Humble Oil & Refining Co. v. Blankenburg

• Decision Date: 10 January 1951
• Docket Number: No. A-2783,A-2783
• Citation: 149 Tex. 498,235 S.W.2d 891
• Parties: HUMBLE OIL & REFINNING CO. v. BLANKENBURG et al.
• Court: Texas Supreme Court

Page 891

235 S.W.2d 891

149 Tex. 498

HUMBLE OIL & REFINNING CO. v. BLANKENBURG et al.

No. A-2783.

Supreme Court of Texas.

Jan. 10, 1951.

A. N. Steinle and Leon Steinle, Jourdanton, and Nelson Jones, W. J. Merrill and Rex G. Baker, all of Houston, for petitioners-respondents, Humble Oil & Refining Co. et al.

Neil E. Beaton, San Antonio, and Raymond Furr, Austin, for petitioners-respondents, Otis Blankenburg et al.

SMEDLEY, Justice.

The district court rendered judgment in favor of petitioner, Humble Oil & Refining Company, against the City of Charlotte, Texas, and respondents Otis Blankenburg, Cleo F. Blankenburg, David Kane and J. S. Atkins for the title and possession of all of the parks and plazas and the one half of the streets and alleys which are adjacent to or abut on the parks and plazas in the City of Charlotte, subject to an easement in the public to use the property for park, plaza, street and alley purposes. The judgment enjoined those who were parties defendant in the trial court from commencing or conducting any drilling or mining operations on any of the parks, plazas, streets and alleys under or by virtue of a certain oil and gas lease from the City of Charlotte to J. S. Atkins. On appeal by all of the defendants except the City of Charlotte the Court of Civil Appeals reversed in part the trial court's judgment and rendered judgment that petitioner Humble Oil & Refining Company take nothing by its suit for title and possession, but affirmed that part of the trial court's judgment which enjoined the defendants. 233 S.W.2d 180.

The case was tried before a jury, which in answer to the one issue submitted to it found that J. E. Franklin, through whom petitioner claims title, died intestate. The trial court's judgment recites that after the trial was completed and before the rendition of judgment Humble Oil & Refining Company and the City of Charlotte, by a contract of settlement, agreed that judgment should be rendered in favor of the Humble Company and against the City for title to the property for which it sued, subject to an easement in the public. The Court of Civil Appeals correctly held that the agreement in no way affected the judgment rendered against the defendants who were not parties to the agreement and that it did not affect their right to prosecute an appeal from the judgment against them. We consider first the question of title in the suit of petitioner, the Humble Company, against respondents, those who appealed from the trial court's judgment.

The parties stipulated that the Charlotte Townsite Company is the common source of title. That Company was incorporated in 1910 with a capital stock of $18,000, divided into 1800 shares of the par value of $10 each, and with its principal place of business in the Town of Charlotte, in Atascosa County. In July, 1911, the Townsite Company made and filed a map of the Town of Charlotte showing lots, blocks, streets, alleys, plazas and parks. On the map was written and executed a dedication reciting that the Townsite Company 'does hereby set apart and dedicate to the use and benefit of the public forever the plazas, parks, streets and alleys as shown in said plat'. The Townsite Company, on December 24, 1912, conveyed to J. E. Franklin nearly 1500 lots in the town. On the same day an amendment to the charter was executed by all of the stockholders, including J. E. Franklin, by which the name of the corporation was changed to Franklin Development Company. This instrument shows J. E. Franklin to be the owner of 180 shares of the capital stock of the company. Petitioner introduced in evidence an original certificate of stock in the Franklin Development Company, dated December 26, 1912, certifying that J. E. Franklin is the owner of 180 shares of the capital stock of the corporation. The record shows the names of those to whom were issued the shares of stock of the Franklin Development Company other than the 180 shares that were issued to J. E. Franklin, but the ownership of those other shares at the time this suit was filed and tried was not proved. Petitioner, the Humble Company, introduced on the trial certificates for 1430 shares of the stock of the Franklin Company that were issued to others than J. E. Franklin. The certificates were endorsed in blank by those to whom they were issued.

On July 2, 1913, the right of Franklin Development Company to do business in this state was forfeited by the Secretary of State for its failure to pay its franchise tax, and the record made in the trial court indicates that the company did not thereafter undertake to engage in business.

