Buffalo Pipeline Co. v. Bell, No. 13-84-121-CV

• Court: Court of Appeals of Texas
• Writing for the Court: UTTER; DORSEY; KENNEDY
• Citation: 694 S.W.2d 592
• Parties: BUFFALO PIPELINE COMPANY, Appellant, v. Bill W. BELL, Sr., and Bill W. Bell, Jr., Appellees.
• Docket Number: No. 13-84-121-CV
• Decision Date: 23 May 1985

Page 592

694 S.W.2d 592 BUFFALO PIPELINE COMPANY, Appellant,
v.
Bill W. BELL, Sr., and Bill W. Bell, Jr., Appellees. No. 13-84-121-CV. Court of Appeals of Texas,
Corpus Christi. May 23, 1985.
Rehearing Denied May 23, 1985.

Page 594

James F. Buchanan, Kleberg, Dyer, Redford & Weil, Corpus Christi, for appellant.

Charles W. Mann, Corpus Christi, for appellees.

The Court sitting En Banc.

OPINION ON MOTION FOR REHEARING

The Court's original opinion issued on February 21, 1985 is hereby withdrawn, and this opinion is substituted therefor.

UTTER, Justice.

This is a suit to cancel a surface lease. At trial, appellees claimed that the subject lease had been terminated when a lease renewal rental was tendered to appellees' predecessor-in-title rather than to appellees, the owners of the property on the rental due date. The trial was held before the court, which entered its judgment declaring that the lease had terminated and further ordering that appellees recover the reasonable rental value of the premises in the amount of $4,072.75 as damages for trespass to realty. We reverse and render the judgment of the trial court.

The record, as indicated by the trial court's findings of fact, reflects the following: On October 10, 1980, appellees acquired thirty (30) acres of land in Nueces County from E.J. Hood. At the time of appellees' acquisition of the land, Sun Pipeline Company was the lessee of a two (2) acre tract, which was a part of the thirty (30) acres acquired by appellees and which is the subject of this suit. At the time they acquired the property, appellees were aware that Sun Pipeline Company had the lease on the two (2) acre tract and that the property continued to be subject to the lease to Sun Pipeline Company. Shortly after they acquired the property, appellee Bill Bell, Sr., personally visited Sun Pipeline Company's office in Corpus Christi where he talked to Thomas Starr, an engineer with Sun Pipeline Company, and notified Sun Pipeline Company that appellees then owned the property. Starr referred appellee Bill Bell, Sr., to H.G. Humphrey, who was in charge of Sun Pipeline Company's right-of-way department in Longview.

In addition, the record, as indicated by the trial court's findings of fact, reflects: While in Sun Pipeline Company's Corpus Christi office, appellee Bill Bell, Sr., placed a long distance call to Humphrey in Longview. "In his telephone conversation with Bill Bell, H.G. Humphrey did not state to Bell that Sun Pipeline Co. would not recognize Bell as owner of the property nor give effect to the change ownership unless Bell sent Sun Pipeline a copy of his conveyance, nor did Humphrey state that Sun maintained a general policy to such effect, nor did Humphrey suggest or request from Bell a copy of his conveyance." "Bell in his conversation with Humphrey relayed the recording numbers for the conveyance by which Bell had acquired the property containing Sun's lease." There were no further communications of any kind between appellees and Sun Pipeline Company concerning the property.

Also, the record, as indicated by the trial court's findings of fact, further reflects: In July of 1981, Sun Pipeline Company mailed a check, the lease renewal rental payment, in the amount of $115.00 to appellees' predecessor-in-title, E.J. Hood. Hood endorsed the check and mailed it to appellee Bill Bell, Sr., at his Corpus Christi address. According to appellee Bill Bell, Sr., he never received the check from Sun Pipeline Company which was forwarded by Hood. In November of 1981, appellant Buffalo Pipeline Company acquired the lease from Sun Pipeline Company. Neither Sun Pipeline Company nor Buffalo Pipeline Company had been notified that appellees had not received the July, 1981, lease renewal rental payment until they were so notified by letter from appellees' attorney in December of 1981. Neither Sun Pipeline Company nor Buffalo Pipeline Company have ever directly tendered to appellees the $115

Page 595

lease renewal rental payment, which was due in July of 1981. Additionally, neither Sun Pipeline Company nor Buffalo Pipeline Company have ever given notice of their desire not to renew the lease to either Hood or appellees.

The subject lease does not contain any provision regarding how effective notification of change of ownership should be given.

In its points of error 1 and 1a, appellant asserts that there was no evidence or, in the alternative, insufficient evidence to support the trial court's finding of fact that appellees had given Sun Pipeline Company actual notice of appellees' acquisition of title to the property; in addition, appellant argues that the trial court erred by impliedly concluding that said notice was legally adequate notice, which would require Sun Pipeline Company to deal with appellees as the new landlords.

