The opinion of the court was delivered by: FAKE
This suit is based upon the theory that the defendant, a New Jersey corporation, is liable in certain damages claimed by the plaintiff because the defendant is an agent or alter ego of a Kansas corporation (the Derby Oil Company), and, as such, chargeable with the acts complained of.
It appears from the pleadings and the evidence before me that the Kansas corporation has been engaged for some years in the development of oil fields largely in the state of Kansas, and also engages in the refining, processing, and selling of crude oil and petroleum by-products. Its annual business runs into several millions of dollars as to all of which it keeps books and makes reports as from time to time required.
Some time after the incorporation of the Kansas corporation, the New Jersey corporation was incorporated for the purpose of buying and holding the capital stock of the Kansas company, and the only asset of the New Jersey corporation, aside from a note of the Kansas corporation, consists of the ownership of 99 9/10 per cent. of the capital stock of the Kansas company. By virtue of this stock holding, the New Jersey corporation has at all times been in a position to control the election of the directors and officers of the Kansas corporation and has exercised that power. This has resulted in a substantial interlocking of the directorates of the two corporations, and certain officers of the one have been and now are officers in the other, and counsel, auditors, and bookkeepers have acted for both companies. The New Jersey corporation keeps no books and has no business other than such as related directly to its aforesaid note and stock holding. Its franchise taxes and other expenses are all paid by advances from the Kansas corporation. The two corporations have signs displayed and transact their affairs at the same offices in Wichita, Kan., but the New Jersey corporation is not authorized to do business in Kansas.
In the year 1923, the plaintiff entered into a contract with the Kansas corporation by virtue of which the Kansas corporation was authorized to crack oil under patents held by the plaintiff, in consideration of certain royalty payments. A dispute has arisen between the parties to this agreement relating to its terms and conditions, but we are not now concerned with that particular phase of the case. It has been stipulated here that the court shall first dispose of the agency or alter ego issue above mentioned.
All that has been heretofore outlined amounts to nothing more than that the defendant New Jersey corporation is the controlling stockholder of the Kansas corporation and has exercised the prerogatives incident thereto. This, standing alone, is not sufficient to hold the New Jersey corporation liable as an agent or alter ego of the Kansas company. To create such a liability something more must appear. Owl Fumigating Corp. v. California Cyanide Co. (D.C.) 24 F.2d 718, affirmed (C.C.A.) 30 F.2d 812.
As bearing upon the additional factors required, it appears that in the offices of the two companies there was kept for use certain letterheads, one of which was headed:
"The Derby Oil and Refining Corporation
Producers, Refiners, Marketers
Petroleum and its Products
Strictly considered, this should be the stationery of the New Jersey corporation.
The other stationery was ...