339 P.2d 341
SINCLAIR PIPE LINE COMPANY, a Corporation, Appellant, v. STATE COMMISSION OF REVENUE AND TAXATION, ROY N. McCUE, IRA C. WATSON and JOHN L. MacNAIR as Members of and Composing Said Commission; THE BOARD OF COUNTY COMMISSIONERS OF THE COUNTY OF MONTGOMERY; THE CITY OF INDEPENDENCE, KANSAS; THE BOARD OF EDUCATION OF THE CITY OF INDEPENDENCE OF THE STATE OF KANSAS; Also Known as SCHOOL DISTRICT No. 5 of MONTGOMERY COUNTY, KANSAS; GUY SHERMAN (Substituted Defendant), County Treasurer of Montgomery County, Kansas; and ELDON SLOAN, State Director of Property Valuation (Substituted Defendant), Appellees.
No. 41,323Supreme Court of Kansas
Opinion filed May 16, 1959.
SYLLABUS BY THE COURT
1. TAXATION — Intangible Tax Situs of Stock — Cross-examination — Evidence — Findings and Conclusions. Certain alleged trial errors are examined and it is found: (a) The trial court is not shown to have committed any material error in allowing cross-examination of appellant’s witnesses; (b) The trial court is not shown to have excluded relevant evidence offered by the appellant; (c) The findings of fact were amply supported by the evidence and support the conclusions of law of the trial court.
2. SAME — Domicile of Origin — Domicile Commercial. The concepts of corporate domicile of origin and of commercial domicile are examined and found to be attempts to assign to corporations a status akin to citizenship or nationality, more accurately described as national character or state character.
3. TAXATION — Intangible Tax Situs Commercial Domicile. In an action to recover taxes paid under protest, the findings of fact and conclusions of law are examined and it is found that where a foreign corporation has established its principal and home office, commercial domicile and seat of government in Kansas from which it directs its entire business in several states and where it owns certain corporate stocks in other companies which are kept and managed at and from the commercial domicile of the corporation, and where it clearly appears that the ownership of said stocks not only produced income but was an integral part of appellant’s business, said corporate stocks had a tax situs in Kansas and were lawfully assessed for taxation under the intangible tax statute G.S. 1949, 79-3108 et seq.
Appeal from Montgomery district court; WARREN B. GRANT, judge. Opinion filed May 16, 1959. Affirmed.
Harold Medill and William Gough, Jr., both of Independence, argued the cause, and were on the briefs for the appellant.
John F. O’Brien, of Independence, and Peter F. Caldwell, of Topeka, argued the cause, and John P. Quinlan and Tom Crossan, both of Independence, and Glen Tongier, of Coffeyville, were with them on the briefs for the appellees.
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The opinion of the court was delivered by
JACKSON, J.:
This action was begun by the appellant, a Delaware corporation, to recover taxes paid under protest and assessed pursuant to G.S. 1949, 79-701 et seq. upon certain corporate stock owned by appellant. The case was tried to the court, which made extensive findings of fact, and held that the intangible tax under G.S. 1949, 79-3108 et seq. was validly assessed upon appellant’s property. Appellant has appealed from that decision.
This is the second appeal in this case. In the former appeal, in Sinclair Pipe Line Co. v. State Commission of Revenue Taxation, 181 Kan. 310, 311 P.2d 342, it was held that the venue of the action was correct; that the state of Kansas was immune from suit and should be dismissed as a party defendant, and that the plaintiff’s petition was sufficient as against a demurrer. Any further information concerning the former appeal is readily available in the opinion of the court in the former appeal.
However, before leaving the former appeal one contention of the plaintiff concerning the former decision may be answered. In several places in the present record and briefs, which together amount to some eight hundred pages, plaintiff contends that the former opinion is in some manner determinative of its rights on this appeal, and that the trial court therefore erred in its decision. It would appear that such contention is untenable. A short answer is that the former demurrer admitted the facts alleged in the petition, while the trial court’s present decision is based upon the facts shown at the trial of the case. There may be other reasons why plaintiff’s contention is not valid, but the foregoing will suffice.
In the caption of this appeal, it will be noted that there have been certain substitutions among the appellees who were defendants below. The reasons therefor are readily apparent, are immaterial to the questions now before the court, and need not be set out. The parties for the sake of brevity will be referred to as plaintiff and defendants.
As already noted, the district court at the close of the trial made extensive findings of fact. These findings are of importance and are set out, or in some instances summarized, in an appendix which follows this opinion.
In a general way, it may be said that the trial court concluded that plaintiff carried on its business from its home office in Kansas and in effect operated pipe lines in three different ways for the
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transportation of petroleum and petroleum products. Plaintiff has wholly owned pipe lines, pipe lines which it operates in conjunction with other pipe line companies in a rather unusual co-operative manner called undivided interest lines, and also holds stock in corporations which own pipe lines. The other stockholders in these corporations are other oil pipe line companies. It is this stock in the jointly owned pipe line companies which is the basis of the present action. The court found the stock company lines had a definite part in plaintiff’s over-all business and had a taxable situs at plaintiff’s home office in Kansas.
Based upon these findings the trial court made the following conclusions of law:
“CONCLUSIONS OF LAW
“1. The headquarters, principal place of business, corporate seat of government, and the commercial domicile of Sinclair Pipe Line Company at all times pertinent hereto was Independence, Kansas.
“2. The Court concludes that the ownership of the various shares of stock involved in this action formed an integral part of plaintiff’s business.
“3. The Court therefore concludes that such shares of stock had a tax situs within the State of Kansas, and that the decision of the State Commission of Revenue and Taxation, subjecting the ownership of such shares of stock to the Kansas intangible tax was lawful and proper.
“4. The Court, therefore, concludes that judgment should be entered in favor of the defendants and against the plaintiff herein, and that plaintiff should be adjudged to pay the costs of the action.”
It would seem the ultimate question to be decided upon this appeal is whether the findings of the trial court support the conclusions of law made.
