Citizens State Bank of Houston v. O'Leary

• Decision Date: 11 November 1942
• Docket Number: No. 7939.,7939.
• Parties: CITIZENS STATE BANK OF HOUSTON v. O'LEARY et al.
• Court: Texas Supreme Court

Page 719

167 S.W.2d 719

CITIZENS STATE BANK OF HOUSTON v. O'LEARY et al.

No. 7939.

Supreme Court of Texas.

November 11, 1942.

Rehearing Denied February 10, 1943.

Error to Court of Civil Appeals of Ninth Supreme Judicial District.

Bill of interpleader by Charles O'Brien and others as members of the Houston Pilots wherein claimants to a fund including Citizens State Bank of Houston and Teresa Elma Basquez O'Leary and others were made parties. The claimants filed answer asserting their respective claims. Judgment was affirmed in part and reversed in part by Court of Civil Appeals, 155 S.W. 2d 677, and Citizens State Bank of Houston brings error.

Judgment of Court of Civil Appeals reversed, and judgment of District Court reformed.

Morrow, Boyd & Murrin and Walter E. Boyd, all of Houston, for petitioner.

Lewis & Knipp and Ernest A. Knipp, all of Houston, for respondent LeBlanc.

Walter F. Johnston, of Houston, for respondent O'Leary.

Chas. A. Murphy, of Houston, for respondent O'Brien.

Chas. J. & Theodore Stubbs, of Galveston, for respondent Carlson.

SHARP, Justice.

The principal question involved here is whether a certificate of a share in the Houston Pilots, a voluntary unincorporated association, may be pledged or mortgaged to secure a debt, and whether it may be the subject of a chattel mortgage so that the instrument, when recorded, constitutes constructive notice to a subsequent pledgee.

A bill of interpleader was filed by Charles O'Brien and twenty other individuals, naming as defendants the executors of the Estate of Captain Joseph G. Basquez, Sr., his six surviving children, Mrs. Honorine LeBlanc, the Citizens State Bank of Houston, and A. M. Carlson. There is no controversy about the trial court's judgment in favor of Carlson, and no further mention need be made of him. Plaintiffs asserted that they had agreed to pay to the Estate of Captain Basquez, Sr., upon his death, the sum of $3,000, upon the surrender and cancellation of a certain certificate issued by the Houston Pilots to Captain Basquez when he became a member of the Houston Pilots, and also agreed to pay certain other sums, not here involved; and that they were willing and ready to pay said amounts, but that Mrs. LeBlanc, the Citizens State Bank, and A. M. Carlson were each asserting a claim to said funds; and plaintiffs asked the court to determine the respective rights of the defendants. At the conclusion of the evidence the trial court withdrew the case from the jury, stating there were no facts for the jury to decide, and rendered judgment: (1) for Mrs. LeBlanc in the sum of $1,692.69, being the balance due on her debt, including interest and attorney's fees, and foreclosing her lien upon the certificate; and (2) for the Citizens State Bank of Houston for $3,302.75, being the balance due on its debt, including interest and attorney's fees, and foreclosing its lien upon the certificate, — subject, however, to the prior right of Mrs. LeBlanc, acquired by her by virtue of the chattel mortgage. The Citizens State Bank of Houston appealed to the Court of Civil Appeals. That court reversed the judgment of the trial court, and held that the certificate could be incumbered only in accordance with the written agreement of the Houston Pilots; and since the agreement made no provision for incumbering the certificate in the manner as Captain Basquez had done, that the two liens were wholly void and of no effect, and that the certificate belonged to the executors free of any lien or claim by the Citizens State Bank of Houston or by Mrs. LeBlanc. 155 S.W.2d 677. A writ of error was granted.

The facts are undisputed. Plaintiffs are marine pilots, who perform the work of piloting ships in and out of the port of Houston. In 1921 a group of Houston pilots entered into a written agreement, whereby they organized the Houston Pilots, an unincorporated association, for the purpose of "more efficiently handling vessels on the Houston Ship Channel." From time to time other pilots joined the association. Each pilot, upon becoming a member, was required to pay into the association the sum of $3,000, and the association issued to each a certificate of membership. When a member retired or died, the association paid to him, or to his representatives, the sum of $3,000, upon the surrender and cancellation of the certificate which had been issued to him. Captain Basquez became a member of said association on April 2, 1925, and Certificate No. 8 was issued to him. The material parts of such certificate read as follows:

"This certifies that Joseph G. Basquez is the legal owner and holder of one share of the Houston Pilots, and as such owner and holder, properly and satisfactorily performing his assigned services and duties, is entitled to one share of the interest, income, revenue, profits, property, trade and business of the Houston Pilots.

"The Houston Pilots is composed of such number of shares as may from time to time be decided by the members thereof, and each owner and holder of a certificate, after due and proper selection, appointment and serving his term as a deputy, and properly and in accordance with the rules of the Houston Pilots admitted to membership, and actually and continuously performing the work and labor of a pilot in association with the Houston Pilots, and acceptable and satisfactory to them, is the owner of one share of the property, income, profits and sinking fund of the Houston Pilots as is more fully covered by the agreement heretofore made between the Houston Pilots, and which will be signed by the holder and owner of this certificate. This certificate or share, shall be sold, transferred, incumbered or restrained only in accordance with the agreement of the Houston Pilots, under their agreement, and any other sale, incumbrance or attempted disposition, or restraints thereof is void."

On May 23, 1930, Captain Basquez executed to Mrs. LeBlanc, his sister, a note for $1,500, payable one year after date; and to secure the payment thereof executed a chattel mortgage on the certificate referred to above. The chattel mortgage was recorded in the office of the clerk of Harris County, in which county Captain Basquez resided on May 29, 1930. On October 30, 1934, Captain Basquez executed an instrument renewing and extending the indebtedness, and promising to pay same at the rate of $35 per month. At the time of the trial there was a balance of $905 due on the principal of said note.

On August 4, 1938, Captain Basquez executed to the Citizens State Bank of Houston a promissory note for $2,638.28, and as security pledged the certificate which he had previously mortgaged to Mrs. LeBlanc. The Bank was then in possession of the certificate, having secured it in connection with a previous loan it had made to Captain Basquez. At the time of the trial no part of the principal of this note had been paid.

The agreement of the association creating the Houston Pilots, and under which it operates, contains no provision providing for the transfer, sale, assignment, or incumbrance of the certificate, other than the first paragraph of Section 10, which reads as follows: "No applicant, related to a member by blood or marriage within the third degree of kindred, shall be eligible for membership in the Association; however, such member may resign from the Association and assign his interest therein to such applicant, whereupon such ineligibility shall be removed."

There is nothing in the agreement, which is made a part of the certificate, which authorized Captain Basquez to mortgage or pledge the certificate held by him; and hence...