Howard Gault & Son, Inc. v. First Nat. Bank of Hereford

• Decision Date: 30 August 1976
• Docket Number: No. 8686,8686
• Citation: Howard Gault & Son, Inc. v. First Nat. Bank of Hereford, 541 S.W.2d 235 (Tex. Ct. App. 1976)
• Parties: HOWARD GAULT AND SON, INC., Appellant, v. FIRST NATIONAL BANK OF HEREFORD, Texas and Pitman Grain Company, Appellees.
• Court: Texas Civil Court of Appeals

Page 235

541 S.W.2d 235

HOWARD GAULT AND SON, INC., Appellant, v. FIRST NATIONAL BANK OF HEREFORD, Texas and Pitman Grain Company, Appellees.

No. 8686.

Court of Civil Appeals of Texas Amarillo.

Aug. 30, 1976.

Rehearing Denied Sept. 27, 1976.

Jack Hazlewood, Amarillo, for appellant.

Witherspoon, Aikin, Langley, Woods & Gulley, D. Wesley Gulley, Andrew J. Shuval, Hereford, for appellees.

ROBINSON, Justice.

Defendant Pitman Grain Company is the maker of a check payable to 'Thomas & Gault' drawn on its account in the Defendant First National Bank of Hereford, Texas. The defendant bank accepted the check and deposited it to the account of T. B. Thomas, Jr. upon its presentment with the endorsment

'Thomas & Gault

T. B. Thomas, Jr.'

Plaintiff, Howard Gault and Son, Inc., sued the bank for conversion of the check and, in the alternative, sued Pitman on the debt for which the check was given. A cause of action alleged by plaintiff corporation against Thomas was severed by the trial court. The trial court rendered judgment, on an instructed verdict, for Pitman and, on a jury verdict refusing to find that the bank acted in bad faith or that Thomas was indebted to plaintiff, for the bank. Plaintiff appeals. Affirmed.

Plaintiff alleges that it is a payee on the check and that the endorsement of the check by Thomas was ineffective to authorize payment by the bank.

The evidence shows without dispute that the 'Gault' of 'Thomas & Gault' is Howard Gault and Son, Inc. The check in question was given by Pitman in payment for milo delivered to Pitman elevators from the farming operation of T. B. Thomas, Jr. and Howard Gault and Son, Inc. The question, then, is whether the endorsement by Thomas was sufficient to authorize the bank to deposit the check to his account.

If plaintiff corporation and Thomas were partners in the farming operation, the bank was authorized to pay the check on Thomas' endorsement. Art. 6132b, Sec. 9(1) Vernon's Ann.Civ.St. The burden of proving partnership is on the parties asserting it, in this case, the bank and Pitman. First National Bank of Brownwood v. Chambers, 398 S.W.2d 313 (Tex.Civ.App., Eastland 1965, no writ). No jury issue was requested and none was submitted concerning either the nature of the relationship between Thomas and plaintiff or Thomas' authority to endorse the check. We, therefore, first consider whether the evidence, as a matter of law, establishes that Howard Gault and Son, Inc. and Thomas were partners.

The written agreements between plaintiff and Thomas provide for farming certain land, part of it belonging to plaintiff and part of it belonging to J. C. Morrison and leased by Morrison to plaintiff and Thomas as lessees. The Morrison lease was for a cash rental. For the use of its land, plaintiff was to receive a crop rental, which in the case of milo was 1/3 of the crop. Plaintiff was to advance financing including a monthly draw for Thomas to be charged against his share of the net proceeds. Thomas was to furnish his equipment, including upkeep, and his own personal labor. All expenses except those for equipment were to be shared equally. After payment of the landlord's share all of the 'net revenues, rents, and proceeds' were to be divided equally between plaintiff and Thomas. The writing states that the parties are not engaged in the transaction as partners but as landlord and tenant. Nevertheless, both were tenants of the Morrison land and their agreement provides for a sharing by plaintiff and Thomas of both profits and potential losses, after payment of the stipulated rentals.

It is undisputed that Thomas had the right to obligate plaintiff for debts incurred in the line of farming, that a number of accounts with different businesses were carried in the name of 'Thomas and Gault,' and that Pitman carried the account on its books as 'Thomas & Gault' with the consent of or at the direction of Howard Gault and Son, Inc. Pitman had made previous payments by check payable to 'Thomas & Gault.' Those checks were accepted by Howard Gault and Son, Inc. without complaint and negotiated with its endorsement and without the endorsement of T. B. Thomas, Jr. With regard to the nature of the payee on the Pitman checks, Howard Gault...