Plaintiff objects at considerable length to many of the findings of the trial court, but when these objections are refined, it seems that at least one of the chief complaints is that defendants were allowed to use the annual reports of the Sinclair Oil Corporation, the parent holding company of the plaintiff, made under the signature of the president of the parent company, to cross-examine the executive officers of the plaintiff, and that these reports were admitted as exhibits. The facts about these reports are set forth in Finding 14 (appendix), and see also Findings 12 and 13. It is noted that plaintiff issues no published annual reports to stockholders, all of its stock being held by Sinclair Oil Corporation, but that the parent corporation regularly reports to its stockholders as to the condition of its subsidiaries including plaintiff. It will also be noted in the brief that the only actual objection urged against
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the use of these exhibits is that it was improper cross-examination. It does not appear in the record that this line of questioning was not proper cross-examination. The trial court did at one point suggest that perhaps defendants wished to make the witness their own. Perhaps, in effect, this was done. At any rate, the exhibits themselves were in the end introduced into evidence without further objection. It would seem the objection of the plaintiff really in its most favorable light comes down to a mere objection as to the order of proof, which is a matter of the discretion of the trial court, see Cunningham v. Cunningham, 178 Kan. 97, at p. 103, 283 P.2d 405, and cases cited. It seems clear that there was no reversible error on the part of the trial court in considering the annual reports of the Sinclair Oil Corporation, and in allowing the use of such reports in cross-examination of plaintiff’s executives.
Another objection is that the trial court excluded as irrelevant the offer of reports made to the Interstate Commerce Commission and tax returns made by plaintiff for income tax purposes. Plaintiff’s brief has failed to show that this exclusion constituted error since none of the reports are shown to have had bearing on the tax situs of the corporate stock involved in this action.
Running through all of plaintiff’s objections, we feel it unnecessary to take any other objection up particularly, is a claim that the trial court erred in disregarding the corporate entities of the various corporations involved. It would almost appear that plaintiff is not really disputing any of the facts — all of the facts were shown by the testimony of its own officers and the reports issued as to plaintiff’s condition by its parent corporation — plaintiff is only saying the court should have taken a narrower view of the picture. But it can hardly be maintained that the court was actually disregarding the corporate entity of the members of the Sinclair family when it merely took into account their relation to each other in the family (see Findings 12, 13, 14, 15, 16 and 20).
Returning to the corporate reports, in plaintiff’s reply brief is found rather an unusual statement relating to these reports, which included a map (plaintiff’s Exhibit “G”) showing the wholly owned pipe lines, the “undivided interest lines” and the pipe lines in which plaintiff has an interest through ownership of the stock involved in this action. As to this, the reply brief states:
“The only use defendants have shown plaintiff has made of stock company lines is that plaintiff draws them on a map for publicity purposes the same as
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undivided interest lines. Can this be a use of a pipeline facility? We think not.
“Use, not a publicity gimmick, is what counts.”
The only actual error in the findings of fact is that by inadvertence the trial court stated in Finding 11, see appendix, that plaintiff had paid without protest the taxes assessed by the state of Kansas on these stocks during the years “1951 to 1954″ inclusive. There is no argument about the matter, the year 1951 is perhaps a typographical error, the plaintiff did not own the stocks in 1951 and did not pay taxes thereon for that year. Likewise there is no dispute that plaintiff did pay the taxes for 1952, 1953 and 1954 without making any protest or complaint.
We now return to the conclusions of law made by the trial court which have been set out, supra. As to conclusion No. 1, relating to the fact that plaintiff’s commercial domicile is in Independence, Kansas, we fail to find any dissent upon the part of the plaintiff (see Findings 18 and 19). The only objection seems to be that the business and taxable situs of the stocks are not in Kansas — this will be discussed later — and that the only state having jurisdiction to tax the stock would be the state of Delaware, the state of plaintiff’s origin.
The theory of a corporation’s commercial domicile has not been before this court in prior cases and the concept merits some consideration. The matter of a commercial domicile of a corporation and the power to tax has been considered by the Supreme Court of the United States in several cases. In Wheeling Steel Corp. v. Fox, 298 U.S. 193, 80 L.Ed. 1143, 56 S.Ct. 773, the court in considering a case concerning the taxation of intangible property said in part:
“Second. — The Corporation complied with the laws of the State of its creation in designating its `principal’ office in that State. It is manifest that this designation, while presumably sufficient for the purpose, was a technical one and that the office is not a principal office so far as the actual conduct of business is concerned. While a duplicate stock ledger and records of transactions with respect to capital stock are maintained in Delaware, the business operations of the Corporation are conducted outside that State. The office in Delaware is maintained through the service of an agency organized to furnish this convenience to corporations of that description. To attribute to Delaware, merely as the chartering State, the credits arising in the course of the business established in another State, and to deny to the latter the power to tax such credits upon the ground that it violates due process to treat the credits as within its jurisdiction, is to make a legal fiction dominate realities in a fashion quite as extreme as that which would attribute to the chartering State all the tangible possessions of the Corporation without regard to their actual location.
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“The constitutional authority of West Virginia to tax the accounts receivable and bank deposits in question cannot be denied upon the ground that they are taxable solely in Delaware. The question is whether they should be deemed to be localized in West Virginia.
“Third. — The Corporation established in West Virginia what has aptly been termed a `commercial domicile.’ It maintains its general business offices at Wheeling and there it keeps its books and accounting records. There its directors hold their meetings and its officers conduct the affairs of the Corporation. There, as appellant’s counsel well says, `the management functioned.’ The Corporation has manufacturing plants and sales offices in other States. But what is done at those plants and offices is determined and controlled from the center of authority at Wheeling. The Corporation has made that the actual seat of its corporate government.” (pp. 211-212.)
Again in First Bank Corp. v. Minnesota, 301 U.S. 234, 81 L.Ed. 1061, 57 S.Ct. 677, we find a case involving a corporation created in Delaware and having a commercial domicile in Minnesota. The question was the power of Minnesota to tax intangible assets of the corporation. The court said:
“It (plaintiff) insists that as the shares are properly taxable by the respective states of their origin, and as due process forbids the imposition of a property tax upon intangibles in more than one state, they cannot be taxed in Minnesota.
“The logic is inexorable if the premises are accepted. But we do not find it necessary to decide whether taxation of the shares in Montana or North Dakota is foreclosed by sustaining the Minnesota tax. Nor need we inquire whether a non-resident shareholder, by acquiring stock in a local corporation, so far subjects his investment to the control and laws of the state which has created the corporation as to preclude any objection, on grounds of due process, to the taxation of the shares there, even though they are subject to taxation elsewhere, at their business situs. We leave those questions open. It is enough for present purposes that this Court has often upheld and never denied the constitutional power to tax shares of stock at the place of the domicil of the owner. (Citing cases.) And it has fully recognized that the business situs of an intangible affords an adequate basis for fixing a place of taxation. (Citing cases.)
