Continental Supply Co. v. Adams

• Decision Date: 17 January 1925
• Docket Number: (No. 10901.)
• Parties: CONTINENTAL SUPPLY CO. v. ADAMS et al.
• Court: Texas Court of Appeals

272 S.W. 325

CONTINENTAL SUPPLY CO. v. ADAMS et al.

(No. 10901.)

Court of Civil Appeals of Texas. Fort Worth.

January 17, 1925.

Rehearing Granted April 4, 1925.

Rehearing Denied, May 2, 1925.

Appeal from District Court, Stephens County; C. O. Hamlin, Judge.

Action by the Continental Supply Company against G. T. Adams and others. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

Hawkins, Hawkins & David, of Breckenridge, for appellant.

John W. Mackey, of Breckenridge, and E. F. Ritchie, for appellees.

BUCK, J.

The Continental Supply Company filed suit for debt against G. T. Adams, W. R. Powers, and Mrs. Cynthia Creagh, and other parties subsequently dismissed. Plaintiff's petition alleged that the defendants associated themselves together in an organization known as the Man O' War Oil Syndicate, and that each member of said association received certificates issued by the duly authorized agents of the association indicating their respective membership therein; that said association was organized under a so-called declaration of trust, which was on file in the deed records of Stephens county, referring to volume and page of the record, "and a certified copy of said declaration of trust is hereto attached and marked Exhibit A, and hereto referred to for all necessary purposes." It was further pleaded that the members of the association had appointed certain named persons as "their trustees and agents, with power to manage the business of the members of the said organization known as the Man O' War Oil Syndicate; that, said defendants * * * having become members of said organization, and under and by virtue of the said declaration of trust" the defendants jointly and severally constituted the said named trustees the agents of each of them in the management of the affairs of the association.

It was alleged that theretofore on May 12, 1921, while the defendants were members of the said association, and S. S. Shelby, one of the named trustees, doing business under the name of the Black Hawk Drilling Company, and H. L. Hendrick, the defendants became indebted to plaintiff on account of certain well supplies furnished by plaintiff to the defendants and used by them in the drilling of a well, and that in settlement of said open account the Man O' War Oil Syndicate and the Black Hawk Drilling Company, both as principals, executed and delivered to plaintiff their promissory note, in the principal sum of $2,085.88, payable in 60 days after date, etc.; that H. L. Hendrick duly guaranteed the payment of said note by indorsing his name thereon. It was further alleged that when said note became due, payment was refused, and said note was protested. It was further alleged that the Man O' War Oil Syndicate, and the trustees thereof, were notoriously insolvent, as was also H. L. Hendrick and S. S. Shelby, and the residences of the persons named unknown.

In the alternative, plaintiff pleaded:

"Plaintiff further alleges, in the alternative, that if it be mistaken in its allegation that the defendants became parties of the said organization known as the Man O' War Oil Syndicate, and if the defendants were not principals with said agents acting as above alleged, then and in that event the defendants, and each of them, were partners doing business under the said trade name of Man O' War Oil Syndicate and that the said S. S. Shelby acted as their duly authorized agent in executing said note herein sued upon and that the said defendants, and each of them, are jointly and severally liable to plaintiff for the payment of the full amount of said note together with interest thereon."

The declaration of trust attached to the petition, and asked to be considered therewith, is signed by the four named trustees, to wit, L. B. Lucius, W. D. Lucius, S. S Shelby, and S. M. Trent. It provides that Mrs. Belle Lucius, otherwise known as L. B. Lucius, is the owner of a leasehold interest in a 40-acre tract of land in Stephens county; that by the deed of assignment to her there was conveyed a thirteen-sixteenths interest in all the oil, gas, and other minerals in and under said tract, reserving to the grantors three-sixteenths of such oil, gas, and other minerals. It was further provided that Mrs. Belle or L. B. Lucius conveyed and assigned to the trustees, including herself, all her right, interest, and title to said leasehold interest; that the named persons do declare themselves as trustees of the association to be formed, to be known as the Man O' War Oil Syndicate, and that they should "own, hold and administer the said property and the said trust in the manner and for the purposes thereinafter stated." The declaration of trust provided that the trustees in their collective capacity should be known as the Man O' War Oil Syndicate, and in said name they should hold, manage, control, and operate the wells to be drilled on the 20 acres; that said trustees should cause to be drilled two wells on the tract, and the output of said wells should be run into pipe lines, and after the payment of the three-sixteenths royalty to the owner of the lease, 25 per cent. of the remainder should be reserved by the trustees for the purpose of paying the expenses of development and operation, and 75 per cent. should belong to the purchasers and owners of unit certificates; that there were to be 1,500 units of par value of $100 each, and each unit holder should be entitled to one-fifteenth hundredth of the said 75 per cent. of the oil and gas produced on the tract, evidently after the royalty had been paid. It was further provided that:

