Reese v. Carey Bros.

• Court: Texas Court of Appeals
• Writing for the Court: Jackson
• Citation: Reese v. Carey Bros., 286 S.W. 307 (Tex. App. 1926)
• Decision Date: 12 May 1926
• Docket Number: (No. 2675.)
• Petition History: writ dism'd
• Parties: REESE et al. v. CAREY BROS. et al.<SMALL><SUP>*</SUP></SMALL>

286 S.W. 307

REESE et al. v. CAREY BROS. et al.^*

(No. 2675.)

Court of Civil Appeals of Texas. Amarillo.

May 12, 1926.

Rehearing Denied June 30, 1926.

COPYRIGHT MATERIAL OMITTED

Appeal from District Court, Wichita County; P. A. Martin, Judge.

Suit by Carey Bros., Guy Rogers, and others against T. T. T. Reese and others, in which J. E. Trigg and others intervened and J. J. Moran brought cross-action against J. E. Trigg. From the judgment, T. T. T. Reese and others appeal. Affirmed.

Weeks, Morrow, Francis & Hankerson, of Wichita Falls, for appellants Reese, Patterson, Bolding, and Stokes.

Martin, Oneal & Allred, of Wichita Falls, for appellant Moran.

Guy Rogers, Arch Dawson, and Kay, Akin & Smedley, all of Wichita Falls, for appellees.

JACKSON, J.

This suit was instituted in the district court of Wichita county, Tex., by E. S. Carey, C. W. Carey, J. E. Childers, W. T. Willis, and Guy Rogers, plaintiffs, against T. T. T. Reese, H. B. Patterson, W. P. Bolding, J. B. Stokes, J. J. Moran, and E. H. Breedlove, defendants.

The plaintiffs alleged:

That on or about May 1, 1919, they, together with E. H. Breedlove, J. E. Trigg, M. J. Michaelias, and H. D. Lewis, associated themselves together under the firm name and style of Carey Bros. Oil Company for the purpose of purchasing an oil and gas lease on the southeast 5 acres of block 88, Red River valley lands in Wichita county, Tex., to be drilled, mined, operated, and developed for their mutual profit and individual gain, and agreed that each should contribute one-tenth of the purchase price and share in proportion to his interest in all losses and profits.

That said tract of land was purchased and developed, oil found in paying quantities, and produced and saved therefrom. That the business was conducted as a mining partnership, and many items of indebtedness incurred.

That on or about November 19, 1919, J. E. Trigg, M. J. Michaelias, and H. D. Lewis, each separately, sold his respective interest to E. H. Breedlove, and, as a part of the consideration for each interest so sold, E. H. Breedlove assumed and agreed to pay the proportion of the outstanding indebtedness of the company chargeable to each interest he purchased. That on said date, or very shortly thereafter, E. H. Breedlove sold to J. J. Moran the interest he had purchased from J. E. Trigg, and, as a part of the consideration therefor, J. J. Moran assumed and promised to pay one-tenth of all the then outstanding indebtedness chargeable to Carey Bros. Oil Company. That E. H. Breedlove sold to T. T. T. Reese and H. B. Patterson the one-tenth interest he had purchased from M. J. Michaelias, and, as a part of the consideration therefor, they assumed and promised to pay one-tenth of the then outstanding indebtedness chargeable to the Carey Bros. Oil Company. That E. H. Breedlove sold to W. P. Bolding the interest he purchased from H. D. Lewis, and, as a part of the consideration therefor, Bolding assumed and agreed to pay one-tenth of the then outstanding indebtedness chargeable to the Carey Bros. Oil Company. That J. B. Stokes purchased from J. J. Moran one-half of his one-tenth interest in the company.

That on and after the purchase by the defendants of their respective interests as aforesaid in the property, the Carey Bros. Oil Company continued to be, as theretofore, a going concern, and that the defendants who purchased from Breedlove bought with full knowledge of the organization, and have continued in said partnership expecting to receive their proportional share of the gains, if profits were made, and expecting to bear their proportional share of the losses, if any. That, since the defendants who purchased their interests from E. H. Breedlove, on or about November 19, 1919, became partners, certain debts have been created and incurred in operating and developing the property, for which the plaintiffs and defendants are jointly liable, the exact amount of which debts can only be ascertained by an accounting. That the liabilities of the partnership greatly exceed the assets, and the debts are due and must be paid; hence it is necessary to dissolve the partnership, have an accounting, and a general contribution among the partners, for all of which plaintiffs pray, as well as for general and equitable relief, both in law and in equity.