“The rule that property is subject to taxation at its situs, within the territorial jurisdiction of the taxing state, readily understood and applied with respect to tangibles, is in itself meaningless when applied to intangibles which, since they are without physical characteristics, can have no location in space. See Wheeling Steel Corp. v. Fox, supra, 209. The resort to a fiction by the attribution of a tax situs to an intangible is only a means of symbolizing, without fully revealing, those considerations which are persuasive grounds for deciding that a particular place is appropriate for the imposition of the tax. Mobilia sequuntur personam, which has won unqualified acceptance when applied to the taxation of intangibles, Blodgett v. Silberman, 277 U.S. 1, 9-10, states a rule without disclosing the reasons for it. But we have recently had occasion to point out that enjoyment by the resident of a state of the protection of its laws is inseparable from responsibility for sharing the costs of its government,
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and that a tax measured by the value of rights protected is but an equitable method of distributing the burdens of government among those who are privileged to enjoy its benefits. See New York ex rel. Cohn v. Graves, 300 U.S. 308.” (Italics supplied.) (pp. 239-241.)
In Newark Fire Ins. Co. v. State Board, 307 U.S. 313, 83 L.Ed. 1312, 59 S.Ct. 918, a corporation created by New Jersey law was attempting to avoid a tax upon intangibles by that state by claiming a commercial domicile and business situs of the property in New York. The court found a failure in the proof as to the connection of the corporation with New York. In Memphis Gas Co. v. Beeler, 315 U.S. 649, 86 L.Ed. 1090, 62 S.Ct. 857, the court again considered the case of a foreign corporation having a commercial domicile in Tennessee.
It would seem pertinent to inquire as to the nature of the so called domicile of a corporation in the state of its origin, and also as to the nature of a commercial domicile. The law as to corporations has grown through the years often by the use of various fictions. It will be remembered that for many years it was thought that the legal entity of a corporation could not exist outside of the state of its creation. It would seem that the concept of the domicile of origin of a corporation is an attempt to assign to the corporation a kind of state citizenship or character. The Fourteenth Amendment makes every citizen of the United States a citizen of the state in which he resides. So even a corporation, which is not a citizen, gains certain rights and is subject to the jurisdiction of the state of its origin — of its domicile. The concept of the national character — citizenship of corporations — is much clearer when the question is between independent states or nations. In the Anglo-American law the national character of a corporation is primarily of the nation of its origin, but other tests are often applied. (Hyde, International Law [1945] 902-908.) In European countries, national character of corporations is often placed according to the nation of its home office — the siege social. (Hudson International Law [1951] 154; Bishop, International Law
[1953] 303.)
It should not be forgotten that international law controls the states of the United States in their relations one with another except as modified by the federal constitution. (Kansas v. Colorado, 185 U.S. 125, at p. 146, 46 L.Ed. 838, 22 S.Ct. 552 Connecticut v. Massachusetts, 282 U.S. 660, at p. 670, 75 L.Ed. 602, 51 S.Ct. 286.) In international law, a corporation is undoubtedly entitled to the
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protection and subject to the jurisdiction of the state or nation of its national character, so as to a corporation having the state character of one of the states of the United States. It is well known that state character is usually taken from the state under whose laws the corporation is created, but where the corporation does absolutely no business in the state of its origin, and has its home office for the direction of its entire business in another state where its officers reside, where its corporate meetings are held — what then? Should not such a corporation be said to be of the character of the last state? Such a situation would seem to call for the application of the doctrine of siege social or of the commercial domicile. Cannot it be found that plaintiff in this case is in fact a Kansas corporation. Perhaps it still retains also some of its Delaware character at least in Delaware. But it is quite common for individuals to possess dual nationality. If the plaintiff possesses the character of a Kansas corporation by having a commercial domicile in the state — the state of siege social, then the doctrine of mobilia sequuntur personam would make the taxable situs of its intangible property in Kansas if that property has no business situs elsewhere.
But in this case now before the court, it is not necessary to rely on the old theory or fiction. It would seem to be an inescapable conclusion that both the business situs and taxable situs of the corporate stock owned by plaintiff are in Kansas.
In an attempt to refute the proposition that the business situs of the stocks in question is in Kansas, plaintiff urges that it is only an investor in securities, and that these stocks have nothing to do with its pipe line business. If this were true, which the findings of the trial court show is not correct, would that mean that the stocks were only taxable in Delaware?
The stocks are kept in Kansas (Finding 29) with the exception of the stock of the Great Lakes Pipe Line Company which was purchased at the time of plaintiff’s incorporation from the Sinclair Oil Corporation in accord with an agreement with two national insurance companies under which agreement the insurance companies loaned plaintiff the sum of eighty million dollars. As a part of this agreement it would seem that the Great Lakes stock is kept in New York (Finding 30). The Part Interests department of the home office in Independence manages all the affairs and interests of plaintiff in these stock companies and as to the stock. It will be noticed that plaintiff does have power and authority
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under its charter of incorporation to act as investor (Finding 1B2) as well as to own and operate pipe lines and other transportation facilities. But if plaintiff is only exercising this “second corporate power” under its charter, where would plaintiff say this business is carried on? Certainly, not in Delaware, where it is admitted plaintiff conducts no business of any kind. The stock is owned, managed and kept at the commercial domicile of plaintiff’s entire business at Independence, Kansas. Even then the business situs of plaintiff’s investing business must be in Kansas.
But the trial court found more concerning plaintiff’s business. In Findings 21 to 32, inclusive, the court analyzes the whole manner of the plaintiff’s business and finds that not only is plaintiff acting as an investor, but that it is investing only in stocks of companies which will in fact extend the pipe line system of the plaintiff.
While it will not be necessary to copy the findings referred t supra, it will be noted that in Finding 25, it is shown that the Part Interests department of plaintiff supervises the undivided interest lines, which are admitted by plaintiff to be part of the Sinclair system of pipe lines, and also supervises the plaintiff’s interest in the pipe lines jointly owned by plaintiff through stock ownership. It is also the duty of this department to consider and appraise possibilities of participating in additional pipe line facilities either by way of undivided interests lines or jointly owned lines by way of corporate stock ownership. It is further shown that in participating in stock ownership companies of this character and in the formation of new companies of this type, the Part Interests department may and does call upon all of the facilities of the plaintiff company to aid in the formation and even the construction of such pipe lines.
We have not taken the space to set out all of Finding 31 in the appendix as to the details of each of the jointly owned stock companies as set forth by the trial court, but the court concluded the finding as follows:
“The Court further finds that in most of the companies that Sinclair actively participated in their formation. Sinclair furnished capital and also actively assisted in the engineering, planning and construction of the lines. For example, during its formative period the Platte Pipe Line Company was located in the Sinclair Building at Independence, Kansas. Sinclair Pipe Line Company loaned to Platte Pipe Line Company various of its key employees who assisted Platte Pipe Line Company in the acquisition of right of way, engineering of the line, and the construction of the line. Although not necessarily
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true in all of the cases, Sinclair Pipe Line Company did in fact render active assistance in acquisition of right of way, engineering, planning and construction of other of the pipe lines involved with the exception of Texas-New Mexico Pipe Line and Great Lakes Pipe Line.”
