Custom Leasing, Inc. v. Texas Bank & Trust Co. of Dallas

• Decision Date: 07 March 1973
• Docket Number: No. B-2990,B-2990
• Citation: 491 S.W.2d 869
• Parties: CUSTOM LEASING, INC., Petitioner, v. TEXAS BANK & TRUST COMPANY OF DALLAS, Respondent.
• Court: Texas Supreme Court

Page 869

491 S.W.2d 869

CUSTOM LEASING, INC., Petitioner, v. TEXAS BANK & TRUST COMPANY OF DALLAS, Respondent.

No. B-2990.

Supreme Court of Texas.

March 7, 1973.

Rehearing Denied April 11, 1973.

Key, Carr, Evans & Fouts, Donald M. Hunt, Lubbock, for petitioner.

Stigall, Maxfield & Collier, John F. Maxfield, Dallas, for respondent.

DENTON, Justice.

Custom Leasing Inc. brought this suit against Texas Bank and Trust Company of Dallas to recover monies alleged to have been paid by Custom either by mutual mistake or through false representation for release of a chattel mortgage. The trial court rendered judgment for the plaintiff based on a jury verdict, and the court of civil appeals reversed and rendered. 470 S.W.2d 123. We reverse the judgment of the court of civil appeals and remand the cause to that court for further consideration.

In April, 1963, James E. Lyles sought to secure a loan of some $20,000 from Texas Bank & Trust Company of Dallas. He represented himself to be the vice-president of the Gentry Construction Company, and stated the loan was for the purpose of operating a large agricultural project in West Texas. Mr. Warren Sudduth, the vice-president of the bank, negotiated the loan with Lyles. Lyles supplied the bank with a financial statement of Gentry Construction Company, a list of the equipment to be mortgaged, credit references for the company, and a power of attorney authorizing Lyles to act in behalf of George W. Gentry. The bank checked the credit references and subsequently approved a loan of $18,900. The note secured by equipment owned by the Gentry Company was executed by Lyles and purportedly by George W. Gentry, the president of the company. Lyles is the son of Mrs. Gentry by a former marriage. Lyles executed the chattel mortgage as vice-president of the company.

The note was not paid when due. After the note had been extended twice Mr. Sudduth made a personal trip to Midland to see Mr. Gentry and Lyles in an effort to collect the past due note. He was unable to contact Gentry but did see Lyles, and again made demand for payment. At this time Lyles informed Sudduth that Mr. Gentry's signature on the note, chattel mortgage, and other papers involved had been forged. He asked Sudduth not to contact Gentry in return for prompt payment of the note.

In April, 1964, which was shortly after Sudduth contacted Lyles in Midland, Lyles contacted Custom Leasing in Lubbock and represented himself to be an officer of the Gentry Construction Company. They entered into an agreement whereby Gentry Construction Company would sell certain trucks and equipment to Custom Leasing, who would in turn lease the trucks and equipment back to Gentry. Lyles furnished Custom Leasing certain information which included a financial statement of Gentry Construction Company; a depreciation schedule of the equipment; a tax return and personal financial statement of George W. Gentry; and other pertinent information. During the negotiation Lyles informed Custom Leasing that the Texas Bank & Trust held a chattel mortgage on the heavy equipment. A telephone call was placed from the office of Custom Leasing to Mr. Sudduth in Dallas. Sudduth was informed of the arrangement that Custom Leasing was buying the equipment and understood that Custom Leasing wanted title to the property free and clear of any mortgage. The Custom Leasing representative then asked Sudduth what it would take to pay off the note securing the mortgage, to which Sudduth affirmed that at least $19,089 was owed to Texas Bank & Trust by Gentry Construction Co., and replied, the bank would release the mortgage for $19,089.00. The bills of sale and two lease contracts were then executed between Custom Leasing and Lyles. These instruments were signed by Lyles individually and as vice-president of Gentry Construction and purportedly by the Gentrys individually and as officers of the Company. Custom issued two checks, one to Gentry Construction in the amount of $5,675.50, which was cashed by Lyles, and one in the amount of $19,089 to cover a draft drawn on it by Texas Bank and Trust Company for the release of the mortgage.

After several months the payments on the Gentry lease became delinquent. On January 19, 1965, Custom Leasing filed suit against Lyles, the Gentrys, and Gentry Construction, to collect all monies due under the two leases in Lubbock County. Lyles failed to answer, and Custom took an interlocutory default judgment against him for the entire amount on March 12, 1965. Subsequent to the filing of the original case and prior to the taking of the interlocutory default judgment, Custom Leasing took the depositions of Mr. and Mrs. Gentry, and learned for the first time that the Gentrys were claiming that they did not sign any of the instruments involved in either the bank loan and mortgage or the sale and lease-back transaction with Custom. They also denied that Lyles was an officer of the corporation during this entire period and testified that he had no authority to transact business for the Gentrys or the corporation. Thereafter, on March 29, 1965, Custom amended its original petition and joined the bank as a defendant. The bank's plea of privilege was subsequently granted and that claim against the bank was severed and transferred to Dallas County. In August, 1966, after Customs' suit against the bank had...