McCallen v. Mogul Producing & Refining Co.

• Decision Date: 23 November 1923
• Docket Number: (No. 8365.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 257 S.W. 918
• Parties: McCALLEN et al. v. MOGUL PRODUCING & REFINING CO.
• Court: Texas Court of Appeals

Page 918

257 S.W. 918

McCALLEN et al. v.MOGUL PRODUCING & REFINING CO.

(No. 8365.)^*

Court of Civil Appeals of Texas. Galveston.

November 23, 1923.

Rehearing Denied December 20, 1923.

Error from District Court, Harris County; W. E. Monteith, Judge.

Action by H. McCallen against the Mogul Producing & Refining Company and others, in which the Burton Lumber Company and others intervened.Judgments for defendants against plaintiff and interveners, except the Lumber Company, and for the latter in part, and plaintiff, the Lumber Company, and other interveners bring error.Affirmed.

Baker, Botts, Parker & Garwood, Stevens & Stevens, and Rodman S. Cosby, all of Houston, for plaintiffs in error.

Bryan, Dyess & Colgin, of Houston, for defendant in error.

GRAVES, J.

This litigation began with the suit of H. McCallen against the Crescent Oil Refining Association, alleged to be operating under a declaration of trust, with its principal place of business in Houston, Tex., declaring upon a debt for some pipe and personal services aggregating about $2,200 claimed to have been furnished the association by him.He charged that the association owned 20 acres of land near the San Jacinto battlefield, in Harris county, upon which it had attempted to build an oil refinery, and that his material had been used in the construction thereof, by reason of which he asserted a lien upon the property in security for it, as well as for his unpaid salary.He further charged that the Mogul Producing & Refining Company was claiming some kind of lien upon the property, and, in conjunction with the officers of the association, was attempting to foreclose the same to his detriment.He prayed for judgment for his debt, establishment of his lien, and interlocutory for the appointment of a receiver for the association, under averments that through the collusion alleged the interests of stockholders and creditors would be ignored; that the association owed part of the purchase money for the land on which its refinery was located, which was subject to a vendor's lien thereon; that it was in great danger of insolvency, and had stopped work on its refinery, etc.

Subsequently McCallen amended his petition, making the Mogul Producing & Refining Companya party to the suit, setting up substantially the same things as before, and, in addition, alleging that the association was organized September 20, 1919, with five trustees whose number was subsequently increased to seven by amendment of the articles of association, two-thirds of whom, if acting at a meeting called for that purpose but not otherwise, might borrow money on behalf of the organization and mortgage its property in security; that the lien claimed by the Mogul Company was invalid and void, because it was created at a meeting on January 27, 1920, called for the purpose of making a loan on the defendant association's assets, of six out of seven of its trustees, whereby they attempted to issue to three of their number, to wit, E. W. Love, E. C. Smith, and H. L. Patton, its two notes for $12,500 each, and to deliver to a trustee for them, H. G. Smith, as security therefor, a deed of trust upon the association's entire assets, including its 20 acres of land and the refinery thereon located, which could not be legally done, as the three named trustees could not act both for themselves individually and for the beneficiary, the Crescent Association; that the Mogul Company had acquired these two notes and the deed of trust securing them by transfer from the three trustees referred to, and was attempting to foreclose its alleged lien so originating; he prayed as in his original petition, and further asked for an injunction restraining the Mogul Company and H. G. Smith, the trustee under the deed of trust it so held, from selling the property.

Into the cause thus having its inception, there came at different times the interventions of (1)J. M. Hubert and others (2) the Burton Lumber Company, and (3) the answer and cross-action of the Mogul Producing & Refining Company.

