Taylor v. Banks

• Decision Date: 23 June 1965
• Docket Number: No. A-10535,A-10535
• Citation: 392 S.W.2d 856
• Parties: H. T. TAYLOR, Sr., Petitioner, v. Louis BANKS, Jr., Respondent.
• Court: Texas Supreme Court

Page 856

392 S.W.2d 856

H. T. TAYLOR, Sr., Petitioner, v. Louis BANKS, Jr., Respondent.

No. A-10535.

Supreme Court of Texas.

June 23, 1965.

Rehearing Denied July 28, 1965.

Spiner, Pritchard & Thompson, Houston, for petitioner.

Frank B. Brooks, Jr., Austin, for respondent.

GRIFFIN, Justice.

This is a suit brought by petitioner H. T. Taylor, Sr., against Banks Transportation Company, Louis Banks, Jr., and others to force the transportation company to transfer on its books 1200 shares of its stock which Taylor alleged he owned. Trial was to a jury, but at the conclusion of the testimony the trial judge discharged the jury and entered judgment as a matter of law ordering the transportation company to issue to Taylor the proper certificates showing Taylor's ownership of the stock, and to transfer these 1200 shares to Taylor on the books and records of the transportation company. The trial court's judgment further held that neither Louis Banks, Sr., Louis Banks, Jr. nor Clay Cotten, who had intervened, owned any of the 1200 shares. From this judgment only Louis Banks, Jr. appealed. The Court of Civil Appeals reversed the trial court's judgment and remanded the case to the district court for retrial. 383 S.W.2d 824.

We granted Taylor's application for writ of error and reverse the judgment of the Court of Civil Appeals and affirm the judgment of the trial court.

The suit arose out of the following facts: December 17, 1959, Louis Banks, Jr. executed and delivered to Taylor his note for $26,206.53 and an additional note payable to Taylor Lumber Company in the sum of $9,082.11. Petitioner Taylor became the owner of this last note prior to its maturity. Banks made various payments on both these notes for a year or two, but by March 19, 1963, both notes were past due. To secure the payment of each of these notes, Banks had pledged Certificate No. 1 for 1200 shares of stock in Banks Transportation Company, and had executed a collateral assignment of these 1200 shares to Taylor.

March 19, 1963, Taylor's attorneys wrote Banks, demanding full payment of both notes on or before April 4, 1963. On the same day the attorneys wrote Banks that the 1200 shares of common stock 'will be sold' at 11.00 A.M., Thursday, April 4, 1963, and stating the sale would be held in the lobby at the main San Jacinto Street entrance of the Harris County Court House, 301 San Jacinto Street, Houston, Texas. The letter further said: 'Either you or such other parties as you may locate may be interested in purchasing such stock at such sale.'

At the time and place set out in the letter notice to Banks, two of Taylor's attorneys and Taylor were present. The letter of notification to Banks was read aloud and bids called for, whereupon Taylor bid $5,000.00 for the stock and there being no other bids, the stock was struck off to Taylor.

The transportation company was controlled by Banks and his relatives and they were the officers of the company. Taylor made demand that the stock be transferred on the books of the company and the company refused. This suit resulted.

Each of the two notes which Banks had given to Taylor contained the following provision:

'In the event of non-payment of this note at maturity, however the same is brought about, the holder hereof is hereby invested with full authority to use, transfer, or sell the said pledged property, or any part thereof, or to cause the same to be done at public or private sale, with or without notice or demand of any sort, at such place and on such terms as the said holder hereof may deem best, and the holder of this note is authorized to purchase said collateral when sold for his own protection and the proceeds of such sale, transfer, or hypothecation shall be applied to the payment of this note, together with all interest, attorney's fees and costs. The surplus, if any, after payment of this note, together with all charges above stated, shall be paid to the maker of this note, and if the proceeds of the above sale shall not be sufficient to pay this note, the maker hereof agrees to make good any deficit.'

