Root Refining Co. v. Brooks

• Decision Date: 13 January 1936
• Docket Number: No. 4-4088.,4-4088.
• Citation: 90 S.W.2d 221
• Parties: ROOT REFINING CO. v. BROOKS et al.
• Court: Arkansas Supreme Court

90 S.W.2d 221

ROOT REFINING CO. v. BROOKS et al.

No. 4-4088.

Supreme Court of Arkansas.

January 13, 1936.

Rehearing Denied February 24, 1936.

Appeal from Union Chancery Court, First Division; Walker Smith, Chancellor.

Action by D. S. Brooks against the Root Refining Company, wherein Harry Ezzell intervened. Judgment for intervener, and defendant appeals.

Reversed, and case dismissed.

Mahony & Yocum, of El Dorado, for appellant.

Marsh & Marsh and W. E. Patterson, all of El Dorado, and W. H. Rector, of Little Rock, for appellees.

SMITH, Justice.

D. S. Brooks was on September 15, 1925, the president of the Root Refineries, Inc., a Louisiana corporation, having its principal office at Shreveport in that state. Brooks maintained an office at El Dorado in this state, where the company's refinery was located. On the date mentioned, Brooks purchased an oil and gas lease from Harry Ezzell, covering a forty-acre tract of land in Union county. The consideration for the lease was the sum of $40,000, of which $20,000 was to be paid in money, the balance in oil, "if as and when produced." Of the money payment, $5,000 was in cash paid by a draft on the corporation. The balance of the money payment was evidenced by three notes for $5,000 each, due respectively thirty, sixty, and ninety days after date, and all bearing interest at the rate of 7 per cent. per annum from date until paid. The testimony is somewhat confusing as to whether the original lease was to Brooks individually or to him as trustee. Ezzell testified that the lease was made to Brooks as trustee but that he understood that the lease had been bought for the corporation of which Brooks was president. He testified, however, that he required Brooks to sign the notes individually and not as trustee and this was done.

The general office at Shreveport was in charge of D. P. Hamilton, who was the vice president of the corporation. It is certain that Hamilton was displeased with the purchase and that Brooks was so advised. The first note due October 15, 1925, was not paid until November 7, 1925, and the draft drawn in its payment made no reference to the interest which had accrued thereon. Brooks does not, however, appear to have taken up the note when he drew the draft covering it.

Brooks testified that when he saw Hamilton's displeasure, he told Hamilton to charge the purchase price to his (Brooks') account, but Hamilton declined to do so and told Brooks to forget it. The remaining two notes were not paid. It appears that Ezzell was satisfied with Brooks' individual liability as the maker of the notes, although Ezzell testified that he considered the corporation secondarily liable, as the lease had been purchased for its account by its president. Ezzell does not appear to have addressed any demand for payment to the corporation itself at its home office in Shreveport, although he frequently discussed the matter with Brooks personally at El Dorado.

The lease required that a well be drilled within ninety days from September 15, 1925. The lease was not transmitted to the corporation, nor was it placed of record, nor was it assigned by Brooks to the corporation. No well was drilled. Thus the matter rested for nearly two years and until September 15, 1927, at which time Ezzell executed and delivered to Brooks, as trustee, a second lease which eliminated the drilling requirement. This lease was not assigned or placed of record, and the Shreveport office appears to have had no information about it until March 29, 1928, at which time the following letter was received from Brooks:

                       "El Dorado, Ark., March 29, 1928
                "Root Refineries, Inc
                  "Commercial Nat'l Bank Bldg
                  "Shreveport, La
                

"Gentlemen:

"On September 15, 1925, I purchased under the name of D. S. Brooks, Trustee, 40 acres from Harry Ezzell, Jr., situated in the NE¼ of the NW¼ of Section 18, Twp. 17 S., Range 17 W., Union County, Arkansas, for the consideration of $20,000 cash and notes, and $20,000 out of oil, as set forth in oil and gas lease attached.

"Our records show that we have paid $10,000.00. Mr. Ezzell still holds two notes for $5,000.00 each, which I have agreed to pay at the rate of $400.00 monthly, commencing this month and continuing over the ensuing 24 months. Hereafter, send remittances to Harry Ezzell, Jr., 511 Exchange Bldg., between the 20th and 25th of each month.

"The lease attached is the same as the original dated September 15th, 1925, except that it runs to September, 1931, instead of 1930.

"If a well is not started on this lease by September 15th, 1928, see that the $40.00 a year rental is taken care of, as set forth in last paragraph, first page of said oil and gas lease.

                     "Your truly,      Dan Brooks
                                           "President."
                

Thereafter the corporation made regular monthly remittances of $400...