Wichita Royalty Co. v. City Nat. Bank

• Decision Date: 10 June 1933
• Docket Number: No. 12784.,12784.
• Citation: 74 S.W.2d 661
• Parties: WICHITA ROYALTY CO. et al. v. CITY NAT. BANK OF WICHITA FALLS.
• Court: Texas Court of Appeals

74 S.W.2d 661

WICHITA ROYALTY CO. et al. v. CITY NAT. BANK OF WICHITA FALLS.

No. 12784.

Court of Civil Appeals of Texas. Fort Worth.

June 10, 1933.

Rehearing Granted February 24, 1934.

Rehearing Denied May 11, 1934.

Appeal from District Court, Wichita County; Vincent Stine, Judge.

Suit by the City National Bank of Wichita Falls, against the Wichita Royalty Company, E. E. Scannell, as its trustee, and individually, who filed cross-actions against plaintiff and another, and others. From a judgment for plaintiff, named defendants appeal.

Affirmed.

See, also, 36 S.W.(2d) 1057.

Kilgore & Rogers, J. T. Montgomery, John Davenport, T. R. Boone, Weeks, Morrow & Francis, and Arch Dawson, all of Wichita Falls, for appellants.

Bullington, Humphrey & King, of Wichita Falls, for appellee.

DUNKLIN, Justice.

This suit was instituted by the City National Bank of Wichita Falls against the Wichita Royalty Company, designated as a common-law trust, and against E. E. Scannell as its trustee, and against Scannell individually, to recover the balance due on a promissory note payable to the plaintiff bank executed by E. E. Scannell as trustee for the Wichita Royalty Company, on June 26, 1930, for the sum of $22,000, due 60 days after date, executed as a renewal and extension of original notes executed by the defendants to the plaintiff and secured by a deed of trust on oil royalties on land situated in Young county; also to recover $14,596 as one-half of the balance remaining due and unpaid on another note, of date June 9, 1930, in the sum of $43,000, executed by the Texas Investment Company, a corporation, and indorsed by the Wichita Royalty Company, by E. E. Scannell, trustee, and also by J. T. Harrell and J. A. Kemp. That note was secured by the pledge of 650 shares of capital stock of the Texas Investment Company, together with notes and accounts receivable. It was alleged that certain payments in money had been made on that note which were duly credited thereon and a further credit for collateral sold in the sum of $20,000, leaving a balance due of $29,192; and that the relative liability of the indorsers was one half to the Wichita Royalty Company, to wit, $14,596, and the other half jointly to the other two indorsers, J. T. Harrell and J. A. Kemp.

The trial judge instructed a verdict in favor of plaintiff for its alleged debt, and also as against defendant's cross-actions hereinafter noted; and, from a judgment in conformity therewith, defendant has appealed.

On June 20, 1930, R. R. Robertson, for the Wichita Royalty Company, executed an instrument in writing designated as a "Declaration of Trust," and in which he was named as trustee. That instrument contained the following provisions:

"First: That this Trust shall be designated and known as the Wichita Royalty Company, with principal office in Wichita Falls, Texas.

"Second: That the said Trustee shall hold all the funds and property now or hereafter held by or paid to, or transferred or conveyed to him or his successor or successors as trustee hereunder in trust for the purpose, with the powers and subject to the limitations hereinafter declared, for the benefit of the cestue que trustent (Hereinafter called the stockholders), and it is hereby expressly declared that a trust, and not a partnership or joint stock association is hereby created; that neither the trustee nor the stockholders shall ever be personally liable hereunder as partners or otherwise, but that for all debts the trustee shall be liable as such to the extent of the trust funds only. * * *

"Third: The general purposes of this company are to purchase and sell oil and gas royalties, and other oil and gas properties.

"Fourth: The capital stock of this trust shall be One Million Dollars ($1,000,000.00) divided into one million shares of par value of one Dollar ($1.00) per share.

"Fifth: The certificate of stock shall be issued and signed by the trustee, and shall be substantially in the following form, towit:

                                "`Wichita Royalty Company
                                "`Wichita Falls, Texas
                

"`(A common law Trust)

                      "`Members Certificate of Interest
                

"`This is to certify that ____ is the owner of ____ fully paid shares of beneficial interest in the Wichita Royalty Company, a common law trust, transferrable only on the books of the trust by the owner thereof in person or by duly authorized agent upon the surrender of this certificate properly endorsed.

