Hoyt v. First Nat. Bank

• Decision Date: 14 October 1922
• Docket Number: (No. 10035.)
• Citation: 247 S.W. 637
• Parties: HOYT et al. v. FIRST NAT. BANK OF CHESTER, W. VA., et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

247 S.W. 637

HOYT et al. v. FIRST NAT. BANK OF CHESTER, W. VA., et al.^*

(No. 10035.)

Court of Civil Appeals of Texas. Fort Worth.

October 14, 1922.

Rehearing Denied December 2, 1922.

Appeal from District Court, Wichita County; H. F. Weldon, Judge.

Action by the First National Bank of Chester, W. Va., and another, wherein Phillip Freshwater was substituted as plaintiff, against F. C. Hoyt and another. From judgment for the substituted plaintiff, defendants appeal. Reversed and rendered.

Campbell & Campbell, of Wichita, Kan., and Cox & Keys, of Wichita Falls, for appellants.

Weeks, Morrow & Francis, of Wichita Falls, for appellees.

DUNKLIN, J.

Under and by virtue of an act of the Legislature of the state of Texas, approved March 16, 1917, the same appearing as chapter 83, Acts of 1917 (Vernon's Ann. Civ. St. Supp. 1918 and 1922, art. 5904 et seq.), the acting commissioner general of the land office of the state issued to N. G. Poe a permit to prospect for and acquire petroleum and natural gas on and from a certain tract of land comprising some 1,361 acres described as being situated in Wichita county, Tex., and bordering on the south bank of Red river. That permit may be properly designated as an oil and gas lease. By a regular chain of conveyances, Phillip Freshwater acquired the rights so granted to Poe to a certain portion of that tract, designated as lot 8, and west 1/2 of lot 9 of block 1 of Poe's Third subdivision. Thereafter, and on October 24, 1919, Freshwater executed a conveyance of his rights to F. C. Hoyt and A. J. Bellport, Jr. The consideration for the conveyance last mentioned was the payment by the grantees of the sum of $10,000, and the execution by Hoyt and Bellport of two promissory notes in favor of Freshwater for the principal sum of $10,000 each.

The first National Bank of Chester, W. Va., instituted this suit against Hoyt and Bellport to recover on those two notes, claiming to be the legal owner and holder thereof for a valuable consideration and without notice of any defense thereto. Hoyt and Bellport interpleaded Freshwater, alleging that the execution of the notes sued on was procured by fraudulent misrepresentations on the part of Freshwater which induced them to purchase the oil and gas permit, which fraud invalidated the notes, and that the bank was not an innocent purchaser of them, but took the same with full notice of the fraud. After that plea was filed, the bank dropped out of the suit, and Freshwater filed a petition asking for a recovery on the notes in his own name, claiming the ownership thereof, and the trial which followed was solely between him as plaintiff and Hoyt and Bellport as defendants.

In their pleadings Hoyt and Bellport not only resisted a recovery upon the notes by reason of the fraud alleged, but also by cross-action sought a recovery against Freshwater for the $10,000 cash paid by them to him for the conveyance executed in their favor. The fraud alleged consisted of representations by Freshwater that he was the owner of the lease and leasehold estate; that he was in possession thereof; that no one else was claiming title to or possession of the oil and gas lease in the land covered by the conveyance to them; that the only question of title was the controversy between the state of Texas and the state of Oklahoma as to whether or not the land covered by the lease was situated in the one state or the other; that said representations were false and fraudulently made by Freshwater; and that the same induced Hoyt and Bellport to purchase said lease from Freshwater and pay him the cash consideration mentioned and execute the promissory notes sued on. It was further alleged, in substance, in that connection, that as a matter of fact Freshwater owned no valid right to prospect for and acquire oil and gas on the land covered by the instrument of conveyance, executed by him to Hoyt and Bellport; that Freshwater was not in possession of said land at the time he executed the said conveyance and made said representations, but that said land was then held and then in actual possession of the Sinclair Oil & Refining Company, which was holding the same under a claim of title, and which refused possession of the same to Hoyt and Bellport, and which maintained an armed guard on the premises to prohibit Hoyt and Bellport from even coming thereupon.

