trustee of this Trust * * * -”1
The end of the trust period was approaching and it was necessary for the trustees to make disposition of the trust assets. They were empowered to adopt one of three methods, namely, (1) to terminate the trust and divide the trust property or the proceeds thereof among the shareholders in proportion to their respective interests; (2) to convey the trust fund and other assets to the trustees of a new trust as trustee ;2 or (3) to convey the trust fund and other assets to a corporation. Method 1 provides for complete liquidation. Methods 2 and 3, which are alternatives to 1, do nob provide for liquidation in the strict sense, but rather for distribution of shares in the new trust or the corporation.
The decision of the trial court was in part predicated on Greer Investment Co. v. Booth, 10 Cir., 62 F.2d 321, 322. The provision of the trust agreement in that case in part read as follows:
“ * * * in case of a decision by the trustees to terminate the trust as herein provided, all property interests owned by the trust shall be converted into money and the proceeds of the sale, less actual expenses, if any incurred by said conversion of trust properties into cash shall be distributed, in accordance with their respective interests, to the shareholders— provided, however, that should it seem judicious to the trustees so to do, they may at their discretion, convey the trust fund and other assets to trustees of a new trust or to *251a corporation, * * *. In such event the new trustees, should conveyance be made to trustees, or to the corporation, should conveyance be made to a corporation, shall succeed to all the powers conveyed by this trust.”
It will be observed that it provided, should conveyance be made to trustees, they should succeed to all the powers conveyed by the original trust, and should conveyance be made to a corporation, it should succeed to all the powers conveyed by the original trust. In other words, the trust agreement there contemplated a conveyance to a corporation as trustee and not an outright transfer of the legal and equitable title to the corporation. In the instant case, the trust agreement provides that if the conveyance is made to new trustees, they shall succeed to all the powers of the trustees under the original trust. It makes no such provision m the event of a conveyance to a corporation, and thereby clearly implies, I think, that a conveyance to a corporation is to be an absolute transfer of the legal and equitable title. Because of this material difference between the trust agreement in the instant case and the trust agreement involved in the Greer case, it is my view that the Greer case has no applicability here.
The trustees, defendants herein, made three distributions to Imperial shareholders of approximately $60,000 each on the basis of distribution judicially determined by the state court.3 The trustees advised the shareholders that as soon as certain proceedings were terminated, definite action would be taken by the trustees to provide for a reorganization of the Imperial Company into a corporate organization provided such was the desire of a majority of the shareholders.
The trustees employed one Alexander B. Morris, a petroleum engineer, to make an appraisal of all the properties of the Imperial Company. His qualifications and ability were admitted by counsel for the complainants. The appraisal was made as of December 1, 1936. It embraced two valuations, one a liquidating value of $582,-768, and one a present worth value of $1,007,000. Morris testified that the liquidating value was what the property would bring on a cash sale, and that the present worth value was the net amount that could be realized from the properties if they were all “kept together and efficiently managed through to exhaustion.”
Bryan was an experienced oil man. He testified that he checked the accuracy of Morris’s appraisal and was of the opinion that it was accurate and fair. After the appraisal, the trustees employed legal counsel and devised a plan of reorganization, The plan contemplated the organization of the Toldan Royalty Corporation, and the transfer to it of all the assets of the Imperial Company except a few intangible assets of doubtful value. It gave the shareholders the option
“(a) To retain his or her ratable interest in the form of shares of the Series A stock of Toldan Royalty Corporation, the present worth or ‘going concern’ value of which is stated to be $1.24 per share;
«(b) To receive, instead) cash equal t0 a ratable proportion of the assets to be transferred, equivalent to 71.73c for each share of Toklan R lt Corporation stock tQ wh¡ch eadl is enütled t0 subscribe.”
. , A Pn.nted Prospectus which described P\an in detail and set out the details of appraisal, giving both the liquidating value and th,e Presfit worth value, was furnished to ea<dl the shareholders,
It is true that the district court of Tulsa County, Oklahoma, in the matter of Alta L. Hamrick et al. v. Imperial Royalties Company et al, No. 56,614, adjudged that the court had no power on the application of a minority group of the shareholders in the Imperial Company to order a reorganization of the trust and a transfer of its assets to a corporation or to compel the shareholders to take stock in such corporation in lieu of their shares in the trust. The question here presented is whether the trustees may, in the exercise of the discretion vested in them/ transfer 1116 trf1 ProPert7 a corporation giving to the Imperial Company shareholders the option to take s^Fes m ^ COTP°ration proportion to their resPective interests or to take their Proportionate share of the fair liquidation valu® of the assets. m casIV ,.Tt ,fcms t0 “e ^at suc,h disposition and distribution is clearl7 ™th¿n the Powers vested in the ^tees by the original and amended declaratl0n 0* trust.
Furthermore, the plan has been expressly approved by 76.54 per cent of the shareholders of the Imperial Company. *252They have expressed a desire that the assets of the trust, consisting largely of oil and gas royalties, be transferred to a corporation, to be held and managed by it until the oil and gas in the properties in which the royalty interests are held have been fully produced, in order that the full value of the royalty interests may be realized, rather than that the assets be sacrificed through a forced liquidation.
I do not regard the state court order of November 8th as a final order of liquidation. It was entered on a petition of the trustees for a construction of the trust and a determination of the relative rights to cash distributions of the holders of each class of shares. It fixed those relative rights and authorized distribution of capital assets on that basis, from time to time as the trustees in their discretion should deem proper. It gave no direction for the disposition of the assets of the trust and, in my opinion, left the trustees free to follow any one of the methods provided in the declaration of trust.
For these additional reasons, I concur in the direction that the decree be vacated and that the complaint and interventions be dismissed.

The original declaration of trust provided:
“ * * * the Trustees may at their discretion terminate the Trust hereby created by dividing the Trust Funds or the proceeds thereof among the cestuis que trustent (shareholders), * * *. And in case of decision by the Trustees to terminate the Trust as herein provided, all property interests owned by 'the trust shall be converted into money and the proceeds of sale, less actual expenses, if any, incurred by said conversion of the Trust properties into cash, shall be distributed, in accordance to their respective interests, to the cestuis que trustent (shareholders) * * *.
“Should it seem judicious to the Trustees so to do, they may at their discretion convey the Trust Fund and other assets to the Trustees of a new trust or to a corporation, * * *. In such event the new Trustees, should conveyance be ■made to Trustees, shall succeed to all the powers conveyed by this Trust, if any exist. * * * ”

 It may be doubted that this could be done without violating the Oklahoma statute limiting the duration of a trust.

 See decree of state court of November 8, 1935, set out in opinion of Judge LEWIS.