Martin v. U.S. Trust Co. of New York

Decision Date05 March 1985
Docket NumberNo. 05-83-00623-CV,05-83-00623-CV
Citation690 S.W.2d 300
PartiesMark MARTIN, Guardian Ad Litem, et al., Appellants, v. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee, Appellee.
CourtTexas Court of Appeals

Stuart C. Hollimon, Strasburger & Price, Dallas, Jim Mattox, Atty. Gen. of Texas, David R. Richards, Executive Asst. Atty. Gen., Lou McCreary, Asst. Atty. Gen., Austin, Fred Weldon, Asst. Atty. Gen., Kevin J. Keith, Wayne E. Lee, Bailey & Williams, Dallas, for appellants.

John L. Hauer, P.C., Michael Byrd, Clarice M. Davis, P.C., of Akin, Gump, Strauss, Hauer & Feld, Dallas, for appellee.

Before STEPHENS, VANCE and ALLEN, JJ.

STEPHENS, Justice.

Almost a century has passed since the Texas Pacific Land Trust issued its Certificate # 390, the only remaining outstanding certificate of the Trust, in the street name of Blake Brothers & Company, a stock brokerage house operating in Boston and New York. This suit is to determine the true owner of the certificate.

In 1885, the Texas and Pacific Railway went into receivership, only a few years after Texas had granted it millions of acres of public domain in return for its promise to build a railroad from Texarkana to El Paso. In 1887, a plan of reorganization was approved whereby a trust was created, known as the Texas Pacific Land Trust. The millions of acres of land were conveyed to the Trust which in turn issued its certificates bearing a par value of $100 each in exchange for original certificates of deposit of the railroad.

In 1888, Blake Brothers, possessed of an aggregate amount of $50,000 of railway income and land grant bonds in various denominations and registered to thirteen different owners, presented to the Trust those bonds, endorsed in blank, in exchange for five Trust certificates of one hundred shares each. The new certificates were numbered 386 through 390 and were issued in the name of Blake Brothers & Company. Four of these five certificates were endorsed in blank by Blake Brothers and, between 1893 and 1902, tendered to the Trust for transfer. The whereabouts of Certificate # 390 remained a mystery until its discovery in 1977, some sixteen years after the State of Texas filed the present suit to escheat the certificate and its proceeds.

Although many diverse claims of ownership of Certificate # 390 have been made over the years, none, before this suit, has had any merit.

In 1930, several years before the Trust began paying its first dividends in 1936, the firm of Blake Brothers was dissolved. From 1936 to 1948, the Trust paid dividends on Certificate # 390 to the successors of Blake Brothers. In 1952, after an unsuccessful attempt to persuade the trustees of Texas Pacific Land Trust to issue a new certificate to replace Certificate # 390, the successors of Blake Brothers sued the trustees in New York for replacement of Certificate # 390, claiming that the original had been lost. The trial court denied relief, and, in 1954, the New York Court of Appeals affirmed the trial court's judgment. Davis v. Fraser, 307 N.Y. 433, 121 N.E.2d 406 (1954).

After Blake Brothers' successors lost in the New York courts, trustees for the Texas Pacific Land Trust initiated suit in Texas for construction of the trust, appointment of a custodian for Certificate # 390, the only remaining outstanding certificate, and for discharge. The successors to Blake Brothers again sought a determination of ownership of the certificate, this time in the Texas court, but lost in the trial court and lost on appeal in the Texarkana Court of Civil Appeals. Davis v. Fraser, 319 S.W.2d 799 (Tex.Civ.App.--Texarkana 1958, writ ref'd n.r.e.). In that case, the trial court appointed the Mercantile National Bank at Dallas as custodian of the certificate and directed the Texas Pacific Land Trust to transfer ownership of the certificate to the Mercantile National Bank as trustee.

On November 11, 1961, the State of Texas filed the present suit to escheat the certificate and its proceeds. The trial court appointed Mark Martin, a Dallas attorney, as guardian ad litem for all persons asserting a claim to Certificate # 390.

While the present suit lay dormant in the trial court, the successors to Blake Brothers were instrumental in obtaining passage of TEX.REV.CIV.STAT.ANN. art. 1358a (Vernon 1980) which purported to create in the record owner of a certificate of interest in a business trust a presumption of ownership of such certificate and to require payment to that record owner of all escrowed distributions. In Jenckes v. Mercantile National Bank at Dallas, 407 S.W.2d 260 (Tex.Civ.App.--Dallas 1966, writ ref'd. n.r.e.), we upheld the trial court's judgment, holding that, as applied to the facts, the statute was unconstitutional, being both retroactive and a legislative invasion of the province of the courts.

