Coats v. Garrett, 6841

Decision Date13 October 1955
Docket NumberNo. 6841,6841
Citation283 S.W.2d 289
PartiesNorvell COATS et al., Appellants, v. M. T. GARRETT et al., Appellees.
CourtTexas Court of Appeals

Gordon R. Wellborn, Rex Houston, James N. Phenix, Henderson, for appellants.

Bath & Turner, Henderson, for appellees.

DAVIS, Justice.

This is a suit by M. T. Garrett and Garrett Engineering Company, a Texas corporation, appellees, against the City of Mt. Enterprise, Rusk County, Texas, formerly a municipal corporation but now dissolved, hereinafter referred to as the City, upon a note in the principal sum of $3,843.07. Appellees allege that the note was given to appellee corporation by the City for engineering services performed under a contract between the City and appellees dated September 14, 1951. The City was incorporated in 1915 and was dissolved by election held March 6, 1954, and results declared on March 9, 1954. The note sued upon was dated March 4, 1954. The City defaulted and the suit was contested by Norvell Coats and wife, Charlie Casey and wife, C. B. Parker and wife, R. J. Watson and wife, Jewel Craycraft and wife, and E. L. Wagner and wife, appellants, residents of said dissolved City and interested persons, by plea of intervention.

The contract dated September 14, 1951, was signed by the mayor and city secretary of the City pursuant to resolution adopted on that date for that purpose. The parts of the contract involved in this case, part of appellees' exhibit No. 3, read as follows:

'* * * This Agreement, by the City of Mt. Enterprise, Texas, acting herein by its Mayor, in accordance with a resolution passed authorizing the executon of this contract, hereinafter called the 'City' as party of the first part, and Garrett Engineering Company, Consulting Engineers of Houston, Harris County, Texas, acting herein by its President or Vice-President, hereinafter called the 'Engineers' as party of the second part.

'1. The City hereby employs the Engineers and the Engineers agree to perform professional services in connection with the following project:

'Waterworks System hereinafter called the 'Project.'

'2. The Engineers shall render all of the professional engineering services necessary in the planning and construction of the project which are enumerated in the 'Texas Society of Professional Engineers' Schedule of Minimum Fees for General Engineering Services' adopted by the Texas Society of Professional Engineers. The fees shall be deemed to have been earned and shall be due and payable upon the performance of the items of services as set forth in said Schedule. Fees for engineering services in connection with the acquisition of existing facilities shall be reduced to five per cent (5%) of the purchase price of said facilities. * * *

'7. The parties hereto agree to the full performance of this contract.

'Executed In Duplicate Originals at Mt. Enterprise, Texas, this 14 day of Sept. A.D. 1951.


'City of Enterprise, Texas

J. A. Breedlove

City Secretary

By-G. N. Boles



Garrett Engineering Company

'By-M. T. Garrett


It will be noted that the contract was executed on behalf of Garrett Engineering Company by M. T. Garrett as president but is not attested by the secretary and does not have the seal of the corporation.

A schedule of minimum fees for engineers is attached to and made a part of the contract but we do not copy same because it is not necessary to a disposition of this case.

Pursuant to the contract, appellees soon commenced making the necessary surveys, compiling maps, laying out the lines, etc., for a waterworks system for the City. Appellees' exhibit No. 12 consists of a page entitled 'Mt. Enterprise Waterworks System' and four maps of an engineer's survey outlining the waterworks system in every detail. One of the issues in dispute in this case is whether or not the Engineering Company completed its work under phase 2 of the contract prior to February 1, 1954. The four additional pages of appellees' exhibit No. 12 are the detailed blueprints above mentioned and are dated as follows: Sheet No. 1, dated October 27, 1953; Sheet No. 2, dated November 2, 1953; Sheet No. 3, dated October 28, 1953; Sheet No. 4, dated October 29, 1953.

