Royal Petroleum Corporation v. McCallum

• Decision Date: 31 January 1940
• Docket Number: No. 7649.,7649.
• Parties: ROYAL PETROLEUM CORPORATION et al. v. McCALLUM, Judge, et al. DEARING v. BROWN, Judge, et al.
• Court: Texas Supreme Court

135 S.W.2d 958

ROYAL PETROLEUM CORPORATION et al. v. McCALLUM, Judge, et al.

DEARING v. BROWN, Judge, et al.

No. 7649.

Supreme Court of Texas.

January 31, 1940.

Original mandamus proceeding by the Royal Petroleum Corporation and others against the Hon. Claude McCallum, District Judge, and others, consolidated with an original prohibition proceeding by Effie Reed Dearing against the Hon. R. T. Brown, District Judge, and others.

Prohibition denied, and writ of mandamus issued.

J. D. Williamson, Tom P. Scott, and W. E. Cureton, all of Waco, Black, Graves & Stayton and Chas. L. Black, all of Austin, for relators Royal Petroleum Corporation et al. and for respondents Brown et al.

W. B. Harrell and Russell Allen, both of Dallas, Willard McLaughlin, of Waco, Dan Moody, of Austin, Leonard Gorin, of Waco, and Claude McCallum, pro se, of Dallas, for respondents McCallum and relator Effie Dearing.

Preliminary Statement.

GERMAN, Commissioner.

In 1922 the partnership of R. H. Dearing & Sons was created by written contract. It consisted of R. H. Dearing, Willis R. Dearing and Roy E. Dearing, each owning a one-third interest in all of the properties and business of the partnership. The written articles provided that the partnership should be continued after the death of any partner by the successors or successor. This partnership accumulated properties of considerable value, including a part of the stock of Royal Petroleum Corporation.

Roy E. Dearing died January 20, 1932, leaving a will which was duly probated. By this will he bequeathed certain properties to his wife, Effie Reed Dearing, and bequeathed to his brother, Willis R. Dearing, as trustee, his entire interest in the partnership of R. H. Dearing & Sons, as well as all stock owned by him in Royal Petroleum Corporation. He provided that Willis R. Dearing should hold all such properties in trust, and should pay annually to his wife, Effie Reed Dearing, during her lifetime the net profits to which he or his estate might be entitled as a partner in R. H. Dearing & Sons. At her death any unpaid income and his share in the partnership were bequeathed one half to Willis R. Dearing and the other one half to his sons, Herman A. Dearing and Robert Moffatt Dearing. The will provided that Effie Reed Dearing should make an election as between the rights given her under the will and any community rights that she might have in the same property.

Effie Reed Dearing elected to take under the will, and the partnership continued under its articles of creation as before.

On May 6, 1933, Effie Reed Dearing entered into a contract of conveyance of her interest in the partnership of R. H. Dearing & Sons, received by her under the will of her deceased husband, and of his interest in the Royal Petroleum Corporation. This took the form of a tripartite agreement. Three instruments were executed, all of the same date, and were as follows:

(1) Effie Reed Dearing executed conveyance to R. H. Dearing & Sons for a recited consideration of $10 and other considerations expressly set out in the conveyance. The principal consideration was the sum of $40,000, payable as evidenced by the instrument next hereinafter mentioned. Said conveyance conveyed the following interests:

"1. All my rights, titles, interests and claims in and to the partnership estate of R. H. Dearing & Sons, whether herein specifically set out or not, and this conveyance, transfer and assignment is to vest and hereby vests in the grantees herein all title to real estate, oil and gas leases, royalties, interest in oil runs and all payments to be made for oil runs and any payments to be made out of oil under contracts or otherwise, and all contracts, equipment and assets of every kind, and all claims, accounts and choses in action, and everything of every kind, character and description and wherever situated or located which has been acquired by R. H. Dearing & Sons from the date of the original partnership agreement dated as of August 1st, 1922, down to date, or which may be acquired in the future by R. H. Dearing & Sons.

"2. All my rights, titles, interests, claims, life estates and benefits and uses given and granted to me by and under the will of my deceased husband, Roy E. Dearing (and which will is probated in Dallas County, Texas) in Items 4 and 5 of such will.

"3. All my right, title, interest and claim in stock of the Royal Petroleum Corporation, except Two and one-half (2½) shares, for which there has been issued to me Certificate #____, in such Corporation, bearing this date."