Of course, plaintiff is represented on the board of directors of all of these jointly owned stock companies (Finding 21, II. et seq.) with the exception of the Great Lakes Pipe Line Company as to which there is a special arrangement, see supra.
Thus, plaintiff participates in the control of the stock companies. Plaintiff argues with much vehemence that plaintiff does not have complete control of the stock companies, but business has been carried on for centuries by joint ownership. Plaintiff does not have complete control of the undivided interest pipe lines, and raises no question concerning that means of doing business.
All in all, this court like the trial court “has some difficulty in perceiving any real practical difference insofar as the issues concerning this law suit are involved between the ownership of stock by plaintiff in another pipe line company and the ownership of an undivided interest in another pipe line system.” (Finding 21 IC) Of course, in plaintiff’s Exhibit “G” (see Finding 22) Sinclair reported to its stockholders and the public that there was no difference between the two types of ownership, but perhaps this was only a publicity gimmick as said in plaintiff’s reply brief.
All of the plaintiff’s objections to the findings of fact have been carefully considered and the court is of the opinion there is no material error in the findings. It is also of the opinion that the findings of fact fully support the conclusions of law, and that the decision of the trial court should be affirmed. It is so ordered.
APPENDIX
“FINDINGS OF FACT.
“1.
“That plaintiff is a corporation organized and existing under
and by virtue of the laws of the State of Delaware; that said
corporation is qualified to do and transact business in the state
of Kansas as a foreign corporation, and that said plaintiff at
all times herein pertinent did maintain its principal business
office and headquarters in Independence, Kansas. That said
plaintiff maintained its commercial domicile at Independence,
Kansas.
“(A) That the certificate of incorporation of
Sinclair Pipe Line Company
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was duly filed in the office of the Secretary of
State of the State of Delaware on November 9, 1950.
“(B) That as declared in said certificate of
incorporation by plaintiff, the nature of the
business, or objects, or purposes, to be transacted,
promoted or carried on by the corporation, among
other things, were:
“1. To build, construct, equip, purchase, lease or
otherwise acquire, hold, own, control, maintain and
operate pipe lines, pipes, tubes, conduits,
conveyors, tank cars, boats, barges or other
conveyances, tanks, storage facilities, compressors,
pump stations, booster stations, control stations,
buildings and improvements, and all other necessary
or desirable facilities, equipments and appurtenances
(including but without limitation telegraph lines,
telephone lines, radio communication systems and
other systems or means of communication, water and
gas lines and aircraft), for the receipt, gathering,
transportation, carriage, conveyance, storage,
handling, measuring, purchase, sale, marketing and
distribution of crude petroleum and the products and
by-products thereof (including but without limitation
gasoline, gas casinghead, kerosene, naphtha, natural
gas and the products and by-products thereof
including but without limitation natural gasoline and
other liquefied gases), coal and all mineral or
volatile substances and the products and by-products
thereof, salt, brine, and other mineral solutions,
both for itself and other persons and corporations
for hire or otherwise.
“2. To acquire by purchase, subscription or
otherwise, and to receive, hold, own, guarantee,
sell, assign, exchange, transfer, mortgage, pledge or
otherwise dispose of or deal in and with any of the
shares of the capital stock, or any vote in trust
certificates in respect to the shares of capital
stock, script, warrants, rights, bonds, debentures,
notes, trust receipts, and other securities,
obligations, choses in action and evidences of
indebtedness or interest issued or created by any
corporations, joint stock companies, syndicates,
associations, firms, trusts, or persons, public or
private, or by the Government of the United States of
America, or by any foreign government, or by any
state, territory, province, municipality or other
political sub-division, or by any governmental
agency, and as owner thereof to possess and exercise
all the rights, powers and privileges of ownership,
including the right to execute consents and vote
thereon, and to do any and all acts and things
necessary or advisable for the preservation,
protection, improvement, and enhancement in value
thereof.”
2.
The Court finds that plaintiff was authorized to do business in
Kansas as a foreign corporation on December 15, 1950. That the
nature and character of the business of said corporation was
“Transportation of petroleum and its products by pipeline in
interstate commerce.”
FINDINGS 3, 4, 5, 6, 7, 8, 9, 10, 11.
All of these findings deal with the filing of plaintiff’s tax
returns before the State Commission of Revenue and Taxation for
the year
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1955 and the assessment of the tax on the property, together with
the protest thereof by the plaintiff and need not be set out
herein.
“12.
“The Court finds from the evidence that the Sinclair Pipe Line
Company is a wholly owned subsidiary of the Sinclair Oil
Corporation and that the said Sinclair Oil Corporation is
organized under the laws of the State of New York. The Court
finds that the Sinclair Oil Corporation bears the relationship of
parent corporation to plaintiff, Sinclair Pipe Line Company.
“13.
“The Court further finds from the evidence that in addition to
Sinclair Pipe Line Company that the Sinclair Oil Corporation has
other wholly owned subsidiaries, some of which are as follows:
“Sinclair Oil and Gas Company, headquarters, Tulsa,
Oklahoma, whose business is crude oil exploration and
production in the United States and that a subsidiary
of the Sinclair Oil and Gas Company, called Sinclair
Canada Oil Company conducts similar operations in the
Dominion of Canada.
“Sinclair Crude Oil Company, headquarters, Tulsa,
Oklahoma, which engages in the purchase and sale of
crude oil.
“Sinclair Refining Company, headquarters, New York
City, New York, whose business is petroleum refining,
product marketing and marine operations, and that in
marketing operations, several Sinclair subsidiaries
distribute under their own names in individual areas,
such as Richfield Oil Corporation of New York,
Sherwood Brothers, Inc., Baltimore, Maryland, Hughes
Oil Company, Chicago, Illinois, Stoll Oil Refining
Company, Louisville, Kentucky.
“Sinclair Research Laboratories, Inc., whose
business is the research development of petroleum
products.
“Sinclair Chemicals, Inc., New York, which engages
in petrochemical development and marketing.
“14.
