Montague v. Brassell

• Decision Date: 15 May 1969
• Docket Number: No. 7044,7044
• Parties: Lawrence E. MONTAGUE, Jr., et al., Appellants, v. Willie Oneida BRASSELL et vir, Appellees. . Beaumont
• Court: Texas Court of Appeals

Page 703

443 S.W.2d 703

Lawrence E. MONTAGUE, Jr., et al., Appellants, v. Willie Oneida BRASSELL et vir, Appellees.

No. 7044.

Court of Civil Appeals of Texas Beaumont.

May 15, 1969.

Rehearing Denied June 5, 1969.

Beck & Beck, Beaumont, for appellants.

W. O. Bowers, Jr., Beaumont, John P. Ritchie, Mineral Wells, for appellees.

STEPHENSON, Justice.

Willie Oneida Brassell brought this action against Lawrence E. Montague, Jr., independent executor of the estate of Lawrence E. Montague, deceased. This action is one for damages for waste, or diminution in the value of the security upon which plaintiff had a deed of trust lien. In essence, the cause of action is to recover a specific $2,346.95 in the hands of defendant. Trial was before the court, and judgment was rendered for plaintiff as prayed. The parties will be referred to here as they were in the trial court.

The evidence showed the following: That plaintiff and Lawrence E. Montague, Sr. were divorced February 16, 1959, and in the settlement of their community estate, he conveyed to plaintiff a one-half interest in certain royalties, and gave plaintiff a note for $10,000 .00 secured by the other one-half of the same royalties. That such royalties had been producing since 1955. That this was payable in annual installments of $1,295.10 each, beginning February 16, 1960, and the following payments were made: February 16, 1960--$1,295.10; February 16, 1961, February 16, 1962 and February 16, 1963--$295.00 each. That Lawrence Montague, Sr. died June 13, 1963. That defendant was appointed by the probate court July 20, 1963. That plaintiff filed a claim on such note September 10, 1963. That such claim was allowed as a preferred claim September 11, 1963. That the deed of trust securing such note was foreclosed and trustee's deed given to plaintiff April 7, 1965. That plaintiff's deed of trust, in the usual form, contained the provision that mortgagor should keep the property in good repair and condition. That the $2,346.95 awarded to plaintiff by the trial court was the amount of royalty checks received by defendant from September 10, 1963 (date claim filed) to April 7, 1965 (date deed of trust foreclosed) from the royalties upon which plaintiff had this lien mentioned.

The trial court found, among others, the following conclusions of law:

That the fee royalty, upon which plaintiff had such lien, was damaged or reduced in value by $2,346.95.

That plaintiff did not have the right to secure the royalty payments from the producer, either before or after her claim was presented and approved, such actions not operating as an assignment of the oil and gas runs.

Defendant's first point of error is that plaintiff was not entitled to the judgment rendered because of Section 306(c) of the Probate Code, V.A.T.S., which reads as follows:

'(c) Approved Claim as Preferred Lien Against Property. When an indebtedness has been allowed and approved under Paragraph (2) of Subsection (a) hereof, no further claim shall be made against other assets of the estate by reason thereof, but the same thereafter shall remain a preferred lien against the property securing same, and the property shall remain security for the debt in any distribution or sale thereof prior to final maturity and payment of the debt.'

This point of error is sustained.

The plaintiff had the right to proceed to the sale of the mortgaged property under the deed of trust or through court proceedings without the necessity of presenting the same for approval to the independent executor. Fischer v. Britton, 125 Tex. 505, 83 S.W.2d 305, 306 (1935) (under the prior statute) and Bunting v. Pearson, 430 S.W.2d 470 (Tex.Sup., 1968) (under the Probate Code) .

Had plaintiff elected so to do under the trust powers contained in the deed of trust, the foreclosure could have been consummated within a matter of weeks after the death of the testator; or, if the plaintiff elected to proceed with a judicial foreclosure, an ancillary receivership or garnishment would have been sufficient to assure that the payments which accrued during the pendency of the foreclosure proceedings would have been available for application upon the indebtedness. Article 2293, § 2, V.A.C.S.; Article 4076, V .A.C.S. Texas Co. v. Kent, 60 S.W.2d 857, 860 (Waco, Tex.Civ.App., 1933, no writ). Cf. Cocke v. Naumann, 188 S.W.2d 781, 783 (Dallas, Tex.Civ.App., 1945, error ref. want of merit).

Rather than pursue either of the direct methods to protect her interest in the payments, plaintiff chose to present her claim under the provisions of the Probate Code, § 306(a)(2), the material provisions of which read as follows:

§ 306 '(a) Specifications of Claim. When a secured claim against an estate is presented, the claimant shall specify therein, in addition to all other matters required to be specified in claims:

'(2) Whether it is desired to have the claim allowed approved, and fixed as a preferred debt and lien against the specific property securing the indebtedness and paid according to the terms of the contract which secured the lien, in which event it shall be so allowed and approved if it is a valid lien; * * *.'

