Bomar v. Smith

• Decision Date: 10 March 1917
• Docket Number: (No. 7629.)
• Citation: 195 S.W. 964
• Parties: BOMAR et al. v. SMITH et al.
• Court: Texas Court of Appeals

195 S.W. 964

BOMAR et al. v. SMITH et al.

(No. 7629.)

Court of Civil Appeals of Texas. Dallas.

March 10, 1917.

Rehearing Denied June 16, 1917.

Appeal from District Court, Dallas County; W. F. Whitehurst, Judge.

Suit by W. B. Smith, as trustee, and others against D. T. Bomar and others. From a judgment favorable to plaintiffs and certain defendants, D. T. Bomar and other defendants appeal. Reversed and remanded.

D. T. Bomar, George Thompson, J. H. Barwise, R. W. Flournoy, W. Storer, and Leroy A. Smith, all of Ft. Worth, for appellants. W. H. Clark, Joseph E. Cockrell, and Etheridge, McCormick & Bromberg, all of Dallas, and Capps, Cantey, Hanger & Short, of Ft. Worth, for appellees.

TALBOT, J.

This suit was instituted by W. B. Smith, as trustee, and by J. H. Moore, W. B. Smith, and J. Merrick Moore, as partners composing the law firm of Moore, Smith & Moore, in the district court of Dallas county, Tex., against D. T. Bomar, J. D. Beardsley, Fidelity Trust Company, and others. From a judgment favorable to the plaintiffs and some of the defendants, D. T. Bomar and the other defendants appealed. The record and briefs filed in this court are very voluminous. The transcript, including the plaintiffs' petition of 68 pages and the several answers and pleas of the defendants, covers 732 pages. The statement of facts covers 2,158 pages. The original brief of the appellants covers 517 pages, and that of the appellees 155 pages. There are also two or three small supplemental briefs on file.

It appears that in the year 1906 J. D. Beardsley acquired an interest in several hundred acres of land adjacent to the city of Mineral Wells, in Palo Pinto county, Tex., with the view of dividing a part, if not all, of it into lots and blocks to be sold for residence purposes. The title to these lands was vested in the Central Texas Realty Company, 52 per cent. of the capital stock of which Beardsley owned. A part of the purchase money of said land was paid in cash, and notes secured by vendor's lien given for the balance. Beardsley also purchased a block of land situated in said city of Mineral Wells, known as the Hawthorne Wells property, agreeing to pay therefor the sum of $25,000. Of said amount he paid $15,000 cash, and gave vendor's lien notes for the remainder. His plan for the development of these properties was to construct through the said city of Mineral Wells and through said lands an electric street railway, and as an investment, to be operated in connection with such railway, he desired to build an electric light plant and an ice plant. To that end he obtained franchises from said city. He did not have sufficient money to make the improvements contemplated, and decided to borrow $200,000 for that purpose. In addition to the lands mentioned Beardsley owned 505 bonds of the Louisiana & Northwestern Railroad Company, which operated a line of railroad from the town of Magnolia, in the state of Arkansas, to Natchitoches, in the state of Louisiana. These bonds were incumbered, a part of them having been hypothecated with Geo. W. Hunter, of St. Louis, Mo., to secure an indebtedness against said railroad and the others attached in a suit brought by A. C. Wisner against Beardsley in said city of St. Louis. In January, 1907, Beardsley acquired from R. K. Wylie and wife a block of land No. 36, situated in the French addition to the city of Mineral Wells, giving as a part of the purchase money therefor his notes aggregating $3,000 or more, payable respectively on or before the 1st days of January, 1908 and 1909, to secure the payment of which the vendor's lien was reserved upon said land. Upon this block of ground the electric light and ice plants which Beardsley contemplated building were constructed after he secured the loan of $200,000, as hereinafter stated. The properties mentioned, incumbered as stated, together with the improvements Beardsley contemplated making, constituted practically all the security, as we understand the record, that he had to offer for the loan desired, and he testified before the master in chancery, which was used upon the trial in the district court, as follows:

"The attachment of the bonds by Wisner considerably complicated my situation in regard to getting money to carry out the Mineral Wells enterprise, to which I was previously committed. It was much more difficult for me to raise the money."