"`This certificate of interest is subject to the provisions and covenants contained in the Declaration of Trust of the Wichita Royalty Company, dated the first day of June, A. D. 1930, and any amendments thereto, and the by-laws of said trust, present or future, and the provisions hereof.

"`No member of said trust, or owner or holder of this certificate, as such, shall have any authority, power or right whatsoever to do, or transact any business whatever for, on behalf of, or binding on the trust, or any member thereof, and no member of this trust shall be personally liable for any debts, covenants, demands, contracts of any kind or torts of this trust beyond the payments in full of the price of which his share or shares were sold to him by the trust.

"`This certificate shall be the sole and only evidence of membership in said trust.

"`Witness the signature of the trustee of said trust, this the ____ day of ____ 19__.'

* * * * * * *

"Sixth: Stockholders in this trust shall have no legal right to the trust property or funds held from time to time by the trustee, as herein provided for, and especially shall have no right to call for any partition of the trust property or funds, or dissolution of this trust, but the shares shall be personal property carrying the right of division of the profits; and at the termination of said trust by expiration of the period fixed for its existence or dissolution otherwise, the stockholders shall be entitled to a division of the principal and profits in due proportion to the number of shares held by each.

* * * * * * *

"Eighth: The entire affairs of this trust shall be managed by one trustee, who shall own at least one certificate of membership for not less than one share. The Trustee may from time to time hire suitable offices for the transaction of the business of this trust; and he may appoint, remove or reappoint such officers, agents and other assistants as he may think best, define their duties and fix their compensation provided, however, that any person to be eligible to hold office of Vice-President, Secretary or Treasurer must be the owner and holder of at least one certificate of membership in this trust for not less than one share.

"The title to all property acquired or to be acquired from time to time by this trust, and all investments shall be made and held in the name of the Trustee as such trustee, or his successors or successor, in office. The trustee in his capacity as such may sue and be sued in any court of law or equity.

"The trustee shall have full and exclusive power and authority to conduct the business and affairs of this trust, to purchase, contract for, lease, or otherwise acquire, any property necessary or proper for the purpose of the trust; to sell and convey all or any part of the property of the trust; to borrow money on the credit of the trust; and, if he deems advisable to execute notes therefor secured by a mortgage or deed of trust upon the property of the company, and generally to do all things which in his judgment is necessary and prudent in the management and conduct of the business of the company; and he shall receive compensation commensurate with his services, to be determined by the officers and as provided by the by-laws.

"Any debt incurred by the trustee shall be charge on the property of the trust in preference to the claim or claims of any stockholder as such; the trustee is authorized in the conduct of the business, to sell in due course of business the property, real or personal, of the trust, free of any incumbrance whatsoever, provided of course that any mortgaged property shall be sold in conformity with the terms of the mortgage or deed of trust theretofore given.

"In the event the trustee should die, resign, refuse or become incapable to act as trustee, the Judge of the District Court of the Thirtieth Judicial District, comprising at present the counties of Wichita, Archer, and Clay, State of Texas, shall fill the vacancy created thereby by the appointment of a person qualified under this Declaration of Trust to act as trustee.

"The trustee may select a manager or managers for all or any part of the property or business of the trust, and may employ such agents, servants and employees, fixing their compensation and entrusting them with such authority and the duties as he may deem wise; and the trustee may appoint or contract with any person, firm, corporation, joint stock association, trust or company as fiscal agents for the sale of the beneficial interests and shares, or may sell all or part of such shares to such fiscal agents upon such terms and conditions of sale as may be fixed by contract entered into by such fiscal agents and the trustee.

"The Trustee shall declare dividends from the net income of the trust quarterly, or oftener, and his decision as to the amount of dividends shall be final; provided, however, that at least once each year the total net profits arising from the operation of this trust shall be distributed among the stockholders in the ratio that the number of shares owned by each bears to the total number of shares then issued and outstanding.

"Tenth: The Trustee may adopt such by-laws in harmony herewith as he thinks proper. This Declaration of Trust and the by-laws so adopted shall be signed and acknowledged by the trustee in the manner required by the laws of the State of Texas for the registration of conveyances of real estate, to the end that the same may be recorded if it be deemed necessary or expedient.

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