In so doing, plaintiff became subject to the restrictions contained in § 306(c), quoted above, which provide that in such event 'no further claim shall be made against other assets of the estate by reason thereof.' Having chosen to proceed under the Probate Code, plaintiff cannot now reach the sums received by the executor after presentation of the claim and prior to foreclosure, since such were 'other assets of the estate.' Probate Code, § 306(c). In construing the predecessor statute (Article 3515a, V.A.C .S.), the Supreme Court in Wyatt v. Morse, 129 Tex. 199, 102 S.W.2d 396, 399 (1937) said:

'In return for this preference the claimants so electing are required to forego making further claim against other assets of the estate.'

Defendant's next point of error is that the trial court erred in rendering its judgment because defendant was not liable for waste. This point of error is also sustained.

Defendant's testator was the mortgagor in possession of the property upon which plaintiff had her lien and the record clearly shows that there was production from the lands for four years before, and at all times subsequent to the execution of the mortgage . The rule is stated in Thornton, Oil and Gas (5th Ed.), Vol. 2, 1932, p. 1048, Sec. 746, as follows:

'The mortgagor of gas, oil or mining lands may extract the oil or gas or remove the minerals, and convert them into money, if the gas or oil wells or mine operated were dug or opened at the time the mortgage was placed upon the premises; but if they were not, then the lands cannot to so worked, for it is waste as against the mortgagee to permit it, even though the land was purchased as mineral land.'

Therefore, the testator during his lifetime and his executor after his death, rightfully received the payments of the oil runs from the property Before foreclosure. 3 Summers Oil & Gas 705, § 557; 59 C.J .S. Mortgages § 316, p. 410; Onyx Ref. Co. v. Evans Prod. Corp., 182 F.Supp. 253 (DC ND Tex., 1959); Texas Co. v. Kent, supra; Cf. Federal Land Bank of New Orleans v. Mulhern, 180 La. 627, 157 So. 370, 373, 95 A.L.R. 948, 953 (1934).

Thus, until plaintiff exercised her right to foreclose the lien, the defendant had the right to continue receiving the payments from the oil production. Willis v. Moore, 59 Tex. 628, 638 (1883); McGeorge v. Henrie, 94 S.W.2d 761, 762 (Texarkana, Tex.Civ.App., 1936, no writ); Simon v. State Mut. Life Assur. Co., 126 S.W.2d 682, 686 (Dallas, Tex.Civ.App., 1939, error ref.). Thornton, Oil and Gas (5th Ed) Vol. 2, 1932, p. 1049, Sec. 747. The royalties received by defendant after the death of his testator and prior to the foreclosure of plaintiff's lien, therefore, became a part of the general estate of the testator. Security Mortgage & Trust Co. v. Gill, 8 Tex.Civ.App. 358, 27 S.W. 835, 836 (1894, error ref.). Plaintiff has not shown any entitlement to a Second preference.

We have been cited no cases passing directly upon the questions raised in this case. The closest analogy that we have found is the rule applicable to statutory liens. Certainly, the contractual lien which plaintiff had is no stronger than the statutory lien created by an abstract of judgment which will attach to the royalty because it is an interest in land, but will not attach to money received from the production of oil therefrom. In Donley v. Youngstown Sheet & Tube Company, 328 S.W.2d 192, 196 (Eastland, Tex.Civ.App., 1959, error ref. n.r.e.), it is said:

'In Texas, where royalty is realty, the filing of an abstract of judgment fixes a lien against royalty. 49 C.J.S. Judgments § 482, p . 922. A judgment lien attaches to realty but not to rents, issues and profits therefrom. 49 C.J.S. Judgments § 472, pp. 906, 907.' (Emphasis ours).

In Donley, while the parties were litigating over the validity of the judgment liens, an oil company continued production from the wells on the land and paid the money into the registry of the court. The court said that the trial court held correctly that the liens attached to the royalty, but in awarding the money to the lien holder, it was in error.

As to the award of the money paid into the registry of the court, in Donley, it was said (328 S.W.2d at 197):

'We find no authority for the holding that appellee's judgment liens can be enforced against the money paid into court by Sohio. Said lien holders did not sue for damages or conversion. There was no garnishment. Their right to said money depends solely upon their judgment liens. The statute that created them provides only that abstracts of judgments shall constitute liens on 'real estate'. Such liens do not attach to personal property. * * * (citing authorities) * * * Appellees had no right to, in effect, foreclose their judgment liens against the money paid into court by Sohio.'

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