Mercantile Nat. Bank at Dallas v. McCullough Tool Co., 10057

• Decision Date: 09 July 1952
• Docket Number: No. 10057,10057
• Citation: 250 S.W.2d 870
• Parties: MERCANTILE NATIONAL BANK AT DALLAS et al. v. McCULLOUGH TOOL CO.
• Court: Texas Court of Appeals

Page 870

250 S.W.2d 870

MERCANTILE NATIONAL BANK AT DALLAS et al. v. McCULLOUGH TOOL CO.

No. 10057.

Court of Civil Appeals of Texas, Austin.

July 9, 1952.

Rehearing Denied July 30, 1952.

Carrington, Gowan, Johnson & Walker by Hubert D. Johnson, Dallas, for appellant.

Fleming A. Waters, Cisco, R. R. Holloway, Brownwood, for appellee.

GRAY, Justice.

Appellee has filed a motion to dismiss this appeal and as grounds for dismissal says that the supersedeas bond filed by appellant is not sufficient as an appeal bond because: (1) it contains no obligation to pay the costs on appeal; (2) it is not conditioned in the manner and form required by law to have the effect of an appeal bond, and (3) there is no certificate by the district clerk estimating the costs in the court below and on appeal.

Appellee cites Rule 354 T.R.C.P., which prescribes the requirements for a cost bond on appeal.

The judgment appealed from is for $8,616.20 with interest as six per cent per annum from date,-January 15, 1952, and costs. The costs accrued in the trial court amount to $416.50. The supersedeas bond filed by appellant is for $10,000, and is conditioned as is required by Rule 364(a), T.R.C.P. This bond bears the approval of the district clerk.

Appellant has requested and has been granted leave to file an additional bond. An additional bond for the sum of $900 has been filed and approved. Rule 365, T.R.C.P.

The bonds now on file are sufficient to meet the requirements of Rule 364(a), supra.

Rule 367, T.R.C.P.

Appellee's motion to dismiss the appeal is overruled.

Appellee sued Louis Burns, Mystic Oil Corporation (later called Mystic) and appellant to recover for personal services and materials furnished Mystic on an oil well designated as well No. 5 on the J. Wylie Green lease in Tom Green County. The services and materials were furnished from October 9, 1949, through January 12, 1950, and, as reflected by appellee's verified account, there was owing to appellee therefor $6,932.90. Appellee also sued to recover an attorney's fee.

Upon a nonjury trial appellee recovered judgment against Mystic and appellant, jointly and severally, for its debt, an attorney's fee for $1,250, interest and costs. Only appellant has appealed.

Some time in November, 1949, Mystic, acting by John Shanahan, its president, and Louis Burns, its vice president, began negotiations with appellant for a loan. On December 27, 1949, the loan was consummated and Mystic gave its note to appellant for $278,500 payable in monthly installments of $5,000 each, the fist installment to become due January 20, 1950. This note was secured by a deed of trust covering an oil and gas lease on 497.32 acres of land in Tom Green County identified as the J. Wylie Green lease, and which lease was then owned or was being operated by Mystic. The deed of trust included rights then existing or to accrue under the lease and the oil runs. At the time of the execution of the note there were four wells drilled on the lease and the fifth (well 5) was being drilled. There were also accumulated oil runs.

Appellee alleged that a part of the consideration for the note and deed of trust was a promise by appellant to pay appellee the sum of $6,932.90 then due and to become due for services and materials furnished to Mystic on well 5; that such promise was made and exacted for the benefit of appellee; that appellant failed and refused to complete the disbursement of the loan and withheld approximately $80,000; that appellee had made demand on appellant for the payment of its debt; that payment was refused, and that it was necessary for it to employ an attorney. Appellee further alleged that Mystic was indebted to it at the time of the loan, that it extended credit and increased its credit to Mystic relying solely on the representations and promises of appellant that it was making a loan to Mystic and that a portion of such loan would be paid by appellant to appellee; that appellee relied on the representations and promises of appellant and did forego its right to file its statutory lien. Appellee also alleged that appellant induced Mystic to repudiate its obligations to appellee and so acted as to create a default by Mystic in its obligation to appellant, and that appellant through an agent and employee went into possession of the oil and gas lease in fraud of the creditors of Mystic, especially appellee.

