West Side Oil Co. v. McDorman

• Decision Date: 04 October 1922
• Docket Number: (No. 1966.)
• Citation: 244 S.W. 167
• Parties: WEST SIDE OIL CO. v. McDORMAN et al.
• Court: Texas Court of Appeals

244 S.W. 167

WEST SIDE OIL CO. v. McDORMAN et al.

(No. 1966.)

Court of Civil Appeals of Texas. Amarillo.

October 4, 1922.

COPYRIGHT MATERIAL OMITTED

Appeal from District Court, Wichita County; E. W. Napier, Judge.

Action by C. R. McDorman and another against the West Side Oil Company. Judgment for plaintiffs, and defendant appeals. Reversed and remanded.

Martin & Oneal and Weeks, Morrow & Francis, all of Wichita Falls, for appellant.

Hunter & Scott, of Wichita Falls, for appellees.

HUFF, C. J.

Appellees, McDorman and P. W. Cunningham, composing a partnership styled McDorman & Cunningham, sued the appellant, West Side Oil Company, as an unincorporated trust association, alleging its trustees to be J. A. Staley, R. W. Ramming, W. T. Willis, J. C. Davis, J. J. Hill and T. C. Scruggs. It is alleged in effect on the 16th of March, 1920, the appellant company, through its trustees, were seized of all of block 5, in Wigham's addition to the town of Burkburnett; that prior to that time the company had two oil producing wells on the lot, but due to neglect, misuse, etc., the wells had run down and were not producing, and at said time were not being operated for oil or any other purpose, and the operation thereof had been abandoned by the officers, and that the property was considered by them as valueless and the personal property thereof deteriorating in value, and in danger of being lost; that the lease on the lot attached was upon the condition that appellees operate the lease for the production of oil for so long as oil could be produced in paying quantities; that the owners of the fee to the lots during the early part of the year 1920, on account of the abandonment by appellant of operation on the lease threatened to bring suit and cancel the lease, which was known by all the trustees. It became necessary for the trustees to take some action to preserve the lease and save same from forfeiture for abandonment. Appellees were advised and allege the fact to be that three of the trustees above named, to wit, Davis, Hill, and Scruggs, failed and refused, though requested by the president of the company, to take any action for the preservation of the property and fulfillment of the trust, but wholly abandoned their trust, leaving only three trustees, Staley, Willis, and Ramming, as trustees acting for and in behalf of the appellant company.

On the 16th of March, 1920, after abandonment by the three trustees, as aforesaid, the appellant acting through its remaining trustees employed appellees to go upon the lease-hold estate and clean out the wells upon the property, and at their own cost and expense to operate the same for the production of oil thereafter, agreeing orally that in consideration of the services of the appellees in that behalf that they the trustees, would convey or cause to be conveyed to appellees for their services thereon seven-sixteenths of the oil produced therefrom, agreeing and binding appellant to convey or cause to be conveyed to appellees an undivided one-half interest in and to said oil and gas lease, subject to an overriding one-eighth royalty, and also to convey the equipment, tools, machinery, and appliances belonging to and connected with the oil lease.

That appellants, acting through its said trustees, placed appellees in possession of the property above described, and that they took possession and entered upon the performance of their agreement and in compliance therewith expended large sums of money in the improvement of said property to the extent of about $6,000. After working on the wells as they had agreed to do for about 35 days, they brought the wells thereon to a condition where they began to produce oil to about 12 barrels per day, which was the result of their labor, skill, and effort, together with the money expended thereon. They further allege, on information and belief, the trustees had abandoned the property and their trust; that they knew the terms and conditions of the employment and knew that the appellees were relying thereon, expending money, and performing work, labor, and time in improving the property, and that said trustees thus knowingly stood by, acquiesced therein, and made no objection thereto, knowing appellees were expecting from appellant the fulfillment of the agreement above set out; that said trustees estopped themselves and appellant company, so far as their veto powers in that regard extended, to object to the execution of the agreement and the carrying the same into execution and full force and effect. They further allege they were advised and believed, and upon such they allege the fact to be, that the term of office of the three nonacting trustees had expired sometime prior to the contract, and that by the terms of the articles creating the association their term of office had expired on the 1st day of September, 1919, which should continue thereafter until their successors were elected; that said trustees had acquiesced in the expiration of their term of office, and had not attempted to act in that capacity for many months prior to the execution of the agreement and were not when it was executed acting as trustees under the continuing clause in the articles of the trust and were not de facto trustees.