A résumé of the more important averments of these intervening proceedings may be made as follows:

(1) Hubert and his numerous associates sued, on July 3, 1920, for themselves and all others similarly situated as creditors or stockholders of the association, alleging the invalidity of the deed of trust lien so created at the January 27, 1920, meeting of the Crescent Association's trustees, which had been transferred to the Mogul Company, charging that a substitute trustee thereunder was then about to sell the Crescent's property to satisfy the two notes it secured, and praying for an injunction against the sale and for a receiver for the Association's properties.Subsequently, on October 6, 1920, this petition was amended, others made themselves parties to it, and the Crescent Oil Refining Association joined therein for the purpose of bringing a cross-action against the Mogul Producing & Refining Company; the amended plea complained affirmatively against the Mogul Company, setting up against it on behalf of the Crescent Association the usual allegations in trespass to try title with reference to the 20 acres of land involved, claiming it as the property of the latter, and alleging its value to be $150,000.The pleading further charged that on August 3, 1921, there had been two sales of the property, at both of which the Mogul Company had been the purchaser.First, one by H. G. Smith, trustee, acting at the instance of the Mogul Company, under the deed of trust of January 27, 1920, securing the two $12,500 notes to Love et al.; second, one by W. S. Hunt, trustee, acting at the instance of J. H. Smith under a deed of trust given on February 3, 1920, to secure $16,000 of unpaid purchase-money notes on the 20 acres of land due J. B. Hine and Nellie B. Mills, which notes and trust deed were then owned by Smith, and carried a vendor's lien on the property superior to the one of January 27, 1920, just referred to; that both of these sales of August 3, 1921, were invalid and void, the first one because the Mogul Company knew at the time it purchased the two $12,500 notes of the limitation on the power of the trustees of the Crescent Association, as contained in its declaration of trust, to procure the loan and create the deed of trust lien on its property, which limitation had been transcended in the manner before set out; and the second one because J H. Smith, who had acquired from Hine and Mills the superior vendor's lien notes against the property and the deed of trust securing them, had agreed to extend these notes and postpone to a later date the deed of trust sale, but had violated that agreement, and had, without the knowledge and in the absence of the officers of the Crescent Association, caused it to be made.The prayer was that the two deed of trust sales be set aside, and that the Crescent Association have judgment for the title and possession of the property.

(2)The Burton Lumber Company filed its amended intervening pleading on October 18, 1921, complaining of the Crescent Association and the Mogul Company, and declaring upon an account against the former for $1,908.08 for lumber and building material alleged to have been furnished to and used by it on the property in controversy, the first item of which was so furnished on November 18, 1919, the last one on March 23, 1920, and asserting a statutory materialman's lien on the properties of the association, which it specifically averred was prior and superior to any lien or claim held by the Mogul Company by reason of having filed its affidavit and account showing such material to have been so furnished by it in the office of the county clerk of Harris county on the 19th day of July, 1920, or within less than four months after furnishing the last item thereof.The lumber company further made common cause with J. M. Hubert and his associates in attacking the validity of the lien claimed by the Mogul Company under its deed of trust of January 27, 1920, and also adopted the allegations of their amended petition to the effect that the sale of August 3, 1920, by trusteeW. S. Hunt, was void because the indebtedness secured by the trust deed he acted under had been validly extended by agreement.Its prayer was that the two deed of trust sales on August 3, 1920, be set aside, and that it have judgment for its debt with foreclosure of its lien, etc.

(3) On October 14, 1921, the Mogul Company filed its second amended answer and cross-action, denying all the material allegations of the interveners, replying that the Crescent Association had borrowed from Love, Smith, and Patton and used in paying its debts and improving its plant the $25,000 called for in the two $12,500 notes, had duly originally authorized its trustees to execute them and the deed of trust securing them, and subsequently, after so receiving and using the $25,000 realized therefrom, had affirmed and ratified the obligations; that it (the Mogul Company) thereafter became a bona fide purchaser of the notes and mortgage for full face value, without notice of any irregularity in the execution thereof, whereby the Crescent Association and other interveners, after so receiving the benefits thereof, were estopped to deny the validity of the notes and accompanying lien; that even up to the day of this trial no offer or tender had ever been made by any of them to it of the $25,000 it had paid out for the two notes, although it had at all times been willing to accept the same and release its claims; that the alleged extension agreement made with J. H. Smith as the owner of the vendor's lien notes acquired from Hine and Mills was without consideration, not known to it, and therefore not binding on it.At much length the regularity and validity of both sales made on August 3, 1920, was then asserted.

By its subjoined cross-action, the Mogul Company further declared in trespass to try title against all of the interveners...