“The Court further finds that Sinclair Pipe Line Company as
such publishes no annual report to stockholders and publishes no
financial information available to the general public except that
Sinclair Pipe Line Company does make a return and file such
information as required of it by law with the Interstate Commerce
Commission. The Court finds from the evidence that the Sinclair
Oil Corporation publishes an annual report to the stockholders in
booklet form. The Annual Reports of the Sinclair Oil Corporation
for itself and subsidiaries for the years 1949, 1950, 1951, 1953,
1954, 1955, were marked in the trial of this action as Exhibits.
Testimony therefrom was elicited from various witnesses and said
Annual
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Reports were offered in evidence and received. The court finds
that each of these reports were signed by P.C. Spencer, President
of the Sinclair Oil Corporation by the order of the Board of
Directors of Sinclair Oil Corporation.
“15.
“The court finds that in each of these reports the word
`Sinclair’ is used to describe the parent company Sinclair Oil
Corporation and or any of its subsidiaries, individually or
collectively.
“16.
“The Court finds that the Sinclair Oil Corporation through its
subsidiaries performs the functions and conducts the business of
an integrated oil company. By that the Court means that the
Sinclair Oil Corporation through subsidiaries, is engaged in all
principal functions of the petroleum industry-production,
transportation, manufacture and marketing. The Court further
finds that in order for Sinclair (and here the Court uses the
term Sinclair to mean and include all of the integrated functions
of the various Sinclair companies) to operate profitably as a
whole, it is necessary that the cost of each separate operation
be kept under constant scrutiny and that it is necessary that
each operation should stand on its own feet and carry its own
burden of expense (1951 Annual Report, Page 3).”
17.
In this finding the Court showed the stock owned by the
plaintiff in the various pipe line companies herein involved. The
amount of stock in individual companies need not be set out and
the companies involved were: Badger Pipe Line, Goodall Pipe Line,
Great Lakes Pipe Line, Pawnee Pipe Line, Pioneer Pipe Line,
Platte Pipe Line, Texas-New Mexico Pipe Line.
“18.
“The Court finds that Sinclair Pipe Line Company has no
property and transacts no business within the State of Delaware
in the general meaning of the terms. The Court does find that
Sinclair Pipe Line Company has an office in the State of Delaware
and maintains such records in the State of Delaware as are
necessary to comply with the laws of the State of Delaware for
incorporation purposes. The Court specifically finds that the
State of Delaware is, so far as the Sinclair Pipe Line Company is
concerned, its domicile,
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a mere legal domicile, in which the corporation carries on none
of its activities relating to its business operations.
“19.
“The Court finds that the State of Delaware does not levy any
tax upon plaintiff by reason of its ownership of stock in
corporations here in question, and that no other state other than
the state of Kansas has ever levied any tax upon plaintiff by
reason of ownership of said stocks or asserted, or attempted to
assert, any right to tax said stocks.
“(A) The Court finds that the commercial domicile of Sinclair
Pipe Line Company is located at Independence, Kansas. The Court
finds that all of the directors of said Company, with the
exception of one director, live in Montgomery County, Kansas, and
live either in or in the immediate vicinity of Independence,
Kansas. The Court further finds that all of the officers of
Sinclair Pipe Line Company live either in Independence, Kansas,
or in the immediate vicinity thereof. The Court finds that the
principal office of the Sinclair Pipe Line Company is located in
a five-story stone and mortar building located in Independence,
Kansas. That in the Annual Reports of the Sinclair Oil
Corporation that Independence, Kansas, is listed as being the
headquarters of Sinclair Pipe Line Company. The Court finds that
Sinclair Pipe Line Company has approximately 475 employees in
Independence, Kansas, and that the general accounting,
engineering, legal and other main offices of the Company are
located in said building in Independence, Kansas. The Court finds
that the seat of the corporate government of Sinclair Pipe Line
Company is in Independence, Kansas. The Court finds that the
Company does have some other offices at various other locations
but that none of the other locations may be considered in the
same category as the office in Independence, Kansas.
“(B) The Court finds that the annual meeting of the
stockholders of Sinclair Pipe Line Company is held in
Independence, Kansas. That at said annual meeting of the
stockholders a proxy of Sinclair Oil Corporation is given to
various executives of Sinclair Pipe Line Company with
instructions from Sinclair Oil Corporation as to the voting of
said stock at the annual meeting. The Court finds that directions
are given by the executive authority of the parent company to
said proxy as to whom to elect as directors for Sinclair Pipe
Line Company at said annual meeting. The Court further finds that
the annual meeting of the directors is held at Independence,
Page 727
Kansas, and that said directors are instructed by the executive
authority of the parent company as to whom to elect as officers
for Sinclair Pipe Line Company. The Court finds that customarily
all meetings of the Board of Directors are held in Independence,
Kansas, with the exception that on occasion meetings of the Board
of Directors of Sinclair Pipe Line Company are held at other
places, but that the customary and regular meeting place of the
Board of Directors of Sinclair Pipe Line Company is at
Independence, Kansas. The Court finds that one meeting of the
Board of Directors of Sinclair Pipe Line Company was held in New
York City, which meeting was held in the meeting room of the
Board of Directors of Sinclair Oil Corporation.
“20.
“The Court finds that in order for Sinclair Oil Corporation,
through its subsidiaries, to compete in modern business with
other major oil companies that it is necessary that Sinclair Oil
Corporation and its subsidiaries have adequate pipe line
facilities for the transportation of crude oil and refined
products. The Court finds that the Sinclair Pipe Line Company is
the vehicle or instrumentality which furnishes such needed pipe
line facilities to Sinclair Oil Corporation and its subsidiaries.
“21.
“The Court finds that the business of Sinclair Pipe Line
Company, both from the statements contained in its Articles of
Incorporation and in actual practice and effect, is as follows:
“A. To furnish the vehicle or provide the means and
facilities for transporting crude oil and refined
petroleum products in pipe lines for wholly owned
subsidiaries of Sinclair Oil Corporation.
“B. In addition to furnishing such necessary
facilities for subsidiaries of the Sinclair Oil
Corporation that the business of the Sinclair Pipe
Line Company is to furnish transportation of crude
and refined petroleum products in pipe lines to any
other company desiring to use the facilities of the
Sinclair Pipe Line Company. That actually the
business of the Sinclair Pipe Line Company is to
transport in pipe lines crude oil and refined
petroleum products for a profit.
“C. The Court further finds that the purchase and
ownership by Sinclair Pipe Line Company of the shares
of stock in other pipe line companies is for the
furtherance and enhancement of the said business of
Sinclair Pipe Line Company.