In reply to such pleading, Freshwater denied all those allegations of fraudulent misrepresentations, and further alleged specially that, before the consummation of the trade between the parties, Hoyt and Bellport went upon and inspected the land in controversy in order to ascertain whether or not any one was in possession of the same, and also had the title to the lease in controversy examined by attorneys of their own selection; that they were also furnished an abstract of title and the opinions of other attorneys who had pronounced the title good; that, if the misrepresentations charged to have been made by Freshwater were in fact made, then Hoyt and Bellport are estopped to complain of the same, and have waived any right to make such complaint, by reason of the fact that they did not rely thereon and were not induced thereby to consummate said trade, but relied on the inspection actually made of the premises for the purpose of ascertaining whether or not any one was in possession of the land and claiming title thereto, and upon the opinions of said attorneys and abstract of title in order to determine whether or not he (Freshwater) had title.

The Sinclair Oil & Refining Company was not a party to the suit, but evidence was introduced pro and con upon the issue whether or not that company owned a valid oil and gas lease upon the land in controversy; Hoyt and Bellport contending that the lease held by that company, under which it was operating, covered the land in controversy, and Freshwater's contention being that it did not cover it. The lease held by that company covered parts of the Lucinda Meadows and Elizabeth Stanley surveys. No question was raised as to the validity of that lease to the lands legally covered thereby, but the pivotal question as to title was whether the land covered by the lease in controversy in this suit was a part of either of those surveys; the permit having been issued by the land commissioner upon the theory that it was unappropriated public domain and was not covered by either of those surveys.

The case was tried before a jury, who returned findings upon special issues submitted to them. The trial judge instructed the jury, in part, as follows:

"If you find and believe from the evidence that the land in controversy is without the boundaries of the Elizabeth Stanley survey, then you are instructed that the Sinclair Oil & Refining Company had no title or claim thereto."

Following that instruction, the court submitted the following special issues, to which the jury made answers as indicated:

"Special Issue No. 1. State whether or not lot 8 and the west one-half of lot 9, out of block 1, of H. C. Poe's Third subdivision, Wichita county, Tex., lays outside and north of the boundaries of the Elizabeth Stanley survey, Wichita county, Tex. Ans. Yes.

"Special Issue No. 2. Did the defendant Freshwater represent to defendants Hoyt and Bellport, or either of them, on or prior to the date of October 24, 1919, that the Graves well was not located on either lots 8 or 9 in question? Ans. Yes.

"Special Issue No. 3. Did the defendant Freshwater represent to defendants Hoyt and Bellport, or either of them, on or prior to the date of October 24, 1919, that there was no adverse claim of title to the lots in question except what claim the state of Oklahoma might have thereto, or placer mining claims? Ans. Yes.

"Special Issue No. 4. Did the defendant Freshwater represent to the defendants Hoyt and Bellport, or either of them, on or prior to the date of October 24, 1919, that there was no one claiming possession to said lots adverse to him? Ans. Yes.

"Special Issue No. 5. Find whether or not the Graves well, which was in the vicinity of the lots in question, was in fact located on lot No. 8 or the west half of lot 9. Ans. Yes.

"Special Issue No. 6. Find whether or not the Sinclair Oil & Gas Company was claiming the title to the oil and gas rights on the lot in controversy in this case, except a part thereof lying on the northwest corner, below the actual low bank of the river, during all of the period and time covered by the negotiations and contract between the defendant Freshwater and defendants Hoyt and Bellport. Ans. Yes.

"Special Issue No. 7. Find whether or not the Sinclair Oil & Gas Company was in the actual possession of the lots in controversy except a part thereof lying on the northwest corner, below the actual bank of the river, during the period of negotiations between Freshwater and Bellport and Hoyt and subsequent thereto. Ans. Yes.

"Special Issue No. 8. Find whether or not the defendants Hoyt and Bellport were able to enter the premises in question and get possession thereof for the purpose of complying with the terms of the contract in question. Ans. No.

"Special Issue No. 9. If you answer No. 5, `Yes,' then find whether or not the defendants Hoyt and Bellport would have entered into the contract in question and would have paid the money and executed the notes in question if they had known that at the time there was a well being drilled on a part of said lots by a party claiming title thereto adverse to the defendant Freshwater. Ans. Yes.

"Special Issue No. 10. If you have answered No. 6, `Yes,' then find whether or not the defendants Hoyt and Bellport would have entered into the contract in question and have paid the money and executed the notes in question had they known that the Sinclair Oil & Gas Company was claiming title to any part of the lots in controversy. Ans. No.

"Special Issue No. 11. If you have answered No. 7, `Yes,' then find whether or not the defendants Hoyt...