In considering a "no evidence" or "insufficient evidence" point of error, we will follow the well established test set forth in Glover v. Texas General Indemnity Company, 619 S.W.2d 400 (Tex.1981); Garza v. Alviar, 395 S.W.2d 821 (Tex.1965); Allied Finance Company v. Garza, 626 S.W.2d 120 (Tex.App.--Corpus Christi 1981, writ ref'd n.r.e.); CALVERT, No Evidence and Insufficient Evidence Points of Error, 38 Tex.L.Rev. 361 (1960).

After examining the entire record, we find that there is sufficient evidence to support the trial court's finding of fact that appellees gave Sun Pipeline Company actual notice of their ownership of the property. However, appellant also argues that, even though such actual notice may have been given by appellees to Sun Pipeline Company, such notice was not legally adequate notice. Appellant claims that it was incumbent on appellees to furnish Sun Pipeline Company proof or documentation of appellees' claim of ownership of the property before Sun Pipeline Company was required to deal with appellees as its new landlords. Appellees allege that the notice of ownership which was given to Sun Pipeline Company was sufficient absent a demand made by Sun Pipeline Company upon appellees for supporting proof or documentation of their claim of ownership.

In Cartledge v. Sinclair Refining Company, 280 S.W.2d 312 (Tex.Civ.App.--Austin 1955, no writ), the Austin Court of Civil Appeals wrote:

The precise question presented is whether Sinclair had the sole responsibility for ascertaining the persons entitled to the rents without any aid or cooperation from any person asserting a right to such rents.

The parties have expressed inability to find any cases directly in point on this question and neither have we. By analogy, however, we believe that the rule applicable to bills and notes should furnish a guide here. The rule as found in 10 C.J.S., Bills and Notes, § 364, p. 884, is that "if the authority of a person presenting paper [for payment] is questioned by the maker or the acceptor, and refusal to comply with the demand is based on a supposed want of authority, such authority must be shown." Two cases are cited in support of this rule: Caine v. Foreman, 106 Cal.App. 636, 289 P. 929 and United States v. Schuermann, D.C.Mo., 106 F.Supp. 86, 89. In the latter case the Court said: "Protection of the maker of the note should be given serious consideration."

We believe that the protection given makers of bills and notes should be extended to lessors and that a person demanding rents should be required to identify himself as being the person entitled to them. This rule is not only in accord with business customs in innumerable analogous every day transactions but it is a rule of common courtesy as well. We believe it to be a sound rule of law.

In Cartledge v. Sinclair Refining Company, after Cartledge (the alleged new landlord) had given Sinclair (the lease tenant) actual notice of his new ownership of the property, Sinclair made a good faith demand on Cartledge to produce documentation of his alleged new ownership and suspended

Page 596

payments of rents. The Austin Court of Civil Appeals held that, since Cartledge failed to provide such documentation, Sinclair was justified in suspending payments of rents as it did.

As in Cartledge v. Sinclair Refining Company, we believe that, by analogy, the standard, which is applicable to bills and notes regarding adequate notice of assignment, should furnish a guide here. For notice of assignment to be adequate or effective under the U.C.C., an account debtor must receive notice that the amount due or to become due has been assigned and must also be notified that payment is to be made to the assignee. TEX.BUS. & COMM.CODE § 9.318(c) (Vernon Supp.1985); see Haas Estate v. Metro-Goldwyn-Mayer, Inc., 617 F.2d 1136 (5th Cir.1980); Taubenhaus v. Jung Factors, Inc., 478 S.W.2d 149 (Tex.Civ.App.--Houston [14th Dist.] 1972, no writ).

The general rule is that, after a debtor receives notice of a valid assignment, payment made by the debtor to the assignor or to any person other than the assignee is made at the debtor's peril and does not discharge the debtor from liability to the assignee. East Texas Bank & Trust Company v. Mid-South Contractors, Inc., 451 S.W.2d 782 (Tex.Civ.App.--Tyler 1970, no writ). "A payment made by the obligor to his original creditor is fully operative in defense against an assignee if it was made in good faith without notice, actual or constructive, of the assignment. It is otherwise of payments made with such notice or with knowledge of facts sufficient to put the obligor on inquiry." Olshan Lumber Company v. Bullard, 395 S.W.2d 670 (Tex.Civ.App.--Houston 1965, no writ), quoting 4 Corbin on Contracts Section 890, p. 577; see also Phillips v. Latham, 523 S.W.2d 19 (Tex.Civ.App.--Dallas 1975, writ ref'd n.r.e.); Chapman v. Tyler Bank & Trust Company, 396 S.W.2d 143 (Tex.Civ.App.--Tyler 1965, writ ref'd n.r.e.).

We hold that, the actual notice given by appellees provided Sun Pipeline Company notice or knowledge of facts sufficient to put Sun Pipeline...