In the second count it is alleged that about April 20, 1920, appellees being then in possession, occupancy, and control of the premises and under the terms of their agreement entitled to and did equitably own seven-sixteenths interest therein. On said day the acting trustees for appellant recognized appellees had performed their agreement and were the equitable owners of seven-sixteenths interest and thereupon entered into a second contract, in writing, whereby appellant, acting through Staley, Ramming, and Willis, contracted and agreed to sell and deliver to the appellees the remaining one-half interest belonging to appellant in and to the oil and gas lease for the sum of $8,500. Appellees thereby agreed to buy the same, the terms being one-half cash, and the remaining one-half to be paid when the assignment was made to appellees. The appellees thereupon paid appellant $4,250, which it accepted and received and at which time appellees were in possession and making valuable improvements on the land, all of which facts were known by Davis, Hill and Scruggs, who remained silent and raised no objection and thereby estopped themselves and the appellant company in so far as they had a veto power. Reference is made to the contract in the pleadings for its terms, etc. That the contract was executed for the purpose and with the intent of all the parties thereto to vest in appellees all and singular the entire interest of whatever nature, belonging to appellant company in and to the oil and gas lease.

The improvements first contracted for and the services for which appellees were first employed were necessary to preserve the estate from forfeiture, and to retain the value of the property. Appellees and the officers with whom they contracted were acting in good faith and to prevent forfeiture, loss, and deterioration. That the contract was equitable and for a fair and valuable consideration. That under the articles of the association the trustees signing the written contract were the only persons legally qualified to act for the appellant company, and that the contract entered into is legal and binding. It is also alleged the appellees went into possession of the property under the agreement and in pursuance thereto improved the land and operated the wells for production, and that their expenditures amounted to about $11,285. In addition thereto they had paid $4,250 for the remaining one-half interest in the lease, and stood ready and offered to pay the remainder, $4,250, upon a transfer of the lease upon a written contract. That the appellant refused to make the transfer. The prayer is for specific performance. If the contract to convey is nonenforceable, then for the value of the time, the value of the property placed thereon, and the amount of the purchase money paid by appellees to appellant thereon, etc. The only answer we find in the record and upon which the case apparently went to trial is that of T. C. Scruggs, J. C. Davis, and J. J. Hill, as trustees. Their answer does not specifically purport to be for the appellant association or the other three trustees thereof, nor is there any allegation that they were authorized by the board of trustees to defend the association in the name of the three trustees answering. However, there appears to have been no question in the court below or in this court of their right to defend in their name and to prevent judgment against the association by default or otherwise. The association joins in the appeal, and all six of the trustees sign the appeal bond. It is asserted by the appellees in their brief the other three trustees answered, but their answer does not appear "in the transcript for some reason, not necessary to this discussion."

There has been no motion suggesting a diminution of the record, or asking to perfect the record. We must, therefore, take it as we find it, and will have to treat the case as if the appellant association, as such, duly appeared and answered. The three trustees answering the amended petition upon which the trial was had denied generally the allegations therein. They also allege the $4,250 check which appellees delivered to Staley was not intended to be cashed by the association, and that it did not, through the majority of its trustees, receive or accept the same. That by the terms of the contract made with Staley the check was not to be cashed and the money delivered to the association, but was to be held in escrow with the contract until the title was accepted as good and merchantable by the appellees, "but by a mistake on the part of Reid, secretary and treasurer of the defendant company, said check was cashed and placed to the credit of the West Side Oil Company....