Continental Oil Co. v. Lane Wood & Co.

• Decision Date: 25 June 1969
• Docket Number: No. B--1183,B--1183
• Citation: 443 S.W.2d 698
• Parties: CONTINENTAL OIL COMPANY, Petitioner, v. LANE WOOD & COMPANY, Respondent.
• Court: Texas Supreme Court

Page 698

443 S.W.2d 698

CONTINENTAL OIL COMPANY, Petitioner, v. LANE WOOD & COMPANY, Respondent.

No. B--1183.

Supreme Court of Texas.

June 25, 1969.

Rehearing Denied July 23, 1969.

Culton, Morgan, Britain & White, Neal R. Allen and L. A. White, Amarillo, for petitioner.

Underwood, Wilson, Sutton, Heare & Berry, Amarillo, Ungerman, Hill, Ungerman & Angrist, Vernon Teofan, Dallas, Hardie, Gramblin, Sims & Galatzan, El Paso, M. G. Davis, Amarillo, for respondent.

WALKER, Justice.

This case, as it reaches us, is a controversy between Continental Oil Company and Lane Wood & Company. Their rights turn upon whether Contintental is entitled to recover the value of certain plastic pipe sold by Carlon Products Corporation to Allied Supply Company, Inc. and by the latter to Western Gas Service Company. All of the assets of Carlon were acquired by Continental after the sales and prior to the institution of suit. Lane Wood held an assignment of accounts from, and a factor's lien agreement with, Allied. Notice of the assignment and lien agreement had been duly filed prior to delivery of the pipe.

At the conclusion of a trial before the court without a jury, judgment was rendered granting Continental the relief it sought. The Court of Civil Appeals reversed and, as between these parties, rendered judgment in favor of Lane Wood. 431 S.W.2d 625. We modify the judgment of the Court of Civil Appeals so as to remand the cause to the trial court.

The principal questions to be decided are: (1) whether the sale by Carlon to Allied was conditioned upon payment by the latter of $21,606.74; and (2) if so, whether the condition was waived by Carlon. Carlon manufactured plastic pipe, and Allied was engaged in the general supply business in Amarillo. Allied had been a regular customer of, and at the time of the transactions that give rise to this suit was heavily indebted to, Carlon. On December 8, 1964, Western placed an order with Allied for plastic pipe to be used on a job in Oklahoma. Allied discussed the order with Carlon and was told that the pipe could not be shipped because its account was in arrears. Carlon's salesman, Sullivan, advised Allied that it 'would have to pay us in cash money sufficient to cover the cost of the pipe' before delivery would be made. Sullivan was later instructed by his home office to obtain a check from Allied in the amount of $21,606.74, which he did on December 9, 1964. The evidence, which will be discussed below, shows that the check was given to cover the balance unpaid on a number of prior invoices. A few days later the pipe was delivered to Allied's trucks at Carlon's plant in Corsicana. The bills of lading showed Carlon as shipper and Western as consignee.

The check was forwarded by Sullivan to his home office in Ohio. It was dishonored when presented for payment through regular banking channels to Allied's bank in Amarillo. Carlon first called upon Allied to pay the check, and a short time thereafter Continental filed the present suit against Allied, Western, and Lane Wood. In its original petition Continental sought to recover the pipe or, in the alternative, judgment against all defendants for $21,606.74. Western admitted liability for $24,080.32, the price it had agreed to pay Allied, and deposited that amount in the registry of the court. Continental then amended and prayed for a recovery of the $21,606.74 from this fund.

On January 29, 1965, Allied was adjudged a bankrupt, and about five months later Continental filed its sworn claim for the $21,606.74 in the bankruptcy proceeding. The trustee in bankruptcy intervened in the present suit and claimed the entire fund deposited in court by Western. Lane Wood also answered and set up its assignment of accounts and factor's lien agreement. It took the position that title to the pipe passed to Allied upon delivery, that in any event Carlon waived payment of the $21,606.74 as a condition to the passage of title, and that by filing its claim in the bankruptcy proceeding Continental made an election of remedies.

Findings of fact were requested and filed. The trial court concluded, among other things: (1) that the sale from Carlon to Allied was made and performed in Texas and is governed by the law of this state; (2) that the agreement between Carlon and Allied was for a cash sale of the pipe for $21,606.74; (3) that the check was to have constituted payment for the pipe when honored by the drawee bank; (4) that since the purchase price was not paid, title to the pipe did not pass from Carlon; (5) that Continental did not waive its rights and is not estopped; and (6) that the filing of the claim in the bankruptcy proceeding did not constitute an election of remedies. Judgment was entered awarding Continental $21,606.74 plus interest and attorneys' fees. Western was allowed an attorney's fee of $750.00, and the remainder of the fund, less court costs, was ordered paid to the trustee in bankruptcy.

The trustee and Lane Wood appealed to the Court of Civil Appeals, which held: (1) that a cash sale could not have been intended by Carlon and Allied, because the evidence shows conclusively that the $21,606.74 check was not given for the purchase price of the pipe; (2) that the evidence establishes as a matter of law waiver by Carlon of payment as a condition precedent to the passage of title; and (3) that the trial court erred in awarding any of the fund to the trustee in bankruptcy. The judgment of the trial court was modified so as to allow Western its attorney's fee in the amount of $750.00, award the remainder of the fund to Lane Wood, and divide the costs equally between Continental and the trustee.

Continental is petitioner here; the trustee did not file an application for writ of error. There is a threshold question as to whether the case is governed by the law of Texas or Ohio or Oklahoma. The statutes of both Ohio and Oklahoma provide that any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business. A similar provision is now found in Section 2.403 of our Business and Commerce Code, V.T.C.A., which had not been adopted at the time of the transactions now in question.

The trial court's finding that the sale from Carlon to Allied was made in Texas is supported by the evidence. As for the sale from Allied to Western, the order was placed with Allied's office in Amarillo by Western's office in El Paso. It directed that the pipe be shipped 'best way prepaid.' Allied then arranged for the pipe to be delivered to its trucks at Carlon's plant in Corsicana on unrestricted bills of lading consigned to Western at Texhoma, Oklahoma. The sale was thus arranged in Texas between parties doing business here. The pipe had not previously been in Oklahoma but was moved there solely for the purpose of...