J. E. Trigg, H. D. Lewis, and M. J. Michaelias, by permission of the court, intervened as plaintiffs, alleging that they were at one time members of the copartnership, and that they had done certain drilling and performed certain labors for the company, upon which was due them a balance of $6,827.61; that the greater part of this indebtedness was created after interveners had retired from the copartnership; prayed for an accounting, and judgment for such amount as might be due them.

Guy Rogers, individually, sued for the sum of $2,500, evidenced by a note of the partnership, and acquired by him for a valuable consideration, and asked for credit therefor on his contribution.

The Petrolia Supply Company intervened, asking judgment for the sum of $298.37; and the Republic Supply Company intervened, asking for judgment for $130.36.

The defendants Reese, Patterson, Bolding, and Stokes, answered by general demurrer special exceptions, and denied generally the allegations of plaintiffs and of the interveners, denied partnership under oath, denied the assumption of the payment of any indebtedness outstanding against Carey Bros. Oil Company at the time of the purchase of their respective interests for which they each paid at the rate of $15,000, and pleaded that they were induced to purchase by the false and fraudulent representations of E. H. Breedlove, who represented to them that the Carey Bros. Oil Company had sold the property to the Seaboard Oil & Gas Company for a consideration of $300,000; that the company owed only $30,000 in addition to a few bills for current expenses, and had enough money in the bank to discharge them; that there were three completed wells on the property, and the derrick erected for a fourth; that the property had cost $180,000, and that the lease was producing more than 1,000 barrels of oil per day, and that the property and equipment above the ground had cost $100,000; that each owner of a one-tenth interest in the lease had invested $15,000—all of which representations were false, and made for the purpose of inducing them to buy, and upon which representations they did rely in making the purchase of their respective interests, and that the interests when purchased were worthless.

J. J. Moran answered by general demurrer, special exceptions, general denial, verified denial of partnership, and alleged that he was induced to purchase his interest by the false and fraudulent statements of E. H. Breedlove, for the sum of $14,000, who represented to him that there were two wells on the lease, both in good condition, with a production at that time of 1,000 barrels per day, and that there was no indebtedness against the lease, all of which statements and representations were false, which he believed and relied upon, and but for which he would not have purchased, that plaintiff J. E. Trigg was a party to the fraud perpetrated on him, and asked recovery on his cross-action against Trigg for the $14,000 as the lease, as Trigg knew, was practically worthless.

Plaintiffs, in reply, by supplemental petition, pleaded that the defendants had waived the fraud, ratified the contract, affirmed their purchase, acquiesced in the partnership relations, and were in all things estopped to set up any matter of fraud as a defense to their liability and their subsequent participation as partners.

The pleadings are very voluminous, but the above statement we consider sufficient for a consideration of the questions involved.

Pursuant to an order of the court, the books and records of the Carey Bros. Oil Company were audited for the period beginning June 23, 1919, and ending May 31, 1922, and a properly verified report of the auditor introduced in evidence. Many general exceptions to this report were filed by the defendants, but no evidence offered to impeach or controvert any of the items constituting the assets or liabilities, profits, or losses, of said company.

The court submitted to the jury, in his main charge, twenty-one special issues, many of which contained numerous subdivisions, three special issues requested by the interveners, and five special issues requested by plaintiffs, all of which were determined against the defendants.

We will not set out all of said findings, but consider those only upon which error is predicated.

The court, in his judgment, decrees that the Carey Bros. Oil Company was a partnership; that the company incurred, prior to November 19, 1919, an indebtedness of $39,119.11, which amount was due and unpaid on said date; that the partnership after said date incurred additional indebtedness in the sum of $23,134.27, and allows the money paid into and for the account of the company to be credited on contributions to the indebtedness, as follows: E. S. Carey, $2,918.20; R. R. Carey, $6,338.57; C. W. Carey, $5,862.40; J. E. Childers, $3,047.01; H. D. Lewis, $3,246.33; M. J. Michaelias, $3,246.33; Guy Rogers, $7,172.17; W. T. Willis, $4,841.60—and that the amounts credited to R. R. Carey and H. D. Lewis should be each increased in the sum of $3,466.03 by reason of their plea in intervention for labor done and material furnished to the partnership.

E. H. Breedlove was beyond the jurisdiction of the court, and no service was or could be had on him. He made no appearance, and judgment was rendered that the one-tenth interest originally acquired and held by him would "not figure in the contributions between the partners." The liability of each of the plaintiffs and of each of the defendants was therefore fixed in proportion to his respective interest on a basis of nine, instead of ten, partners, and judgment rendered against each of...