In the early part of October Beardsley met D. T. Bomar and Ed S. Hughes in the passenger station of the Texas & Pacific Railway Company at Dallas, and informed them that he was desirous of obtaining a loan of $200,000 with which to make the contemplated improvements in Mineral Wells, and, according to the testimony of the said Bomar, stated that he would be willing to pay 6 per cent. interest for the loan of the money and "a brokerage of 10 per cent." of the amount thereof to the person who would secure the loan, proposing as security the railroad bonds mentioned above, and a mortgage or deed of trust on the Hawthorne Wells property, heretofore referred to, and also on the electric light and ice plants when they should be erected. Bomar and Hughes, immediately after this meeting with Beardsley, set about to secure the co-operation of others with them in making the loan of $200,000 desired by him or to find persons who would be willing to form a syndicate and make such loan. For this purpose a number of people were approached by both Bomar and Hughes, and Bomar went to St. Louis, Beardsley agreeing to pay his expenses, to investigate the condition of the railroad bonds offered by Beardsley as a part of the security for the loan, in order that he might be able to report their condition and probable value as such security to the persons he was trying to induce to make the loan. There is also evidence to the effect that Ed S. Hughes told Bomar that he would not cooperate with him in obtaining the loan of $200,000 unless Beardsley would give to them an option to purchase a one-half interest in Beardsley's Mineral Wells properties at cost, plus interest, and that Morgan Jones also requested Bomar to secure such option; that such option was given by Beardsley, and later canceled in consideration of two notes of Beardsley, one for $20,000, and the other for $1,600, said note for $1,600 being for the interest to accrue on the said note for $20,000. The 505 railroad bonds mentioned were pledged to secure the payment of these two notes, and they were sold under such pledge on the 28th day of November, 1908, and purchased by the Fidelity Trust Company. The negotiations and efforts to secure the loan of $200,000 continued for about one month, and resulted in the formation of a syndicate for that purpose, composed of D. T. Bomar, Ed S. Hughes, Morgan Jones, and others. The syndicate being thus formed, D. T. Bomar notified Beardsley that he was "ready for a conference," and on November 15, 1906, they met at Ft. Worth, and what is known as the collateral trust agreement was executed. Bomar testified that when he sat down to put this agreement in writing it occurred to him that it was desirable that they have a trustee, that the Fidelity Trust Company, being a corporation of which he was president and Morgan Jones a director, was agreed upon to act as trustee, and that the insertion of the name of Fidelity Trust Company as trustee in the written agreement was purely for the purpose of having it act as such trustee in carrying out the already existing agreement between Beardsley and himself and associates. The said collateral trust agreement, after reciting that the said J. D. Beardsley is the owner of the Hawthorne Wells property hereinbefore referred to and a third interest in about 1,400 acres of land lying adjacent to the town of Mineral Wells and certain other real estate, and after further reciting that the said Beardsley is the owner of a franchise granted by the city of Mineral Wells for the erection, maintenance, and operation of a street car line, electric light, and ice plants in said city, and that the said Beardsley is desirous of procuring the services of the Fidelity Trust Company in the matter of the organization of the necessary corporation or corporations for the construction and operation of said plants, the issuance of bonds to be secured by a mortgage thereon, and the procuring of the remainder of the money necessary to be used in the construction of said plants, provides, among other things, that the said Beardsley shall execute and deliver to or upon the order of the Fidelity Trust Company his promissory notes, payable to D. T. Bomar (the president of said company), aggregating the sum of $200,000, bearing date November 15, 1906, and to become due on the 31st day of December, 1908, and bearing interest from date at the rate of 8 per cent. per annum, interest payable semiannually. This agreement further provides that the Fidelity Trust Company shall credit to the account of the said Beardsley the proceeds arising from the sale of said notes as fast as same is required for use under the terms of said agreement, and that same shall be paid out only for such purpose and under such restrictions and safeguards as may be prescribed by said Fidelity Trust Company. Attached to this contract and executed contemporaneously therewith is a separate agreement signed by the said J. D. Beardsley, the substance of which is that for a valuable consideration Beardsley promises to pay to or upon the order of the Fidelity Trust Company a sum equal to 10 per cent. of all or such amount of the $200,000 of notes executed by Beardsley to D. T. Bomar under the terms of said contract of date November 15, 1906, as said company shall cause to be sold for the construction of the plants therein mentioned, and authorizing said Fidelity Trust Company to charge "said commission of 10 per cent." on the amount so sold and credited to the said Beardsley account as its compensation for obtaining said loan of $200,000. This...