Petroleum Anchor Equipment, Inc. v. Tyra, B--69

• Decision Date: 11 October 1967
• Docket Number: No. B--69,B--69
• Citation: 157 U.S.P.Q. 452,419 S.W.2d 829
• Parties: PETROLEUM ANCHOR EQUIPMENT, INC., Petitioner, v. William D. TYRA, Senior et ux., Respondent.
• Court: Texas Supreme Court

Page 829

419 S.W.2d 829

157 U.S.P.Q. 452

PETROLEUM ANCHOR EQUIPMENT, INC., Petitioner, v. William D. TYRA, Senior et ux., Respondent.

No. B--69.

Supreme Court of Texas.

Oct. 11, 1967.

Rehearing Denied Nov. 15, 1967.

Burford, Ryburn & Ford, Spencer C. Relyea, III, and John L. Estes, Dallas, for petitioner.

Baker, Jordan & Foreman, Russell M. Baker, Dallas, for respondent.

CALVERT, Chief Justice.

This is an action by Petroleum Anchor Equipment, Inc., a Mississippi corporation against William D. Tyra and wife to cancel certain written assignments from Petroleum to Luther S. Fite and from Fite to Tyra purporting to transfer title to an invented device for anchoring pipelines and to recover the title thereto. Following trial to a jury, the trial court rendered judgment that the plaintiff take nothing. The court of civil appeals has affirmed. 410 S.W.2d 238. We reverse the judgments of the courts below and render judgment for Petroleum. Earlier opinions of the court of civil appeals and this court on the question of necessary parties to the suit will be found in Petroleum Anchor Equipment, Inc. v. Tyra, Tex.Civ.App., 392 S.W.2d 873 (1965) and Sup., 406 S.W.2d 891 (1966).

Luther S. Fite invented a device designed to anchor pipelines in marshy land where they have a tendency to 'float,' and applied for letters patent thereto. While the application was pending, Fite, on April 7, 1962, executed and delivered a written instrument to Petroleum Anchor Equipment, Inc., by the terms of which instrument Fite sold, transferred and assigned to Petroleum his 'entire right, title and interest in and to said invention and application and in and to Letters Patent of the United States which may be granted therefor.' The assignment was recorded in the U.S. Patent Office on April 17, 1962.

On February 14, 1963, W. A. Moss, President of Petroleum, acting pursuant to a resolution purportedly adopted on January 8, 1963, by the board of directors of Petroleum, executed and delivered a written instrument to Fite by the terms of which all of Petroleum's right, title and interest in the patent rights to the anchor was sold and assigned to Fite. Thereafter, on March 4, Fite by written instrument sold and assigned his right, title and interest in the anchor, the application and letters patent to W. D. Tyra, Sr. The bill of sale from Petroleum to Fite and a copy of the purported resolution authorizing Moss to execute the same were recorded in the U.S. Patent Office on March 21, and the assignment from Fite to Tyra was recorded on April 11.

On July 11, 1963, the board of directors of Petroleum rescinded the purported resolution of January 8, and thereafter on September 13 this suit was filed. Letters patent were granted September 24, 1963.

The primary basis on which Petroleum attacked the validity of the assignments was that the resolution which authorized Moss to sell and transfer the corporation's property was never passed by its board of directors, and that the assignment to Fite executed by Moss, purporting to act for Petroleum, was therefore void. The jury found in answer to special issue no. 1 that the board of directors did not pass the resolution, and in answer to special issue no. 2 that when the assignment was made to Fite by Moss the application for letters patent constituted substantially all of Petroleum's property and assets.

The defenses urged by the Tyras to the action were (1) want of consideration for the assignment from Fite to Petroleum; (2) that the assignment from Fite to Petroleum was in trust for Fite; and (3) that Petroleum was estopped to assert invalidity of the assignment from it to Fite because of its failure to take prompt action after it had or was charged with knowledge of the contents of the January 8 resolution. Although Fite testified that he assigned title to his invention to Petroleum to avoid claims of his creditors and with an agreement that Petroleum would reassign, no issues were submitted to the jury embracing the trust defense and no complaint has been made on appeal by the Tyras because of refusal of the trial court to submit such issues. The trust defense, if it be a defense, has thus gone out of the case except in so far as the evidence relating thereto may incidentally throw light on the defense of want of consideration. On that defense, the jury found in answer to special issue no. 3 that no money or thing of value passed from Petroleum to Fite for the transfer of the application for letters patent. In answer to special issue No. 4, the jury found that after January 8, 1963 the board of directors of Petroleum was informed as to the contents of the January 8 resolution; and in answer to special issue no. 5 found that after learning of the contents of the resolution, Petroleum's board of directors 'failed to act as ordinary prudent persons would have acted under the same or similar circumstances.'

