Lyons v. Texorado Oil & Gas Co.

• Decision Date: 09 December 1935
• Docket Number: No. 4519.,4519.
• Parties: LYONS v. TEXORADO OIL & GAS CO. et al.
• Court: Texas Court of Appeals

Page 375

91 S.W.2d 375

LYONS v. TEXORADO OIL & GAS CO. et al.

No. 4519.

Court of Civil Appeals of Texas. Amarillo.

December 9, 1935.

Rehearing Denied February 17, 1936.

Appeal from District Court, Hutchinson County; E. J. Pickens, Judge.

Action by the Texorado Oil & Gas Company and others against Minnie J. Lyons, wherein the defendant filed a cross-action. From an adverse judgment, the defendant appeals.

Affirmed.

A. A. Lumpkin, of Amarillo, for appellant.

Fischer & Fischer and Madden, Adkins, Pipkin & Keffer, all of Amarillo, for appellees.

JACKSON, Judge.

Texorado Oil & Gas Company, a Texas corporation, on December 1, 1931, was the owner of the oil and gas on and under the north 80 acres of the south 160 acres of section 83, block 46, H. & T. C. Railway Company surveys in Hutchinson county, together with producing gas wells and other improvements, subject to certain overriding royalties which are not involved in this litigation.

On December 17, 1931, in cause No. 1852, styled Oil Well Supply Company v Texorado Oil & Gas Company, in the Eighty-fourth district court of Hutchinson county, the plaintiff and several interveners obtained a judgment against the Texorado Oil & Gas Company for the sum of their respective claims, which aggregated approximately $15,000 and for foreclosure of their respective liens against the property. The court directed the property to be sold and the proceeds applied to the payment of the debts, but by partial payment the creditors were induced to withhold the issuance of an order of sale until about January 1, 1933.

On October 15, 1932, in the 104th district court of Hutchinson county, in cause No. 1794, styled Irvan Farrell v. Farrell Associates Incorporated et al., the plaintiff obtained a judgment against the Texorado Oil & Gas Company for $444.89.

In March, 1933, the judgment obtained and the liens foreclosed in cause No. 1852 were, for a valuable consideration, by the owners thereof transferred and assigned to Minnie J. Lyons, and the judgment obtained in cause No. 1794 was also, for a valuable consideration, assigned to her.

On November 28, 1932, in cause No. 2326, in the Eighty-fourth district court of Hutchinson county, styled R. S. Marshall v. Texorado Oil & Gas Company et al., the plaintiff secured a judgment against the Texorado Oil & Gas Company for the sum of $3,589 on which an execution was issued, and at a sale thereunder the property was purchased by R. S. Marshall for the sum of $1.

On June 18, 1933, Minnie J. Lyons caused to be issued on the judgments she had theretofore purchased orders of sale. The property was advertised, sold, and conveyed to her by a sheriff's deed.

On May 8, 1934, in cause No. 427 in equity in the District Court of the United States for the Northern District of Texas, styled Minnie J. Lyons v. R. S. Marshall, the plaintiff obtained a judgment against Marshall decreeing that any title theretofore claimed or asserted by him to the property or the proceeds thereof be annulled.

On July 16, 1934, the Texorado Oil & Gas Company, G. K. Olmsted, Frank Barmettler, O. E. Brueggeman, and W. E. Greenewald, directors of such corporation, as plaintiff, instituted this suit in the Eighty-fourth district court of Hutchinson county against Minnie J. Lyons, defendant, in the form of an action in trespass to try title.

The defendant answered by general demurrer, general denial, plea of not guilty, and by way of cross-action sought judgment for title and possession of the property.