This instrument also contained a provision as follows: "As a part of the consideration for the execution of this instrument, said R. H. Dearing & Sons, and/or Royal Petroleum Corporation accepting this instrument agree to cancel and release any and all claims that they or each of them might have or assert against Mrs. Effie Reed Dearing, or her deceased husband, Roy E. Dearing, and/or the estate of Roy E. Dearing, deceased, and further, that said Royal Petroleum Corporation and R. H. Dearing & Sons shall hold harmless said Mrs. Effie Reed Dearing from any and all claims, demands or causes of action that might be asserted against her individually by any creditor, or other person, firm or corporation in connection with either her interest or the interest of her deceased husband, or his estate, in and to said business herein named, it being the intention that Mrs. Effie Reed Dearing be released in full and held harmless from any and all liabilities of R. H. Dearing & Sons, and/or Royal Petroleum Corporation, and further, that any and all payments made by R. H. Dearing & Sons, and/or Royal Petroleum Corporation for her account or the account of Roy E. Dearing, or his estate shall be, and are in all things cancelled as of this date."

(2) As above indicated, the major consideration for the conveyance was the sum of $40,000 to be paid in money received from oil production from a three-eighths interest in a certain lease on three acres of land. Apparently R. H. Dearing & Sons owned one-half interest in this three-eighths, while Royal Petroleum Corporation owned the other one-half. R. H Dearing & Sons first conveyed to Royal Petroleum Corporation the one-half interest owned by it, and in turn Royal Petroleum Corporation, joined by R. H. Dearing & Sons, conveyed to Effie Reed Dearing the full three-eighth interest, the granting provision being as follows: "Do hearby bargain, sell, transfer, assign and convey unto the said Mrs. Effie Reed Dearing, her heirs and assigns, three-eighths (3/8 ths) of all of the oil in to and under the above described property and that may be saved produced and marketed from said property (being three-eighths) (3/8 ths) of the full eight-eighths (8/8ths) until the said Mrs. Effie Reed Dearing her heirs and assigns shall have received the total sum of $40,000.00 free and clear of all costs of drilling, equipping the well, cost of operation, taxes, including ad valorem, gross production and any and all taxes, standardization of the property, and in fact to be free and clear and net and delivered to the credit of the said Effie Reed Dearing, assignee, her heirs and assigns into the pipelines with which said well may be connected and this assignment being effective from and after May 1, 1933."

This instrument contained a joint covenant on the part of Royal Petroleum Corporation and R. H. Dearing & Sons that the lease was to be kept in operation so long as commercially profitable, or until the $40,000 was fully paid, and after said payment the said three-eighth interest was to revert to or be reconveyed to Royal Petroleum Corporation.

(3) There was executed by Royal Petroleum Corporation and R. H. Dearing & Sons, and accepted by Effie Reed Dearing, an instrument in the form of a guaranty agreement. This instrument recited that Effie Reed Dearing in consideration of all of the oil, gas and minerals produced from the three-eighths interest in said lease, until the sum of $40,000 was paid, had sold and released all her right, title and interest in the partnership of R. H. Dearing & Sons and in the Royal Petroleum Corporation. Said instrument further recited that Royal Petroleum Corporation and R. H. Dearing & Sons had that day conveyed to Effie Reed Dearing said mineral interest until said $40,000 was fully paid. It was also recited that it was the desire of Royal Petroleum Corporation and R. H. Dearing & Sons to guarantee to Effie Reed Dearing the full and complete payment of said $40,000 in all events, if same was not paid out of the oil and gas produced from said mineral interest. The instrument then contained the joint and several guarantee by the parties to Effie Reed Dearing of the full payment of said $40,000 in cash net to her out of the proceeds of the oil and gas produced from said mineral interest assigned to her and further guaranteeing the payment of same in any and all events.

As stated above, all of these instruments were executed contemporaneously, and were each and all an essential and inseparable part of one contract. Farm & Home Savings & Loan Ass'n v. Martin, 126 Tex. 417, 88 S.W.2d 459. In November, 1932, R. H. Dearing died, and in proper manner his interest in the partnership passed to Willis R. Dearing, who owned an interest in the partnership in his own right and also as trustee under the will of Roy E. Dearing. The partnership of R. H. Dearing & Sons continued, Willis R. Dearing individually and as trustee being the sole constituent and owner of same and its properties.

Proceedings in Suit in Dallas County.

On March 20, 1935, Effie Reed Dearing as plaintiff filed suit in the 101st District Court of Dallas County against Willis R. Dearing, as surviving partner of R. H. Dearing & Sons, and individually. Subsequently, new parties were made and various proceedings were had over a period of some three years. On December 20, 1938, Willis R. Dearing died. He left a will and his legal...