From 1966 until 1969, the present suit remained inactive. In April 1979, Wells Fargo & Company of San Francisco filed a petition in intervention and interpleader and tendered into court the original Certificate # 390. It was after this plea in intervention that the present litigants emerged.

The circumstances under which the original certificate was discovered are somewhat amazing. In 1969, the American Express Company sold all of the papers as well as other items which it had obtained through a series of acquisitions from the original Wells Fargo, formed in 1852 as a banking and express business, to Wells Fargo and Company of San Francisco which was interested in further clarification and development of the early history of Wells Fargo.

Mr. Edward Munger, the officer of Wells Fargo and Company of San Francisco in charge of receiving and cataloguing the documents purchased from American Express, consisting of approximately four and one-half tons of paper, read a human interest article in the San Francisco Chronicle regarding a "$2 million missing bond" identified as "Texas Pacific Land Trust Bond Numbered 390" and realized that he had inventoried the certificate while cataloguing the papers. Upon investigation, he discovered the certificate which resulted in the interpleader action.

Found along with the certificate were three other documents: a $15,298.48 promissory note, dated May 8, 1896; a letter written by Allen McCulloh, dated May 3, 1897; and an old envelope, brown from age. From the ensuing investigation, the following facts were learned.

The May 8, 1896, promissory note was issued by the New York investment firm of Decker, Howell & Company, payable to the order of Joseph S. Decker, a partner in the firm. The note was non-interest-bearing, due and payable four months after its date. This note was endorsed by Decker to the order of J.R. DeLamar, a wealthy New York industrialist and mining magnate.

The letter found with the certificate was written by Allan McCulloh and sent on the letterhead of Alexander & Green, a New York City law firm, addressed to H.B. Parsons, Esq., of Wells Fargo & Company's bank at 63 Broadway in New York City. It acknowledged receipt of a letter from Parsons, the $15,298.48 note, and a "certificate for 100 shares of the Texas Pacific Land Trust, which note and stock are held by Captain DeLamar. I will at once take steps to collect this amount."

The discovery of these three documents prompted a further search. The officials of Wells Fargo knew that other papers from the Wells Fargo days had been preserved at the Huntington Library in San Marino, California. It was there that other correspondence between Mr. DeLamar and H.B. Parsons, who was once the cashier of the Wells Fargo Bank in New York, a position which would now equate with the presidency of the bank, was discovered. It was developed that Mr. Parsons was a confidant of and financial advisor to Mr. DeLamar. Those letters are in evidence in this case.

On January 4, 1980, after the certificate had been interpleaded into court, the DeLamar Estate intervened, claiming ownership of the certificate. In February of 1982, the heirs of Decker and Williams 1 intervened, contending that they were the owners of the certificate.

Trial was before a jury. At the conclusion of the trial, the court submitted only two special issues. Special Issue No. 1 asked the jury to determine whether the certificate was delivered as part payment of the note or as a pledge to secure the payment of the note. The jury answered that it was delivered as a partial payment of the note. The second special issue asked the jury to determine whether the certificate was delivered by Decker to Parsons on, before, or after September 8, 1896. The jury answered that it was delivered after September 8, 1896. On February 9, 1983, the court rendered judgment on the jury's verdict in favor of the DeLamar Estate.

On appeal, Mark Martin, guardian ad litem, asserts by four points of error that, as a matter of law, title to the certificate and its proceeds is vested in George R. Coughlan or his duly appointed successor as assignee for the benefit of creditors of Decker/Williams by virtue of a New York Supreme Court judgment; that there was no evidence or insufficient evidence that the certificate was delivered to DeLamar as partial payment of the note; that the trial judge erred by failing to instruct the jury that pledge agreements may be made orally; and, in the alternative, that there was no evidence or insufficient evidence that the certificate delivered to Parsons by Decker was in fact Certificate # 390.

Appellant Decker/Williams, by seven points of error, contends that the jury's answer that Certificate # 390 was delivered as part payment of the debt was against the great weight and preponderance of the evidence; that there was no evidence or factually insufficient evidence to support the jury's answer to Special Issue No. 1; that the trial court erred by overruling Decker/Williams' motion for judgment notwithstanding the verdict because the evidence conclusively showed that the...

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