On February 25, 1935, by a first amended original petition, the plaintiffs, in addition to their action of trespass to try title, alleged that in February, 1933, the Texorado Oil & Gas Company began negotiations with the defendant, and on or about March 1st thereafter, acting by and through its said directors, made an oral contract and agreement with the defendant, by the terms of which she agreed to purchase all the judgments, except the one in favor of R. S. Marshall, if the money required did not exceed $14,000, and allow the company to remain in possession, management, and control of the premises, provided the corporation would pay, or cause to be paid, to her, the amount so advanced, together with a bonus of 50 per cent. thereof out of one-half of the proceeds accruing to the company from the production on the property, and upon such payment she would release such indebtedness; that such oral contract was completed and pursuant thereto the defendant acquired such indebtedness and liens; that at the time of this transaction the corporation had not made satisfactory settlement with R. S. Marshall, whose judgment was void and the claim asserted by him excessive, the approximate amount of which did not exceed $1,800, and the corporation had instituted against him cause No. 2413, the object of which was to set aside the purported Marshall judgment and the sale thereunder; that the defendant was in good faith advised of the facts and circumstances relative to the Marshall claim, and said cause No. 2413 was tried in May, 1933, with the defendant present, the corporation prevailed, the judgment and sale were set aside, but on May 29, 1933, a new trial was granted and the suit of the corporation dismissed because it had theretofore defaulted in the payment of its franchise tax to the state, and such default prohibited it from maintaining the suit; that on or about June 1, 1933, the defendant advised the plaintiffs that she had been informed by her attorneys that the most expeditious manner of clearing the property of the Marshall judgment was for her to have orders of sale issued thereon and the property sold, and, if plaintiffs would consent to such sale, she was willing and able to perform the agreement made in March, and would purchase the property and hold it in trust for plaintiffs, subject to the payment to her of the moneys she had advanced and the bonus she was to receive under the original agreement; this proposition was accepted by the plaintiffs and the property sold to defendant for $3,610, which amount was credited on her judgments; that, by reason of the aforesaid agreements, the defendant holds the property in trust for the corporation, but such trust has been repudiated; on account of such oral contract upon which plaintiff relied, it did not appear at the sale, made no bid on the property, and made no arrangements to secure others to bid thereon or to obtain any money with which to satisfy the judgments; that the property at the time of the sale was worth $50,000, and the price paid, $3,610, was wholly inadequate, and but for such agreements and their reliance thereon plaintiffs would have bid or secured a bidder who would have paid at least the amount of the judgments; that the proceeds accruing from the operation of the property since the agreements with defendant have not been disbursed, and amounted, at the time of the trial, to approximately $11,471.

The case was tried before the court, without the intervention of a jury, and judgment entered that the Texorado Oil & Gas Company recover from the defendant, Minnie J. Lyons, the equitable title and possession of the leasehold estate burdened in her behalf for the indebtedness due her, aggregating the sum of $20,086.50, to be satisfied out of one-half the proceeds of the production saved and marketed from and after March 1, 1933, from which judgment this appeal is prosecuted.

The appellant presents as error the action of the trial court in rendering judgment against her, asserting that under the record there is a fatal variance between the contract alleged and the contract proved.

The appellees alleged that the Texorado Oil & Gas Company is a corporation and, acting by a majority of its directors Greenewald, Olmsted, Brueggeman, and Barmettler, orally agreed with the defendant, Minnie J. Lyons, on the terms of the contract alleged and relied on.

The testimony shows that neither O. E. Brueggeman nor W. E. Greenewald were directors of the corporation at the time of the agreements. The contract alleged is one that the corporation was authorized to make, and there is no question but that Greenewald and Olmsted were directors with authority to represent the company.

Corporations must act by agents, and whether or not the alleged directors had authority to bind appellee corporation at the time the transaction was made becomes immaterial, since the record shows that the corporation acquiesced in the terms and conditions of the oral contract, accepted benefits thereunder, and instituted this suit for the purpose of enforcing the terms thereof. This conduct was such a ratification of such contract as to render it valid and enforceable.

"With reference to a mere absence of authority in a corporate officer to bind the company, ratification is deemed to make good the defect and the corporation is as much bound as if precedent authority had been given." 10 Tex.Jur. p. 912, par. 965.

"Ratification," as distinguished from "estoppel," overcomes the objection that the corporate agent had no precedent authority to bind the company. 10 Tex.Jur. p. 389, § 331.

"Except as to intervening rights of strangers, ratification by a corporation of an unauthorized act or contract by its officers or others relates back to the time of the act or contract ratified, and is equivalent to original authority. The corporation and the other party to the transaction are in precisely the...