The Court further finds that at all times pertinent Sinclair
Pipe
Page 728
Line Company has used three types of ownership in order to carry
out its business purposes above stated. These are:
“I.A. Wholly owned lines. Sinclair Pipe Line
Company has certain wholly owned crude and products
lines. These lines were either purchased by or
constructed by Sinclair Pipe Line Company and are
used by Sinclair Pipe Line Company for interstate and
intrastate shipment of crude and refined petroleum
products for subsidiaries of Sinclair Oil Corporation
and for other companies.
“I.B. Undivided interest lines. In certain
situations, Sinclair Pipe Line Company has associated
itself with other parties (principally major oil
companies) and built and constructed what are
commonly referred to as undivided interest lines. In
this type of ownership each of the participating
companies owns a percentage of the space in the line
in proportion to the respective contribution of
capital by each company for the construction of the
line. This type of ownership is not a partnership
since each of the companies participating in the line
owns an undivided interest in the line and is
entitled to receive the transportation charges under
its own tariffs for the oil transported through its
space in the lines.
“I.C. Stock company ownership. This is the type of
ownership with which we are here involved. In this
situation Sinclair has associated itself with one or
more major oil companies and such companies have
contributed capital through the purchase of stock in
a new corporation which the participating companies
have caused to be created. Such new company has then
caused a new pipe line facility to be built and
constructed. The Court notes that in the case of the
Goodall Pipe Line Company that Sinclair Pipe Line
Company associated itself with an individual to form
the new corporation rather than another major oil
company and the Court also notes that the Texas-New
Mexico Pipe Line Company was formed prior to the
existence of Sinclair Pipe Line Company but finds
that Consolidated Oil Corporation was one of the
major oil companies participating in the formation of
the Texas-New Mexico Pipe Line Company. That the name
of the Consolidated Oil Corporation was subsequently
changed to Sinclair Oil Corporation and that when
Sinclair Pipe Line Company was organized that the
shares of stock owned by Sinclair Oil Corporation by
reason of the participation of Consolidated Oil
Corporation in Texas-New Mexico Pipe Line Company
were transferred or sold to Sinclair Pipe Line
Company. The Court also notes that the shares of
stock in the Great Lakes Pipe Line Company were owned
by Sinclair Refining Company prior to the
incorporation of Sinclair Pipe Line Company and that
the shares of stock owned by Sinclair Refining
Company were sold or transferred to Sinclair Pipe
Line Company immediately after the organization of
the Sinclair Pipe Line Company.
“The Court has some difficulty in perceiving any real practical
difference insofar as the issues concerning this law suit are
involved between the ownership of stock by plaintiff in another
pipe line company and the ownership of an undivided interest in
another pipe line system. However, since counsel for plaintiff
has so consistently
Page 729
and strongly urged the difference between the two types of
organization, the Court makes the following findings:
“II. A. Whether the pipe lines are `Wholly Owned,’
`Undivided interest lines,’ or `stock company
ownership lines,’ all of the pipe lines in which
plaintiff owns an interest are operated either in
interstate commerce or intrastate commerce. If
operated in intrastate commerce the operation of such
lines is subject to the control of such regulatory
state bodies and administrative rules and regulations
as may be prescribed by the law of the state in which
such operation is conducted. If such lines operate in
interstate commerce, then they are subject to the
rules and regulations of the Interstate Commerce
Commission and the laws of the United States of
America pertaining to common carriers.
“II. B. The Court finds that crude oil and
petroleum products move in pipe lines under what is
commonly referred to as a `tariff’ which is the term
used in the business to describe and designate the
rate charged for the transportation service rendered
by the transporting carrier.
“II. C. In many instances a movement of such crude
or products in pipe lines will involve transportation
through lines owned by two or more different
carriers. In such cases the carrier which first
receives the oil for movement is designated as the
`originating carrier.’ Subsequent carriers are
designated as `connecting carriers.’
“II. D. The Court finds that the shipper or the
party owning the oil and tendering the oil for
movement through one line or a series of connecting
lines designates the route over which such oil shall
move, if there is more than one possible route for
such movement.
“II. E. The Court also finds that the oil tendered
for shipment at all times is the property of the
shipper through its movement through one line or a
series of connecting lines.
“II. F. The Court finds that in the case of a
`wholly owned’ line that the company owning the line
publishes tariffs under the control and subject to
regulatory agencies covering the rates charged for
movement in its wholly owned lines.
“II. G. In the case of connecting carriers, the
Court finds that the rates for movement are governed
by `joint tariffs’ which means that under a joint
tariff a rate is published governing the movement of
oil through two or more lines differently owned.
“II. H. In the case of the `undivided ownership’
lines in which plaintiff participates, the Court
finds that each of the companies owns an undivided
interest in the space or capacity of the line. That
each participating party publishes its own tariffs.
That if a shipper wishes to ship over the line, that
the shipper tenders his oil for shipment directly to
one of the owning companies and each owning company
owning space in the line collects its own revenues
from other shippers using its space in the line. The
court finds that being a common carrier for hire,
that all shipments tendered must be accepted
providing there is sufficient capacity in the line,
and that if the capacity of the line is not
sufficient for all parties desiring to use it the
capacity is pro rated among various shippers.
“II. I. In the case of the `stock ownership’ lines,
the Court finds that each
Page 730
such company is organized as a corporation. Each such
corporation has a board of directors. Officers for
each corporation are elected by the board of
directors.
“II. J. The Court finds that each stock company
publishes its own tariffs. In most instances the line
is operated by the corporation through its own
employees and personnel, although in some instances
the line is operated and maintained under an
operating agreement with one of the participating
companies.
“II. K. The Court finds that with regard to the
stock companies that the companies participating in
the formation are represented on the board of
directors of such company by employees of the
respective participating companies in the approximate
proportion that they have contributed to the capital
of the company and own stock in said company.
“II. L. The Court finds that the stockholders of
the respective stock ownership companies elect the
directors at annual meetings of the stockholders held
in accordance with the respective by-laws of the
companies. That in each instance the participating
companies elect employees of such participating
companies in proportion to stock ownership. In this
connection, however, the Court notes that in regard
to the Great Lakes Pipe Line Company that Sinclair
Pipe Line Company does not have any employee serving
on the board of directors of the Great Lakes Pipe
Line Company.
“II. M. The Court further finds that the board of
directors of the various stock companies elect the
officers for such respective companies.
“II. N. The Court further finds that the various
companies owning stock in companies in question
jointly participate in the management and control of
these companies through representatives of the
forming companies serving as officers and members on
the boards of directors. Such forming companies own
all of the stock of such companies.