Appellees' exhibit No. 13 entitled 'Contract and Specifications for the City of Mt. Enterprise, Texas, Waterworks System' is bound in a printed booklet, on the bottom of the front cover of which is printed, 'December 1953'; and on the first page inside the front cover bears the same notation of 'December 1953', and bears a seal of M. T. Garrett as a registered, professional engineer. Following this page is a purported index, but the pages of the printed booklet are not numbered so the index is of no assistance at all. Following the index is a 'Notice To Bidders.' This notice to bidders calls for bids at the office of the City Secretary of the City until 1:30 p. m., December 18, 1953. Elsewhere we find in the booklet, appellees' exhibit No. 13, a 'Proposal' addressed to the City of Mt. Enterprise which was originally dated December 18, 1953, but that date was struck over with a typerwriter and immediately underneath same is the date January 20, 1954. This proposal shows to have been made by H. D. Gillis Company who subsequently executed a contract with the City to furnish the materials and construct a waterworks system for the City. There is no notice to bidders by the City in this record calling for bids on January 20, 1954. Then following a detailed list of every item from valves and light switches to the water tank necessary for the construction of a complete water system. Near the back of appellees' exhibit No. 13 we find a contract executed by and between the City and the H. D. Gillis Company, a partnership. This contract is dated January 25, 1954. Immediately following the contract is a performance bond by the H. D. Gillis Company which is also dated January 25, 1954; and immediately following the performance bond is a certified copy of a general power of attorney by the bonding company, surety, and the certificate of the official of the bonding company is also dated January 25, 1954.

At the time the contract for the construction of the waterworks system was entered into, or thereabout, an election had been called to dissolve the corporate status of the City. The election was to be held on March 6, 1954. This fact was well known to all the officials of the City and to the appellees. On March 4, 1954, the City Council met and adopted what they called an Ordinance approving a claim submitted to them by Garrett Engineering Company in the sum of $3,843.07. The resolution provided that the money was to be paid out of the current revenues of the City and directed the Mayor and City Secretary to execute a note to Garrett Engineering Company for that amount payable on January 31, 1955.

Appellee M. T. Garrett alleged that the note which was given on March 4, 1954, had been endorsed to him and that he was the sole owner of said note. We will note here that the record reveals that M. T. Garrett was President of the corporation of Garrett Engineering Company and the endorsement shows to be to M. T. Garrett, Sr., by the Secretary-Treasurer of the corporation. The endorsement is the only time in the record that M. T. Garrett is referred to as M. T. Garrett, Sr. The endorsement of the Secretary-Treasurer of a corporation of assets of the corporation of the President of the corporation presents a rather unique transfer of such assets. Although the endorsement is not challenged, we could not escape notice of the peculiar endorsement.

On September 14, 1951, at the time the contract was entered into with the Garrett Engineering Company the City had on deposit $38.97. It had no tax roll and collected no taxes. Its revenues from a light company serving the city and donations amounted to about $250 a year for 1951, 1952, and 1953. At the time the corporate status was dissolved, the City had on deposit about $19.46. There is testimony in the record that a tax roll had been made up for the fiscal year of the City beginning February 1, 1954, and ending January 31, 1955. There is also testimony that the Council anticipated fixing a tax rate for the fiscal year 1954, but no tax rate was ever fixed. There is testimony in the record that the City Council anticipated fixing a budget for the City for the fiscal year 1954 but no budget was ever fixed.

Appellees' position in this lawsuit is that the contract dated September 14, 1951, created no obligation against the City and that no obligation was created by virtue thereof until the work for which they sue was completed, and that such work being allegedly completed within the fiscal year of 1954 of the City and the City anticipating at that time that it would have sufficient revenue from taxation to pay the obligation, and it being the intention of the City Council to do so, the debt is a valid debt and the dissolved corporation is liable and bound to pay the same.

The intervenors as interested parties, residents of the City at the time of its dissolution, contested the suit on the ground that the obligation is void as being in violation of Secs. 5 and 7 of Article 11 of the Constitution of the State of Texas, Vernon's Ann.St., and filed special exceptions, to appellees' pleadings, setting up such defenses.

Appellants also contend that the contract dated September 14, 1951, actually created the obligation against the City, and in the alternative that the 'debt' accrued against the City before the beginning of the fiscal year, February 1, 1954, without provision having been made for the payment and is therefore void.

There is nothing in the record that shows that any provision whatever was made for the payment of the services to be rendered by Garrett Engineering Company at the time of or prior to the execution of the contract dated September 14, 1951. Neither did the City at any subsequent time make or attempt to make any...

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