J. E. Franklin died in 1946 or 1947. The jury found that he died intestate. Franklin left four children by his first wife as his only heirs. These heirs of Franklin, in August, 1948, executed deeds conveying to E. R. Wyatt all of their undivided interests in the land embraced in the Charlotte Townsite and also conveying, assigning and transferring all of their titles and interests in all of the capital stock and assets of the Townsite Company and of the Franklin Development Company 'which appears of record in the name of J. E. Franklin'. During the same month the same property was conveyed and transferred by Wyatt to petitioner, Humble Oil & Refining Company.

Petitioner offered in evidence, pursuant to its pleading attacking their validity, an oil and gas lease executed by the City of Charlotte to respondent J. S. Atkins, and assignments from and under Atkins to the other respondents of interests in the lease. The oil and gas lease, executed July 9, 1948, is for a primary term of 10 years, recites a consideration of $200 paid, and covers all parks, plazas, streets and alleys in the city as shown by the plat of the Townsite of Charlotte.

As held by the Court of Civil Appeals, the dedication by the Charlotte Townsite Company of the plazas, parks, streets and alleys shown on the plat of the Town of Charlotte to the use and benefit of the public did not convey the Townsite Company's title. It created an easement, the fee remaining in the Townsite Company subject to the easement. O'Neal v. City of Sherman, 77 Tex. 182, 14 S.W. 31; Watts v. City of Houston, Tex.Civ.App., 196 S.W.2d 553, application for writ of error refused; Riley v. Davidson, Tex.Civ.App., 196 S.W.2d 557; 16 Am.Jur. pp. 402-403, Sec. 56; 39 Am.Jur. pp. 809-810, Sec. 12.

The Court of Civil Appeals either held that petitioner, the Humble Company, proved its ownership of shares of stock of the Franklin Development Company or assumed that it is an owner of shares of stock of that corporation. Its decision that petitioner failed to prove any title or interest in the assets of the company rests upon its conclusion that a stockholder has no title or interest in the assets of the corporation until its debts have been paid. With that conclusion we do not agree. When a corporation is dissolved its property becomes the property of its stockholders in proportion to their respective shares, subject, however, to the rights of the creditors of the corporation whose debts must be satisfied out of the corporation property. Peurifoy v. Wiebusch, 132 Tex. 36, 41, 117 S.W.2d 773, and authorities there cited. The title rests in the stockholders, subject to the payment of the debts owed by the corporation.

When, as here, the Secretary of State, acting under Article 7091 of the Revised Civil Statutes, Vernon's Ann.Civ.St. art. 7091, has entered on the record in his office the forfeiture of the right of the corporation to do business in this state, the charter of the corporation has not thereby been cancelled nor has the corporation been dissolved. Ross Amigos Oil Co. v. State, 134 Tex. 626, 138 S.W.2d 798; State v. Dyer, 145 Tex. 586, 200 S.W.2d 813. The effect of such a forfeiture is to prohibit the corporation from doing business in the state and to deny to it the right to sue or defend in any court of the state except in a suit to forfeit its charter. The legal title to the assets remains in the corporation, but the beneficial title to the assets of the corporation is in the stockholders. This being true, and since the right to sue has been denied to the corporation by the forfeiture under Article 7091, the stockholders as beneficial owners of the assets of the corporation may prosecute or defend such actions in the courts as may be necessary to protect their property rights. Pratt-Hewit Oil Corporation v. Hewit, 122 Tex. 38, 52 S.W.2d 64; Federal Crude Oil Co. v. Yount-Lee Oil Co., 122 Tex. 21, 52 S.W.2d 56; Favorite Oil Co. v. Jef Chaison Townsite Co., Tex.Civ.App., 162 S.W. 423; Canadian Country Club v. Johnson, Tex.Civ.App., 176 S.W. 835, application for writ of error refused; Aransas Pass Harbor Co. v. Manning, 94 Tex. 558, 563, 63 S.W. 627; Hildebrand's Texas Corporations, Vol. 3, p. 146, § 761, p. 192, § 767.

By the records of the Franklin Development Company and a certificate of stock in evidence, J. E. Franklin is shown to have become the owner of 180 shares of the stock of that corporation. When he died intestate the title to the shares of stock that he owned passed to his four children as his heirs. They assigned and transferred to Wyatt all of the stock in that company that had been owned by Franklin, and Wyatt assigned and transferred that stock to petitioner, the Humble Company. There is no proof that these transfers were entered on the records of the corporation. As between the parties to them, however, the written assignments were sufficient, without entry on the...