“II. P. The Court finds that the said employees of
the Sinclair Pipe Line Company serving on the various
boards of directors or as officers of the stock
companies involved, receive no compensation from the
various companies for which they serve as directors
or officers. The Court further finds that the
meetings of such boards of directors are held at
various places throughout the country. That said
employees of Sinclair Pipe Line Company customarily
attend such directors’ meetings and that the expenses
for travel, and other expenses incurred by them in
connection with attending said meetings are borne by
Sinclair Pipe Line Company.
“II. Q. That such employees of Sinclair Pipe Line
Company so serving on the boards of directors of said
companies represent the interests of Sinclair Pipe
Line Company in said stock companies and the purpose
of having said employees of Sinclair Pipe Line
Company serve upon the various boards of directors is
to represent and protect the interest of Sinclair
Pipe Line Company in said stock companies.
“II. R. The Court further finds that Sinclair Pipe
Line Company through its right to vote its stock at
the annual stockholders meeting, and through its
representatives upon the various boards of directors
actively participates in the control and management
of such companies in direct proportion to its
ownership of the capital stock.
Page 731
“22.
“The Court has examined with particular care plaintiff’s
Exhibit `G’ which was received in evidence, and which is a map
published by plaintiff showing the various pipe line systems
owned by plaintiff or in which plaintiff has interest. The Court
has also examined the written statement contained on the reverse
side of said Exhibit entitled `Sinclair’s Pipe Line Systems.’
“The Court finds that said statement is of particular value in
understanding the operation of the Sinclair Pipe Line System and
its place in the general structure of the Sinclair Oil
Corporation and, therefore, makes the following finding of fact,
in accordance with said statement therein contained: `Crude Oil
at a well head in Texas is of no value to the Sinclair Refinery
in East Chicago, and gasoline in Houston is useless to a service
station in Kansas City unless some effective method of
transportation is employed. Petroleum, to be of value and
service, must usually move over great distances before it can be
utilized. Because pipe lines offer the lowest cost for overland
movement of petroleum, they play a major role in this field.
Sinclair has long recognized this fact, and through Sinclair Pipe
Line Company (headquarters: Independence, Kansas) makes effective
use of one of the largest pipe line systems in the world to
transport, as a common carrier, crude oil and petroleum products
for both Sinclair and other shippers. Sinclair’s wholly owned and
operated crude lines extend more than 8,700 miles and serve most
of the major producing areas in the country. All of the Sinclair
refineries are supplied with crude petroleum by pipe lines
excepting the Marcus Hook, Pennsylvania, refinery, which is
supplied by ocean tanker. These lines assure Sinclair’s
refineries steady supplies of the proper crude oils needed to
make high grade Sinclair products. They operate `round the clock,
untroubled by many of the conditions which frequently hamper
other methods of overland transportation. Sinclair’s
approximately 3,000 miles of wholly owned products pipe lines
comprise the most extensive single products pipe line system in
the whole world, and carry gasolines, heating oils, diesel oils,
kerosene and various other refined products for Sinclair and
other shippers into the most populous markets. They provide the
lowest cost of transportation available in the areas served, an
essential requirement in the highly competitive oil industry,
where costs and prices must be figured to fractions of a cent.
The magnitude of this wholly
Page 732
owned crude and products pipe line system, which reaches from the
Gulf of Mexico into the State of New Jersey, and a separate
system serving the state of Wyoming is indicated by its annual
delivery of approximately 135 million barrels of crude oil and 40
million barrels of refined petroleum products. Approximately 48
million people live within a 50 mile radius of Sinclair’s wholly
owned products lines, and over 82 million people — or more than
half the population of the entire United States — live within the
same 50 mile radius of Sinclair’s wholly owned, jointly owned and
connecting carrier lines. To supplement its wholly owned crude
and products pipe lines, Sinclair is rapidly expanding its
interests in pipe lines jointly owned and operated with other
companies. These joint interest pipe lines, both crude and
products, have now reached a total of approximately 10,000
miles.’
“24.
“To understand the integration of the Sinclair Oil Corporation
and its subsidiaries and the place of the Sinclair Pipe Line
Company in this integrated operation, the Court makes the
following findings:
“A. The Sinclair Oil and Cas Company is the wholly
owned subsidiary of Sinclair Oil Corporation which
engages in prospecting and drilling for crude oil.
“B. After the crude oil is produced by Sinclair Oil
and Gas Company it is purchased by the Sinclair Crude
Oil Company.
“C. After the crude has been purchased by the
Sinclair Crude Oil Company, some of it is then moved
to refineries owned by the Sinclair Refining Company
which is likewise a wholly owned subsidiary of
Sinclair Oil Corporation. The crude remains the
property of the Sinclair Crude Oil Company until it
is delivered to and sold to the Sinclair Refining
Company. The crude may be moved by various means,
such as, barges, trucks, or pipe lines. However, pipe
line transportation is the most economical and best
for overland transportation and where overland
transportation is necessary the crude is moved
through pipe lines where at all possible.
“D. The Sinclair Pipe Line Company through its
ownership of wholly owned lines, or its ownership of
interests in other lines (and by such ownership the
Court refers to ownership either in undivided lines
or stock company lines) furnishes the principal
facility for such pipe line transportation to the
Sinclair refineries. The Sinclair Pipe Line Company
as such, regarding the Sinclair Pipe Line Company as
a separate corporate entity, never at any time has
any actual ownership of any crude oil or refined
products. However, where possible, crude belonging to
the Sinclair Crude Oil Company is shipped over the
Sinclair Pipe Line System (meaning wholly owned
lines, undivided interest lines, or stock company
lines).
“E. After the refinery has refined crude oil then
the products must be shipped to market. Various means
are utilized for such shipment, such as, truck,
barge, and pipe lines. However, for overland
transportation of products
Page 733
refined by Sinclair Refining Company and marketed by
it, pipe line transportation is the best and most
economical form of transportation. Where possible
refined products are shipped over products lines
owned by Sinclair Pipe Line Company, or in which it
has an interest.
“25.
“The Court finds that the Sinclair Pipe Line Company maintains
at Independence, Kansas, a department which is known as the part
interests department. In 1955, Mr. Earl W. Unruh, who is now
president of The Sinclair Pipe Line Company, bore the title of
part interests executive and was in charge of that department.
The Court finds that it is the function of the part interests
department to look after and supervise the interests of Sinclair
Pipe Line Company in the undivided interests lines and also the
interests of Sinclair Pipe Line Company in the stock ownership
companies.
“In addition to such function it is the function of this
department to serve and appraise the possibility or feasibility
of Sinclair Pipe Line Company participating in other and
additional pipe line facilities. That it is the function of this
department to appraise and consider participation in further
undivided interest lines as well as further participation in
stock ownership lines.
