Davis v. Fraser

• Decision Date: 02 December 1958
• Docket Number: No. 7054,7054
• Citation: 319 S.W.2d 799
• Parties: Howland S. DAVIS et al., Appellants, v. George C. FRASER et al., Appellees.
• Court: Texas Court of Appeals

Page 799

319 S.W.2d 799

Howland S. DAVIS et al., Appellants, v. George C. FRASER et al., Appellees.

No. 7054.

Court of Civil Appeals of Texas, Texarkana.

Dec. 2, 1958.

Rehearing Denied Dec. 30, 1958.

Winthrop, Stimson, Putnam & Roberts, Allen T. Klots, Merrell E. Clark, Jr., New York City, Choate, Hall & Stewart, Marcien Jenckes, Boston, Mass., Robertson, Jackson, Payne, Lancaster & Walker, W. B. Patterson, A. W. Walker, Jr., Dallas, for appellants.

Kelley, Drye, Newhall & Maginnes, Henry E. Kelley, Frederick T. Shea, New York City, Turner, Rodgers, Winn, Scurlock & Terry, George S. Terry, Kilgore & Kilgore, James F. McCarthy, Dallas, Wickes, Riddell, Bloomer, Jacobi & McGuire, New York, City, for appellees.

FANNING, Justice.

Howland S. Davis and other named appellants have appealed from a judgment entered in a non-jury case by the 101st Judicial District Court of Dallas County, Texas, involving instructions given to the Trustees of Texas Pacific Land Trust, an unincorporated business trust, with respect to the disposition to be made by them of:

1. Certificate No. 390, issued to Blake Borthers & Company, a partnership, on June 26, 1888, for 100 shares of $100 each of proprietary interest in lands and property in the State of Texas conveyed by the Texas & Pacific Railway Company to said Trustees, and held by them under and pursuant to the terms of a Declaration of Trust dated February 1, 1888;

2. Declared and unpaid cash dividends subsequent to 1947 with respect to Certificate No. 390; and

3. 40,000 shares of the capital stock of the TXL Oil Corporation, a corporation formed in 1954 out of mineral interests and estates held by said Trust, being the number of shares attributable to Certificate No. 390 under the plan for the formation of said Corporation approved by said District Court in a previous proceeding.

The firm of Blake Brothers & Company, a partnership, went into voluntary liquidation in 1930 and the appellant, Howland S. Davis, is now serving as its liquidating partner. The appellants constitute all the persons who now have any interest in any asset of said partnership.

This suit was instituted by the Trustees of Texas Pacific Land Trust against appellants for a construction of the Declaration of Trust and of their fiduciary duties thereunder with respect to the three items of property hereinabove enumerated, it being requested that said property be turned over to a depositary to be designated by the court with such powers of investment, management and control as the court might prescribe, and that the Trustees be relieved of all duties and responsibilties in connection therewith.

As requested by the Trustees in their original petition, filed on August 30, 1956, the trial court entered an interlocutory order directing that notice of this suit and the nature thereof be published once each week for four consecutive weeks in certain leading newspapers of general circulation in Boston, Chicago, New Orleans, San Francisco, Dallas and New York. This notice urged any person having any claim to Certificate No. 390 to intervene at any time prior to the trial, which commenced on April 15, 1957. This order also required the Trustees to send the same notice to all of the more than 5,000 registered owners of shares or sub-shares in the Trust located in all 48 states of the United States and in many foreign countries.

Appellants, in their answer, counterclaim and third-party action, alleged their ownership of Certificate No. 390, and that they were entitled to receive a duplicate certificate to replace said lost certificate and to receive the dividends due thereon and the shares of stock attributable thereto. Appellants in their third-party action requested that service by publication be had on the third-party defendants, being the unknown persons, if any, having or claiming any interest therein adverse to them. An attorney ad litem was appointed to represent all unknown claimants.

The trial court held that the appellants failed to establish their ownership of Certificate No. 390 and consequently were not entitled to recover any of its fruits. Also in its judgment the trial court directed the Trustees to cancel the registration of Certificate No. 390 on the books of the Trust in the name of Blake Brothers & Company and to issue a new certificate for the same number of shares in the name of Mercantile National Bank at Dallas, as custodian; to pay over and deliver to said Bank, as custodian, all cash dividends theretofore or thereafter declared with respect to Certificate No. 390; and to assign and deliver to said Bank 40.000 shares of the common stock of the TXL Oil Corporation, as custodian. The Trustees were relieved of all liability and responsibility in connection with said property, and said Bank, as custodian, was invested with various managerial powers with respect thereto but subject at all times to further orders of the court with respect to any sale, transfer, exchange, investment, reinvestment or other disposition of the property not specifically directed or authorized in the judgment.