The facts show that prior to the time that Mystic Oil Corporation was formed (early Fall of 1949) the J. Wylie Green lease was operated by Louis Burns and others under an agreement with the holder of the lease; that Burns was indebted to appellant, and that at the time the corporation was formed there had been three wells drilled on the lease and the fourth was being drilled, three of these wells (including number 4) were producers. Mystic took over the Green lease and consummated the loan with appellant as already noted. Appellant proceeded to disburse the loan and paid out the borrowed money to the creditors of Mystic to the extent of approximately $211,360 on January 13, 1950. Included in this amount was a debt of Louis Burns owing to appellant. On April 12 1950, appellant filed suit on the note and to foreclose its deed of trust lien because of the failure of Mystic to pay the $5,000 installments due. At that time there was in appellant's possession the undisbursed portion of the loan, which the trial court found was $67,139.49. Also, there were uncollected oil runs which Mr. Pryor, appellant's vice president, said amounted to approximately $50,000.

During the negotiations for the loan and at the time it was consummated well 5 was being drilled. This fact was known to appellant, and Mystic was then indebted to appellee for service and materials furnished to the extent of $2,300 on that well. The existence of this indebtness was also made known to appellant.

Louis Burns testified, by deposition, that:

'59 What did you propose to the Bank that you would do with the money? A. The $278,000?

'60 Yes? A. Drill wells; that is what they loan money for; clean up our bills and keep drilling wells.

'61 Did they disburse to you the $278,000? A. No; they wanted to disburse the money; they had a man by the name of Holloway, Assistant Vice President, who would disburse this money, and it was agreed to by everyone of us to let him do it.

'62 That was agreeable to let him do the disbursing? A. Yes; as we needed it.

'63 Did you have an agreement with the Bank that this money was to be disbursed to your creditors? A. Yes; that was what we borrowed it for, to clean up what we owed and drill these wells. We borrowed the money to pay the people we owed and to drill more wells.

'64 Did the Bank agree to that proposition, that they would pay the bills that you owed and advance money for your drilling of other wells? A. That was my understanding.

'70 Did you furnish the Mercantile National Bank with a list of your creditors? A. Had an auditor to do that.

'71 Who was that auditor? A. Fred Bryant.

'72 Where does he live? A. In Brady.

'73 Did he make a list of all of your creditors? A. Yes.

'A Yes; I talked to McCullough Tool Company, but I don't remember the name of Gray.

'96 But you talked to someone down there about these bills? A. Yes.

'97 And you told them you were getting a loan from the Mercantile National Bank? A. Yes, sir.

'98 And you told them that as soon as you got the loan, the Bank would pay the bill? A. Yes, sir.

'1 While ago you were asked with reference to the debts being paid by the Mercantile National Bank at Dallas; state whether or not they were to be paid out of the loan that you secured? A. Yes, that's right.

'2 It was not debts the Bank was to pay; but to pay your debts for you out of the money you borrowed? A. Yes; if we owed $278,000 in debts, they would pay it.

'3 You agreed with the Bank that they were to use the money from that $278,000 loan to retire your indebtedness? A. That's right.

'4 You did not intend to say that the Bank was to pay the indebtedness other than out of your own money that you had borrowed from the Bank? A. That's right.'

Burns further said that prior to the time the loan was made the oil runs had not been paid because they had been unable to get a division order for the reason that there was an argument with the owner of the Green lease; that appellant would not make the loan without a division order; that before the loan was made a division order was secured and that it was delivered to appellant; that the first time he knew the division order was not 'in tact' and that the money had not been sent to appellant was after he was used by appellant and then appellant told them the order had been lost, and that it was then too late to get another.

The note contained the following provision:

'In addition, the undersigned agrees that seventy-five percent (75%) of the oil runs and production accruing to it under its interest in the oil and gas leasehold estate on certain properties situated in Section 195, S. P. R. R. Company, District No. 11, in Tom Green County, Texas, which oil runs and production runs are being assigned to the Mercantile National Bank at Dallas to secure the payment of this note, may be applied by said Bank on the payment of principal and interest due under this note. It is agreed and understood that the monthly installments described in the preceding paragraph of this note are the minimum amounts to be paid and are to be paid unconditionally irrespective of whether or not the oil runs referred to in this paragraph amount to as much as the minimum monthly payment prescribed in the preceding paragraph.

'This note, to the extent of the amount mentioned herein, represents money this day borrowed by the undersigned from Mercantile National Bank at Dallas.'

Fred Bryant testified that James Rankin (a vice president of appellant) and Louis Burns came to his office and requested him to prepare a schedule of Mystic's debts and forward the...