Petroleum objected to the court's charge because no special issue was submitted in connection with special issues nos. 4 and 5 inquiring whether Tyra had relied upon the matters therein inquired about. After the jury's verdict was received, Petroleum filed a motion to disregard the jury's answers to special issues nos. 3, 4 and 5 and render judgment for it on the remainder of the verdict. One of the grounds urged for disregarding the answer to special issue no. 3 was that the finding that no consideration passed to Fite was immaterial inasmuch as the assignment did not have to be supported by consideration to be effective and valid. One of the grounds for urging that the answers to special issues nos. 4 and 5 be disregarded was that there was neither evidence nor a finding by the jury that Tyra relied on the resolution to his detriment.

On appeal, Petroleum has not questioned that Tyra was a purchaser for value and in good faith from Fite; and no doubt be cause of the jury's answer to special issue no. 1, neither the Tyras nor the court of civil appeals has questioned Petroleum's right to the relief it seeks except as that right may be defeated by the jury's answers to special issues nos. 3, 4 and 5. As supporting the right, see Franco-Texan Land Co. v. McCormick, 85 Tex. 416, 23 S.W. 123 (1893). The questions to be decided are thus narrowed to whether Petroleum's right to recover is defeated by the jury's findings (1) of want of consideration for Fite's assignment to Petroleum, and (2) Petroleum's negligence in failing to act promptly after learning of the contents of the January 8 resolution. The court of civil appeals held that Petroleum's right to recover was defeated by each of the findings. We hold that it is defeated by neither.

We agree with the holding of the court of civil appeals that there is evidence in the record to support the jury's finding that Fite received no consideration for his assignment to Petroleum; but we disagree with the court's holding that the finding renders the assignment ineffective or invalid.

The Tyras' position with reference to their defense of want of consideration is, and must be, this: Inasmuch as Fite received no consideration from Petroleum for his transfer on April 7, 1962, the written assignment never became effective and title never passed from but remained in Fite; and that Fite, therefore, was at all times the owner and holder of legal title which was transferred by him to Tyra by the assignment of March 4, 1963. The fatal flaw in the argument is that the finding of lack of consideration for the assignment to Petroleum does not lead to a legal conclusion that the assignment was void and never became effective.

According to Fite's own version of the facts, corroborated by the testimony of Moss, his reason for executing and delivering the assignment to Petroleum without consideration was for the purpose of putting his patent rights out of the reach of his creditors; and the transfer was made pursuant to a promise by Petroleum to hold the title in trust and reassign when the creditors were satisfied. In this factual context Petroleum argues that inasmuch as the agreement was executed rather than executory, the finding of want of consideration is immaterial and will not defeat Petroleum's right to relief. We agree. Assuming Fite's version of the facts to be correct, want of consideration for his assignment did not render the transfer of legal title ineffective or void. Consideration flowing to one who transfers property to another in trust is not essential to effectiveness or validity of the transfer. Restatement (Second) of Trust § 29; Scott on Trusts § 29 (1939); Bogert, Trusts & Trustees, § 202 (2d ed. 1965); Birk v. First Wichita Nat'l Bank, 352 S.W.2d 781 (Tex.Civ.App.--Ft. Worth 1962, writ ref'd n.r.e.). Section 29 of the Restatement puts the rule in this positive language: 'The owner of property can create a trust of the property by transferring it to another person in trust although there is no consideration other than the transfer of the property.' Fite, or Tyra as his vendee, may have had a cause of action to cancel Fite's assignment to Petroleum for fraud or to impose a constructive trust if Petroleum refused to reassign on demand, but Tyra did not seek by cross-action in this case either to cancel the assignment or to impose a trust.

The court of civil appeals has held that the jury's answers to special issues nos. 4 and 5 will support the trial court's judgment denying to Petroleum the relief it seeks on the following grounds: (1) estoppel...