City Nat. Bank v. Wichita Royalty Co., 358.

• Decision Date: 30 March 1937
• Docket Number: No. 358.,358.
• Citation: 18 F. Supp. 609
• Parties: CITY NAT. BANK OF WICHITA FALLS et al. v. WICHITA ROYALTY CO. et al.
• Court: U.S. District Court — Northern District of Texas

18 F. Supp. 609

CITY NAT. BANK OF WICHITA FALLS et al. v. WICHITA ROYALTY CO. et al.

No. 358.

District Court, N. D. Texas, Wichita Falls Division.

March 30, 1937.

Kilgore & Rogers, of Wichita Falls, Tex., for the motions.

Bullington, Humphrey & King, T. R. Boone, and Weeks & Morrow, all of Wichita Falls, Tex., opposed.

ATWELL, District Judge.

On October 11, 1930, the City National Bank of Wichita Falls filed a suit against the Wichita Royalty Company and E. E. Scannell alleging that the company was a trust operating under a declaration made by R. R. Robertson on June 1, 1920, and that Scannell was the sole trustee; that the trust was engaged in the business of selling lands, oil properties, mineral rights, and royalties; that it was the owner of one-half of the capital stock of the Texas Investment Company, a Texas corporation; that on the 26th of June, 1930, Scannell, as such trustee, executed and delivered to the plaintiff a promissory note in the sum of $22,000, due 60 days after date, and that a deed of trust had theretofore been executed, in 1925, to J. T. Harrell as trustee, upon certain realty, for the securing of the notes which preceded the last $22,000 transaction; that the company was also the maker and indorser upon an obligation of the Texas Investment Company for $23,500 and one for $5,000 and another for $5,000; that the trust and the trustee were without sufficient assets to pay the indebtedness and were insolvent and that its producing oil properties were being depleted. A receiver was sought, together with judgment and foreclosure.

That suit wended its way through the state trial court, a court of civil appeals, and the Supreme Court of the state, and was finally back in the state trial court for further proceedings. On June 18, 1936, the company and its trustee filed its third amended original answer and cross-action and impleaded certain other parties theretofore unknown to the record. It sought $200,000, and this pleading covered approximately fifty-five pages. It sought to void a transfer of the assets of the City National Bank of Wichita Falls, the original plaintiff, to the City National Bank in Wichita Falls, alleging that it was made while the transferer was insolvent and in voluntary liquidation. It sought an accounting between all of the parties in both the old and the new institution and was really a bill to wind up the affairs of the bank. It sought such remedies against the liquidating agent of the old institution and declared for a right to share in the funds and assets that that agent was administering. Likewise, it sought a ratable distribution, among the creditors of the old institution, of the assets, which were in the hands of the liquidating agent, who had theretofore been appointed under and by force of the laws of the United States.

One of the subdivisions of the prayer is, "that the old bank be declared to have been insolvent when payments were made by it to the several parties hereto, and that its assets be decreed to be a trust fund for the benefit of all creditors, and that such creditors, parties hereto, who have been preferred be required to restore the amounts received to the trust fund. That all creditors of the old bank be given notice of the pendency of this suit and permitted to intervene herein and set up their rights with respect to such trust fund, and that such fund be ratably distributed between the creditors of the old bank existing at its insolvency." The suit as thus framed was against the City National Bank of Wichita Falls, its successor, the City National Bank in Wichita Falls, J. T. Harrell, as trustee for the City National Bank of Wichita Falls, W. H. Peckham, administrator of the estate of G. W. Peckham, William Peckham, and George Peckham, minor sons of G. W. Peckham, Robert W. Peckham, Mrs. Hazel D. Peckham, the Texas Investment Company, E. A. Deaton, liquidating agent of the City National Bank of Wichita Falls, L. H. Cullum, J. T. Harrell, Leslie Humphrey, Jack Jeffus, Oral Jones, Frank Kell, Joe Kell, J. J. Perkins, C. W. Snider, and F. P. Timberlake, each stockholders and directors of the City National Bank of Wichita Falls. In paragraph 39 of the rather unusual pleading is this statement: "And they now sue for themselves and all other creditors similarly situated, and invoke the general equity power of the court to assert the liens upon all such properties for an accounting, for a restoration of such trust funds as may have been dissipated and/or paid to creditors, for their ratable interest therein, for the determination of the amount of personal liability of the old directors and for judgment thereon, all with the view and to the end that cross complainant be accorded an equal participation in the assets of the old bank as every other creditor has or may obtain."

It is also alleged that in March, 1933, when, by presidential proclamation, the bank was closed, that it never reopened, but was superseded by the City National Bank in Wichita Falls, which succeeded to the assets and liabilities of the old institution and promised to settle such liabilities.

On July 1, 1936, a petition for removal was filed by the old as well as the new City National Bank and by all...