"The trustees, by the issuance of the said certificates, shall not undertake nor bind themselves nor their successors nor assigns to deliver to the holders of such certificates any specific amount of oil, gas, or other minerals, or to pay any specific amount of money or other thing of value, nor to pay any dividends; but the said certificates shall only represent a conveyance or assignment by the said trustees of a certain proportion of such oil, gas, or other minerals as may be produced and marketed from the said 20 acres of land, as set out in paragraph 6 hereof. And there shall be no liability against the said trustees, or any or either of them, or any of the unit or certificate holders, by reason of a failure to produce oil or gas from the said tract of land; it being understood that by the issuance of the said certificates the said trustees only bind themselves that they are the owners and holders of thirteen-sixteenths of the oil, gas, and other minerals in, under, and upon the said land; that they will in good faith drill or cause to be drilled at least two wells thereon for the production of oil, gas, and other minerals, as herein provided; that the proportion of such products, whether much or little, as represented by the said units or certificates, shall be delivered in the pipe line for the respective owners and holders thereof; and that the said trustees will not issue in excess of 1,500 units of $100 each against the said 75 per cent. of the gross product of the wells to be drilled on said land."

It was further provided that, in the event of the death of, or total disability of, one of said trustees, all of the rights, powers, and duties originally conferred upon the four should vest absolutely in the survivors, and all vacancies should be filled by the remaining trustees. It was specially provided that:

"The trust hereby created shall not be considered in any sense as either a copartnership or a joint-stock association, nor shall the certificates to be issued by the trustees hereunder be considered or treated as shares of stock, nor as entitling the holders thereof to any profits or dividends out of the funds of said trust, but the same are and intended to be absolute conveyances of a definite and fixed proportion of such oil, gas, and other minerals which may be produced from the said tract of land, whether same be much or little."

It was further provided in the declaration that after the two wells stipulated should be drilled, and after the issuance and delivery of the certificates of units of stock therein provided, the trustees might at their discretion terminate the trust, and evidence their intention so to do by filing and recording their declarations to that effect in the office of the county clerk of Stephens county.

The defendants filed, on November 7, 1922, an unverified answer consisting of a general demurrer and a general denial. On April 9, 1923, they filed their first amended answer, duly verified, in which they especially denied that either of them had authorized the named trust to act as their agents to conduct the business of the Man O' War Oil Syndicate for them, or that they had executed or signed the note sued on, or that same was signed by any person authorized so to do for them, and especially denied a partnership with any of the trustees, and with any of the other defendants named, or with the Black Hawk Drilling Company, or the Man O' War Oil Syndicate, and denied that they had ever authorized such persons or associations to do any business or to bind them in any way. On January 4, 1923, defendants filed their motion for a continuance, and on January 6th said motion was sustained. On March 9th defendants demanded and were granted a jury, and on April 9, 1923, were granted leave to file their amended answer, and a second continuance was granted them. On June 11, 1923, a third application by defendants for continuance was overruled. On September 28, 1923, plaintiff dismissed its suit as to defendants other than the defendants heretofore named, and sustained the general demurrer of defendants Adams and Powers, and, plaintiff declining to amend, the court rendered judgment that plaintiff take nothing as to defendant Mrs. Cynthia Creagh. Plaintiff has appealed.

The main complaint on this appeal is that the trial court failed and refused to grant plaintiff...