In said judgment it was decreed that appellants take nothing on their counterclaim but 'without prejucice to their right to bring another suit for recovery of same if additional evidence of their ownership and loss of such Certificate shall become available.'

At the request of appellants the trial court filed his findings of fact and conclusions of law and certain additional findings of fact.

On February 16, 1952, Howland S. Davis and the other appellants in this cause sued George C. Fraser and the other Trustees of Texas Pacific Land Trust (who are also appellees here) and The Hanover Bank, ad registrar of the trust, in the Supreme Court of New York. The facts and issues before that court and the disposition made of such case are set forth in the written opinion of that court, Davis v. Fraser, Sup., 121 N.Y.S.2d 643, 644, opinion by Justice Steuer as Follows:

'The relevant facts in this unusual case begin in 1886 when the Texas & Pacific Railway Company went into receivership. The company, at that time, owned vast tracts of land. The company had outstanding bonds which were a first lien on these lands. In 1887 a plan of reorganization of the railroad was approved. This plan provided that these lands be conveyed to trustees of the Texas Pacific Land Trust. The holders of the bonds had hitherto deposited them with a trust company and had received certificates of deposit in their stead. The trustees now issued, in exchange for these certificates of deposit, certificates of proprietary interest in the lands. The holder of a certificate of deposit for a $1,000 bond was entitled to receive 10 certificates of proprietary interest of a par value of $1,000 and $600 in new second mortgage bonds of the Railroad Company. The certificates of proprietary interest are generally called 'shares' and for convenience will be so designated here.

'At this time, 1888, and for at least thirty years prior thereto there was a partnership known as Blake Brothers & Company engaged in the stock brokerage business in Boston and New York. This firm continued in business until 1930, at which time it was dissolved. The plaintiffs are all the persons who are entitled to receive assets of the dissolved partnership. On June 26, 1888, Blake Brothers presented to the defendant, the Texas and Pacific Land Trust, 50 certificates of deposit for the bonds above described. These certificates were made out to various people and indorsed by them. None of them was made out to Blake Brothers. Blake Brothers in return received on July 5, 1888, five certificates of stock of the Land Trust, each for 100 shares, the numbers of the certificates being 386 to 390, inclusive. They also received thirty $1,000 bonds of the new issue of second mortgage bonds.

'Of the five certificates of stock, the four numbered consecutively 386 to 389, inclusive, have since been presented for transfer, the earliest on March 1, 1893, and the latest on February 13, 1902. All four of the certificates were endorsed in blank by Blake Brothers on October 1, 1898, and were presented by three different persons. The forth (fifth) certificate was never presented and is the subject matter of this case. The plaintiffs claim to be the owner and by this action seek to have a new certificate issued to them, upon presentation of a proper bond indemnifying the defendant and also seek to revover dividends which have been declared, appropriate to the ownership of the stock.

'There can be little doubt that the remaining certificate (No. 390) has been lost. As such the right of the owner to have a new certificate issued is unquestionable. The only question is, are the plaintiffs the owners. The earliest complete record of Blake Brothers' assets now extant is the first audit by independent auditors made in 1924. It does not show the stock listed as an asset nor is there any reference to it as held in any capacity. There are earlier records of assets, more of less fragmentary, going back to 1920 which likewise do not mention this certificate. No one living today was connected with Blake Brothers in 1898. The nearest approach is a gentleman who entered their employ in 1890 as a messenger and who later served in various capacities of increasing responsibility. This witness, Mr. Frederick G. Bennett, undoubtedly has the most intimate knowledge of the affairs of Blake Brothers at about this period, is possessed of a notable memory exceptional in resisting the erosive process of the years. He had no recollection of this security as an asset of the firm.

'The history of the Texas and Pacific Land Trust until 1936 was not such as would necessarily bring it to the attention of its shareholders, particularly those whose interestst embraced many other securities. It did, from time to time, send information and notices to its listed shareholders but it never paid a dividend until that date. Its...