Taylor did not file suit on these notes nor ask for a deficiency judgment against Louis Banks, Jr., but sought only the relief above outlined.

Banks filed a general denial and pleaded a failure of consideration for the two notes. This failure of consideration was alleged to have resulted from the fact that Taylor and Banks entered into an agreement whereby Taylor sold to Banks 50 shares of stock in a cab company, nineteen taximeters, two taxicabs and two taximeters and thirteen notes signed by Taylor's employees and given for the purchase price of certain taxicabs and equipment purchased from Taylor by these employees. Allegations were made by Banks that these notes could not be collected and that the collateral securing them was worthless cars, and therefore there had been a partial failure of consideration for the two notes he gave to Taylor. It was to secure these two notes that the 1200 shares of stock were pledged as collateral security.

Banks had no pleadings of fraud or misrepresentation on Taylor's part in conducting the sale of the collateral. Neither did Banks seek to recover the 1200 shares of stock or their value. Banks made no tender of any balance due on his note, nor did he allege that Taylor had placed it beyond his power to return the stock to Banks if Banks paid the balance due on the notes. It was not pleaded that the stock brought an inadequate price at the sale.

Since Taylor was not seeking to recover on the two notes, the plea of failure of consideration evidently went out of the case. There is no complaint here nor in the Court of Civil Appeals, nor does the judgment of the trial court mention such plea. There is no complaint of the failure of the trial court to dispose of this plea in his judgment.

In the trial court's judgment it is recited 'that there is good and sufficient evidence in this case to show that the sale of such 1200 shares of the capital stock of Banks Transportation Company held on April 4, 1963, was a good and valid sale and should be in all things ratified and confirmed by this court. That such evidence was in no way controverted by any of the other evidence introduced by plaintiff, defendant or intervenor in the trial of this cause.'

Banks, as petitioner in this Court, seeks to have the judgments of the trial court and the Court of Civil Appeals reversed and judgment here rendered for Banks, because Taylor did not show (a) that he made a reasonable effort to obtain the best possible price for the 1200 shares of stock sold under the pledge agreement; (b) that the sale of the 1200 shares of stock as collateral was a good and valid sale; (c) that the sale held was a private sale rather than a public sale; (d) that he or his attorneys made any effort to secure bidders at or to notify the public of the time and place of the sale.

A reading of the collateral pledge agreement sets out what Taylor must do in order to make a valid sale of the 1200 shares of stock.

(1) It has been recognized since the case of King & Co. v. Texas Banking & Insurance Co., 58 Tex. 669 (1883), 'That parties by contract may regulate in advance the remedy which the creditor must pursue in subjecting property pledged to the payment of the debt which it is hypothecated to secure, cannot be questioned.

'The time, mode and place of sale may be so fixed; and it has been held that the parties may agree that the property may be sold without notice and at a private sale upon default of pledgor to pay the debt.'

In the case of Kent v. National Supply Co. of Texas, Tex.Civ.App., 1931, 36 S.W.2d 811, writ refused, suit was brought by National Supply Company against Kent et al for five pieces of oil field equipment. National Supply claimed title under a valid chattel mortgage sale at which it was the purchaser. The chattel mortgage set out the terms under which a sale could be made and gave authority to the supply company to purchase at such sale. Kent attacked the sale on various grounds. The Court of Civil Appeals, in upholding the sale said:

'* * * Appellee proved affirmatively the execution and record of its mortgages covering the entire property, a sale thereunder, and its purchase at such sale. The presumption is that appellee in this matter followed the law and not that it violated it. Haynes v. Western Union Telegraph Co. (Tex.Com.App.) 231 S.W. 361, 362, par. 2, and authorities there cited. A contention that such sale was invalid and insufficient to reinvest appellee with the title to such machinery must therefore be supported by affirmative proof of some fatal defect therein.'

In Smith v. Allbright, Tex.Civ.App., 279 S.W. 852 (1926), aff. 288 S.W. 178 (1926) in a trespass to try title suit over a tract of land, an attack was made on the...