“The Court finds that when the said part interest department is
considering participation in other such lines that it has
available and may call on and does call upon all the facilities
of the Sinclair Pipe Line Company, including any of its
departments whose services may be necessary or desirable such as
the engineering department, accounting department and legal
department for advice and assistance in its consideration of such
participation in such other lines.
“26.
“The Court finds that the Sinclair Pipe Line Company through
its part interest department has never considered, nor is it now
considering, participation in any additional pipe line facilities
which have not or would not directly or indirectly serve some
wholly owned subsidiary of the Sinclair Oil Corporation.
“27.
“The Court finds that prior to the formation of the Sinclair
Pipe Line Company that Sinclair Refining Company Pipe Line
Division performed the functions of supplying pipe line
transportation for Sinclair Oil Corporation and its subsidiaries
now performed by Sinclair Pipe Line Company. The Court finds that
the Sinclair Pipe Line Company was organized to own and operate
the pipe line
Page 734
properties previously operated as a department of the Sinclair
Refining Company. The Court finds that most of the pipe line
facilities of Sinclair Refining Company were transferred to
Sinclair Pipe Line Company after its organization. The Court
finds that this step was taken for the purpose of obtaining
increased operating efficiency and to enable Sinclair Oil
Corporation and its subsidiaries better to supply the increasing
demands of refineries for raw material and to more efficiently
accomplish distribution of products (1950 Annual Report).
“28.
“The Court finds that Sinclair Pipe Line Company was organized
for profit and that any profit made by the Sinclair Pipe Line
Company enures solely and only for the benefit of its only
stockholder, Sinclair Oil Corporation. The Court finds that since
its organization in 1951 that it has been the custom and practice
of the Sinclair Pipe Line Company to keep all dividends received
by it resulting from ownership of stock in the various stock
companies in a segregated account and when a dividend is paid by
Sinclair Pipe Line Company to Sinclair Oil Corporation to
specifically designate which part of the dividend is paid with
funds resulting from dividends received from other companies and
which part is paid out of operating revenues. The Court, however,
attaches no particular significance to the segregation of such
dividends since from the evidence the Court finds that the
dividends paid to the parent company representing receipt of
dividends resulting from stock ownership formed a significant
part of the total dividends paid. The Court finds that on
December 14, 1954, a dividend of three million dollars was
declared by Sinclair Pipe Line Company. Of this amount
$1,251,652.00 was designated as coming from dividends received
and the sum of $1,748,348.00 was designated as coming from
current earnings from operations. The Court finds that of said
dividend of $3,000,000.00 that 42% of said dividend resulted from
ownership by Sinclair Pipe Line Company of the various stocks
here involved, and that the use of these dividends resulting from
stock ownership as part of the dividend paid to the parent
company released exactly that additional amount of earnings from
operations by it for use in its business operations. The Court
also finds from testimony of Mr. J.H. Amend, auditor of the
company, that it made no practical difference whether such
dividend of $3,000,000.00 was declared from earnings or from
earnings and dividends received. The Court also specifically
Page 735
finds that said policy of segregating dividends received from
stock ownership was in effect during the years 1951, 1952, 1953,
1954, in which years the Sinclair Pipe Line Company paid the
intangible tax levied upon its ownership of said stock without
protest.
“29.
“The Court further finds from the evidence that the actual
certificates evidencing the ownership of Sinclair Pipe Line
Company of the various shares of stocks in the companies here
involved are all located in a safety deposit vault owned by
Sinclair Pipe Line Company in Independence, Kansas, with the
exception of the certificate or certificates, evidencing the
ownership of stock in Great Lakes Pipe Line Company, which
certificate is located in a safety deposit box in New York City.
“30.
“The Court further finds that the Sinclair Pipe Line Company
was commenced, or that the business of the Company was started
with a paid capital of $100,000.00. The Court further finds that
under certain debenture purchase and debenture agreements
executed between plaintiff and the Equitable Life Assurance
Society of the United States and Metropolitan Insurance Company,
that Sinclair Pipe Line Company borrowed the sum of
$80,000,000.00. That among other requirements contained in said
debenture purchase agreements and in said debenture agreement it
was required of plaintiff that plaintiff should have acquired
from Sinclair Refining Company shares of stock in the Great Lakes
Pipe Line Company which plaintiff now owns, and also that it
should have acquired from Sinclair Oil Corporation the stock of
the Texas-New Mexico Pipe Line Company which it now owns, and
that it should have acquired from Sinclair Oil Corporation the
shares of stock in Platte Pipe Line Company which it now owns,
with the exception of 750 shares of stock of the Platte Pipe Line
Company subsequently acquired. That said debenture agreement
further required that Sinclair Pipe Line Company should assume
the obligation of Sinclair Oil Corporation to loan to Platte Pipe
Line Company the sum of $540,000.00. The Court further finds that
said Sinclair Pipe Line Company subsequently did loan to Platte
Pipe Line Company the sum of $540,000.00. The Court further finds
that the said Annual Report of the Sinclair Oil Corporation and
its subsidiaries is the only general report made available to the
public of the operations and
Page 736
financial status of the Sinclair Oil Corporation and its
subsidiary companies other than such information as is required
by law to be filed with the Interstate Commerce Commission. The
Court finds that said Annual Reports contain a consolidated
balance sheet showing all of the assets of the subsidiaries of
Sinclair Oil Corporation as well as consolidated statement of
liabilities and earnings. The Court finds that said consolidated
balance sheet shows the value of the stocks in question owned by
the Sinclair Pipe Line Company as being a part of the
consolidated assets of Sinclair Oil Corporation and its
subsidiaries. Likewise, the Court finds that the liabilities of
Sinclair Pipe Line Company such as the 25 year 3 3/8% sinking
fund debentures referred to in the previous findings are shown as
a liability in the consolidated balance sheet. Likewise, the
Court finds that the dividends received by Sinclair Pipe Line
Company from the stocks in question are reflected in the
consolidated earnings statement. For example, the Court finds
that in 1955 the consolidated income statement showed that in
1955 Sinclair Oil Corporation had a net income of $6.01 per
share. The Court finds that the dividends received by Sinclair
Pipe Line Company and paid to Sinclair Oil Corporation were
reflected in and showed as a part of the said figure of $6.01 per
share reported in the Consolidated Income Statement of Sinclair
Oil Corporation.”
NOTE: In Finding No. 31, the court found the specific facts
concerning all of the companies in which the plaintiff owned
stock and their connections to the plaintiff’s business. Finding
No. 32 concerns the dividends received from the stock owned by
the plaintiff.
Page 737
